FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934
For the Quarter ended March 31, 1999
Commission File Number: 1-14791
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc. )
(originally Taurus Enterprises, Inc.)
Delaware 76-0418364
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
112 C Longview Drive, Los Alamos, New Mexico 87544
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 257-3602
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 3/31/99 11,903,911
Yes[x] No[] (Indicate 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.)
As of March 31, 1999 the number of shares outstanding of
the Registrant's Common Stock was 11,903,911
1
<PAGE>
INTRODUCTION
Our 1934 Securities Exchange Act registration of our common stock has
become effective during 1999, but has not yet cleared final comments by the
Staff of the Securities and Exchange Commission.
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PART I: FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
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Attached hereto and incorporated herein by this reference are consolidated
unaudited financial statements under cover of Exhibit 99QF-1 for the three
months ended March 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(A) PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.
CASH REQUIREMENTS AND OF NEED FOR ADDITIONAL FUNDS, TWELVE MONTHS. This Issuer
has had no revenues since inception. It has been funded by investors. Virtually
all of the funding/working capital raised to date has been allocated for
research and development of our several prototype projects. We have minimally
sufficient funds to continue for the next 12 months. Each of our projects is
sufficiently partially or fully funded, sufficiently for the next 12 months. Our
minimally sufficient funds are not deemed adequate for the optimal requirements
of our Corporation. Due to the large number of potentially viable projects, we
are exploring methods of maximizing our potential by additional capital
formation. We are looking at converting one or more of our projects into its own
subsidiary, and preparing one or more initial public offerings. In any such
program, we would either retain majority control of the resulting pubic company
or companies; or we would distribute the shares of the new company to our
shareholders, pro-rata, in connection with a registered public offering of
shares. We estimate that we need a million dollars optimally. We are also
exploring raising funds in an additional limited offering and/or private
placement to highly sophisticated accredited investors. We have not yet
determined what capital program is in the best interests of our shareholders.
(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We are a development stage company. Our activities to date consist entirely of
research and development.
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PART II: OTHER INFORMATION
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2
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. REPORTS ON FORM 8-K
None
EXHIBITS
Attached hereto and incorporated herein by this reference are consolidated
unaudited financial statements under cover of Exhibit 99QF-1 for the three
months ended March 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-QSB Report for the Quarter ended March 31, 1999, has been signed below
by the following person on behalf of the Registrant and in the capacity and on
the date indicated.
Dated: March 31, 1999
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc. )
(originally Taurus Enterprises, Inc.)
/s/ /s/
Dr. Melvin L. Prueitt Joel S. Dumaresq
Chairman/Director President/Director
/s/ /s/
Norman Wareham David M. Jones
Secretary/Treasurer/Director Director
3
<PAGE>
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EXHIBIT 99QF-1
UN-AUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
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4
<PAGE>
SOLAR ENERGY, LTD.
BALANCE SHEETS (UNAUDITED)
For the fiscal years ended December 31, 1997 and 1998
And for the three months ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
March 31, December 31,
1999 1998 1997
----------- ---------- ---------
CURRENT ASSETS
Cash $ 373,486 $ 286,627 $ 0
Employee advance -0- 213 -0-
Notes receivable -0- 50,000 -0-
----------- ---------- ---------
Total Current Assets 373,486 336,840 -0-
----------- ---------- ---------
Property & Equipment 25,297 16,653 -0-
----------- ---------- ---------
OTHER ASSETS
Organization costs -0- 2,181 -0-
Patent costs 17,344 9,808 -0-
Goodwill 75,713 66,677 -0-
Deposits 4,537 3,537 500
----------- ---------- ---------
97,594 82,203 500
----------- ---------- ---------
TOTAL ASSETS $ 496,377 $ 435,696 $ 500
=========== ========== =========
LIABILITIES
Accounts payable 58,973 44,236 0
Accrued liabilities 16,183 15,154 0
Notes payable - related party 399,685 210,252 -0-
----------- ---------- ---------
Total Liabilities 474,841 269,642 -0-
STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value; authorized 50,000,000
shares; issued and outstanding, 11,903,911
11,903,911 and 1,278,511 shares respectively 1,190 1,190 128
Additional Paid in Capital 953,322 953,323 29,385
Accumulated Surplus (Deficit) (932,976) (788,459) (29,013)
----------- ---------- ---------
Total Stockholders' Equity 21,536 166,054 500
----------- ---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 496,377 $ 435,696 $ 500
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
SOLAR ENERGY, LTD.
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT (UNAUDITED)
For the fiscal years ended December 31, 1997 and 1998
And for the three months ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Comulative
For the years Total
March 31, ended December 31, Since
1999 1998 1997 Inception
------------ -------------------- ----------- -----------
Revenues: $ 0 $ 0 $ 0 $ 0
Expenses:
Amortization 16,995 19,866 500 38,861
Bad Debt -0- 225,000 -0- 225,000
Bank Charges 288 983 -0- 1,271
Consulting 10,407 16,675 -0- 29,300
Depreciation 1,629 -0- -0- 1,629
Filing Fees -0- -0- -0- 235
Financial Services 1,500 -0- 3,500 13,540
Interest expense -0- 15,923 -0- 15,923
Legal and accounting 6,774 90,089 -0- 109,363
Notary -0- -0- -0- 20
Office 1,115 3,072 -0- 4,187
Promotion -0- 15,666 -0- 15,666
Research and development 105,223 288,088 -0- 393,311
Travel 2,655 89,328 -0- 91,983
------------ -------------------- ----------- -----------
Total Expenses 146,586 764,690 4,000 940,289
------------ -------------------- ----------- -----------
Other Income (Expenses)
Interest Income 2,069 5,244 -0- 7,313
------------ -------------------- ----------- -----------
Net Income (Loss) ($144,517) ($759,446) ($4,000) ($932,976)
============ ==================== =========== ===========
Loss per Share ($0.01214) ($0.14706) ($0.00313) ($0.72974)
============ ==================== =========== ===========
Weighted average number
of shares outstanding: 11,903,911 5,164,228 1,278,511 1,278,511
============ ==================== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
SOLAR ENERGY, LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
For the period from inception of the Development Stage on January 5, 1994
For the fiscal years ended December 31, 1997 and 1998
And for the three months ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional Accumulated Total Stock-
Common Par Paid-In Equity holders' Equity
Stock Value Capital (Deficit) (Deficit)
---------- ------ ------------ ------------- -----------------
Inception (January 5, 1994) 0 $ 0 $ 0 $ 0 $ 0
Inception through December
31, 1994: Stock issued for
cash and services 1,250,000 125 2,375 (500) 2,000
Year ended December 31, 1994 1,250,000 125 2,375 (500) 2,000
Net Loss December 31, 1995 0 0 0 (500) 0
Year ended December 31, 1995 1,250,000 125 2,375 (1,000) 1,500
August 14, 1996, Shares issued
for cash at $2.00 13,000 1 25,999 0 0
August 14, 1996, Shares issued
for cash at $0.00458 8,312 1 761 0 0
October 29, 1996, Shares issued
for cash at $0.01 1,250 0 251 0 0
Stock split rounding adjustment 5,949 1 (1) 0 0
Net Loss December 31, 1996 0 0 0 (24,013) 0
Year ended December 31, 1996 1,278,511 128 29,385 (25,013) 4,500
Net Loss December 31, 1997 0 0 0 (4,000) 0
Balances at December 31, 1997 1,278,511 128 29,385 (29,013) 500
January, 1998, Shares issued for
acquisition of Hydro-Air Technologies 700,400 70 (70) 0 0
January, 1998, Shares issued
for cash @ $0.10 7,800,000 780 779,220 0 0
January, 1998, Shares issued
for cash at $1.00 each 125,000 13 124,988 0 0
November, 1998, Shares issued
for cash @ $0.01 2,000,000 200 19,800 0 0
Net Loss December 31, 1998 0 0 0 (759,446) 0
Balances at December 31, 1998 11,903,911 1,190 953,322 (788,459) 166,054
Net Loss March 31, 1999 0 0 0 (144,517) 0
Balances at March 31, 1999 11,903,911 1,190 953,322 (932,976) 21,537
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
SOLAR ENERGY, LTD.
STATEMENTS OF CASH FLOW (UNAUDITED)
For the fiscal years ended December 31, 1997 and 1998
And for the three months ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
January 5,
1994 (inception
of the
development
stage) to
March 31, December 31, March 31,
1999 1998 1997 1999
----------- ----------- --------- -----------------
Cash Flows from Operating Activities
Net Income (Loss) ($146,586) ($759,446) ($4,000) ($935,045)
Add changes not affecting
working capital:
Amortization and Depreciacion 18,624 21,968 500 42,592
Increase (Decrease) in:
Employee advance 213 (176) -0- -0-
Accounts Payable 14,321 34,770 -0- 58,557
Accrued expenses 1,029 15,154 -0- 16,183
----------- ----------- --------- -----------------
Total working capital (used) (112,399) (687,730) (3,500) -0-
----------- ----------- --------- -----------------
Cash Flows from Investment Activities
Cash acquired from subsidiary 42,733 204,956 -0- 247,689
Cash paid for patent costs (7,536) (3,917) -0- (11,453)
Cash paid for property & equipment (17,378) (8,397) -0- (25,775)
Cash paid for Deposits (1,000) (3,537) -0- (4,537)
Cash paid for on notes receivable -0- (50,000) -0- (50,000)
----------- ----------- --------- -----------------
Net Cash Provided by Investing Activities 16,819 139,105 -0- -0-
----------- ----------- --------- -----------------
Cash Flows from Financing Activities
Issued common stock for cash -0- 925,000 -0- 952,013
Cash received on advance by shareholders 182,439 410,252 -0- 592,691
Cash paid on debt financing -0- (500,000) -0- (500,000)
----------- ----------- --------- -----------------
Net Cash Provided by Financing Activities 182,439 835,252 -0- -0-
----------- ----------- --------- -----------------
Net increase (decrease) in cash 86,859 286,627 (3,500) 373,486
Cash, beginning of period 286,627 -0- 3,500 -0-
----------- ----------- --------- -----------------
Cash, end of period $ 373,486 $ 286,627 $ 0 $ 373,486
=========== =========== ========= =================
Supplemental Cash Flow Information
Cash paid for:
Interest $ 0 $ 15,923 $ 0 $ 15,923
Taxes $ 0 $ 0 $ 0 $ 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to The Consolidated Financial Statements
December 31, 1997 and 1998 and March 31, 1999
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Solar Energy Limited ("the Company") was incorporated as Taurus Enterprises,
Inc. under the laws of the State of Delaware on January 5, 1994. The Company
was organized primarily for the purpose of operating a used automobile brokerage
firm. The Company did not become operational and abandoned its attempts to
establish the brokerage operation.
In August of 1996 its shareholders decided to reactivate the Company, merge the
Company with Salvage World, Inc., a private company, change the name to Salvage
World, Inc. and reincorporate in the state of Nevada.
On December 17, 1997 the Company merged with Solar Energy Limited (Solar) a
Delaware corporation organized on July 24, 1997 and changed the name to Solar
Energy Limited. The surviving corporation is the Delaware corporation and the
authorized shares were changed to 50,000,000 par value $.0001. Solar's
headquarters are located in Los Alamos, New Mexico.
On January 1, 1998 the Company issued the initial 170,400 shares of stock and on
October 21, 1998 an additional 530,000 share were issued for the acquisition of
100% of Hydro-Air Technologies, Inc. (Hydro) a New Mexico corporation organized
June 18, 1997. Hydro owns various rights to patented intellectual property
called Hydro-Air Renewable Power System ("HARPS"), and has developed a prototype
system to generate electricity from the evaporation of water. Hydro's
headquarters are located in Los Alamos, New Mexico. This business combination
was accounted using the purchase method.
In January 1999 the Company authorized the issuance 350,000 shares of stock for
the acquisition of 100% of Renewable Energy Corporation (RECO) a New Mexico
corporation organized November 30, 1998. RECO owns various rights to patented
intellectual property associated with the solar recycling of CO2 to fuel.
RECO's headquarters are located in Los Alamos, New Mexico. These shares were
issued in April, 1999.
The Company is in the development stage according to Financial Accounting
Standards Board Statement No. 7 and is currently focusing its attention on
raising capital in order to pursue its goals.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of accounting.
9
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1998 and March 31, 1999
NOTE 1 - Summary of Significant Accounting Policies (Continued)
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Fully diluted earnings per share is not presented because it is anti-dilutive.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating loss
carryforwards totaling approximately $932,976 that will be offset against future
taxable income. These NOL carryforwards begin to expire in the year 2009. No
tax benefit has been reported in the financial statements because the Company
believes there is a 50% or greater chance the carryforward will expire unused.
Deferred tax assets and the valuation account is as follows at March 31, 1999
and 1998.
1999 1998
---- ----
Deferred tax asset:
NOL carrryforward $317,212 $268,076
Valuation allowance (317,212) (268,076)
-------- --------
Total $ 0 $ 0
f. Organization Costs
The Company incurred $2,500 of organization costs in 1994. These costs, which
were paid by shareholders of the Company, were exchanged for 1,250,000 shares of
common stock. Organization costs are being amortized on a straight line method
over a 60 month period. These costs will be recovered only if, the Company is
able to generate a positive cash flow from operations. Hydro incurred costs of
$3,116 for their organization. All organizational costs were fully amortized
during 1999 to conform with recently issued accounting standards.
10
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1998 and March 31, 1999
NOTE 1 - Summary of Significant Accounting Policies (Continued)
g. Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. In these financial statements, assets
involve extensive reliance on management's estimates. Actual results could
differ from those estimates.
h. Principles of Consolidation
The Consolidated Financial Statements include the accounts of Solar Energy
Limited and its wholly owned subsidiaries Hydro-Air Technologies, Inc. (1999
and 1998) and Renewable Energy Corporation (1999 only). All intercompany
accounts and transactions have been eliminated in the consolidation.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has had recurring
operating losses for the past several years and is dependent upon financing to
continue operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. It is management's plan
to raise sufficient funds to develop the next phase of the HARPS Technology and
then begin to manufacture and market the HARPS Power system.
NOTE 3 - Development Stage Company
The Company is a development stage company as defined in Financial Accounting
Standards Board Statement No. 7. It is concentrating substantially all of its
efforts in raising capital and developing its business operations in order to
generate significant revenues.
NOTE 4 - Stockholders' Equity Transactions
Pursuant to the plan or reorganization and merger agreement dated August 20,
1996, the Company merged Taurus Enterprises, Inc. (a public company) with
Salvage World, Inc. (a private company). The shareholders of Taurus returned
their stock and received stock in the new combined entity named Salvage World,
Inc. The Company changed the par value of its common stock from $.0001 to
$.001.
11
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1998 and March 31, 1999
NOTE 4 - Stockholders' Equity Transactions (continued)
Pursuant to the merger agreement dated December 17, 1997, the Company merged
with Solar Energy Limited and the shareholders of Salvage received shares in the
new combined Solar entity. The Company then changed the par back to $.0001 and
the new authorized capital became 50,000,000. The Board then authorized a 1 for
20 reverse stock split. These financial statements have been retroactively
restated to reflect the split.
The Company has issued 700,400 shares of stock to acquire 100% of the stock of
Hydro-Air Technologies. The acquisition agreement between the Company and
Hydro-Air Technologies provides an initial issuance of stock at the beginning of
phase one, and additional issuances throughout the development process to arrive
at no less than 4,000,000 shares or 40% of the outstanding stock. Because Hydro
had a negative equity position goodwill was recorded and no value was assigned
to the stock issued.
The Company issued 7,800,000 shares of common stock at $.10 and 2,000,000 shares
of common stock at $.01 in an exempt 504 offering which raised $800,000 during
1998.
The Company also issued 125,000 shares of common stock for $125,000 in a 505
exempt offering.
NOTE 5 - Property & Equipment
Property and equipment consists of the following at March 31, 1999 and 1998:
1999 1998
------ ------
Office Equipment & Furniture $26,496 $11,020
Tools 1,539 1,539
Auto 6,522 6,522
------- ------
34,557 19,081
Accumulated Depreciation (9,260) (2,428)
Net Property & Equipment $25,297 $16,653
Depreciation expense for the years ended March 31, 1999 and 1998 is $6,516 and
$2,102, respectively.
NOTE 6 - Patent Costs
The Company has incurred legal costs in connection with the Patent process which
the Company has rights to, and has therefore capitalized those costs and is
amortizing them over a five year period. Amortization expense attributable to
patents during 1999 and 1998 was $7,312 and $778, respectively.
12
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1998 and March 31, 1999
NOTE 7 - Goodwill
The Company recorded Goodwill in connection with the acquisition of Hydro, due
to the negative equity position of Hydro. A total of $83,346 was recorded upon
acquisition and is being amortized over a 5 year period. The realization of
this asset is contingent upon Hydro's ability to generate revenues from the
HARPS process.
The Company also recorded Goodwill in connection with the acquisition of RECO
due to the negative equity position of RECO. A total of $439,900 was recorded
upon acquisition and is being amortized over a ten year period. The realization
of this asset is contingent upon RECO's ability to generate revenues from the
Solar Energy process.
NOTE 8 - Notes Payable - Related Party
FCIC a shareholder of the Company advanced $300,000 to Hydro Air during 1997 and
$200,000 to the Company during 1998 for phase one expense requirements. $500,000
has been paid back, leaving a $0 balance due at December 31, 1998.
Cesare Bette, a shareholder, loaned the Company $100,000 during 1998 as a short
term working capital loan. The advance was repaid in February 1999.
Baycove Investments, Ltd., a shareholder, loaned the Company $308,387 and
$110,252 during 1999 and 1998, respectively. The loans are non-interest bearing
and due upon demand. The balance of these loans at March 31, 1999 and 1998 is
$418,639 and $110,252, respectively
Reed Jensen, a shareholder, loaned the Company $20,000 during 1999. The loan is
non-interest bearing and due upon demand. The Company made payments of $10,000
on the loan and the balance due at March 31, 1999 is $10,000.
NOTE 9 - Notes Receivable/Acquisition of RECO
Pursuant to a purchase agreement between the Company and Renewable Energy
Corporation (RECO) the Company advanced $50,000 during 1998 as an unsecured
loan. Upon the closing at January 31, 1999, $30,000 of the loan converted to
equity of RECO and the Company became 100% owners of the common stock. The
remaining $20,000 of the unsecured loan was advanced for startup costs and is
considered as a cost of the investment in RECO. According to the agreement, the
Company issued 350,000 shares to the shareholders of RECO. This business
combination was accounted for using the purchase method.
NOTE 9 - Notes Receivable/Acquisition of RECO (continued)
In addition, the agreement specifies a commitment by the Company to provide
working capital loans of $5,700,000 to it' subsidiaries throughout various
phases of development.
13
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1998 and March 31, 1999
NOTE 10 - Commitments
The founder of the HARPS technology has granted Hydro an exclusive license to
develop, manufacture and market the same. For the license Hydro is committed to
a 1% royalty on gross sales of the units and 1/2% royalty on the sale of the
electrical power generated by any power plants owned by Hydro.
The Company is committed to an operating lease for office space in Los Almos,
New Mexico that expires in August 2000. Future minimum lease payments are as
follows at March 31, 1999.
2000 $ 18,400
- ------
Total $ 18,400
= ======
NOTE 11 - Fair Value of Financial Instruments
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 the carrying values of such amounts.
Based on borrowing rates currently available to the Company for loans with
similar terms, the
