UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SOLAR GROUP, INC.
(Name of Small Business Issuer in its Charter)
Nevada 85-0290243
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5135 Golf Road Skokie, Illinois 60077
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (847) 853-1000
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class to be registered
___________________ _______________________________
___________________ _______________________________
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
______________________________________
(Title of class)
<PAGE>
PART I.
1. DESCRIPTION OF BUSINESS.
Solar Group, Inc. (the "Company") was incorporated under the laws of the State
of Nevada on February 8, 1984 under the name Solar Age Industries, Inc. The
Company's principal business activity was the manufacture and sale of solar air
and water heating devices. As of January, 1986, the federal energy credits and
most state energy credits expired which severely impacted on the Company's
ability to market its products, resulting in a substantial loss to the Company
for the first two calendar quarters of 1986. The Company attempted to diversify
its operation, but because of the continuing substantial financial loses
sustained by the Company, it was forced to file a Chapter 11 petition under the
Bankruptcy Code District of New Mexico. In late 1987, the Company filed its plan
of reorganization, which was approved by the Bankruptcy Court. Following
distribution to its creditors under the terms of the plan and consummation of
the plan, the bankruptcy case was subsequently closed. Although the Company
continued to market its products, the Company did not attain the commercial
success for its products and, subsequently, ceased operations. The Company has
been dormant. In July 1998, pursuant to an Agreement and Plan of Reorganization
and, as a result of a reverse merger, the Company has acquired through its
wholly owned subsidiary SGI Capital, Inc. an Illinois corporation, a majority
ownership of ninety percent of JSC NBM Stroyservice ("NBM"), Russian limited
liability company, which is a real estate development and construction company
based in Moscow, Russia. New management has assumed control of the Company's
business activities. Shortly after the merger, the Company was unable to develop
its operation, due to deteriorating economic conditions in Russia and the
inability of NBM to provide audited financial statements for the fiscal year
ended as of June 30, 1999 in accordance with the U.S. General Accepted
Accounting Principals, the Company was forced to rescind the Agreement and Plan
of Reorganization. Pursuant to an Agreement to Rescind the Agreement and Plan of
Reorganization dated September 27, 1999, the Company has returned to the status
quo ante just immediately prior to the effectuation of the Agreement and Plan of
Reorganization. The Company currently has no operation but is seeking to acquire
an ongoing business. No assurance can be given that any new business will ever
occur.
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
The Company has had no revenues from operations in each of the last two fiscal
years. During the last fiscal year ended June 30, 1999 the Company incurred net
losses of $622,054. As of June 30, 1999, the Company's loses accumulated from
inception totaled $1,677,873. These factors, among others, raise substantial
doubt that the Company may be able to continue as a going concern for a
reasonable period of time unless the Company's management will be able to raise
additional equity capital so that the Company can purchase an ongoing business.
The Company plans to look for business opportunities. In the last two years, the
Company has financed its operations primarily with the proceeds it borrowed form
the investors and the Company's management. The Company intends to continue its
borrowings to fund expenditures. The Company intends to raise additional equity
capital to be able to fund its future growth. There can be no assurance that the
Company will be in a position to borrow funds from the investors and/or the
Company's management at such times, as they are required. Additionally, there
can be no assurance that the Company will be able to raise additional equity
capital to purchase an ongoing business. The Company's management
1
<PAGE>
believes the Company has historically been able to cover its expenses, however
no assurance can be given that the Company will continue to be able to meet the
Company's cash requirements over the next twelve months. The Company believes
that this form contains forward-looking statements, including statements
regarding among other items, the Company's future plans and growth strategies.
These forward-looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, many of which are beyond
the Company's control. Actual results could differ materially form these
forward-looking statements as a result of certain factors, including, among
others, regulatory or economic influences. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this form will in fact transpire or prove to be accurate.
3. DESCRIPTION OF PROPERTY.
There is no property owned by the Company.
4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
<TABLE>
<CAPTION>
Title of class Name and address of beneficial Amount and nature of Percent of
owner beneficial owner class
(1) (2) (3) (4)
<S> <C> <C> <C>
Common Stock Leon Leibovich, 6,000,000 shares, 85.3%
276 Park Avenue, Director & Chief
Highland Park, IL 60035 Executive Officer
</TABLE>
5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Leon Leibovich, 50, is the Company's Chief Executive Officer and Chairman of the
Board. Mr. Leibovich business experience includes corporate management,
marketing, strategic planning and business development. He has also been the
Chairman and CEO of privately held Illinois corporations Lerox Productions, Inc.
and Palcan Group, Inc., since 1981 and 1988 respectively. He maintains a 100%
ownership of each of these corporations. Mr. Leibovich has experience in such
diverse industries as technology, communications, media, information and others.
He holds Master Degrees in Management Science and Applied Mathematics from the
University of St. Petersburg, he is a member of a number of Professional
Associations, including Chicago Chamber of Commerce, "Who's Who for
Professionals and Executives", Chicago Sister Cities International Committee,
etc.
The Company intends to fill the vacancies on the Board of Directors at the next
shareholders meeting scheduled in June 2000, although no assurance can be given
that such meeting will take place.
6. EXECUTIVE COMPENSATION.
There was no executive compensation awarded to any executive officers and/or any
director of the Company. A liability was accrued for the operations of the
Company by Mr. Leibovich, the Company's Chief Executive Officer.
2
<PAGE>
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company as of August 1998 borrowed $128,000 and $6,000 at an annual interest
rate of 9.5% from investors and its Chief Executive Officer, respectively. The
amounts were due on February 1, 2000. On February 3, 2000, the notes were
converted to the 6,000,000 shares of common stock. The Company has an accrued
liability for the amount of $420,000 for management services of Leon Leibovich,
the Company's Chief Executive Officer in fiscal year ended June 30, 1999.
8. DESCRIPTION OF SECURITIES.
The Company's authorized capital consists of 50,000,000 shares of Common Stock,
par value $.01 per share, and 1,000,000 shares of preferred stock, par value
$.01 per share. None of the preferred stock is outstanding. The Company has
50,000,000 shares of authorized common stock par value $.01 share, of which
7,027,647 shares are issued and outstanding. Each outstanding share of common
stock is entitled to one vote, either in person or by proxy, on all matters that
may be voted upon the owners thereof at meeting of the shareholders. The holders
of Common Stock (i) have equal ratable rights to dividends form funds legally
available therefor, when, as and if declared by the Board of Directors of the
Company, (ii) are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon liquidation,
dissolution or winding up of the affairs of the Company, (iii) do not have
preemptive, subscription or conversion rights, or redemption or sinking fund
provisions applicable thereto, and (iv) are entitled to one non-cumulative vote
per share on all matters on which shareholders may vote at all meetings of
shareholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the right of the holders of any series of
preferred stock that may be issued in the future, including voting, dividend,
and liquidation rights. The holders of shares of Common Stock of the Company do
not have cumulative voting rights, which means that the holders of more than 50%
of such outstanding shares, voting for the election of directors, can elect all
of the directors of the Company if they so choose and, in such event, the
holders of the remaining shares will not be able to elect any of the Company's
directors. As a result Mr. Leibovich, the Company's CEO will be able to
effectively control the Company to the exclusion of all shareholders.
The Company's Board of Directors has the authority to issue 1,000,000 shares of
Preferred Stock, $.01 par value, none of which is issued and outstanding, in one
or more series and to fix, by resolution, conditional, full, limited or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights, if any, and qualifications, limitations or
restrictions thereof, if any including the number of shares in such series
(which the Board may increase or decrease as permitted by Nevada law),
liquidation preferences, dividend rates, conversion or exchange rights,
redemption provisions of the shares constituting any series, and such other
special rights and protective provisions with respect to any class or series as
the Board may deem advisable without any further vote or action by the
shareholders. Any shares of Preferred Stock so issued would have priority over
the Common Stock with respect to dividend or liquidation rights or both and
could have voting and other rights of shareholders. The issuance of Preferred
Stock with voting or conversion rights may adversely affect the voting rights of
the holders of Common Stock. The Company has no present plans to issue shares of
Preferred Stock.
3
<PAGE>
PART II.
1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTER.
The Company's Common Stock has been quoted on the OTC Bulletin Board since
January 1999. Prior to that for several years there was no quotations for the
company's common stock. Quotes may not be deemed to be accurate due to the fact
that there has never been an active market. Even after January 1999 no active
market was generated and there may have been sporadic quotes of bid and ask
prices by a relatively few market makers. In addition, the price of the shares
of Common Stock may trigger the necessity for broker to comply with the "penny
stock" rules, which will further impact on any active trading of the shares of
the Company. The following is a schedule of some of the quotes for the Company's
shares:
First Quarter of 1999
- ---------------------
52wk High 3.25 Low 0.625 Bid 2.75 Ask 3.25
Second Quarter of 1999
- ----------------------
52wk High 5.25 Low 0.125 Bid 2.5 Ask 3.75
Third Quarter of 1999
- ---------------------
52wk High 5.25 Low 0.125 Bid 0.875 Ask 1.125
Fourth Quarter of 1999
- ----------------------
52wk High 5.25 Low 0.125 Bid 0.125 Ask 0.875
The Company has never declared any dividends and may never do so. In addition
the Company has not held any shareholders meeting for several years. The Company
is anticipating having shareholders meeting in the year 2000, but there is no
assurance that such meeting will take place. Any action taken since July 1998
has been done by written consent of the shareholders holding a majority of the
shares of stock of the Company. There are approximately 525 shareholders of the
shares of the Company's common stock.
2. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceeding. The Company is not aware of
any legal matters threatened or otherwise against it.
3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company retained the accounting firm of Hansen, Barnett & Maxwell ("HBM").
HBM has conducted an audit of the Company and has prepared certified financial
statements, which are incorporated herein. There is no disagreement with the
Accountants and the Company.
4. RECENT SALES OF UNREGISTERED SECURITIES.
In July 1998 the Company issued 20,000 shares of stock to Reva Enterprises in
settlement of an obligation owed by the Company. These shares were issued
pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") as well as other provisions for exemptions thereunder.
The shares issued provide for a restrictive legend on any stock certified issued
for said shares. In January 1999 the Company issued 30,000 shares of stock to
Cary Grant in part payment of certain services rendered to the Company. The
shares also were issued to under the same exemptions above and also bear a
restrictive legend.
4
<PAGE>
In February 2000, the Company issued 6,000,000 shares of stock to Leon Leibovich
in lieu of payment due for the promissory note. The shares also were issued to
under the same exemptions above and also bear a restrictive legend.
5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation of the Company provide for indemnification for the
Directors and Officers of the Company as follows:
To indemnify any person made a party to any action, suit, or proceeding, whether
civil or criminal, by reason of the fact that he, his testator or intestate, is
or was a director, officer, or employee of the Company, or of any corporation
which he served in such capacity at the request of the Company, against the
reasonable expenses, including attorneys' fees, actually and reasonably incurred
by him in connection with the defense of the action, suit, or proceeding, or in
connection with any appeal of it, and to reimburse any such person any amount
paid upon any such action, suit, or proceeding; but to make no indemnification
or reimbursement in relation to matters as to which shall be finally adjudged in
this action, suit, or proceeding that the director, officer, or employee is
liable for gross negligence or willful misconduct in the performance of duly to
the Company.
Right to Indemnification. The Company shall indemnify and person made a party to
any action, suit or proceeding, whether civil or criminal, by reason of the fact
that he, his testator, or intestate, is or was a director, officer, or employee
of the Company, or any corporation which he served in such capacity at the
request of the Company, against the reasonable expenses, including attorney's
fees, actually and reasonably incurred by him in connection with the defense of
the action, suit or proceeding or in connection with any appeal. The right to
indemnification conferred by this section shall not restrict the power of the
Company to make any indemnification permitted by law.
In addition the Nevada Revised Status also make provision for indemnification of
Directors and Officers.
PART III.
ITEM 1. INDEX TO EXHIBITS
(a) Index
(2) i. Agreement and Plan of Reorganization (Previously filed)
ii. Agreement to Rescind Agreement and Plan of Reorganization (Previously
filed)
(3) i. Articles of Incorporation, with Amendments (Previously filed)
ii. By-laws (Previously filed)
(27) Financial Data Schedule, Certified Financial Statements for the six months
ended December 31, 1999.
(27.1) Financial Data Schedule, Certified Financial Statements for the six
months ended December 31, 1998.
5
<PAGE>
SANFORD H. FEIBUSCH
CERTIFIED PUBLIC ACCOUNTANT
9 CARPENTER COURT
MONSEY, NEW YORK 10952
914-368-2397
FAX 914-368-4110
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Solar Age Industries, Inc.
I have audited the accompanying balance sheet of Solar Age Industries,
Inc., as of June 30, 1998 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years ended June 30,
1998. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Solar Age Industries, Inc.
at June 30, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years ended June 30, 1998, in conformity with generally
accepted accounting principles.
The accompanying Financial Statements have been prepared assuming the
Company will continue as a going concern. As discussed in Notes 1 and 4, the
Company ceased its prior operations and needs additional equity in order to
acquire a new business or start up operations. As a result, there is substantial
doubt about the Company's ability to continue as a going concern. Management's
plan with regard to these matters are described in Note 4. These Financial
Statements do not include any adjustments that might result.
/s/ Sanford H. Feibusch
Monsey, New York
July 7, 1998
<PAGE>
SOLAR AGE INDUSTRIES, INC.
BALANCE SHEET
JUNE 30, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1997 1998
----------- -----------
ASSETS:
<S> <C> <C>
Investments $ 1 $ --
----------- -----------
Total Assets $ 1 $ --
----------- ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable 15,075 16,875
Note Payable 162,706 --
----------- -----------
Total Current Liabilities 177,781 16,875
----------- -----------
STOCKHOLDERS' DEFICIT:
Preferred Stock, $.01 par value
authorized 1,000,000 shares;
none issued
Common Stock, $,01 par value
authorized 9,000,000 shares;
issued and outstanding 5,375,000 53,750 53,750
Additional Paid-In Capital 974,094 974,094
Retained Deficit (1,205,624) (1,044,719)
----------- -----------
Total Stockholders' Deficit (177,780) (16,875)
----------- -----------
Total Liabilities & Stockholders' Deficit $ 1 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
SOLAR AGE INDUSTRIES, INC.
INCOME STATEMENT FOR THE
YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Settlement of Indebtedness $ -- $ -- $ 162,075
----------- ----------- -----------
Expenses 1,800 1,800 1,800
----------- ----------- -----------
Net Income (Loss) (1,800) (1,800) 160,275
=========== =========== ===========
Earning Per Share $ -- $ -- $ .03
=========== =========== ===========
Weight Average Shares Outstanding 5,375,000 5,375,000 5,375,000
----------- ----------- -----------
</TABLE>
SOLAR AGE INDUSTRIES, INC.
STATEMENT OF CASH FLOWS FOR THE
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (1,800) (1,800) 160,275
Adjustments to reconcile Net Income
(Loss) to Net Cash Flow used in
Operating Activities:
Gain, Settlement of Debt -- -- (162,706)
Change in Operating Assets
and Liabilities 1,800 1,800 1,800
----------- ----------- -----------
Net Cash Flows from Operating Activities $ -- $ -- $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
SOLAR AGE INDUSTRIES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Common Stock
------------ Additional Retained Stockholders'
Shares Amount Paid-In Deficit Deficit
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance-July 1, 1995 5,375,000 $ 53,750 974,094 $(1,202,024) $ (174,180)
Net Income -
June 30, 1996 -- -- -- (1,800) (1,800)
----------- ----------- ----------- ----------- -----------
Balance-July 30, 1996 5,375,000 53,750 974,094 (1,203,824) (175,980)
Net Income -
June 30, 1997 -- -- -- (1,800) (1,800)
----------- ----------- ----------- ----------- -----------
Balance-June 30, 1997 5,375,000 53,750 974,094 (1,205,624) (177,780)
Net Income -
June 30, 1998 -- -- -- 162,075 160,275
----------- ----------- ----------- ----------- -----------
Balance-June 30, 1998 5,375,000 $ 53,750 $ 974,094 $(1,044,719) $ (16,875)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
SOLAR AGE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - INCOME TAXES
There were no provisions for income taxes in 1998, 1997, and 1996, due to the
Company's net utilization of a loss carryforward in 1998, as well as a deferred
tax asset valuation allowance. As of June 30, 1998, the Company had a deferred
tax assets of approximately $350,000 generated from net operating loss
carryforwards of $1,028,000. Such carryforwards expire in 2002 and 2003, and are
subject to limitation under the Internal Revenue Code of 1986, as amended. A
valuation allowance equal to the deferred tax asset recognized has been
recorded, as it was determined that more likely than not, the deferred tax asset
will not be realized. During the year ended June 30, 1998, the valuation
allowance decreased by approximately $55,300.
NOTE 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non Cash Investing and Financial Activities: 1998 1997 1996
---- ---- ----
Reduction of Note Payable in Settlement
of Outstanding Debt $162,706 - -
NOTE 4 - GOING CONCERN
Management of the Company is seeking additional equity capital so that they can
either purchase an ongoing business for cash, or acquire an ongoing business
with common stock. If they are unable to accomplish this, there is substantial
doubt about the Company's ability to continue as a going concern.
<PAGE>
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
MEMBER OF AICPA DIVISION OF FIRMS Fax (801) 532-7944
MEMBER OF SECPS 345 East 300 South, Suite 200
MEMBER OF SUMMIT INTERNATIONAL ASSOCIATES Salt Lake City, Utah 84111-2693
January 12, 2000
To the Board of Directors and Management
Solar Group, Inc.
We have audited the financial statements of Solar Group, Inc for the year ended
June 30, 1999 and have issued our report thereon dated January 3, 2000
Professional standards require that we provide you with the following
information related to our audit.
OUR RESPONSIBILITY UNDER GENERALLY ACCEPTED AUDITING STANDARDS
As stated in our engagement letter dated December 2, 1999, our responsibility,
as described by professional standards, is to plan and perform our audit to
obtain reasonable, but not absolute, assurance that the financial statements are
free of material misstatement and are fairly presented in accordance with
generally accepted accounting principles. Because of the concept of reasonable
assurance and because we did not perform a detailed examination of all
transactions, there is a risk that material errors, irregularities, or illegal
acts, including fraud and defalcations, may exist and not be detected by us.
As part of our audit, we considered the internal control structure of Solar
Group, Inc. Such considerations were solely for the purpose of determining our
audit procedures and not to provide any assurance concerning such internal
control structure.
SIGNIFICANT ACCOUNTING POLICIES
Management has the responsibility for selection and use of appropriate
accounting policies. In accordance with the terms of our engagement letter, we
will advise management about the appropriateness of accounting policies and
their application. The significant accounting policies used by Solar Group, Inc.
are described in Note 1 to the financial statements.
ACCOUNTING ESTIMATES
Accounting estimates are an integral part of the financial statements prepared
by management and are based on management's knowledge and experience about past
and current events and assumptions about future events. Certain accounting
estimates are particularly sensitive because of their significance to the
financial statements and because of the possibility that future events affecting
them may differ significantly from those expected. The most sensitive estimates
affecting the financial statements were estimated useful lives of property and
equipment and depreciation methods used.
SIGNIFICANT AUDIT ADJUSTMENTS
For purposes of this letter, professional standards define a significant audit
adjustment as a proposed correction of the financial statements that, in
our judgment, may not have been detected except through our auditing procedures.
<PAGE>
HANSEN, BARNETT & MAXWELL
- --------------------------------------------------------------------------------
Page 2
Significant audit adjustments for 1999 included the following:
1. Reclassification of $16,875 which was recorded as an extraordinary gain on
extinguishment of debt. Our audit procedures indicated that this debt had
been satisfied with cash and stock issued to the vendor. We reclassified
$7,500 that had been recorded as consulting expense as a payment against
this liability and we recorded the issuance of 20,000 shares of common
stock to satisfy the remaining $9,375.
2. We also recorded the issuance of 30,000 shares of stock issued to satisfy a
$15,000 liability for consulting services. We recorded an increase in
common stock of $300, and increase in paid in capital of $14,700 and a
corresponding increase in expense of $15,000.
3. We recorded a prior period adjustment for $11,100 of expenses relating to
legal and consulting fees that should have been accrued in the prior
period.
4. Reclassification of $128,000 from common stock and paid in capital to Notes
Payable. Our audit procedures indicated that these amounts were loans
rather then capital contributions as evidenced by the Board Consent dated
July 17, 1998 and the promissory notes relating to these amounts dated the
same day. In addition, we recorded accrued interest in the amount of
$11,756 on these notes as per the stated interest rate in the promissory
note.
DISAGREEMENTS WITH MANAGEMENT
For purposes of this letter, professional standards define a disagreement with
management as a matter, whether or not resolved to our satisfaction, concerning
a financial accounting, reporting, or auditing matter that could be significant
to the financial statements or the auditor's report. We are pleased to report
that no such disagreements arose during the course of our audit.
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT
We encountered no significant difficulties in dealing with management in
performing the audit.
USE OF FINANCIAL STATEMENTS
Please be aware that if the Company desires to submit registration statements
with the SEC, the financial statement presentation will need to be modified to
include the activities of prior years. If this is the case either the prior
years' activities will need to be reaudited by us or the predecessor auditor
will be required to reissue his audit report in which case we will need to
revise our report to make reference to the predecessor auditor's report.
In addition, if the Company is deemed to be in the development stage, the SEC
will require the income statement, cash flow statement, and statement of
stockholder's equity to be presented from inception of the development stage
through the most current balance sheet date.
This information is intended solely for the use of the Board of Directors and
management of International Automated Systems, Inc. and should not be used for
any other purpose.
Sincerely,
HANSEN, BARNETT & MAXWELL
/s/ Robert K. Bowen
Robert K. Bowen, CPA
<PAGE>
SOLAR GROUP, INC.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
AND
FINANCIAL STATEMENTS
JUNE 30, 1999
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
SOLAR GROUP, INC.
TABLE OF CONTENTS
PAGE
Report of Independent Certified Public Accountants 1
Financial Statements
Balance Sheet - June 30, 1999 2
Statement of Operations for the Year Ended June 30, 1999 3
Statement of Stockholders' Equity (Deficit) for the Year
Ended June 30, 1999 4
Statement of Cash Flows for the Year Ended June 30, 1999 5
Notes to the Financial Statements 6
<PAGE>
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
MEMBER OF AICPA DIVISION OF FIRMS Fax (801) 532-7944
MEMBER OF SECPS 345 East 300 South, Suite 200
MEMBER OF SUMMIT INTERNATIONAL ASSOCIATES Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Solar Group, Inc.
We have audited the accompanying balance sheet of Solar Group, Inc. as of June
30, 1999, and the related statements of operations, stockholders' equity
(deficit), and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform our audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of Solar Group,
Inc. as of June 30, 1999, and the results of its operations and its cash flows
for the year then ended.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company currently has ceased
operations and is seeking additional equity capital. As discussed in Note 1 to
the financial statements, the Company's current operating loss and its total
accumulated deficit raise substantial doubt about its ability to continue as a
going concern. Management's plans concerning these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ HANSEN, BARNETT & MAXWELL
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
January 3, 2000
1
<PAGE>
SOLAR GROUP, INC.
BALANCE SHEET
JUNE 30, 1999
ASSETS
CURRENT ASSETS
Related Party Receivable $ 267
-----------
TOTAL CURRENT ASSETS $ 267
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 60,165
Accrued liabilities 431,756
Short term notes payable 128,000
Related party payable 6,000
-----------
TOTAL CURRENT LIABILITIES 625,921
-----------
STOCKHOLDERS' EQUITY
Common stock - par value $0.01 per share;
50 million shares authorized; 1,027,647 shares
issued and outstanding 10,276
Additional paid in capital 1,041,943
Accumulated deficit (1,677,873)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (625,654)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 267
===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30,1999
REVENUES $ --
GENERAL AND ADMINISTRATIVE EXPENSES 610,298
-----------
LOSS FROM OPERATIONS (610,298)
OTHER INCOME (EXPENSE)
Interest expense (11,756)
-----------
NET LOSS $ (622,054)
===========
BASIC AND DILUTED LOSS PER SHARE $ (0.62)
===========
WEIGHTED AVERAGE SHARES 1,009,894
===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30,1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------------- PAID-IN ACCUMULATED TOTAL
SHARES AMOUNT CAPITAL DEFICIT EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE - JUNE 30, 1998
AS PREVIOUSLY STATED 977,636 $ 9,776 $ 1,018,068 $(1,044,719) $ (16,875)
Prior period adjustment -- -- -- (11,100) (11,100)
----------- ----------- ----------- ----------- -----------
BALANCE - JUNE 30, 1998 977,636 9,776 1,018,068 (1,055,819) (27,975)
July 9, 1998 shares issued
for debt; $0.47 per share 20,000 200 9,175 9,375
January 26, 1999 shares
issued for services; $0.50
per share 30,000 300 14,700 -- 15,000
Net loss for the year
ended June 30, 1999 -- -- -- (622,054) (622,054)
----------- ----------- ----------- ----------- -----------
BALANCE - JUNE 30, 1999 1,027,636 $ 10,276 $ 1,041,943 $(1,677,873) $ (625,654)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying, notes are an integral part of these financial statements.
4
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(622,054)
Stock issued for services 15,000
Changes in current assets and liabilities:
Accounts payable 41,565
Accrued liabilities 431,756
---------
NET CASH FROM OPERATING ACTIVITIES (133,733)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in receivable from related party (267)
---------
NET CASH FROM INVESTING ACTIVITIES (267)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 128,000
Proceeds from issuance of related party notes 6,000
---------
NET CASH FROM FINANCING ACTIVITIES 134,000
---------
NET INCREASE (DECREASE) IN CASH --
CASH - JUNE 30, 1998 --
---------
CASH - JUNE 30, 1999 $ --
=========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
SOLAR GROUP, INC
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - SOLAR Group, Inc was incorporated under the laws of the State of
Nevada in February 1984, as a subsidiary of Solar Age Manufacturing Corp. In
August 1984, Solar Age Manufacturing Corp. and its subsidiaries were merged into
Solar Age Industries, Inc. The companies principle business activity was the
manufacture and sale of solar air and water heating devices. As of January
1,1986, the federal energy credits and most state credits expired which severely
impacted on the company's ability to market its solar products, resulting in a
substantial loss to the company for the first two calender quarters of 1986. The
Company attempted to diversify into the manufacture of greenhouses, but because
of the continuing, substantial financial losses sustained by the Company, it was
forced to file a Chapter 11 petition under the Bankruptcy Code in the United
States Bankruptcy Court, District of New Mexico. In late 1987, the company filed
its plan of reorganization which was approved by the Bankruptcy Court. Following
distribution to the creditors under the terms of the plan and consummation of
the plan, the bankruptcy case was subsequently closed. Although the Company
continued to market its greenhouse products while in bankruptcy and thereafter,
the Company never attained commercial success for its products and,
subsequently, ceased operations.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting period. Estimates also affect the
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
BASIS OF PRESENTATION - The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. During the year
ended June 30, 1999 the Company incurred net losses of $622,054. As of June 30,
1999, the Company's losses accumulated from inception totaled $1,677,873. These
factors, among others, raise substantial doubt that the Company may be unable to
continue as a going concern for a reasonable period of time. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amount and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern. The Company's ability to continue as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations on a timely basis.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair value of financial
instruments is not presented because, in Management's opinion, there is no
material difference between carrying amounts and estimated fair values of
financial instruments as presented in the accompanying balance sheet.
CASH AND CASH EQUIVALENTS - All highly-liquid debt instruments purchased with
maturities of three months or less have been considered cash equivalents.
INCOME TAXES - The Company recognizes the amount of income taxes payable or
refundable for the current year and recognizes deferred tax assets and
liabilities for the future tax consequences
6
<PAGE>
attributable to differences between the financial statement amounts of certain
assets and liabilities and their respective tax bases. Deferred tax assets and
deferred liabilities are measured using enacted tax rates expected to apply to
taxable income in the years those temporary differences are expected to be
recovered or settled. Deferred tax assets are reduced by a valuation allowance
to the extent that uncertainty exists as to whether the deferred tax assets will
ultimately be realized.
BASIC LOSS PER COMMON SHARE - Loss per common share is computed by dividing net
loss available to common stockholders by the weighted-average number of common
shares outstanding during the period.
NOTE 2--PRIOR PERIOD ADJUSTMENT
In its financial statements for the year ended June 30, 1998 the Company did not
record $11,100 in Accounts Payable attributable to legal and consulting fees.
Consequently, the Company has restated its 1998 financial statements to record
additional Accounts Payable of $11,100 and general and administrative expenses
of $11,100 net of tax effect of $0. The effect of this adjustment resulted in an
$11,100 increase in accumulated deficit as of June 30, 1999.
NOTE 3--INCOME TAXES
The Company did not have a current or deferred provision for income taxes for
the year ended June 30, 1999. The following presents the components of the net
deferred tax asset at June 30, 1999:
BENEFIT OF OPERATING LOSS CARRYFORWARDS $ 564,792
LESS: VALUATION ALLOWANCE (564,792)
---------
NET DEFERRED TAX ASSET $ --
=========
The valuation allowance increased $211,498 during the year ended June 30, 1999.
The Company has net operating loss carryforwards of $1,661,154 that expire, if
unused, in years 2002 through 2019.
The following is a reconciliation of the income tax benefit computed at the
federal statutory tax rate with the provision for income taxes for the year
ended June 30, 1999.
JUNE 30,
1999
----------
Income tax benefit at statutory rate (34%) $ (211,498)
----------
Deferred tax valuation allowance change 211,498
PROVISION FOR INCOME TAXES $ --
==========
7
<PAGE>
NOTE 4--NOTES PAYABLE
Notes payable at June 30, 1999, consisted of the following:
Notes payable to investors, bearing interest
at 9.5%; unsecured; due February 2000 $ 128,000
Note payable to officer bearing interest at
9.5%; unsecured; due February 2000 6,000
---------
TOTAL $ 134,000
=========
NOTE 5--SUPPLEMENTAL CASH FLOW INFORMATION
During the year ended June 30, 1999, the Company issued 30,000 shares of Common
stock and $10,000 of cash in exchange for consulting services valued at $25,000.
The company also transferred 20,000 shares of common stock and $7,500 in cash to
extinguish accounts payable owing to the transfer agent in the amount of
$16,875.
During the year ended June 30, 1999, the Company accrued interest expense of
$11,756 and paid $0 in interest.
NOTE 6--RELATED PARTY TRANSACTIONS
As described in Note 4, the company borrowed $128,000 from investors during the
year ended June 30, 1999 at an annual interest rate of 9.5%. The amounts are due
February 2000. As of June 30, 1999, the Company had not made any payments.
The Company also borrowed $6,000 from its chief executive officer at an annual
interest rate of 9.5%. This amount is also due February 2000.
The Company maintained no bank accounts during the year ended June 30, 1999.
Deposits were made into and expenses disbursed from an account controlled by a
related party. As of June 30, 1999, this related party held $267 belonging to
the Company.
8
<PAGE>
SOLAR GROUP, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Related Party Receivable 101
TOTAL CURRENT ASSETS 101
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 60,165
Accrued liabilities 438,121
Short term notes payable 128,000
Related party payable 6,000
TOTAL CURRENT LIABILITIES 632,286
STOCKHOLDERS' EQUITY
Common stock - par value $0.01 per share;
50 million shares authorized; 1,027,647 shares
issued and outstanding 10,276
Additional paid in capital 1,041,943
Accumulated deficit (1,684,404)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (632,185)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 101
</TABLE>
Page 1 of 8
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF OPERATION
FOR SIX MONTHS ENDED DECEMBER 31, 1999
REVENUES $ --
GENERAL AND ADMINISTRATIVE EXPENSES 166
LOSS FROM OPERATION (166)
OTHER INCOME (EXPENSE)
Interest expense (6,365)
NET LOSS (6,531)
BASIC AND DILUTED LOSS PER SHARE (0)
WEIGHTED AVERAGE SHARES 1,009,894
Page 2 of 8
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR SIX MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL ACCUMULATED TOTAL
Shares Amount PAID IN CAPITAL DEFICIT EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1999 1,027,636 10,276 1,041,943 (1,677,873) (625,654)
Net loss for six months
ended December 31, 1999 (6,531) (6,531)
BALANCE DECEMBER 31, 1999 1,027,636 10,276 1,041,943 (1,684,404) (632,185)
</TABLE>
Page 3 of 8
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF CASH FLOWS
FOR SIX MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (6,531)
Stock issued for services
Changes in current assets and liabilities:
Accounts payable
Accrued liabilities 6,365
NET CASH FROM OPERATING ACTIVITIES (166)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in receivable from related party 101
NET CASH FROM INVESTING ACTIVITIES 101
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable
Proceeds from issuance of related party notes
NET CASH FROM FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH
CASH - JUNE 30, 1999
CASH - DECEMBER 31, 1999
</TABLE>
Page 4 of 8
<PAGE>
SOLAR GROUP, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Related Party Receivable 2,734
TOTAL CURRENT ASSETS 2,734
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 60,165
Accrued libilities 216,365
Short term notes payable 128,000
Related party payable 6,000
TOTAL CURRENT LIABILITIES 410,530
STOCKHOLDERS' EQUITY
Common stock - par value $0.01 per share;
50 million shares authorized; 997,647 shares
issued and outstanding 9,976
Additional paid in capital 1,027,243
Accumulated deficit (1,445,015)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (407,796)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,734
</TABLE>
Page 5 of 8
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF OPERATION
FOR SIX MONTHS ENDED DECEMBER 31, 1998
REVENUES $ --
GENERAL AND ADMINISTRATIVE EXPENSES 376,300
LOSS FROM OPERATION (376,300)
OTHER INCOME (EXPENSE)
Interest expense (6,365)
NET LOSS (389,196)
BASIC AND DILUTED LOSS PER SHARE (0)
WEIGHTED AVERAGE SHARES 996,800
Page 6 of 8
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR SIX MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL ACCUMULATED TOTAL
Shares Amount PAID IN CAPITAL DEFICIT EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1998 977,636 9,776 1,018,068 (1,055,819) (27,975)
July 9, 1998 shares issued for
debt; $0.47 per share 20,000 200 9,175 9,375
Net loss for six months
ended December 31, 1998 (389,196) (389,196)
BALANCE DECEMBER 31, 1998 997,636 9,976 1,027,243 (1,445,015) (407,796)
</TABLE>
Page 7 of 8
<PAGE>
SOLAR GROUP, INC.
STATEMENT OF CASH FLOWS
FOR SIX MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (389,196)
Stock issued for services
Changes in current assets and liabilities:
Accounts payable 41,565
Accrued liabilities 216,365
NET CASH FROM OPERATING ACTIVITIES (131,266)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in receivable from related party (2,734)
NET CASH FROM INVESTING ACTIVITIES (2,734)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 128,000
Proceeds from issuance of related party notes 6,000
NET CASH FROM FINANCING ACTIVITIES 134,000
NET INCREASE (DECREASE) IN CASH
CASH - JUNE 30, 1998
CASH - DECEMBER 31, 1998
</TABLE>
Page 8 of 8
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 3, 2000
Solar Group, Inc.
(Registrant)
By /s/ Leon M. Leibovich
--------------------------
(Signature)
Leon M. Leibovich, President, Chief Executive Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 101
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 101
<CURRENT-LIABILITIES> 632,286
<BONDS> 0
0
0
<COMMON> 10,276
<OTHER-SE> (632,185)
<TOTAL-LIABILITY-AND-EQUITY> 101
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (166)
<OTHER-EXPENSES> (6,365)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,531)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,734
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,734
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,734
<CURRENT-LIABILITIES> 410,530
<BONDS> 0
0
0
<COMMON> 9,976
<OTHER-SE> (407,786)
<TOTAL-LIABILITY-AND-EQUITY> 2,734
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (376,300)
<OTHER-EXPENSES> (6,365)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (389,196)
<EPS-BASIC> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
