AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON APRIL 3, 2000.
====================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Amendment Number 1
POWER SAVE INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
NEVADA 3629 88-0227424
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification No.)
Incorporation or
Organization)
5800 NW 64 Avenue
Building 26 #109
Tamarac, Florida 33319
(954) 722-1615
-----------
____________________
Scott Balmer, Chairman
POWER SAVE INTERNATIONAL, INC.
5800 NW 64 Avenue
Building 26 #109
Tamarac, Florida 33319
-----------
COPIES OF COMMUNICATIONS TO:
State Agent and Transfer Syndicate, Inc.
Attention: Jed Block, phone (775) 882-1013
318 North Carson Street, Suite 214
Carson City, NV 89701
-----------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
<PAGE>
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Amount to Maximum Maximum
Title of Each Be Offering Price Aggregate Registration
Class of Securities Registered Per Security Offering Price Fee
to be Registered
Common Stock, par
Value $.03 per share 1,000,000 $5.00 $5,000,000 $1,390
Includes no shares of Common Stock which the Underwriters have the option
to purchase from the Registrant to cover over-allotments, if any.
_________________________
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. Subject
to Completion dated _________
POWER SAVE INTERNATIONAL, INC.
1,000,000 SHARES OF COMMON STOCK AT $5.00 PER SHARE
Power Save International, Inc., (the "Company") hereby offers up to 1,000,000
shares of the Company's Common Stock (the "Shares") at an offering price of
$5.00 per Share (the "Offering"). The offering price has been arbitrarily
determined solely by the Company. The Offering will begin on the date of this
Offering Circular and continue until the Company has sold all of the shares
offered hereby or such earlier date as the Company may close or terminate the
Offering, no later than December 31, 2001. A minimum of 100,000 shares totaling
$500,000 must be sold to release funds from escrow. The subscriber's funds will
be promptly returned with interest if the minimum is not achieved by the escrow
date of December 31, 2001. No plans for exchange listing have been made. The
shares are offered by the single Underwriter, Three Arrows Capital, on a best
efforts basis only, which means that no underwriters have promised to buy any or
all of the shares. No officers, directors or employees sell the shares.
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 THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS OFFERING HAS BEEN REGISTERED UNDER THE SECURITIES LAWS OF A LIMITED NUMBER
OF STATES, AND THE SHARES OFFERED HEREBY MAY BE SOLD ONLY IN THOSE STATES. SUCH
REGISTRATIONS, HOWEVER, DO NOT CONSTITUTE AN ENDORSEMENT OR APPROVAL BY ANY
PARTICULAR STATE SECURITIES COMMISSION OF ANY SECURITIES OFFERED OR THE TERMS OF
THIS OFFERING. NO STATE SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR
COMPLETENESS OF THIS OFFERING CIRCULAR OR ANY OTHER SELLING LITERATURE.
THIS OFFERING INVOLVES SUBSTANTIAL RISKS (SEE "RISK FACTORS" BEGINNING ON PAGE
3) AND SHOULD BE CONSIDERED ONLY BY PERSONS ABLE TO BEAR THE ECONOMIC RISK OF
THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<TABLE>
<CAPTION>
Offering Price Underwriting Commissions Proceeds to the Company
--------------- -------------------------- -------------------------
<S> <C> <C> <C>
Per share $ 5.00 $ 0.25 $ 4.75
Total Minimum (escrow) $ 500,000 $ 25,000 $ 475,000
Total Maximum $ 5,000,000 $ 250,000 $ 4,750,000(1)(2)
<FN>
(1) Three Arrows Capital Corp. has also received a warrant to purchase up to 83,333 shares of
Common Stock at the Offering Price. See "Plan of Distribution."
(2) Before deduction of offering expenses previously paid by the Company of $18,500 and a
consulting fee paid to Three Arrows Capital Corp. of $9,950.
</TABLE>
<PAGE>
THREE ARROWS CAPITAL CORP.
December 31, 2000
TABLE OF CONTENTS
PAGE
----
Offering Summary 1
Risk Factors 3
Use of Proceeds 9
Capitalization 11
Dividend Policy 12
Dilution 12
Plan of Operation 13
Selected Historical Financial Data 14
Management's Discussion and Analysis
Of Financial Condition and
Results of Operations. 15
Business 17
Management 24
Principal Shareholders 25
Certain Articles & Bylaws 26
Description of Securities 26
Plan of Distribution 28
Financial Statements 30
Appendix (not enclosed)
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THE OFFERING CIRCULAR AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITERS. THIS OFFERING CIRCULAR DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS OFFERING CIRCULAR, OR AN OFFER TO BUY
ANY SECURITIES BY PERSONS IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. THE DELIVERY OF THIS OFFERING
CIRCULAR SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
OFFERING CIRCULAR.
<PAGE>
OFFERING CIRCULAR SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this prospectus. Investors should carefully consider the risk factors
related to the purchase of Common Stock of Power Save. See "Risk Factors."
OUR BUSINESS
Power Save International designs, manufactures, sells/leases and finances
fossil-fueled engine-driven air conditioning, heating, thermal heat recovery and
electric cogenerating plants for the more than 2 million U.S. small businesses
that usually are unable to negotiate attractive utility rates. A co-generator
produces both heat and electricity from one fuel source. We provide equipment
that can provide typical savings of 20% to 50% on annual utility bills for HVAC
(heating, ventilating, air conditioning) on a convenient rental or
lease/purchase. With conventional utility connections in reserve, our clients
have redundant and secure power supplies at less cost than organizations that
are solely dependent upon normal utility hookups.
Our original demonstration test site model (Power Save International-120)
system was installed in 1995 in Mamaroneck, NY and continues to meet or exceed
the customer's expectations. Our latest Power Save International-70/50 Combo
system was completed in a commercial office building in Rochester, New York. We
also have a contingent acquisition of Mirage Air Systems, Inc. for $1.5 million
that is detailed in the business section.
We have incurred losses since our inception in 1987 through July 31, 2000
of $1,315,514. While we believe that only a few unit sales are necessary to
bring us to profitability, we have not undertaken extensive marketing steps nor
contracted for a large number of units to date. Our sales and competitive
strategies must be considered as unproven to date.
POWER SAVE
For a detailed description of our business strategy, see
"Business--Business Strategy." We were incorporated in Nevada on May 8, 1987.
Our principal executive offices are located at 5800 NW 64 Avenue, Bldg. 26,
#109, Tamarac, FL 33319. Our telephone number is (954) 722-1615 and the fax
number is (954) 722-6417. E-mail is addressed [email protected] and the
---------------------
Website is www.power-save.net.
------------------
THE OFFERING
Shares offered by Power Save . . . . . . . . 1,000,000
Shares outstanding after the offering . . . . 7,414,149
Use of proceeds . . . . . . . . . . . . . . . Power Save intends to use the net
Proceeds from the offering for:
(i) acquisitions (ii) marketing
and advertising, (iii) development
of new applications, and (iv)
equipment and inventory. See "Use
of Proceeds."
Minimum/maximum . . . . . . . . . . . . . . . Power Save is offering a minimum
of 100,000 shares to break escrow
and a maximum of 1,000,000 shares.
If Power Save returns funds
interest will be paid.
We intend to continue the sale of shares past escrow until all of the
shares have been sold and within a period not later than one year from this
offering.
Potential investors should carefully consider the risk factors relating to
Power Save described in the "Risk Factors" section of this prospectus before
making an investment decision with respect to the securities offered hereby.
<PAGE>
SUMMARY FINANCIAL DATA
(As of July 31, 2000)
0 BALANCE SHEET DATA
DECEMBER 31
-----------
1998 1999 JULY 31, 2000
---------- -------- --------------
Cash & Cash Equivalents, $ 3,527 $ 53,227 $ 145,137
Current Assets . . . . . . . . . . . 3,527 973,625 243,424
Total Assets . . . . . . . . . . . . 3,973 976,000 245,507
Current Liabilities. . . . . . . . . 166,924 257,633 29,888
Total Shareholders' Equity (deficit) $(162,951) $718,367 $ 215,619
1
2 STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 SEVEN MONTHS THROUGH
----------------------
1998 1999 JULY 31, 2000
---------- --------- --------------
Revenue . . . . . . . . . . $ 5,041 $ 69,986 $ 4,075
Cost of Sales . . . . . . . 589 67,261 11,089
Operating Expenses . . . . 331,895 86,163 44,151
Other Income (Expenses) . . 12,002 (2,449) 169,557
Net Ordinary Income (Loss) $(315,441) $(85,887) $ 118,392
<PAGE>
RISK FACTORS
You should carefully consider the following risks and all other information
contained in this prospectus before purchasing our common stock. If any of the
following risks occur, our business, prospects, results of operations or
financial condition could be harmed. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of specific factors, including the
risks described below and elsewhere in this prospectus.
1 OUR AUDITORS HAVE EXPRESSED A "GOING CONCERN" ISSUE THAT NOTES OUR NEED
FOR CAPITAL AND/OR REVENUES TO SURVIVE AS A BUSINESS
Our auditors have expressed reservations concerning our ability to continue
as a going concern. The auditors state: "As discussed in Notes 3 and 4
[financial statements], we are in the development stage and have sustained
significant losses from inception to date and there is no assurance that we can
realize sufficient revenues from our products and services to attain profitable
operations. These matters raise substantial doubt about our ability to continue
as a going concern. Management's plans regarding those matters is also
discussed in Note 3 and 4. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. (See
"Financial Statements.")
2 WE HAVE INCURRED LOSSES FOR THE LAST SEVERAL YEARS AND REQUIRE A SIGNIFICANT
CHANGE IN OUR BUSINESS OPERATIONS TO REVERSE THIS TREND
We have incurred net losses of $1,315,514 from inception of Power Save
through July 31, 2000. We have not achieved profitability and expect to continue
to incur net losses until we can produce sufficient revenues to cover our costs.
Even if we achieve our objectives of significant sales and profitability in the
year 2001, we may be unable to sustain or increase our profitability in the
future. (See "Selected Historical Financial Data.")
WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL TO COMPLETE OUR PRODUCT DEVELOPMENT
AND COMMERCIALIZATION PLANS
Our product distribution schedule could be delayed if we are unable to fund
our marketing capabilities. We expect that the net proceeds of this offering,
together with the proceeds from our issuance of shares and all other existing
sources of capital, will be sufficient to fund our activities through the end of
2001. We do not know whether we will be able to secure additional funding, or
funding on terms acceptable to us, to pursue all of our marketing plans through
the mass-market stage. (See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".)
A MASS MARKET FOR SMALLER COGENERATION SYSTEMS MAY NEVER DEVELOP OR MAY TAKE
LONGER TO DEVELOP THAN WE ANTICIPATE
A mass market may never develop for our systems, or may develop more slowly
than we anticipate. Cogeneration systems for small business use represent an
emerging market, and we do not know whether our targeted distribution method
will be successful, if distributors will want to sell them or whether end-users
will want to use them. If a mass market fails to develop or develops more slowly
than we anticipate, we may be unable to recover the losses we will have incurred
to develop our product and may be unable to achieve profitability. (See
"Business.") The development of a mass market for our systems may be impacted
by many factors, some of which are out of our control, including:
<PAGE>
- the cost competitiveness of cogeneration systems;
- the future costs of natural gas, propane and other fuels used
by our systems;
- consumer reluctance to try a new product;
- consumer perceptions of our systems' safety;
- regulatory requirements; and
- the emergence of newer, more competitive technologies and products.
3 WE HAVE ONLY MANUFACTURED OUR SYSTEMS ON A PILOT BASIS AND WE DO NOT HAVE
MANUFACTURING EXPERIENCE FOR COGENERATION SYSTEMS ON A PRODUCTION BASIS
To date, we have focused primarily on research and development and have
little relevant experience to the manufacture of cogeneration systems for the
small business market on a commercial basis. All of our manufacturing and
installation to date has been on a pilot basis. We are also relying on
contractors to outsource the production of our systems. Even if we are
successful in developing effective manufacturing capability and processes on an
outsourced basis, we do not know whether we will do so in time to meet our
product commercialization schedule or to satisfy the requirements of our
distributors or customers. (See "Business-Manufacturing".)
4 WE FACE INTENSE COMPETITION AND MAY BE UNABLE TO COMPETE SUCCESSFULLY
The markets for electricity are intensely competitive. There are many
companies engaged in all areas of traditional and alternative electric power
generation in the United States, Canada and abroad, including, among others,
major electric, oil, chemical, natural gas, and specialized electronics firms,
as well as universities, research institutions and foreign government-sponsored
companies. Many of these entities have substantially greater financial, research
and development, manufacturing and marketing resources than we do. (See
"Business-Competition.")
5 ALTERNATIVES TO OUR TECHNOLOGY COULD RENDER OUR SYSTEMS OBSOLETE
Our system is one of a number of alternative energy products being
developed today as supplements to the electric grid that have potential
residential applications, including fuel cells, solar power and wind power, and
other types of cogeneration technologies. Improvements are also being made to
the existing electric transmission system. Technological advances in alternative
energy products, improvements in the electric grid or other fuel cell
technologies may render our systems obsolete. (See "Business.")
<PAGE>
6 WE MAY NOT BE ABLE TO PROTECT IMPORTANT INTELLECTUAL PROPERTY
Our ability to compete effectively against other cogeneration companies
will depend, in part, on our ability to protect our proprietary technology,
systems designs and manufacturing processes. Much of our products and processes
are in the public domain. The manner in which we package, brand and market our
products is our most distinguishing feature. We do not expect, therefore, to
seek patent protection.
Further, our competitors may independently develop or patent technologies
or processes that are superior to ours. If we are found to be infringing on
third party patents, we do not know whether we will be able to obtain licenses
to use such patents on acceptable terms, if at all. Failure to obtain needed
licenses could delay or prevent the sale of our systems.
We rely, in part, on contractual provisions to protect our trade secrets
and proprietary knowledge. These agreements may be breached, and we may not have
adequate remedies for any breach. Our trade secrets may also be known without
breach of such agreements or may be independently developed by competitors. Our
inability to maintain the proprietary nature of our products could harm our
business, prospects, results of operations or financial condition. (See
"Business-Intellectual Property".)
7 AN EXISTING STOCKHOLDER WILL CONTROL ALL MATTERS REQUIRING A STOCKHOLDER VOTE
Upon the completion of this offering, our principal stockholder, Scott
Balmer, will retain approximately 87% of our outstanding stock. For instance,
Mr. Balmer would be able to control the outcome of all stockholder votes,
including votes concerning director elections, charter and by-law amendments and
possible mergers, corporate control contests and other significant corporate
transactions. (See "Principal Stockholders" and "Description of Capital Stock".)
8 OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE AND SHOULD ONLY BE CONSIDERED
FOR PURCHASE BY THOSE WHO CAN HOLD VOLATILE SECURITIES
The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for our common
stock to decline, perhaps substantially, following this offering, including: (a)
failure to meet our marketing milestones; (b) demand for our common stock; (c)
revenues and operating results failing to meet expectations of investors; (d)
changes in general market conditions; (e) technological innovations by
competitors or in competing technologies; (f) investor perception of our
industry or our prospects; or (g) general technology or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in a securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could harm our business, prospects, results of
operations, or financial condition. (See "Financial Statements.")
9 PROVISIONS OF NEVADA LAW AND OF OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER
MORE DIFFICULT THEREBY POTENTIALLY RENDERING SHAREHOLDERS' ABILITY TO PROFIT
FROM A TAKEOVER LESS LIKELY
Provisions in our certificate of incorporation and by-laws and in the
Nevada corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt, which is opposed
by our management and Board of Directors. Public stockholders who might desire
to participate in such a transaction may not have an opportunity to do so. We
also have a staggered Board of Directors, which makes it difficult for
stockholders to change the composition of the Board of Directors in any
one-year. These anti-takeover provisions could substantially impede the ability
of public stockholders to benefit from a change in control or change our
management and Board of Directors. (See "Description of Capital Stock".)
<PAGE>
10 FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE
Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower our stock price or make it difficult for us to raise additional equity
capital in the future. After this offering, we will have 7,414,149 shares of
common stock outstanding. Of these shares, the 1,000,000 shares sold in this
offering will be freely tradable. The remaining 6,414,149 shares are subject to
one-year lock-up agreements. At Power Save's discretion 6,414,149 shares will
generally be available for sale in the public market one-year after the date of
this prospectus. We cannot predict if future sales of our common stock, or the
availability of our common stock for sale, will harm the market price for our
common stock or our ability to raise capital by offering equity securities.
(See "Underwriting" and "Shares Eligible for Future Sale".)
OUR SECURITY PRICING HAS NOT BEEN MADE ON CONVENTIONAL VALUATION ASSUMPTIONS AND
THE FUTURE PRICE OF OUR STOCK MAY PROVE LESS AS A RESULT OF SUCH ABSENCE OF
CONVENTIONAL PRICING
The offering price of the shares has been determined based on an estimate
by management of our earnings potential over the next five years. Management
makes no representations that we will generate such earnings and there can be no
assurance as to when we will generate revenues and earnings, if ever. The
offering price does not reflect our asset value, net worth, present earnings,
cash flow or any other established criteria of value. The offering price of the
shares may or may not be an indication of their present value or the value of us
or their future value or the future value of us. The capital requirements
estimated by management are based on a series of internal projections of
revenues and expenses prepared by management and are subject to the inherent
limitations associated with making financial forecasts. (See "Financial
Statements.")
PURCHASERS OF SHARES IN THIS OFFERING SHOULD NOT EXPECT LIQUIDITY FOR THEIR
SHARES AND MAY EXPERIENCE DIFFICULTY IN SELLING SUCH SHARES.
At the present time, there is no public market for Power Save's Common
Stock, nor can there be any guarantee that such a market will develop, or if
developed, will be sustained. Investors should consider the purchase of shares
to be a long-term investment. (See "Plan of Distribution.")
LIMITS OF INSIDERS' LIABILITY TO OUR COMPANY AND OUR STOCKHOLDERS.
The Certificate of Incorporation and our Bylaws limit the liability of the
Board of Directors and Officers of Power Save for errors in judgment and other
acts or omissions. Our Bylaws also provide for indemnification of the Directors
and Officers for certain liabilities they may incur. As a result, stockholders
will have limited rights of action against the Directors and Officers. (See
"Limitations on Directors' Liability and Indemnification of Directors and
Officers.")
IMMEDIATE AND SUBSTANTIAL DILUTION.
The offering price is substantially higher than the pro forma book value
per outstanding ordinary share. Based upon the offering price of $5.00 per
share, investors purchasing shares in the offering will incur immediate and
substantial dilution of $4.81 per share on a minimum offering and $4.26 on a
maximum offering. This amounts to 96% on a minimum offering and 85% on a
maximum offering. (See "Capitalization.")
<PAGE>
CHANGES IN GOVERNMENT REGULATIONS AND ELECTRIC UTILITY INDUSTRY RESTRUCTURING
MAY AFFECT DEMAND FOR OUR SYSTEMS
The market for electricity generation products is heavily influenced by
federal and state governmental regulations and policies concerning the electric
utility industry. The loosening of current regulatory standards could deter
further investment in the research and development of alternative energy sources
and could result in a significant reduction in the potential market demand for
our products. We cannot predict how the deregulation and restructuring of the
industry will affect the market for small business cogeneration systems. We do
believe that our product and its installation will be subject to oversight and
regulation at the local level in accordance with state and local ordinances
relating to building codes, safety, pipeline connections and related matters.
Such regulation may depend, in part, upon whether a system is placed outside or
inside a building. (See "Business".)
LIMITED STATE REGISTRATION MEANS SHAREHOLDERS IN THIS OFFERING MAY EXPERIENCE
DIFFICULTIES IN SUBSEQUENT SALES OF SUCH SHARES.
These securities are not registered in states other than those indicated in
this prospectus. Subsequent sale and transfer to residents of various states may
be required to be made only pursuant to registration or an exemption from
registration in the transferee's state. (See "Plan of Distribution.")
SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS.
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
expectations about our future performance, contain projections of our future
operating results of our future financial condition, or state other "forward-
looking" information. We believe it is important to communicate our expectations
to our investors. There may be events in the future, however, that we are not
accurately able to predict or over which we have no control. The risk factors
listed in this prospectus, as well as any other cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of any of the events described in these risks factors
and elsewhere in this prospectus could have a material and adverse effect on our
business, results of operations and financial condition and that upon the
occurrence of any of these events, the trading price of our common stock could
decline and you could lose all or part of your investment.
<PAGE>
0 USE OF PROCEEDS
Our net proceeds Save from the sale of 1,000,000 shares of Common Stock
offered hereby, after deducting commissions and estimated offering expenses
payable by us, are estimated to be approximately $4,722,500 if the maximum
number of shares are sold and $450,000 if the minimum number of shares are sold.
The following table sets forth our anticipated use of the proceeds of this
offering.
If Minimum Sold If Maximum Sold
Amount Percent Amount Percent
1 TOTAL PROCEEDS $ 500,000 100% $5,000,000 100%
Less offering Expenses:
Commissions $ 25,000 5.0% $ 250,000 5.0%
Legal & Accounting Fees 4,500 .9% 4,500 .1%
Copying & Advertising 4,000 .8% 4,000 .1%
Filing Fees 16,000 3.2% 16,000 .3%
Postage 500 .1% 3,000 .1%
NET PROCEEDS OF OFFERING $ 450,000 90.0% $4,722,500 94.4%
Use of Net Proceeds:
- Rent, Utilities, Leases $ 58,200 12.9% $ 116,400 2.4%
- Payroll:
- Administrative 160,000 35.6% 320,000 6.8%
- Professional 75,675 16.8% 351,350 7.4%
- Insurance 14,500 3.2% 29,000 .6%
- Equipment Purchase/Lease 14,600 3.2% 43,800 .9%
Inventory/Lease Financing 31,025 6.9% 1,189,950 25.2%
- Advertising/Marketing 46,000 10.3% 720,000 15.2%
- Corporate Website 10,000 2.2% 10,000 .2%
Acquisition 1,500,000 31.8%
- Working Capital 40,000 8.9% 450,000 9.5%
TOTAL USE OF NET PROCEEDS $ 450,000 100.0% $4,722,500 100.0%
If required, we will seek additional sources of funds to include equipment
leasing, equity financing, commercial bank loans and private investors. There
can be no assurances that we will be eligible for such loans or that private
financing will be available to us.
We currently have 5 individuals who serve on an as needed basis, and are
currently uncompensated. We will expand that number in response to the pace of
our development and subject to the availability of funds from the proceeds of
this offering and other sources. Power Save anticipates hiring added personnel
as the offering progresses. Payroll taxes will be incurred by Power Save and are
included in the estimates for payroll above. Except as detailed under "Material
Agreements," all salaries, bonuses and reimbursements are subject to Company
earnings and finances.
Payroll is divided into administrative and professional personnel as a
function of the general nature of the duties performed. Administrative
personnel are categorized as staff (payroll, human resources, secretarial,
clerical, etc.) while professional personnel are categorized as engineers and
managers.
If Power Save successfully completes the sale of the shares, even if just
the minimum is raised, management does not anticipate any cash flow or liquidity
problem for its planned operations. Power Save is not in default or in breach of
any debenture indebtedness or financing arrangement. Power Save has no
collective bargaining agreements. However, it may be confronted with such issues
as it develops its workforce.
<PAGE>
With the exception of normal operating revenues, no material amounts of
funds from sources other than this offering are expected to be used in
conjunction with the proceeds from this offering. No portion of the proceeds
will be used to reimburse an officer, director and principal stockholder for
services already rendered, assets previously transferred, or moneys loaned or
advanced. The amount shown as advances from shareholders in the financial
statements at December 31, 1999 were paid in full in February 2000. Power Save
does not anticipate any liquidity problems in the next 12 months and will not be
in default or in breach of any note, loan, lease or other indebtedness or
financing (See below and "Risk Factors").
Differences in estimated expenses for filing fees, legal and accounting,
etc., between the amounts required under a minimum offering and those required
under a maximum offering reflect the anticipated greater number of state
registrations that would be required for larger sales throughout the offering
period. Such registrations would only be secured as a function of Power Save's
experience with the offering.
If Power Save realizes less than the maximum amount from this offering
Power Save intends to prioritize its fund uses as follows:
1. Acquisition
2. Inventory
3. Advertising/Marketing
4. Payroll
5. Working Capital
6. Rent, Utilities, Leases
7. Training of Employees
8. Corporate Website
9. Insurance
Power Save has no plans or intentions to acquire any assets from officers,
directors or principal stockholders.
Power Save has concluded an agreement with Mirage Air Systems, Inc. to
acquire that company for $1,500,000 if and when such funds are secured in an
offering, and is identified in the Use of Proceeds table. Mirage is a
distributor of air-conditioning equipment. We have no other plans for other
acquisitions at the present time.
0
1 We believe that the proceeds from this offering will be sufficient to
remove the going concern opinion and that proceeds will permit operations to
continue for the next twelve months.
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Power Save as of July
31, 2000 and as adjusted to give effect to the sale of 100,000 shares of Common
Stock (assuming the minimum number of shares offered hereby are sold) and the
sale of 1,000,000 shares (assuming the maximum number of shares offered hereby
are sold) and the application of the estimated net proceeds therefrom, assuming
an offering price at $5.00 per share for the Common Stock. This table should be
considered together with our financial statements included elsewhere in this
prospectus. No stock splits, stock dividends, or other forms of
re-capitalization are planned at this time. See "Use of Proceeds."
<TABLE>
<CAPTION>
Amount Outstanding
As of July 31, 2000
Prior to Offering Minimum Maximum
------------------- ------------ ------------
<S> <C> <C> <C>
Debt: $ 29,888 $ 29,888 $ 29,888
Stockholder's equity:
Preferred stock, par value of $.03 per share;
50,000,000 authorized; 296,300 shares
issued and outstanding. 8,889 8,889 8,889
Common stock, $.03 par value; 50,000,000
shares authorized; 6,414,149 shares issued
and outstanding. 192,425 195,425 222,425
Additional paid-in capital 1,625,899 2,072,899 6,318,399
Deficit accumulated during development (1,315,514) (1,315,514) (1,315,514)
Accumulated other comprehensive income (296,080) (296,080) (296,080)
Total stockholders' equity 215,916 665,619 4,938,119
Total Liabilities & Stockholders' Equity $ 245,507 $ 695,507 $ 4,968,007
</TABLE>
<PAGE>
2 DIVIDEND POLICY
Power Save has not declared or paid any cash dividends on the Common Stock
since its inception. Power Save currently anticipates that all of its earnings
will be retained in the immediate future for development and expansion of Power
Save's business. No declaration or payment of any cash dividend is anticipated
in the foreseeable future.
3 DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the net tangible book value of their Common Stock
from the offering price. The net tangible book value of Power Save as of July
31, 2000 was $196,640 or $0.03 per Share of Common Stock. Net tangible book
value per share represents the amount of Power Save's tangible net worth divided
by the total number of shares of Common Stock outstanding as of July 31, 2000.
After giving effect to the sale of 1,000,000 shares of Common Stock by Power
Save in the offering and the application of the net proceeds therefrom (assuming
the maximum offering is subscribed and after deduction of underwriting discounts
and commissions and estimated offering expenses payable by Power Save), the pro
forma net tangible book value of Power Save as of July 31, 2000 would have been
$4,968,007 or $0.77 per Share of Common Stock. This represents an immediate
increase in net tangible book value of $0.74 per Share to existing shareholders
and an immediate dilution of $4.23 per Share to purchasers of shares in this
offering on a maximum basis (85%) and $4.90 on a minimum basis (98%). The
following table illustrates the per Share dilution:
<TABLE>
<CAPTION>
Offering price: $5.00 Minimum Maximum
-------- --------
<S> <C> <C>
Net tangible book value per common share before the offering $ 0.03 $ 0.03
Increase attributable to new investors .07 .74
Pro forma net tangible book value per share after the offering .10 .77
Dilution in net tangible book value per share to new investors $ 4.90 $ 4.23
</TABLE>
The following table sets forth a comparison as of July 31, 2000 of the
number of shares of Common Stock acquired by current shareholders from Power
Save, the total consideration paid for such shares of Common Stock and the
average price per share paid by such current shareholders and to be paid by the
prospective purchasers of the shares (based upon an offering price of $5.00
Shares Purchased Consideration Avg. Cash Price
------------------- --------------- ---------------
Number Percent Amount Percent Per Share
-------- -------- --------------- ----------
Existing shareholders 6,414,149 86.5% $ 297,348 5.6% $0.05
New investors 1,000,000 13.5% $ 5,000,000 94.4% $5.00
Total 7,414,149 100.0% $ 5,297,348 100.0%
The offering price of the shares has been determined based on an estimate
by management of Power Save's earnings potential over the next five years.
Management makes no representations that Power Save will generate such earnings
and there can be no assurance as to when Power Save will generate revenues and
earnings, if ever. The offering price is arbitrary and does not reflect Power
Save's asset value, net worth, present earnings, cash flow or any other
established criteria of value. The offering price of the shares may or may not
be an indication of their present value or the value of Power Save or their
future value or the future value of Power Save.
<PAGE>
PLAN OF OPERATION
The following plan of operation of Power Save should be read in conjunction
with The Use of Proceeds included elsewhere in this Prospectus. This plan of
operation and other parts of this prospectus contain forward-looking information
that involves risks and uncertainties. Power Save's actual results could differ
materially from those anticipated by such forward-looking information as a
result of certain factors including, but not limited to, those set forth under
Risk Factors and elsewhere in this prospectus.
Power Save is a development stage Company, which intends to become a
leading (OEM) Original Equipment Manufacturer, owner and lessor of engine
driven, air conditioning, refrigeration, heat recovery and electric generating
systems for the commercial and industrial marketplace. Since its inception,
Power Save's operations have been limited to developing the concepts, the
marketing program and the basic mechanical modules, and raising needed capital.
As shown in the Use of Proceeds section, a large percentage of the funds
raised will be for inventory of components, finished goods and systems site
lease financing.
Power Save has determined that there are 20 states where the difference
between the cost of natural gas as opposed to the cost of electricity create a
favorable economic situation for the placement of the Power Save International
systems.
The states are as follows: New York, Vermont, New Jersey, New Hampshire,
Massachusetts, Connecticut, Nevada, Missouri, Rhode Island, Pennsylvania,
Kansas, California, Ohio, Arizona, Missouri, New Mexico, Mississippi, Illinois,
Michigan, Louisiana.
Upon completion of the offering, Power Save International will commence
with a marketing program, which encompasses, advertisements in the trade
magazines backed up by recruiting qualified systems sales engineers for each of
these marketing areas.
Additionally, in order to have the product available for placement at sites
and eliminate long lead times, Power Save International will order and stock
sufficient components to have 10 basic system modules on hand as finished goods.
The bulk of the systems as installed will be owned by Power Save
International and leased to the sites for a ten-year period of time on a
guaranteed savings basis. Such guarantee made by us reflects our economic
analysis that notes the costs of generating electricity and heat by our system
versus the client's present and expected costs for providing equivalent power.
Guaranteed savings basis means that we will be able to guarantee a certain level
of savings by opting for our alternative and can offer our systems without cost
in return for a share of the savings in payments versus what clients are
presently realizing.
Placement of the systems on that basis will generate a continuous stream of
positive revenue for Power Save International from site energy reductions over
that ten-year period of time. Over the next twelve months we intend to market
our systems extensively and lay a base for national expansion. Realization of
funds on a minimum basis in this offering will permit us added marketing but
require us to seek added distribution assistance from a corporate partner, if
available (though no such partner has yet been identified). We realize that the
next twelve months are particularly critical to our success and extensive
marketing and publicity will be hallmarks of our ability to conduct operations
in the longer period ahead.
We have engaged in the above on a small basis in order to test our systems
and develop marketing and other information. We intend to embark on an
aggressive marketing campaign in order to realize the implementation of our
plans, based on that test. We believe that the proceeds from this offering will
be sufficient to remove the going concern opinion and that proceeds will permit
operations to continue for the next twelve months.
<PAGE>
Our standard licensing/lease agreement requires the licensee to posses the
installation and services necessary to operate CoGenAirHeat systems and to
otherwise protect our proprietary information for a period of ten years.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
11 OVERVIEW
Power Save was formed on May 8, 1987 to design, manufacture, sell/lease and
finance fossil-fueled engine-driven air conditioning, heating, thermal heat
recovery and electric co-generation plants. Realizing that Power Save needed
operating capital to effectively execute its proposed business plan, Power Save
raised both cash and services through the issuance of Power Save's stock
$1,090,750 through December 31, 1998. These funds allowed Power Save to stay in
business and generate over $500,000 in gross sales. However, Power Save's
operating losses exceeded its gross revenues and capital by over $140,000
through December 31, 1998. On July 22, 1999 Power Save was re-incorporated,
whereby, the operations were transferred to the new corporation and the old
parent company was sold to a new investor group to seek a new operation. As
part of this reorganization, certain shareholders of the old corporation
transferred their common stock of the old corporation into the newly
re-incorporated entity. As a result of this reorganization, Power Save now has
working capital of over $213,500 and a positive shareholders' equity over
$245,500.
Florida Pacific Corporation was incorporated on May 8, 1987 in the State of
Nevada and became a public company in July 1987. In December 1988 a company
called Power Save Products was reverse merged into Florida Pacific, and Power
Save Products was dissolved. After the reverse merger the name of Florida
Pacific was changed to Power Save International, Inc. and operated as a
development stage company in the co-generation industry until July 1999. At
that time, Scott Balmer, the principal shareholder of Power Save International,
Inc. sold his personal controlling shares for the sum of $150,000 plus the
retention of a certain number of shares. The name of the company was then
changed to Interactive Music, Inc. and traded as an OTC Bulletin Board Company.
Scott Balmer executed an agreement with the buyers to purchase the assets,
liabilities and name Power Save International, Inc. for the sum of $2,000. A
new company was incorporated by Scott Balmer in the State of Nevada and when the
name Power Save International, Inc. became available the name of that
corporation was changed to Power Save International, Inc. and the assets
purchased by Scott Balmer were essentially spun-off to the new Nevada
corporation with Scott Balmer as the sole shareholder. Therefore, the old
operations, the net operating loss from inception and any assets, intellectual
property, etc. were re-incorporated in the new corporation. It was treated
essentially as if the old corporation had been a wholly owned subsidiary and was
spun-off to this new Nevada corporation. All of the assets and liabilities were
transferred to the new corporation by Scott Balmer. The old investors retained
their public traded shares in Interactive Music, the old entity. This
transaction did no increase the working capital or shareholders' equity. It was
a personal sale of securities by the majority shareholder of the old corporation
who loaned the new company certain funds, which were included in the shareholder
loan that was paid in 2000.
Even though Power Save still has a going concern issue, Power Save believes
with the successful completion of the offering and with the new working capital
it has obtained, it will be successful in generating sufficient revenues in the
future to sustain current operations. The going concern issue is in regards to
the continued operating losses of Power Save. The company has enough liquidity
to maintain its operations and has a positive equity and a positive working
capital. The company is seeking the additional capital through this offering of
its newly issued common stock to increase revenues, either through an
acquisition or expansion and the sale of its technology and cogeneration
systems. This would eliminate the going concern due to continued losses from
operations.
Due to the sale of the old company, the principal officer and director had
additional funds that he was willing to lend to the company to continue its
operations. Secondly, through the issuance of 296,300 shares of its preferred
stock for liquid marketable securities, the company has been able to liquidate a
portion of these shares to generate enough cash to satisfy its working capital
requirements and achieve a positive working capital and stockholders' equity
position. This allowed the company to obtain enough liquidity to expand its
basic operations because it had acquired enough cash to pay its bills in a
timely fashion and seek additional work through advertising and business
contacts. Prior to this point in time, it did not have the liquidity to obtain
new business and to finance the work that it had obtained.
<PAGE>
Power Save operates in a very competitive environment often competing for
the same customers where larger more established and well-capitalized companies
exist. Additionally, Power Save prior to late 1999 did not have the personnel
or finances to be competitive in its current market.
Typically, the systems Power Save sells outright require a fifty percent
deposit up front, with forty percent upon shipment of the system. The remaining
ten percent is due upon the equipment functioning properly on startup. Turnkey
installations of the systems, at commercial and industrial sites, are made on a
long-term 10-year lease from Power Save International with full maintenance and
service. The system is owned by Power Save International and produces a
continuous stream of positive cash-flow to Power Save International for 10 years
from the reduction in utility costs
In the past, Power Save has not had the ability to finance, engineer, or
market its equipment properly. However, with the current funds and the funding
from the offering, Power Save believes it will become competitive within its
market and generate sufficient revenues to allow Power Save to obtain profits
from its operations.
12 RESULTS OF OPERATIONS
For the seven months ended July 31, 2000 revenues decreased due to the fact
that most of the Company's current efforts are related to the completion of the
offering presented herein. The Company is additionally reviewing and analyzing
its two test sites to determine the performance and marketability of its product
line.
Additionally, for the seven months ended July 31, 2000 the Company's gross
profit was a negative $7,014. This was due to the fact that the Company has
incurred certain costs for design changes and modifications to enhance its two
test units. The Company decided to incur 100% of these costs to make these
modifications.
Once the offering is completed, the Company expects to implement a full
marketing plan of its product line and expects to drastically improve its gross
margin through better pricing on its purchase prices from outside vendors.
For the year ended December 31, 1999, as compared to December 31, 1998, the
Company had an increase in sales from $5,041 to $69,986. This was due to the
Company being able to sell two of its units to certain clients in New York.
Based on the results of these units, the increase of capital from this offering
and an expected marketing campaign, the Company expects to generate a
substantial increase in sales in 2001.
For the seven months ended July 31, 2000, general and administrative
expenses were fairly similar in nature and amount, as compared to the year ended
December 31, 2000. The Company expects these to substantially increase once the
offering is completed and a full marketing and sales program is initiated. The
Company expects the increase in gross margins from the sales generated will
produce overall a net income overall for the Company.
The Company in the current year launched its web site that we believe will
result in additional sales and revenues for the Company, plus market exposure.
The Company in early 2000 sold a certain number of shares of its marketable
securities it currently holds for resale. The proceeds from the profitable
sales of these securities allowed the Company to reduce its obligations due to
the major shareholder of the Company and provide enough cash to have a current
working capital in excess of $200,000. The Company believes it currently has
enough working capital to cover its operations for the next twelve months.
<PAGE>
13 LIQUIDITY
During late 1999, Power Save, as discussed above, re-capitalized itself
with the issuance of preferred stock for certain marketable securities.
Power Save has been selling a certain number of these securities on a daily
basis converting its investment to cash. From the sales of the marketable
securities, Power Save has generated sufficient liquidity to maintain its
current operations.
Power Save has over $145,000 cash in its bank accounts at July 31, 2000 and
over $215,000 in working capital.
The Company believes it has enough liquidity to sustain its current
operations for the next twelve months.
As reflected in the financial statements, Power Save's working capital
decreased by $502,456 from December 31, 1999 to July 31,2000. This was mainly
due to the decrease in the value of the marketable securities it holds for
resale. However, the Company liquidated enough of these securities in early
2000 to provide the liquidity it needs for its operations as discussed above.
As reflected in the financial statements, Power Save's working capital
increased by $893,539 from December 31, 1998 to December 31, 1999. This was
mainly due to the fact that the marketable securities it had acquired had
substantially appreciated at December 31, 1999.
14 CAPITAL RESOURCES
As discussed above, Power Save believes it has generated sufficient capital
in 2000 to sustain its current operations.
During the year ended December 31, 1999, Power Save through an exchange of
preferred stock for marketable securities increased its capital by over
$880,000. Power Save had a net stockholders' equity of $718,367 at December 31,
1999. However, due to the decrease in the value of the marketable securities,
the stockholders' equity decreased by $502,748 from December 31, 19999 to July
31, 2000.
Power Save lost $88,887 from operations in 1999 and expects to continue to
have a loss from operations through the end of the year 2000. However, Power
Save believes it currently has sufficient working capital to continue its
operating plan until it will generate sufficient revenues from operations to
support its activities.
If the offering is successful, Power Save will have the additional capital
required to accelerate its business plan via an expansion of its operations,
marketing activities and financing of its activities. Additionally, Power Save
would seek certain alliances with manufacturers and marketing agreements. Power
Save will also seek certain acquisitions to further expand its planned
operation. However, Power Save will seek stock based acquisitions to preserve
its cash for the operating activities.
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables present selected historical financial data for the
seven months ended July 31, 2000 and for the years ended December 31, 1999 and
1998 and the period from (date of inception) through July 31, 2000. The balance
sheet data as of July 31, 2000 and December 31, 1999 and 1998 and the statement
of operations data for the seven months ended July 31, 2000 and for the years
ended December 31, 1999 and 1998 have been derived from financial statements
(including those set forth elsewhere in this prospectus) that have been audited
by David T. Thomson, P.C., independent accountants. The historical data for the
period from inception through July 31, 2000 is derived from our unaudited
financial statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of our results of operations for that period.
STATEMENTS OF OPERATIONS DATA
Seven Months Ended Year Ended Inception Through
July 31, December 31, July 31,
-------------
2000 1999 1998 2000
----------- ----------- ----------- ------------
Net Sales $ 4,075 $ 69,986 $ 5,041 $ 591,656
Cost of Sales 11,089 67,261 589 363,296
Gross Profit(Loss) (7,014) 2,725 4,452 228,360
Total Operating Expenses 44,151 86,163 331,895 1,640,990
(Loss) from Operations (51,165) (83,438) (327,443) (1,412,630)
Net Income(Loss) 118,392 (85,887) (315,441) (1,315,514)
Basic and Diluted Income
(Loss) Per Share $ .02 $ (.01) $ (.05)
Basic and Diluted
Weighted Average
Number of Common shares
Outstanding 6,414,149 6,414,149 6,414,149
BALANCE SHEET DATA
December 31,
-------------------- July 31,
1999 1998 2000
--------- --------- ----------
Cash $ 53,227 $ 3,527 $ 145,137
Current Assets 973,625 3,527 243,424
Total Assets 976,000 3,973 245,507
Current Liabilities 257,633 166,924 29,888
Stockholders' Equity(Deficiency) 718,367 (162,951) 215,619
<PAGE>
BUSINESS
We design, manufacture, sell/lease and finance fossil-fueled engine-driven
air conditioning, heating, thermal heat recovery and electric cogenerating
plants for the more than 2 million U.S. small businesses that usually are unable
to negotiate attractive utility rates. A co-generator produces both heat and
electricity from one fuel source. We provide equipment that can provide typical
savings of 20% to 50% on annual utility bills for HVAC (heating, ventilating,
air conditioning) on a convenient rental or lease/purchase. With conventional
utility connections in reserve, our clients have redundant and secure power
supplies at less cost than organizations that are solely dependent upon normal
utility hookups. Our natural gas-fired individual unit sales range from $75,000
to $125,000, with retrofits ranging between $125,000 and $500,000, on an
installed and connected basis. Most competition for cogeneration has focused on
large-scale industrial users, permitting Power Save International to concentrate
on the market for small businesses. The energy efficiency of cogeneration
systems is approximately twice that of conventional generation, largely stemming
from our ability to economically use the heat produced (source: DOE, "Tomorrow's
Energy Today") with important environmental benefits.
Through our founder, Scott Balmer, we have more than thirty years of
development and installation experience and now intend to develop a national
market for our proven technology. Our formal beginning starts in 1987. Our
original demonstration test site model (Power Save International-120) system was
installed in 1995 in Mamaroneck, NY and continues to meet or exceed the
customer's expectations. Our latest Power Save International-70/50 Combo system
was completed in a commercial office building in Rochester, New York. The Power
Save International systems are built in a proprietary manner, sold outright
and/or operated on a turnkey basis as the Power Save International Combo package
of cogeneration technology. Our expansion will be created through a combination
of advertising in the national trade magazines for outright sales, and direct
sales representatives in selected areas for the sale/lease of units. We also
intend to acquire suitable HVAC companies that will permit the more rapid
conversion of existing customer bases to our units.
We have built our systems to date from components that we have purchased
from Ford Motor Company, Hall Screw and other suppliers. We believe that ample
components are available from normal commercial sources and we have relied upon
purchase orders without formal contracts or agreements in place.
OUR RISK MODEL
We have taken steps to lower the risks that we take and simultaneously
enhance our expectations of profitability during a period of rapid growth. We
have structured the following business profile:
- Outright sales are made for cash with a 50% deposit due upon the
order, 40% prior to shipment and the remaining 10% on startup.
<PAGE>
- We intend to contract out most manufacturing and routine maintenance
needs to companies or individuals in the field; the requirement for a
parts inventory will also be primarily shifted to other concerns as
well. We intend to arrange for maintenance with local HVAC companies
and to provide servicing information to them. We have not presently
developed agreements for such maintenance.
- Unless sold outright, the systems remain the property of Power Save
International and are easily recoverable, if necessary.
- Funds from this offering and borrowings are targeted principally for
production and installations with immediate income.
MARKETING
We have examined various factors associated with our market including small
business electricity usage, ability to pay for our systems, power availability
and quality, fuel sources, electricity prices, penetration of competing
distributed generation technologies, new capacity requirements and the cost of
new capacity additions. Based on this evaluation, we intend to target the
following market segments for our systems
1. Business users with annual electricity costs between ($100,000 to
$1,000,000);
2. Firms in remote areas with little available service competition.
3. Facilities in high electricity cost areas.
4. Business users where utilities are unable to efficiently satisfy power
needs.
5. Strategic partnership possibilities where natural gas utilities can
enhance their sales with Power Save International installations.
We will employ numerous techniques to identify potential customers such as:
- Advertisements in the trade publications.
- Maintenance of a Web sites that illustrates our benefits.
- Identify, acquire and support several profitable and attractive HVAC
companies as subsidiaries.
- Secure motivated sales engineers at each HVAC subsidiary site and
provide evaluation, design and marketing support. We are specifically
looking for superior market and technologically specific expertise.
- We will centrally manage the delivery and installation to allow field
personnel to concentrate on marketing activities.
<PAGE>
SALES STRATEGY
We will implement our marketing plan with an emphasis on differentiating us
from competing manufacturers of equivalent equipment. Our strategy is
essentially to permanently upgrade and alter the way HVAC equipment is used by
the small end user market. We generate direct sales of our units partially
through industry advertising, largely in trade publications. We will also depend
upon contractor sales personnel who have already established relationships with
prime sales prospects. We will target owners, operators and managers of the
properties that are prime candidates for our systems and seek to leverage our
advertising. We will also supply a resident cogeneration sales engineer and
support him or her with operating systems, a defined marketing program and
facilities.
Our line of products is destined for the cogeneration market. These
systems are also known as "CoGenAirHeat" units, indicating that they are
engine-driven air-conditioning, refrigeration, electric-generation and heat
recovery units. We do not expect to be dependent upon a few customers.
Our on-site sales engineer will develop working relationships with local
utilities and complete energy audits for prospective customers. Although the
sales cycle to initial system placement may take up to nine months from the date
of the energy audit, we expect to generate a sustaining backlog of projected
installations. We also anticipate that successful site-performance histories
will serve as valuable referrals and demonstrations for on-going system sales
and acquisitions as well.
INDUSTRY BACKGROUND
The bulk of the cogeneration industry today primarily revolves around large
industrial installations and numerous systems are operating in the marketplace
today. Capital markets have developed attractive financing mechanisms and
regularly fund such projects. The National Energy Policy Act of 1992 brought
about deregulation in order to balance out the usage of natural gas and
electricity and alleviate the need to build new power plants. Incentive
programs that encourage adherence to the Act constitute an important impetus to
our growth. Because natural gas sales should increase to our clients, the gas
utility in the market of each of our prospective HVAC licensees/subsidiaries
should be an immediate beneficiary of our installations and may have an interest
in working closely with us. To the extent that natural gas becomes a more
available power source we anticipate that such availability will make our
natural gas systems even more attractive.
POWER SAVE INTERNATIONAL STRATEGY
Our approach has been to overcome the existing competitive barriers by
making cogeneration technology available to small users and we have developed:
(a) a standard line of affordable and easy to integrate, 100KW to 500 KW
cogeneration modules, with impressive energy efficiency savings; (b) a low risk
leasing vehicle whose repayment stream is closely matched to savings and is
compatible with customer needs; and (c) a decentralized overhead structure with
an added new focus on stable HVAC licensees for an operational format that is
fast, directed towards the customer and is hands-on.
<PAGE>
The modular nature of our systems permits us to fully use HVAC facilities
and personnel with other technological expertise as well as plant and equipment.
Our corporate and site engineering staff will specify, design and deliver the
cogeneration components and/or modules to a HVAC facility for their assembly,
installation and continuing maintenance. The expected increase in site
placements and revenues accompanied by new technology is expected to
significantly improve the competitive position as well as the stability and
capabilities of HVAC organizations.
PRODUCTS
The benefits and flexibility of our CoGenAirHeat System for commercial,
industrial and large residential equipment of all sizes and BTU capacities are
exclusive and unequaled in the industry. Technological developments in
efficiency, size and standardized manufacturing or sub-systems and components
have allowed us to introduce this competitive new line. We can outsource major
manufacturing components, while producing cost-effective solutions to an
underserved market niche of significant size. We sell complete systems with all
the components necessary to provide full cogeneration power and heat. Our
products have been fully developed and rest largely upon combining off the shelf
components into attractive systems. We are not dependent upon any one supplier
for any of our components.
ACQUISITIONS
We have entered into a contingent acquisition agreement whereby we would
assume all the ownership, assets and obligations of Mirage Air Systems, Inc.
upon the successful completion of this offering. The purchase price is $1.5
million and will add substantially to our sales, marketing ability and product
line in terms of conventional HVAC products.
COMPETITIVE ADVANTAGES
We have formulated our systems and marketing program to contain multiple
benefits to users, affiliates and partners alike:
- The customer receives a state of the art equipment upgrade at no
cost by opting to share the energy savings with us, while the
existing life of his present facility is extended with efficiency
and substantial cost savings, all under our standard lease
agreement.
- The HVAC licensee will receive enhanced technological capacities
and accelerated revenues. He experiences only incremental costs
under our agreements.
- The subsystem and component manufacturer receives stable demands
with economies in production and resultant improved
profitability.
- The natural gas utility receives increased throughput, load
balancing and profits with the marketing goodwill associated with
environmental improvements.
- The electric utility company is helped to achieve its mandated
deferral of electric power capital investments, since the use of
our systems permits alternative and off-peak generation that they
would otherwise be forced to provide. Our systems reduce the need
for present electric utility customers to be dependent upon their
existing power connections for all of their needs.
<PAGE>
COMPETITION
There are approximately 25 engine-drive system (air-conditioning and/or
electric generating) manufacturers in the U.S., but none have successfully
addressed the millions of small businesses that could use some form of
cogeneration equipment, except for Power Save International. Current
manufacturers have supplied to, and focused upon, the large industry segment
only, to date. The significant barriers to this market include: (a) long sales
and installation cycles; (b) complicated due diligence procedures for system
financing, and (c) costly operational structure need to expand quickly into new
markets. We have solved these problems by: (a) building standard and easily
scalable modules available in weeks; (b) we have in place financing packages
that are paid for by system savings; and (c) by leveraging the existing assets
of HVAC companies through distribution or acquisition alignments, we accelerate
geographical penetration. There are presently no other manufacturers of
cogeneration equipment for the needs of small businesses.
We will also compete with other distributed generation technologies
including fuel cells and reciprocating engines, available at prices competitive
with existing forms of power generation. We believe that our systems will have
a competitive advantage in that they can be easily scaled to various business
sizes and will be more efficient in handling the load profile of small business
customers. We also believe that our systems will be quiet, environmentally
clean, efficient and relatively inexpensive to install, service and maintain.
Our systems will also compete with solar and wind-powered systems.
NEED FOR COGENERATION
Due to increasing competitive pressures to cut costs, owners and operators
of industrial and commercial facilities are actively looking for ways to use
energy more efficiently. One option is cogeneration. In this context,
cogeneration is the simultaneous production of air conditioning, or other shaft
power usage, electricity and useful heat from the same fuel source. Facilities
with cogeneration systems use them to produce their own electricity, and use the
waste heat for process steam, hot water heating, space heating, and other
thermal needs. They may also use excess process heat to produce steam for
electricity production. Cogeneration currently coexists with a regulated
industry that is going through major structural changes that may limit its
application.
15
16 HISTORY OF COGENERATION REGULATORY ISSUES
The following discussion is provided to serve as an introduction to the
nature of the industry and the particular regulatory environment surrounding
this form of alternative electrical power generation. We do not intend to
resell energy provided through our systems and any lease agreements negotiated
by us with clients will similarly exclude such consideration. We do not believe
that our systems will be subject to governmental regulation over and above any
other normal manufacturing equipment.
<PAGE>
The concept of cogeneration is not new. Early in this century, before there
was an extensive network of power lines, many industries had cogeneration
plants. As utilities became established and grew, most states began to regulate
them in order to limit their pricing power. The Public Utilities Holding Act of
1935, together with amendments to the Federal Power Act (also in 1935), were the
final steps in protecting utility companies from competition. These laws created
vertically integrated utilities with responsibility for the production,
transmission, and distribution of power. In exchange for their exclusive
franchises (territories) and guaranteed revenues, utilities agreed to government
regulation of rates and service. Under these rules, more investments in
infrastructure and more sales meant more profits. As the network of power lines
grew and electricity from utilities became more economical, industrial
facilities bought more of their electricity from utilities. However, many
industries still had to generate process heat on-site. The economies of scale
that the utilities were able to obtain at that time, as well as the availability
of low-priced process heat from cheap oil and gas, removed incentives to retain
cogeneration.
In the past three decades, however, the long-term trend of energy prices
generally moved upward. Building more and more large power plants no longer
provided economies of scale. This was a major factor in the increasing use of
cogeneration by commercial and industrial facilities. The Public Utilities
Regulatory Policies Act of 1978 provided further encouragement for developers of
cogeneration plants. Section 210 required utilities to purchase excess
electricity generated by "qualified facilities" and to provide backup power at a
reasonable cost. Qualified facilities included plants that used renewable
resources and/or cogeneration technologies to produce electricity. As specified
in The Public Utilities Regulatory Act of 1978, cogenerators must use at least
5% of their thermal output for process or space heating (10% for facilities that
burn oil or natural gas). In many cases, this forced independent cogenerators to
accept very low rates for their steam production in order to become a qualified
facility, under the Public Utilities Regulatory Act of 1978 . Another problem is
the rate at which utilities purchase a cogenerator's excess power production.
Most states set the price at "avoided cost," or the cost to the utility of
producing that extra power. Utilities with excess power generation capacity are
often allowed to have extremely low avoided costs. This practice has created
artificial barriers to cogeneration as well as to independent power generators.
The Energy Policy Act of 1992 tried to create a more competitive
marketplace for electricity generation. It created a new class of power
generators known as Exempt Wholesale Generators. These are exempt from the
Public Utilities Holding Act of 1935's regulation and can sell power
competitively to wholesale customers. A cogeneration facility can be (but does
not have to be) a qualified facility under the Public Utilities Regulatory Act
of 1978 and an Exempt Wholesale Generators under Energy Policy Act . This
happens when the facility is in the exclusive business of wholesale power sales,
and makes no retail power sales to its "steam host" (customer).
COGENERATION TECHNOLOGY
A typical Power Save International cogeneration system consists of an
engine, steam turbine, or combustion turbine that uses shaft power to drive
compressors, pumps, and/or electrical generators. A waste heat exchanger
recovers waste heat from the engine and/or exhaust gas to produce hot water or
steam. Cogeneration produces a given amount of electric power and process heat
with 10% to 30% less fuel than it takes to produce the electricity and process
heat separately.
<PAGE>
There are two main types of cogeneration concepts: "Topping Cycle" plants,
and "Bottoming Cycle" plants. A topping cycle plant generates electricity or
mechanical power first. Facilities that generate electrical power may produce
the electricity for their own use, and then sell any excess power to a utility.
There are four types of topping cycle cogeneration systems. The first type
burns fuel in a gas turbine or diesel engine to produce electrical or mechanical
power. The exhaust provides process heat, or goes to a heat recovery boiler to
create steam to drive a secondary steam turbine. This is a combined-cycle
topping system. The second type of system burns fuel (any type) to produce
high-pressure steam that then passes through a steam turbine to produce power.
The exhaust provides low-pressure process steam. This is a steam-turbine
topping system. A third type (diesel-engine topping system) burns natural gas
or diesel fuel. Gasified coal and landfill gas can also be used. The hot water
from the engine jacket cooling system flows to a heat recovery boiler, where it
is converted to process steam and hot water for space heating. The fourth type
is a gas-turbine topping system. A natural gas turbine drives a generator. The
exhaust gas goes to a heat recovery boiler that makes process steam and process
heat. A topping cycle cogeneration plant always uses some additional fuel,
beyond what is needed for manufacturing, so there is an operating cost
associated with the power production. Bottoming cycle plants are much less
common than topping cycle plants. These plants exist in heavy industries such
as glass or metals manufacturing where very high temperature furnaces are used.
A waste heat recovery boiler recaptures waste heat from a manufacturing heating
process. This waste heat is then used to produce steam that drives a steam
turbine to produce electricity. Since fuel is burned first in the production
process, no extra fuel is required to produce electricity.
An emerging technology that may have cogeneration possibilities is the fuel
cell. A fuel cell is a device that directly converts fossil fuels to
electricity without combustion. The first commercial availability of fuel cell
technology was in the phosphoric acid fuel cell, which has been on the market
for a few years. There are about 40 installed and operating in the United
States. A portable, 200 kW, natural gas fired phosphoric acid fuel cell was
hooked up to the Springs Industries baby-clothing manufacturing plant in
Jackson, Georgia in 1996 (we were not involved in any way). The fuel cell will
supply electricity to the textile plant for one year while the engineers monitor
its performance. Hot water generated by the fuel cell is used in the
manufacturer's dyeing and washing processes. Other fuel cell technologies
(molten carbonate and solid oxide) are in early stages of development, though
not by us. Solid oxide fuel cells (SOFCs) may be potential source for
cogeneration due to the high temperature heat generated by their operation.
COGENERATION APPLICATIONS
Cogeneration systems have been designed and built by the larger firms in
the industry for many different applications. PSI has only two installed
systems, both for smaller users. Large-scale systems can be built on-site at a
plant, or off-site. Off-site plants need to be close enough to a steam customer
(or municipal steam loop) to cover the cost of a steam pipeline. Industrial or
commercial facility owners can operate the plants, or a utility or a non-utility
generator (NUG) may own and operate them. Manufacturers use 90% of all
cogeneration systems. Some industries and waste incinerator operators who own
their own equipment realize sizable profits with cogeneration.
Another large-scale application of cogeneration is for district heating.
Many colleges and cities, which have extensive district heating and cooling
systems, have cogeneration facilities. The University of Florida has a 42
Megawatt (MW) gas turbine cogeneration plant ("Gator Power"), built in
partnership with the local utility (PSI was not involved in any aspect of this
installation). Pictures of the plant as well as descriptions of the system and
other technical references are currently available on the Internet (see address
below).
<PAGE>
Some large cogeneration facilities were built primarily by other
manufacturers to produce power. They produce only enough steam to meet the
requirements for qualified facilities under the Public Utilities Regulatory Act
of 1978. If no steam host is nearby, one can be built. For example, there are
large (80 MW) plants operating under the Public Utilities Regulatory Act of
1978, that have large greenhouses as steam hosts" (this was not a PSI project).
The greenhouses operate without losing money only because their steam heat is
virtually free of charge. These types of plants are candidates to become Exempt
Wholesale Generators in the new regulatory environment.
Many utilities have formed subsidiaries to own and operate cogeneration
plants. These subsidiaries are successful due to the operation and maintenance
experience that the utilities bring to them. They also usually have a long-term
sales contract lined up before the plant is built. One example is a 300 MW
plant that is owned and operated by a subsidiary co-owned by a utility and an
oil company (PSI did not participate in this project). The utility feeds the
power directly into its grid. The oil company uses the steam to increase
production from its nearby oil wells.
Cogeneration systems are also available to small-scale commercial and
industrial users of electricity, our only target market. Small-scale packaged
or "modular" systems are being manufactured for commercial and light industrial
applications. Modular cogeneration systems are compact, and can be manufactured
economically. These systems, ranging in size from 20 kilowatts (kW) to 650 kW
produce electricity and hot water from engine waste heat. It is usually best to
size the systems to meet the hot water needs of a building. Thus, the best
applications are for buildings such as hospitals or restaurants that have a
year-round need for hot water or steam. They can be operated continuously or
only during peak load hours to reduce peak demand charges, although continuous
operation usually has the quickest payback period.
Cogeneration systems have also been developed for private residences
however this is not a market that we have an immediate interest in pursuing.
These home-sized cogeneration packages have a capacity of up to 5 kW. Both
natural gas-fueled and oil-fueled systems exist. They are capable of providing
most of the heating and electrical needs for a home. Small-scale cogeneration
has not been widely used in the United States due to the initial cost of buying
and installing the system.
ENVIRONMENTAL ISSUES
While cogeneration provides several environmental benefits by making use of
waste heat and waste products, air pollution is a concern any time fossil fuels
or biomass are burned. The major regulated pollutants include particulates,
sulfur dioxide (SO2), and nitrous oxides (NOX). Water quality, while a lesser
concern, can also be a problem. New cogeneration plants are subject to an
Environmental Protection Agency (EPA) permit process designed to meet National
Ambient Air Quality Standards (NAAQS). Many states have stricter regulations
than the EPA. This can add significantly to the initial cost of some
cogeneration facilities.
<PAGE>
Some cogeneration systems, such as diesel engines, do not capture as much
waste heat as other systems. Others may not be able to use all the thermal
energy that they produce because of their location. They are therefore less
efficient, and the corresponding environmental benefits are less than they could
be. The environmental impacts of air and water pollution and waste disposal are
very site-specific for cogeneration. This is a problem for some cogeneration
plants because the special equipment (water treatment, air scrubbers, etc.)
required to meet environmental regulations adds to the cost of the project. If,
on the other hand, pollution control equipment is required for the primary
industrial or commercial process, cogeneration still can be economically
attractive.
0
We have configured our products with considerations of environmental and
other regulatory features in mind and we currently do not believe that we are
subject to any federal and state regulation that is over and above normal
considerations. We do not have any special costs or impact that are an effect
of complying with any environmental laws.
1
2 FUTURE MARKET DEVELOPMENT
Although the number of cogeneration systems is growing at a steady rate,
certain factors have and will slow the acceleration of cogeneration activities.
Such factors include the initial cost of buying and bringing a cogeneration
system on-line, maintenance costs, and environmental control requirements. Not
all electric utilities need the additional electricity. They may have excess
generation capacity or a stable customer base. This leads to lower "avoided
cost" rates, which reduces the viability of cogeneration projects that rely
heavily on power sales to utilities. In addition, the deregulation, or
restructuring, of electric power generation makes it more attractive for
developers to become independent power producers and to build "electricity only"
power plants, instead of cogeneration plants. There has also been a great deal
of pressure from utility and industrial special interests to repeal or amend the
Public Utilities Regulatory Act of 1978 . If they are successful, it could be
difficult for new cogeneration projects to get off the ground. Barring that
development, improved technology and cooperation among industries, businesses,
utilities, and financiers should provide impetus to the continued development of
both cogeneration projects and independent power production projects.
17 INTELLECTUAL PROPERTY
We intend to trademark and otherwise brand our services. If successful,
our rights to such trademarks and service marks will last indefinitely so long
as we continue to use and police the marks and, with respect to registered
marks, to renew filings with the appropriate government agencies. We consider
that marks will become material to our business.
18
19 WEB SITE
<PAGE>
As part of our program to secure added clients, we have provided a Web site
that features a variety of information for sales engineers and customers alike.
Our national Web site features valuable information for HVAC needs of small
business as well as a chat room to allow questions to be submitted to Company
personnel. Each HVAC licensee/subsidiary will also have a Web site that relates
to his particular territory and unique community dynamics. We believe continued
participation and promotion of such Web sites will provide the important
marketing advantages.
20 EMPLOYEES
As of July 31, 2000 we had 5 individuals who served on as needed basis only
and are unsalaried. None of these individuals is represented by a union. We
intend to augment our staff in response to the proceeds of this offering and the
success of our acquisition and marketing strategies.
21 PROPERTIES
Our principal executive and administrative offices are located at 5800 NW
64th Avenue, Bldg 26 #109, Tamarac, FL. We currently occupy 1,000 square feet
of space at a monthly cost of $500, on a month-to-month basis. Upon completion
of this offering we intend to acquire approximately 2,500 square feet in a
nearby facility.
22 LEGAL PROCEEDINGS
We are not a party to any material litigation. However, claims and
litigation may arise in the normal course of business.
0 ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 under the Securities
Act with the Securities and Exchange Commission in Washington, D.C. with respect
to the securities offered hereby. This prospectus, which constitutes a part of
the registration statement, does not contain all of the information set forth in
the registration statement and the exhibits and schedules thereto. For further
information with respect to us and the securities offered hereby, reference is
made to the registration statement and the exhibits and schedules thereto filed
as a part thereof. Statements contained in this prospectus as to the contents of
any contract or other document filed as an exhibit to the registration statement
to are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference. The registration statement, including all amendments, exhibits and
schedules thereto, and any other documents involved in this filing, may be
inspected without charge at the Public Reference Room at the office of the
Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Securities and Exchange Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material may also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the Securities and Exchange Commission
maintains a web site that contains reports, proxy and information statements and
other information regarding issues that file electronically with the Commission.
The address of site is http://www.sec.gov.
------------------
<PAGE>
Following this registration, we intend to make an annual report with
audited financial statements available to our shareholders. We intend to file
quarterly and annual reports with the Commission and other regulatory
authorities, as required by law and regulation. Our fiscal year ends on
December 31.
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Name Age Position Director Since
<S> <C> <C> <C>
SCOTT EMERSON BALMER 74 Chairman of the Board of Directors 1988
BURTON T. O'DONALD 57 Vice Chairman, CEO 1999
RAYMOND H. BOLDUC II 52 President, COO, CFO
VICTOR V. VURPILLAT, PHD 68 Vice President, Acquisitions
NORMAN S. HAUGEN 65 Consultant, Electric Power Programs
MARY JANE BALMER, 69 Interim Secretary and Treasurer 1988
</TABLE>
Note: Presently all executives serve on an as needed basis only. Except for
Mr. Balmer, this requirement has been filled on a part-time basis only, usually
requiring less than 2 hours per week. No compensation has been granted for such
service and no compensation is due in the future for such service. They will
join us permanently in the position indicated upon attaining financing. An
officer or director "expected to join Power Save" or "designate" is one who will
assume the office no later than upon completion of the offering.
Our directors are elected for a one-year period at the annual meeting of
our shareholders and can be re-elected to subsequent terms. Each director holds
office until his successor is elected and qualified or until his earlier death,
resignation or removal. Our executive officers serve at the discretion of the
Board of Directors. None of the permanent executives or directors has or will
have any family relationship to any other. We expect to obtain key life
insurance on Scott Balmer, payable to us. Mary Jane Balmer, the Interim
Secretary and Treasurer, is the wife of Scott Balmer. Mrs. Balmer intends on
resigning her position once adequate funding for the growth of the Company and
hiring of added personnel is secured.
23 Scott Emerson Balmer is our founder and has exclusively directed
Power Save since 1988. He has spent a lifetime in the HVAC industry and has
designed equipment to fill a variety of niches in the marketplace. Balmer & his
associates have concentrated on development of medium capacity combo system
electric generating plants, cogeneration, and research and development of
natural gas fueled systems. He is a creator of numerous unique designs in
energy saving equipment including solar and geothermal energy systems. He is
the husband of Mary Jane Balmer.
Burton D. O'Donald joined us as CEO in 1998 following three years at the
Oxford Acceptance Company, a sub-prime lender for automobile financing and ten
years at the DME Corporation, an electromechanical systems manufacturer. He
co-founded Oxford and implemented direct marketing and support systems for this
capital provider. At DME he was involved in product development, design
engineering and support of marketing. He holds two Bachelor's degrees from the
University of Pennsylvania and a Master's degree from the Wharton School.
Raymond H. Bolduc II has been our President, CFO and COO since December
1998. He has served as an advisor and participant in major corporate development
programs for Arthur D. Little Company and has held a variety of executive
positions with firms such as American Express-Latin America. From January 1994
to September 1996 he served as a consultant to Renova Group, a South Florida
business planning company, and from 1996 to 1997 as a consultant to Tronco-South
Africa, a pre-fabricated building manufacturer. From 1997 he was a consultant to
Hidden Eyes, Inc., an electronic security firm and from 1998 to the present he
has served as Manager of Administration and Projects of Miami Millwrights, an
installation contractor of airport baggage handling systems. He holds a
Bachelor's degree from Rutgers University and an MBA from Northeastern
University.
<PAGE>
Victor V. Vurpillat has chaired our Executive Committee since 1995 and
presently serves as Vice President, Acquisitions. From 1999 to the present he
has served as a vice-president of 21st Century Medicine, a firm engaged in
anti-aging research. From 1996 to 1999 he was with SpanWorks, a joint venture
technology funder and manufacturer of networks at the conference table for
laptop and notebook computers, with Toshiba, as a founder and board member. From
1992 to 1996 he was the chairman of a biotech engineering company, Incell. From
1976 to 1990 he served as a founder and VP for R&D of Safeguard Scientifics,
Inc., a company that served as an early incubator for many technology firms. He
is either a founder, officer or director of 13 early stage companies including
Novell, Telerate, LV Computer Systems, Compucom, InCell and IDR-Reuters. He
holds 7 U.S. patents and was granted a PhD by Newport University.
Norman S. Haugen has served as a Consultant to Power Save since 1988 with
compensation paid on a per job basis. He has 40 years of experience in the power
generation field with extensive experience in the application of cogeneration
systems and is semi-retired. He also is experienced in the manufacturing and
servicing of cogeneration applications.
Mary Jane Balmer has served PSI exclusively as our Interim Secretary and
Treasurer since 1988. She is the wife of Scott Balmer.
DIRECTOR COMPENSATION
None of Power Save's directors received any compensation for their services
as a director during fiscal year 1998, 1999 or 2000. After completion of the
offering, Power Save will consider a small stipend for directors who are not
employees of Power Save and/or participation in a stock option plan. Power Save
reimburses all reasonable expenses incurred in connection with attending
meetings of the Board. Officers serve at the discretion of the Board and are
elected annually. No director is selected or serves pursuant to any special
arrangement or contract. (See "Description of Capital Stock.")
EXECUTIVE COMPENSATION
No executives received compensation from Power Save in 1999 or 2000.
Any bonuses would be awarded by the Board of Directors following a review
of our performance in the previous year and a judgment that such bonuses were
warranted. The Board may also choose additional forms of compensation if Power
Save's and the individual's performance so warranted. The formula or criteria
for determining bonuses past 2000 has not yet been established.
STOCK OPTION AND EXERCISE PRICES
Power Save has no stock option plan at the present time and there are no
outstanding stock options that have been granted to anyone.
EMPLOYMENT AGREEMENTS.
We will enter into a new three-year employment agreement containing
confidentiality and non-compete provisions with all current officers and we
intend to negotiate similar agreements with new executive officers. We expect
to have these in place during the fourth quarter 2001. The employment
agreements will specify salary, other forms of compensation, termination and
other provisions to protect both our rights and those of the employee.
<PAGE>
Each employment agreement also will provide that the employee is entitled
to a bonus as determined by the board of directors, from time to time, and
options under Power Save's Stock Option Plan, if adopted. Each Employment
Agreement provides for a term of three years and is renewable upon mutual
consent. The employment agreements may be terminated for cause and, in the event
of change in control of Power Save, each employee is entitled to a lump sum
payment equal to the greater of one year's salary or the baser salary and
benefits that would have been received by the employee if he/she had remained
employed by us the remainder of the three year term. The employment agreements
also contain confidentiality and non-competition provisions prohibiting the
employee from competing against us and disclosing trade secrets and other
proprietary information. Courts have often held that such non-compete agreements
are contrary to public policy and may easily not be enforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently utilizes office space from a major stockholder of the
Company, Mr. Scott Balmer. Mr. Balmer is not charging the Company for the use
of the office space. The Company has recorded contributed capital for the
estimated cost of the space at $500 per month starting January 1998 with and
offset to rent expense. The same stockholder and director of the Company have
provided free services to the Company. The Company has recorded contributed
capital for the estimated cost of the services at $1,500 per month starting
January 1998 with an offset to officer compensation. The same stockholder, and
director have made certain advances to the Company on an interest free basis,
payable upon demand. From inception of the loans to December 31, 1996, the
Company has computed interest on the advances at 8% and has treated the interest
of $70,318 as contributed capital with an offset to interest expense. From 1997
forward the Company has accrued interest on the advances, until paid, as a
liability with an offset to interest expense. During the period ended July 31,
2000 the Company paid off the advances, which at the time were $218,753 and paid
down the accrued interest to $23,992.
We believe that all of the transactions set forth in this document were
made on terms no less favorable to us than could have been obtained from
unaffiliated third parties. We intend that all future transactions, including
loans, between us and our officers, directors, principal shareholders and their
affiliates will be approved by a majority of the board of directors, including
outside directors, and be on terms no less favorable to us than could be
obtained from unaffiliated third parties.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of July 31, 2000 and as adjusted to
reflect the sale of the minimum and maximum amount of the shares offered hereby,
by: (1) each person known by Power Save to be the beneficial owner of more than
5% of Power Save's Common Stock; (2) each of Power Save's directors; (3) each of
Power Save's executive officers, (4) all directors and executive officers of
Power Save as a group, and (5) all other stockholders as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NUMBER PERCENT (%)
------ -----------
Prior to After After
Name of Beneficial Owner Offering Minimum Maximum
----------------- -------------- -------------
<S> <C> <C> <C>
Scott Balmer 6,414,149(100%)* 6,414,149(99%) 6,414,149(87%)
Mary Jane Balmer 6,414,149(100%)* 6,414,149(99%) 6,414,149(87%)
Other Investors None
Total 1
Total shares sold in the offering (Min) 100,000
Total shares sold in the offering (Max) 1,000,000
</TABLE>
* Scott Balmer and Mary Jane Balmer are married to each other and report each
other's shares as beneficial owners.
<PAGE>
0 CERTAIN ARTICLES AND BYLAWS
The Certificate of Incorporation and Bylaws of Power Save contain certain
provisions regarding the rights and privileges of shareholders. The provisions
of the Certificate of Incorporation and Bylaws are summarized below. Reference
is made to the full text of the Certificate and Bylaws. The following summary is
qualified in its entirety by such reference.
Size of Board and Election of Directors. The Certificate of Incorporation
provides that the number of Directors shall be fixed from time to time as
provided in the Bylaws. The Articles of Incorporation and Bylaws currently
provide for not less than one person to serve on the Board, but the number of
Directors may be changed (to not less than one) by amendment to the Bylaws,
which requires the vote of a majority of the Board. The Articles of
Incorporation further provides that the Board may amend the Bylaws by action
taken in accordance with such Bylaws, except to the extent that any matters
under the Articles of Incorporation or applicable law are specifically reserved
to the shareholders.
1 OPTION FOR SHAREHOLDERS OWNING MORE THAN 10%
The only shareholder owning more than 10% is the founder, Scott Balmer. He
has not been granted any options.
2 DESCRIPTION OF SECURITIES
The authorized capital stock of Power Save consists of 50,000,000 shares of
common stock, par value $0.001. On July 31, 2000 6,414,149 shares of common
stock were issued and outstanding and there is one holder of the common stock.
50,000,000 preferred shares are authorized and 296,300 have been issued and are
outstanding. All of the shares of common stock are subject to lock-up
agreements and therefore cannot be placed upon the market until such time as
those lock-ups expire.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders and do not have cumulative voting
rights. The holders of a majority of the outstanding shares of Common Stock
represented at a meeting at which a quorum is present may elect all directors to
be elected at the meeting. Holders of the common stock may take action without a
meeting of stockholders if a consent in writing setting forth such action is
signed by the holders of the majority of all outstanding shares of Common Stock.
The holders of Common Stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the Board of Directors out of
legally available funds. In the event of the liquidation, dissolution or
winding up of Power Save, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities. There are no
preemptive rights, redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and the shares of
Common Stock to be outstanding upon completion of the offering will be, fully
paid and non-assessable. The dividends and liquidation rights of holders of
common stock are subject to the rights and preferences of the holders of shares
of any series of preferred stock that Power Save may issue in the future.
No material terms of our by-laws are believed to exist that would delay,
defer or prevent a change of control of the company. The staggered terms of our
board of directors relate to the time that they originally agreed to serve and
were elected and do not constitute a barrier to change in control of the
company.
<PAGE>
3 LIMITATIONS OF DIRECTORS' LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
The Bylaws of Power Save provide that directors of Power Save will not be
personally liable for monetary damages to Power Save or its shareholders for
breaches of their duties as directors except in instances involving
self-dealing, willful misconduct or recklessness, criminal violations or
liabilities involving the payment of taxes.
Power Save has included provisions in its Bylaws providing for
indemnification of its directors and officers by Power Save to the maximum
extent permitted under applicable law, including the advancement of expenses
incurred by a director or officer in any suit in which the director or officer
is involved. Power Save believes that such actions will assist it in attracting
and retaining qualified individuals to serve as directors and officers.
Prospective investors should be aware, however, that the costs associated with
indemnifying a director or officer could be significant and, if not covered by
insurance, could adversely affect Power Save's results of operations.
Furthermore, in situations where Power Save has advanced litigation expenses to
a director or officer and the director or officer is required to repay the
expenses because it is ultimately determined that the director or officer is not
entitled to indemnification, the director or officer may not have sufficient
cash or assets to repay the expenses advanced.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Power Save
pursuant to the foregoing provisions or otherwise, Power Save 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
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Power Save of expenses incurred or
paid by a director, officer or controlling person of Power Save in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Power Save will 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 issue.
4 LIMITATIONS ON TRANSFER OF SHARES
There is currently no public market for Power Save's Common Stock, and
there is little likelihood that an active trading market will develop in the
near future as a result of this offering.
5 TRANSFER AGENT AND ANNUAL REPORT
Power Save will act as its own transfer agent until the offering is
completed. Each year Power Save will prepare and distribute to shareholders an
Annual Report that describes the nature and scope of Power Save's business and
operations for the prior year and contains a copy of Power Save's audited
financial statements for its most recent year.
6 VALIDITY OF COMMON STOCK
The validity of the issuance of Common Stock offered hereby will be passed
upon by competent counsel.
<PAGE>
7 ACCOUNTING
Power Save's audited financial statements contained herein show Power
Save's position as of July 31, 2000 and are audited by the firm of David T.
Thomson, P.C., of Murray, Utah.
8 QUALIFIED SMALL BUSINESS ISSUER CAPITAL GAINS TAX EXCLUSION
In 1993, IRS Section 1202 was enacted to provide a 50-percent exclusion of
any gain from the sale of qualified small business stock." For the shares to
qualify for the exclusion, several tests must be met. For instance the shares
must be purchased directly from Power Save, not in a later trading market, and
the shares must be held for at least five years. In addition, a "qualified small
business" must not have more than $50 million in assets at all times before the
issuance of the stock and immediately thereafter. Further, at least 80 percent
of the assets must be used in the "active conduct of one or more qualified
trades or businesses" throughout the holding period. There are also limitations
on the persons who may use the exclusion. Prospective investors should consult
their own tax advisers as to the availability of the exclusion.
9 PLAN OF DISTRIBUTION
Power Save is offering to sell up to 1,000,000 shares of Common Stock at an
offering price of $5.00 per share. Power Save has agreed to pay to a
broker-dealer, Three Arrows Capital Corporation, 7515 Westfield Drive BeRevda,
MD 20817-6627 (301) 229 6240 (the "selling agent") a sales commission of 5
percent, or $0.25 per share. In addition, Power Save has issued warrants to the
broker-dealer to purchase shares at the offering price, within five years
following effectiveness of the offering as declared by the Commission, at the
rate of one warrant for each fifteen shares sold up to a maximum of 83,333
shares, and paid a fee of $9,950 for due diligence and consultation. Warrants
to be received by Three Arrows Capital Corp. are restricted from sale,
transfer, assignment or hypothecation for a period of one year from the
effective date of the offering except to officers or partners (not directors) of
the underwriter and members of the selling group and/or their officers or
partners. Three Arrows Capital Corp. is a registered broker-dealer with the
NASD and is registered with the states of New York, Maryland, Virginia and
numerous other jurisdictions. Power Save has also agreed to indemnify the
selling agent for any material misstatement in its filing. Power Save has no
plans, proposals, arrangements, or understandings with the selling agent, other
than the warrants shares of Power Save's common stock, with regard to future
transactions. No other material relationships exist between the selling agent
and Power Save or its management. No selling group exists at the present time
or is contemplated. We currently also do not contemplate any electronic
offering of the security. We may choose to place the prospectus and the
subscription agreement on the Internet and if so it will be done by the company
itself and the underwriter without any third-party participation. All
communications regarding the offering will cite the availability of the
prospectus and no preliminary prospectus or pre-qualification efforts have been
offered or undertaken.
No officers, employees, or directors of Power Save will be paid a
commission in connection with the sale of any shares nor will any officer,
employee or director of Power Save undertake the sale of the shares. Sale of the
shares will only be undertaken by the underwriter. None of the principal
shareholders nor management of Power Save nor the underwriter will buy shares in
the offering to meet the escrow. The shares will be offered by the selling agent
on behalf of Power Save primarily through direct solicitations, media coverage,
and posting of announcements.
Notices of the offer and how to get a prospectus will be posted on our
website, www.power-save.net, and may also be in selected print media and sent to
------------------
customers and other interested parties by mail. These notices will be in the
form permitted by Rule 134 of the federal Securities Act of 1933. Copies of
this prospectus will be accessible through our website to persons registering as
residents of states in which we may lawfully offer shares. The share purchase
agreement will also be available on the website to those persons and can be
completed and submitted electronically or printed and mailed. Printed copies of
the prospectus and share purchase order will be mailed to those requesting them.
Notice of accepted share purchase orders will be sent by email or regular mail.
Shares are to be sold on a "first come- first served," basis as determined by
the date when share purchase orders are received. The offering will end when
either all of the shares have been sold or we terminate the offering. When the
offering is completed, purchasers will receive a certificate for those shares.
We have not solicited conditional offers or indications of interest and full
payment will be required with the subscription.
<PAGE>
1 DETERMINATION OF OFFERING PRICE
Because there has been no market for our common stock, the public offering
price has been determined by our board of directors. Among the factors
considered were Power Save's results of operations, our current financial
condition, our future prospects, the state of the markets for our products and
services, the experience of management and the economics of the industry segment
in general.
2 BEST EFFORTS OFFERING
Neither the underwriter nor any other party has agreed to purchase any
amount of securities and the success of the offering is dependent upon sales of
the security.
Power Save reserves the right to reject any subscription in its entirety or
to allocate shares among prospective investors. If any subscription is rejected,
funds received by Power Save for such subscription will be returned with
interest and without deduction. The termination date of the prospectus is
December 31, 2001. Subscribers will be required to make certain representations
and warranties in the subscription agreement that should be carefully read
before signing.
Investors will have payment for stock deposited in an escrow account in The
Business Bank, 8399 Leesburg Pike, Vienna, VA 22101 by noon of the next business
day after receipt by the broker-dealer. If the minimum proceeds of $500,000 are
not raised, the Subscriber's funds will be promptly returned, with interest, by
the escrow date of December 31, 2001. Escrowed funds will be invested only in
investments permissible under SEC Rule 15c2-4.
Within five days of its receipt of a subscription agreement from the
selling agent confirming that an accompanying check for the purchase price of
shares has been received following escrow, Power Save will send by first class
mail a written confirmation to notify the subscriber of the extent, if any, to
which subscription has been accepted by Power Save. Power Save reserves the
right to reject orders for the purchase of shares in whole or in part. Not more
than thirty days following the mailing of its written confirmation, and upon
achieving the minimum number of total shares to be sold, a subscriber's Common
Stock certificate will be mailed by first class mail. Power Save shall not use
the proceeds paid by an investor until such time as escrow is broken.
LOCK-UP AGREEMENTS
Officers and directors of Power Save are required to sign "lock-up"
agreements for any and all shares they own or have beneficial rights to own.
Such agreements specify that the holders will not sell or otherwise dispose of
any shares of common stock in any public market transaction including pursuant
to Rule 144 without the specific written approval of the underwriter, Three
Arrows Capital Corp.
<PAGE>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JULY 31, 2000
AND
DECEMBER 31, 1999 AND 1998
<PAGE>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statement of Stockholders' Equity 4-5
Statements of Cash Flows 6
Notes to Financial Statements 7-12
<PAGE>
<TABLE>
<CAPTION>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
JULY 31, 2000, DECEMBER 31, 1999 AND 1998
ASSETS
July 31, December 31, December 31,
2000 1999 1998
------------ -------------- --------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 145,137 $ 53,227 $ 3,527
Prepaid expenses 1,500 - -
Accounts receivable 3,788 3,788 -
Marketable securities-available-for-sale 74,020 904,160 -
Deferred offering costs 18,979 12,450 -
------------ -------------- --------------
Total Current Assets 243,424 973,625 3,527
------------ -------------- --------------
PROPERTY, PLANT AND EQUIPMENT, at cost
Equipment 4,112 4,112 1,612
------------ -------------- --------------
4,112 4,112 1,612
Less accumulated depreciation 2,029 1,737 1,166
------------ -------------- --------------
Net property, plant and equipment 2,083 2,375 446
------------ -------------- --------------
OTHER ASSETS
Product rights, development costs and other intangible assets
net of reserve of $244,000 at July 31, 2000 and December 31,
1999 and 1998 - - -
------------ -------------- --------------
Total Other Assets - - -
------------ -------------- --------------
TOTAL ASSETS $ 245,507 $ 976,000 $ 3,973
============ ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,896 $ 2,056 $ 9,256
Accrued interest payable - stockholder 23,992 36,824 22,674
Advances from shareholder - 218,753 134,994
------------ -------------- --------------
Total Current Liabilities 29,888 257,633 166,924
------------ -------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock; 50,000,000 shares authorized; $.03 par value;
296,300 shares issued and outstanding at July 31, 2000 and
December 31, 1999 and no shares issued and outstanding
at December 31, 1998 8,889 8,889 -
Capital stock, $.03 par value; 50,000,000 shares authorized;
6,414,149 shares issued and outstanding at July 31, 2000,
December 31, 1999 and 1998 192,425 192,425 192,425
Additional paid-in capital 1,625,899 1,611,899 992,643
Deficit accumulated during the development stage (1,315,514) (1,433,906) (1,348,019)
Accumulated other comprehensive income (loss) (296,080) 339,060 -
------------ -------------- --------------
Total Stockholders' Equity (Deficit) 215,619 718,367 (162,951)
------------ -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 245,507 $ 976,000 $ 3,973
============ ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
<TABLE>
<CAPTION>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Seven Months Year Ended Inception
Ended ----------------------------- Through
July 31, December 31, December 31, July 31,
2000 1999 1998 2000
----------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
SALES, Net of Returns, Allowances and Discounts $ 4,075 $ 69,986 $ 5,041 $ 591,656
COST OF SALES 11,089 67,261 589 363,296
----------- -------------- -------------- ------------
Gross margin (7,014) 2,725 4,452 228,360
----------- -------------- -------------- ------------
EXPENSES:
Research and development costs - - - 119,554
Depreciation and amortization 292 571 50,186 548,438
Reserve against product rights - - 244,000 244,000
General and administrative expenses 43,859 85,592 37,709 728,998
----------- -------------- -------------- ------------
TOTAL OPERATING EXPENSES 44,151 86,163 331,895 1,640,990
----------- -------------- -------------- ------------
Net (loss) before other items (51,165) (83,438) (327,443) (1,412,630)
----------- -------------- -------------- ------------
OTHER INCOME (EXPENSE)
Nonrefundable option income - - 23,000 23,000
Gain on sale of marketable securities 167,249 11,474 - 178,723
Interest expense (2,877) (14,150) (10,998) (110,019)
Dividend income 5,185 227 - 5,412
----------- -------------- -------------- ------------
TOTAL OTHER INCOME 169,557 (2,449) 12,002 97,116
----------- -------------- -------------- ------------
NET (LOSS) BEFORE TAXES 118,392 (85,887) (315,441) (1,315,514)
PROVISIONS FOR INCOME TAXES - - - -
----------- -------------- -------------- ------------
NET (LOSS) $ 118,392 $ (85,887) $ (315,441) $(1,315,514)
=========== ============== ============== ============
EARNINGS (LOSS) PER SHARE $ 0.02 $ (0.01) $ (0.05)
=========== ============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 6,414,149 6,414,149 6,414,149
=========== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
<TABLE>
<CAPTION>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (MAY 8, 1987) TO DECEMBER 31, 1999
Preferred Stock Capital Stock Additional
---------------------- --------------------- Paid-in
Shares Amount Shares Amount Capital
----------- --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Issuance of shares for cash-May 1987 - $ - 100,000 $ 3,000 $ -
Issuance of shares for cash-August 1987 - - 63,433 1,903 278,037
Issuance of shares for product rights and other
intangible assets - - 33 - -
Sale of shares to the public for $.30 per share-restated - - 74,334 2,230 20,070
Deferred offering costs - - - - (7,892)
Exchange of shares regarding pooling of interest
of subsidiaries:
Cancellation - - (63,467) (1,904) 1,904
Re-issuance - - 396,767 11,904 (11,904)
Issuance of shares for services - - 30,500 915 -
Cancellation of shares-former officer - - (30,000) (900) (9,100)
Issuance of shares to A.P.S.I.-merger - - 5,144,000 154,320 (109,320)
Issuance of shares for prepaid lease and
working capital - - 449,000 13,470 236,530
Issuance of shares for services - - 95,000 2,850 -
Conversion of debt to preferred stock 50,000 1,500 - - 498,500
Exchange of preferred shares for oil and gas
properties 2,000,000 60,000 - - 9,940,000
Issuance of shares for services - - 154,549 4,637 -
Additional contributed capital - - - - 70,318
Net loss from inception through
December 31, 1996 - - - - -
----------- --------- ---------- --------- ------------
Balance-December 31, 1996 2,050,000 61,500 6,414,149 192,425 10,907,143
Net loss for the year ended December 31, 1997 - - - - -
----------- --------- ---------- --------- ------------
Balance-December 31, 1997 2,050,000 61,500 6,414,149 192,425 10,907,143
Additional contributed capital - - - - 24,000
Cancellation of preferred shares for oil and gas
properties and other outstanding preferred shares (2,050,000) (61,500) - - (9,938,500)
Net loss for the year ended December 31, 1998 - - - - -
----------- --------- ---------- --------- ------------
Balance-December 31, 1998 - $ - 6,414,149 $192,425 $ 992,643
=========== ========= ========== ========= ============
Deficit
Accumulated Accumulated
During the Other Total
Development Comprehensive Stockholders' Comprehensive
Stage Income Equity Income
------------ ------- ------------- ---------------
<S> <C> <C> <C> <C>
Issuance of shares for cash-May 1987 $ - $ - $ 3,000
Issuance of shares for cash-August 1987 - - 279,940
Issuance of shares for product rights and other
intangible assets - - -
Sale of shares to the public for $.30 per share-restated - - 22,300
Deferred offering costs - - (7,892)
Exchange of shares regarding pooling of interest
of subsidiaries:
Cancellation - - -
Re-issuance - - -
Issuance of shares for services - - 915
Cancellation of shares-former officer - - (10,000)
Issuance of shares to A.P.S.I.-merger - - 45,000
Issuance of shares for prepaid lease and
working capital - - 250,000
Issuance of shares for services - - 2,850
Conversion of debt to preferred stock - - 500,000
Exchange of preferred shares for oil and gas
properties - - 10,000,000
Issuance of shares for services - - 4,637
Additional contributed capital - - 70,318
Net loss from inception through
December 31, 1996 (979,024) - (979,024) $(979,024)
------------ ------- ------------- ----------
Balance-December 31, 1996 (979,024) - 10,182,044
Net loss for the year ended December 31, 1997 (53,554) - (53,554) $ (53,554)
------------ ------- ------------- ----------
Balance-December 31, 1997 (1,032,578) - 10,128,490
Additional contributed capital - - 24,000
Cancellation of preferred shares for oil and gas
properties and other outstanding preferred shares - - (10,000,000)
Net loss for the year ended December 31, 1998 (315,441) - (315,441) $(315,441)
------------ ------- ------------- ----------
Balance-December 31, 1998 $(1,348,019) $ - $ (162,951)
============ ======= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
<TABLE>
<CAPTION>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (MAY 8, 1987) TO DECEMBER 31, 1999
Deficit
Accumulated
Preferred Stock Capital Stock Additional During the
---------------- ------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage
------- ------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance- December 31, 1998 - $ - 6,414,149 $192,425 $ 992,643 $(1,348,019)
Additional contributed capital - - - - 35,545 -
Issuance of preferred shares for marketable securities 296,300 8,889 - - 583,711 -
Comprehensive income:
Net loss for the year ended December 31, 1999 - - - - - (85,887)
Other comprehensive income (loss)
Unrealized gain on securities - - - - - -
Comprehensive income - - - - - -
------- ------- --------- -------- ---------- ------------
Balance-December 31, 1999 296,300 8,889 6,414,149 192,425 1,611,899 (1,433,906)
Additional contributed capital - - - - 14,000 -
Comprehensive income:
Net loss for the seven months ended July 31, 2000 - - - - - 118,392
Other comprehensive income (loss)
Unrealized loss on securities - - - - - -
Comprehensive income - - - - - -
------- ------- --------- -------- ---------- ------------
Balance-July 31, 2000 296,300 $ 8,889 6,414,149 $192,425 $1,625,899 $(1,315,514)
======= ======= ========= ======== ========== ============
Accumulated
Other Total
Comprehensive Stockholders' Comprehensive
Income Equity Income
---------- ---------- ----------
<S> <C> <C> <C>
Balance- December 31, 1998 $ - $(162,951)
Additional contributed capital - 35,545
Issuance of preferred shares for marketable securities - 592,600
Comprehensive income:
Net loss for the year ended December 31, 1999 - (85,887) $ (85,887)
Other comprehensive income (loss)
Unrealized gain on securities 339,060 339,060 339,060
Comprehensive income - - $ 253,173
---------- ---------- ----------
Balance-December 31, 1999 339,060 718,367
Additional contributed capital - 14,000
Comprehensive income:
Net loss for the seven months ended July 31, 2000 - 118,392 $ 118,392
Other comprehensive income (loss)
Unrealized loss on securities (635,140) (635,140) (635,140)
Comprehensive income - - $(516,748)
---------- ---------- ----------
Balance-July 31, 2000 $(296,080) $ 215,619
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
<TABLE>
<CAPTION>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Seven Months Year Ended Inception
Ended ----------------------------- Through
July 31, December 31, December 31, July 31,
2000 1999 1998 2000
---------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 118,392 $ (85,887) $ (315,441) $(1,315,514)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 292 571 50,186 548,438
Common stock issued for lease - - - 225,000
Gain on sale of securities (167,249) (11,474) - (178,723)
Contributed interest - - - 70,018
Contributed rent and officer compensation 14,000 24,000 24,000 62,000
Reserve against assets and liabilities - - 244,000 244,000
Changes in assets and liabilities:
(increase) in prepaid expenses (1,500) - - (1,500)
(Increase) in accounts receivable - (3,788) - (3,788)
(Increase) in deferred offering costs (6,529) (12,450) - (18,979)
Increase in accounts payable 3,841 (7,199) (6,303) 5,897
Increase in accrued interest 2,877 14,150 10,998 39,701
Increase (decrease) in advances from shareholder (234,463) 83,759 (4,954) (15,710)
---------- -------------- -------------- ------------
Net cash used in operating activities (270,339) 1,682 2,486 (339,160)
---------- -------------- -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Product rights, development costs and intangibles - - - (244,000)
Increase in organization costs - - - (36,408)
Acquisition of fixed assets - (2,500) - (14,112)
---------- -------------- -------------- ------------
Net cash used in investing activities - (2,500) - (294,520)
---------- -------------- -------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of marketable securities 362,249 38,974 - 401,223
Proceeds from issuance of common stock, net - - - 366,050
Contributed capital - 11,544 - 11,544
---------- -------------- -------------- ------------
Net cash provided by financing activities 362,249 50,518 - 778,817
---------- -------------- -------------- ------------
Net Increase (decrease) in Cash 91,910 49,700 2,486 145,137
CASH AT BEGINNING PERIOD 53,227 3,527 1,041 -
---------- -------------- -------------- ------------
CASH AT END OF PERIOD $ 145,137 $ 53,227 $ 3,527 $ 145,137
========== ============== ============== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Stock issued in exchange for goods and services $ - $ - $ - $ 8,402
========== ============== ============== ============
Cash paid for interest $ - $ - $ - $ -
========== ============== ============== ============
Cash paid for income taxes $ - $ - $ - $ -
========== ============== ============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Power Save International, Inc. (the Company), a Nevada corporation, was
re-incorporated on July 22, 1999. The original incorporation date of the
previous company was May 8, 1987 and the following financial statements
reflect activities from this date of inception. The company is currently
consulting, creating and providing commercial and industrial energy
efficient, engine driven or electrically driven oxygen plants, air
conditioning, refrigeration, compressed air and electric generating plant
designs and systems, for domestic and export applications, from a variety
of energy technology related products, developed over the years. The
Company's products are being sold in the eastern United States.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Power Save
International, Inc. (the Company) is presented to assist in understanding
the Company's financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
ACCOUNTING METHOD - The Company's financial statements are prepared using
------------------
the accrual method of accounting.
INVENTORIES - Due to the nature of the Company's business it has no
-----------
inventories. All of the systems described in Note 1 are built by outside
manufacturers and subcontractors. The Company pays for these finished
products and provides them to their customers.
EQUIPMENT - Equipment is stated at cost. Maintenance and repairs are
---------
expensed as incurred. Depreciation is determined using the straight-
line method over the estimated useful lives of the assets, which is three
to ten years.
PRODUCT RIGHTS - Product rights were to be amortized over revenue
---------------
generating operations based on management's expectations of the life of
such technology acquired. In 1998, the remaining cost of the product rights
were reserved in total leaving a zero balance at July 31, 2000, December
31, 1999 and 1998. (see note 5).
EARNINGS (LOSS) PER SHARE - The Company adopted Statement of
----------------------------
Financial Accounting Standard No. 128, "Earnings per Share"("SFAS No.
128"), which is effective for annual periods ending after December 15,
1997. Earnings (loss) per share are computed based on the weighted average
number of shares actually outstanding which was 6,414,149 for all periods
presented. No changes in the computations of diluted earnings per share
amount are presented since there were no capital stock transactions that
would serve to dilute common shares.
INCOME TAXES - The Company accounts for income taxes using the asset and
------------
liability method. The differences between the financial statement and tax
bases of assets and liabilities is determined annually. Deferred income tax
assets and liabilities are computed for those differences that have future
tax consequences using the currently enacted tax laws and rates that apply
to the period in which they are expected to affect taxable income.
Valuation allowances are established, if necessary, to reduce deferred tax
asset accounts to the amounts that will more likely than not be realized.
Income tax expense is the current tax payable or refundable for the period,
plus or minus the net change in the deferred tax asset and liability
accounts.
STATEMENT OF CASH FLOWS - The Company considers (if and when they have any)
-------------------------
all highly liquid investments with maturities of three months or less to be
cash equivalents. During 1999 the Company had a noncash transaction as
explained in Note 9. The Company had no noncash investing and financing
transaction during 1998.
7
<PAGE>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
ISSUANCE OF SHARES FOR SERVICES AND OTHER ASSETS - Valuation of shares for
-------------------------------------------------
services and other acquired assets were based on the fair market value of
services received.
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 and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION - The Company's sale of plant design and revenue from
--------------------
plant installation is done within a short time since its plants are
designed for small commercial sites and buildings and are generally
completed within a few months. The Company recognizes revenue as earned at
the completion of the contract.
ORGANIZATION AND START-UP COSTS - The Company has adopted SOP 98-5
----------------------------------
"Reporting on the Costs of Start-up Activities." The SOP requires costs of
start-up activities and organization costs to be expensed as incurred.
COMPREHENSIVE INCOME - The Company adopted Statement of Financial
----------------------
Accounting Standard No. 130, "Comprehensive Income"("SFAS No. 130"), which
is effective for annual periods ending after December 15, 1997. As provided
by SFAS No. 130, reclassification adjustments to prior year amounts are
reported in a separate statement of comprehensive income along with current
year components of comprehensive income.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
-----------------
conform with July 31, 2000 classifications.
MARKETABLE SECURITIES - Marketable securities consist of common stock.
----------------------
Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date. All
marketable securities are defined as trading securities or
available-for-sale securities under the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Management determines the appropriate classification of its investments in
marketable securities at the time of purchase and re-evaluates such
determination at each balance sheet date. Securities that are bought and
held principally for the purpose of selling them in the near term are
classified as trading securities and unrealized holding gains and losses
are included in earnings. Debt securities for which the company does not
have the intent or ability to hold to maturity and equity securities are
classified as available-for-sale. Available-for-sale securities are carried
at fair value, with the unrealized gains and losses, net of tax if
applicable, reported as a separate component of stockholders' equity in
accumulated other comprehensive income. The company at this time has no
trading securities.
NOTE 3 - BASIS OF PRESENTATION AND CONSIDERATIONS RELATED TO CONTINUED EXISTENCE
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Through July
31, 2000, the Company has net income of $118,392 and is its only period to
have income for many years. The Company incurred net losses of $85,887 and
$315,441 for the years ended December 31, 1999 and 1998, respectively.
Additionally, the Company has incurred losses of $1,315,514 from inception
through July 31, 2000. These factors, among others, raise substantial doubt
as to the Company's ability to obtain debt and/or equity financing and
achieve profitable operations.
The Company's management intends to raise additional operating funds
through equity and/or debt offerings. However, there can be no assurance
management will be successful in its endeavors. Ultimately, the Company
will need to achieve profitable operations in order to continue as a going
concern.
8
<PAGE>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - BASIS OF PRESENTATION AND CONSIDERATIONS RELATED TO CONTINUED EXISTENCE
- CONTINUED
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
NOTE 4 - DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It has yet to commence
full-scale operations. Through July 31, 2000, the Company had income
$118,392. The income was from sale of stock investments and not operations.
From inception through December 31, 1999, the Company did not have any net
income from operations. At the current time, the Company has $245,507 in
assets and $29,888 in liabilities.
The Company has not yet generated significant revenue and has begun to fund
its operations through the issuance of equity. Accordingly, the Company's
ability to accomplish its business strategy and to ultimately achieve
profitable operations is dependent upon its ability to obtain additional
financing and execute its business plan. There can be no assurance that the
Company will be able to obtain additional funding, and, if available, that
the funding will be obtained on terms favorable to or affordable by the
Company. The Company's management is exploring several funding options and
expects to raise additional capital through private placements to continue
to develop the Company's operations around its business plan. Ultimately,
however, the Company will need to achieve profitable operations in order to
continue as a going concern.
NOTE 5 - PRODUCT RIGHTS
The company acquired certain product rights, development costs and other
intangible assets at a cost of $244,000 from H.C. Technology, Inc. (a then
related corporation). These assets were appraised on September 15, 1987 for
$1,480,000 and such assets include product technology, employee replacement
costs, marketing programs, trade names, and other assets with determinable
value. Since the acquisition of these assets was a number of years ago, the
valuation carried on the books was reserved to a zero value at July 31,
2000 and December 31, 1999 and 1998.
NOTE 6 - LICENSE FEE
The company had a license for a design of a thermal compression hemispheric
jet chiller to utilize a source of heat to provide chilled water for use in
refrigeration and air-conditioning systems to reduce the energy consumption
of systems in which they were to be incorporated. This license fee has
expired and all related costs were fully amortized at the end of 1998.
NOTE 7 - INCOME TAXES
Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or
non-current, depending on the classification of the assets and liabilities
to which they relate. Deferred taxes arising from temporary differences
that are not related to an asset or liability are classified as current or
non-current depending on the periods in which the temporary differences are
expected to reverse. Amounts for deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
July 31, December 31, December 31,
2000 1999 1998
---------- -------------- --------------
<S> <C> <C> <C>
Deferred tax liability (asset) -
unrealized gain (loss) $(100,667) $ 115,280 $ -
Use of NOL against deferred tax liability - (115,280) -
Deferred tax asset 450,671 350,004 341,593
Net of valuation allowance (450671) ( 350,004 (341,593)
---------- -------------- --------------
Total $ -0- $ -0- $ -0-
</TABLE>
9
<PAGE>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES - CONTINUED
The following temporary differences gave rise to the deferred tax asset at
July 31, 200, December 31, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
July 31. December 31, December 31,
2000 1999 1998
---------- -------------- --------------
<S> <C> <C> <C>
Tax benefit of reserve against product rights $ 82,960 $ 82,960 $ 82,960
Tax liability of option income - 7,820 (7,820)
---------- -------------- --------------
82,960 90,780 75,140
Valuation allowance for judgment of
realizability of net deferred tax benefit
in future years $ (82,960) $ ( 90,780) $ (75,140)
</TABLE>
Because the Company has not generated taxable income since its inception,
no provision for income taxes has been made. For tax purposes, the Company
had available at December 31, 1999, net operating loss ("NOL")
carryforwards for regular Federal income tax purposes of $1,029,423. The
NOL at July 31, 2000 is estimated to be $911,031, but the final NOL for the
year ended 2000 will not be know until the year is completedThe balance of
NOL carryforwards through December 31, 1999 of $1,029,423 will expire as
shown below.
Year Ended
December 31,
-------------
2002 $ 8
2003 13,546
2004 156,871
2005 162,877
2006 130,190
2007 113,298
2008 108,239
2009 95,943
2010 46,043
2011 76,349
2012 41,877
2013 59,445
2018 24,737
-------------
$1,029,423
=============
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company currently utilizes office space from a major stockholder of the
Company. The stockholder is not charging the Company for the use of the
office space. The Company has recorded contributed capital for the
estimated cost of the space at $500 per month starting January 1998 with
and offset to rent expense. The same stockholder and director of the
Company has provided free services to the Company. The Company has recorded
contributed capital for the estimated cost of the services at $1,500 per
month starting January 1998 with an offset to officer compensation. The
same stockholder, and director has made certain advances to the Company on
an interest free basis, payable upon demand. From inception of the loans to
December 31, 1996, the Company has computed interest on the advances at 8%
and has treated the interest of $70,318 as contributed capital with an
offset to interest expense. From 1997 forward the Company has accrued
interest on the advances, until paid, as a liability with an offset to
interest expense. During the period ended July 31, 2000 the Company paid
off the advances which at the time were $218,753 and paid down the accrued
interest to $23,992.
10
<PAGE>
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - NON-CASH TRANSACTIONS
The following noncash investing and financing activities occurred during
the period from inception through December 31, 1999:
During 1991, the Company exchanged 50,000 shares of its preferred stock for
certain license fees valued at $500,000.
During 1990, the Company issued certain shares of its common stock for a
prepaid lease valued at $225,000.
During 1996, the Company exchanged 2,000,000 shares of preferred stock for
oil and gas properties valued at $10,000,000. This transaction was
rescinded. For financial statement purposes the transaction was treated as
being rescinded in 1998.
During 1999, the Company exchanged 296,300 shares of preferred stock for
marketable securities valued at the time of exchange at $592,600. The value
of the securities was determined by using market quotes for the stock at
the time of the exchange.
NOTE 10 - STOCKHOLDERS' EQUITY
The Company's Preferred Stock is non-voting, non-dividend bearing,
redeemable and convertible to common stock at the time the Company and the
holders of the preferred stock deem it appropriate.
The Company and its assets were spun off from the previously owned parent
company when a majority interest of the common stock in the old company was
sold to a consulting group. The assets and liabilities were transferred to
the current corporation and all the activities from inception through July
31, 2000 have remained with the current company.
The Board of Directors has authorized a stock issuance totaling 1,000,000
shares of its common stock at $5.00 per share. The offering will be filed
under the Securities Act of 1933 or an exemption under the Act.
The Company has paid certain deferred offering costs related to the above
mentioned offering totaling $18,979. It is expected that additional legal
and accounting costs will be incurred in relation to the offering. If the
current offering is successful, the costs will be offset against any gross
proceeds received. Otherwise, the costs will be written off to expense in
the year the offering is unsuccessful or terminated.
The company has adopted SFAS 130, which requires presentation of
comprehensive income(net income plus all other changes in net assets from
non-owner sources) and its components in the financial statements. The
company has changed the format of its statements of stockholders' equity to
present comprehensive income. Accumulated other comprehensive income or
loss shown in the statements of stockholders' equity at July 31, 2000 and
December 31, 1999, is solely comprised of the accumulated change in
unrealized gains and losses on marketable securities. There was no other
comprehensive income prior to 1999.
NOTE 12 - MARKETABLE SECURITIES
Marketable securities are carried on the balance sheet at their fair value.
As of July 31, 2000 and December 31, 1999, the market value of the
available-for-sale securities was $74,020 and $904,160 respectively. At
July 31, 2000 and December 31, 1999 the above consisted of 740,200 and
1,130,200 respectively of common shares of one company. As of July 31, 2000
and December 31, 1999 respectively, the following applies to the company's
available-for-sale securities. Cost was $370,100 and $565,100. Unrealized
loss at July 31, 2000 was $518,140 and unrealized gain at December 31, 1999
was $339,060. Historical cost is used to compute realized gains. The net
unrealized holding gain or loss on securities available for sale that has
been included in other comprehensive income during the seven months ended
July 31, 2000 was a $518,140 holding loss and during the year ended
December 31, 1999 was a $339,060 holding gain.
<PAGE>
POWER SAVE INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - COMMITMENTS
As part of the offering of the Company's common stock as explained in Note
10, the Company has signed an underwriting and selling agreement. The
agreement calls for a 5% commission of the gross proceeds of the offering,
contingent upon achieving the minimum specified in the offering. The
Company is also to pay a due diligence fee of $4,000 and consulting fee of
$5,950 plus mutually agreed expenses.
On April 24, 2000, the Company signed an agreement for 12 months for
publicity and promotional services. The Company paid a $3,000 retainer per
the agreement of which $1,500 was prepaid. The Company will pay $1,500 per
month and the provider of publicity and promotional services will also
receive 1% of the stock offering described in Note 10.
NOTE 14 - SHARE EXCHANGE AND PURCHASE AGREEMENT
On April 18, 2000, the Company signed a share exchange and purchase
agreement with Mirage Air Systems, Inc. (MAS). MAS had audited revenues of
$6,740,387 as of December 31, 1999 and has been engaged in the HVAC
business for 10 years. MAS is a New York Corporation. The Company offers
under the agreement to purchase MAS for the amount of 4 million dollars.
The purchase price for MAS will be paid by the issuance of Company
preferred shares. The preferred shares will be non-dividend, redeemable
convertible shares in an arbitrarily agreed amount equaling the agreed
purchase price. The shares shall be exchanged for 100% of the shares of
MAS. The preferred shares will be retired over a mutually agreed period of
time, as set forth in the agreement. The purchase has not yet taken place.
MIRAGE AIR SYSTEMS, INC.
Financial Statements for the Period Ended July 31, 2000, and
Independent Accountant's Report
TABLE OF CONTENTS
INDEPENDENT ACCOUNTANT'S REPORT
FINANCIAL STATEMENTS FOR THE YEAR ENDED JULY 31, 2000:
Balance Sheet
Statement of Income
Peter Maniscalco, Certified Public Accountant, 500 North Broadway, Suite 163,
Jericho, New York 11753 Office 516 827-1100 Fax 516 827-1101
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Mirage Air Systems, Inc.
Bohemia, New York
I have compiled the accompanying balance sheet of Mirage Air Systems, Inc. (the
"Company") as of July 31, 2000, and the related statements of income for the
period then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting, in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, we do not
express an opinion or any other form of assurance on them.
Peter Maniscalco /s/
October 2, 2000
<PAGE>
BALANCE SHEET (UNAUDITED) JULY 31,1999
ASSETS
CURRENT ASSETS:
Cash mid cash equivalents $ 186,678
Accounts receivable 1,442,214
Prepaid expenses 7,322
Deferred income taxes
Total current assets 1,636,214
PROPERTY AND EQUIPMENT -Net 109,938
DEFERRED INCOME TAXES
SECURITY DEPOSITS 8,488
TOTAL $ 1,754,640
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,280,930
Income taxes payable 95,000
Total current liabilities 1,375,930
NOTES PAYABLE 49,596
LOANS TO SHAREHOLDERS 9,385
DEFERRED INCOME TAXES
TOTAL LIABILITIES 1,434,911
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, no par value - 100 shares issued 31,100
Retained Earnings 288629
Total stockholders' equity (deficiency) 319,729
TOTAL $ 1,754,640
SEE ACCOUNTANT'S COMPILATION REPORT
<PAGE>
STATEMENT OF INCOME (UNAUDITED)
PERIOD ENDED JULY 31, 2000
NET SALES $ 4,652,759
COST OF SALES:
Purchases 1,373,113
Subcontract 1,683,519
3,056,632
Administrative expenses (income):
Officer Salaries 370,000
Salaries and Wages 426,585
Rent and utilities 209,998
Professional Fees 6,616
Travel 32,652
Payroll taxes 49,708
Contributions 575
Employee benefits 15,000
Miscellaneous Taxes 10,123
Stationery and supplies 2,517
Office Expenses 26,953
Interest expense 11,200
Insurance 109,709
Depredation and amortization 19,500
Other administrative expenses 11,621
Total costs and expenses - net 1,302,757
INCOME BEFORE PROVISION FOR INCOMB TAXES 293,370
PROVISION FOR INCOME TAXES 95,000
NET INCOME 198,370
<PAGE>
Financial Statements for the
Year Ended December 31, 1999, and Independent Auditors' Report
MIRAGE AIR SYSTEMS, INC.
TABLE OF CONTENTS
NDEPENDENT AUTITORS' REPORT FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1999:
Balance Sheet
Statement of Income
Statement of Stockholders' Equity (Deficiency)
Statement of Cash Flows
Notes to Financial Statements
Peter Maniscalco Certified Public Accountant 500 North Broadway Jericho, New
York 11753 Office: 516 827-1100 Fax: 516 827-1101
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Mirage Air Systems, Inc.
Bohemia, New York
I have audited the accompanying balance sheets of Mirage Air Systems, Inc.
(the "Company") as of December 31, 1999, and the related statements of income,
stockholders' equity (deficiency) and cash flows for the years then ended. 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 auditing standards generally accepted in
the United States of America. 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 nay audits provide a reasonable basis for
my opinion.
In my opinion, such financial statements present fairly, in ail material
respects, the financial position of the Company at December 31, 1999, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
August 10, 2000
Peter Maniscalco /s/
<PAGE>
BALANCE SHEET
DECEMBER 31 1999
Assets
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 80,295
Accounts receivable 1,149,743
Prepaid expenses 18,522
Deferred income taxes (Note 7)
Total current assets 1,248,560
PROPERTY AND EQUIPMENT - Net (Note 3) 128,452
DEFERRED INCOME TAXES (Notes 2 and 7)
SECURITY DEPOSITS 7,288
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,188,393
Income taxes payable
Total current liabilities 1,188,393
NOTES PAYABLE (Note 4) 68,963
LOANS TO SHAREHOLDERS (Note 8) 6,085
DEFERRED INCOME TAXES (Notes 2 and 7)
TOTAL LIABILITIES 1,263,441
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, no par value - 100 shares issued 31,100
Retained Earnings 90,259
Total stockholders' equity (deficiency) 121,359
TOTAL 1,384,800
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS, INC. STATEMENT OF INCOME YEAR ENDED DECEMBER 31 1999
NET SALES $6,740,387
COST OF SALES:
Purchases 2,275,061
Subcontract 2,284,618
4,559,679
Administrative expenses (income):
Officer salaries 650,830
Salaries and Wages 790,565
Rent and utilities 314,353
Professional Fees 7,620
Travel 79,484
Payroll taxes 97,976
Contributions 550
Employee benefits 40,000
Miscellaneous Taxes 4,042
Stationery and supplies 3,449
Office Expenses 46,891
Interest expense 6,087
Insurance 145,960
Depreciation and amortization 33,142
Other administrative expenses 10,448
Total costs and expenses - net 2,221,397
INCOME BEFORE PROVISION FOR INCOME TAXES (40,689)
PROVISION FOR INCOME TAXES (Note 7)
NET INCOME (40,689)
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1999
Additional Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
BALANCE, 100 31,100 130,948 162,048
JANUARY 1, 1999
Net income (loss) - - - (40,689) (40,689)
BALANCE, 100 31,100 $ - $ 90,259 $ 121,359
DECEMBER 3l, 1999
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS. INC. STATEMENT 0F CASH FLOWS YEAR ENDED DECEMBER 31 1999
OPERATING ACTIVITIES:
Net income $ (40,689)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 33,142
Deferred income taxes (5,121)
Changes in operating assets and liabilities:
Accounts receivable (619,800)
Prepaid expenses (5,068)
Accounts payable and accrued expenses 631,232
Net cash provided by operating activities 6,304
INVESTING ACTIVITIES:
Purchases of property and equipment (36,560)
Cash paid for security deposits (1,700)
Net cash used in investing activities (38,260)
FINANCING ACTIVITIES:
Proceeds from note payable (6,056)
Payment of loans to shareholders 5,599
Net cash used in financing activities (457)
NET INCREASE IN CASH AND CASH EQUIVALENTS (45,021)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 125,316
CASH AND CASH EQUIVALENTS, END OF YEAR 80,295
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest 1,155
Income taxes -
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31,1999
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Mirage Air Systems, Inc, (the "Company") was formed on November 2,1989.
The Company is in the business of heating, ventilation and air conditioning
installation. The Company's sole location is in Long Island, NY.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - The Company considers all highly liquid
temporary investments with original maturities of less than 90 days to be cash
equivalents.
Depreciation and Amortization - Depreciation and amortization of property and
equipment is computed using the straight-line method over the following
estimated useful lives:
Automobiles & Trucks 5 years
Furniture and fixtures 7 years
Office equipment 7 years
Machinery and Equipment 7 years
Impairment of, Long-Lived Assets - The Company reviews its long-lived assets,
including property and equipment and identifiable intangibles, for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be fully recoverable. To determine recoverability of its
long-lived assets, the Company evaluates the probability that future
undiscounted net cash flows, without interest charges, will be less than the
carrying amount of the assets. Impairment is measured at fair value.
Income Taxes - The Company accounts for income taxes by recognizing deferred tax
assets and liabilities of the expected future lax consequences of events that
have been included in the Company's financial statements or tax returns. Under
this method, deferred lax assets and liabilities are determined based on the
differences between the financial accounting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse (Note 7).
Revenue Recognition - The Company recognizes income when the related heating,
ventilation and air conditioning services are provided.
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 and liabilities clad
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
3. PROPERTY AND EQUIPMENT - NET
Property and equipment at December 31, 1999 consist of the following:
Automobiles & Trucks $ 183,551
Furniture and fixtures 10,550
Office equipment 10,253
Machinery and Equipment 60,826
Total, at cost 265,180
Less accumulated depreciation and amortization 228
Property and equipment - net $ 128,952
NOTES PAYABLE
Notes payable at December 31, 1999 consist of the following:
Note payable 68,963
68,963
Less current portion (31,409)
Long-term portion $37,554
Interest expense related to the note payable was approximately $6,087 for the
year ended December 31, 1999.
5. COMMITMENTS
Lease Agreements - The Company is obligated under noncancelable operating lease
agreements for the rental of machinery and equipment through April 2003.
Minimum rental commitments at December 31, 1999 under all noncancelable
operating leases are as follows:
Year Ending December 3, 2000 Amount
2000 31,578
2001 29,870
2002 21,173
2003 5,867
Total 88,488
Rent expense for the years ended December 31, 1999 was approximately $29,792.
6. PROFIT-SHARING PLAN
The Company has a qualified profit-sharing plan for all employees who have one
year of service with the Company. Participants vest 20% after the first year,
40% after the second year, 60% after the third year, 80% after the fourth year,
and after five years they would be fully vested. The Company's contribution to
the plan was approximately $40,000 for the year ended December 31, 1999.
7. INCOME TAXES
Under the provisions of SFAS 109, deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future. Such deferred income tax asset and liability computations affect
taxable income. Valuation allowances have bean established to reduce deferred
tax assets to the amount expected to be realized.
The composition of the Company's net deferred taxes at December 31, 1999 is as
follows:
Deferred tax assets $ 2,242
Deferred tax liabilities -
Less valuation allowances (2,242)
Net $ -
Deferred tax assets consist principally of depreciable tax basis of property and
equipment in excess of book basis and net operating loss carryforwards.
8. NOTES PAYABLE TO SHAREHOLDER
The Company owes $6,085 to a shareholder of the Company at December 31, 1999.
The note is payable on demand, with no interest payable. The note is secured by
all of the assets of the Company.
<PAGE>
MIRAGE AIR SYSTEMS, INC. financial Statements for the Year Ended December 31,
1998, and Independent Auditors' Report MIRAGE AIR SYSTEMS, INC.
TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998:
Balance Sheet
Statement of Income
Statement of Stockholders' Equity (Deficiency)
Statement of Cash Flows
Notes to Financial Statements
Peter Maniscalco Certified Public Accountant 500 North Broadway Suite 163
Jericho, New York 11753 Office 516 827-1100 Fax 516 827-1101
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders Of Mirage Air Systems, Inc.
Bohemia, New York
I have audited the accompanying balance sheets or Mirage Air Systems, Inc.
(the "Company") as of December 31, 1998, and the related statements of income,
stockholders equity (deficiency) and cash flows for the years then ended. 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 auditing standards generally accepted in
the United States of America. 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 included assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. I believe that
my audits provide a reasonable basis for my opinion.
In my opinion, such financial statements present fairly, in all material
aspects, the financial position of the Company at December 31, 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
Peter Maniscalco /s/ August 10, 2000
<PAGE>
BALANCE SHEET DECEMBER 31, 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 125,316
Accounts receivable 529,943
Prepaid expenses 13,454
Deferred income taxes (Note 7)
Total current assets 668,713
PROPERTY AND EQUIPMENT- Net (Note 3) 125,534
DEFERRED INCOME TAXES (Notes 2 and 7)
SECURITY DEPOSITS 5,588
TOTAL $ 799,835
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES,
Accounts payable and accrued expenses $ 557,161
Income taxes payable -
Total current liabilities 557,161
<PAGE>
NOTES PAYABLE (Note 4)
LOANS TO SHAREHOLDERS (Note 8)
DEFERRED INCOME TAXES (Notes 2 and 7)
TOTAL LIABILITIES 637,787
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, no par value - l00 shares issued 31,100
Retained Earnings 130,948
Total stockholders' equity (deficiency) 162,048
TOTAL $ 799,835
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS, INC. STATEMENT OF INCOME YEAR ENDED DECEMBER 31 1998
NET SALES $ 3,731,710
COST 0F SALES
Purchases 345,883
Subcontract 1,786,494
Administrative expenses (income)
Officer Salaries 377,060
Salaries and Wages 504,144
Rent and utilities 200,751
Professional fees 11,426
Travel 54,457
Payroll taxes 57,460
Contributions 425
Employee benefits 75,000
Miscellaneous Taxes 19,100
Stationery and supplies 1,013
Office Expenses 36,203
Interest expense 11,273
Insurance 124,872
Depreciation and amortization 49,948
Other administrative expenses 12,011
Total costs and expenses - net 1,541,172
INCOME FROM OPERATIONS 58,161
OTHER INCOME (EXPENSE)
Loss on sale of stock (11,281)
INCOME BEFORE PROVISION FOR INCOME TAXES 46,880
PROVISION FOR INCOME TAXES (Note 7) 15,903
NET INCOME $ 30,977
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)YEARS ENDED DECEMBER 31. 1998
Additional Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
BALANCE, JANUARY 1, 1998 100 31,100 99,971 131,071
Net income - 30,977 30,977
BALANCE, DECEMBER 31, 1998 100 $ 3l,100 - $ 130,948 $162,048
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS, INC. STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31,1998
OPERATING ACTIVITIES:
Net income $30,977
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 49,948
Deferred income taxes 5,121
Changes in operating assets and liabilities:
Accounts receivable 175,720
Prepaid expenses (11,194)
Accounts payable and accrued expenses (197,805)
Net cash provided by operating activities 52,767
INVESTING ACTIVITIES:
Purchases of property and equipment (54,254)
Cash paid for security deposits (3,498)
Net cash used in investing activities 57,748
FINANCING ACTIVITIES:
Proceeds from note payable 29,205
Payment of loans to shareholders (3,500)
Net cash used in financing activities 25,705
NET INCREASE IN CASH AND CASH EQUIVALENTS 20,724
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 104,592
CASH AND CASH EQUIVALENTS, END OF YEAR $ 125,316
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 11,131
Income taxes $ 10,845
See notes to financial statements.
<PAGE>
MIRAGE AIR SYSTEMS, NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Mirage Air Systems, Inc. (the "Company") was formed on November 2, 1989. The
Company is in the business of heating, ventilation and air conditioning
installation. The Company's sole location is in Long Island, NY.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash arid Cash Equivalents - The Company considers all highly liquid temporary
investments with original maturities of less than 90 days to be cash
equivalents.
Depreciation and Amortization - Depreciation and amortization of property and
equipment is computed using the straight-line method over the following
estimated useful lives:
Automobiles & Trucks 5 years
Furniture and fixtures 7 years
Office equipment 7 years
Machinery and equipment 7 years
Impairment of Long-Lived Assets - The Company reviews its long-lived assets,
including property and equipment and identifiable intangibles, for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be fully recoverable. To determine recoverability of its
long-lived assets, the Company calculates the probability that future
undiscounted net cash flows, without interest charges, will be less than the
carrying amount of the assets. Impairment is measured at fair value.
Income Taxes - The Company accounts for income taxes by recognizing deferred tax
assets and liabilities of the expected future tax consequences of events that
have been included in the Company's financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based on the
differences between the financial accounting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse (Note 7).
Revenue Recognition - The Company recognizes income when the related heating,
ventilation and air conditioning services are provided.
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 and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
3. PROPERTY AND EQUIPMENT - NET
Property and equipment at December 31, 1998 consist of the following:
Automobiles & Trucks $ 146,991
Furniture and fixtures 10,550
Office equipment 10,253
Machinery and Equipment 60,826
Total, at cost 228,620
Less accumulated depreciation and amortization 103,086
Property and equipment - net $ 125,534
<PAGE>
4. NOTES PAYABLE
Notes payable at December 31, 1998 consist of the following:
Note payable $ 75,019
Less current portion (36,522)
Long-term portion $ (36,522)
Interest expense related to the note payable was approximately $11,000 for the
year ended December 31, 1998.
5. COMMITMENTS
Lease Agreements - The Company is obligated under noncancelable operating lease
agreements for the rental of machinery and equipment through April 2003.
Minimum rental commitments at December 31, 1998 under all noncancelable
operating leases are as follows:
Year Ending December 31, Amount
1999 $ 24,436
2000 24,436
200l 22,728
2002 17,602
2003 5,867
Total $ 95,069
Rent expense for the years ended December 31, 1998 was approximately $13,782.
6. PROFIT-SHARING PLAN
The Company has a qualified profit-sharing plan for all employees who have one
year of service with the Company, Participants vest 20% after the first year,
40% after the second year, 60% after the third year, 80% after the fourth year,
and after five years they would be fully vested. The Company's contribution to
the plan was approximately $75,000 for the year ended December 31, 1998.
7. INCOME TAXES
The provision for income taxes for the year ended December 31, 1998 is comprised
of the following components (Note 2):
Federal $ 4,881
State 2,603
Total current provision 7,484
Deferred provision (benefit):
Federal 3,174
State 1,947
Total deferred provision (benefit) 5,121
Total provision for income taxes $ 12,605
At December 31, 1998, the net deferred tax liabilities consisted of the
following:
Noncurrent:
Federal 3,174
State 1,947
Noncurrent deferred tax liabilities 5,121
Net deferred tax liabilities 5,121
At December 31, 199$, the net deferred tax liabilities consisted of the
following:
Property and equipment 5,121
Net deferred tax liabilities 5,121
5. NOTES PAYABLE TO SHAREHOLDER
The Company owes $486 to a shareholder of the Company at December 31,1998. The
note is payable on demand, with no interest payable. The note is secured by all
of the assets of the Company.
<PAGE>
PART II
Information Not Required in prospectus
Item 13. Other Expenses of Issuance and Distribution.
The estimated expenses of this offering, all of which will be paid by
Registrant, are as follows:
SEC Registration Fee $2,640
National Association of Securities Dealers, Inc. Fee 1,500
Nasdaq Listing Fee 6,000
Accounting Fees and Expenses 3,000
Registrant's Legal Fees and Expenses 1,500
Blue Sky Expenses and Counsel Fees 7,000
Printing and Engraving Fees 4,000
Transfer Agent and Registrar's Fees and Expenses 1,000
Document Preparation 9,950
Miscellaneous Expenses *
Total ___*____
* To be completed by amendment.
<PAGE>
Item 14 Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of Registrant pursuant to the provisions of its Restated
Articles of Incorporation, Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant for expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, 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 Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) For purposes 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 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.
(2) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
Item 15. Recent Sales of Unregistered Securities
There has been no recent sale of securities.
<PAGE>
Item 16. Exhibits.
Exhibits listed below are filed as part of the Registration Statement pursuant
to Item 601 of Regulation S-B
1 Underwriting Agreement [Form].
3.1 Articles of Incorporation of Power Save International, Inc., Amendment
dated October 8, 1999.
3.2 By-Laws of Power Save International, Inc.
3.3 Specimen of Security.
3.4 Form of Subscription Agreement.
5.1 Opinion of Counsel. *
10.1 Share Purchase Agreement for Mirage Air Systems, Inc.
10.2 Lock-Up Agreement between the Company and Balmer.* [Form]
10.3 Escrow Agreement between the Company, The Business Bank and Three
Arrows.
23.1 Consent of the auditor, David T. Thomason, P.C.
23.2 Consent of the auditor for Mirage Air Systems, Inc., Peter Maniscolo,
CPA *
23.3 Consent of Attorney, *
24 Power of Attorney (Signature Page).
99.1 Exclusive Cogeneration Commercial Distributor-Dealer Marketing License
Agreement Between XYZ Corporation and Power Save International, Inc.
99.2 "The Proof is in the Free Trial Offer Results, 'No Out of Pocket
Cost'"
* To be filed by amendment.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made pursuant
to Rule 415 under the Securities Act, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events which, individually
or in the aggregate, represent a fundamental change in the information
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the total dollar value of securities offered,
if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; (iii)
To include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Registrant hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations
and registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser. 0
<PAGE>
SIGNATURE PAGE
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 has duly caused this
registration statement to be signed on its behalf by the undersigned in the
State of Florida on March 22, 2000.
Registrant: Power Save International, Inc.
____________________________
Scott Balmer, Chairman
26 POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint Scott Balmer with full power to act
without the other, his true and lawful attorney-in-fact and agent for him and in
his name, place and stead, in any and all capacities, to sign any or all
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
in order to effectuate the same, as fully, for all intents and purposes, as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Principal Officers
Burton D. O'Donald
Signature CEO March 16, 2000
Raymond H. Bolduc II
Signature President, COO, CFO March 16, 2000
Victor V. Vurpillat VP, Acquisitions
Signature
Mary Jane Balmer Interim Secretary and Treasurer March 16, 2000
Directors
Scott E. Balmer
Signature /s/ March 16, 2000
Burton D. O'Donald
Signature /s/ March 16, 2000
Mary Jane Balmer
Signature /s/ March 16, 2000
<PAGE>
