FORM 10-K-SB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
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: 12/31/99 13,153,911
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.)
[] (Indicate by check mark if disclosure of delinquent filers ('229.405) is not
and will not to the best of Registrant's knowledge be contained herein, in
definitive proxy or information statements incorporated herein by reference or
any amendment hereto.)
As of 12/31/99:
the aggregate number of shares held by non-affiliates was approximately
9,893,511.
the number of shares outstanding of the Registrant's Common Stock was
13,153,911
Exhibit Index is found on page 21.
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PART I
UN-NUMBERED ITEM: INTRODUCTION
This Annual Report on Form 10K-SB is filed voluntarily. Our Form 10-SB
Registration Statement became effective after the close of 1998. That 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.
ITEM 1. DESCRIPTION OF BUSINESS.
(A) ORGANIZATION AND HISTORY. Solar Energy Limited (the "Registrant" and
sometimes "we","us" or "our") was first incorporated in Delaware as Taurus
Enterprises, Inc. on January 5, 1994, and re-incorporated in Nevada on August
20, 1996 as Salvage World, Inc. On August 20, 1996. Taurus made its original
issuance of 25,000,000 share to founders in 1994, pursuant to '4(2) of the
Securities Act of 1933. During 1996, Salvage placed an additional 451,250
shares, pursuant to Regulation D, Rule 504, resulting in the a total of
25,451,250 shares then issued and outstanding. On December 17, 1997, the
Shareholders approved a proposal to Reverse Split the Common Stock of the
Corporation 20 to 1; with the provision that no Shareholder owning 100 shares or
more shall be reversed or reduced below 100 Shares. The 25,451,260 shares were
reduced to 1,272,562, and the adjustment for small shareholders was 5,949
shares, for a total post-reverse of 1,278,511. Also on December 17, 1997,
shareholders approved, and Management effected a Plan of Reorganization and
Merger of Salvage World, Inc. into Solar Energy Limited, a private Delaware
Corporation, the effect of which merger changed the name of this Corporation,
move its place of incorporation from Nevada to Delaware and involved the
acquisition of Hydro-Air Technologies, Inc. ("HAT") to become a wholly-owned
subsidiary of this Issuer, Solar Energy Limited.
In accordance with our shareholders' approval, we acquired Hydro-Air
Technologies, Inc. ("HAT"), for stock equal to 40% of the total issued and
outstanding of the company, on a fully diluted basis (following the 20 to 1
Reverse Split, and the proposed issuance of such of the additional 10,000,000
Regulation D shares as might have been placed). The issuance to HAT is to
proceed in phases. The first phase issuance of 170,400 was made about April 15,
1998. The second phase issuance of 530,000 shares was made on October 23, 1998.
The amount of shares issued and possibly to be issued for HAT is summarized as
follows:
A. Issuance and Release of Solar stock. Solar and the HAT Shareholders
desired to create an orderly process for the issuance and progressive release of
common stock to or for the benefit of the HAT Shareholders.
1. HAT Shareholders. The HAT Shareholders were to receive subject to
this Reorganization Agreement, shares of Solar equal to 40% of the resulting
total issued and outstanding stock of Solar, on a fully-diluted basis, computed
following certain designated capital formation stages. However, the total number
of Solar shares which was to be issued to the HAT Shareholders to meet this
obligation was undeterminable at the time of the agreement.
2. Initial Issuance. Upon consummation of the Merger, Solar was issue
and did issue to the HAT Shareholders 20% of 40% of the outstanding Solar
shares, as follows:
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
HAT Shareholder April 1998 October 1998 Total
- ---------------------------------------------------------------
Melvin L. Prueitt 16,359 50,880 67,239
David Jones 8,179 25,440 33,619
Stanley D. Prueitt 8,179 25,440 33,619
Leslie Speir 8,179 25,440 33,619
Dana Hansen and Linda Hansen 3,408 10,600 14,008
Ara Lee Stevens 1,363 4,240 5,603
Baycove Investments, Inc. 34,080 106,000 140,080
Hydro-Air Founders, LLC 90,653 281,960 372,613
Total HAT 170,400 530,000 700,400
============================ ========== ============ =======
</TABLE>
3. Phased Release of Shares. The remaining 80% of 40% is to be issued
to the HAT Shareholders in phases based on the following formula: one share of
Solar stock for each $2.00 of earnings generated by HAT, as determined by
Generally Accepted Accounting Principles (GAAP). There have not been revenues to
date, so that no further issuances have been made to or for HAT.
There are certain internal agreements between the HAT Founders and
Shareholders (and not involving us) which are disclosed in Item 12 of Part III,
Relationships and Transactions. These are arrangements by which the HAT group
agreed to manage the distribution, voting and private trading restrictions, as
between them.
Hydro-Air Technologies, Inc. (the Issuer's first wholly-owned subsidiary)
is a development stage company, founded by Dr. Melvin L. Prueitt, David Jones,
Stanley Prueitt and Leslie Speir, which company has developed certain
intellectual property rights with which they intend to generate commercially
viable electrical power using the energy of vaporization. The intellectual
property rights are called Hydro-Air Renewable Power System ("HARPS") and
include two U.S. Patents, one granted on September 3, 1996 (number 5,551,238)and
a second granted on July 28, 1998 (number 5784886). We regarded and regard this
acquisition HAT as an investment by us Issuer in future growth of demand for
HARPS. HAT has proposed other projects which are disclosed and discussed under
section (b) of this Item 1.
Also on December 17, 1997, shareholders approved the placement of up to
10,000,000 additional shares of common stock, at $0.10, pursuant to Regulation
D, Rule 504. A total of 7,800,000 shares were placed.
About July 23, 1998, we placed 125,000 restricted shares to three
knowledgeable investors.
About November 10, 1998, we placed a further 2,000,000 shares, in reliance
on Rule 504, to four accredited off-shore investors, at $0.01 per share. As
before, these investors were known to management and affiliates before the
investment and had complete access, by virtue of that relationship to the kind
of information which registration would have provided.
Accordingly, a total of 9,800,000 shares were placed pursuant to Rule 504.
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Renewable Energy Corporation ("RECO")(the Issuer's second wholly-owned
subsidiary) is also a development stage company. It was founded by Dr. Reed
Jensen. Dr. Jensen has developed certain intellectual property rights for a
process called Direct Solar Reduction of CO2 to Fuel and Feedstock, which rights
and process the Company intends to develop into a commercially viable system.
This process utilizes solar energy to directly reduce CO2 that would have been
released to the atmosphere while producing chemical feedstock, fuel and "green"
or environmentally friendly electricity. Management of the parent issuer regards
the acquisition of RECO as a long-term investment in the growing market for
renewable energy sources.
RECO was acquired 100% from its owner developer Dr. Reed Jensen, an
individual unrelated to us, for 350,000 escrowed shares of the common stock of
this Issuer, plus $20,000 cash. In addition to those share for direct
acquisition, 150,000 shares have been reserved un-issued for possible future
employee options. No options for the acquisition of these option shares has been
adopted.
On April 27, 1999, we places an additional 100,000 restricted securities,
at $1.00 per share, pursuant to section 4(2) to a single accredited investor.
On or about November 22, 1999, we placed an additional 800,000 shares to a
single accredited investor, at $0.18 per share.
The resulting total issued and outstanding 13,153,911 is further
illustrated in the following table:
The Remainder of this Page is Intentionally left Blank
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Series # Taurus Salvage Solar Energy
Issuances (20 to 1)
1 4(2) 25,000,000 1,250,000
2 504 451,260 22,562
Subtotal 25,451,260 1,272,562
Adjustment (1) 5,949
Subtotal 5,949
Interim Total 1,278,511 1,278,511
3 504 7,800,000
4 4(2) 125,000
5 504 2,000,000
6 4(2) 100,000
6 4(2)/Rule 145 700,400
7 4(2)/Rule 145 350,000
8 Rule 4(2) 800,000
Total Issued 13,153,911
================ ============
</TABLE>
(B) BUSINESS OF THE ISSUER. Solar Energy Limited is a public U.S. company
listed on the OTC Electronic Bulletin Board ("OTCBB") whose ticker symbol is
"XSEL". The Company's thrust is to explore and/or develop alternative energy
systems that are environmentally friendly in addition to being economically
viable and competitive. It is estimated that the world needs 50% more electrical
power in the next 25 years. It is calculated that, at the current use, there are
44 years of oil, 57 years of gas, 91 years of uranium and 564 years of coal
left. What is an alternative? Solar power in several forms. The sun discharges
on the earth enough energy each day to fill our global total energy requirements
for many years. We only need to tap a small portion of the sunlight. At the same
time the globe's second major problem, lack of water, could also be solved (it
is mainly a lack of inexpensive power to fuel desalination plants).
PROJECTS HAT:
1. HARPS. As a first project, XSEL purchased 100% of a private company
located in Los Alamos, New Mexico. This operating company, Hydro-Air
Technologies, Inc. ("HAT") has as its main assets certain technology, patents,
and intellectual property rights to the concept producing electricity using the
energy of evaporation. One quart of water has about one-twentieth the energy of
a quart of gasoline. The process derived from this technology, called Hydro Air
Renewable Power Systems ("HARPS"), is an efficient and environmentally friendly
energy source. It uses only dry air and water (either fresh, ocean, or waste
water) to produce electricity while at the same time cleaning the air! Initial
internal computer driven studies conducted by the Company indicate that
electricity could be produced at one-third the current cost of electricity
generated by nuclear or fossil fuel plants. A working prototype is being built
in Los Alamos. Research and Development continues. No date for marketability has
been set. The HARPS units can be small enough for a house or large enough to
service a state. In theory, on a few hundred acres of land on the Baja,
California coast, enough electricity could be produced to service the needs of
Canada, the U.S. and Mexico. HAT was founded by and is headed by Dr. Melvin
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Prueitt, a research scientist, author of three books and more than thirty
publications. One of his many achievements is that he was the first to determine
the temperature of a lightning bolt. He holds twelve patents and is listed in
Who's Who in America Index, Men of Achievement and Who's Who in the West. Most
of the team Dr. Prueitt assembled to assist in the project come from the Los
Alamos National Laboratory facilities, the research center managed by the
University of California for the Department of Energy of the U.S. government.
2. ACES - HAT has recently acquired the rights of a second project called
Air Conditioner Energy System ("ACES"). This project is similar in theory to
HARPS. The difference is that the ACES units are primarily for single family
residences. They are small, self-contained roof mounted units that produce
electricity with a unique bi-product - cold air. That is, they provide
electricity 24 hours a day whilst air conditioning a house. The theory also
relies on the heat of vaporization of water but is simpler than the HARPS.
Excess power can be sold to the utility company. Again, a model/prototype is to
be built with the same team from HAT. Research and Development continues. No
date for marketability has been set.
3. PHOTOVOLTAICS (THE CONVERSION OF LIGHT TO ELECTRICITY). Much work, time
and research dollars are being spent globally on this concept which is the
direct production of electricity by light passing through a photovoltaic medium.
WE have already spent some time and funds on this concept but the field is
currently flooded with hundreds of companies exploring this potential. For now
we are focusing on investigating various new photovoltaic materials that are
both economical and have higher efficiencies than those now readily available.
4. DESALINATION PLANTS: SPAESS AND SUNSPRING: The main problem of
desalination plants is that the energy required per ton of water produced is
high. We have developed an energy collection system (patent pending) called
SPAESS, which stands for Solar Power and Energy Storage System. The concept of
SPAESS is that it employs a large flexible earth coupled solar thermal collector
system. SPAESS collects energy during the daytime and stores it, for daytime and
nighttime use. SPAESS transfers heat to low boiling liquids to drive turbine
generators. The projected cost of energy per kilowatt, using SPAESS system is
projected by Dr. Prueitt to be less than any existing system currently in use.
These are projections only. As a result of the work done on SPAESS, we have
developed a unique (patent pending) system to produce low cost fresh water from
sea water. The name given for this system is SunSpring. It is an innovative
method of converting low temperature solar heated water to directly pump sea
water (rather than having to produce electricity to power a motor to drive a
high-pressure pump). SunSpring uses no electric motor. We have already tested
various components of SunSpring, and all tests have exceeded expectations, thus
far. This does not guarantee that the final assembled unit will be trouble free.
A full working prototype is expected to be in operation by the fall of 2000.
5. MECH. As a result of the research work on ACES and HARPS, we have
developed an engine that is one-third the size of a conventional internal
combustion engine for the same power, while being about 25% more efficient. MECH
is the name given for Motor, Expander, Compressor, Hydraulics. We have already
made a small working prototype and all tests currently exceed expectations. We
are currently exploring our options with MECH, while continuing to test and
refine the prototype. The main source of the increased efficiency is because
there is primarily rolling friction generated (instead of sliding friction in
conventional engines) as the MECH pistons rotate back and forth on rollers.
PROJECTS RECO:
DIRECT SOLAR REDUCTION OF CO2 (SOLAREC). We acquired 100% of the shares of
Renewable Energy Corp (RECO as of January 1, 1999 from Dr. Reed Jensen, who
joined our Board of Directors. "Solarec" is the concept name for the patented
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process whereby, using only solar energy and CO2 obtained from the atmosphere,
to produce a fuel (gasoline, diesel, etc.) with electricity and free oxygen
produced as by-products. Various components of the system have been successfully
tested to date and a full scale prototype is scheduled to be completed by June
2000. Dr. Jensen is the President of this subsidiary, RECO, as well as one of
our principal directors.
DEVELOPMENT TEAMS AND PROGRESS: Two separate teams have been organized and are
now in place. The HAT team is directed by Dr. Mel Prueitt. The RECO team is
directed by Dr. Reed Jensen. Four prototypes are in process of development:
SPAESS, SunSpring, MECH and RECO's solar reduction of CO2 (Solarec). It is
likely that each of these projects, if and when prototypes are operational and
successful, will be functional but not immediately commercial, cost effective or
aesthetically packaged or contained. It is therefore expected that related
spin-off projects will emerge from these technologies, until one or more
products be commercialized profitably. HARPS and ACES are progressing albeit
slowly. We are focusing on SPAESS, SunSpring, MECH and RECO's Solarec. We feel
that one the these latter four will be in commercial production earlier with
less capital requirement. However, much of the research and development work
already performed in HARPS and ACES has given rise to, and been used in these
latter four projects.
The success of the SPAESS and Solarec projects will dependent on the final
cost to produce the renewable electricity by the Issuer's developmental system,
as compared to other existing or competitive methods of producing electricity.
If the result is not cost-effective, the system will not be commercially viable.
Should SPAESS and Solarec prove able to produce electricity at better than $0.05
per kilowatt, the concept would be deemed proven and successful. Completion of
both the SPAESS and Solarec prototypes, and testing of them, is expected to
occur by fall of 2000.
WORKING PROTOTYPES refer to assembled model systems which not only work, but
work at an acceptable level of performance. Preliminary prototypes or working
models may prove the scientific validity of a process before the system is
refined or redesigned to bring performance to an acceptable and possibly
commercial level. HARPS and ACES are presently deferred favor of the other
projects, but not abandoned. The reason is that the development of these
projects has given rise to technologies and science suggestive of products
capable of more rapid development. We expect that working prototypes will be
demonstrated for MECH in May 2000. Solarec is scheduled tentatively for June
2000. SunSpring and SPAESS is scheduled for fall of 2000. RECO is scheduled for
June 2000.
We feel that it is too early and speculative to make projections about marketing
and sales at this point in time. The earliest possible pre-sales revenues, sales
of licenses and such, not expected before the year 2001.
FUTURE MARKETING. In all of our projects, the business plan is to produce a
working model/prototype that can be tested as to efficiency, cost of product,
etc. The decision whether to produce the units directly or whether to license
other companies the right to manufacture and distribute the unit is yet to be
decided. More likely, it will be a combination of some company owned plants
combined with territorial licenses to other qualified manufacturers. The market
for each of our projects (if successfully tested) is unlimited. The amount of
units to be sold will be dependant on our ability to raise sufficient working
capital for our own manufacturing plants and our ability of the Company to
franchise or license other facilities globally. It follows that the ability of
the Company to raise funds will be dependent on the performance of the
prototypes currently in development and production. No efforts have been made to
date to identify other companies to manufacture our products, or to identify
probable or targeted licensees. The Issuer had determined to await commercially
viable prototype readiness before addressing manufacturing and marketing issues.
We are not ready to address those issues.
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Should we encounter new technologies with synergies to our existing work,
further acquisitions might well be considered. However, we have enough before us
at the present time, such that we are not looking for additional project or
other acquisitions at this time. Neither our officers, directors, promoters or
their respective affiliates have had any discussions with (and there are no
present plans, proposals or arrangements with) any representatives of the owners
of any business or company regarding the possibility of any additional
acquisitions or mergers.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's principal offices are located at 112 C Longview Drive, Los
Alamos, New Mexico, 87544. The facilities consist of a leased plant and building
of about 3,400 square feet, including offices and laboratory facilities in which
prototype development is on-going. The lease provides for rent of $55,200
payable $2,300 per month. We pay for fire, flood and damage insurance of the
premises and for premises liability to third persons, in addition to normal
utilities. Our facilities are located minutes away from the prestigious Los
Alamos National Laboratory.
ITEM 3. LEGAL PROCEEDINGS.
There are no legal proceedings pending against the Company, as of the
preparation of this Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no Shareholder Meetings or matters submitted to shareholders during
1999.
The Remainder of this Page is Intentionally left Blank
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND STOCKHOLDER MATTERS.
(A) MARKET INFORMATION. The Company, has one class of securities, Common Voting
Equity Shares ("Common Stock"). The Company's Securities may be quoted in the
over-the-counter market, but there is a young, sporadic and potentially volatile
trading market for them. Quotations for, and transactions in the Securities, are
capable of rapid fluctuations, resulting from the influence of supply and demand
on relatively thin volume. There may be buyers at a time when there are no
sellers, and sellers when there are no buyers, resulting in significant
variations of bid and ask quotations by market-making dealers, attempting to
adjust changes in demand and supply. A young market is also particularly
vulnerable to short selling, sell orders by persons owning no shares of stock,
but intending to drive down the market price so as to purchase the shares to be
delivered at a price below the price at which the shares were sold short.
(B) HOLDERS. Management calculates that the approximate number of holders of
the Company's Common Stock, as of December 31, 1999, the number of shareholder
was approximately 270.
(C) DIVIDENDS. We have not paid any cash dividends on our Common Stock, and do
not anticipate paying cash dividends on its Common Stock in the next year. We
anticipate that any income generated in the foreseeable future will be retained
for the development and expansion of our business. Future dividend policy is
subject to the discretion of the Board of Directors and will depend upon a
number of factors, including future earnings, debt service, capital
requirements, business conditions, the financial condition of the Company and
other factors that the Board of Directors may deem relevant.
(D) SALES OF UNREGISTERED COMMON STOCK 1999.
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On April 27, 1999, we places an additional 100,000 restricted securities,
at $1.00 per share, pursuant to section 4(2) to a single accredited investor.
On or about November 22, 1999, we placed an additional 800,000 shares to a
single accredited investor, at $0.18 per share.
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(E) MARKET INFORMATION.
Our Common Stock is quoted Over-the-Counter on the Bulletin Board
("OTCBB"). The Company's trading symbol is XSEL. Based upon standard reporting
sources, the following information is provided:
<TABLE>
<CAPTION>
<S> <C> <C>
period high bid low bid
1st 1999 2.90 1.75
2nd 1999 1.95 0.80
3rd 1999 1.05 0.15
4th 1999 0.75 0.25
======== ======== =======
</TABLE>
The foregoing price information is based upon inter-dealer prices without
retail mark-up, mark-down or commissions and may not reflect actual
transactions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(A) PLAN OF OPERATION: 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.
GOING CONCERN. Note 2 of our Auditor's report states: "The Company has had
recurring operational 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 this uncertainty. It is management's plan to
raise sufficient funds to develop the next phase of HARPS and to begin to
manufacture and Market HARPS power system." The issues relating to this note are
discussed above and in the following paragraphs of this Item.
In summary, our circle of principal shareholders are committed to our
continued operations. We have reported that our activities are sufficiently
funded for the next twelve months. Any unexpected shortfall will be covered by
our principal shareholders as advances or additional internal placements. Beyond
our minimal requirements for the activities described in Item 1 of Part I and
this Item, we will seek additional capital for future needs and for the
expansion of our activities from development stage to operational stage.
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(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(1) OPERATIONS AND RESULTS FOR THE PAST TWO FISCAL YEARS AND.
(2) FUTURE PROSPECTS.
HAT
Our business consists entirely of the activities of HAT and RECO. It
consists of scientific research and development of working prototypes of the
projects identified in Item 1 of Part I, Description of Business. HAT's
development team has made substantial progress in proving the viability of the
scientific and chemical processes which underlie HARPS and ACES. Full working
prototypes are not yet achieved. They are taking more time than originally
expected, for the reason that no existing turbines will work with the chemical
processes as low temperatures. It is therefore necessary for our HAT team to
develop a turbine generator of our own. As a result of HAT's work on HARPS and
ACES, the HAT team became aware of MECH, SPAESS and SunSpring, and has
re-allocated attention to these promising areas. Accordingly, management's
decision to focus on one or more of the projects is based on its evaluation of
which can become commercially viable earliest. We are focusing on MECH,
SunSpring, Solarec and SPAESS.
RECO
The RECO team reports that RECO is well underway developing the Solarec
prototype. This last project is on schedule and under budget.
(C) MARKETING AND LICENSING ISSUES AND CRITERIA. No efforts have been made to
date to identify other companies to manufacture HARPS, ACES or RECO, or to
identify probable or targeted licensees. The Issuer had determined to await
commercially viable prototype readiness before addressing manufacturing and
marketing issues. We do not expect to achieve significant sales, if any, in the
next six to twelve months.
(D) REVERSE ACQUISITION: Our first wholly-owned subsidiary, Hydro-Air
Technologies, Inc. ("HAT"), was acquired in a transaction which is similar to a
reverse acquisition. A reverse acquisition is the acquisition of a private
company by a public company, by which the private company's shareholders
acquired control of the public company. Neither HAT nor its shareholders
acquired majority control of us. However, since we had no revenues or assets,
this acquisition is treated as a Reverse Merger for accounting purposes. This
Issuer is presently committed to the development of the business of its two
wholly-owned subsidiaries. While this Issuer is continuously interested in
opportunities for direct acquisition of other technologies which may have
synergy with its existing developmental projects, Solar Energy Limited may no
longer be used as a vehicle for a reverse acquisition. The acquisition of the
second subsidiary, Renewable Energy Corporation Renewable Energy Corporation in
April 1999, was a direct acquisition. We are presently committed to the
development of the business of its two wholly-owned subsidiaries. While we are
continuously interested in opportunities for direct acquisition of other
technologies which may have synergy with its existing developmental projects,
Solar Energy Limited may no longer be used as a vehicle for a reverse
acquisition
Expansion of our present office and lab is under consideration, and the
operating subsidiaries may employ more laboratory assistants in the near future
as justified. Purchases of additional laboratory equipment is also likely. While
no guarantee can be given as to when the company's operations will achieve
substantial profitability, a reasonable estimate is believed to be one to two
years of transition from its development stage to a true operational stage with
sales and distribution.
ENVIRONMENTAL ISSUES: HARPS and ACES use refrigerants; however, these newer
refrigerants are considered environmentally friendly, in contrast to older
substances. If seawater is used as the evaporation energy source, the salt
concentration in the water will be increased. In order to discharge this brine
into the ocean, it may need to be diluted by a significant quantity of seawater
before discharge. The same is true of desalination, using seawater, where the
energy required per ton of water is quite high. SunSpring is our project
designed to be an efficient osmosis desalination plant.
OTHER REGULATION. We do not yet know whether agency regulation or approval of
any of our projects will be required before they can be marketed. It is too
early in the process for us to determine that. It is reasonable to expect that
we will face such issues as to some or all of our products, when our projects
achieve the stage of being products, ready for manufacture and sale.
YEAR 2000 (Y2K) ISSUES. We have encountered no year 2000 computer problems of
our own, or in connection with any suppliers or correspondents. Management has
determined that no such problems or issues exist which affect us.
REVENUES are not a factor in our current financial reports.
EXPENSES in total were less in 1999 than 1998, but we do not consider the
differences to be materially indicative of much. We had no interest expense in
1999, no bad debt write-off, almost no promotional expenses and our legal and
accounting was substantially less, as was our travel expense. However we have
more developmental and patent expenses to amortize, and more items to
depreciate. We had some increase in consulting fees and financial service fees,
and have increased our research and development. These differences are due to
the fact that 1998 was our first real operating year, and many expenses were
unique to that year that are not normal operation expenses for us. The
differences are further explained by the increase in the number of projects we
now manage, and addition of our second operating subsidiary's activities.
NET LOSS, with no revenues, is chiefly a function of our expenses. We had a
smaller operating loss in 1999 than 1998, but, for the reasons stated, we do not
consider the improvement to be indicative of future results, but rather
reflective of the factors stated.
ITEM 7. FINANCIAL STATEMENTS.
Please see the Exhibit Index found on page 20 of this Report. The financial
statements listed therein, attached hereto and filed herewith are incorporated
herein by this reference as though fully set forth herein.
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
The Remainder of this Page is Intentionally left Blank
12
<PAGE>
PART III
ITEM 9.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following information is provided concerning the Management of Issuer,
including all current directors and officers, and positions with the Company.
All directors were elected at the last meeting of shareholders on August 7,
1998, and will hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified. The officers are elected
by the Board of Directors at the first meeting after each annual meeting of
shareholders and hold office until their successors are elected. The date of the
next annual meeting of the Company has not yet been set. The management of the
Company is presently provided on a day-to-day basis by personnel of the Company.
The overall management of the Company is presently under the direction and
control of its officers and directors.
The Board of Directors of this Company, Solar Energy Limited, consists of,
Dr. Melvin L. Prueitt, Joel S. Dumaresq, Norman Wareham, David Jones and Dr.
Reed Jensen.
The Board of Directors of the subsidiary, Hydro-Air Technologies, Inc.,
consists of Dr. Prueitt and David Jones, Leslie Speir, and Stanley Prueitt.
The Board of Directors of the subsidiary, Renewable Energy Corporation,
consists of Dr. Reed Jensen.
Dr. Melvin L. Prueitt, is the Chairman of the Board of Directors of Solar
Energy Limited, and President of our wholly-owned subsidiary, Hydro-Air
Technologies, Inc. Dr. Prueitt received his B.S. from the Brigham Young
University, his M.S. from the University of Arizona and his Ph.D. from the
University of New Mexico, all in physics. Following his graduation from the
University of Arizona, Dr. Prueitt joined the Los Alamos National Laboratory
where he remained until 1993. He has developed a method which combines dry air
and water under controlled conditions to release the energy of vaporization of
water. This method called HARPS (Hydro-Air Renewable Power System), uses the
energy developed thereby to drive a turbine and generator for the production of
electric power. HARPS produces no atmospheric pollutants, and, since it produces
large quantities of air, it can be used to clean particulates and some noxious
gases from polluted air by adding a wet scrubber to the exhaust air. Unlike
nuclear plants, it produces no radioactive materials that must be disposed of,
unlike coal-fired plants it requires no land-scarring strip mining, and unlike
oil-fired plants it does not contribute to the imbalance of foreign trade. Dr.
Prueitt, who holds 12 U.S. patents, was the first to determine the temperature
of lighting strikes. A prolific research scientist and writer, he has written
three books and has been published in over 30 publications. He is listed in Whos
Who in the West, Whos Who in America Index, Men of Achievement, Dictionary of
International Biography and Contemporary Authors.
Joel S. Dumaresq, is the President of Solar Energy Limited. He is also CFO
of Nifco Synergy, Inc. developing financial controls and systems for Expert
Software Developer with operations in Canada, the United States and Mexico, and
was instrumental in securing $27 million Class 12 Software financing for the
company. Mr. Dumaresq was President of Westair Aviation, Inc., responsible for
re-organizing and re-financing this air ambulance company. His experience with
corporate finance, institutional equity sales and investment brokerage spans the
past decade.
13
<PAGE>
Norman Wareham is the our Secretary-Treasurer and Chief Financial Officer.
He has a comprehensive background in implementing information systems for public
and private companies, with particular expertise in financial management and tax
planning. He was president of Global Financial Corporation in the British West
Indies, and has been a public accountant for 25 years, owning two accounting
firms. Mr. Wareham is currently on the board of directors and is chief financial
officer for several public companies, including the ZMAX Corporation, and
Cybernet Internet Services International, Inc. He is also president of Wareham
Management Ltd., a private company engaged in management consulting for public
and private companies.
David Jones is one of our Directors. He brings to the Company 17 years of
business experience resulting from starting and developing Jomar Systems, Inc.,
which specialized in the design and manufacture of nuclear assay equipment, and
32 years of systems development experience involving electronic circuit design,
mechanical apparatus design, application software and firmware design,
manufacturing and integration. In addition to publishing several articles on
nuclear instrumentation and methods, Mr. Jones holds a patent for "Method &
Apparatus for Controlling Multiple Motors". In 1992, David F. Jones was awarded
the "Excellence in Enterprise" award by the Los Alamos Economic Development
Corporation, the Los Alamos National Bank and the Los Alamos National
Laboratory.
Dr. Reed Jensen. is a one of our Directors, and the sole Director of our
second subsidiary, Renewable Energy Corporation. From 1998 to Present, he has
been engaged as a Program Manager for CO2 sequestration, at Los Alamos National
Laboratory ("LANL"). From 1995 to 1998, Dr. Jensen was Deputy Director for
Environmental Program Management, LANL. He was responsible for the establishment
of environmental stewardship at Los Alamos. From 1993 to 1995, he was engaged in
Research at LAN in Nuclear fuel cycle separations from molten salt media and
high temperature gas kinetics. From 1986 to 1993, he was Deputy Associate
Director with line management responsibility for over 1000 chemistry and
materials people including chemistry and materials divisions, at LANL centers
and program offices. From 1981 to 1986, he was Program manager and technical
leader for Isotope LANL Separation and Laser Programs. From 1974 to 1981, he was
Division Leader and Deputy responsible for quality of the technical work, and
Role Division Leader LANL engaged primarily in technical leadership. From 1972
to 1974, he was Group Leader, LANL Technical director of activities for about 50
people, in developing giant pulse chemical lasers and inventing the nozzle
expansion/laser dissociation method for uranium isotope separation. From 1969 to
1972, he was a Staff Member, Geomagnetic field tracing with barium jets,
chemical, LANL kinetics and chemical lasers. From 1967 to 1969, he was Assistant
Professor of Chemical laser kinetics, Environmental science and Chemistry,
Brigham Young University. From 1966 to 1967, he was Staff Member, Weapons
explosives initiation and kinetics of LANL explosions, and engaged in CO2 laser
research. He was educated at the University of California at Berkeley, doing
Postdoctoral Studies in Laser Chemical Kinetics (1965-1966 school year); and
Brigham Young University, Provo, Utah, earning his Ph.D., 1965, in Physical
Chemistry and his B.A., 1960, in Chemistry and Mathematics. He enjoys a reading
knowledge of German and French, and is fluent in Spanish, by formal study and
residence in Hispanic countries. His awards include NIH Postdoctoral Fellow
(1965-1966), NDEA Graduate Fellow (1962-1965), Outstanding Thesis Award (1965),
Army Commendation Medal (for technical work, 1962), U.S. Department of Energy
Certificate of Appreciation (1989), American Academy of Environmental Engineers
Excellence in Environmental, Engineering Superior Achievement Award (1998).
Leslie Speir is a Directory of our Subsidiary, Hydro-Air Technologies. He
brings to that Company the solid technical experience in systems design, and in
heading up mechanical design teams. He is presently Senior Designer for the
Process Equipment Section, Merrick and Company, having participated in the Cold
Vacuum Drying Facility for the DOE Richland Operations Office, and he designed
14
<PAGE>
equipment for the Pit-9 Waste Reclamation Characterization Facility. He enriches
the Company with specialized knowledge and experience in construction, operation
and maintenance of electro-mechanical and hydraulic systems, refrigeration
equipment, gas chromatographies, ultra high vacuum systems, and mass pectrometer
leak detectors, as well as engineering stress and dynamic drive train and basic
nuclear physics calculations and radiation exposure computations, heat flow
calculations and operation and maintenance of nuclear reactors including
pressurized water sodium cooled and gas cooled variation. He is also trained and
experienced in health physics surveying techniques and radiological hazards
control.
Stanley Prueitt is a Director of our Subsidiary, Hydro-Air Technologies. He
brings that Company a range of business, management and personnel skills along
with solid experience in project controls and coordination. His executive
experience includes marketing, franchising, news director, and business
start-up, and the organization of public companies. He speaks, reads and writes
Scandinavian languages and is an experienced motivational speaker and conductor
of public seminars, a very active member of the New Mexico Mounted Patrol.
Dr. Prueitt and Dr. Jensen are engaged in the affairs our research and
development projects substantially full-time. Our other officers and directors
provide insubstantial time to our affairs, as needed, but have not been required
to devote more than minimal time to us, at the present time.
Dr. Melvin L. Prueitt, and Stanley Prueitt are father and son.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Based solely upon a review of
Forms 3, 4 and 5 furnished to us, if any, we are not aware of any person who at
any time during the fiscal year ended December 31, 1998 was a director, officer,
or beneficial owner of more than ten percent of the Common Stock of the Company,
and who failed to file, on a timely basis, reports required by Section 16(a) of
the Securities Exchange Act of 1934 during such fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
The Officers and Directors of Solar Energy Limited serve without
compensation at this time. No plan of compensation has been adopted or is under
consideration at this time. None of the Directors currently receives, or has
ever received, any salary from the Company in their capacities as such, and none
are expected to be compensated in their capacities as such. No officers are
expected to receive any compensation for their services. No officers or
directors are under an employment contract with the Company. Each Officer
presently devotes an insubstantial amount of time to the affairs of the Company.
The Company has no retirement, pension, profit sharing, or insurance or medical
reimbursement plans.
The Officers and Directors of the HAT Operating subsidiary are compensated
for their time on an hourly wage basis. The only full-time person is Dr.
Prueitt, whose compensation is set at $35.00 per hour. Compensation is not
specifically for duties as Officers and Directors as such, but generally for
participation in all their activities of the Operating Subsidiary.
Dr. Reed Jensen is the only officer/employee of RECO. He is its founder. He
receives no compensation at this time. 150,000 shares have been reserved for
employees of RECO, to be issued, if at all, pursuant to a plan not yet
developed. No plan will be developed until commercially viable products are
developed, and until this subsidiary achieves profitability.
We issued a total of 700,400 shares to or for HAT. We are required to issue
to or for HAT one additional share for each $2.00 of earnings generated by HAT,
as determined by Generally Accepted Accounting Principles (GAAP) to a maximum of
3,502,000 additional investment shares. There have not been revenues to date, so
that no further issuances have been made to or for HAT. There is no indication
when or if these shares or any of them will be earned.
This discussion is complicated by those internal arrangements among the HAT
shareholders, and their Hydro-Air Founders LLC. The HAT Founders LLC is a kind
of trust arrangement for the shares issued to it and the shares which may become
15
<PAGE>
issuable to it, when and if HAT produces earnings. Their Founders Agreement sets
up a formula for distribution in proportion to their continuing participation.
Please see Item 12 following, for more information and for citation to the
appropriate exhibits provided with this filing. In order to determine how the
HAT founders would distribute their Founders Agreement shares, the computation
would include factors such as hours and other participation not yet
ascertainable.
Since it is impossible to determine whether or whom shares may be issued in
the future, no tabular presentation of these multiple contingencies is
practicable, except to show the amount issued, that maximum amount which could
be issued, and the distribution by percentages of those shares, assuming the
maximum issuance, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HAT Shareholder Issued % If Issued
Melvin L. Prueitt 67,239 10 350,200
David Jones 33,619 5 175,100
Stanley D. Prueitt 33,619 5 175,100
Leslie Speir 33,619 5 175,100
Dana Hansen and Linda 14,008 2 70,040
Hansen
Ara Lee Stevens 5,603 1 35,020
Baycove Investments, Inc. 140,080 20 700,400
Hydro-Air Founders, LLC 372,613 53 1,856,060
Total HAT 700,400 100 3,502,000
========================= ======= ==== =========
</TABLE>
It is important to understand that these relationships and agreements among
and between the HAT shareholders and the Hydro-Air Founders pre-existed our
acquisition of HAT and are internal matters to that subsidiary. Our obligation
to HAT is only to issue additional shares per formula if and when Hat generates
earnings to us.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
To the best of Issuer's knowledge and belief the following disclosure
presents, as of the date of this Report, December 15, 1998, the total beneficial
security ownership of all Directors and Nominees, naming them, and by all
Officers and Directors as a group, without naming them, of Issuer, known to or
discoverable by Issuer, and the total security ownership of all persons,
entities and groups, known to or discoverable by Issuer, to be the beneficial
owner or owners of more than five percent of any voting class of Issuer's stock.
More than one person, entity or group could be beneficially interested in the
same securities, so that the total of all percentages may accordingly exceed one
hundred percent. Issuer has only one class of stock, issued and outstanding,
namely Common Voting Equity Shares.
In the following table, the total beneficial ownership of shares is shown.
All of the shares issued for the acquisition of HAT are shown as
owned/attributed to each of the HAT Founders. Please refer to Item 12 of this
Part III for more acquisition about the internal share ownership relationships
of the HAT owners with respect to each other.
The Remainder of this Page is Intentionally left blank
Please see Table on next page
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address of Beneficial Owner Share %
Ownership
- --------------------------------------------------------------------------------
Dr. Melvin L. Prueitt (1) 700,400 5.33
146A Estagate Drive
Los Alamos, New Mexico, 87544
Chairman/Director
- --------------------------------------------------------------------------------
Joel S. Dumaresq 20,000 0.15
#5 4360 Agar Drive
Richmond BC Canada V7B 1A3
President/Director
- --------------------------------------------------------------------------------
Norman Wareham -0- 0.00
1177 West Hastings
Vancouver BC 2V6E 2K3 Secretary
Treasurer/Director
- --------------------------------------------------------------------------------
David M. Jones (1) 700,400 5.33
146A Estagate Drive
Los Alamos, New Mexico, 87544 Director
- --------------------------------------------------------------------------------
Dr. Reed Jensen. 350,000 2.66
146A Estagate Drive
Los Alamos, New Mexico, 87544 Director
- --------------------------------------------------------------------------------
Officers and Directors as a Group 1,770,800 13.48
- --------------------------------------------------------------------------------
Leslie Speir (1) 700,400 5.33
1177 West Hastings
Vancouver BC V6E 2K3 Director Subsidiary
- --------------------------------------------------------------------------------
Stanley Prueitt (1) 700,400 5.33
1177 West Hastings
Vancouver BC V6E 2K3 Director Subsidiary
- --------------------------------------------------------------------------------
Hydro-Air Founders (1) 700,400 5.33
1177 West Hastings
Vancouver BC V6E 2K3
- --------------------------------------------------------------------------------
Givigest Fiduciaria SA 800,000 6.09
Corso Elvezia 4
6900 Lugano Switzerland
- --------------------------------------------------------------------------------
Diane Poole (2) 940,000 7.16
1177 West Hastings
Vancouver BC V6E 2K3
- --------------------------------------------------------------------------------
Baycove Investments, Ltd. (2) 940,000 7.16
1177 West Hastings
Vancouver BC V6E 2K3
- --------------------------------------------------------------------------------
Baycove Capital Crop. (2) 940,000 7.16
1177 West Hastings
Vancouver BC V6E 2K3
- --------------------------------------------------------------------------------
Total Shares Issued and Outstanding 13,135,911 100.00
================================================================================
</TABLE>
(1) The Founders of HAT are the interested persons in the Hydro-Air Founders. In
addition to displaying the actual shares of each, the total of all is shown as
attributed to each. Please see Item 12, Relationships and Transactions, for more
information and disclosure.
(2) Rene Poole is the managing Director of the two Baycove entities. Diane Poole
is Rene Poole's daughter. These shareholders report that they are a single group
of related shareholders.
17
<PAGE>
CHANGES IN CONTROL. There are no arrangements known to Registrant,
including any pledge by any persons, of securities of Registrant, which may at a
subsequent date result in a change of control of Registrant. Should we encounter
new technologies with synergies to our existing work, further acquisitions might
well be considered. However, we have enough before us at the present time, such
that we are not looking for additional project or other acquisitions at this
time. Neither our officers, directors, promoters or their respective affiliates
have had any discussions with (and there are no present plans, proposals or
arrangements with) any representatives of the owners of any business or company
regarding the possibility of any additional acquisitions or mergers.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The founders of HAT are interested persons in the Hydro-Air Founders, LLC,
an entity created by the founders of HAT to determine the ultimate and phased
distribution of shares issued and to be issued to HAT for its acquisition by
this Issuer.
Founders Agreement. Pursuant to that certain Founders Agreement, David F.
Jones, Melvin L. Prueitt, Stanley Prueitt, and Leslie Speir (individually
referred to by name or as a "HAT Shareholder," and collectively referred to as
"HAT Shareholders") and Hydro-Air Technologies, Inc., ("HAT") a New Mexico
corporation (Corporation") agreed to a plan of organization, management and
funding for the HAT and for ownership of their interest in the Solar Energy
Limited. The sum and substance of this agreement is that the "Founders Shares",
that is the shares issued to Hydro-Air Founders, LLC, would be distributed to
the Founders according to a formula keyed to their future participation,
measured by hours, and by specific kinds of tasks. This Founders agreement is
internal to the Founders of HAT and does not further concern Solar Energy
Limited, this reporting corporation.
We issued a total of 700,400 shares to or for Hat. We are required to issue
to or for HAT one additional share for each $2.00 of earnings generated by HAT,
as determined by Generally Accepted Accounting Principles (GAAP) to a maximum of
3,502,000 additional investment shares. There have not been revenues to date, so
that no further issuances have been made to or for HAT. There is no indication
when or if these shares or any of them will be earned.
Voting Trust Agreement. The HAT shareholders also created a Voting Trust,
to hold and manage the shares covered by their Founders Agreement. This
agreement is also internal to the Founders and Shareholders of HAT, and does not
further concern Solar Energy Limited.
Stock Restriction Agreement. The HAT shareholders also created a private
stock restriction agreement, to limit the ability, as between the Founders and
Shareholders, to resell the shares of stock issued to them, in connection with
the acquisition of HAT by Solar Energy Limited.
The Founders Agreement, the Voting Agreement, and the Stock Restriction
Agreement effectively precede the acquisition by us of HAT. We are not a party
to these internal agreements of the HAT Founders and Shareholders.
18
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS. Audited Consolidated Financial Statements, for the
years ended December 31, 1999, and 1998.
(B) FORM 8-K REPORTS. None.
(C) EXHIBITS. F-99 Audited Consolidated Financial Statements, for the years
ended December 31, 1999, and 1998.
19
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the individual capacities
and on the date indicated.
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc. )
(originally Taurus Enterprises, Inc.)
Dated: March 15, 2000
/s/ /s/
Dr. Melvin L. Prueitt Joel S. Dumaresq
Chairman/Director President/Director
/s/ /s/
Norman Wareham David M. Jones
Secretary/Treasurer/Director Director
/s/
Dr. Reed Jensen
Director
20
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT F-99
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED
DECEMBER 31, 1999, 1998
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
22
<PAGE>
C O N T E N T S
Accountants Report 3
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Stockholders Equity 6
Consolidated Statements of Cash Flows 7
Notes to the Consolidated Financial Statements 8
23
<PAGE>
INDEPENDENT AUDITOR S REPORT
To the Board of Directors and Stockholders of
Solar Energy Limited
We have audited the accompanying consolidated balance sheets of Solar Energy
Limited (a Development Stage Company) as of December 31, 1999 and 1998 and the
related consolidated statements of operations, stockholders equity and cash
flows for the years ended December 31, 1999, 1998, 1997 and from inception on
January 5, 1994 through December 31, 1999. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Solar Energy Limited
(a Development Stage Company) as of December 31, 1999 and 1998 and the results
of its operations and cash flows for the years ended December 31, 1999, 1998,
1997 and from inception on January 5, 1994 through December 31, 1999 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring operating losses and is
dependent upon financing to continue operations. These factors raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in the Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
_________/s/_________
Salt Lake City, Utah
March 7, 2000
24
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Balance Sheets
ASSETS
December 31,
1999 1998
- --------------------------------------------------------------------------------
Current assets
Cash $263,371 $286,627
Employee advance 0 213
Notes receivable (Note 9) 0 50,000
Total Current Assets 263,371 336,840
Property & Equipment (Note 5) 25,297 16,653
Other Assets
Organization costs (Note 1) 0 2,181
Patent Costs (Note 6) 33,549 9,808
Goodwill (Note 7) 445,908 66,677
Deposits 4,537 3,537
Total Other Assets 483,994 82,203
Total Assets $772,662 $435,696
================================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable 58,973 44,236
Accrued liabilities 16,183 15,154
Notes payable - related party (Note 8) 428,639 210,252
Total Current Liabilities 503,795 269,642
Stockholders Equity
Common Stock, authorized
50,000,000 shares of $.0001 par value,
issued and outstanding 13,153,911 and
11,903,911 shares respectively 1,315 1,190
Additional Paid in Capital 1,617,197 953,323
Deficit Accumulated During the
Development Stage (1,349,645) (788,459)
Total Stockholders Equity 268,867 166,054
Total Liabilities and Stockholders Equity $772,662 $435,696
================================================================================
The accompanying notes are an integral part of these financial statements
25
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Statements of Operations
Cumulative
For the years Total
ended December 31, Since
1999 1998 1997 Inception
- --------------------------------------------------------------------------------
Revenues: $ 0 $ 0 $ 0 $ 0
Expenses:
Amortization 67,981 19,866 500 89,847
Depreciation 6,516 0 0 6,516
Bank Charges 1,152 983 0 2,135
Bad Debt 0 225,000 0 225,000
Consulting 48,007 16,675 0 66,900
Filing Fees 0 0 0 235
Financial Services 4,512 0 3,500 16,552
Interest Expense 0 15,923 0 15,923
Legal and accounting 26,294 90,089 0 128,883
Office 4,459 3,072 0 7,531
Promotion 275 15,666 0 15,941
Notary 0 0 0 20
Research & Development 399,792 288,088 0 687,880
Travel 10,474 89,328 0 99,802
================================================================================
Total Expenses 569,462 764,690 4,000 1,363,165
Other Income (Expenses)
Interest Income 8,276 5,244 0 13,520
Net (Loss) $(561,186) $(759,446) $(4,000)$(1,349,645)
Net Loss Per Share $(.045) $(.147) $(.003) $(.358)
Weighted average shares
outstanding 12,378,911 5,164,228 1,278,511 3,766,694
================================================================================
The accompanying notes are an integral part of these financial statements
26
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Statement of Stockholders Equity
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount capital Stage
- --------------------------------------------------------------------------------
Balance at beginning of development
stage-January 5, 1994 0 $ 0 $ 0 $ 0
Stock issued for
organization cost 1,250,000 125 2,375 0
Net loss December
31, 1994 0 0 0 (500)
Balance, December
31, 1994 1,250,000 125 2,375 (500)
Net loss December
31, 1995 0 0 0 (500)
Balance, December
31, 1995 1,250,000 125 2,375 (1,000)
Shares issued for
cash at $.10 13,000 1 25,999 0
Shares issued for
cash at $.00458 8,312 1 761 0
Shares issued for
cash at $.01 1,250 0 251 0
Stock split rounding
adjustment 5,949 1 (1) 0
Net loss December
31, 1996 0 0 0 (24,013)
Balance, December
31, 1996 1,278,511 128 29,385 (25,013)
Net loss December
31, 1997 0 0 0 (4,000)
Balance, December
31, 1997 1,278,511 128 29,385 (29,013)
Shares issued for acquisition of
Hydro-Air
Technologies, Inc. 700,400 70 (70) 0
Shares issued for cash at
$.10 per share 7,800,000 780 779,220 0
Shares issued for cash at
$1.00 per share 125,000 12 124,988 0
Shares issued for cash at
$.01 per share 2,000,000 200 19,800 0
Net loss for the year ended
December 31, 1998 0 0 0 (759,446)
Balance, December
31, 1998 11,903,911 1,190 953,323 (788,459)
Shares issued for cash at
$1.00 per share 100,000 10 99,990 0
Shares issued for acquisition of Renewable
Energy Corporation 350,000 35 419,965 0
Shares issued for cash at
$.18 per share 800,000 80 143,920 0
Net loss for the year ended
December 31, 1999 0 0 0 (561,186)
Balance, December
31, 1999 13,153,911 $1,315 $1,617,197 $(1,349,645)
================================================================================
The accompanying notes are an integral part of these financial statements
27
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Statement of Cash Flows
January 5,
1994
(inception
of the
development
For the years stage) to
ended December 31, December 31,
1999 1998 1997 1999
- --------------------------------------------------------------------------------
Cash Flows From Operating
Activities
Net loss $(561,186) $(759,446) $(4,000) $(1,349,645)
Adjustments to reconcile
net loss to net cash
provided by operations
(net of acquisition):
Amortization/Depreciation 74,497 21,968 500 98,465
Increase/Decrease in:
Employee advance 213 (176) 0 37
Accounts payable 14,321 34,770 0 49,091
Accrued expenses 1,029 15,154 0 16,183
Net Cash Flows Used In
Operating Activities (471,126) (687,730) (3,500) (1,185,869)
Cash Flows From Investment
Activities:
Cash acquired from subsidiary 42,733 204,956 0 247,689
Cash paid for patent costs (28,872) (3,917) 0 (32,789)
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 on notes receivable 0 (50,000) 0 (50,000)
Net Cash Provided by Investing
Activities (4,517) 139,105 0 134,588
Cash Flows From Financing
Activities:
Issued common stock for cash 244,000 925,000 0 1,196,013
Cash received on advance by
shareholders 318,387 410,252 0 728,639
Cash paid on debt financing (110,000) (500,000) 0 (610,000)
Net Cash Provided by Financing
Activities 452,387 835,252 0 1,314,652
Net increase (decrease) in cash (23,256) 286,627 (3,500) 263,371
Cash, beginning of year 286,627 0 3,500 0
Cash, end of year $263,371 $286,627 $ 0 $263,371
Supplemental Cash Flow Information
Cash Paid For:
Interest $ 0 $15,923 $ 0 $15,923
Taxes $ 0 $ 0 $ 0 $ 0
================================================================================
The accompanying notes are an integral part of these financial statements
28
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to The Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Solar Energy Limited ( the Company ) was incorporated as Taurus
Enterprises, Inc. under the laws 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 issued 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.
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.
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.
29
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies (Continued)
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 $1,349,645 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 December 31,
1999 and 1998.
1999 1998
- --------------------------------------------------------------------------------
Deferred tax asset:
NOL carrryforward $458,880 $268,076
Valuation allowance (458,880) (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.
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.
30
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
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.
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.
During January 1999, the Company issued 350,000 shares of its common stock
to acquire 100% of the stock of Renewable Energy Corporation. The shares were
valued at $1.20 each net of a 40% discount due on their restricted nature based
on the trading value of the stock at the time.
During May 1999, the Company issued 100,000 shares of its common stock for
cash of $100,000.
During November 1999, the Company issued 800,000 shares of its common stock
for cash of $144,000.
31
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 5 - Property & Equipment
Property and equipment consists of the following at December 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 December 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.
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 December 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 December 31 1999 is $10,000.
The accompanying notes are an integral part of these financial statements
32
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
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.
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.
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 December 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 carrying value of notes payable approximate fair value.
