U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period from _____________ to _______________
Commission File Number 001-14439
SOLPOWER CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 87-0384678
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7309 East Stetson Drive, Suite 102
Scottsdale, Arizona 85251
(Address of principal executive offices)
(602) 947-6366
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
The number of shares outstanding of each of the issuer's classes of
common equity was 23,391,560 shares of common stock, par value $.01, as of
September 30, 1998.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
SOLPOWER CORPORATION
INDEX TO FORM 10-QSB FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS PAGE NUMBER
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements............................................ 3
Balance Sheet
September 30, 1998 (unaudited) and March 31, 1998............. 3
Statements of Operations
Three Months and Six Months Ended September 30,
1998 (unaudited)............................................. 4
Statement of Cash Flows
Six Months Ended September 30, 1998 (unaudited)
and 1997 (unaudited)......................................... 5
Notes to the Financial Statements............................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 7
PART II
OTHER INFORMATION
None.................................................................... 8
SIGNATURES
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SOLPOWER CORPORATION
BALANCE SHEET
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
------------------ --------------
(UNAUDITED)
ASSETS
Current Assets
Cash $ 47,816 $ 183,842
Inventory 91,445 101,906
License Fee Receivable 4,600,987 2,160,000
Stock Subscription Receivable 100,000 600,000
Prepaid Expenses -- 2,917
---------- ----------
Total Current Assets $4,840,248 $3,048,665
Property and Equipment, Net 238,683 131,942
Other Assets
Marketing Rights 90,833 35,833
Security Deposits 14,422 14,422
---------- ----------
Total Other Assets $ 105,255 $ 50,255
---------- ----------
Total Assets $5,184,186 $3,630,862
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ -- $ 2,432
Capital Lease Obligation, Current Portion 2,459 4,575
Income Taxes Payable $ 892,273 14,914
---------- ----------
Total Liabilities $ 894,732 $ 21,921
Long Term Liabilities
Capital Lease Obligation, Noncurrent Portion $ 5,167 $ 5,167
Advances Payable, Related Party 240,901 39,725
---------- ----------
Total Long Term Liabilities $ 246,068 $ 44,892
---------- ----------
Total Liabilities $1,140,800 $ 66,813
---------- ----------
Commitments and Contingencies
Stockholders' Equity
Preferred Stock; $0.001 Par Value, 5,000,000
Authorized; Issued and Outstanding, NONE
Common Stock; $0.01 Par Value, 30,000,000
Authorized; Issued and Outstanding,
23,391,560 Shares at September 30, 1998
and 17,391,560 Shares at March 31, 1998 $ 233,915 $ 173,916
Additional Paid In Capital $3,410,904 $3,410,904
Less: Subscription Receivable (300,000) (400,000)
Accumulated Profits (Deficit) 698,567 (20,771)
---------- ----------
Total Stockholders' Equity $4,043,386 $3,164,049
---------- ----------
Total Liabilities and Stockholders' Equity $5,184,186 $3,230,862
========== ==========
The Accompanying Notes are an Integral Part
of the Financial Statements
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<PAGE>
SOLPOWER CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 2,445,307 $ -- $ 19,505 $ --
Expenses
General and Administrative 849,877 95,838 464,060 36,642
----------- ----------- ----------- -----------
Operating Income (Loss) 1,595,430 (95,838) (444,555) (36,642)
Other Income (Expense)
Interest Income 2,189 -- 1,881 --
Interest Expense (925) -- (462) --
----------- ----------- ----------- -----------
Total Other Income (Expense) 1,264 -- 1,419 --
----------- ----------- ----------- -----------
Net Income (Loss) Before Provision
for Income Taxes 1,596,694 (95,838) (443,136) (36,642)
Provision for Income Taxes 877,359 -- -- --
----------- ----------- ----------- -----------
Net Income (Loss) Available to
Common Shareholders $ 719,335 $ (95,838) $ (443,136) $ (36,642)
=========== =========== =========== ===========
Net Income (Loss) Per Common
Share Equivalents $ 0.04 $ (0.01) $ (0.02) $ 0.00
=========== =========== =========== ===========
Weighted Number of Common Shares and
Common Share Equivalents Outstanding 18,891,560 11,311,560 18,891,560 11,311,560
=========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
-4-
<PAGE>
SOLPOWER CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
September 30,
1998 1997
---- ----
Cash Flows From Operating Activities:
Net Income (Loss) $ 719,335 $ (95,838)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Used in Operating Activities:
Depreciation and Amortization 18,739 9,154
Other Non-Cash Items -- 529,000
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 43,225 --
(Increase) Decrease in License Fee Receivable (2,397,761) --
(Increase) Decrease in Inventory 10,461 --
(Increase) Decrease in Prepaid Expenses 2,917 --
(Increase) Decrease in Security Deposits -- (15,260)
(Increase) Decrease in Accounts Payable 2,432 --
(Increase) Decrease in Income Taxes Payable 877,359 --
----------- ---------
Total Adjustments (1,533,943) 513,894
----------- ---------
Net Cash Used in Operating Activities (814,608) 418,056
Cash Flows From Investing Activities:
Capital Expenditures 120,480 (17,024)
----------- ---------
Net Cash Flows Provided By (Used In)
Investing Activities 120,480 (17,024)
Cash Flows From Financing Activities:
Proceeds From Issuance of Common Stock 600,000 --
Capital Lease Obligations (2,116) 15,172
Net Advances (Repayments) from Stockholders 201,178 (413,858)
----------- ---------
Net Cash Provided by (Used In) Financing Activities 799,062 (398,686)
Increase (Decrease) in Cash and Cash Equivalents (136,026) 2,346
Cash and Cash Equivalents Beginning of Year 183,842 437
----------- ---------
Cash and Cash Equivalents End of Year $ 47,816 $ 2,783
=========== ---------
Supplemental Information:
Cash Paid For:
Interest $ 925 $ --
=========== =========
Income Taxes $ -- $ --
=========== =========
Non-Cash Investing and Financing:
Issuance of Common Stock for Marketing
Rights (Note 2) $ 60,000 $ --
=========== =========
Issuance of Common Stock in Exchange for
Cancellation of a Portion of Advances Payable $ -- $ 520,000
=========== =========
The Accompanying Notes are an Integral Part
of the Financial Statements
-5-
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PREPARATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and Article 10 of Regulation S-X. These statements do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
month periods ended September 30, 1998 are not necessarily indicative of the
results that may be expected for the year ended March 31, 1999. The unaudited
condensed financial statements should be read in conjunction with the financial
statements and footnotes thereto for the year ended March 31, 1998 included in
the Company's report on Form 10- SB.
NOTE 2 - MARKETING RIGHTS
On June 17, 1998, the Company issued 6,000,000 shares of common stock at $.01
per share, or $60,000 in exchange for the exclusive North America sales,
distribution, marketing and manufacturing rights for SP34E, a direct drop-in
replacement refrigerant gas for R-12 and R-134a. The Company also will make
royalty payments of $2.25 per kilogram of SP34E sold.
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
SIX MONTHS ENDED SEPTEMBER 30, 1998
Revenues for the six months ended September 30, 1998 were $2,445,307 as compared
to no revenues for the six months ended September 30, 1997. Revenues from the
sale of Territory Licenses represented 98.1% of the Company's total revenues
with the remainder representing the commencement of sales of the product
Soltron(TM) through its corporate territory as well as to its licensees. The
increase in revenues resulted primarily from the signing of Territory Licenses
during the six months ended September 30, 1998 as compared to the start up stage
the Company was in during the six months ended September 30, 1997.
On June 30, 1998 the Company had entered into licensing agreements with Houston
Mercantile Exchange, Inc. ("HME") which provided for the exclusive use and
distribution by HME of the Company's product Soltron(TM) in the South and Mexico
Territories. The license fee was $1,800,000 and $600,000, respectively, with a
down payment of $180,000 and $60,000 respectively due upon the signing of the
agreements. HME signed promissory notes for the amounts outstanding, with the
notes bearing interest at one half percent (0.5%) on the unpaid principal
balance, with all unpaid principal and interest due on or before June 30, 2000.
The licensee is required to pay the Company the greater of the amount payable
per a payment schedule in the agreements or the product of $5.50 times the
number of liters of concentrate shipped by the Company to the licensee during
the immediately preceding calendar month.
General and Administrative expenses were $849,877 during the six months ended
September 30, 1998 as compared to $95,838 during the six months ended September
30, 1997. The increase in expenses was related to the organization of the
corporate offices and business plan; organization and production of licensing
agreements and related materials; identification and qualification of territory
licensees; permitting and equipping the Phoenix production facility; locating
and leasing the Elkhart production facility; financing and investor relations
activities; and requisite trademark and product registration.
Cash flow of $801,178 was provided from shareholder advances and the placement
of the Company's stock as compared to $520,000 for the six months ended
September 30, 1997 which resulted from shareholder advances.
The Company experienced an after tax profit of $719,335 for the six months ended
September 30, 1998 compared to an after tax loss of $95,838 for the six months
ended September 30, 1997, at which point in time, the Company was in a start up
phase with no revenues or licensees in place.
On a weighted average per share basis, earnings were $0.04 per share for the six
months ended September 30, 1998 compared to a loss of $0.01 per share for the
six months ended September 30, 1997.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997
Revenues for the three months ended September 30, 1998 were $19,505 compared to
no revenues for the three months ended September 30, 1997. Sales of the
Company's product were $19,505 for the quarter ended September 30, 1998 as
compared to no sales for the same quarter of 1997, at which point in time the
Company was still in its start up phase and had no licensees or product
available for sale. Sales of product during the quarter ended September 30, 1998
represented 91.2% of revenue, with no sales having occurred in the quarter ended
September 30, 1997. The balance of revenues for the Company consisted of
interest income.
General and administrative expenses for the quarter ended September 30, 1998
were $464,060 as compared to $95,838 for the quarter ended September 30, 1997
during the start up phase of the Company. The utilization of cash resources
continued during the quarter ended September 30, 1998, in the Company's major
activity of permitting and equipping the Phoenix production facility; locating
and leasing the Elkhart facility; financing and investor relations activities;
organization and production of licensing agreements and related materials; and
identification and qualification of territory licensees.
The net loss for the quarter ended September 30, 1998 was $443,136 or $0.02 per
share compared to a loss of $36,642 or $0.00 per share for the quarter ended
September 30, 1997 being the start up phase of the Company.
During the remainder of the 1999 fiscal year the Company will pursue the
identification of potential Territory Licensees for the remaining territories;
completion of the Phoenix and Elkhart production facilities and the
implementation of appropriate marketing strategies to gain market penetration
and acceptance of its products.
-7-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates future liquidity needs will continue to be met through
equity and debt financings primarily from its major shareholder, Dominion
Capital, Pty Ltd., until such time as cash flow from operations are sufficient
to meet the Company's capital requirements for product production and
operations.
PART II. OTHER INFORMATION
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed by the undersigned, thereunto duly authorized.
SOLPOWER CORPORATION
(Registrant)
Dated: November 23, 1998 By /s/ Leif Schipper
---------------------------------
Leif Schipper, Chief Financial
Officer and Secretary
-8-
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<ARTICLE> 5
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 47,816
<SECURITIES> 0
<RECEIVABLES> 4,700,987
<ALLOWANCES> 0
<INVENTORY> 91,445
<CURRENT-ASSETS> 4,840,248
<PP&E> 238,683
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,184,186
<CURRENT-LIABILITIES> 894,732
<BONDS> 0
0
0
<COMMON> 233,915
<OTHER-SE> 3,310,904
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<SALES> 46,460
<TOTAL-REVENUES> 2,445,307
<CGS> 0
<TOTAL-COSTS> 849,877
<OTHER-EXPENSES> (1,264)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 925
<INCOME-PRETAX> 1,596,694
<INCOME-TAX> 877,359
<INCOME-CONTINUING> 719,335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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