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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(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, 1999
[ ] 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
Incorporation or organization) Identification No.)
7309 East Stetson Drive, Suite 102
Scottsdale, Arizona 85251
(Address of principal executive offices)
(480) 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 [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
equity was 23,471,560 shares of common stock, par value $.01, as of September
30, 1999.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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<PAGE>
SOLPOWER CORPORATION
INDEX TO FORM 10-QSB FILING
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements................................................ 2
Balance Sheet
September 30, 1999 (unaudited) and March 31, 1999................. 2
Statements of Operations
Three and Six Months Ended September 30, 1999 (unaudited)
and 1998 (unaudited).............................................. 4
Statement of Cash Flows
Six Months Ended September 30, 1999 (unaudited)
and 1998 (unaudited).............................................. 5
Notes to the Financial Statements................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 6
PART II.
OTHER INFORMATION
Item 2. Changes in Securities............................................... 8
SIGNATURES
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SOLPOWER CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1999 (UNAUDITED) AND MARCH 31, 1999
ASSETS
Sept. 30, 1999 March 31, 1999
---------- ----------
(unaudited) (audited)
Current Assets
Cash and Cash Equivalents $ 115,906 $ 2,228
Accounts Receivables 63,959 50,145
Inventory 72,032 92,178
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Total Current Assets 251,897 144,551
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Property & Equipment, net 364,883 399,262
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Other Assets
Marketing Rights 2,608,333 2,658,333
Security Deposits 13,922 13,922
License Fee Receivable -- 2,400,000
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Total Other Assets 2,622,255 5,072,255
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Total Assets $3,239,035 $5,616,068
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
2
<PAGE>
SOLPOWER CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1999 (UNAUDITED) AND MARCH 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
Sept. 30, 1999 March 31, 1999
----------- -----------
(unaudited) (audited)
Current Liabilities
Lease Payable - Current $ 1,662 $ 4,060
Loans Payable - Related Parties 51,440 13,500
Accounts Payable 390,824 429,409
Accrued Expenses 348,685 213,792
Convertible Notes Payable 1,500,000 --
----------- -----------
Total Current Liabilities 2,292,611 660,761
----------- -----------
Long Term Liabilities
Loans Payable - Related Parties 15,218 407,219
Accrued Expenses Noncurrent 70,000 70,000
Deferred Revenue -- 2,400,000
----------- -----------
Total Long Term Liabilities 85,218 2,877,219
----------- -----------
Total Liabilities 2,377,829 3,537,980
----------- -----------
Commitments and Contingencies
Stockholders' Equity
Preferred Stock; $0.001 Par Value,
5,000,000 Shares Authorized; Issued
and Outstanding, None -- --
Common Stock; $0.01 Par Value,
30,000,000 Shares Authorized; Issued
and Outstanding 23,471,560 Shares at
September 30, 1999 and 23,456,560
Shares at March 31, 1999 234,716 234,566
Additional Paid in Capital 6,747,625 6,736,525
Accumulated Deficit (6,121,135) (4,893,003)
----------- -----------
Total Stockholders' Equity 861,206 2,078,088
----------- -----------
Total Liabilities and Stockholders' Equity $ 3,239,035 $ 5,616,068
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
3
<PAGE>
SOLPOWER CORPORATION
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED
SEPTEMBER 30, 1999 (UNAUDITED) AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue
Sales - Product $ 73,257 $ 45,307 $ 47,818 $ 19,505
License Fees -- -- -- --
------------ ------------ ------------ ------------
Total Revenues 73,257 45,307 47,818 19,505
Cost of Sales 209,634 -- 76,668 --
------------ ------------ ------------ ------------
Gross Profit (136,377) 45,307 (28,851) 19,505
Expenses
General and Administrative 1,091,615 1,054,875 755,687 596,096
------------ ------------ ------------ ------------
Operating Income (Loss) (1,227,992) (1,009,508) (784,538) (576,591)
------------ ------------ ------------ ------------
Other Income (Expense)
Interest Income 0 2,189 0 1,880
Interest Expense (140) (925) 0 (463)
------------ ------------ ------------ ------------
Total Other Income (Expense) (140) 1,264 0 1,417
------------ ------------ ------------ ------------
Net Loss Before Provision (1,228,132) (1,008,304) (784,538) (575,174)
for Income Taxes
Provision for Income Taxes -- -- -- --
------------ ------------ ------------ ------------
Net Loss $ (1,228,132) $ (1,008,304) $ (784,538) $ (575,174)
============ ============ ============ ============
Basic (Loss) Per Share $ (0.05) $ (0.05) $ (0.03) $ (0.03)
============ ============ ============ ============
Weighted Average Number
of Shares Outstanding 23,456,560 19,391,560 23,456,560 19,391,560
============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
4
<PAGE>
SOLPOWER CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED
SEPTEMBER 30, 1999 (UNAUDITED) AND 1998 (UNAUDITED)
Six Months Ended
September 30,
--------------------------
1999 1998
----------- -----------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net Loss $(1,228,132) $(1,008,304)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation and amortization 100,486 18,739
Non-cash Transactions 11,250 --
Changes in operating assets and liabilities
Accounts receivables (13,814) 43,228
Inventory 20,146 10,461
License fee receivable 2,400,000 (2,397,761)
Prepaid expense -- 2,917
Accounts payable (38,585) (2,432)
Accrued expense 134,893 --
Deferred revenue (2,400,000) 2,400,000
----------- -----------
Toal Adjustments 214,376 193,696
----------- -----------
Net cash used by operating activities (1,013,756) (814,608)
----------- -----------
Cash Flows from Investing Activities:
Capital Expenditures (16,107) (120,480)
----------- -----------
Net cash used by Investing Activities: (16,107) (120,480)
----------- -----------
Cash Flows from Financing Activities:
Proceeds From Issuance of Common Stock -- 600,000
Capital Lease Obligations (2,398) (2,116)
Convertible Notes Payable 1,500,000 --
Loans and Advances from related parties (354,061) 201,178
----------- -----------
Net cash provided by financing activities 1,143,541 799,062
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Increase (Decrease) in Cash and Cash Equivalents $ 113,678 $ (136,026)
Cash and Cash Equivalents, Beginning of Period 2,228 183,842
----------- -----------
Cash and Cash Equivalents, End of Period $ 115,906 $ 47,816
----------- -----------
Supplemental Information
Cash Paid For:
Interest $ 0 $ 925
=========== ===========
Income Taxes $ 0 $ 0
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
5
<PAGE>
SOLPOWER CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDING SEPTEMBER 30, 1999
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, 1999 are not necessarily
indicative of the results that may be expected for the year ended March 31,
2000. The unaudited condensed financial statements should be read in conjunction
with the financial statements and footnotes thereto for the year ended March 31,
1999 included in the Company's report on form 10-KSB.
NOTE 2 - LICENSE FEE RECEIVABLES
On November 7, 1999, the Company terminated its Master License Agreement
with Houston Mercantile Exchange, Inc., holder of the South (Texas, Oklahoma and
New Mexico) and Mexico licenses. The Company regains the right to operate these
territories as corporate sales territories in exchange for 30,000 shares of
stock yet to be issued and cancellations of Promissory Notes totaling $2,160,000
and unpaid license fee deposits of $240,000. This transaction is reflected in
the financial statements as of September 30, 1999.
NOTE 3 - REAL ESTATE LEASE
On November 8, 1999, the Company negotiated an early termination of the
lease from its Stetson Drive offices to January 31, 2000 from June 30, 2000 in
exchange for issuance of 15,000 shares of stock and a cash payment of $1,000.
NOTE 4 - CONVERTIBLE NOTES
The Company has issued $1,5000,000 in 6% Convertible Notes Payable. The
notes mature on September 30, 2000, and are convertible into common shares of
the Company at the issue price of $1.00 per share for each $1.00 of principal
owed. The notes automatically convert in the event the Company's shares trade at
$1.75 or higher for ten consecutive trading days.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1998
Revenues from the sale of Soltron for the six months ended September 30,
1999 were $73,257 as compared to revenues of $45,307 for the three months ended
September 30, 1998. The Company recovered the Territorial Licenses previously
sold to Masters Marketing Group, Solpower Southeast Corporation and Houston
Mercantile Exchange, Inc. and is operating those areas as Company territories.
The increase in revenues resulted primarily from improved sales in several
expanding regional markets during the six month period ended September 30, 1999
compared to the six month period ended September 30, 1998.
General and administrative costs were $1,091,615 for the six month period
ended September 30, 1999 compared to $1,054,875 for the six month period ended
September 30, 1998. The slight increase (3%) in costs was due to additional
expenses incurred in relation to the territorial license repurchase agreements.
Cash flows of $1,145,939 were provided by convertible notes payable and
advances from related parties for the six months ended September 30, 1999 as
compared with $801,178 received from related party advances and stock
subscription payments for the six months ended September 30, 1998.
The Company experienced a net loss of $1,228,132 for the six months ended
September 30, 1999 as compared with a loss of $1,008,304 for the six months
ended September 30, 1998 due in part to expenses incurred for the repurchase of
all outstanding territorial licenses, debt restructuring costs and other
liabilities.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Revenues from the sales of Soltron for the three months ended September 30,
1999 were $47,818 as compared to revenues of $19,505 for the three months ended
September 30, 1998. The increase in revenues resulted primarily from improved
6
<PAGE>
sales in several expanding regional markets during the three months ended
September 30, 1999 compared to the three month period ended September 30, 1998.
General and administrative costs were $755,687 for the three months ended
September 30, 1999 compared to $596,096 for the three months ended September 30,
1998. This 27% increase in costs was due to increases in regional sales and
marketing efforts, debt restructuring charges and other liabilities.
The Company experienced a net loss of $784,538 for the three months ended
September 30, 1999 as compared with $575,174 for the three months ended
September 30, 1998 due primarily from the one-time costs related to the
repurchase of all outstanding territorial licenses.
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.
7
<PAGE>
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On September 24, 1999, the Company sold a total of $1,500,000 of its 6%
Convertible Notes Payable (the "Notes") for a total purchase price of
$1,500,000. No placement agent was utilized and no commissions were paid with
respect to the sale of the Notes. The Notes were sold to Dominion Capital Pty
Ltd., the Company's largest shareholder, and certain other entities and
individuals affiliated with the Company and with Dominion Capital Pty Ltd. The
Notes mature on September 30, 2000 and are convertible into 1,500,000 shares of
the Company's common stock at a rate of 1 share for each $1.00 of principal owed
under the Notes. The Notes will automatically convert in the event the Company's
common stock trades at $1.75 or higher for ten consecutive trading days. The
Notes were issued in reliance on Section 4(2) of the Securities Act of 1933, as
amended. The Company has used the proceeds from the sale of the Notes for
general corporate and development purposes.
Effective December 31, 1999, the Company and the purchasers of the Notes
entered into an agreement changing the conversion rate to one (1) share of the
Company's common stock for each $0.50 of principal owed under the Notes.
Accordingly, the number of common shares into which the Notes are convertible
was increased to 3,000,000. The Notes were unchanged in all other respects.
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: March 8, 2000 By /s/ James H. Hirst
-------------------------------------
James H. Hirst
Chief Executive Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 115,906
<SECURITIES> 0
<RECEIVABLES> 63,959
<ALLOWANCES> 0
<INVENTORY> 72,032
<CURRENT-ASSETS> 251,897
<PP&E> 511,600
<DEPRECIATION> 146,717
<TOTAL-ASSETS> 3,239,035
<CURRENT-LIABILITIES> 2,291,611
<BONDS> 0
0
0
<COMMON> 234,716
<OTHER-SE> 626,490
<TOTAL-LIABILITY-AND-EQUITY> 3,239,035
<SALES> 73,257
<TOTAL-REVENUES> 73,257
<CGS> 209,634
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,091,615
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> (1,228,132)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,228,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,228,132)
<EPS-BASIC> (0.02)
<EPS-DILUTED> 0
</TABLE>
