DEMARCO ENERGY SYSTEMS OF AMERICA INC, 10SB12G, 1999-11-24

DEMARCO ENERGY SYSTEMS OF AMERICA INC
10SB12G, 1999-11-24

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB

GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934

DeMARCO ENERGY SYSTEMS OF AMERICA, INC.

(Exact Name of registrant as specified in charter)

<TABLE>
<S> <C>
UTAH 87-0392000
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number

12885 Hwy 183, ste 108-A 78750
Austin, Texas (Zip Code)
(Address of principal executive offices)

512-335-1494
Registrant's telephone number, including area code
</TABLE>

Securities registered pursuant to section 12(b) of the Act:

Title of Class Name of each exchange on which registered
None None

Securities registered pursuant to Section 12(g) of the Act:

common stock

(Title of Class)

<PAGE> 2

Item 1. Description of Business

BUSINESS OF THE COMPANY

The Company currently competes in two business segments - the
installation of heating and cooling systems and the installation of lighting
systems using new, more efficient, systems. Each of these products can be used
to retrofit less efficient systems. While each of these products can be and is
marketed and installed independently of each other, the Company has begun
offering the heating and cooling system and the lighting products as a
comprehensive energy services product.

THE PRODUCTS

The DeMarco Energy Miser

The Energy Miser is a patented earth-coupled heat pump utilizing the
municipal water main or any other underground piping loop to heat, cool and
provide domestic hot water for buildings. Earth-coupled heat pumps are from 50%
to 70% more efficient than other methods for heating and air conditioning.
Monthly operating costs are significantly lower than other methods.

In the cooling mode, heat pumps operate by removing heat from the
inside of a building to an exterior heat "sink." In the heating mode, the
process is reversed. Heat is moved from an exterior source to the inside of a
building. Earth-coupled heat pumps normally use the heat absorbing, or heat
supplying, capacity of large bodies of water such as lakes, ponds, water wells
or specially constructed networks of pipe called ground loops. The requirements
for a "large body of water" as the external source/sink or the costly excavating
required for the heat pump, imposes three constraints on anyone wanting to
take advantage of the system. The first is the need to be located near such a
body of water if a natural source/sink is going to be used. The second is the
added expense of drilling a water well. The third is the need for enough
property to accommodate laying of several hundred feet of plastic pipe.

The Energy Miser removes those three constraints by utilizing the
thermal properties of public water supplies. As only the thermal properties of
the water are used (not the water itself), the need for large external bodies of
water and expensive wells or land acquisitions is eliminated. There is no cross
flow between the water supply and the heat pump. No water is consumed in the
process.

Energy Efficient Lighting Systems

In 1999, the Company introduced a second commodity for their
comprehensive Energy Services program - a lighting retrofit division. In
commercial facilities, lighting typically represents 30 to 40 percent of a
commercial facility's energy consumption. By reducing the kilowatts used for
lighting, utility costs can be reduced. New more efficient lighting systems can
reduce consumption by as much as 50 percent, without reducing lumens.

The lighting retrofit services are offered as a combined package with
the DeMarco Energy Miser system, creating a marketing/sales program based upon
return on investment time parameters. Lighting retrofits installations are
performed by sub-contractors generally located within the geographic region of
the project. These sub-contractors are identified, recruited and managed by
Company Project Managers. Typical installation time for a complete retrofit is
not more than one day.

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<PAGE> 3

MARKETING AND COMPETITION

The Company markets its Energy Miser system via a marketing agreement
with Florida Heat Pump Manufacturing Company, of Ft. Lauderdale, Florida.
Florida Heat Pump manufactures, distributes and markets the DeMarco Energy Miser
as a private label through its dealer network. Florida Heat Pump and the Company
focus primarily on the commercial and institutional markets. The Company
displays the Energy Miser at trade shows in booths sponsored by Florida Heat
Pump. In addition to trade shows, the Company markets the Energy Miser directly
to end users, architects, designers and installers of HVAC equipment. The
market for HVAC equipment and installation exceeds $30,000,000 annually. In this
business segment, the Company is in competition with all other producers of HVAC
systems, some of whom are more firmly established in the marketplaces and have
substantially greater financial resources than the Company.

One significant obstacle confronted by the Company in the marketing of
the Energy Miser is governmental interpretation and regulation. The Energy Miser
requires a constant flow of water, the volume of which must increase as the
amount of space to be conditioned and as the size of the unit increases. For
many applications, this requires connecting into the public water supply to gain
access to "main" water lines. In some cases public officials in charge of
maintaining public water supplies challenge any such tapping into the public
potable water supply. The Energy Miser does not use water - it only uses the
thermal properties of the water, meaning that the water removed from the main is
returned at a slightly different temperature. The Company is not aware of any
proof to support water quality concerns of public officials. The Company can
offer no assurances that it will ever be able to overcome the concerns of public
water officials.

Notwithstanding governmental obstacles, the Company has experienced
success in two areas. When a given facility will be sufficiently large that it
has a significant demand for water, the "private" water pipes bringing the water
in from the public water supply may have the requisite volume. In addition, for
such sites, it is possible and cost effective to install a back-flow preventor,
which prevents the return of water from the site into the public water supply.
The back-flow prevention addresses concerns of public health officials. In
addition, some sites use enough water that the "gray" water in the sanitary
sewer would provide sufficient volume to utilize the Energy Miser. The Company
is attempting to maximize its marketing efforts in these areas.

A secondary water system has become the initiative of approximately
2000 communities throughout the United States. This secondary water system
contains water treated less than that of potable water, and referred to as
either reuse, gray, or brown water. This water type is used for applications
other than human or animal consumption, such as cooling towers and boiler
systems, lawn sprinklers and fire prevention. Because it has equal thermal
properties of potable water, the DeMarco Energy Miser is being considered as a
generally acceptable application.

The Company's lighting retrofit business also focuses on the commercial
and institutional markets. The Company markets the products of other
manufacturers and manufactures no products itself. At some point in the future,
the Company will forge a strategic partnership relationship to audit and manage
the installation of the energy efficient lighting fixtures it markets, but for
the time being it will refrain from bidding lighting retrofit projects. The
Company has recently signed a significant contract with Pacific Gas and Electric
Service Company to retrofit a large number of gasoline stations in the Eastern
and Southeastern portions of the United States. The Company is pursuing a
strategic partnership agreement with an existing lighting retrofit company as of
the date of this filing.

The Company's lighting retrofit business competes with a very wide
array of businesses, some of whom are quite substantial. Several of the
Company's competitors manufacture the lighting fixtures they market, which may
offer them a competitive advantage. Others are adversaries or affiliates of
electric

-3-
<PAGE> 4

utilities, which may afford them greater or more ready access to potential
customers.

Item 2. Management's Discussion and Analysis of Plan of Operation

As of fiscal year-end 1999, the Company had installed a total of 2,500
unit applications or approximately 10,000 tons of the Energy Miser heating and
cooling system. Revenues for fiscal year-end 1999 were $91,117.00, down
$190,456.00 from 1998. The Company experienced a loss for fiscal 1998 and 1999.

Results of operations for both 1998 and 1999 were due to the gradual
dissolution of Cyberlink, a wholly-owned subsidiary of the Company. For fiscal
1999, the Company decided to reorganize sales and income strategies. It began
implementing corrective efforts in January 1999 to resolve organizational and
operational deficiencies. Efforts to organize a lighting retrofit
infrastructure, establish strategic partnerships, and pursue energy-related
business acquisition candidates began in March of 1999. During the same month, a
comprehensive energy solutions program was outlined, presenting multiple energy
solution services and products to previous clients as well as current and new
clients. Results of re-organized operations have currently produced two Energy
Miser retrofit work orders; a military barracks at the Marine Air Station in
South Carolina, and a commercial facility retrofit in New York state.

The Company is benefitting from the Federal Government mandates to
reduce energy consumption. In 1999, the Government revised the energy reduction
mandate for all federal buildings to reduce energy consumption as much as 35% by
2005. Energy service companies ("ESCOs") have pursued systems and products, and
share the savings with the government through Performance Contracting. As a
result, the Company has initiated strategic partnership opportunities with such
ESCOs to jointly offer a very competitive return on investment when utilizing
the DeMarco Energy Miser system. State and local governments have mirrored the
energy reduction mandate, as well as commercial building owners. The Company
sales lead generation has increased 300% for 1999, and 200% for 1998.

Performance contracting should minimize out-of-pocket expenses for the
Company. Payment is due prior to delivery of product from the manufacturer, and
the Company receives its percentage (usually 20%) within two weeks thereafter.
The Company believes that strategic partnerships with ESCOs will provide the
Company with resources to subsidize sales and marketing strategies and implement
other short-term growth objectives.

Energy efficiency awareness has produced a demand for retrofit services
which is growing faster than the number of companies capable of performing
retrofit services. Although current manpower availability is less than adequate
for the retrofit services market, manufacturers have recognized and prepared for
the escalating market demand. The Company believes that the amount of energy
efficient product exceeds the installation capability. This excess has caused
pricing to become highly competitive and resulted in widespread pricing
reductions. The Company does not foresee the need to establish an inventory of
energy efficient products.

Partnership arrangements with larger energy service companies will
provide the company with resources to engage in performance contracting.
Performance contracting should minimize out of pocket expenses for the Company.
The proceeds will be used to subsidize sales and marketing efforts and implement
other growth objectives.

The Company remains an industry leader in reducing operating cost for
heating and cooling and production of domestic hot water expenses, achieving as
much as 70% in energy cost savings. The Company

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<PAGE> 5

has the only patent which allows the connection of geo-thermal heat pumps to the
municipal water main or reuse water, for the purpose of heating and cooling.
Both the lighting and the heating and cooling systems are virtually maintenance
free with a system life expectancy of well over 25 years. Key sales advantages
include: providing the industry's shortest return on investment time frames, low
power consumption and flat load operation, energy efficient rebates from
utilities, all heating and cooling equipment remain indoor, no fossil fuels
consumed or required for use, and environmental friendliness.

Item 3. Description of Property

The Company occupies approximately 1200 square feet of office space at
12885 Hwy 183, Suite 108-A, Austin, Texas 78750. The Company owns no property
other than office furniture, equipment and software. The Company employs 2
people, both of whom are full time and one independent contractor. It is
anticipated that up to 15 additional personnel will be required to meet the
demands of the projected market over the next five years. Most of these
positions will be in the areas of sales, marketing and project management as the
Company's projected volume increases.

Item 4. Security Ownership of Certain Beneficial Owners and Management

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of September 30,1999, the name and
shareholdings, including options to acquire Common Stock, of each person who
owns of record, or was known by the Company to own beneficially, 5% or more of
the shares of the Common Stock currently issued and outstanding; the name and
shareholdings, including options to acquire the Common Stock, of each director;
and the shareholdings of all executive officers and directors as a group. The
address of each of the individuals listed below is the address of the Company.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Name of Person or Group Nature of Number of Shares Percentage of
Ownership Owned Ownership (1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Victor M. DeMarco, President Direct 7,904,500 35.2%
- --------------------------------------------------------------------------------------------------------
All executive officers and directors
as a group (1) 7,904,500 35.2%
- --------------------------------------------------------------------------------------------------------
TOTAL 7,904,500 35.2%
- --------------------------------------------------------------------------------------------------------
</TABLE>

Item 5. Directors, Executive Officers, Promoters and Control Persons

The Company's Chief Executive Officer, President and sole director is
Victor M. DeMarco. Mr. DeMarco is 36 years old and has served as the Company's
President and Chief Executive Officer since 1992.

Item 6. Executive Compensation

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<PAGE> 6

<TABLE>
<CAPTION>
Long Term Compensation

Awards Payouts

Annual Compensation Restricted Stock Securities LTIP All
Underlying/Options Other
------------------- --------------------------- ------------------ ------------
Name and Year Salary Bonus Other Award SARS Payouts Compensation
Principal Position

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Victor DeMarco 1999 40,800 0 0 0 0 0 0
---- ------ ----- ----- ----- ----- ----- -----
1998 36,000 0 0 0 0 0 0
---- ------ ----- ----- ----- ----- ----- -----
1997 36,000 0 0 0 0 0 0
---- ------ ----- ----- ----- ----- ----- -----
</TABLE>

Item 7. Certain Relationships and Related Transactions.

Victor DeMarco, the Company's controlling shareholder and sole officer
and director has personally guaranteed indebtedness of the Company totaling
approximately $80,000.

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<PAGE> 7

Item 8. Legal Proceedings.

There are no legal proceedings pending against the Company.

Item 9. Market for Common Equity and Related Stockholder Matters.

The Common Stock has been traded in the over-the-counter market and
quoted on OTC EBB under the symbol "DMES" and quoted in the pink sheets
published by the National Quotations Bureau. Since 1984, from time to time, a
very small number of securities broker-dealers published only intermittent
quotations for the Common Stock, and there was no continuous, consistent trading
market. The trading volume in the Common Stock has been and is extremely
limited. During the above period, the limited nature of the trading market
created the potential for significant changes in the trading price for the
Common Stock as a result of relatively minor changes in the supply and demand
for Common Stock and perhaps without regard to the Company's business
activities. Because of the lack of specific transaction information and the
Company's belief that quotations during the period were particularly sensitive
to actual or anticipated volume of supply and demand, the Company does not
believe that such quotations during this period are reliable indicators of a
trading market for the Common Stock.

Subject to the above limitations, the Company believes that during
eight fiscal quarters preceding the date of this filing, the high and low sales
prices for the Common Stock during each quarter are as set forth in the table
below (such prices are without retail mark-up, mark-down, or commissions).

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three-Month Period Ending High Dollar Low Dollar
- --------------------------------------------------------------------------------
<S> <C> <C>
9/30/97 5/16 0.18
- --------------------------------------------------------------------------------
12/31/97 3/8 1/32
- --------------------------------------------------------------------------------
3/31/98 0.50 0.10
- --------------------------------------------------------------------------------
6/30/98 0.50 1/16
- --------------------------------------------------------------------------------
9/30/98 3/8 1/8
- --------------------------------------------------------------------------------
12/31/98 9/32 3/32
- --------------------------------------------------------------------------------
3/31/99 0.53 1/8
- --------------------------------------------------------------------------------
6/30/99 9/32 1/8
- --------------------------------------------------------------------------------
9/30/99 0.35 1/8
- --------------------------------------------------------------------------------
</TABLE>

Under recent rules promulgated by the National Association of
Securities Dealers, Inc., the Company's listing on the OTC EBB was suspended
until the Company could become a reporting company under the Securities Exchange
Act of 1934, as amended. When this registration statement becomes effective the
Company anticipates that its common stock will once again be listed in the OTC
EBB.

Item 10. Recent Sales of Unregistered Securities.

In September 1999, the Company completed a private placement (the
"Placement") of 696,852 shares of its common stock. The aggregate sales proceeds
of the Placement were $174,300, of which approximately $97,000 was sold in the
twelve months preceding the date of this registration statement. The Company
believes that the issuance of shares of common stock in the Placement was exempt
from the registration requirements of the Securities Act under Rule 504 under
the Securities Act.

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<PAGE> 8

Item 11. Description of Securities.

Common Stock. The Company is authorized to issue 100,000,000 shares of
Common Stock, of which approximately 22,454,000 shares are currently issued and
outstanding. Holders of shares of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors from assets legally
available for that purpose and are entitled at all meetings of stockholders to
one vote for each share held by them. The shares of Common Stock are not
redeemable and do not have any preemptive or conversion rights. All of the
outstanding shares of Common Stock are fully paid and nonassessable. In the
event of a voluntary or involuntary winding up or dissolution, liquidation, or
partial liquidation of the Company, holders of Common Stock shall participate,
pro rata, in any distribution of the assets of the Company remaining after
payment of liabilities.

As of June 30, 1999, there were approximately 1000 holders of record of
Common Stock.

Transfer Agent.

The transfer agent for the Common Stock is Fidelity Transfer Company,
1800 South West Temple, Salt Lake City, Utah 84115.

MARKET FOR COMMON STOCK

Item 12. Indemnification of Directors and Officers.

The articles of incorporation of the Company limit the personal
monetary liability of the Company's directors to the fullest extent permissible
under the corporation laws of Utah. In general, Section 16-10a-841 of the Utah
Revised Business Corporation Act (the URBCA"), permits the elimination of
personal monetary liability in all cases except liability for: (a) the amount of
a financial benefit received by a director to which he is not entitled; (b) an
intentional infliction of harm on the corporation or the shareholders; (c) a
violation of Section 16-10a-842 of the Utah Revised Business Corporation Act
(relative to distribution of assets in violation of the URBCA or the Company's
articles of incorporation); or (d) an intentional violation of criminal law.

Except as set forth in the articles of incorporation and under the
provisions of the URBCA, no statute, charter provision, bylaw, contract or other
arrangement which indemnifies any controlling person, officer or director of the
Company, affects or limits their liability.

-8-
<PAGE> 9

Item 13. Financial Statements.

Independent Auditor's Report

To the Shareholders of
DeMarco Energy Systems of America, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of DeMarco Energy
Systems of America, Inc. and Subsidiary as of June 30, 1999, and the related
consolidated statements of income and retained earnings, 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.

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 DeMarco Energy Systems of
America, Inc. and Subsidiary as of June 30, 1999, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

Nathan M. Robnett, C.P.A.
October 13, 1999

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<PAGE> 10

CONSOLIDATED BALANCE SHEET
June 30, 1999

<TABLE>
<CAPTION>
ASSETS

CURRENT ASSETS

<S> <C>
Cash and Cash Equivalents $ 2,647
Accounts Receivable 45,000

Total Current Assets $ 47,647

CAPITAL ASSETS

Fixtures and Equipment $ 149,045
Accumulated Depreciation (92,712)

Total Fixed Assets $ 56,333

OTHER ASSETS

Patent Pending Costs $ 9,912
Accumulated Amortization (248)
Deposits 1,000

Total Other Assets $ 10,664

TOTAL ASSETS $ 114,644

LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES

Accounts payable $ 46,108
Promissory Note 57,898
Current Portion of Long-Term Debt 26,852
Other Current Liabilities 4,388

Total Current Liabilities $ 135,246

OTHER LIABILITIES

Long-Term Notes Payable 52,541
Notes Payable to Shareholders 55,420

TOTAL LIABILITIES 243,207

SHAREHOLDERS' EQUITY

Common Stock $0.001 par value 100,000,000 $ 22,454
shares authorized and 22,453,657 shares issued
Additional paid-in capital 2,223,892
Retained deficit (2,164,379)
Subscriptions Receivable (210,530)

Total Shareholder's Equity (128,563)

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 114,644
</TABLE>

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<PAGE> 11

CONSOLIDATED STATEMENT OF INCOME
AND RETAINED EARNINGS

June 30, 1999

<TABLE>
<CAPTION>
REVENUES

<S> <C>
Net Sales $ 14,761
Other Income 76,356

TOTAL REVENUES $ 91,117

COSTS AND EXPENSES

Cost of merchandise sold 5,545
Selling and Administrative 217,178
Depreciation and Amortization 37,084
Interest 28,284

TOTAL COSTS AND EXPENSES $ 288,091

OTHER INCOME AND EXPENSE

Loss on Equipment Sales 19,866

NET LOSS (216,840)

Retained deficit at beginning of year (1,947,539)

Retained deficit at end of year (2,164,379)

Loss per Common Share $ (0.007)
</TABLE>

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<PAGE> 12

CONSOLIDATED STATEMENT OF CASH FLOWS
June 30, 1999

<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES

<S> <C>
Net Loss 0.00 $ (216,840)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES:

Depreciation and Amortization 37,084

CHANGES IN OPERATING ASSETS AND LIABILITIES

Prepaid expenses 10,157
Due from Shareholders 115,843
Accounts Receivable (45,000)
Inventories 5,545
Deposits (1,000)
Accounts Payable (3,350)
Current Portion of Notes Payable 3,665
Other current liabilities 3,634

NET CASH USED BY OPERATING ACTIVITIES 89,494

CASH FLOWS FROM INVESTING ACTIVITIES

Patent Pending (9,912)
Equipment Additions (778)
Fixed asset retirements 32,843
Fixed asset depreciation retirements (12,977)

NET CASH USED BY INVESTING ACTIVITIES 9,176

CASH FLOWS FROM FINANCING ACTIVITIES

Line of Credit (43,141)
Notes Payable (25,873)
Shareholder Loans 41,035
Proceeds from stock transactions 104,310

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 76,331

Net decrease in Cash and Cash Equivalents (4,755)

Cash and Cash Equivalents at Beginning of Year 7,402

Cash and Cash Equivalents at End of Year 2,647
</TABLE>

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<PAGE> 13

DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations
DeMarco Energy Systems of America, Inc. (the Company) was organized under the
laws of the State of Utah in 1983. The Company is primarily engaged in the
process of investigating business opportunities which appear to have profit
potential for the Company. Primary emphasis is being placed on the DeMarco
Energy System water-air heating/cooling systems, energy audits and energy
related equipment such as lighting and electrical fixture retro-fittings.

During 1989, the Company exchanged 10,396,790 shares of its stock for exclusive
rights to a United States patent. The patent was granted for a unique
water-source heat pump system that both heats and cools buildings and provides
domestic hot water at an extremely low cost to install and operate. The heat
pump is specifically designed to utilize municipal water systems as a heat
source/sink. Florida Heat Pump Manufacturing Co. manufactures the DeMarco Energy
Miser System under a patent licensing agreement.

During the fiscal year ending June 30, 1999, the Company filed an application
with the United States Patent Office for a patent covering a heat pump system
using gray water sources, reclaimed water sources and other non-potable water
sources. Costs of approximately $10,000 related to the patent application have
been capitalized. The eventual approval or denial of this patent application is
indeterminable at this time.

DeMarco Energy Systems of America, Inc. currently has installations in Oregon,
Pennsylvania, Washington, Montana, South Dakota, Mississippi, and California.

In July 1996, the Company organized Cyberlink Systems, Inc. (Cyberlink), a
wholly owned subsidiary. Cyberlink was organized to refurbish and market
after-market computer components. During March of 1998 Cyberlink ceased doing
business. All activities regarding Cyberlink were wound down during the fiscal
year ended June 30, 1999.

Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of the Company and
its subsidiary. Intercompany transactions and accounts have been eliminated.

Furniture and Equipment
Furniture and equipment are recorded at historical cost less depreciation.
Depreciation is accounted for on the straight-line method based on estimated
useful lives. Betterments and large renewals which extend the life of assets are
capitalized whereas maintenance and repairs and small renewals are expensed as
incurred.

Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

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<PAGE> 14

DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999

NOTE B - LONG TERM DEBT
Long-term debt consists of $52,541 in notes to financing companies
collateralized by computer systems which have a net book value of $45,559. The
amount due within one year is $26,852.

The maturities of long-term debt for each of the succeeding five fiscal years
subsequent to June 30, 1999, are as follows:

<TABLE>
<S> <C>
Year ending June 30, 2000 $ 26,852
Year ending June 30, 2001 29,954
Year ending June 30, 2002 22,586
Year ending June 30, 2003 0
Year ending June 30, 2004 0
--------

Total $ 79,392
========
</TABLE>

NOTE C - COMMITMENTS AND CONTINGENCIES
The company entered into a new office facility lease calling for the following
rents:

<TABLE>
<S> <C>
Year ending June 30, 2000 $ 12,454
Year ending June 30, 2001 13,061
Year ending June 30, 2002 6,683
Year ending June 30, 2003 0
Year ending June 30, 2004 0

Total $ 32,198
========
</TABLE>

The company has had, and renewed, a short term promissory note payable. At June
30, 1999, the balance was $57,898, the company was making interest and principal
payments of $1,200 per month, and the note was secured by shares in the company
owned by the company's president, Mr. Victor DeMarco. The president has also
guaranteed payments called for under the long term debt above and the office
facility lease payments.

NOTE D - EARNINGS (LOSS) PER COMMON SHARE
Earnings (Loss) per common share are computed by dividing net losses by the
average number of common share outstanding during the year. The weighted average
number of common shares outstanding during the year ended June 30, 1999 was
approximately 31,250,000 shares.

NOTE E - INCOME TAXES
As of June 30, 1999, DeMarco Energy Systems of America, Inc. had an operating
loss carry forward of approximately $1,924,000 which expires between 2005 and
2013 and is available to offset future taxable income to the extent permitted
under the Internal Revenue Code.

NOTE F - RELATED PARTY TRANSACTIONS
During the year ending June 30, 1999, Mr. Louis DeMarco, chairman of the board,
passed away. His estate forgave $66,356 owed by the company and is included in
other income in the financial statements. Additionally, 9,746,745 of his shares
were cancelled.

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<PAGE> 15

DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999

Mr. Victor DeMarco, president of the company has advanced sums totaling $25,419
as at June 30, 1999 and they are included in Notes Payable to Shareholders in
the financial statements. The president has personally guaranteed payment and
performance of certain company obligations, including the promissory note,
equipment notes payable and facility lease through at least June 30, 2000.

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<PAGE> 16

Independent Auditor's Report

To the Shareholders of
DeMarco Energy Systems of America, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of DeMarco Energy
Systems of America, Inc. and Subsidiary as of June 30, 1998, and the related
consolidated statements of income and retained earnings, 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DeMarco Energy Systems of
America, Inc. and Subsidiary as of June 30, 1998, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

Nathan M. Robnett, C.P.A.
June 5, 1999

-16-
<PAGE> 17

BALANCE SHEET
June 30, 1998
DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY CONSOLIDATED

ASSETS

<TABLE>
<CAPTION>
CURRENT ASSETS

<S> <C>
Cash and cash equivalents $ 7,402
Inventory 5,545
Prepaid Expense 10,157
Due from Stockholders 115,843

TOTAL CURRENT ASSETS $ 138,947
Fixed Assets:
Fixtures and Equipment 181,109
Accumulated Depreciation (68,853)

TOTAL FIXED ASSETS 112,256

TOTAL ASSETS 251,204

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts Payable $ 50,059
Line of Credit with Bank 101,039
Other Current Liabilities 154
Current Portion of Long-term Debt 23,187

TOTAL CURRENT LIABILITIES $ 174,438

Long-Term Notes Payable 78,414
Note Payable to Shareholder 14,385

TOTAL LIABILITIES $ 267,237

STOCKHOLDERS' EQUITY

Common Stock par value $ 0.001
100,000,000 Shares authorized and 31,620,140 Shares issued 31,621
Additional paid-in capital
Retained deficit 2,104,765
Subscriptions Receivable (1,947,539)
Total Stockholders' Equity (204,880)
(16,033)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 251,204
</TABLE>

-17-
<PAGE> 18

DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS FOR
THE YEAR ENDED
June 30, 1998

<TABLE>
<CAPTION>
REVENUES

<S> <C>
Net Sales $ 275,573
Other income 6,000
281,573
Cost and Expenses:

Cost of merchandise sold 248,714
Loss of Sale of Inventory 55,545
Selling and Administrative 346,260
Depreciation 40,863

Interest 29,689

Net Loss (439,498)

Retained deficit at beginning of year, as restated (1,508,041)

Retained deficit at the end of year (1,947,539

Loss per Common Share (0.014)
</TABLE>

-18-
<PAGE> 19

DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
June 30, 1998

<TABLE>
<CAPTION>
Cash Flow From Operating Activities:

<S> <C> <C>
Net loss $ (439,499)

Adjustments to Reconcile Net Loss to Net Cash Provided by
Operating Activities:

Amortization 793
Depreciation 40,863

Provision for Losses on Inventories Change in Operating Assets
and Liabilities:

Accounts Receivable 60,275
Inventories 114,378
Other current assets (3,918)
Due from Stockholders (85,652)
Investment in Subsidiary (45,588)
Accounts payable (9,829)

Other current liabilities (9,007)

Due to Stockholders 14,385

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures on furniture and equipment 23,736
Wholly owned Subsidiary 45,588
Net Cash Provided by Investing Activities 69,324

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from Issuance of Stock 126,438
Repayment of Note Payable to Bank (120,000)
Assume debt from Subsidiary 109,941
Repayment of Note Payable to Individual (2,750)
Repayment of Long-term Debt (18,492)
(Repayments)Proceeds of revolving agreement borrowings 101,039
Transfer Debt to Parent
Repayments to Stockholder (109,941)
(10,762)

Net Cash Provided by Financing Activities 75,472

Net Decrease in Cash and Cash Equivalents (218,003)

Cash and Cash Equivalents at Beginning of Year 225,405

Cash and Cash Equivalents at End of Year 7,402
</TABLE>

-19-
<PAGE> 20

DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY
JUNE 30, 1998
NOTES TO THE FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS: DeMarco Energy Systems of America, Inc. ( The Company) was
organized under the laws of the State of Utah in 1983. The Company is primarily
engaged in the process of investigating business opportunities which appear to
have profit potential for the Company. Primary emphasis is being placed on the
DeMarco Energy System Water-Air Heating/Cooling System.

DeMarco Energy Systems of America, Inc. currently has installations in Oregon,
Pennsylvania, Washington, Montana, South Dakota, Mississippi, and California.

In July 1996, the Company organized Cyberlink Systems, Inc.(Cyberlink), a wholly
owned subsidiary. Cyberlink was organized to refurbish and market after-market
computer components. During March of 1998 Cyberlink ceased doing business.

BASIS OF FINANCIAL STATEMENT PRESENTATION: The consolidated financial statements
include the accounts of the Company and its subsidiary. Intercompany
transactions and accounts have been eliminated.

CASH EQUIVALENTS: Holdings of highly liquid investments with maturities of three
months or less when purchased are considered to be cash equivalents.

INVENTORIES: Inventories consist primarily of components and are stated at net
realizable value at June 30, 1998 which is lower than cost.

FURNITURE AND EQUIPMENT: Furniture and equipment are recorded at cost less
depreciation. Depreciation is accounted for on the straight-line method based on
estimated useful lives. Betterments and large renewals which extend the life of
the asset are capitalized whereas maintenance and repairs and small renewals are
expensed as incurred.

ADVERTISING COSTS: The Company expenses the production costs of advertising as
incurred. Advertising expense was $17,230 for the year ended June 30, 1998.

ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

NOTE B - LONG-TERM DEBT

Long-term debt consists of $101,601 in notes to financing companies
collateralized by four computer systems. Monthly payments total $2979.80 and
include interest at 14.73%. The equipment has a net book value of $71,593 at
June 30, 1998. The amount due within one year is $23,187.

-20-
<PAGE> 21

DEMARCO ENERGY SYSTEMS OF AMERICA, INC. AND SUBSIDIARY
JUNE 30, 1998
NOTES TO THE FINANCIAL STATEMENTS

NOTE B - LONG-TERM DEBT(Cont.)
The maturities of long-term debt for each of the succeeding five fiscal years
subsequent to June 30, 1998, are as follows:

<TABLE>
<S> <C>
Year ended June 30, 1999 $ 23,187
Year ended June 30, 2000 25,873
Year ended June 30, 2001 29,954
Year ended June 30, 2002 22,586
Year ended June 30, 2003 0
--------

101,601
========
</TABLE>

NOTE C - EARNINGS PER COMMON SHARE

Earnings per common share are computed by dividing net losses by the average
number of common share outstanding during the year. The weighted average number
of common shares outstanding during the year ended June 30, 1998 were
approximately 31,366,000.

NOTE D - INCOME TAXES

As of June 30, 1998, DeMarco Energy Systems of America, Inc. had an operating
loss carry forward of $1,638,587 which expires between 2005 and 2012 and is
available to offset future taxable income to the extent permitted under the
Internal Revenue Code.

NOTE E - PRIOR PERIOD CORRECTION

During the year ended 6/30/97, the Corporation did not record a portion of the
necessary straight-line depreciation on its furniture and equipment. To properly
reflect the income in the current year, a prior period adjustment has been
recorded to the beginning Retained Earnings and Accumulated Depreciation
balances to reflect the effect of recording the depreciation in the appropriate
periods.

The effects of this restatement on Retained Earnings and Accumulated
Depreciation at the beginning of the period and on the net loss for the year
ended June 30,1997 are as follows:

<TABLE>
<CAPTION>
As Previously Increase Due Restated
Reported To Correction Balances
------------- ------------- -----------
<S> <C> <C> <C>
Accum. Depreciation $ 42,402 $ 11,800 $ 54,202

Retained Deficit (1,496,241) (11,800) (1,508,041)

Net Loss (139,066) (11,800) (150,866)
</TABLE>

NOTE F - SUBSEQUENT EVENTS

During the period from July 1, 1998 through June 5, 1999 Shareholders have
advanced approximately $232,000 in loans to the Corporation to fund continuing
operations.

-21-
<PAGE> 22

BALANCE SHEET
September 30, 1999
(unaudited)

ASSETS

<TABLE>
<S> <C>
CURRENT ASSETS

Main Checking Account $ 9,309.30
Advances 850.00
Allowance for Doubtful Accounts (20,000.00)
Prepaid Expense 10,000.00
Due from Jim Vaden 20,000.00

TOTAL CURRENT ASSETS $ 20,159.30

FIXED ASSETS

Fixtures and Equipment 161,049.05
Accumulated Depreciation (92,959.76)

TOTAL FIXED ASSETS 69,089.29

OTHER ASSETS

Deposits 1,000.00

TOTAL OTHER ASSETS 1,000.00

TOTAL ASSETS 89,248.59
============

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts Payable $ 133,814.06

TOTAL CURRENT LIABILITIES $ 133,814.06

LONG TERM LIABILITIES

Long Term Notes Payable 46,463.68
Note Payable - Victor DeMarco 36,419.88

TOTAL LONG TERM LIABILITIES 82,883.56

EQUITY

Common Stock - Par 76,830.00
Paid in Surplus 2,223,892.76
Subscriptions Receivable (210,530.00)
Retained Earnings (2,164,378.82)
Current Income (Loss) (53,262.97)

TOTAL EQUITY (127,449.03)

TOTAL LIABILITIES & EQUITY $ 89,248.59
============
</TABLE>

-22-
<PAGE> 23

INCOME STATEMENT
September 30, 1999
(unaudited)

<TABLE>
<CAPTION>
REVENUE

<S> <C>
Cost of Sales
Contract Labor 3,000.00

TOTAL COST OF SALES 3,000.00

GROSS PROFIT (3,000.00)

OPERATING EXPENSES

Accounting 9,535.00
Advertising 480.00
Auto Expense 1,197.21
Bank Charges 422.49
Credit Card Fees 91.41
Dues and Subscriptions 4,732.57
Entertainment 95.36
Freight 920.83
Interest Expense 6,738.00
Internet Carrier 158.45
Legal & Professional 1,230.00
Officers Salaries 11,400.00
Office Expense 3,260.65
Postage 200.00
Rent 3,037.50
Repairs and Maintenance 519.60
Salaries & Wages 5,010.75
Supplies 26.45
Taxes - Payroll 1,358.20
Telephone 1,588.85
Travel 1,034.13
Utilities 623.52

TOTAL EXPENSES 53,662.97

OPERATING INCOME (56,662.97)

INTEREST INCOME 3,400.00

TOTAL OTHER INCOME 3,400.00

NET INCOME (LOSS) (53,262.97)
</TABLE>

-23-
<PAGE> 24

STATEMENT OF CASH FLOWS
September 30, 1999
Increase (Decrease) in Cash or Cash Equivalents
(unaudited)

<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES

<S> <C>
NET INCOME (LOSS) (53,262.97)
Adjustments to Reconcile Cash Flow
DECREASE (INCREASE) IN CURRENT ASSETS
Advances (850.00)
Prepaid Expense (10,000.00)
Due from Keystone Services, Inc. 45,000.00
INCREASE (DECREASE) IN CURRENT LIABILITIES
Accounts Payable - AmEx Optima 8.77
Accounts Payable - AmEx Delta 196.61
Accounts Payable - Diners Club (1,989.95)
Depository - FIT & FICO (6,129.01)
Line of Credit - Norwest Bank (10,000.00)
Note Payable - Tom Ray (10,000.00)
Note Payable - Peter Des Camp (7,000.00)
Federal Withholding Payable 1,527.92
FICA Tax Payable 2,510.82
Federal Unemployment Payable (485.84)
State Unemployment Payable (71.04)

TOTAL ADJUSTMENTS 2,718.28

Cash Provided (Used) by Operations (50,544.69)

CASH FLOW FROM INVESTING ACTIVITIES
Sales (Purchases) of Assets
Computer Equipment (2,091.80)

Cash Provided (Used) by Investing (2,091.80)

Cash Flow From Financing Activities
Cash (Used) or provided by:
Note Payable - Americorp (1,494.38)
Note Payable - Copelco Capital (1,546.13)
Note Payable - GE Capital (1,553.29)
Note Payable - Green Tree (1,483.28)
Note Payable - Victor DeMarco 11,000.00
Common Stock - Par 54,376.00

Cash Provided (Used) By Financing 59,298.92

Net Increase (Decrease) In Cash 6,662.43

CASH AT BEGINNING OF PERIOD 2,646.87

CASH AT END OF PERIOD 9,309.30
============
</TABLE>

-24-
<PAGE> 25

Item 14. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.

Not applicable.

Item 15. Financial Statements and Exhibits.

The following financial statements are filed as part of this
registration statement:

<TABLE>
<S> <C>
Report of Independent Certified Public Accountants (Nathan M. Robnett,
C.P.A.) dated October 13,1999

Consolidated Balance Sheet at June 30, 1999

Consolidated Statements of Operations for the Year ended June 30, 1999

Consolidated Statement of Stockholders' Equity for the Year ended
June 30, 1999

Consolidated Statements of Cash Flows for the Years ended June 30, 1999

Report of Independent Certified Public Accountants (Nathan M. Robnett,
C.P.A.) dated June 5, 1999

Consolidated Balance Sheet at June 30, 1998

Consolidated Statements of Operations for the Year ended June 30, 1998

Consolidated Statement of Stockholders' Equity for the Year ended
June 30, 1998

Consolidated Statements of Cash Flows for the Years ended June 30, 1998

Consolidated Balance Sheets at September 30, 1999

Consolidated Statements of Operations for the three months ended
September 30, 1998 and 1999

Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1999
</TABLE>

Exhibit No. Name of Exhibit

3.01 Articles of Incorporation

3.02 Bylaws

10.01 Agreement effective 1999 by and between
DeMarco Energy Services, Inc., and Pacific
Gas & Electric Services Co.

21.01 List of Subsidiaries

23.01 Consent of Nathan M. Robnett

All of the foregoing exhibits are filed electronically herewith.

-25-
<PAGE> 26

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant causes this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.

DEMARCO ENERGY SYSTEMS OF AMERICA, INC.

Date: November 24, 1999
---------------------------------

By: Victor M. DeMarco, President
-----------------------------------
(Signature)

-26-
<PAGE> 27
EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
------- -----------

<S> <C>
3.01 Articles of Incorporation

3.02 Bylaws

10.01 Agreement effective 1999 by and between
DeMarco Energy Services, Inc., and Pacific
Gas & Electric Services Co.

21.01 List of Subsidiaries

23.01 Consent of Nathan M. Robnett

</TABLE>

<PAGE> 1
EXHIBIT 3.01

ARTICLES OF AMENDMENT

TO THE

ARTICLES OF INCORPORATION

DeMARCO ENERGY SYSTEMS OF AMERICA, INC.

DeMarco Energy Systems of America, Inc., by and through the
undersigned, constituting the President and Secretary of such corporation,
hereby amends the Articles of Incorporation of said corporation as follows:

1. The name of the corporation is DeMarco Energy Systems of America,
Inc.

2. Article IV of the Articles of Incorporation is amended to read as
follows:

Section 1. The authorized capital of this corporation
shall consist of one hundred million (100,000,000) common shares,
having $.001 par value. All such common shares are non-assessable
and each share shall have equal rights as to voting and in the event
of dissolution and liquidation.

Section 2. The shareholders shall have no preemptive
rights to acquire any shares of this corporation. There shall be no
cumulative voting by shareholders.

3. Article XI of the Articles of Incorporation is repealed.

4. A new Article XI of the Articles of Incorporation is adopted to read
as follows:

To the fullest extent permitted by the Utah Revised
Business Corporation Act or any other applicable law as now in
effect or as it may hereafter be amended, a director of this
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for any action taken or any
failure to take any action, as a director.

5. The foregoing amendments were adopted by the shareholders at a
meeting held on January 24, 1997.

6. The number of shares of common stock outstanding and entitled to
vote upon such amendments was 21,013,640. The number of votes
indisputably represented at the meeting was 11,238,181.

7. The number of shares voted for the amendment set forth in paragraph
2 above was 11,079,181; against was 159,000; and none abstained. The
number of shares voted for each of the amendments set forth in
paragraphs 3 and 4 above was 11,179,181; against was 59,000; and
none abstained.

8. The foregoing amendments do not provide for an exchange,
reclassification, or cancellation of issued shares of the
corporation.

9. At the special meeting of the shareholders held on January 24, 1997,
a resolution was duly adopted to provide that the provisions of
Section 16-10a-704 of the Utah Revised Business Corporation act may
operate to permit a the corporation to take action by the written
consent of fewer than all of the shareholders entitled to vote with
respect to the subject matter of any action.

Dated: January 24, 1997

/s/ Victor M. DeMarco
-------------------------------------
Victor M. DeMarco, President

Attest:

/s/ John W. Wyatt
-------------------------------------
John W. Wyatt, Secretary

<PAGE> 2

ARTICLES OF AMENDMENT

TO THE

ARTICLES OF INCORPORATION

FOUNTAIN HEAD, INC.

Fountain Head, Inc., by and through the undersigned, constituting the
President and Secretary of Fountain Head, Inc., hereby amends the Articles of
Incorporation of said Corporation as follows:

1. The name of the Corporation is Fountain Head, Inc.

2. Article I of the Articles of Incorporation is amended to read as
follows:

The name of the corporation is DeMarco Energy Systems of America, Inc.

3. The foregoing amendment was adopted by the shareholders at a meeting
held on November 17, 1989.

4. The number of shares outstanding and entitled to vote upon such
amendment was 38,000,000.

5. The number of shares voted for the amendment was 22,486,500; against
was 0; and abstained was 0.

6. The foregoing amendment does not provide for an exchange,
reclassification, or cancellation of issued shares of the
Corporation. However, the shareholders also approved at the
above-referenced meeting, a 1 for 40 reverse split of the
outstanding common shares.

7. The foregoing amendment does not effect a change in the amount of
stated capital of the Corporation. However, the above-referenced
reverse split will reduce the amount of stated capital from $38,000
to approximately $950.

Dated: December 1, 1989

Attest: FOUNTAIN HEAD, INC.

By: /s/ John W. Wyatt By: /s/ Louis M. DeMarco
---------------------------- ---------------------------
John W. Wyatt, Secretary Louis M. DeMarco, President

-2-
<PAGE> 3

The State of Texas )
)
County of Travis )

On the 1st day of December, 1989, before me, the undersigned, a Notary
Public, duly commissioned and sworn, personally appeared Louis M. DeMarco, known
to me to be the president of Fountain Head, Inc., who executed the within
instrument and known to me to be the person who affixed his name thereto as such
president and who acknowledged to me that he executed the same freely and
voluntarily and for the uses and purposes therein mentioned.

My Commission Expires: /s/
----------------------------------
Notary Public
Residing in

The State of Texas )
)
County of Travis )

On the 1st day of December, 1989, before me, the undersigned, a Notary
Public, duly commissioned and sworn, personally appeared John W. Wyatt, known to
me to be the secretary of Fountain Head, Inc., who executed the within
instrument and known to me to be the person who affixed his name thereto as such
president and who acknowledged to me that he executed the same freely and
voluntarily and for the uses and purposes therein mentioned.

My Commission Expires: /s/
----------------------------------
Notary Public
Residing in

-3-
<PAGE> 4

ARTICLES OF INCORPORATION

FOUNTAIN HEAD, INC.

WE, THE UNDERSIGNED natural persons of the sage of twenty-one years or
more, acting as incorporators of a corporation under the Utah Business
Corporation Act adopt the following Articles of Incorporation for such
corporation.
ARTICLE I
CORPORATE NAME

The name of this corporation is Fountain Head, Inc.

ARTICLE II
DURATION OF CORPORATION

The duration of this corporation is "perpetual".

ARTICLE III
CORPORATE PURPOSES

The purpose for which this corporation is organized is the purchase,
lease and sell real property for investment and to acquire other business
entities or investments, and all matters related or ancillary thereto and to do
all things and engage in all lawful transactions which a corporation organized
under the laws of the State of Utah might do or engage in, even though not
expressly stated herein.
ARTICLE IV
CAPITALIZATION

The aggregate number of shares which this corporation shall have
authority to issue is FIFTY MILLION (50,000,000) shares of $0.001 par value
Common Stock. All stock of the corporation shall be of the same class and shall
have the same rights and preferences. Fully paid stock of this corporation shall
not be liable to any further call or assessment.

-4-
<PAGE> 5

ARTICLE V
PRE-EMPTIVE RIGHTS ABOLISHED

The authorized and treasury stock of this corporation may be issued at
such time, upon such terms and conditions and for such consideration as the
Board of Directors shall determine. Shareholders shall not have pre-emptive
rights to acquire unissued shares of the stock of this corporation.

ARTICLE VI
COMMENCING BUSINESS

This corporation will not commence business until consideration of a
value of at least $1,000 has been received for the issuance of shares.

ARTICLE VII
INTERNAL AFFAIRS

The Directors shall adopt Bylaws which are not inconsistent with law or
these Articles for the regulation and management of the affairs of the
corporation. These Bylaws may be amended from time to time or repealed pursuant
to laws.
ARTICLE VIII
REGISTERED OFFICE AND AGENT

The address of this corporation's initial registered office and name of
its original registered agent at such address is:

Richard J. Lawrence
Suite 500
175 South West Temple
Salt Lake City, Utah 84101

ARTICLE IX
DIRECTORS

The Board of Directors consist of not less than three (3) nor more than
nine (9) members as the Board of Directors may itself from time to time
determine. The names and addresses of persons who are to serve as Directors
until the first meeting of stockholders, or until their successors be elected
and qualify are:

-5-
<PAGE> 6
<TABLE>
<CAPTION>

NAME ADDRESS
---- -------
<S> <C>
William L. Jorgensen 2778 South 100 West
Bountiful, Utah 84010

Reed T. Searle 9226 South 2490 West
West Jordan, Utah 84084

Alan K. Tibbitts 2672 South 50 West
Bountiful, Utah 84010
</TABLE>

ARTICLE X
INCORPORATORS

The name and address of each Incorporator is:

<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
William L. Jorgensen 2778 South 100 West
Bountiful, Utah 84010

Reed T. Searle 9226 South 2490 West
West Jordan, Utah 84084

Alan K. Tibbitts 2672 South 50 West
Bountiful, Utah 84010
</TABLE>

ARTICLE XI
OFFICERS AND DIRECTORS CONTRACTS

No contract or other transaction between this corporation and any other
corporation shall be affected by the fact that a Director or officer of this
corporation is interested in or is a Director or officer of such other
corporation; and any Director, individually or jointly, may be a party to or may
be interested in any corporation or transaction of this corporation or in which
this corporation is interested; and no contract or other transaction of this
corporation with any person, firm or corporation shall be affected by this fact
that any Director of this corporation is a party to or is interested in such
contract, act or transaction or any way connected with such person, firm or
corporation, and every person who may become a Director of this corporation is
hereby relieved from liability that might otherwise exist from contracting with
the corporation for the benefit of himself or any firm, association or
corporation in which he may be in any way interested, provided said Director
acts in good faith.

-6-
<PAGE> 7

DATED this 13th day of January, 1983.

/s/ William L. Jorgensen
------------------------------------------
William L. Jorgensen

/s/ Reed T. Searle
------------------------------------------
Reed T. Searle

/s/ Alan K. Tibbitts
------------------------------------------
Alan K. Tibbitts

STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )

I, THE UNDERSIGNED, a Notary Public, hereby certify that on the 13th
day of January, 1993, William L. Jorgensen, Reed T. Searle and Alan K. Tibbitts,
personally appeared before me who being by me first duly sworn severally
declared that they are the persons who signed the foregoing document as
incorporators and that the statements therein contained are true.
DATED this 13th day of January, 1983.

/s/ Sharon E. Vance
-----------------------------------------
Notary Public

My commission expires: Residing at:

September 20, 1986 Salt Lake City, Utah

-7-

<PAGE> 1
EXHIBIT 3.02

BYLAWS OF DEMARCO ENERGY SYSTEMS OF AMERICA, INC.
(A UTAH CORPORATION)

ARTICLE I. OFFICES

SECTION 1.1 BUSINESS OFFICE AND REGISTERED OFFICE.

The principal office of the corporation shall be located at any place
either within or outside the state of Utah as designated by the Board of
Directors. The registered office of the corporation shall be located within the
State of Utah and may be, but need not be, identical with the principal office
(if located within the State of Utah).

ARTICLE II. SHAREHOLDERS

SECTION 2.1 ANNUAL AND SPECIAL SHAREHOLDERS MEETINGS.

The annual meeting of the shareholders shall be held on the second Friday of
August in each year, beginning with the year 1997, at the hour of 3:00 o'clock
p.m. or at such other time on such other day within such month as shall be fixed
by the board of directors for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday in the State of Utah such
meeting shall be held on the next succeeding business day.

Special meetings of the shareholders, for any purpose or purposes,
described in the meeting notice, may be called by the president, or by the board
of directors and shall be called by the president at the request of the holders
of not less than one-tenth of all outstanding votes of the corporation entitled
to be cast on any issue at the meeting.

The board of directors may designate any place, either within or
without the State of Utah as the place of meeting for any annual or any special
meeting of the shareholders.

SECTION 2.2 NOTICE OF SHAREHOLDER MEETING.

(a) Required notice. Written notice stating the place, date and hour of any
annual or special shareholder meeting shall be delivered not less than 10 nor
more than 60 days before the date of the meeting, either personally or by mail,
at the direction of the president, the board of directors, or other persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting and to any other shareholder entitled by the Utah Revised Business
Corporation Act or the articles of incorporation to receive notice of the
meeting.

(b) Contents of Notice. The notice of each special shareholder meeting shall
include a description of the purpose or purposes for which the meeting is
called.

If a purpose of any shareholder meeting is to consider either: (1) a
proposed amendment to the articles of incorporation (including any restated
articles requiring shareholder approval); (2) a plan of merger or share
exchange; (3) the sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the dissolution of the
corporation; or (5) the removal of a director, the notice must so state and be
accompanied by respectively a copy or summary of the: (1) articles of amendment
or restated

<PAGE> 2

articles; (2) plan of merger or share exchange; and (3) transaction for
disposition of all, or substantially all, of the corporation's property. If the
proposed corporate action creates dissenters' rights, the notice must state that
shareholders are, or may be entitled to assert dissenters' rights, and must be
accompanied by a copy of Part 13 of the Utah Revised Business Corporation Act.

SECTION 2.3 FIXING OF RECORD DATE.

In order to make a determination of shareholders for any directors may
fix in advance a date as the record date. The record days prior to the date on
which the particular action requiring such determination of shareholder, is to
be taken.

SECTION 2.4 SHAREHOLDER LIST.

The officer or agent having charge of the stock transfer books for
shares of the corporation shall make a complete record of all the shareholders
of the corporation entitled to vote at each meeting of shareholders thereof,
arranged in alphabetical order, with the address of and the number of shares
held by, each shareholder. The list must be arranged by voting group (if such
exists) and within each voting group by class or series of shares. The
shareholder list must be available for inspection by any shareholder, beginning
on the earlier of ten days before the meeting or two business days after notice
of the meeting is given for which the list was prepared and continuing through
the meeting. The list shall be available at the corporation's principal office
or at a place identified in the meeting notice in the city where the meeting is
to be held.

SECTION 2.5 SHAREHOLDER QUORUM REQUIREMENTS.

Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.

SECTION 2.6 PROXIES.

At all meetings of shareholders. a shareholder may vote in person or
vote by proxy which is executed in writing by the shareholder or which is
executed by his duly authorized attorney-in-fact. Such proxy shall be filed with
the secretary of the corporation or other person authorized by the corporation
to tabulate votes before or at the time of the meeting. No proxy shall be valid
more than 11 months from the date of its execution unless otherwise provided in
the proxy.

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ARTICLE III. BOARD OF DIRECTORS

SECTION 3.1 GENERAL POWERS.

Unless the articles of incorporation have dispensed with or limited the
authority of the board of directors by describing who will perform some or all
of the duties of a board of directors, all corporate powers shall be exercised
by or under the authority of and the business and affairs of the corporation
shall be managed under the direction of the board of directors.

SECTION 3.2 NUMBER, TENURE, AND QUALIFICATIONS OF DIRECTORS.

Unless otherwise provided in the articles, the authorized number of
directors shall be not less than three (minimum number) nor more than nine
(maximum number); provided that after shares are issued and for as long as the
corporation has fewer than three shareholders entitled to vote for the election
of directors, the board of directors may consist of a number of individuals
equal to or greater than the number of those shareholders. Each director shall
hold office until the next annual meeting of shareholders or until removed.
However, if his term expires, he shall continue to serve until his successor
shall have been elected and qualified or until there is a decrease in the number
of directors. Unless required by the articles, directors do not need to be
residents of the State of Utah or shareholders of the company.

SECTION 3.3 REGULAR AND SPECIAL MEETINGS OF THE BOARD OF DIRECTORS.

The board of directors may provide, by resolution, the time and place,
either within or without the State of Utah for the holding of regular meetings,
which shall be held without other notice than such resolution. Special meetings
of the board of directors may be called by or at the request of the president,
chairman or any two directors.

SECTION 3.4 DIRECTOR QUORUM.

A majority of the number of directors prescribed by resolution (or if
no number is prescribed the number in office immediately before the meeting
begins) shall constitute a quorum for the transaction of business at any meeting
of the board of directors unless the articles require a greater number.

SECTION 3.5 REMOVAL OF DIRECTORS.

The shareholders may remove one or more directors at a meeting called
for that purpose if notice has been given that a purpose of the meeting is such
removal.

ARTICLE IV. OFFICERS

SECTION 4.1 NUMBER OF OFFICERS.

The officers of the corporation shall be a president, a secretary and a
treasurer, each of whom shall be appointed by the board of directors. Such other
officers and assistant officers as may be deemed

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necessary, including any vice-presidents, may be appointed by the board of
directors. If specifically authorized by the board of directors, an officer may
appoint one or more officers or assistant officers. The same individual may
simultaneously hold more than one office in the corporation.

SECTION 4.2 APPOINTMENT AND TERM OF OFFICE.

The officers of the corporation shall be appointed by the board of
directors for a term as determined by the board of directors. Any officer or
agent may be removed by the board of directors at any time, with or without
cause.

SECTION 4.3 PRESIDENT.

The president shall be the principal executive officer of the
corporation and, subject to the control of the board of directors, shall in
general supervise and control all of the business and affairs of the
corporation. He shall, when present, preside at all meetings of the shareholders
and of the board of directors. He may sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation and deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.

SECTION 4.4 THE VICE-PRESIDENTS.

If appointed, in the absence of the president or in the event of his
death, inability or refusal to act, the vice-president (or in the event there be
more than one vice-president, the vice-presidents in the order designated at the
time of their election, or in the absence of any designation, then in the order
of their appointment) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. (If there is no vice-president, then the treasurer shall perform
such duties of the president.) Any vice-president may sign, with the secretary
or an assistant secretary, certificates for shares of the corporation. the
issuance of which have been authorized by resolution of the board of directors;
and shall perform such other duties as from time to time may be assigned to him
by the president or by the board of directors.

SECTION 4.5 THE SECRETARY.

The secretary shall: (a) prepare and maintain the minutes of the
proceedings of the shareholders and of the board of directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these bylaws or as required by law; (c) be
custodian of the corporate records and of any seal of the corporation and if
there is a seal of the corporation see that it is affixed to all documents the
execution of which on behalf of the corporation under its seal is duly
authorized; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the post office address of each shareholder
which shall be furnished to the secretary by such shareholder; (f) sign with the
president, or a vice-president, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the board of
directors; (g) have general charge of the stock transfer books

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<PAGE> 5

of the corporation; and (h) in general perform all duties incident to the office
of secretary and such other duties as from time to time may be assigned to him
by the president or by the board of directors.

SECTION 4.6 THE TREASURER.

The treasurer shall: (a) have charge and custody of and be responsible
for all funds and securities of the corporation; (b) receive and give receipts
for moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositaries as shall be selected by the board of directors
and (c) in general perform all of the duties incident to the office of treasurer
and such other duties as from time to time may be assigned to him by the
president or by the board of directors. If required by the board of directors,
the treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the board of directors shall determine.

SECTION 4.7 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.

The assistant secretaries, when authorized by the board of directors, may sign
with the president or a vice-president certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution of
the board of directors. The assistant treasurers shall respectively, if required
by the board of directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the board of directors shall determine.
The assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the board of directors.

ARTICLE V. AMENDMENTS

SECTION 5.1 AMENDMENTS.

The corporation's board of directors may amend or repeal the
corporation's bylaws unless:

(1) the articles of incorporation or the Utah Revised Business Corporation
Act reserve this power exclusively to the shareholders in whole or
part; or

(2) the shareholders in adopting, amending, or repealing a particular bylaw
provide expressly that the board of directors may not amend or repeal
that bylaw; or

(3) the bylaw either establishes, amends, or deletes, a supermajority
shareholder quorum or voting requirement.

The corporation's shareholders may amend or repeal the corporation's
bylaws even though the bylaws may also be amended or repealed by its board of
directors.

CERTIFICATE OF SECRETARY

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned does hereby certify that the undersigned is the
secretary of DeMarco Energy Systems of America, Inc., a corporation duly
organized an existing under and by virtue of the laws of the State of Utah; that
the above and foregoing Bylaws of said corporation were duly and regularly
adopted as

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such by the Board of Directors of said corporation by unanimous consent on the
10th day of October 1996; and that the above an foregoing Bylaws are now in full
force and effect.

Dated this 10th day of October 1996.

/s/ John W. Wyatt
- ------------------------
John W. Wyatt, Secretary

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<PAGE> 1

EXHIBIT 10.01

PG&E ENERGY SERVICES SUBCONTRACTOR MASTER AGREEMENT
FOR ENERGY RELATED EQUIPMENT AND SERVICES

THIS SUBCONTRACTOR MASTER AGREEMENT ("Master Agreement"), effective as of August
23, 1999 ("Effective Date), is made and entered into between PG&E ENERGY
SERVICES CORPORATION, a California corporation with principal offices at 345
California Street, Suite 3200, San Francisco, California 94104 ("PG&E ES") and
DEMARCO ENERGY SYSTEMS OF AMERICA, INC., a Utah Corporation, with principal
offices au 12885 Highway 183, Suite 108-A, Austin, Texas 78750
("SUBCONTRACTOR").

ARTICLE 1. RECITALS

1.1 Whereas, SUBCONTRACTOR is in the business of providing, among other products
and services, certain energy related equipment and services (as hereinafter
defined) to its customers; and

1.2 Whereas, PG&E ES has or will be executing agreements with various Customers,
including Facility owners and/or tenants ("Customers"), to provide certain
energy related equipment; and

1.3 Whereas, PG&E ES desires to retain SUBCONTRACTOR to design, provide, install
and optionally maintain and/or operate certain specified energy related
equipment ("Energy Related Equipment") hereinafter described; and

1.4 Whereas, this Master Agreement sets forth the general terms and conditions
for SUBCONTRACTOR to design, provide, install and optionally maintain and/E
operate the Energy Related Equipment, as requested by FG&E ES on a work order
basis ("Work Order, as a subcontractor to E&E ES. Individual Work Orders will be
issued under his Master Agreement which shall constitute Amendments to this
Master Agreement and will be fully incorporated herein. Each Work Order will
identify the Customer: individual Site Locations where the work will be
performed: Scope of Work including description of Energy Related Equipment and
other related equipment to be provided; Project Schedule; compensation: any
changes to Warranty provisions for equipment provided; if the Operations and
Maintenance ("O&M") provisions shall apply and any modifications to such C&M
provisions that shall apply to the Work Order: changes to the insurance
requirements for SUBCONTRACTOR's subcontractors; and whether or not Performance
Bonds shall be required tr the Work Order work; and

NOW. THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the Parties agree as follows:

- --------------------------------------------------------------------------------
- ------
"PG&E Energy Services is not the same company as Pacific Gas and Electric
Company. the utility PG&E Energy Services is not regulated by the California
Public Utilities Commission; and you do not have to buy PG&E Energy Services
products in order to continue to receive quality regulated services from Pacific
Gas and Electric Company. the utility."

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<PAGE> 2

ARTICLE 2. WORK ORDER

2.1 GENERAL PROVISIONS. Work under this Master Agreement shall be performed on a
Work Order basis as requested by PG&E ES. Each Work Order issued by PG&E ES
shall be executed by both Parties and will serve as authorization for
SUBCONTRACTOR to commence work as described in the Work Order. Each Work Order
shall be subject to all the terms and conditions of this Master Agreement, but
shall constitute a separate and independent performance obligation of the part
of SUBCONTRACTOR and payment obligation of PG&E ES. The Work Order may not
modify the Master Agreement general terms and conditions except in regards to
the Warranty; Operations and Maintenance obligations; SUBCONTRACTOR's
subcontractors insurance coverage; and whether or not Performance Bonds will be
required for the Work Order Work. Each Work Order. a sample form is attached as
EXHIBIT A to this Master Agreement. may include additional information but shall
include all of the following information:

A) PG& E ES Contract Number assigned to this Master Agreement; and
B) Date of the Work Order and Work Order Number; and
C) Identification of Customer who owns and/or leases the Facility, or
Facilities, where the Work will be performed; and
D) All Facility Site Locations where Work will be performed,' and
E) Scope of Work, including description of the Energy Related Equipment to be
provide; and
F) Project Schedule, including commencement date, substantial completion date,
and Operational Date; and
G) Contract Amount for Work Order including schedule of payment, and payment
terms; and
H) Indication of whether or not standard Operations and Maintenance ("O&M")
provisions apply and if so, details of the O&M provisions and any changes or
modifications to the O&M terms; and
I) Changes to standard Warranty provisions. if any.

Any other changes or modifications to the general terms and conditions of the
Master Agreement shall require an amendment to the Master Agreement.

2.2 EFFECT OF CHANGES AND MODIFICATIONS TO MASTER AGREEMENT O&M AND WARRANTY
PROVISIONS. Each Work Order may include changes and/or modifications to the
standard Master Agreement provisions as to O&M, Warranty, Performance Bond, and
insurance requirements tr SUBCONTRACTOR's lower tiered subcontractors. If such
changes are made, those changes shall affect only the individual Work Order and
shall not affect the standard Master Agreement provisions or previously and/or
subsequently issued Work Orders.

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<PAGE> 3

ARTICLE 3. SCOPE OF WORK

3.1 GENERAL PROVISIONS. SUBCONTRACTOR shall design, procure, install, and
optionally, operate, and maintain at each Site Location the Energy Related
Equipment, and any other material, hardware, or software, as identified in the
Work Order.

3.2 PERMITS. SUBCONTRACTOR shall obtain any and all necessary permits to
complete the Work, as described herein, and as identified in the Work Order.

3.3 INSTALLATION/CONSTRUCTION PHASE. SUBCONTRACTOR shall provide or cause the
Work to be performed including, but not limited to, providing all labor,
ma-dais, equipment, tools, transportation and other facilities and services
necessary for the proper design. procurement and installation of the Energy
Related Equipment. If Work includes Construction, as defined in Exhibit B, the
terms and conditions of Article 6 herein shall apply.

3.4 LICENSING. SUBCONTRACTOR shall possess any and all licenses required by
Applicable Laws to complete the Work, and if specified in the Work Order, to
operate and maintain the installed Energy Service Equipment. If SUBCONTRACTOR
does not possess a required license- SUBCONTRACTOR shall either acquire the
license prior to start of Work or shall subcontract such Work to a contractor
who possesses the required license to perform the Work and who shall perform the
Work for which a license is required.

ARTICLE 4. PERFORMANCE

4.1 PROJECT SCHEDULE AND STANDARD OF PERFORMANCE. SUBCONTRACTOR shall
diligently, and competently perform the Work set forth in all Work Orders, All
work performed will comply with standards for comparable work performed by
reputable contractors working in the same geographical area where the Work will
be performed. A Project Schedule will be attached to each Work Order,

4.2 ACCESS TO SITE LOCATIONS. SUBCONTRACTOR shall be solely responsible for
coordinating directly with the Customer regarding all issues related to access C
he Site Location to perform the Work.

4.3 DIRECTION TO SUBCONTRACTOR. SUBCONTRACTOR shall take direction only from
PG&E ES, or as otherwise designated in writing by PG&E ES, and -or from Customer
or others, unless directed because of immediate safety concerns- All requests
for additional Work, changes - Work, and/or direction from the Customer or
others shall Ce forwarded to PO&E ES' Project Manager for prior written approval
Dr denial prior to acting on such requests- If SUBCONTRACTOR performs such work
requested without PG&E ES' prior written approval, SUBCONTRACTOR shall not
receive any additional compensation or time for such unauthorized work.

4.4 REQUESTS FOR ADDITIONAL WORK. SUBCONTRACTOR shall perform the Work as
specified in each Work Order. SUBCONTRACTOR is under no obligation to perform
additional work which exceeds the Scope of Work described in the Work Order.
During the performance of Work, PG&E ES may request SUBCONTRACTOR E perform
additional work, outside the Scope of Work, and such new work shall be
authorized by a new or amended Work Order. If, during the performance of the
Work, SUBCONTRACTOR is requested to perform work under the existing Work Order
that SUBCONTRACTOR believes is outside the Scope of Work identified in the Work
Order,

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<PAGE> 4

SUBCONTRACTOR shall provide written notice of same to PG&E ES within three (3)
working days of SUBCONTRACTOR receipt of notice of such request If the Work is
teemed by PG&E ES to be outside the original Scope of Work, a new or amended
Work Order for the additional work shall be issued. If PG&E ES deems said work
to be within the Work Order Scope of Work, SUBCONTRACTOR shall perform such
work. But may do so under protest for additional compensation and/or time and
such protests shall be resolved in accordance with terms of Section 11.3 herein.

4.5 MATERIAL CHANGED CONDITION. If, during the performance of the Work,
SUBCONTRACTOR believes that a Material Changed Condition is impacting or will
impact the Work requiring additional time and/or compensation, SUBCONTRACTOR
shall provide written notice of same to PG&E ES within Three (S) working days of
SUBCONTRACTOR's notice of such Changed Condition, the anticipated time of delay
and/or the estimated additional costs associated with the Material Changed
Condition. SUBCONTRACTOR shall continuously update PO&E ES as to the impact of
the Material Change Condition. If PG&E ES agrees that there is a Material
Changed Condition, a new or amended Work Order shall be issued to increase time
and/or compensation. A Material Changed Condition shall be defined as one or
more of the following conditions that impact the Project Schedule ("Time".)
and/or Cost: 1) parties outside the control of SUBCONTRACTOR caused delays in
Project Schedule; 2) discovery of differing and unexpected site conditions which
were not previously disclosed by Customer and could not have been readily
discoverable by SUBCONTRACTOR prior start of Work; 3) discovery of hazardous
wastes or material which was not previously disclosed: (4) adverse weather
conditions not reasonably anticipated: and (5) any other condition that could
not have been reasonably anticipated by the Parties and is outside
SUBCONTRACTOR's control, If there is a disagreement between PG&E ES and
SUBCONTRACTOR as to whether or not there 5 a Material Change Condition, those
disputes shall be resolved in accordance with the provisions of Section 11.3 of
this Master Agreement.

4.6 OWNERSHIP OF ENERGY RELATED EQUIPMENT. Until the Operational Date,
Substantial Completion. and PG&E ES has made final payment of the Contract
Amount as defined in the Work Order, all rights and liabilities of ownership of
such Energy Related Equipment shalt remain with the SUBCONTRACTOR, or its
subcontractors, hereunder.

4.7 FORCE MAJEURE. SUBCONTRACTOR shall use its best efforts to achieve
completion of each Work Order in accordance with the Project Schedule set forth
n the applicable Work Order, Performance by either PG&E ES and SUBCONTRACTOR
shall not be deemed in default nor shall either Panty be held responsible for
any delays that are caused by acts of God, flood, earthquake, unusually severe
weather, drought, fire, lightning or other natural catastrophes: or events
outside their control including war riot: civil disturbance or disobedience;
sabotage; terrorism; strikes; unavoidable accidents: relocation or construction
of facilities by others, or shutdown of facilities for repair, maintenance or
failure by others: strike; lockout; labor disturbance; freight embargoes; acts
or failure to act of any regulatory public or governmental agency or entity; or
any other matter beyond the reasonable control of the Party so obligated,
whether similar to matters herein enumerated or not. in the event either Party
experiences a delay in performance that was caused by events beyond its control,
the delayed Party shall provide a written notice of same within three (3)
working days to the other Panty. Delayed performance shall be excused for the
period of delay, and the time for performance shall be extended for a period
equivalent to the period of delay; provided, however, that the Party delayed or
prevented from

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<PAGE> 5

performance of Work per the terms of the Work Order has notified the other of
such delay or prevention of performance within three (3) days of the inception
thereof; and n-as thereafter kept said Panty regularly informed of the status of
such delay or prevention of performance.

ARTICLE 5. COMPENSATION

5.1 GENERAL PROVISIONS. For performance of Work as set for I-n each Work Order,
PG&E ES will pay SUBCONTRACTOR Contract Amount and in the manner indicated in
each Work Order. PO&E ES will pay progress payments for Work completed to date,
or for the entire Work on a lump sum basis after the Work is completed, or other
payment arrangement. as specified in the Work Order, upon receipt for
SUBCONTRACTOR's invoice and in accordance with Section 5-3 herein.

5.2 INVOICES. SUBCONTRACTOR shall submit its invoice for payment to PC&E ES on a
monthly basis, or as specified in the Work Order, to the PG&E ES Project Manager
identified in the Work Order.

5.3 PAYMENT/RETENTION. Al invoices properly submitted by SUBCONTRACTOR, inducing
applicable waivers and releases, in accordance with this Master Agreement and
applicable Work Order will be paid by PG&E ES within fifteen (15) days of
receipt of such invoice, less a ten (-D%) retention ("Retention") (identified by
SUBCONTRACTOR in each invoice). unless an invoice contains a disputed amount,
whereupon PC&E ES shall make a partial payment to SUBCONTRACTOR for the
undisputed amount, minus the Retention, and PG&E ES shall withhold the disputed
amount until the dispute is resolved by the Parties. Except for Retention
amounts expended by PG&E ES to correct SUBCONTRACTOR's defective work or to
complete the Work not completed by SUBCONTRACTOR, the -'Il Retention amount
shall be paid to SUBCONTRACTOR a te time of the Work Order final payment.

ARTICLE 6. CONSTRUCTION ACTIVITIES

6.1 GENERAL PROVISIONS. This Article shall apply only to those Work Orders that
include Construction as defined herein that will be performed by SUBCONTRACTOR,
or SUBCONTRACTOR's subcontractor.

6.2 CONSTRUCTION DEFINED. Work to be performed shall be defined as Construction
Work if it includes any of the activities defined as Construction in EXHIBIT 3.
Definitions, attached hereto and incorporated herein.

6.3 LICENSING. if the Work to re performed by SUBCONTRACTOR includes
Construction. as defined in EXHIBIT B, any and all Construction activities must
be performed by Licensed Contractors, or speciality Licensed Contractors (such
as required when disturbing asbestos or other Hazardous Materials), as required
by Applicable Law. If Construction Work includes certain design work that
requires engineering plans, specifications, and/or drawings. such documents must
be signed by an appropriately licensed engineer, and/or architect as required by
Applicable Law. if SUBCONTRACTOR does not possess any of the required license or
licenses, SUBCONTRACTOR shall subcontract that portion of the Work to a
subcontractor, or subcontractors, who possess the required license or licenses
and who shall perform such work at no additional cost to PS&E ES.

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<PAGE> 6

6.4 PERFORMANCE BONDS.

6.4.1 PERFORMANCE BOND. SUBCONTRACTOR shall provide PG&E ES at the time of
executing a Work Order, unless otherwise specified in the Work Order, an
executed Performance Bond for the Construction portion. or all, of the Work.
Such Performance Bond shall be in the amount of one hundred percent (100%) of
the Contract Amount for the Construction Work portion. or all, of the Work
defined in the Work Order, in a form and secured by a surety acceptable to PG&E
ES, that shall condition the faithful performance of the Construction Work
within the time identified in the Work Order. If SUBCONTRACTOR fails to complete
the Construction Work within such time, or such extension thereof as may be
allowed, the Work Order may be terminated and if so terminated. PG&E ES shall
not thereafter pay or allow SUBCONTRACTOR any further compensation for any
Construction Work cone by SUBCONTRACTOR under said Work Order, and SUBCONTRACTOR
or its surety shall be liable to POSE ES for all loss or damage which it may
suffer because of SUB CONTRACTOR's failure to complete the Construction Work
within such time.

6.4.2 NOTIFICATION OF SURETY COMPANIES. All the surety companies providing the
Performance Bond shall familiarize themselves with all or the terms and
conditions of the Master Agreement and Work Order and they waive tine right of
special notification of any change or modification of the Master Agreement, Work
Order, extension of time; of decreased or increased work. of the cancellation of
the Work Order, or of any other act or acts by PG&E ES or its authorized agents,
under the terms of the Master Agreement or Work Order; and failure to -so notify
the aforesaid surety companies of changes shall in no way relieve the surety
companies of their obligation under the Master Agreement or Work Order.

6.5 WAIVERS AND RELEASES.

6.5.1 UNCONDITIONAL WAIVER AND RELEASE. If SUBCONTRACTOR uses subcontractors to
complete any part of the Construction Work, prior to PG&E ES making any progress
or final payment to SUBCONTRACTOR, SUBCONTRACTOR shall provide to POSE ES from
each Construction subcontractor an Unconditional Waiver and Release at time of
invoicing, in a form acceptable to PG&E ES. that states that the subcontractor
has been paid in full to date for all labor, services, equipment or materials
furnished to the Project at SUBCONTRACTOR's request, and thereby waives and
releases any right to a mechanic's lien, stop notice, or any right against any
bond. except for any disputed amount identified in the release.

6.5.2 CONDITIONAL WAIVER AND RELEASE. In addition to the requirements of Section
6.5.1 herein, prior to PG&E ES making any progress or final payment to
SUBCONTRACTOR. SUBCONTRACTOR shall provide to PG&E ES a Conditional Waiver and
Release at time of invoicing, in a form acceptable to PG&E ES, that states that
upon receipt of payment from PG&E ES for Work under the Work Order,
SUBCONTRACTOR shall waive and release any right to a mechanic's lien, stop
notice, or any right against any bond for Work completed to date, except for any
disputed amount identified in the waiver and release.

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ARTICLE 7. OPERATION AND MAINTENANCE

7.1 GENERAL PROVISIONS. If tie Work Order specifies that SUBCONTRACTOR shall
provide O&M services on behalf of the Customer for the installed Energy Related
Equipment. SUBCONTRACTOR shall be responsible for the O&M of said equipment as
specified in The Work Order. The Work Order shall provide the terms and
conditions under which SUBCONTRACTOR shall provide the O&M services. Such O&M
services may extend beyond the Master Agreement Term, and any such expiration of
the Term shall not affect the obligations of either Priority under the
outstanding and/or incomplete Work Order including the application of the terms
and conditions of the Master Agreement to such Work Order.

7.2 ACCESS TO EQUIPMENT. If SUBCONTRACTOR agrees in an individual Work Order to
be responsible for the O&M of the Energy Related Equipment provided and
installed by SUBCONTRACTOR, SUBCONTRACTOR shall seek from the Customer,
permission for SUBCONTRACTOR C reasonably access said equipment to perform O&M
responsibilities in accordance with the Master Agreement and Work Order. After
termination of the Work Order O&M provisions. SUBCONTRACTOR shall not have any
O&M responsibility for the Energy Related Equipment.

ARTICLE 8. WARRANTY

SUBCONTRACTOR warrants that the Energy Related Equipment and its installation as
specified in each Work Order shall conform to applicable specifications,
drawings, and descriptions and shall be fit for the particular purpose, shall be
merchantable, of good workmanship and material, and free from defect.
SUBCONTRACTOR assumes responsibility for workmanship and warrants the Energy
Related Equipment to be free from defects and is suitable for the purposes
intended by PG&E ES and Customer. SUBCONTRACTOR '5 warranties shall run to PG&E
ES and Customer, shall not E deemed exclusive and shall be in effect for a
period of One (I) Year from the Operational Date of the Energy Related
Equipment, or such Warranty period as specified in the Work Order. If PG&E ES or
the Customer notifies, or SUBCONTRACTOR has notice of any equipment defect or
non-conforming work, SUBCONTRACTOR shall promptly correct the equipment defect
or non-conforming work at its own cost and expense.

ARTICLE 9. TERM OF AGREEMENT

This Master Agreement shall remain-n effect for an initial term of one (1) year
('Term') commending on the Effective Date, and such Term shall be automatically
extended for additional one (1) year terms, unless the Master Agreement is
terminated earlier in accordance with of Article 10 herein. Unless otherwise
stated in a Notice of termination, any termination shall not affect the
obligations of either Panty under any outstanding and/or incomplete Work Order.

ARTICLE 10. TERMINATION

10.1 TERMINATION FOR CAUSE. I either Parity defaults in the performance its
obligations under this Master Agreement. unless such default is due to causes
beyond the control of the defaulting Party per Section 4.7, Force Majeure, and
such default continues for a period of thirty (30) calendar days after the
defaulting Party receives written notice of the default from the non-defaulting
Parity. and the defaulting Party does not -Ere the default or receive written
approval of a proposal and schedule to cure

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<PAGE> 8

the default that is acceptable to the non-defaulting Party within such time, the
non-defaulting Party may terminate this Master Agreement and/or exercise any
right or remedy, provided by law or equity. Upon termination of this Master
Agreement, each Parity shall forthwith return to the other all papers.
materials, and property of the other held by such Parity in connection herewith.
Each Party shall also assist the other in the orderly termination of this Master
Agreement and the transfer of all aspects hereof, tangible and intangible, as
may be necessary for the orderly, non-disrupted business continuation of each
Party.

10.2 TERMINATION FOR INSOLVENCY. Either Party may terminate this Master
Agreement immediately by written notice to the other if: (1) the other Parity
ceases to carry on its business; or (2) a receiver or similar officer's
appointed for the other Party: or (3) the other Parity becomes insolvent, admits
in writing its inability to pay debts as they mature, is adjudicated bankrupt,
or makes an assignment for the benefit of its creditors or another arrangement
of similar import; or (4) voluntary proceedings under bankruptcy or insolvency
laws are commenced by he other Panty, or involuntary proceedings are commenced
and such proceedings have not been discharged within forty-five (45) days.

10.3 TERMINATION FOR CONVENIENCE. PG&E ES shall have the right to terminate
tints Master Agreement at any time during the Term of the Master Agreement for
is convenience upon sixty (60) days advance written Notice to SUBCONTRACTOR.
Upon such termination. each Party shall forthwith return to the other all
papers, materials. and property of the other held by such Party in connection
herewith. Earn Party shall also assist the other in the orderly termination of
this Master Agreement and the transfer of all aspects hereof, tangible and
intangible. as may be necessary for the orderly. non-disrupted business
continuation of each Parity. Notwithstanding the above. SUBCONTRACTOR shall
complete Work under an existing Work Order unless terminated per Sections 10.1
and 10.2 herein.

ARTICLE 11. LIABILITY

11.1 INDEMNIFICATION. Each Panty hereby agrees to protect, indemnify and hold
the other harmless. and to defend the other. with competent counsel reasonably
satisfactory to the indemnified Party, from and against any and all Claims and
the assertion thereof to the extent arising from the negligence, breach of
contractor willful misconduct of tine indemnifying Party, except That neither
Party shall be responsible for Calms arising from the sole negligence or
intentional misconduct of the other Party. In no event shall PG&E ES be liable
to SUBCONTRACTOR, Customer, or others for any indirect, incidental,
consequential or special damages of any kind whatsoever, including without
limitation any loss of revenue or loss of profit, loss of savings. loss of
goodwill. cost of any substitute Energy Related Equipment downtime cost of
capitol, loss of qualification, increased cost of operation. cost of replacement
power or fuel or claims of SUBCONTRACTOR or other third parties, by reason of
anything done or omitted to be done by-PG&E ES in connection with any Work Order
issued under this Master Agreement.

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<PAGE> 9

11.2 INSURANCE. SUBCONTRACTOR shall maintain the following insurance coverage.
SUBCONTRACTOR is also responsible for its lower-tiered Subcontractors
maintaining sufficient limits of the same insurance coverage. (1) Workers'
Compensation and Employers' Liability: Workers' Compensation insurance or
self-insurance indicating compliance with any applicable labor codes, acts, laws
or statutes, state or federal, where SUBCONTRACTOR performs Work. Employers'
Liability insurance shall not be less than $1,000,000 for injury or death each
accident. (2) Commercial General Liability: Coverage shall be at least as broad
as the Insurance Services Office (ISO) Commercial General Liability Coverage
'occurrence' form, with no coverage deletions. The limit shall not be less than
$1,000,000 each occurrence for bodily injury, property damage, and personal
injury. If coverage is subject to a general aggregate limit this aggregate limit
shall be twice the occurrence limit, Coverage shall: a) by 'Additional Insured'
endorsement add as insured PG&E ES. its directors, officers, agents and
employees with respect to liability arising out of Work performed by or for tine
SUBCONTRACTOR: b) be endorsed to specify that the SUBCONTRACTOR's insurance is
primary and that any insurance or self-insurance maintained by POSE ES shall not
contribute with it, (3) Business Auto: Coverage shall be at least as broad as
Insurance Services Office (ISO) Business Auto Coverage form covering Automobile
Liability, Code 1 "any auto.' The limit shall not be less than $1,000,000 each
accident for bodily injury and property damage. (4) Builders Risk: An 'all risk'
Builders Risk insurance policy, including earthquake and flood, shall be
maintained during the course of Construction. Policy shall include coverage for
materials anc equipment to be used while at the Site, offsite or while in
transit to the Site. Coverage shall be written to cover the full replacement
cost of the property. Limits and deductibles shall be approved by PG&E ES. PG&E
ES shall be named as Loss Payee. (5) Additional Insurance Provisions: Before
commencing performance of Work, SUBCONTRACTOR shall furnish PG&E ES with
certificates of insurance and endorsements of all required insurance for
SUBCONTRACTOR. The documentation shall state that coverage shall not be canceled
except after thirty (30) days prior written notice has been give to PG&E ES. The
documentation must be signed by a person authorized by that insurer to bind
coverage on its behalf and shall be submitted to: PG&E Energy Services,
Contracts Department, 345 California Street, Suite 3200, San Francisco, CA
94104. PG&E ES may inspect the original polices or require complete certified
copies upon request. Upon request, SUBCONTRACTOR shall furnish PG&E ES the same
evidence of insurance for its lower-tiered subcontractors as PG&E ES requires of
SUBCONTRACTOR.

11.3 DISPUTE RESOLUTION. In E.-e event of a dispute, controversy, or claim
arising out of or relating to this Master Agreement. the Parties shall confer
and attempt to resolve such matter informally. If such dispute or claim can not
be resolved in this manner, then the dispute or claim shall be referred first to
the Panties' executive officers for their review and resolution. If the dispute
or claim still can not be resolved by such officers, then tine Parties may agree
to submit to non-binding mediation or either Party may file a written demand for
arbitration with the American Arbitration Association ("AAA") and shall send a
copy of such demand to the other Party. The arbitration shall be conducted
pursuant to the Arbitration Rules of the AM in effect at the time the
arbitration is commenced. The award rendered by the arbitrator shall be final
and binding on the Parties and shall be deemed enforceable in any count having
jurisdiction thereof and of 'he Parties. The arbitration shall be heard by one
mutually agreeable arbitrator, who shall have experience in the general subject
matter to which tine dispute relates. The arbitration shall take place in San
Francisco, California unless both Parties mutually agree to a different venue
for arbitration.

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<PAGE> 10

11.4 ATTORNEYS' FEES. In the event that binding arbitration or other litigation
is initiated between PG&E ES and SUBCONTRACTOR, the prevailing Party, as
determined by the Arbitrator or Count, shall be awarded its reasonable
attorneys' fees and costs.

ARTICLE 12. MISCELLANEOUS

12.1 DEFINITIONS. For the purposes of This Master Agreement, including all Work
Orders and Exhibits, the defined terms shall have the meaning as set forth in
EXHIBIT B, Definitions, attached hereto and incorporated herein.

12.2 INDEPENDENT CONTRACTOR. SUBCONTRACTOR's performance of Work under this
Master Agreement and all Work Orders shall be as an independent contractor to
PG&E ES, and not as an employee, representative or agent of PG&E ES, and shall
be responsible for its own work. As an independent contractor, SUBCONTRACTOR
shall employ, at its own expense, all personnel necessary to perform the Work,
represents that all personnel engaged in performing such Work are fully
qualified. authorized, and permitted to do so under all Applicable Laws, and
shall be responsible for all matters including payment of its employees,
compliance with social security. workers compensation requirements. and
withholding for federal, local, and state taxes. In no event shall PG&E ES shall
be held responsible for any actor omission of SUBCONTRACTOR.

12.3 COMPLIANCE WITH LAWS. Each Panty agrees that it shall comply with all
Applicable Laws including federal, state and local laws, ordinances,
regulations, and codes in the performance of this Master Agreement including but
not limited to acquiring licenses, insurance, permits. authorizations.
registrations. or other governmental requirements necessary for performance of
each Party's obligations hereunder.

12.4 GOVERNING LAW/VENUE. This Master Agreement shall be governed by, and
interpreted and construed in accordance with, the laws of the State of
California, without reference to its rules of conflict of laws. For the
enforcement of any dispute resolved pursuant to Articles 10 and 11 of this
Master Agreement, the Parties hereby consent to personal and exclusive
jurisdiction and venue of the State and Federal Courts within the City and
County of San Francisco, California.

12.5 SEVERABILITY. In the event that any provision of this Master Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void. this Master Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the benefits or burdens of this Master
Agreement to either PG&E ES or Customer.

12.6 ASSIGNMENT. SUBCONTRACTOR shall not transfer or assign any rights or
interests in this Master Agreement or individual Work Orders without the prior
written consent PG&E ES.

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<PAGE> 11

12.7 CHANGES/MODIFICATION/WAIVER. No change or modification to this Master
Agreement nor an: waiver of any rights hereunder, shall be effective unless it
is consented to in writing by both Parties. The failure of a Party to insist
upon compliance with the strict forms of this Master Agreement or to act or
react upon a default in the performance of any obligation hereunder shall not
excuse or constitute any form of waiver of that Party's rights or the other
Party's obligation. The waver of any breach or default shall not constitute a
waiver of any other right hereunder or any subsequent breach or default. 12.8
NOTICES. Any notices hereunder shall be given in writing and shall be delivered
by hand or by first class certified U.S. Mail, return receipt requested to the
addresses set forth below, or to such other address as either Panty may
substitute by written notice to the other in the matter contemplated herein, and
will be deemed given when delivered, or, if delivery is not accomplished by some
fault of the addressee. when tendered.

To PG&E ES:
With copy to;
To SUBCONTRACTOR:

PG&E Energy Services Corporation
6900 East Camelback E. Suite 800
Scottsdale, AZ 86261
Attn: Robert Holmes, -Program Manager,
Phone Number: (480)874-4067
Fax Number: (480) 994-4438

PG&E Energy Services Corporation
345 California Street, Suite 3200
San Francisco, CA 94104
Attention: Manager, Contract
Contract Services
DeMarco Energy Services of America, Inc,
2885 Highway 183, Suite 10&A
Austin, Texas .78750
Attention: Peter Des Camps, Sr. VP
Phone Number: (512)335-1494
Fax Number. (512)335-6380

12.9 THIRD PARTY BENEFICIARIES. This Master Agreement shall not create any third
party beneficiary obligations with respect to any third party.

12.10 CONFIDENTIAL AGREEMENT. The terms and conditions of this Master Agreement
shall be subject. to that certain Mutual Non-Disclosure Agreement between PG&S
ES and SUBCONTRACTOR dated April 12, 1999 which is attached hereto as EXHIBIT C
and incorporated herein.

12.11 DUPLICATE ORIGINALS. Two (2) duplicate originals of this Master Agreement
shall be executed each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.

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<PAGE> 12

12.12 ENTIRE AGREEMENT. This Master Agreement contains the entire agreement
between the Parties and there are no oral or written representations.
understandings. or agreements between the Parties respecting the subject matter
of, this Master Agreement, which are not fully expressed herein.

12.13 EXHIBITS. The Exhibits to this Master Agreement are listed as following
and are fully incorporated herein:

EXHIBIT A Work Order Sample Form
EXHIBIT B Definitions
EXHIBIT C Executed Mutual Non-Disclosure Agreement

IN WITNESS WHEREOF the Parties hereto have executed this Master Agreement as of
the day and year first above written.

PG&E Energy Services Corporation DeMarco Energy Systems of America,
Inc.

By: By:
Michael Coffin (signature) Victor M. DeMarco

Name: Name:
Michael Coffin Victor M. DeMarco

Title: Title:
Vice President President/CEO

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<PAGE> 13

EXHIBIT A
WORK ORDER SAMPLE FORM

PG&E ENERGY SERVICES PG&E ES CONTRACT NUMBER: 2131

WORK ORDER # _____________

SUBCONTRACTOR MASTER AGREEMENT
FOR ENERGY RELATED EQUIPMENT AND SERVICES

THE SUBCONTRACTOR MASTER AGREEMENT (Master Agreement), entered into
[Month, Day, Year] by and between PG&E ENERGY SERVICES CORPORATION, a California
corporation with principal offices at 345 California Street, Suite 3200. San
Francisco, California 94104 ("PG&E ES") and DEMARCO ENERGY SYSTEMS OF AMERICA,
INC., a Utah corporation ("SUBCONTRACTOR"), with principal offices at 12885
Highway 183, Suite 108-A, Austin. Texas 78750 is hereby amended on this date
[ADD DATE OF WORK ORDER] by this Work Order which is fully incorporated into the
MASTER AGREEMENT as follows:

1. CUSTOMER. The Customer for whom the Work will be performed is ______________.
The address and phone number of the customer is _________________________.

2. SCOPE OF WORK/SITE LOCATIONS. The Scope of Work at each Site Location,
including the description of the Energy Related Equipment and other materials to
be provided and installed and any other Work to be performed; Warranty
provisions; and the Operations and Maintenance provisions. if any: to be
provided under this Work Order is identified on ATTACHMENT 1 - "SCOPE OF
WORK/SITE LOCATIONS" attached hereto and incorporated herein, Unless otherwise
described herein. SUBCONTRACTOR shall be responsible for me disposal of alt
lights and ballasts removed from facilities as pant of me Work herein, including
responsibility of such light and ballasts that are deemed hazardous materials.

3. PROJECT SCHEDULE. The Project Schedule for each Site Location where Work
shall be performed by SUBCONTRACTOR pursuant to this Work Order. including
Commencement Date, Substantial Completion Date, and Operational Date is
identified on "ATTACHMENT 2 -PROJECT SCHEDULE" attached hereto and incorporated
herein

4. CONTRACT AMOUNT FOR WORK ORDER. The total Contract Amount for performance of
this Work Order, schedule of payment, and payment terms is as follows: [ ADD
HERE____________]

5. GENERAL TERMS AND CONDITIONS. All other Terms and Conditions provided in the
Master Agreement remain unchanged.

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<PAGE> 14

IN WITNESS WHEREOF, the Parties hereto have executed this Work Order as
of the day and year first above written.

PG&E ENERGY SERVICES CORPORATION DEMARCO ENERGY SYSTEMS OF AMERICA,
INC.

By: By:
Name: Name:
Title: Title:

"PG&E Energy Services is not the same company as Pacific Gas and Electric
Company, the utility. PG&E Energy Services is not regulated by the California
Public utilities Commission: and you do not have to buy PG&E Energy Services
products in order to continue to receive quality regulated services from Pacific
Gas and Electric Company, the utility."

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<PAGE> 15

PG&E ENERGY SERVICES PG&E ES CONTRACT NUMBER: 2131

EXHIBIT B

DEFINITIONS

For the purposes of its Master Agreement, including all Work Orders and
Exhibits, the defined terms herein shall have the meaning set forth as follows:

1. APPLICABLE LAWS: "Applicable Laws" shall mean all laws, building codes,
rules, regulations, or orders of any federal, state, county, local, or other
governmental body, agency, or other authority having jurisdiction over the
performance of the Work, as may be in effect at the time the work is completed.

2. CUSTOMER: "Customer" shall mean the owner and/or tenant of the Facility where
SUBCONTRACTOR shall perform the Work pursuant to an applicable Work Order,

3. CLAIMS: "Claims" shall mean any and all actions, claims, losses, damages,
expenses or liabilities of either Party arising from or a result of this Master
Agreement.

4. CONSTRUCTION: "Construction" shall mean any Work to be performed that
involves any and all construction, alteration, repair, addition to, subtraction
from, improving, moving, wrecking or demolishing any building, highway, road,
parking facility, excavation, or other structure or improvement, or to do any
pant thereof, including the erection of scaffolding or other structures or works
in connection therewith, and the cleaning of grounds or structures in connection
with any of the above activities.

5. CONTRACT AMOUNT: "Contract Amount" shall mean the amount of compensation that
shall be paid to SUBCONTRACTOR by PG&E ES for satisfactorily providing and
installing the equipment, and optionally providing operational and maintenance
services for such equipment. described in each Work Order.

6. EFFECTIVE DATE: "Effective Date" shall mean the date this Master Agreement is
fully executed as noted above and is the date the Master Agreement is in full
force and effect.

7. ENERGY RELATED EQUIPMENT: Energy Related Equipment' shall mean the certain
equipment provided and installed, and possibly operated and maintained if
requested in the Work Orders, by SUBCONTRACTOR and includes any and all other
material, hardware, or software, as specified in each Work Order. Such Energy
Related Equipment is and shall remain the personal property of SUBCONTRACTOR,
with all the rights and liabilities associated with such ownership, until the
final acceptance by the Customer, the Operational Date, and PG&E ES has made
final payment to SUBCONTRACTOR of the Contract Amount defined in the Work Order.

8. FACILITY OR FACILITIES: "Facility" or "Facilities" shall mean the
building(s), structure(s) and or other fixtures on the Site Location where Work
shall be performed pursuant to an applicable Work Order,

9. HAZARDOUS SUBSTANCES. "Hazardous Substances" shall mean any hazardous, toxic,
or dangerous wastes, substances, chemicals, constituents. Contaminants,
pollutants, and materials and any other carcinogenic, corrosive, ignitable,
radioactive, reactive, toxic, or otherwise hazardous substances or mixtures
(whether solids, liquids, or gases) now or at any time subject to regulation,
control, remedation, or otherwise addressed under Applicable Laws.

10. INSTALLATION: "Installation" shall mean the setting up and placement of the
Energy Related Equipment in accordance with all Applicable Laws, in the manner
it will be operated, and as defined in the Work Order. Installation wilt not be
deemed complete until the Operational Date and final acceptance by PG&E ES and
the Customer.

11. MASTER AGREEMENT: "Master Agreement" shall mean this Energy Related
Equipment and Services Master Agreement and all Exhibits attached hereto which
are incorporated herein, as the same may be amended or modified from time to
time in accordance with the provisions hereof.

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<PAGE> 16

12.MATERIAL CHANGED CONDITION: "Material Changed Condition" shall mean changes
to the Work, outside the Scope of Work, as defined in Section 4.5, Material
Changed Conditions, herein.

13. OPERATIONAL DATE: "Operational Date" shall mean the date when the Energy
Related Equipment, and other related equipment, is fully installed and
operational. SUBCONTRACTOR shall provide written notice of such date to PG&E ES.
Unless PG&E ES disputes, for reasonable cause, the validity of the notice within
15 days of receiving such report, the same shall be deemed accepted by PG&E ES
as the Operational Date.

14. OPERATIONS AND MAINTENANCE SERVICES OR O&M: "Operations and Maintenance
Services", or O&M, shall mean the provision of operations and maintenance
services for the equipment, and any and all other material, hardware, or
software provided and installed by SUBCONTRACTOR, in accordance with Article 7
herein.

15. PARTY OR PARTIES: "Party" or "Parties" shall mean PG&E ES, SUBCONTRACTOR.-
each or both of them, as the context may require pursuant to the terms and
conditions of this Master Agreement.

16. PROJECT: "Project" shall mean the entirety of Work to be performed by
SUBCONTRACTOR, as well as all efforts of PG&E ES, CITGO, Customer. and other
entities, all as an integrated whole.

17. SITE LOCATION: "Site Location" shall mean the location of the facility where
the Energy Related Equipment, other related equipment, and any Test Equipment
will be installed, as described and identified in the Work Order.

18. TIME: "Time" shall mean the time period within which the SUBCONTRACTOR shall
complete the Work in accordance with the Work Order Project Schedule.

19. RETENTION: "Retention" shall mean the amount to be withheld by PG&E ES from
each payment to SUBCONTRACTOR, in the amount of ten (10%) percent, to ensure
SUBCONTRACTOR'S performance and completion of the Work as defined in the Work
Order.

20. WARRANTY: "Warranty" shall mean, unless otherwise defined in the Work Order,
the Energy Related Equipment provided and installed by SUBCONTRACTOR shall
conform to applicable specifications and shall be fit for the particular
purpose, shall be merchantable. of good workmanship and material, and free from
defect for a period of one (1) year from the Operational Date as defined herein.

21. WORK: "Work" shall mean the all the equipment and services described in each
Work Order to be provided. installed and performed by SUBCONTRACTOR. Depending
on the terms of each Work Order, the Work may include SUBCONTRACTOR designing,
supplying, installing, maintaining. operating, and warranting of certain Energy
Related Equipment, and providing any other energy-related services specified in
the Work Order. The Work described in each Work Order shall also include all
labor necessary to produce such services, all materials, fabrications,
assemblies, and equipment incorporated or to be incorporated in such
installation.

22. WORK ORDER: "Work Order" shall mean the document more fully described in
Article 3 of this Master Agreement. To be effective, each Work Order must be
executed by both Parties.

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<PAGE> 1

Exhibit 21.01

List of Subsidiaries

Cyberlink Systems, Inc., a Texas Corporation

<PAGE> 1
Exhibit 23.01

[NATHAN M. ROBNETT, C.P.A. LETTERHEAD]

SENT VIA FAX TO (512) 322-8143

November 24, 1999

Mr. Vince Mouer
Kuperman, Orr, Mouer & Albers
100 Congress Avenue, Suite 1400
Austin, Texas 78701

Dear Mr. Mouer,

I, Nathan M. Robnett, hereby consent to the use of my name as "independent
auditor" (but not as "expert") and my Independent Auditor's Report dated October
13, 1999, and the Consolidated Financial Statements of DeMarco Energy Systems of
America, Inc. as of June 30, 1999, including the respective notes thereto, and
the separate Independent Auditor's Report dated June 5, 1999, and, the
Consolidated Financial Statements of DeMarco Energy Systems of America, Inc. as
of June 30, 1998, including the respective notes thereto, in the Registration
Statement Form 10-SB of DeMarco emailed by you to our office November 23, 1999.

My consent is limited as described above and is valid until December 31, 1999.
Any additional use or use after December 31, 1999 of my name will require my
consent in each and every instance.

Sincerely,

/s/ NATHAN M. ROBNETT

Nathan M. Robnett

Copy Faxed to:
(512) 335-6380
Mr. Victor DeMarco
DeMarco Energy Systems of America, Inc.
12885 U.S. Highway 183, Suite 108-A
Austin, TX 78750