SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24989
AMERICAS POWER PARTNERS, INC.
(Name of small business issuer in its charter)
COLORADO 05-0499526
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
710 NORTH YORK ROAD, HINSDALE, ILLINOIS 60521
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 630/325-9111
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
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.Yes[ ] No[X]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $ 124,213
As of November 13, 2000, the registrant had 9,937,100 shares of its
Common Stock, no par value, outstanding. The aggregate market value of
the voting stock held by non-affiliates of the registrant as of that date
is $4,929,796.
DOCUMENTS INCORPORATED BY REFERENCE
Items 9 (in part),10,11 and 12 of Part III of this Annual Report on Form
10-KSB incorporate information by reference from the Registrant's Proxy
Statement for the Annual Shareholders' Meeting to be held in February 2001.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Disclosure Regarding Forward-Looking Statements 2
Item 1. Description of Business 2
Item 2. Description of Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 9
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 7. Financial Statements 13
Item 8. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure 13
PART III
Item 9. Directors and Executive Officers of the Company 13
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial Owners
and Management 16
Item 12. Certain Relationships and Related Transactions 16
PART IV
Item 13. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 16
Index to Financial Statements and Financial Statement
Schedules F-1
<PAGE>
PART I
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report includes historical information as well as statements
regarding the Company's future expectations. Important factors that
could cause actual results to differ materially from those discussed in
forward-looking statements include:
supply/demand for products, competitive pricing pressures, availability
of capital on acceptable terms, continuing relationships with strategic
partners, dependence on key personnel, changes in industry laws and
regulations, competitive technology, and failure to achieve, cost
reduction targets or complete construction projects on schedule. The
Company believes in good faith that the forward-looking statements in
this Annual Report have a reasonable basis, including without limitation,
management's examination of historical operating trends, data contained
in records and other data available from third parties, but such forward
looking statements are not guarantees of future performance and actual
results may differ materially from any results expressed or implied by
such forward looking statements.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Americas Power Partners, Inc. (the "Company" or "APP") was incorporated
in April 1998 with a mission to reduce the cost and environmental impact
of on-site utilities for industrial, commercial and institutional
campuses. The Company seeks long-term all-requirements contracts for
energy and utility services and bases those contracts upon open-book
partnerships with the campus owners. In return, the Company's business
strategy is to purchase and/or manage the existing utility plant, then
develop and finance additions, replacements and improvements that
increase reliability and efficiency while reducing the environmental
impact.
To achieve this "double-bottom line" mission, the Company will employ and
partner with on-site utility specialists whose skills include design,
operation and financing of combined heat and power generation, waste heat
recovery, thermal and electrically based cooling/refrigeration, steam,
electric, chilled water distribution, energy storage, measurement,
automation, wastewater treatment and pollution control.
The Company is developing the capacity to serve domestic and
international clients from its headquarters in Hinsdale, Illinois and a
regional development office in Pittsburgh, Pennsylvania. In addition, the
Company has the ability to provide services to its customers through six
US locations and 325 distributorships of its partner, Armstrong
International, Inc. The Company's current clients and those under letter
of intent or term sheet are located in 20 states and 4 countries.
<PAGE>
The Company's key alliance is with Armstrong Services Inc. (ASI), a
wholly owned subsidiary of Armstrong International, Inc. (AII), a company
with a 100-year history as a supplier of steam equipment and services to
the power industry. AII distributors and representatives are in frequent
contact with virtually every North America steam using campus as
providers of technical solutions to steam distribution issues. AII has
invested in APP and has expanded the role of its distributors and
representatives to lead generation and development of energy services
contracts.
APP offers two distinct products that target the energy requirements of
the industrial, institutional and commercial market:
(i) Utility Optimization
(ii) Utility Monetization.
APP seeks to utilize its knowledge and expertise to fulfill client energy
needs while using less fossil fuel, and thereby lowering fuel costs. APP
finances the capital improvements, enabling clients to avoid capital
expenditures in non-core activities. Customers can focus on their core
business, while APP focuses on providing energy and utility services.
APP achieves energy savings with a variety of approaches, but seeks to
combine heat and power generation in each case, in order to capture fuel
energy that is wasted in conventional central generation of electricity
only. APP's approach is not limited to any specific fuel or technology,
but is instead based on the needs of the individual customer, and the
need to reduce fossil fuel consumption and related costs.
UTILITY OPTIMIZATION
For clients who wish to continue owning and operating their utility
systems (steam, electric, air, water and condensate return), APP provides
intellectual capital and financial resources to upgrade those systems.
The Company relies on ASI personnel where appropriate to supervise the
installation of improvements and to provide maintenance. In this way,
APP is able to apply its intellectual capital in many markets without
having its own local sales and service forces. The Company earns a return
on its funds through utility optimization and services agreements, which
provide for the following:
(a) A thorough review of a client's entire energy usage system to
identify specific projects that will improve the utility system.
1) An agreement for a maintenance contract for 3 to 10 years.
2) At the termination of the agreement, the customer owns the
system improvements.
3) Additional system improvements will be analyzed and implemented
at the client's discretion.
<PAGE>
UTILITY MONETIZATION
Under the Utility Monetization program, the Company purchases the
client's power plant assets, typically for book value, and incorporates
improvements in the utility and distribution system. APP enters long-
term agreements to sell steam, electricity, compressed air, water and
wastewater treatment to the facility at a discount to the cost of
conventional thermal production and electricity purchase. This program
provides benefits to the customer including:
* The Company purchases the existing power plant, invests in
efficiency and reliability enhancements and operates and maintains
the entire utility system.
* The Company pays for needed fuel, electricity, water, and
wastewater, produces final energy products on site, and sells those
products under an open book contract for an initial period of 10 to
25 years.
* The Company takes responsibility for those risks it can control
including conversion efficiency, labor productivity, reliability,
and steam and power quality. The customer remains at risk for
inflation and changes in purchased commodity prices, but will
generally need less purchased commodities per unit of production or
other benchmark, due to the Company's efficiency improvements.
The Company's focused expertise in substituting knowledge and capital for
fossil fuel and purchased electricity enables clients to:
* Contain or reduce costs
* Reduce production downtime
* Increase reliability
* Increase overall return on assets
* Decrease pollution and risk of future fines and lawsuits
* Improve shareholder value
MARKET AND INDUSTRY
The US currently spends an estimated $220 billion on purchased
electricity and produces an amount of thermal energy that would cost $170
billion if purchased from third parties. With few exceptions, consumers
separately convert purchased energy to chilled water and compressed air,
and employ personnel and capital resources to distribute steam, chilled
water, electricity and compressed air throughout their buildings and
campuses. US spending for the full utility process, from fuel and
commodity procurement to provision of comfort and process energy, exceeds
$500 billion per year. In the early days of electricity development,
governments believed that the generation of electricity was a natural
monopoly, and to induce rapid deployment of electric power, awarded
exclusive franchises for each territory. By 1977, 96% of US electric
power was produced by one of the 2800 monopoly electric companies. The
first electric generation plants in 1880 converted only about 8% of the
fuel energy to electric power (a term referred to as "efficiency'). Over
time, efficiencies increased and by 1959, the U.S. electric industry
delivered electric power efficiency rose to 33%. In the ensuing 40
years, there have been no further increases in the industry's efficiency,
and 66% of the energy in the fuel continues to be wasted.
<PAGE>
Combined heat and power plants achieve efficiencies of 65% to 97% by
generating power near thermal users and then providing normally wasted
heat to those users. Recognizing this possibility, Congress passed and
President Carter signed the Public Utility Regulatory Policies Act
("PURPA") in 1978, enabling non-monopoly generation. Subsequent federal
legislation further weakened the monopoly protection afforded electric
utilities; on March 1, 1998, Massachusetts became the first state to open
its entire electric market to competition. California followed on March
30, 1998, and by June 30, 2000,over half of the states had legislatively
or administratively eased restrictions to competition in electric power
generation. The Company believes that historic monopoly protection of
generation and distribution and the resulting barriers to efficient
generation will continue to be eased, making on-site combined heat and
power generation more financially attractive, leading in turn to
significant shifts from central to distributed generation. The Company's
business approach is further based on the history of thermal generation,
a description of which follows.
The generation of hot water and/or low-pressure steam needed for process
heating is more simple and less capital intensive than the combined
generation of heat and power. Consequently, most firms and institutions
such as hospitals and universities generate their own thermal energy,
using their organization's capital and labor. Under historic regulation
of third party electric generation, these firms and institutions opted to
generate only thermal energy, which fails to extract the full value
potential of the fuel. With easing of monopoly restrictions, combined
heat and power has risen from only 4% of U.S. power production in 1977
to 9% in 1999. In 1999 , the U.S. Department of Energy set a goal of
doubling U.S. combined heat and power production over the next ten years,
to 18-19% of total generation.
The Company believes that it is economically feasible to generate 50 to
60% of all U.S. power at combined heat and power plants located at or
near large thermal users' sites. However, the conversion of existing
thermal only power plants to more efficient and cleaner combined heat and
power plants is complex and capital intensive. Global competition has
forced most firms and institutions to focus on their core activities
rather than expending resources on thermal and electric generation and
distribution. This creates, in the Company's view, an opportunity to
purchase the existing inefficient thermal only power plants and/or
combined heat and power plants and optimize the combined generation and
distribution of energy products.
The Company believes that the market for the power management service
industry is expanding at a rapid rate, and that both competitive pressure
to reduce costs and government mandates to reduce pollution will increase
the use of third party energy professionals to manage campus utility
plants. In addition, many firms and institutions depend on boilers that
are technically and economically obsolete, difficult to operate and
maintain, and polluting. A great deal of the power generation equipment
must soon be upgraded or replaced to avoid costly downtime and
environmental fines.
<PAGE>
APP believes it can continue to find significant opportunities to achieve
cost and environmental savings in all campus utility systems. The
company's target market includes all industrial campuses that have
process steam requirements, all medical centers and university campuses.
In addition, the Company pursues industrial plants that currently vent
high-temperature exhaust, which can be converted to steam and
electricity. Examples of such industries include mini steel mills,
carbon black producers and glass manufacturers.
STRATEGIC ALLIANCES
The Company has strategic alliances with the following partners:
ARMSTRONG SERVICE, INC. (ASI)
Armstrong International, Inc., the parent company of ASI, is a 100-year-
old, privately held U.S. multi-national manufacturer of steam specialty
products and provider of steam system services to improve system
efficiency. Armstrong personnel have extensive experience in steam
distribution, energy management, project management and construction of
on-site utility plants. Armstrong has certified boiler specialists with
experience in process and design engineering, power generation/boiler
design and cogeneration. Additional information can be found at
www.armstrongservices.com.
ASI provides the Company with business development support through ASI's
worldwide network of direct sales and independent representatives. Upon
completion of a transaction, ASI typically coordinates and/or implements
all of the site projects, along with providing operations, maintenance
and sustaining engineering for the Company's customers.
STRATEGIC ENERGY LTD. (SEL)
SEL is a leading provider of natural gas services and electric power
marketing. SEL has blended the talents of its consulting and management
groups to provide a comprehensive asset optimization service to power
plant systems. With expertise in services such as generation
optimization, risk management, natural gas consulting, fuel management,
market and strategy development, information systems, and administrative
and support services, SEL's energy professionals can help decide what
products and services are right for a project and then aggressively
manage the project's portfolio in the competitive market. Additional
information can be found at www.sel.com.
<PAGE>
SEL provides the Company with energy price management services for
electric power and natural gas on an as required basis. SEL typically
develops long and short-term energy management services to assure
reliable cost efficient electric power and natural gas for the Company's
customers.
ENVIRONMENTAL RESOURCES MANAGEMENT (ERM)
ERM is a multi-national environmental, health and safety consulting firm
whose client list includes many of the Fortune 500 companies, as well as
numerous foreign multi-nationals. With 2,400 specialists at more than 120
locations worldwide, the organization has been a leading provider of
environmental engineering, consulting and management services for more
than 20 years. ERM helps clients address technical, regulatory and
economic issues in areas such as air quality, pollution control,
hazardous waste site remediation, industrial water and wastewater
treatment and compliance, and environmental management consulting.
Additional information can be found at www.erm.com.
ERM provides the Company with environmental support for all of the
Company's customer requirements. ERM also provides complete water and
wastewater services for the Company.
COMPETITION
The market for the Company's optimization and monetization services is a
recent development. Historically, each separate user of thermal energy
has been responsible for the boiler plant cost and operation. For the
foreseeable future, the Company's principal competition will continue to
be the in-house operation of the utility plant with most electricity
purchased from the grid. In the past decade, several firms have formed
divisions that offer energy management services and on-site utility plant
operation. The Company believes that the firms currently in the market
will refine their strategies and grow, and that other firms will enter
the market, offering competitive services. Several of the Company's
competitors have higher market profile and significantly greater
financial resources than the Company.
DOMINANT PLAYERS
The Company believes that no firm yet has what could be termed a dominant
role in the emerging market of utility outsourcing and energy services.
Several unique strategies are being offered, based variously on existing
strength in commodity management, in operations, or in specific
technologies. Further easing of monopoly protection will continue to
subject electric utility managements to possible loss of market share,
and will in the Company's opinion, encourage these utilities to enter the
energy services market, especially in other utility territories.
<PAGE>
PROPRIETARY RIGHTS
The Company has applied for trademark protection in the United States for
the name AMERICAS POWER PARTNERS, INC. The Company also relies on trade
secrets and proprietary know-how. There can be no assurance that the
trade secret or propriety nature of such information will not wrongfully
be breached by employees, consultants, advisors or others, or that the
Company's trade secrets or propriety know-how will not otherwise become
known or be independently developed by competitors in such a manner that
the Company has no practical recourse.
BACKLOG
As of June 30, 2000, the Company had signed long-term contracts for the
optimization and monetization of client power plants that represent
future minimum service revenue of $455,000 over the next 10 years.
RAW MATERIALS AND SUPPLIERS
In providing its optimization and monetization services, the Company is
not directly dependent upon raw materials or supplies, specifically
electric, gas, steam or water energy sources. However, since the
Company's services to most clients involve consulting as to the most
inexpensive sources of such energy, changes in the supply and pricing of
these commodities may have an impact on the Company's operations. Client
reliance on sole or limited sourcing for some commodities does present
risk that adequate alternative supplies or timely deliveries will
interfere with successful new project development.
HUMAN RESOURCES
As of June 30, 2000, the Company had seven full-time employees situated
in offices in Hinsdale, Illinois and Pittsburgh, Pennsylvania. Three of
the employees are engineers, two are in sales, and two are in
administration. None of the Company's employees are covered by
collective bargaining agreements. The Company's success will depend in
part on its continued ability to attract and retain high quality
employees. The Company considers its relations with employees to be
good.
In addition, at June 30, 2000, the Company had an agreement with a
consulting firm, that is owned by two directors, to provide management
consulting and financial advisory services with respect to client
projects and Company administration. Three individuals assisted the
Company in this manner. This agreement subsequently was amended on
November 13, 2000.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
As of June 30, 2000, the Company leased approximately 1,350 square feet
of office space in Hinsdale, Illinois under a lease that was cancelled
effective September 30, 2000. The Company has signed a new lease for
5,000 square feet of office space in Hinsdale for a period of five years,
but for which certain terms are still being negotiated. The lessor of
the later lease is owned by two of the Company's directors.
The regional office in Pittsburgh is leased on a month-to-month basis.
The Company believes that these facilities are adequate to meet its needs
for the foreseeable future, and that suitable replacement space is
readily available.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings involving the Company or
any of its properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock commenced trading on the over-the-counter
Bulletin Board market under the symbol "APPN" on January 24, 2000.
QUARTERLY COMMON STOCK PRICE RANGES
Fiscal 2000
QUARTER HIGH LOW
3rd (Jan. 1-Mar. 31) $6 $1 1/8
4th (Apr. 1-Jun. 30) $4 7/8 $ 7/8
Such over-the-counter market quotations reflect inter-dealer prices,
without retail markup, markdown or commission, and may not necessarily
represent actual transactions.
As of June 30, 2000, the approximate number of holders of record of the
Common Stock of the Company was 160.
<PAGE>
The Company has never paid any cash dividends on its Common Stock in the
past and anticipates that, for the foreseeable future, all earnings, if
any, will be retained to finance growth and to meet working capital
requirements.
During the period of three months ended September 30, 1999, the Company
sold to individuals in private transactions 102,500 shares of its Common
Stock, no par value, at $2.50 per share, and received cash proceeds of
$256,250.
During the period of three months ended December 31, 1999, the Company
sold to individuals in private transactions 48,000 shares of its Common
Stock, no par value, at $2.50 per share, and received cash proceeds of
$120,000.
During the period of three months ended March 31, 2000, the Company sold
to individuals in private transactions 70,000 shares of its Common Stock,
no par value, at $2.50 per share, and received cash proceeds of $175,000.
During this same period, the Company issued 25,000 shares of its Common
Stock, no par value, in exchange for certain public relations services,
and recorded the issuance in the financial statements at the fair market
value of the shares at the time the services were performed.
During the period of three months ended June 30, 2000, the Company issued
10,000 shares of its Common Stock, no par value, in exchange for certain
engineering services, and recorded the issuance in the financial
statements at the fair market value of the shares at the time the
services were performed.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements of the Company, including the notes thereto, which appears
elsewhere in this annual report.
RESULTS OF OPERATIONS.
During the period from January 27, 1998 (date of inception) through
December 31, 1999, the Company engaged in no significant operations other
than organizational activities, acquisition of capital and preparation
for registration of its securities under the Securities Exchange Act of
1934, as amended. The Company recorded no revenues during this period.
During the third quarter of fiscal 2000, the Company signed its first two
contracts for the monetization and optimization of steam generation
facilities, and recognized revenue and expenses associated with the
contracts.
<PAGE>
During the fiscal year ended June 30, 2000, the Company incurred a net
loss of $2,225,971, compared to a net loss of $ 562,984 for the prior
fiscal year. In the current period, the Company recorded the following
expenses that were either not present in or increased over the
corresponding amounts recorded during fiscal 1999:
1 The first employee was hired and placed on
the payroll in October 1999. At the end of
the fiscal year, the payroll included seven
employees.
2 Management fees increased $232,000 in
fiscal 2000 as a result of a full year of
fees associated with a venture
capital/management firm under an agreement
that was effective in April 1999.
3 Consulting fee payments were made to the
venture capital/management firm responsible
for orchestrating the August 1999 merger
with a publicly-traded corporate entity and
certain other capital formation activities
Under terms of consulting agreement with
the venture capital/management firm, the
Company recorded consulting fees of $
505,770, which were subsequently reduced by
$300,000 to $205,770. See Note I of Notes
to Financial Statements.
4 Professional fees increased 250,000 during
the fiscal year ended June 30, 2000 as a
result of increased legal costs associated
with the Preferred Stock private placement
agreement and an increase in public
relations expenses.
5 General and administrative expenses for
fiscal 2000 increased $580,000 over the
prior year with the additional expenditures
relating to increased personnel, rental of
office facilities, accounting fees
associated with the reporting requirements
of a publicly-held company, and the
initiation of marketing programs.
Interest income increased $27,704 in fiscal 2000 over the prior year as a
result of the higher cash balances available after closing on the sale of
the $3,000,000 Preferred Stock issue. Interest expense in fiscal 2000
was $2,532 and resulted from capital leases for equipment entered into
during the year.
LIQUIDITY AND CAPITAL RESOURCES
The working capital of the Company at June 30, 2000 was $743,482,
compared to $189,266 at June 30, 1999. Year-end cash balances increased
$644,851 during fiscal 2000 principally representing the balance of the
proceeds from a Preferred Stock issue. The initiation of the Company's
first two contracted projects resulted in an increase in accounts payable
and an amount due to a related party in connection with a client
contract.
On January 31, 2000, the Company authorized 2,725,000 shares of Series A
Convertible Preferred Stock to be issued and sold 2,709,519 shares of the
Series A Convertible Preferred Stock in a private placement to a
strategic partner and certain of the partner's officers for $3,000,000
and the exchange of 521,694 shares of the Company's Common Stock.
<PAGE>
The Company had no bank borrowings or long-term liabilities, other than
capital leases for equipment, at June 30, 2000 or for the year then
ended. The Company had no line of credit at June 30, 2000. However,
subsequent to June 30, 2000, the Company financed with a bank its
investment in the capital lease relating to a client project.
Management believes that, in order to attract and finance additional
optimization and monetization projects, significant amounts of new
capital will be needed. The Company intends to secure such additional
capital to sustain its project development plans, which may include
acquisition of client energy facilities, through bank financing or equity
markets. The Company cannot be certain that it will be successful in
efforts to raise such new funds.
On September 13, 2000, Thomas R. Casten acquired 2,400,000 shares of
Common Stock for $2,000,000 cash and a $1,000,000 promissory note and was
appointed to the Company's Board of Directors and elected Chairman and
Chief Executive Officer.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement established standards for
reporting comprehensive income in the financial statements. The
Company's adoption of this new standard in June 2000 did not result in
material changes to the financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement established
standards for the way companies report information about operating
segments and requires that those enterprises report selected information
about operating segments in the financial reports issued to shareholders.
The Company's operations are deemed to be one reportable segment for
purposes of this disclosure.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to recognize
all derivatives as assets and liabilities measured at their fair value.
The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and whether it qualifies for hedge
accounting. The Company believes adoption of this statement as amended
by SFAS No. 137, which will occur by July 2001, will not have an affect
on the financial statements, as the Company currently does not hold any
derivative instruments.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements and the report of Blackman Kallick
Bartelstein LLP, independent auditors, with respect thereto, referred to
in the Index to Financial Statements, appear elsewhere in this Form 10-
KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Form 8-K filed with the Securities and Exchange Commission on July 7,
2000 and the disclosures made therein under Item 4. are incorporated
herein by reference. There were no disagreements with accountants on
accounting and financial disclosures during the fiscal year ended June
30, 2000.
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Americas Power Partners, Inc.
Hinsdale, Illinois
We have audited the accompanying balance sheet of Americas Power Partners,
Inc. as of June 30, 2000 and the related statements of operations, changes
in stockholders' equity and cash flows for the year then ended. 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 audit. The financial statements of Americas Power Partners,
Inc. as of and for the eighteen months ended June 30, 1999 were audited by
other auditors whose report dated October 17, 1999 expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Americas Power Partners,
Inc. as of June 30, 2000, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
/s/Blackman Kallick Bartelstein LLLP
Chicago, Illinois
September 11, 2000, except for Notes F and I
as to which the date is November 13, 2000
AMERICAS POWER PARTNERS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30
2000 1999 - NOTE A
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents - Note C $ 951,509 $ 306,658
Accounts receivable 75,588 100
Receivable from related parties - Note I 548,221 -
Current portion of net investment in lease - Note D 108,811 -
Prepaid expenses 27,057 -
TOTAL CURRENT ASSETS 1,711,186 306,758
EQUIPMENT AND FIXTURES
Computer equipment 77,013 -
Office equipment 29,935 -
Equipment leased to clients 56,743 -
163,691 -
Less accumulated depreciation (8,338) -
TOTAL EQUIPMENT AND FIXTURES 155,353 -
OTHER ASSETS
Net investment in lease, less current portion - Note D 488,673 -
Deposits 28,703 -
Deferred contract costs, net of accumulated
amortization of $1,819 in 2000 220,652 -
TOTAL OTHER ASSETS 738,028 -
TOTAL ASSETS $ 2,604,567 $306,758
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
AMERICAS POWER PARTNERS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30
2000 1999 - NOTE A
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 299,496 $ 117,492
Due to related party in connection with client
contracts 655,995 -
Accrued expenses 3,432 -
Current maturities of capital leases - Note D 8,781 -
TOTAL CURRENT LIABILITIES 967,704 117,492
CAPITAL LEASES - net of current maturities - Note D 13,868 -
TOTAL LIABILITIES 981,572 117,492
STOCKHOLDERS' EQUITY - Notes B, F and I
Preferred Stock, no par value,
10,000,000 shares authorized;
2,725,000 Series A authorized;
2,709,519 shares issued and outstanding 3,952,250 -
Common Stock, no par value,
1,500 shares authorized;
753.9194 shares subscribed - 752,250
Common Stock, no par value,
40,000,000 shares authorized;
7,579,600 shares issued and outstanding 459,700 -
Retained earnings deficit (2,788,955) (562,984)
TOTAL STOCKHOLDERS' EQUITY 1,622,995 189,266
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,604,567 $ 306,758
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
AMERICAS POWER PARTNERS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended June 30
2000 1999 - NOTE A
<S> <C> <C>
Contract revenues - Note G $ 124,213 $ -
Cost of client services 106,447 -
Gross profit 17,766 -
Costs and expenses:
Payroll and employee benefits 476,048 -
Management fee - Notes F and I 479,759 247,734
Consulting fee - Notes F and I 205,770 37,773
Other professional fees 458,830 209,114
General and administrative 650,204 70,065
Total expenses 2,270,611 564,686
LOSS FROM OPERATIONS (2,252,845) (564,686)
Interest income (29,406) (1,702)
Interest expense 2,532 -
Total interest income, net (26,874) (1,702)
NET LOSS ($ 2,225,971) ($562,984)
Net loss per share - basic and diluted ($ 0.27) ($ 0.08)
Weighted average number of common
shares outstanding - Note H 8,281,855 7,166,477
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
AMERICAS POWER PARTNERS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended June 30, 2000 and 1999
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1998 709.7500 $ 100 $ 100
Common Stock issued for cash 44.1694 752,150 752,150
Net loss for year (562,984) (562,984)
BALANCE AT
JUNE 30, 1999 -Note A 753.9194 752,250 (562,984) 189,266
Common Stock (no par value)
of Oak Brook Capital II,
Inc. - Note B 1,228,000
Correction of founders'
shares issued (210.)
Common Stock retired at
time of merger - Note B (543.9194) (752,250) (752,250)
Common Stock issued at
time of merger - Note B 5,439,194 752,250 752,250
Shares issued to founders -
Note I 1,175,000 11,750 11,750
Shares issued for
compensation and services -
Note I 35,000 92,500 92,500
Preferred Stock issued
(2,709,519 shares) and
exchanged for Common
Stock - Note F 3,952,250 (521,694) (952,250) 3,000,000
Common Stock issued for cash 224,100 555,450 555,450
Net loss for year (2,225,971) (2,225,971)
BALANCE AT
JUNE 30, 2000 $3,952,250 7,579,600 $459,700 (2,788,955) 1,622,995
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
AMERICAS POWER PARTNERS, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended June 30
2000 1999 -NOTE A
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ($ 2,225,971) ($562,984)
Adjustments to reconcile net loss to
net cash used in operating activities:
Provision for depreciation and amortization 10,157 -
Common Stock issued for compensation and
services - net of Common Stock to be returned
valued at $62,500 104,250 -
Change in accounts receivable (75,588) -
Change in prepaid expenses (18,945) -
Change in accounts payable 182,004 117,492
Change in accrued expenses 3,432 -
Total adjustments 205,310 117,492
Net cash used in operating activities (2,020,661) (445,492)
Cash Flow from Investing Activities:
Purchase of equipment and fixtures (136,115) -
Purchase of equipment underlying lease agreements (666,219) -
Payments from lessees regarding finance
lease receivables 68,735 -
Increase in deposits (28,703) -
Payment of deferred contract costs (230,483) -
Net (advances to) repayments from related parties 107,774 -
Net cash (used in) investing activities (885,011) -
Cash Flow from Financing Activities:
Payments on capital leases (4,927) -
Proceeds from issuance of Common Stock 555,450 752,150
Proceeds from issuance of Preferred Stock 3,000,000 -
Net cash provided by financing activities 3,550,523 752,150
Net Increase in Cash 644,851 306,658
Cash at beginning of year 306,658 -
CASH AT END OF YEAR $ 951,509 $ 306,658
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended June 30, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE BUSINESS AND DEVELOPMENT STAGE ACTIVITIES
The Company was in the development stage since its inception on January 27,
1998. There was no financial statement activity between the date of
inception and June 30, 1998, except for the issuance of Common Stock,
resulting in a credit to Common Stock of $100. During the third quarter of
the fiscal year ended June 30, 2000, the Company emerged from its
development stage with the signing of two client contracts, billings under
these contracts and the raising of additional capital through a private
placement Preferred Stock offering.
The Company was formed to develop, optimize, own and operate power plant
systems (steam, electric, compressed air, water, waste water and condensate
return) for industrial, commercial and institutional clients. The Company
has formed strategic alliances with several recognized energy companies in
the areas of power plant optimization, operations and maintenance, fuel
supply and electric power marketing. These strategic relationships bring key
skill sets to the development process, as well as a steady flow of project
opportunities from their established client base. The Company generates
revenue primarily from fees produced from structuring and financing these
energy projects. All of the Company's customers are in the United States.
The Company is prepared to participate in the private energy market through
two distinct avenues, namely, financing upgrades, or purchasing powerhouse
assets and selling utilities back to clients through long-term contracts.
USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on
informed estimates and judgments of management. Changes in such estimates
may affect amounts reported in future periods.
CASH AND CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, all short-term investments in
interest-bearing accounts and other instruments with an original maturity
of three months or less are considered to be the equivalent of cash. The
Company maintains all its cash and cash equivalents in bank accounts which,
at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to
any significant credit risk on its cash and cash equivalents.
DEFERRED CONTRACT COSTS
Initial direct costs associated with negotiating the Company's contracts are
capitalized and amortized over the life of the respective agreements.
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company evaluates the terms of the energy services agreements (ESA) and
operation and maintenance agreements (O&M) which it executes with clients to
determine the applicable accounting treatment on an individual case basis.
To the extent that ESA's provide for fixed minimum payments and terms that
qualify as a capital lease as defined in Statement of Financial Accounting
Standards No. 13, "Accounting for Leases", the net investment in the
contract is recorded on the balance sheet and unearned income is amortized
over the term of the agreement using the interest method. Revenue from
ESA's that qualify as operating leases under SFAS No. 13 is recorded on a
straight-line basis over the term of the contract. O&M revenue also is
recognized on a straight-line basis, which coincides with the monthly
payments to vendors that provide the operations and maintenance service.
The Company grants credit to all of its customers.
EQUIPMENT AND FIXTURES
Equipment and fixtures, including capitalized equipment acquired by leases
and improvements that significantly add to productive capacity or extend
useful life, are recorded at cost. Depreciation expense, including the
amortization of capital lease assets, is calculated for financial reporting
purposes using the straight-line method based on the estimated useful lives
of the assets as follows: computer equipment (including software) - five
years; office equipment - seven years; equipment leased to clients - the
respective lease period.
PER SHARE OF COMMON STOCK
Primary earnings (loss) per share of Common Stock are computed based on the
weighted average number of shares of Common Stock and common stock
equivalents outstanding during the year. For fiscal 2000 and 1999, the
fully diluted loss per share computation was antidilutive; therefore, the
amount reported for primary and fully diluted loss per share is the same.
NEW ACCOUNTING STANDARDS
In July 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement established standards for reporting
comprehensive income in the financial statements. The Company's adoption of
this new standard in June 2000 did not result in material changes to the
financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement established
standards for the way companies report information about operating segments
and requires that those enterprises report selected information about
operating segments in the financial reports issued to shareholders. The
Company's operations are deemed to be one reportable segment for purposes of
this disclosure.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to recognize
all derivatives as assets and liabilities
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
measured at their fair value. The accounting for changes in the fair value
of a derivative depends on the intended use of the derivative and whether it
qualifies for hedge accounting. The Company believes adoption of this
statement as amended by SFAS No. 137, which will occur by July 2001, will
not have an affect on the financial statements, as the Company currently
does not hold any derivative instruments.
NOTE B - MERGER AND EXCHANGE OF COMMON STOCK
On August 17, 1999, the Company completed a reverse merger with Oak Brook
Capital II, Inc., a fully reporting public "shell" company under the
Securities and Exchange Commission's Securities Act of 1934. Upon
completion of the merger, Oak Brook Capital II, Inc. changed its name to
Americas Power Partners, Inc., and issued 10,000 shares of common stock for
each share of the former Americas Power Partners, Inc. then outstanding.
All shares of the former Americas Power Partners, Inc. were retired.
The merger was accounted for as a pooling of interests. At the time of the
merger, Oak Brook Capital II, Inc. had no assets, had recognized no revenue,
and had incurred expenses of $11,925. All other expenses up to the date of
the combination were incurred by the original Americas Power Partners, Inc.
NOTE C - CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
JUNE 30
2000 1999
<S> <C> <C>
Cash $ 622,874 $(20,041)
Money market accounts 328,635 326,699
$ 951,509 $306,658
</TABLE>
NOTE D - LEASES
EQUIPMENT LEASED TO OTHERS
At June 30, 2000, the Company leased equipment to one client under an
optimization and service agreement that meets the criteria of a financing
lease and to another client for which the agreement
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE D - LEASES (CONTINUED)
is classified as an operating lease with contingent rentals. The net
investment in the financing lease consists of the following:
Minimum lease payments receivable $ 756,085
Less unearned interest income 158,601
Net investment in financing lease $ 597,484
Future minimum lease payments receivable as of June 30, 2000 are as follows:
YEAR ENDING JUNE 30
2001 $ 164,964
2002 164,964
2003 164,964
2004 164,964
2005 96,229
$ 756,085
Contingent rentals included in income from the operating lease were $1,883
during the fiscal year ended June 30, 2000.
OFFICE SPACE AND EQUIPMENT LEASED FROM OTHERS
During the year ended June 30, 2000, the Company entered into leases for
computer equipment that are classified as capital leases and certain other
leases for office space and a vehicle that are operating leases. At June
30, 2000, the future minimum lease payments under these leases are as
follows:
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE D - LEASES (CONTINUED)
<TABLE>
Operating Capital
YEAR ENDING JUNE 30 Leases Leases
<S> <C> <C>
2001 $129,983 $ 10,816
2002 133,658 10,816
2003 132,454 4,192
2004 133,859 -
2005 137,875 -
Total minimum lease payments $667,829 25,824
Less amounts representing
interest 3,175
Present value of net minimum
lease payments 22,649
Less current maturities 8,781
Long-term capital
lease obligations $ 13,868
</TABLE>
Included above is a five-year operating lease with a related-party
management consulting firm (see Notes F and I) for office space entered into
on May 17, 2000, which provides for annual rentals of $122,500 plus annual
increases equal to the greater of 3% or the annual increase in the Consumer
Price Index. Rental expense incurred for operating leases was $44,300 and
$624 in fiscal 2000 and 1999, respectively.
NOTE E - INCOME TAXES
The deferred tax assets, net of valuation allowances, in the accompanying
balance sheets includes the following components:
<TABLE>
JUNE 30
2000 1999
<S> <C> <C>
Deferred tax assets $ 1,171,615 $ 223,000
Deferred tax asset valuation allowance (1,171,615) (223,000)
Net deferred tax assets $ - $ -
</TABLE>
The Company has loss carryforwards totaling $3,018,226 that may be offset
against future taxable income. If not used, the carryforwards will expire
as follows:
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE E - INCOME TAXES (CONTINUED)
<TABLE>
YEAR ENDING JUNE 30,
<S> <C>
2019 $ 562,984
2020 2,455,242
$ 3,018,226
</TABLE>
The income tax provision differs from the expense that would result from
applying federal statutory rates to income before income taxes because the
aforementioned valuation allowance has been provided to reduce the deferred
tax assets to the amount that is more likely than not to be realized.
NOTE F - RELATED PARTY TRANSACTIONS
On April 24, 1999, the Company entered into a three-year contract with a
management consulting firm owned by two officers and directors of the
Company that provides for payment of various consulting fees. The contract
provided for minimum monthly consulting fees of $15,000 and an annual
expense allowance of $125,000. The agreement also provided for additional
minimum consulting fees totaling $150,000 upon completion of a reverse
merger, such as that described in Note B, plus 550,000 shares of the
Company's Common Stock. Subsequent to June 30, 2000, this contract was
amended and extended. See Note I.
The Company also has entered into independent contractor agreements with
three individuals who are officers and directors of the Company. These
agreements provide for consulting services related to business development and
the day-to-day management of the Company. Each agreement provides for a monthly
payment to the independent contractor of $10,000 (multiplied by 125% for the
remaining term if the contractor is terminated prior to the end of the
respective agreement), plus an automobile allowance. Subsequent to
June 30, 2000, these contracts were voluntarily cancelled.
During the fiscal years ended June 30, 2000 and 1999, the Company incurred
the following expenses in connection with the aforementioned consulting
agreements, as subsequently modified -see Note I:
<TABLE>
YEAR ENDED JUNE 30
2000 1999
<S> <C> <C>
Management consulting fees and expenses $ 163,480 $ 130,833
Consulting regarding merger 205,770 75,000
Independent contractor fees 353,000 135,707
TOTAL $ 722,250 $ 341,540
</TABLE>
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F - RELATED PARTY TRANSACTIONS (CONTINUED)
On January 31, 2000, the Company issued 2,709,519 shares of its Series A
Preferred Stock to a company, and certain of that company's officers and an
affiliate, with which Americas Power Partners, Inc. has entered into
"partnering" arrangements when signing certain contracts with its clients.
In exchange for the Preferred Stock, the Company received 521,694 shares of
its previously issued Common Stock, plus $3 million in cash. The Series A
Preferred Stock Purchase Agreement provides that the Series A Preferred
Stock is convertible into the Company's Common Stock at a conversion price
($1.4846 at June 30, 2000) that ensures that, upon conversion, the previous
preferred stockholders retain the same 21.55% Common Stock ownership
interest as existed at the time the Agreement was signed. Each share of
Series A Preferred Stock will automatically convert into Common Stock, if
not previously converted, on the earlier of January 31, 2005 or a change in
control of the investor company.
Optimization and monetization projects that the Company performed for its
clients during the fiscal year ended June 30, 2000 included $693,434 of
material and services acquired from the aforementioned investor company.
NOTE G - CUSTOMER CONCENTRATION
Sales to each of the Company's two customers amounted to more than 10% of
total sales for the year ended June 30, 2000. The receivable balances for
major customers were $43,529 and $32,059 as of June 30, 2000.
NOTE H - RECLASSIFICATION
For comparability, the fiscal 1999 financial statements reflect
reclassifications where applicable to conform to the financial statement
presentation used in fiscal 2000. The weighted average number of common
shares outstanding for fiscal 1999 has been adjusted to reflect the
equivalent number of shares after the effect of the reverse merger referred
to in Note B.
NOTE I - SUBSEQUENT EVENTS
On August 9, 2000, the Company obtained a loan in the amount of $606,000
from a bank to finance an optimization project. The note is payable in 57
monthly installments of $13,593, including interest at a rate of 10.651% per
annum.
On September 1, 2000, the Company signed a contract with a food processing
corporation to purchase certain of its energy generation assets and, in
turn, provide the company's full requirement energy services for the next
sixteen years at estimated annual billings of $5,400,000.
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE I - SUBSEQUENT EVENTS (CONTINUED)
On September 13, 2000, the Company signed an executive employment agreement
with an individual that provides that the individual will be employed as the
chief executive officer and will be named as a member and chairman of the
board of directors. Concurrently, the individual
acquired 2,400,000 shares of Common Stock for $2,000,000 cash and a
$1,000,000 promissory note.
On October 13, 2000, the board of directors of the Company authorized a
special committee of the board to review prior related party transactions
that occurred during a period when all of the Company's directors also were
consultants or employees of the company. The special committee reported
the following matters, among others, to the board of directors on November
13, 2000.
1) 2,848,186 options granted to purchase Common Stock for one-cent per
share were deemed to be invalid, as the full board of directors had not
approved an option plan or the issuance of the options. The special
committee recommended and the full board agreed to adopt an omnibus
option plan as of November 13, 2000 and to grant 1,140,645 options at
the market price of $1.25 per share on that date to partially
substitute for the invalid options. All persons holding the one-cent
options voluntarily agreed to return those options and acknowledged
that they were not valid.
The Company had not previously recorded any expense related to the
granting of the 2,848,186 options and, because they were not validly
issued, the Company will not restate expenses for the respective prior
quarterly periods.
In addition, the board granted 994,101 options on November 13, 2000 at
$1.25 per share to new employees and other parties.
2) 930,000 shares of Common Stock were awarded to related party
consultants and employees subsequent to the Company raising outside
capital, and these shares were not properly approved by the board of
directors. The individuals who received these shares have agreed to
voluntarily return the shares to the treasury. In return, the board
agreed to grant options to purchase 597,000 shares of stock at the
market price on November 13, 2000 of $1.25 per share.
The Company had not previously recorded any expense in connection with
the above shares and, in light of their issuance subsequently being
determined invalid, prior quarterly results will not be restated.
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE I - SUBSEQUENT EVENTS (CONTINUED)
The Company had issued 60,000 shares of Common Stock to vendors in
consideration of services rendered that were previously valued at
$155,000. The committee determined that 25,000 of these shares were
not authorized and these shares are being returned to the treasury.
Following is a summary of options under the new plan, which were
granted at the fair market value of $1.25 per share:
<TABLE>
Vest in Number
YEAR ENDED JUNE 30, OF OPTIONS
<S> <C>
2001 1,254,400
2002 427,400
2003 427,400
2004 386,000
2005 227,445
2006 9,101
2,731,746
3) Under the valid contract referred to in Note F, the Company had paid
consulting fees of $505,770 in connection with the raising of equity in
the third quarter of fiscal 2000 and the reverse merger in the first
quarter of fiscal 2000. However, the special committee found that
provisions of a Preferred Stock Purchase Agreement did not allow the
Company to pay fees on that issue, and, accordingly, the Company will
receive a refund of $300,000. The third quarter of fiscal 2000 will be
restated to record this reduction of consulting expense.
4) The board has agreed to renegotiate payments for past services, and
amend and extend for two years the contract with the related party
consulting firm. In consideration of this, the firm has agreed to
reduce its past consulting fees by $306,639. The employment contract
of another officer/director also was renegotiated, resulting in a
refund to the Company of $93,000. The June 30, 2000 balance sheet
includes a receivable of $248,221 from the aforementioned related
parties, and the balance of the recovery of $151,413 will be recorded
in the first quarter of fiscal 2001.
5) The lease obligations reported in Note D includes a five-year lease on
office space in a building owned by two directors. These directors and the
Company have agreed to have a third party real estate firm acceptable to
both determine what the market lease rates and terms should be, and the
lease will be modified for those findings, and adjusted to
<PAGE>
AMERICAS POWER PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE I - SUBSEQUENT EVENTS (CONTINUED)
cover any prior payments. This determination is expected to be
completed by November 30, 2000 and may reduce future lease obligations.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning executive officers
and directors of the Company, including their ages and positions with the
Company as of November 13, 2000.
NAME AGE POSITION
Thomas R. Casten 58 Chief Executive Officer and Chairman of
the Board of Directors
Thomas W. Smith 42 President and Director
Raymond F. Weber 44 Chief Financial Officer, Executive Vice
President and Director
Mark A. Margason 44 Director, Vice Chairman
David W. Pequet 48 Director
Theodore Bogard 46 Director
Douglas V. Bloss 42 Director
John K. Leach 42 General Counsel and Secretary
Tom F. Perles 56 Chief Accounting Officer
Larry G. Cox 62 Executive Vice President of Engineering
Thomas R. Casten joined APP in September 2000 as Chief Executive Officer
and Chairman of the Board of Directors. From 1986 to January 2000, Mr.
Casten founded and served as President and Chief Executive Officer of
Trigen Energy Corporation. Between 1980 and 1986, he was Chief Executive
Officer of Trigen's predecessor company, Cogeneration Development Corp.
and prior to that he spent eleven years with Cummins Engine Company.
<PAGE>
Thomas W. Smith was employed as President of APP in May 1999. He was
elected to serve as a Director of the Company on September 13, 2000.
From 1996 to 1998, Mr. Smith was a partner with Alternative Energy
Consultants and from 1993 to 1995 he was Vice President of Business
Development for Polsky Energy Corporation. Previous experience includes
Vice President Sales and Marketing for U. S. Turbine, Vice President
Sales and Marketing of International Power Technology, and Sales Manager
of Westinghouse Electric Corporation.
Raymond F. Weber joined APP in August of 2000 as Chief Financial Officer
and Executive Vice President. He was elected a Director on September 11,
2000. Prior to that Mr. Weber was a Director at Republic Financial from
1999 to August 2000 and Executive Vice President of Heller Financial,
Inc., serving as general manager of the company's Project Finance
Division from 1988 to 1998. Mr. Weber was a Vice President within GE
Capital Corporation's Energy Project Finance unit from 1982 to 1988.
Mark A. Margason is a Director and Vice Chairman of APP. Mr. Margason
resigned his position of Chief Executive Officer of APP on September 12,
2000, and continues as a Director, which he has served as since the
Company's inception. Previously, Mr. Margason was a Vice President at
Citicorp North America from 1986 to 1991, and a Vice President at Mellon
Bank N. A. from 1982 to 1986. He was employed at American National Bank
and Trust Company of Chicago from 1979 and resigned as Assistant Vice
President in 1982. Mr. Margason currently is a director of MPI
Investment Management, Inc., MPI Venture Management, LLC, and Livestock
Direct, Inc.
David W. Pequet was Chairman of the Board of Directors of APP since its
inception in January 1998 through September 2000, and continues as a
Director of the Company. He co-founded the advisory firm of MPI
Investment Management, Inc. (MPI) in 1986, and he is a managing partner
of MPI Venture Management, LLC. He was a fixed income broker at
Prudential Bache Securities since 1976. In June 2000, Mr. Pequet and MPI
Investment Management, Inc. settled a dispute with the SEC dating from
1993-94 regarding a violation of Section 206 and 207 ("Soft Dollar
Commissions") of the Investment Advisor Act of 1940. The settlement
resulted in the payment of a disgorgement fee to the administrative
agency and an agreement to cease and desist from any further violations.
Theodore Bogard was a Vice President of Project Development until October
31, 2000 and continues as a Director of APP From 1996 to 1999, he was
an officer of a predecessor company responsible for power development in
South America. Prior to 1996, he was a partner in a commercial real
estate development company in Atlanta, Georgia for eight years.
Douglas V. Bloss is President of Armstrong Service, Inc. and Corporate
Vice President of Marketing and Sales for Armstrong International, Inc.
Mr. Bloss has been employed with Armstrong International, Inc. in various
marketing capacities since 1980. He was elected a Director of APP on
September 11, 2000.
<PAGE>
John K. Leach joined APP as General Counsel in June 2000. On October 13,
2000, he was elected by the Board of Directors to serve as the Company's
Secretary. Mr. Leach is licensed to practice law in the States of
Illinois, Texas and Louisiana. Prior to joining Americas Power Partners,
Inc., he was a partner in the law firm of Preston & Cowan, L.L.P. in
Houston, Texas. From 1985 through June 1998, he was employed as an
associate then partner of Christovich and Kearney, L.L.P. in New Orleans,
Louisiana and in Houston, Texas.
Tom F. Perles is Chief Financial Officer of MPI Venture Management, LLC,
and has served as Chief Accounting Officer of Americas Power Partners,
Inc., a portfolio company of MPI, since March 2000. Prior to March, Mr.
Perles was a financial consultant to computer software and real estate
development companies for ten years. From 1982 to 1990, he was the chief
financial officer and treasurer of Miller Building Systems and
controller of Ball Seed Company. Prior to 1982, Mr. Perles was on the
professional staff of Ernst & Young for 15 years.
Larry G. Cox, P.E. has been Executive Vice President of Engineering of
APP since its inception, and was employed at a predecessor company in the
same capacity since April 1997. From 1991 to 1997, he was co-founder and
President of International Development Engineering Associates, Inc., an
international power development and engineering firm, and for fourteen
years prior to that he was employed with Parsons Corporation as Principal
Project Manager. Mr. Cox served ten years with the U.S. Navy nuclear
submarine program.
There are no family relationships between any of the Directors and
officers of the Company, except for Thomas W. Smith and John K. Leach,
who are related by marriage.
With respect to the other information required by this item, the sections
entitled "Election of Directors - Nominees" and "Section 16(a) Beneficial
Ownership Reporting Compliance" of the Company's Information Statement
pursuant to Section 14(c) of the Securities Exchange Act of 1934 for the
Company's Annual Meeting of Stockholders to be held in February 2001 and
to be filed with the SEC approximately January, 2001, are incorporated by
reference herein.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's Schedule 14A to be
filed approximately January 2001 regarding a shareholder meeting to be
held in February 2001.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated herein by reference from the Company's Schedule 14A to be
filed approximately January 2001 regarding a shareholder meeting to be
held in February 2001.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's Schedule 14A to be
filed approximately January 2001 regarding a shareholder meeting to be
held in February 2001.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON
FORM 8-K
* Financial Statements and Schedules.
The following documents are filed as part of this report:
Independent Auditors' Report
Balance Sheets - June 30, 2000 and 1999
Statements of Operations - For the Fiscal Years Ended June 30, 2000
and 1999
Statements of Stockholders' Equity - For the Fiscal Years Ended June
30, 2000 and 1999
Statements of Cash Flows - For the Fiscal Years Ended June 30, 2000
and 1999
Notes to Financial Statements
* Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
fourth quarter
ended June 30, 2000.
<PAGE>
* Exhibits.
Exhibit
NUMBER DESCRIPTION
10.1 Executive Employment Agreement by and between Thomas R. Casten
and Americas Power Partners, Inc.
10.2 Employment Agreement by and between Thomas W. Smith and
Americas Power Partners, Inc.
10.3 Americas Power Partners, Inc. 2000 Equity Incentive Plan
10.4 Joint Operating Agreement
10.5 Energy Services Agreement by and Between H. J. Heinz and
Armstrong-Americas I, L.L.C.
10.6 Operation and Maintenance Agreement by and Between H. J. Heinz
and Armstrong-Americas I, L.L.C.
11. Statement re: computation of per share earnings.
23 Report on Financial Statement Schedule and Consent of
Independent Auditors
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAS POWER PARTNERS, INC.
Date: November 15, 2000 /s/ Thomas R. Casten
THOMAS R. CASTEN
Chairman of the Board and
Chief Executive Officer
November 15, 2000 /s/ Tom F. Perles
TOM F. PERLES
Chief Accounting Officer
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 capacities and on the dates indicated.
Signature Title
/s/ Thomas R. Casten Chairman of the Board and Chief
THOMAS R. CASTEN Executive Officer and Director
(Principal Executive Officer)
/s/ Thomas W. Smith President and Director
THOMAS W. SMITH
/s/ Raymond F. Weber Executive Vice President,
RAYMOND F. WEBER Chief Financial Officer and Director
/s/ Douglas V. Bloss Director
DOUGLAS V. BLOSS
<PAGE>
/s/ Mark A. Margason Director
MARK A. MARGASON
/s/ Tom F. Perles Chief Accounting Officer
TOM F. PERLES
</TABLE>
