As filed with the Securities and Exchange Commission on October 26, 2000.
Registration No. 333-33134
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2 AMENDMENT 3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SAVE ON ENERGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
GEORGIA 336300 58-2267238
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(State or Other Jurisdiction of (Primary Standard (IRS Employer
Incorporation or Organization Classification Code Number) Identification Number)
</TABLE>
SAVE ON ENERGY, INC.
Ste. 211 4851 Georgia Hwy 85
Forest Park Georgia 30050
(404) 765-0131
----------------------------------------------------------------------------
(Address and Telephone Number
of Registrant's Principal Executive Offices and Principal Place of Business)
Robby E. Davis
President and Chief Executive Officer
SAVE ON ENERGY, INC.
Ste. 211, 4851 Georgia Hwy 85
Forest Park Georgia 30050
---------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
with a copy to:
Edward C. Kramer, Esq.
Kramer & Kramer, LLP
708 Third Avenue
New York, NY 10017
(212) 983-0007
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the date on which this Registration Statement becomes
effective.
-----------------------------------
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. |_|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post_effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post_effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration for the same
offering. |_|
--------------
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================
Title of each class Proposed maximum Proposed maximum Amount of
of securities Amount to be offering price per aggregate offering registration
to be registered registered share (1) price (2) fee
=========================================================================================================
<S> <C> <C> <C> <C>
Common Stock 900,000(1) $1.75(2) $1,575,000 $415
=========================================================================================================
</TABLE>
(1) Based on the highest sales price of the registrant's common stock as quoted
on the Nasdaq OTC Bulletin Board on March 17, 2000, representing the most
recent sales, as estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457 under the Securities Act.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
SAVE ON ENERGY, INC.
Up to 900,000 Shares
of Common Stock
Save on Energy, Inc. is registering an aggregate of 900,000 shares of our
common stock under this prospectus out of 3,406,000 shares of common stock that
are currently issued and outstanding. As of March 23, 2000 our common stock was
quoted on the Nasdaq OTC Bulletin Board under the symbol "SAVEE." At this time
our common stock is no longer traded on the Nasdaq OTC Bulletin Board under the
symbol "SAVEE, but is traded on the "Pink Sheets" under the symbol "SAVE." On
March 17, 2000, the last reported sale price of Save's common stock was $1.75
per share. We will not receive any proceeds from the resale of any securities
being registered. We have agreed to pay the expenses of this offering.
-------------------------
See "Risk Factors" beginning on page 6 of this prospectus for a discussion
of certain factors that you should consider before investing.
-------------------------
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
This prospectus is dated September 18, 2000.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY..................................................................... 4
RISK FACTORS................................................................ 4
FORWARD LOOKING STATEMENTS.................................................. 8
THE SELLING SHAREHOLDERS.................................................... 9
USE OF PROCEEDS............................................................. 10
MARKET FOR COMMON STOCK..................................................... 10
DIVIDEND POLICY............................................................ 11
THE COMPANY................................................................ 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................... 23
PRINCIPAL STOCKHOLDERS...................................................... 25
MANAGEMENT.................................................................. 27
RELATED PARTY TRANSACTIONS.................................................. 29
DESCRIPTION OF SECURITIES................................................... 30
PLAN OF DISTRIBUTION........................................................ 31
LEGAL MATTERS............................................................... 31
EXPERTS ................................................................... 32
WHERE YOU CAN GET MORE INFORMATION.......................................... 32
3
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SUMMARY
This summary highlights selected information from this prospectus and may
not contain all the information that is important to you. To understand the
stock offering fully, you should carefully read this entire prospectus.
References in this prospectus to "we," "us," and "our" refer to Save on Energy,
Inc., Electronic Fuel Control, a division of Save on Energy, Inc., Save or EFC.
SAVE ON ENERGY, INC.
Ste. 211 4851 Georgia Hwy 85
Forest Park, Georgia 30050
(404) 765-0131
Fax (404) 765-0171
Save on Energy, Inc., formerly known as Electronic Fuel Control, Inc. (the
"Company"), was incorporated in the State of Georgia in 1996 to manufacture and
market retrofit systems for the conversion of gasoline and diesel engines,
stationary or vehicular, to non-petroleum based fuels such as compressed natural
gas and liquefied natural gas.
The Company markets alternative fuel conversion kits for gasoline or diesel
fuel engines which include a patented device. In the case of a gasoline engine,
the engine is converted to an engine powered by either gasoline or an
alternative fuel. In the case of a diesel engine, the engine is converted into
an engine powered by either diesel fuel or a mixture of diesel fuel and
alternative fuel.
The Offering
We will use any proceeds from the exercise of warrants for working capital and
general corporate purposes.
RISK FACTORS
The purchase of the securities offered involves a high degree of risk. You
should consider, in addition to the negative implications of all material in
this prospectus, the following specific risks, particularly in relation to your
own financial circumstances and your ability to suffer the loss of your entire
investment.
RISK FACTORS RELATING TO THE COMPANY'S BUSINESS
--------------------------------------------------
You should carefully consider the following risk factors before making an
investment.
4
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1. Our Limited Operating History Makes it Difficult to Access or Analyze
Our Prospects for Success. We were organized on April 1, 1996 and have conducted
only limited operations to date, consisting of negotiating the license to use
the Patents, further research and development and limited sales efforts. No
assurances can be given that we will develop a marketing and sales program which
will generate significant revenues from the sales of the products we offer. The
likelihood of our success must be viewed in light of the delays, expenses,
problems and difficulties frequently encountered by an enterprise in its
development stage, many of which are beyond our control. We are subject to all
the risks inherent in the development and marketing of new products.
2. There is No Assurance of Sales or Acceptance of Products, Which Involve
New Technologies and Which Have Only Been Sold on a Limited Basis. The engine
conversion kits we market and sell have been distributed only on a limited basis
during the last 14 years and no assurance can be given that we will be able to
market such products successfully on a wide-scale commercial basis or that
significant revenues will be generated from any such sales.
3. We Are Dependent on a License to Manufacture and Market Our Products.
Our right to manufacture and market products based upon the Patents is dependent
upon the continuing validity of a license (the "License") granted by the Davis
Family Trust, the assignee (or holder) of the Patents, to us.
4. Our Ability to Manufacture and Market Our Products Can Be Adversely
Affected by Domestic Government Regulation. Federal, state and local governments
are endeavoring to find ways to decrease pollution caused by petroleum burning
products and simultaneously reduce the use of petroleum products in general. To
that end, the federal government has enacted the National Energy Strategy
(1992), the Clean Air Act of 1970, as amended in 1990, and the Energy
Conservation Act, among many other regulations, which provide a major impetus
for our business. In order to be successful, our products will have to operate
at levels which allow compliance with the myriad government regulations now
existing or which may be implemented in the future. The implementation of many
of the provisions of these regulations relating to the phase-in of alternative
fuels have been deferred indefinitely which could diminish or dampen any impetus
for success of our products. Hence, these regulations and the timing of the
activation of their key provisions, as they relate to us, will have a
significant bearing on our operations and may, in some instances, materially
adversely affect our business. A number of states and alternative fuel industry
associations have adopted safety standards relating to the integrity of fuel
systems in vehicles and equipment which burn alternative fuels. Standards have
been adopted for fueling connection devices, fuel containers, natural gas
compressors, and conversion kits such as those we manufacture and market. In
order to be certified by the American Gas Association ("AGA"), each aspect of a
conversion kit must be in compliance with AGA standards. We believe that the
products we design and manufacture meet current AGA safety standards, but there
is no guarantee that our belief will be accepted by a government entity,
regulator or court. However, as the industry is relatively new, standards and
regulations governing the use of alternative fuels and conversion kits are being
revised frequently. In the event that the regulations governing the manner of
use of alternative fuels are amended or laws specifically affecting alternative
fuel conversion kits are adopted by the federal government or in the event that
our products are not within AGA standards, such laws, regulations, and new
standards could have a material adverse effect on our business, as we may have
to redesign our products to be in compliance with these standards which would
require time and expense and which may cause us to scrap our inventory.
Furthermore, state and local laws and regulations vary significantly from state
to state;
5
<PAGE>
therefore, any changes in the regulatory framework in any one or more states
could cause delays in our operation in such states, or make continued operation
unprofitable.
5. Our Ability to Manufacture and Market Our Products Can Be Adversely
Affected by International Government Regulation. We intend to sell our products
and do business abroad and are relying to a great extent on foreign sales.
Changes in existing regulatory requirements outside of the United States or the
adoption of new requirements in foreign countries could have a material adverse
effect on our business, financial condition and results of operations. For
instance, foreign governments may extend time-tables decelerating the time
within which certain industries must comply with existing regulations mandating
the use of alternative fuels so that the industry will grow at a much slower
pace. Further, there can be no assurance that we will not be required to incur
significant costs to comply with foreign laws and regulations in the future or
that other countries' laws and regulations adopted in the future will not have a
material adverse effect on our business, financial condition and results of
operations. Regulations vary significantly from country to country; therefore,
any changes in the regulatory framework in any one or more countries could cause
delays in our operation or sales in such countries, or make continued operation
or sales unprofitable.
6. Technological Change May Make Our Products Obsolete or Difficult to Sell
at a Profit. Modern technology is characterized by extensive research and rapid
technological change. Newer technologies may be developed which perform more
efficiently than the equipment we manufacture and market. Major automobile and
truck companies, academic and research institutions and others could develop new
fuels or new devices which could be installed at the OEM (original equipment
manufacturer) level and which could potentially render our systems obsolete. In
addition, competitors may develop technology and systems which can be sold and
installed at a lower per unit cost. There can be no assurance that we will have
the capital resources available to undertake the research which may be necessary
to upgrade our equipment or develop new devices to meet the efficiencies of
changing technologies. Our inability to adapt to technological change could have
a materially adverse effect on our results of operations.
7. The Limited Availability of Alternative Fuels Can Hinder Our Ability to
Market Our Products. Alternative fuel engines have been commercially available
in the past; however, the most significant impediment to the growth in the
market for alternative fuel vehicles traditionally has been the limited
availability of alternative fuel sources, such as natural gas and propane. The
success of engines based on alternative fuels will probably be directly effected
by the development of the infrastructure of the natural gas industry and the
widespread availability of such fuel sources. To some degree, this problem will
remain at the forefront of, and be an impediment to, the success of alternative
fuel power sources. However, we believe that with the development of the dual
fuel conversion system kit, vehicles will not be tied exclusively to alternative
fuels, but will have the option and ability to operate on standard diesel fuel
alone. In all events, our business and the market for alternative fuel vehicles
would benefit substantially from the growth of the infrastructure of the natural
gas industry and the more widespread availability of alternative fuels.
Conversely, our business and the market for alternative fuel vehicles would be
substantially hurt by a diminished or lack of growth of the infrastructure of
the natural gas industry and the less widespread availability of alternative
fuels.
8. The Lack of Distributorships Limits Our Ability to Market Our Products.
As of the date hereof, we are distributing our products exclusively through our
offices in Forest Park, Georgia. We intend to establish regional master
distributorships through which we will offer and sell our products.
6
<PAGE>
However, there is no assurance that we will be able to negotiate or conclude
satisfactory distributor agreements or, if negotiated and concluded, that such
distributors will employ qualified or competent personnel or that they can
obtain satisfactory locations from which to distribute our products. Until such
time as we can establish distributorships, if ever, we must continue to rely on
our offices in Forest Park to develop a sales base for our products.
9. Competition from Companies with Already Established Marketing Links to
Our Potential Customers May Adversely Effect Our Ability to Market Our Products.
As the time to comply with federal and state regulations relating to emissions
and fuel efficiency approaches, so too does the universe of entities seeking to
develop and market products such as those we sell. Other companies presently are
marketing diesel fuel and dual fuel conversion kits. In addition, automobile and
truck manufacturers may develop and install similar proprietary devices as
original equipment.
10. Competition Utilizing Other Energy Sources May Adversely Affect Our
Ability to Market Our Products. The current regulatory emphasis on lowering
engine emissions is an economic incentive for developing non-petroleum based or
decreased hydro-carbon emitting power sources, some of which may be superior to
ours or may well be selected by converters, states or federal agencies,
regardless of superiority. In this regard, we are also competing against
manufacturers of electric vehicles and against vehicles which rely on other fuel
sources such as solar power or hydrogen. Electric cars have been in development
for many years and have been tested extensively and some manufacturers are
selling such vehicles on a commercial basis.
11. Resistance to Our Products by Major Oil Companies May Adversely Affect
Our Ability to Market Our Products. The major oil companies remain a powerful
and formidable lobby. Our products directly contest the continued use of large
quantities of petroleum based products (gasoline and diesel fuel) and we and
others in the industry may face obstacles to our success imposed by the major
oil companies. We are unable to predict at this time whether or not the oil
companies will present any significant impediments to the continued growth and
overall success of the industry in which we are engaged.
12. Safety Concerns in Connection with Alternative Fuels and Our Limited
Insurance May Adversely Affect Our Ability to Conduct Business. Liquefied
natural gas is highly flammable and may present risk in the event of a collision
involving the storage tanks. These concerns may make marketing our products more
difficult at any point in time. Further, an accident or catastrophe could
adversely affect our ability to conduct business in view of our limited
insurance. We have obtained liability insurance from a "Best" A rated insurance
carrier in the gross amount of $2 million. The policy provides insurance of $2
million in the aggregate during any one year and $1 million per event to cover
accidents or other liability incurred as a result of a malfunction of the
Company's products. There is no assurance that coverage in this amount will be
sufficient to meet all claims which we may face in respect of our products in
the event of serious bodily harm or property damage as a result of defects or
flaws in the products. In the event the amount of any claim or claims in the
aggregate exceed the amount of our liability insurance, we may be required,
among other possible scenarios, to remit all revenues to claimants which may
force us to cease operations.
13. Our Business is Dependent Upon a Key Employee and a Key Consultant. Our
future success will be largely dependent on the personal efforts of Robby Davis,
an officer and director of the Company, and Frank Davis, a consultant to the
Company and the Technical Advisor to the Board of Directors. The
7
<PAGE>
loss of either of such persons would have a material adverse effect on our
business and prospects. We have no key man life insurance on either individual.
14. The Fact That We Currently Have a Single Supplier for Certain Key
Components May Adversely Affect Our Ability to Manufacture Our Products.
Currently, the control boxes and other key elements used for our conversion kits
are received from a single source. Accordingly, should anything happen to our
supplier, or for some reason we are no longer able to obtain the control boxes
or other key elements from our supplier, we will not be able to produce or will
be delayed in producing conversion kits for sale or distribution, which could
cause delays in our operation or sales or make continued operation or sales
unprofitable.
15. We Are Subject to Risks in Our International Transactions and
Operations. We are subject to risks related to our international operations. We
anticipate that international sales will increasingly account for a significant
portion of our net sales and revenue. We intend to widen the scope of our
license from the Davis Family Trust and to expand our export sales to markets in
Asia, Europe, South America, Africa and the Middle East and to enter additional
countries in these international markets which may require significant
management attention and financial resources. Our operating results will be
increasingly subject to risks related to international sales, including:
o regulatory requirements;
o political and economic changes and disruptions;
o transportation delays;
o national preferences for locally manufactured products; and
o import duties or other taxes which may affect the prices of our
products in other countries relative to competitors.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future expectations,
contain projections of results of operations or financial condition or state
other "forward-looking" information. Those statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from those contemplated by the statements. The
forward-looking information is based on various factors and was derived using
numerous assumptions.
Important factors that may cause actual results to differ from projections
include, for example:
o general economic conditions, including their impact on capital
expenditures;
o business conditions in industries using diesel engines;
o the regulatory environment;
o rapidly changing technology and evolving industry standards;
o new products and services offered by competitors; and
o price pressures.
8
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SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the selling stockholders as of the date hereof,
the number of shares owned by them covered by this prospectus and the amount and
percentage of shares to be owned by each selling stockholder after the sale of
all of the shares offered by this prospectus. None of the selling stockholders
has had any position, office or other material relationship with us within the
past three years other than as a result of the ownership of the shares or other
securities of ours or as a consultant. All of the selling stockholders, except
for Bresner Partners, Ltd., are shareholders of International Fuel Systems,
Inc., which has a consulting and distribution agreement with us. The information
included below is based on information provided by the selling stockholders.
Because the selling stockholders may offer some or all of their shares, no
definitive estimate as to the number of shares that will be held by the selling
stockholders after such offering can be provided and the following table has
been prepared on the assumption that all shares of Common Stock offered hereby
will be sold.
Shares
Owned Percentage of
Shares of After Shares Owned
Beneficially Shares Offering After Offering
Name Owned Offered (1) (1)
-------------------------- --------- ------- -------- -------------
Lanier M. Davenport 300,000 300,000 0 0.00%
Lanier M. Davenport, Jr.,
UTMA 40,000 40,000 0 0.00%
Steven Ray Davenport, UTMA 40,000 40,000 0 0.00%
Sarah Byrd Davenport, UTMA 40,000 40,000 0 0.00%
Carol Espinosa 65,000 65,000 0 0.00%
Jonathan P. Hoover 65,000 65,000 0 0.00%
Dennis L. Knight 40,000 40,000 0 0.00%
Kota Suttle 20,000 20,000 0 0.00%
Daryl Powell 40,000 40,000 0 0.00%
Gerald B. Andrews 150,000 150,000 0 0.00%
Bresner Partners, Ltd. 100,000 100,000 0 0.00%
----------
(1) Assumes sale of all shares offered by the selling stockholders.
9
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USE OF PROCEEDS
We will not be selling any of our shares through this registration, since the
main purpose of this registration is to register already issued shares.
Accordingly, we will not receive any funds or proceeds from this registration.
However, if the holders of warrants to purchase common stock, at some point in
time, exercise the warrants, the holders will pay an exercise price to us. We
will use any proceeds from the exercise of warrants for working capital and
general corporate purposes.
MARKET FOR COMMON STOCK
Our common stock is quoted on the "Pink Sheets" under the symbol "SAVE" and
began trading December 17, 1996. The following table taken from America Online
shows quarterly low and high bid information for the common stock from January
1, 1998 through March 6, 2000:
2000 Low Bid High Ask
---- ------- --------
First Quarter (1) $0.875 $3.875
1999
----
Fourth Quarter $0.25 $1.125
Third Quarter $0.48 $1.125
Second Quarter $0.375 $0.9375
First Quarter $0.75 $1.375
1998
----
Fourth Quarter $0.625 $1.125
Third Quarter $0.25 $2.00
Second Quarter $1.50 $3.375
First Quarter $1.00 $3.125
----------
(1) Through and including March 6, 2000.
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Market quotations reflect inter-dealer prices, without retail markups, markdown
or commissions and may not necessarily reflect actual transactions. As of April
13, 2000, there were 3,406,000 shares of common stock outstanding.
DIVIDEND POLICY
We have never paid a cash dividend on our common stock and do not plan to pay
any cash dividends on our common stock in the foreseeable future.
THE COMPANY
Save On Energy, Inc. was originally incorporated as Electronic Fuel Control,
Inc. on April 1, 1996 for the purpose of developing and marketing after-market
conversion systems to permit diesel engines to run in a "dual-fuel" mode with
natural gas added to the fuel mixture. Although the technology is equally
applicable to gasoline and diesel engines, we subsequently decided to
concentrate our energy and assets on building a business serving only
diesel-powered vehicles, a market determined to have a larger revenue potential
per customer.
HISTORICAL OPERATIONS AND FUTURE PLANS
We became a publicly traded company in 1996 as a result of the sale of 195,000
shares at $5.00 per share under Section 504 of the Securities Act of 1934. This
placement raised $975,000 for us, less commissions and costs of the offering. It
was from these funds as well as other monies previously and subsequently raised
that we developed commercial versions of our technology to fit many older,
naturally aspirated, diesel engine types and placed more than 1,200 conversion
units into engines all around the world. In addition, we completed preliminary
work to apply our technology to the newer Drive-by-Wire engine types. As a
result of these activities we believe we are poised to begin a much more
extensive sales and revenue creation phase. With appropriate financing we plan
on marketing to large engine manufacturers, municipalities and government
entities, both nationally and internationally.
During the first quarter of 1999, we acquired we entered into an agreement with
International Fuel Systems, Inc., a Tennessee corporation, and Lanier Davenport,
which set in writing their prior purchase of 600,000 shares and, in addition,
for 600,000 additional shares to be issued upon certain contingencies. As of
March 6, 2000, 200,000 of the reserve shares have been issued. International
Fuel Systems, Inc. established several business relationships for the SAVE Dual
Fuel System with organizations outside the US. In particular, it initiated a
development program with a diesel engine manufacturer in Hungary and established
a joint venture with NUI/CARITRADE INTERNATIONAL with respect to certain
countries of Eastern and Western Europe. Should this program materialize, we
will seek to include such additional territories as may be relevant to our
License from The Davis Family Trust. At this time it cannot be determined if
such program and venture will eventually realize revenue.
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LEASES
We lease 6,000 square feet of combination office and warehouse space in an
established industrial park in Forest Park, Georgia located near the
intersections of Interstates 285 and 75, and close to the Atlanta airport. The
lease for this location expires at the end of February 2001. There are 8 full
time employees in this facility, with adequate space to add several more as the
business grows.
PRODUCTS and TECHNOLOGY
German engineer Rudolf Diesel invented the diesel engine in the late 1890's. A
diesel engine looks and works very much like a gasoline engine. However, unlike
the gas engine, diesel engines have no spark plugs. Diesel fuel has a very low
flash point, meaning that it self ignites at a low pressure/temperature
condition. Within the diesel engine, when the piston is at the top of the
cylinder (at the conclusion of the compression stroke) and the mixture of fuel
and air within the cylinder is at the maximum pressure, the air has been heated
by being compressed, and the diesel fuel vapors spontaneously combust. With no
spark (and no spark plugs or distributor) needed to ignite the fuel, diesel
engines are much simpler and more reliable than gasoline engines. In addition,
diesel fuel contains unrefined hydrocarbons that act as a lubricant to internal
engine components while the engine is running. This contributed to a
significantly longer engine life than can be expected from other fuels.
The main disadvantage of a diesel engine is that it emits far more pollutants
than its gasoline-fueled counterpart. Diesel exhaust contains particulate
matter, visible as soot that contains unburned and partially burned fuel. These
hydrocarbon emissions are a significant contributor to air pollution and to
human respiratory system difficulties. This is particularly true when
hydrocarbons become suspended in the atmosphere (as opposed to settling to
earth) or when they come to exist in great quantity in the air at a particular
location (such as is the case Los Angeles, Mexico City, and Cairo). Of even
greater significance is the fact that diesel fuel combustion produces Nitrous
Oxide ("NOx"), a toxin that is universally acknowledged as harmful to humans and
the environment.
Engines. There are different diesel engines. Many of the differences are in how
the fuel/air mixing operation is performed. However, all diesel engine are
sparkless, using the increased temperature of the compressed air to ignite the
fuel.
Naturally Aspirated Engine. Unlike gasoline engines that mix the fuel with the
air outside the cylinder, diesel engines mix the fuel with the air inside the
cylinder. In all diesel engines, the fuel is directly injected into the
cylinder. Because they are able to operate on a wider range of fuel quality than
gasoline engines and because they could be built in much larger and more
powerful configurations, diesel engines quickly adapted to many commercial
applications.
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Turbocharged Engine. Turbocharged engines force compressed air into the
cylinder. These are more efficient than the naturally aspirated engines and
consume less fuel.
Drive-by-Wire Engines. As a further extension of automobile engine technology to
diesels, in 1993/94, engine manufacturers began producing turbocharged engines
that use an electronically timed fuel injection system. In this engine,
injection of the fuel into the engine cylinder is controlled more precisely than
is possible using the mechanical system. Because the fuel injection process is
more precisely timed and measured, Drive-By-Wire engines have lower emissions
and better fuel economy than other engines.
The improved fuel efficiency and reduced emissions that resulted from the
Drive-by-Wire engines is only a small step. These engines, like other diesel
engines continue to emit substantial quantities of unburned fuel, particulate
hydrocarbons and NOx that exceed the levels permitted under the guidelines of
the Clean Air Act.
BARRIERS TO GROWTH OF ALTERNATIVELY FUELED VEHICLES
Few Fueling Stations. Gas companies are reluctant to install fueling stations
against a market with a limited vehicle count. Recent estimates indicate that
there are about 1,200 compressed natural gas vehicle refueling stations in the
USA, certainly far less than one on every corner, as is the case with gasoline.
Despite this, suppliers of CNG and LNG have developed trailer mounted fueling
stations to provide an option for fleet vehicle fueling without the great
expense for a fixed installation.
Few Vehicles. Even though the base legislation has now been in force for nearly
10 years, and the conversion requirements are clearly set, particularly for
state, municipal and federal vehicle fleets, estimates place the number of
Natural Gas powered medium and heavy duty vehicles in service in the USA at less
than 50,000. This compares disproportionately to the more than 1 million natural
gas or dual fuel vehicles in service outside the US.
High Cost of Dedicated Engine Conversions. To convert an existing and running
diesel engine to run exclusively on natural gas (a "dedicated" engine),
regardless of whether the gas is liquefied or compressed, requires that an
electronic ignition system be installed in the vehicle. This requires new
cylinder heads, the spark plug electronics, and a whole lot more. The end result
is a conversion cost for a typical heavy-duty truck in excess of $50,000.
Similarly, the cost of a new vehicle equipped with a full time natural gas
engine is as much as $50,000 more than the same vehicle with its standard diesel
engine.
Large Inventory of Diesel Powered Vehicles. One of the main advantages of diesel
engines is their long life. With millions of perfectly good vehicles in service,
private sector fleet operators have little incentive to discard them and replace
them with dedicated alternative fuel vehicles.
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OUR CONVERSION KITS.
Our Dual Fuel System permits existing vehicles to be converted to dual fuel
capability at a cost, including the fuel tank, of less than $10,000 in most
cases. Importantly, we believe that significant engine performance is not lost
as a result.
LEGISLATIVE INCENTIVE and ASSISTANCE PROGRAMS
Some of the Federal laws that apply directly to increased use of alternative
fuels and conversion of vehicles to for the use of alternative fuels are
described below:
The Clean Air Act of 1970, together with the Clean Air Act Amendments of 1990.
The Clean Air Act (CAA) was passed in 1970 to improve air quality nationwide.
Congress amended that law in 1990, passing the Clean Air Act Amendments of 1990
(CAAA) creating several initiatives to reduce vehicle pollutants. The CAAA sets
emissions standards for stationary and mobile pollutant sources. The Act
establishes targets, sets standards and creates procedures for reducing human
and environmental exposure to a range of pollutants generated by industry in
general and transportation most specifically. Importantly for us, the1990
Amendments to the Clean Air Act requires businesses that maintain centrally
fueled fleets of 10 or more vehicles in certain heavy smog locations to convert,
either through new vehicle purchases or by converting existing vehicles, a
portion of their fleet to clean burning alternative fuels. The Act specifically
includes the diesel and natural gas duel-fuel system as an "alternative fuel."
The Act goes on to specify actions that fleet operators must take and timetables
for their completion.
The Energy Policy Act of 1992 (EPAct) was created to accelerate the use of
alternative fuels in the transportation sector. With the EPAct in place, the
primary goal of the Department of Energy (DOE) became to decrease the nation's
dependence on foreign oil and increase our energy security through the use of
domestically produced alternative fuels.
EPAct mandates the schedule by which Federal, State and Municipal vehicle fleets
must incorporate alternative fueled vehicles into their overall vehicle mix. As
we enter the 21st Century, this aspect of the EPAct has significant
ramifications for the military, which operates thousands of diesel vehicles, and
for the state departments of transportation, which operate tens of thousands of
diesel powered dump trucks and related highway service and repair vehicles, plus
the tens of thousands of vehicles operated by the private contractors who
support these agencies.
Other Federal and State Incentives and Alternative Fuel Vehicle Programs. There
are a number of other Federal and State programs that have been created and
which provide funding or other incentives for the conversion from diesel engines
to alternative fuels.
Clean Cities Program. Created by the DOE, the Clean Cities Program coordinates
voluntary efforts between locally based government and industry to accelerate
the use of alternative fuels and expand the alternative fuel vehicle ("AFV")
refueling infrastructure.
State and Alternative Fuel Provider Fleets AFV Credits Program. Congress created
the
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"Credits Program" to encourage fleets to increase the number of AFVs in their
fleets early and aggressively. Credits are allocated to state fleet operators
and covered Alternative Fuel Provider fleet operators when AFVs are acquired
over and above the amount required, or earlier than expected. Since credits can
be traded and sold, fleets have the flexibility to acquire AFVs on the most
cost- effective schedule without impeding the achievement of EPAct national oil
displacement goals.
State Energy Program. States will promote the conservation of energy, reduce the
rate of growth of energy consumption, and reduce dependence on imported oil
through the development and implementation of a comprehensive State Energy
Program. The State Energy Program is the result of the consolidation of two
Federal formula-based grant programs - the State Energy Conservation Program and
the Institutional Conservation Program. The State Energy Program includes
provisions for financial assistance for a number of state-oriented special
project activities. These activities specifically include programs to accelerate
the use of alternative transportation fuels for government vehicles, fleet
vehicles, taxis, mass transit, and individuals' privately owned vehicles.
DOE/Urban Consortium Funds. DOE's Municipal Energy Management Program has funded
about 300 projects that demonstrate innovative energy technologies and
management tools in cities and counties through the Urban Consortium Energy Task
Force ("UCETF"). Each year the task force requests proposals from urban
jurisdictions including cities, counties and recognized tribal governments. It
funds those projects that best define and demonstrate innovative and realistic
technologies, strategies, and methods that can facilitate urban America's
efforts to become more energy efficient and environmentally responsible. In the
past, a number of AFV projects have received funding from UCETF.
Petroleum Violation Escrow (PVE) Account. Oil overcharge funds, also known as
petroleum violation escrow (PVE) funds were created by fines or settlements that
became available as a result of oil company violations of the federal oil
pricing controls. These monies have been made available to the states for use in
one or more of three federal energy-related grant programs: the State Energy
Program (as discussed above) and the Weatherization Assistance Program
(administered by DOE), and the Low-Income Home Energy Assistance Program, which
is administered by the Department of Health and Human Services.
Congestion Mitigation and Air Quality (CMAQ) Improvement Program. The CMAQ
program was re-authorized in the recently enacted Transportation Equity Act for
the 21st Century (TEA-21). The primary purpose of the CMAQ program remains to
fund projects and programs in non-attainment and maintenance areas that reduce
transportation related emissions.
Section 3 Discretionary and Formula Capital Program. This program provides
funding for the establishment of new rail projects, improvement and maintenance
of existing rail projects, and the rehabilitation of bus systems. Funding is not
specifically designated for AFVs, but the funds provided by this program could
be used to purchase alternative fuel buses. For most projects funded through
Section 3, FHWA will pay 80% of the total project costs.
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The Clean Fuel Fleet Program (CFFP). This is an initiative implemented by the
EPA in response to the CAAA. The CFFP requires fleets in cities with significant
air quality problems to incorporate vehicles that will meet clean fuel emissions
standards.
National Low Emission Vehicle (NLEV) Program. The NLEV program, effective March
2, 1998, is a voluntary program between the EPA, nine of the Ozone Transport
Commission (OTC) states, and the automobile manufacturers. The program is
designed to reduce unhealthy levels of smog and other toxic air pollutants
formed from vehicle tailpipe emissions. Automobile manufacturers will provide
cars and light-duty trucks that are cleaner burning than currently required by
law.
Pollution Prevention Grants Program. This Federal program supports the
establishment and expansion of state pollution prevention programs and addresses
various sectors of concern such as energy, transportation, industrial toxins,
and agriculture. Funds available under this grant/cooperative agreement are
awarded to support innovative pollution prevention programs that address the
transfer of potentially harmful pollutants across air, land, and water. State
agencies are required to contribute at least 50% of the total cost of their
project.
State Legislation and Alternative Fuel Vehicles Support Programs. In addition,
many states also offer incentives for converting and operating alternative
fueled vehicles. These incentives take many forms, including income tax
deductions and credits, vehicle fuel tax reductions, access to HOV lanes, and
grants to cover some of the costs of acquiring or converting vehicles and
installing fueling infrastructure.
Impact of Legislative Initiatives on SAVE. We consider that the dual fuel system
we have developed and marketed is an "alternative fuel" as defined by these
laws. Subject to completing EPA certifications for reduced emissions, engines
converted to the SAVE Dual Fuel Operating System may qualify for available tax
incentives.
Global Initiatives. In addition to the many Federal and State programs, the
United Nations has a long-standing program to improve the air quality,
worldwide. The program is administered through the UN's Economic and Social
Development Division. The UN does not provide funding, but they do work
extensively to facilitate the flow of technical information into member nations
that have need to address local or regional pollution problems.
PATENTS ISSUED AND APPLIED
On October 30, 1984, United States Patent # 4,479,466 was issued to SAVE founder
Frank Davis for:
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"A natural gas and air mixing device for allowing the combustion
of a mixture of natural gas and air in a conventional internal
combustion engine."
Although this device was designed specifically for the purpose of using natural
gas to power a gasoline engine, it set the stage for future work to develop
conversion kits that would permit diesel engines to operate on a mixture of
diesel and natural gas.
From the knowledge gained in subsequent years, Frank Davis and his son, Robby
Davis, were granted three additional patents for mixing devices. Two were issued
in 1991 and the third in 1994. All three described apparatuses for introducing a
mixture of air and gaseous fuel into internal combustion engines and the method
or process for doing that.
Further, in December 6, 1994, Frank Davis and Robby Davis were issued United
States Patent # 5,370,097 for a "Combined Diesel and Natural Gas Engine Fuel
Control System and Method of Using Such" for an internal combustion engine. This
patent describes using a control means to insert the gaseous fuel in response to
engine speed and load. This is the base patent upon which the Company relies.
Foreign applications have been filed in Germany and the United Kingdom. Frank
Davis and Robby Davis have assigned their interests in these patents to the
Davis family Trust. The Trust has granted us a license to use the patents. (See
License)
OUR DUAL FUEL SYSTEM
There are two types of dual fuel systems in use. Our Dual Fuel system is a
"Closed Loop" system. The fuel flow Controller monitors engine operating
parameters. Based on the input it receives, it adjusts the gas/air and diesel
fuel mixtures as necessary to create the optimum engine performance for the load
at the time. The system makes continuous changes to the percentages of natural
gas and diesel entering the cylinder during the intake cycle.
In an "Open Loop" system, as used by two competitors, the natural gas to diesel
fuel mixture is pre-set, usually to around 40% gas and 60% diesel. The engine
receives this mixture at all times, without regard to engine speed or load.
We believe that our Closed Loop system generally provides better fuel economy
than an Open Loop system, better vehicle performance under the variety of load
requirements engines face, a greater emissions reduction (particularly unburned
fuel, hydrocarbon particulate and NOx) and reduced engine maintenance costs.
Our Dual Fuel System has three main components.
The Controller. This electronic unit is the brain of the system. From sensors
that monitor key
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parameters of engine performance (speed, temperature and several others) and
what it is being asked to do (throttle position and fuel demand), the Controller
determines how much natural gas to place into the air intake stream. In general,
the controller places the least amount of gas into the engine at idle engine
speed without load. At this resting state, a typical dual-fuel engine would be
running on 80% diesel and 20% natural gas. Conversely, the greatest amount of
gas is inserted when the vehicle is cruising at speed. In this state, a typical
engine would be consuming a mixture of 20% diesel and 80% gas. Experience
gathered over hundreds of installations has indicated that a typical engine,
after conversion to our Dual Fuel System will normally run on a mixture of 70%
gas and 30% diesel.
The Gas Air Mixing Device. The natural gas vapor must be administered into the
air fuel flow in a manner that permits thorough mixing. To accomplish this, we
hold patents on three different and unique devices that are placed into an
engine air intake system This device, called the Gas Air Mixing Device, together
with the fuel flow regulator and hoses is the second major component of our Dual
Fuel System.
The Measuring, Monitoring and Reporting Devices and Their Connections. To
optimize engine and vehicle performance, the Controller needs to know the
current status of a number of engine operating parameters ranging from throttle
position to exhaust temperature. The sensors and wiring that gather and report
this information to the Controller make this the third component of our Dual
Fuel system.
SWITCHING FROM DUAL FUEL TO FULL DIESEL OPERATION
The Controller is programmed to automatically switch from dual-fuel operation to
diesel when the natural gas fuel supply reaches a low level. As an option, a
vehicle can be equipped with a manual switch. This switch permits 100% diesel
operation on the drivers command.
COMPRESSED VS. LIQUEFIED NATURAL GAS.
Our Dual Fuel system is indifferent to the two gas types. In general, compressed
and liquefied natural gas differ only in their method of storage. Once they
leave their storage vessels and are presented for insertion into the engine's
fuel flow, both are in a gaseous state.
We do not include gas storage vessels in our "conversion kit". The customer
purchases these separately from a number of companies who manufacture them, or
from us at the customer's request.
At the moment, Liquefied Natural Gas (LNG) is the preferred form of fuel. In
liquid form, the gas requires less space to hold and its tanks put less weight
onto the vehicle than does Compressed Natural Gas (CNG). Because the LNG dealer
brings the gas to the fleet site as frequently as needed, there is no supply
constraint.
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However, as the future unfolds, CNG filling stations might proliferate making
these more easily accessible than is presently the case. Regardless, our dual
fuel engine does not care which type is on the vehicle. The fleet's service
technicians can make whatever minor adjustments the Controller may require for
optimum engine performance.
OUR SUPPLIER OF DUAL FUEL CONTROL SYSTEMS
On April 29, 1996, we entered into a supply agreement with Ambac International
Corporation ("Ambec") to exclusively supply us with electronic duel fuel control
systems for a period of twenty years. According to our supply agreement, Ambec
cannot sell the control systems designed for us to anyone else and we cannot
purchase the control systems from anyone other than Ambec provided that Ambec
remains competitive in both technology and price.
CERTIFICATION OF POLLUTION REDUCTIONS
In order to qualify for Federal and State grants and tax benefits, the reduction
in polluting emissions that result from our engine modifications must be
certified by independent outside agencies.
Environmental Protection Agency (EPA). The Federal Income Tax deductions
available as a result of the Energy Policy Act of 1992 require that the engine
"satisfy any federal and state emissions certification, testing, and warranty
requirements that apply." We will attempt to qualify the SAVE Dual Fuel System
on several of the most common diesel engine families in the first two quarters
of 2000. An engine family is generally one manufacturer/displacement/or
horsepower type, even though numerous models of that type may have been
manufactured over the years. The cost to certify an engine is generally between
$50,000 and $75,000. Testing requires about 30 days, including set up and tear
down. The EPA typically issues reports of the results and certifications within
60 days following the testing.
New York State Energy Research and Development Authority (NYSERDA). The State of
New York provides funding for alternative fuel projects through NYSERDA. We are
currently taking steps to formalize our relationship with N.Y.S. Electric and
Gas, with which we intend to jointly develop a project under a NYSERDA grant,
which may be as high as 50% of the cost of the project.
MARKET SIZE
The Company believes that the market for after-market vehicle conversion kits is
large, assuming the actual conversion of only a very small portion of the more
than 12 million medium and heavy-duty diesel powered vehicles, 3 million of
which are in the US, and 9 million are outside the US. The assumed average cost
of the component kit to convert one vehicle is a conservative $5,000. This
market estimate does not include the tanks to contain the gas or any costs born
by the fleet operator to create the refueling facility.
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USA Market Potential. To determine the market potential for SAVE Dual Fuel
System, the US vehicle inventory can be divided into several segments, all
consisting of heavy-duty vehicles with large numbers of the same type of engine.
Transit Buses. The Department of Transportation reports more than 128,000
transit buses in use nationwide. Of these, less than 5,000 are believed to be
operating on alternative fuel.
School Buses. The transit bus figures do not include buses operated by public
school districts or by private schools or churches. According to Department of
Transportation statistics, there are 580,000 school, church, institutional and
industrial buses registered in the US. The federal government, excluding the
military, operates an additional 5,000 buses.
Trucks. Motor Vehicle Census data from 1992 indicate that "Heavy- Heavy" trucks
(gvw exceeding 26,000 pounds) numbered over 2 million then. The data does not
indicate the number that were diesel powered, however, it is believed that most
were. This census included detailed information about types of trucks. Some of
the highlights were:
Sanitation Trucks. The total number of sanitation vehicles was over 72,000.
Dump Trucks. Cities, counties and states own dump trucks for highway
maintenance. In addition, there are countless fleets operated by private
construction companies. The total number of dump trucks was reported to be
611,900, nationwide.
Wreckers. In 1992, there were 104,000 wrecker body trucks and an additional
58,800 trucks with a winch or crane.
Concrete Mixers. There were 61,000 concrete mixers in 1992.
Interstate Freight Trucks. According to Department of Transportation statistics,
there were 1,741,800 "Combination" trucks, another way of describing the truck
end of a "semi."
Local Delivery Trucks. United Parcel Service, the largest local delivery
operation with over 50,000 trucks in service, is already the largest operator of
dedicated CNG vehicles. Beverage delivery trucks, which frequently appear at
local convenience stores, numbered 73,000 in 1992.
Retail Delivery Trucks. This category will includes a number of smaller trucks,
and
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the beverage trucks will be double counted, but for companies like Wal-Mart, the
retail grocery industry, department stores, and the building supply retailers,
and others, there were over 1.1 million vehicles.
Working Boats. Certain highly active port cities have large numbers of
ferryboats and tugboats. Although these have highly specialized marine engines,
there is no doubt that their air pollution is receiving attention from various
government programs. The Department of Transportation reports that there were
8,300 vessels licensed to transport things or people in the US.
Locomotives. Because of the loads they pull, and particularly in urban areas
where they move slowly and engine load is heavy, diesel locomotives are serious
polluters. These engines will require a hybrid system to be converted to dual
fuel, similar to vehicle engines, but controlling a much larger engine.
Department of Transportation statistics indicated there were 19,600 locomotive
engines.
Foreign Markets.
In addition to the US market, there are many nations with large and antiquated
diesel-engine vehicle fleets. Various estimates place the number of
diesel-engine transportation and freight vehicles outside the US at more than 10
million. Significant numbers are located in the nations referred to as the
Eastern Block (Czechoslovakia, Hungary, Romania, etc.), Mexico, Egypt, Chile,
Philippines, China, India and Japan. These nations each have a serious air
pollution problem. Importantly, each has excellent access to natural gas in
their urban centers.
FUEL SUPPLY
It must be noted as a significant strategic influence on the fuel supply side
that vast quantities of natural gas are being burned at the wellhead or simply
expelled into the atmosphere every day because there is no market for it. This
represents an undetermined incentive for the oil industry to increase demand for
natural gas.
COMPETITIVE ANALYSIS
Original Equipment Manufacturer Dedicated Fuel Systems. Diesel engine
manufacturers offer an engine alternative that runs only on Natural Gas. These
single-fuel (natural gas) engines often cost at least $50,000 more than the same
engine in diesel-only form. The major reason for this cost difference is that to
convert a diesel engine to operate only on natural gas, a complete spark plug
and ignition system must be incorporated. In addition, because the all gas
mixture explodes much more violently upon ignition, the pistons have to be
extensively modified to reduce the compression ratio. Experience has
demonstrated that these engines have higher maintenance costs and shorter lives.
This phenomenon is partially explained by the fact that diesel fuel acts as
an engine lubricant.
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Caterpillar. Caterpillar offers two Original Equipment Manufacturer Dual Fuel
engines. Both are "Open Loop" systems that operate on one, pre-set mixture of
diesel and natural gas. The cost of this option is often more than $25,000
higher than the same engine in Diesel only form.
Alternative Fuel Systems, Inc., headquartered in Calgary, Alberta, Canada is a
company that manufactures an after-market "Open Loop" kit to convert an existing
vehicle engine to dual fuel. Installed in the customer's vehicle, the
Alternative Fuel Systems' and our systems are believed to cost approximately the
same. Alternative Fuel Systems is a publicly traded company on the Canadian
Stock Exchange under the symbol "ATF". Additional information on the Alternative
Fuel Systems'system is available at their website, www.altfuelsys.com.
Original Equipment Manufacturer Bi-Fuel Systems. Some engine manufacturers also
manufacture an engine that will run on natural gas or diesel, but not on both at
the same time. We call these bi-fuel engines. These engines suffer the same up
to $50,000+ cost disadvantage as the dedicated, single-fuel engine. In order to
convert a bi-fuel engine from one fuel to another, the vehicle must be returned
to the service facility and have its operating parameters re-set. By comparison,
our dual fuel system can be set to change to full diesel operation either
manually or automatically.
Bio-Diesel Fuel. In addition to natural gas/diesel, bio-diesel is another "clean
burning" dual-fuel. This fuel is a mixture of diesel and a vegetable oil.
Several such oils are available. Bio-diesel requires no engine conversion for
use. At about $3.00 per gallon, the cost is prohibitive to most operators. A
further disadvantage is the odor emitted, which depends on the specific oil that
is being used. For example, corn/diesel emits a popcorn odor from the exhaust.
THE MARKET FOR OUR SHARES
There is a limited public market for our common stock. There is no
established active public trading market for our common stock. Our common stock
is traded on the "Pink Sheets" and is quoted under the symbol "SAVE". As of
March 6, 2000, the last reported sale price of our common stock was $2.875, and
there were 11 firms listed as market makers for our common stock. There can be
no assurance that our common stock will trade at prices at or about its present
level, and an inactive or illiquid trading market may have an adverse impact on
the market price. Moreover, price fluctuations and the trading volume in our
common stock may not necessarily be dependent upon or reflective of our
financial performance. In early April, our stock was delisted from the Nasdaq
OTC Bulletin Board and is now only be traded on the "Pink Sheets." This will
make it more difficult to trade our shares. Although, upon this filing becoming
effective, it is expected that we will reapply to be listed on the Nasdaq OTC
Bulletin Board.
Holders of our common stock may experience substantial difficulty in
selling their securities. The trading price of our common stock could be subject
to significant fluctuations in response to variations in quarterly operating
results, changes in the analysts' estimates, announcements of technological
innovations, general industry conditions. Furthermore, our stock is very thinly
traded, meaning that very few shares are sold in a day and that there are very
few actual trades. Thus, although the public sale price of our stock increased
over 400% in the several months prior to March 6, 2000, this increase was based
upon few and low volume trades and may not be representative of the value of the
stock or a particular selling price on any given day. Before purchasing our
stock, you should become aware of the stock's volume and number of trades, as
well as the history of the price of the stock over, at least, the last year.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis of the financial
condition and results of operations should be read in conjunction with our
financial statements and the accompanying notes appearing elsewhere in this
prospectus. In addition to historical information, this management discussion
and analysis of financial condition and results of operations contain
forward-looking statements. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of factors,
including those set forth under "Risk Factors" and in other parts of this
prospectus.
Overview
We primarily market alternative fuel retrofit conversion kits which include
a patented device by which a diesel fuel engine is converted to an engine
powered by either a mixture of diesel fuel and alternative fuel (approximately
80% natural gas, 20% diesel fuel) or diesel fuel exclusively, which system
permits the vehicle operator to switch from the mixed fuel source to diesel fuel
at the flip of a switch from the driver's seat when the alternative fuel is
depleted (the system is referred to as our "Dual Fuel System"). We also market
conversion kits which convert a gasoline fuel engine to a bi-fuel engine which
can be powered by either gasoline or natural gas.
The primary marketing focus of our Dual Fuel System is the diesel truck and
bus market segments. Although we have completed development of our Dual Fuel
System for normally aspirated engines and turbocharged engines, we are still in
the process of developing our Dual Fuel System for Drive-by-Wire engines.
Results of Operations
Comparison of Twelve Month Periods Ended December 31, 1999 and December 31, 1998
The following table sets forth certain statement of operation items as a
percentage of net sales for the period indicated:
<TABLE>
<CAPTION>
Twelve Months Ended December 31
1st 6 mos. 1st 6 mos.
1999 1998 2000 1999 1998 2000
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Sales .......................................... 100.0% 100.0% 100.0% 560,124 539,443 105,392
Cost of Goods Sold ................................. 58.9 36.1 57.4 329,791 194,701 60,511
Gross Profit ....................................... 41.1 63.9 42.6 230,333 344,742 44,888
Selling and Administrative ......................... 121.7 125.3 470.9 681,918 675,958 496,271
Interest Expense ................................... 5.9 1.7 30.1 33,013 9,030 31,710
Other Expense ...................................... 22.3 -- -- 125,000 -- --
Income Tax ......................................... -- -- -- -- -- --
----- ----- ------ -------- -------- ---------
Income (Loss) ...................................... (108.8) (63.1) (458.4) (609,598) (340,246) (483,100)
====== ====== ======= ======== ========= =========
</TABLE>
Our revenues resulted mostly from sales of the our Dual System Fuel
kits. About 60 Dual Fuel System fuel kits, at prices ranging from about $4,000
to over $5,000 (depending on customers' needs and configurations) were sold in
each of 1998 and 1999. The remaining revenues stemmed from the sale of gasoline
bi-fuel conversion kits, part kits for dedicated diesel fuel vehicles,
installations of conversion kits and sales of fuel tanks.
However, while Net Sales increased 3% from 1998 to 1999, Cost of
Goods Sold
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increased by 69% in the same period. The increase in the Cost of Goods Sold was
primarily due to increased use of inventory during development, as well as the
greater consulting income we generated in 1998 than in 1999. Since our
consulting income is generated with less total associated costs than that of
product sales, the mix of consulting sales and product sales in each year helped
produce a lower Cost of Goods Sold in 1998 than in 1999. These were the primary
reasons that the Loss for 1999 (excluding Losses for Litigation) increased by
$144,352 or 42% over 1998.
Including Losses for Litigation (see, Other Expense, above), the Loss for
1999 increased by $269,352 or 79% over 1998. The Losses for Litigation for 1999
comprise an accrual of $125,000 with respect to a lawsuit brought against us by
an independent contractor in connection with a project in Uzbekistan in 1997 and
1998. See Note 11 to the accompanying financial statements.
Selling and Administrative expense, which primarily included salaries,
employee benefits, consulting fees, transportation, rent, utilities,
professional fees, insurance and provision for doubtful accounts, changed little
from 1998 to 1999, from $675,958 to $681,918. However, the Provision for
Doubtful Accounts portion of the Selling and Administrative expense increased by
$73,338 from 1998 to 1999. At the same time, Interest Expense increased from
$9,030 in 1998 to $33,013 in 1999, a change of $23,983.
Our losses in 1998 were funded by loans totaling $153,500, represented by
promissory notes payable in 18 months which bear interest at 9% and are
convertible to common stock at $4.00 per share. These lenders also received
57,400 warrants to purchase our common shares at $1.50 per share. Forty thousand
of such warrants expire on June 17, 2000 and 17,400 of such warrants expire on
December 15, 2000. As of the date of this filing, the principal of all such
loans have been paid in full. The losses were also funded by $105,000 paid in
capital from the sale of shares of common stock. In addition, in 1998, we
borrowed $50,000 as a revolving loan from Peachtree National Bank at an interest
rate of 8.75%. See Note 4 to the accompanying financial statements.
Our losses in 1999 were funded by loans totaling $150,000, represented by
promissory notes payable in 1 year, which bear interest at 12% and are
convertible to common stock at $0.75 per share, and by $133,000 paid in capital
from the sale of shares of common stock. In addition, we increased the revolving
loan from Peachtree National Bank by an additional $90,000 to a total of
$140,000 and the interest rate on the entire balance increased to 10.5% and is
payable on May 5, 2000. See Note 4 to the accompanying financial statements.
Since we are not liquid, if we are unable to raise additional funds by
either loans or the sale of securities this year or have a substantial increase
in sales, we may not be able to continue operations or may have to decrease
development and testing efforts.
On November 23, 1999, we entered into a Consulting Agreement with MBO,
Inc., a
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South Carolina Corporation, principally to raise up to $750,000 and to assist in
marketing our products, provide financial advice and help form strategic
alliances. Our agreement with MBO, Inc. was entered into as of November 23, 1999
for a term of one year. MBO, Inc. was obligated to prepare a business plan with
financial projections; render advice on corporate goals, strategy and
organization; prepare and implement a marketing plan; direct public relations;
assist in preparing filings to become a reporting company; assist in the
preparation of interim and annual financial reports; consult on corporate
finance; consult on corporate acquisitions, mergers and sales; and consult on
and assist in capital raising activities. MBO, Inc. was to be compensated
principally as follows: $10,000 on receipt of the first $250,000 in funding;
$15,000 upon completion of business plan and financial model (deferred until a
total of $500,000 in funding has been received); 10% of all equity money raised;
up to 250,000 warrants for our common stock at an exercise price of $0.75 per
share as follows: 100,000 warrants upon receipt of $250,000, 50,000 warrants
upon completion of business plan and financial model, 50,000 warrants upon
receipt of a total funds of $500,000 and 50,000 Warrants upon receipt of total
funds of $750,000. I addition, MBO. Inc. was to receive a monthly retainer
$5,000 per month beginning January 1, 2000, but deferred until the $250,000 in
funding is received.
During the first quarter of 1999, we entered into an agreement with
International Fuel Systems, Inc., a Tennessee corporation, and Lanier Davenport
in memorializing the prior purchase of 600,000 shares and, in addition, for
600,000 additional shares to be issued upon certain contingencies. As of March
6, 2000, 200,000 of the reserve shares have been issued in exchange for payment
of $155,000, one of such contingencies.
During the first six months of 2000, sales at an annual rate were down by
more than 62% from the previous year. This was mainly due to diverting resources
toward perfecting and certifying our technology and raising capital. Annualized
selling and administrative expenses increased by more than 45% over the prior
year. This was due to many factors, including increased efforts to advertize our
products, raise capital, perfect and certify our technology and increased travel
expenses to promote our products. The losses of $483,100 for the first six
months of 2000 reflected the issuance of 470,000 shares in consideration of
services provided and licensing. 100,000 of such shares were issued to Patricia
Davis, wife of Frank Davis, a consultant to the company, and were expensed at
$15,000. These losses were also funded by loans totaling $229,900, represented
by promissory notes payable in 1 year, which bear interest at 12% and are
convertible to common stock at $0.75 per share
PRINCIPAL SHAREHOLDERS
Our certificate of incorporation, as amended, does not provide for
cumulative voting in the election of directors. Therefore, the holders of a
majority of the outstanding shares of Common Stock at any given time will be in
a position to elect our directors and otherwise control us. Currently, and in
the foreseeable future, it is expected that the principal shareholders listed
below, acting in whole or in part as a group, can exert such control.
25
<PAGE>
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of December 31, 1999, by each of
the Company's officers and directors; each person who is known by the Company to
own beneficially 5% or more of the Company's outstanding Common Stock; and all
officers and directors of the Company as a group:
Name and Address of 5% Number of
Shareholders, Officers Shares
and Directors Owned(1) Percent
------------- -------- -------
Robby E. Davis /1 357,000 10.6%
Director, President and
Chief Executive Officer
4851 Ga. Hwy #85
Forest Park, GA 30297
Jeffrey Davis /1 357,000 10.5%
Director, Vice President
and Secretary
4851 Ga. Hwy #85
Forest Park, GA 30297
Ricky Davis /1 357,000 10.5%
Treasurer and Chief
Financial Officer
4851 Ga. Hwy #85
Forest Park, GA 30297
Kerry Davis /1 357,000 10.5%
4851 Ga. Hwy #85
Forest Park, GA 30297
Davis Family Trust /2 358,000 10.6%
C/0 Mark Crouch - Trustee
PO BOX 502287
Atlanta, GA 31150
Lanier M. Davenport 300,000 8.9%
PO BOX 178
Lookout Mountain, TN 37350
Edward C. Kramer - 0.0%
Director
Kramer & Kramer, LLP
708 Third Ave.
New York, NY 10017
All Officers and Directors 1,071,000 31.5%
1. Robby F. Davis, Jeffrey Davis, Ricky Davis and Kerry Davis are
siblings and children of Frank Davis (see Significant Consultant) and each
disavows beneficial ownership of, or control over, the shares of Common Stock
owned by the other siblings.
2. All members of the Davis family associated with Save disclaim
beneficial ownership or control over this trust.
26
<PAGE>
MANAGEMENT
OFFICERS AND DIRECTORS
----------------------
The following table sets forth the names, age, and position of each
director and executive officer of the Company.
Name Age Position and Office Held
---- --- ------------------------
Robby E. Davis 31 President, Chief Executive Officer and Director
Jeffrey F. Davis 36 Vice President, Secretary and Director
Ricky Davis 38 Treasurer and Chief Financial Officer
Edward C. Kramer 49 Director
Each of the above individuals, became an officer and director of the
Company in connection with its organization, except Edward C. Kramer who became
a director in 1998. The term of office of each officer and director is one year
and until his successor is elected and qualified.
BIOGRAPHICAL INFORMATION
------------------------
Set forth below is biographical information for each of the Company's
officers and directors.
Robby E. Davis. President, Chief Executive Officer and Director since 1996.
Prior to the formation of SAVE, Mr. Davis was employed by Combustion Labs, Inc.
for 10 years as a senior technician installing natural gas and dual fuel
conversion kits in diesel and gasoline vehicles. He is an ASSE Certified Natural
Gas Technician and has attended numerous business and technical seminars. Davis
studied Business Administration at Clayton State College.
27
<PAGE>
Jeffrey F. Davis. Vice President, Secretary and Director since 1996. Prior to
joining SAVE, Mr. Davis was employed by Clayton (Georgia) County, working
primarily in the Transportation and Development group. He holds an AA degree in
Business Administration from Clayton State College where he was named to the
Deans List.
Ricky Davis. Treasurer and Chief Financial Officer since 1996. Prior to joining
SAVE, Mr. Davis was employed by Combustion Labs, Inc. for three years as a
technician working with gasoline to natural gas conversions, for four years as
the Office Manager of a large mechanical contractor and ran his own
mechanical/electrical contracting business for 6 years. He studied Business
Management and Marketing at Griffin Area Tech, and has attended many seminars on
computer operations and accounting.
Edward C. Kramer. Director since 1998. Mr. Kramer is a partner of the New York
law firm of Kramer & Kramer. He received an A.B. degree from the University of
Pennsylvania in 1973 and a J.D. degree from the Columbia University School of
Law in 1996. He first became admitted to the New York Bar in 1997 and is
admitted to practice in the Southern and Eastern Districts of New York, the
Second Circuit Court of Appeals and the Supreme Court. Since 1991, Mr. Kramer
has practiced law as a partner of Kramer & Kramer.
REMUNERATION OF OFFICERS AND DIRECTORS
--------------------------------------
Robby E. Davis /1 $40,000/yr
Jeffrey Davis /1 $40,000/yr
Ricky Davis /1 $40,000/yr
1. These officers' remuneration has been the same for the past 3 fiscal years,
except that each of these officers received $2,000 bonuses in 1999. No officers
receive any benefits and have not received any benefits for the past 3 fiscal
years. For the past 3 fiscal years, there have not been, and currently there are
no, remuneration plans, deferred benefits plans, employment contracts, deferred
compensation plans, retirement plans, active stock option plans or other
compensation related plans in effect for the officers.
SIGNIFICANT CONSULTANT
----------------------
Frank Davis. Director of Product Research and Development since 1996. Mr. Davis
presently serves the Company in a consulting capacity responsible for
development of the Drive-By-Wire engine conversion kits and also providing
assistance in other business matters as necessary. In
28
<PAGE>
1980, he founded and until 1996 served as Chief Executive Officer of Combustion
Labs, Inc., where he conducted research and development related to converting
gasoline and diesel engines to run on natural gas or bifuel. Frank Davis is the
father of Robby F. Davis, Jeffrey Davis and Ricky Davis. In the first quarter of
2000, Patricia Davis, wife of Frank Davis, received 100,000 shares of common
stock in satisfaction of over $100,000 in consulting fees we owed him.
RELATED PARTY TRANSACTIONS
All of the technology, know-how, devices and apparatus embodied in the
Patents and incorporated into the various products sold by us were developed and
patented by Frank Davis or Frank Davis and Robby E. Davis and assigned to the
Davis Family Trust (the "Trust"), an irrevocable trust established by Mr. Davis
for the benefit of his family and which is administered by an independent third
party. The Patents thereafter were assigned to the Trust, which such assignments
were recorded with the United States Patent and Trademark Office. Pursuant to an
agreement dated May 13, 1996 (the "License"), the Trust granted a license to us
to exploit the Patents for the life thereof (each Patent has a life of seventeen
years from the date of issue) plus any extension thereof, including the right to
market and sell any and all products developed therefrom or to grant, licenses
to others to manufacture and sell any such products, subject to the approval of
the trustee of the Trust. Our territory, though, was limited by the License to
the Continental United States, Mexico and Canada. In consideration of the
license, we are required to pay the Trust a license fee equal to $150,000 and a
royalty equal to $21 per unit sold during the life of the Patents, adjusted
annually to reflect increases in the consumer price index for the prior twelve
month period, except as hereinafter provided. Under the terms of the License,
the royalty shall be increased by an amount equal to $79. Said additional sum
shall be payable until such time as the amount generated from the sale of units
shall aggregate $150,000 plus accrued interest calculated at the rate of 12% per
annum. When said sum is paid, the royalty shall revert to the original royalty
as adjusted to reflect increases in the consumer price index.
On June 18, 1998, the License was amended to provide that the $150,000
promissory note would be satisfied by the payment of $42,576.10 on July 31, 1998
and the delivery to the Trust of 108,000 shares of our common stock.
On January 3, 2000, the License was amended, among other things, to extend
our licensed territory to include the continental United States of America,
Mexico, Canada, Egypt as of its borders on January 3, 2000, and South America in
exchange for 250,000 shares.
------------------------------------------------------------------------------
Indemnification of Officers and Directors
Our certificate of incorporation provides that to the fullest extent permitted
by law, no director
29
<PAGE>
or officer personally liable to SAVE or its stockholders for damages for breach
of any duty owed to SAVE or its stockholders and that SAVE may, in its by-laws
or in any resolution of its stockholders or directors, undertake to indemnify
the officers and directors of SAVE against any contingency or peril as may be
determined to be in the best interests of SAVE, and in conjunction therewith, to
procure, at SAVE's expense, policies of insurance. Georgia law, under which SAVE
is incorporated, allows a corporation to indemnify its directors and officers if
such director or officer acted in good faith and in a manner such director or
officer reasonably believed to be in , or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. We intend to obtain a
director and officer liability insurance policy covering each of our directors
and executive officers.
DESCRIPTION OF SECURITIES
General
Authorized Capital Stock.
We are authorized to issue an aggregate of 25,000,000 shares of capital
stock, consisting of 20,000,000 shares of Common Stock, par value $.001 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share. As of
the date hereof, 3,406,000 shares of Common Stock are outstanding and no shares
of Preferred Stock are outstanding.
Common Stock.
The shares of Common Stock outstanding are, and the Shares issued hereby
will be, legally issued, fully paid and non-assessable. Holders of the Common
Stock are entitled to one vote per share with respect to all matters that are
required by law to be submitted to a vote of stockholders. Holders of the Common
Stock are not entitled to cumulative voting. The Common Stock has no preemptive,
or sinking fund rights.
We have not paid any dividends on its Common Stock and do not intend to pay
dividends in the foreseeable future. Any earnings will be retained by us for
working capital. Future dividend policy will be determined by the Board of
Directors in light of financial need and earnings, if any, and other relevant
factors.
In the event of our liquidation, dissolution or winding up, holders of
Common Stock, subject to the rights of any series of Preferred Stock which may
be designated and issue in the future, are entitled to share ratably all our
remaining assets, after satisfaction of our liabilities.
Preferred Stock.
30
<PAGE>
As of yet, the Preferred Stock has not been designated and no shares of
Preferred Stock have been issued. We have reserved the right for the Board of
Directors to designate the Preferred Stock into such classes or series as it
deems necessary. Any such series or classes of Preferred Stock which may be
designated by the Board of Directors in the future may effect the rights of the
class of Common Stock.
Transfer Agent
The Transfer Agent for our Common Stock is Interwest Transfer Company,
located at 1981 East Murray, Holladay Road, Suite 100, Salt Lake City, Utah
84117.
Reports to Stockholders.
We intend to furnish to our stockholders, after the close of each fiscal
year, an annual report containing audited financial statements. In addition, we
will furnish our stockholders with quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
PLAN OF DISTRIBUTION
We will not be selling any of our shares through this registration, since
the main purpose of this registration is to register already issued shares.
Accordingly, we will not receive any funds or proceeds from this registration.
No privately held shares of the Company are being offered for sale as part of
this registration as well. However, individuals or entities, upon this
registration becoming effective, may sell all or part of their shares on the
open market from time to time. These individuals and entities substantially are
Lanier Davenport - 200,000 Shares (see Section 26 (v)), Bressner Group, Ltd. -
100,000 Shares (see Section 26(xiii)). However, if the holders of warrants to
purchase common stock, at some point in time, exercise the warrants, the holders
will pay an exercise price to us. We are required to pay all fees and expenses
incident to the registration of the shares. Excluded from this registration are
the following shares of common stock: Davis Family Trust - 250,000 Shares (see
Section 26(xi)) and Patricia Davis - 100,000 Shares (see Section 26(xii)).
LEGAL MATTERS
On November 24, 1999 a lawsuit was served against us in the State Court of
Clayton County, State of Georgia, File No.99-CV-04454-E, entitled Roger Shugart
v. Save On Energy, Inc. f/k/a Electronic Fuel Control, Inc.. The Plaintiff seeks
$120,000 plus interest stemming from a personal services agreement between
Plaintiff and us for certain services to be rendered in connection with a fuel
conversion project in Uzbekistan in 1997 and 1998. We intend to bring into the
lawsuit or arbitration, as the case may be, as a third-party defendant, American
31
<PAGE>
Engineering Corporation, on a claim for indemnification. See, Management's
Discussion and Analysis and Footnote 10 to the attached financial statements for
1998 and 1999.
EXPERTS
The financial statements for the fiscal years ended December 31, 1999 and
December 31, 1998 included in this prospectus have been so included in reliance
on the report of Jack Kane & Company, P.C., independent accountants, given on
the authority of such firm as experts in auditing and accounting.
WHERE YOU CAN GET MORE INFORMATION
This prospectus is part of a registration statement filed with the Securities
and Exchange Commission. At your request, we will provide you, without charge, a
copy of any exhibits to the registration statement. If you would like more
information, write or call us at:
SAVE ON ENERGY, INC.
Ste. 211 4851 Georgia Hwy 85
Forest Park Georgia 30050
(404) 765-0131
We intend to provide to our stockholders annual reports containing audited
financial statements and other appropriate reports. In addition, we file annual,
quarterly and current reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any reports,
statements or other information we file at the Securities and Exchange
Commission's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the Securities
and Exchange Commission. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our Securities and Exchange Commission filings are also available to the
public free of charge on the Securities and Exchange Commission's Internet site
at http:\\www.sec.gov.
32
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Our certificate of incorporation provides that to the fullest extent permitted
by law, no director or officer shall be personally liable to SAVE or its
stockholders for damages for breach of any duty owed to SAVE or its stockholders
and that SAVE may, in its by-laws or in any resolution of its stockholders or
directors, undertake to indemnify the officers and directors of SAVE against any
contingency or peril as may be determined to be in the best interests of SAVE,
and in conjunction therewith, to procure, at SAVE's expense, policies of
insurance. Georgia law, under which SAVE is incorporated, allows a corporation
to indemnify its directors and officers if such director or officer acted in
good faith and in a manner such director or officer reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. We intend to maintain a director and officer liability
insurance policy covering each of our directors and executive officers.
Item 25. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of all expenses
payable by the Registrant in connection with the registration of the shares of
common stock offered hereby, other than underwriting discounts and commissions:
Registration Fee--Securities and Exchange Commission $ 2,182
*Accountants' fees and expenses ..............................$20,000
*Legal fees and expenses .....................................$20,000
*Printing and EDGAR expenses .................................$10,000
*Miscellaneous ...............................................$ 1,000
-------
Total ...............................................$53,182
=======
* Estimate
Item 26. Recent Sales of Unregistered Securities
With respect to the following share transactions, excluding shares
issued under Rule 504 of Regulation D of the Securities Act of 1933, each stock
certificate issued contained a restrictive legend on the back of the
certificate, restricting its transfer.
II-1
<PAGE>
In June 1998, two sophisticated investors, made loans to us of $55,000,
$110,000, total. In reliance upon Rule 4(2) of the Securities Act, each investor
received a promissory note convertible for common stock at $4.00 per share,
along with 20,000 warrants, each warrant entitling the holder to purchase 1
share of common stock at a price of $1.50. The warrants expired unexercised in
June 2000. As of the date of this filing, the promissory notes have been
satisfied and will not be converted into common stock. Commissions were paid in
the form of 20,000 warrants, total, each warrant entitling the holder to
purchase 1 share of common stock at a price of $1.50. The warrants expired
unexercised in June 2000. There was no underwriter; nor was there a general
solicitation or advertising. Each of the purchasers represented that the
purchaser was acquiring the securities for the purchaser's own account, for
investment only, and not with a view toward the resale, fractionalization,
division or distribution thereof, and further, the investors each represented
that they had no present plans to enter into any contact, undertaking,
agreement, or arrangement for any such resale, distribution, division or
fractionalization thereof.
In December 1998, a sophisticated investor made a loan to us of $43,500.
In reliance upon Rule 4(2) of the Securities Act, the investor received a
promissory note convertible for common stock at $4.00 per share, along with
17,400 warrants, each warrant entitling the holder to purchase 1 share of common
stock at a price of $1.50. The warrants expire in December 2000. As of the date
of this filing, the promissory note has been satisfied and will not be converted
into common stock. Commissions were paid in the form of 7,000 warrants, total,
each warrant entitling the holder to purchase 1 share of common stock at a price
of $1.50. The warrants expire in December 2000. There was no underwriter; nor
was there a general solicitation or advertising. Each of the purchasers
represented that the purchaser was acquiring the securities for the purchaser's
own account, for investment only, and not with a view toward the resale,
fractionalization, division or distribution thereof, and further, the investors
each represented that they had no present plans to enter into any contact,
undertaking, agreement, or arrangement for any such resale, distribution,
division or fractionalization thereof.
In 1999, 4 sophisticated investors made loans to us of $150,000. In
reliance upon Rule 4(2) of the Securities Act, each investor received a 1 year
promissory note convertible for common stock at $0.75 per share. There was no
underwriter; nor was there a general solicitation or advertising. Each of the
purchasers represented that the purchaser was acquiring the securities for the
purchaser's own account, for investment only, and not with a view toward the
resale, fractionalization, division or distribution thereof, and further, the
investors each represented that they had no present plans to enter into any
contact, undertaking, agreement, or arrangement for any such resale,
distribution, division or fractionalization thereof.
II-2
<PAGE>
In June 1998, two sophisticated investors, made loans to us of $55,000,
$110,000, total. In reliance upon Rule 4(2) of the Securities Act, each investor
received a promissory note convertible for common stock at $4.00 per share,
along with 20,000 warrants, each warrant entitling the holder to purchase 1
share of common stock at a price of $1.50. The warrants expired unexercised in
June 2000. As of the date of this filing, the promissory notes have been
satisfied and will not be converted into common stock. Commissions were paid in
the form of 20,000 warrants, total, each warrant entitling the holder to
purchase 1 share of common stock at a price of $1.50. The warrants expired
unexercised in June 2000. There was no underwriter; nor was there a general
solicitation or advertising. Each of the purchasers represented that the
purchaser was acquiring the securities for the purchaser's own account, for
investment only, and not with a view toward the resale, fractionalization,
division or distribution thereof, and further, the investors each represented
that they had no present plans to enter into any contact, undertaking,
agreement, or arrangement for any such resale, distribution, division or
fractionalization thereof.
In December 1998, a sophisticated investor made a loan to us of $43,500.
In reliance upon Rule 4(2) of the Securities Act, the investor received a
promissory note convertible for common stock at $4.00 per share, along with
17,400 warrants, each warrant entitling the holder to purchase 1 share of common
stock at a price of $1.50. The warrants expire in December 2000. As of the date
of this filing, the promissory note has been satisfied and will not be converted
into common stock. Commissions were paid in the form of 7,000 warrants, total,
each warrant entitling the holder to purchase 1 share of common stock at a price
of $1.50. The warrants expire in December 2000. There was no underwriter; nor
was there a general solicitation or advertising. Each of the purchasers
represented that the purchaser was acquiring the securities for the purchaser's
own account, for investment only, and not with a view toward the resale,
fractionalization, division or distribution thereof, and further, the investors
each represented that they had no present plans to enter into any contact,
undertaking, agreement, or arrangement for any such resale, distribution,
division or fractionalization thereof.
In 1999, 4 sophisticated investors made loans to us of $150,000. In
reliance upon Rule 4(2) of the Securities Act, each investor received a 1 year
promissory note convertible for common stock at $0.75 per share. There was no
underwriter; nor was there a general solicitation or advertising. Each of the
purchasers represented that the purchaser was acquiring the securities for the
purchaser's own account, for investment only, and not with a view toward the
resale, fractionalization, division or distribution thereof, and further, the
investors each represented that they had no present plans to enter into any
contact, undertaking, agreement, or arrangement for any such resale,
distribution, division or fractionalization thereof.
II-3
<PAGE>
In January 2000, Lanier M. Davenport, a sophisticated investor, as well as
a consultant to us, and Lanier M. Davenport, Jr., UTMA; Steven Ray Davenport,
UTMA; Sarah Byrd Davenport, UTMA; Carol Espinosa; Jonathan P. Hoover; Dennis L.
Knight; Kota Suttle; Daryl Powell; and Gerald B. Andrews, in reliance upon Rule
4(2) of the Securities Act, received 600,000 common shares in exchange for
services directly to us, services in connection with International Fuel Systems,
Inc. and, for direct investments of $233,500 made in 1998 and 1999 by
International Fuel Systems, Inc.. The value of the services was approximately
$215,000, the shares being priced at $0.75 per share. Lanier M. Davenport, Jr.,
Steven Ray Davenport and Sarah Byrd Davenport are minor children of Lanier M.
Davenport and the shares were issued in their names under the Uniform Trust For
Minors Act. Carol Espinosa, a sophisticated investor, is the wife of Lanier
Davenport. Jonathan P. Hoover is a sophisticated investor, a management
consultant and acted as a consultant to International Fuel Systems, Inc. Dennis
L. Knight, Kota Suttle, Daryl Powell and Gerald B. Andrews are all sophisticated
investors and, along with Lanier M. Davenport, Jr., UTMA; Steven Ray Davenport,
UTMA; Sarah Byrd Davenport, UTMA; Carol Espinosa; and Jonathan P. Hoover,
shareholders of International Fuel Systems, Inc. The issuance of these shares
was considered by International Fuel Systems, Inc. as a distribution to its
shareholders. The $233,500 invested by International Fuel Systems, Inc. was
initially contributed by its shareholders for the operations of International
Fuel Systems, Inc. and not as an investment in our company. There was no
underwriter; nor was there a general solicitation or advertising. The investors
represented that they were acquiring the securities for their own accounts, for
investment only, and not with a view toward the resale, fractionalization,
division or distribution thereof, and further, the investors each represented
that they had no present plans to enter into any contact, undertaking,
agreement, or arrangement for any such resale, distribution, division or
fractionalization thereof.
In January and February 2000, Lanier M. Davenport, Lanier M. Davenport,
Jr., UTMA; Steven Ray Davenport, UTMA; Sarah Byrd Davenport, UTMA; Carol
Espinosa; Jonathan P. Hoover; and Gerald B. Andrews, all sophisticated investors
and shareholders of International Fuel Systems, Inc., in reliance upon Rule 4(2)
of the Securities Act, purchased 200,000 shares of common stock for an
investment of $150,000, i.e., $0.75 per share. Such funds were used to retire
promissory notes discussed above. There was no underwriter; nor was there a
general solicitation or advertising. Mr. Davenport represented that he was
acquiring the securities for his own account, for investment only, and not with
a view toward the resale, fractionalization, division or distribution thereof,
and further, represented that he had no present plans to enter into any contact,
undertaking, agreement, or arrangement for any such resale, distribution,
division or fractionalization thereof.
In 2000, 6 sophisticated investors made loans to us of $229,900. In
reliance upon Rule 4(2) of the Securities Act, each investor received a 1 year
promissory note convertible for common stock at $0.75 per share. Commissions
were paid in the amount of $20,000 (See Exhibit 10.4). There was no underwriter;
nor was there a general solicitation or advertising. Each of the purchasers
represented that the purchaser was acquiring the securities for the purchaser's
own account, for investment only, and not with a view toward the resale,
fractionalization, division or distribution thereof, and further, the investors
each represented that they had no present plans to enter into any contact,
undertaking, agreement, or arrangement for any such resale, distribution,
division or fractionalization thereof.
II-4
<PAGE>
In 1996 and 1997, we issued 184,000 shares of common stock to fewer than
25 investors under Rule 504 of Regulation D of the Securities Act of 1933, as
amended for a total consideration of $900,000. Russo Securities, Inc. was the
placement agent. The underwriter's discount was 10% of the $5.00 per share
selling price or $90,000.
In 1996, shortly after incorporation, as part of the initial
organization, in reliance on Rule 4(2) of the Securities Act, 20,000 shares of
common stock were allotted to John I. Davis, brother of Frank Davis and uncle of
Robby E. Davis, Ricky Davis, Jeffrey Davis and Kerry Davis for services valued
at $4,700.
In April 1996, shortly after incorporation, as part of the initial
organization, in reliance upon Rule 4(2) of the Securities Act, 1,428,000 shares
of common stock were purchased by Robby E. Davis, Ricky Davis, Jeffrey Davis and
Kerry Davis, each receiving 357,000 shares for the purchase price of $357.
In April 1996, shortly after incorporation, the Davis Family Trust, in
reliance upon Rule 4(2) of the Securities Act, purchased 108,000 shares of
common stock for the purchase price of $108.
In 2000, the Davis Family Trust, in connection with an amendment to the
License agreement respecting certain patents and technology, which amendment
extended the License to include the continental United States, Mexico, Canada,
Egypt and South America, in reliance upon Rule 4(2) of the Securities Act,
received 250,000 shares of common stock.
In 2000, in reliance upon Rule 4(2) of the Securities Act, 100,000 shares
of common stock were issued to Patricia Davis the wife of Frank Davis in lieu of
past consulting fees of $15,000 to Frank Davis. Frank Davis is a consultant to
us and a sophisticated investor. Patricia Davis represented that the shares were
acquired for her own account, for investment only, and not with a view toward
the resale, fractionalization, division or distribution thereof, and further,
that she had no present plans to enter into any contact, undertaking, agreement,
or arrangement for any such resale, distribution, division or fractionalization
thereof.
In 2000, in reliance upon Rule 4(2) of the Securities Act, 100,000 shares
of common stock were issued to the Bresner Partners, Ltd. for consulting
services valued at $75,000. Bresner Partners Ltd. was not formed for the purpose
of this transaction and is an Isle of Jersey corporation, which was organized
approximately seven years ago, comprised of a group of foreign sophisticated
investors. Bresner Partners, Ltd. represented that the shares were acquired for
its own account, for investment only, and not with a view toward the resale,
fractionalization, division or distribution thereof, and further, that it had no
present plans to enter into any contact, undertaking, agreement, or arrangement
for any such resale, distribution, division or fractionalization thereof.
II-5
<PAGE>
In 1998, in reliance upon Rule 4(2) of the Securities Act, 252,500
warrants, in consideration of consulting services on the part of Bresner
Partners, Ltd. and Jeffrey Langberg, were issued to Bresner Partners, Ltd.;
Jeffrey Langberg, as Custodian for Logan Langberg a minor under the Uniform Gift
To Minors Act; and Jeffrey Langberg, as Custodian for Harley Langberg a minor
under the Uniform Gift To Minors Act, each warrant entitling the holder to
purchase 1 share of common stock at a price of $1.00 per share. These warrants
expire in 2003. Bresner Partners, Ltd. was not formed for the purpose of this
transaction and is an Isle of Jersey corporation, which was organized
approximately seven years ago, comprised of a group of foreign sophisticated
investors. Logan Langberg and Harley Langberg are the minor children of Jeffrey
Langberg. Each of the holders represented that the acquisition of the securities
for the acquirer's own account, for investment only, and not with a view toward
the resale, fractionalization, division or distribution thereof, and further,
that the acquirer's had no present plans to enter into any contact, undertaking,
agreement, or arrangement for any such resale, distribution, division or
fractionalization thereof.
In 1998, in reliance upon Rule 4(2) of the Securities Act, 60,000 warrants
were issued for services to Max Rockwell; and Hunter S. Singer, each warrant
entitling the holder to purchase 1 share of common stock at a price of $1.00 per
share. These warrants expired, unexercised on April 30, 2000. Each of the
holders represented that the acquisition of the securities for the acquirer's
own account, for investment only, and not with a view toward the resale,
fractionalization, division or distribution thereof, and further, that the
acquirer's had no present plans to enter into any contact, undertaking,
agreement, or arrangement for any such resale, distribution, division or
fractionalization thereof.
In 2000, in reliance upon Rule 4(2) of the Securities Act, 62,500 warrants
were issued to Dirks & Company, Inc.; Hugh and Rosemarie Deane; and Richard
Wells for financial consulting services, each warrant entitling the holder to
purchase 1 share of common stock at a price of $1.00 per share. These warrants
expire in 2005. Each of the holders represented that the acquisition of the
securities for the acquirer's own account, for investment only, and not with a
view toward the resale, fractionalization, division or distribution thereof, and
further, that the acquirer's had no present plans to enter into any contact,
undertaking, agreement, or arrangement for any such resale, distribution,
division or fractionalization thereof.
In 2000, 20,000 shares of common stock were issued to
Success-Unlimited.Net, Inc., a public relations company, for public relations
services. The services, which are to be performed in the future, after the
acceptance by the Securities and Exchange Commission of this filing and any
applicable quiet period, are valued at approximately $20,000.
Success-Unlimited.Net, Inc. represented that the shares were acquired for its
own account, for investment only, and not with a view toward the resale,
fractionalization, division or distribution thereof, and further, that it had no
present plans to enter into any contact, undertaking, agreement, or arrangement
for any such resale, distribution, division or fractionalization thereof.
Item 27. Exhibits
The following exhibits are filed as part of this registration statement.
Exhibit numbers correspond to the exhibit requirements of Regulation S-B.
Number Description
------ -----------
3.1 Articles of Incorporation of Save On Energy , Inc.
3.2 Amendment to Articles of Incorporation of Save On Energy , Inc.
3.3 By-laws of Save On Energy, Inc.
4.1 Specimen common stock certificate.
10.1 May 13, 1996 License Agreement By and Between the Davis Family Trust
and Electronic Fuel Control, Inc. ("License Agreement").
10.2 June 18, 1998 Amendment to License Agreement.
10.3 January 3, 2000 Amendment to License Agreement.
10.4 November 23, 1999 Consulting Agreement between Save on Energy, Inc.
and MBO, Inc.
10.5 April 29, 1996 Exclusive Supply Agreement between Ambac International
Corporation and Electronic Fuel Control, Inc.
10.6 Agreement re: IFS and Davenport
23.2 Consent of Certified Public Accountant
II-6
<PAGE>
Item 28. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) include any
prospectus required by Section 10 (a) (3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together, represent a
fundamental change in the information set forth in the Registration Statement,
and (iii) include any additional or changed material information with respect to
the plan of distribution.
2. That for the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
4. That for the purpose of determining any liability under the Securities Act,
to treat the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant under Rule 424(b)(1) or (4), or 497(h)
under the Securities Act as part of this Registration Statement as of the time
the Commission declared it effective.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in a successful defense of any action, suit or proceeding) is asserted by a
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issuer.
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Atlanta,
State of Georgia, on June 23, 2000.
SAVE ON ENERGY, INC.
By: /s/ Robby E. Davis
------------------------------------------
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey Davis and Ricky Davis, and either of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
33
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on September 18, 2000.
Signature Title
---------- -----
/s/ Robby E. Davis President, Chief Executive Officer
-------------------------- and Director
Robby E. Davis
/s/ Jeffrey Davis Vice President, Secretary and Director
--------------------------
Jeffrey Davis
/s/ Ricky Davis Principal Financial Officer, Principal
------------------------- Accounting Officer, Treasurer and Chief
Ricky Davis Financial Officer
34