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Registration Statement No. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Q POWER, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation)
13-4105842
(Primary Standard Industrial I.R.S. Employer Identification
Classification Code Number) Number)
Q Power, Inc.
535 Westgate Drive
Napa, California 94558
(707) 254-9302
(Address, including zip code, and telephone
number, including area code, of Registrant's principal
executive offices)
Christopher Gabrys
President
Q Power, Inc.
535 Westgate Drive
Napa, California 94558
(707) 254-9302
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Stanley Moskowitz, Esquire
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
(212) 940-8800
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement is effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |__|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |__|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |__|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |__|
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CALCULATION OF REGISTRATION FEE
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Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Aggregate Amount of
Registered registered Per Unit(1) Offering Price (1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, par value 1,000,000 $0.25 $250,000 $66.00
$0.001 per share
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) of the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
FILES A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER ___, 2000
PROSPECTUS
Q POWER, INC.
1,000,000 SHARES
COMMON STOCK
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This is an initial public offering of 1,000,000 shares (the "Shares")
of common stock of Q Power, Inc. (the "Company"). The shares are being offered
for sale by the Company on a "any and all best efforts" basis (the "Offering")
up to $250,000. The offering price will be $0.25 per share. The Offering expires
90 days from the date hereof and may be extended by the Company for an
additional 90 days. There are no minimum purchase requirements in the Offering.
An "any and all best efforts" offering means that we will use our best efforts
to sell the stock offered by this prospectus but that we are not required to
sell a particular amount of shares in order to complete the offering. Further,
because there are no escrow arrangements in this offering, money we receive for
shares will be deposited directly with us and will be immediately available for
our use. Shares in this offering will be offered by our directors and executive
officers, who will not receive commissions for any sales they may make. In
addition, we may reject all or part of any subscription to purchase shares of
common stock for any reason.
Prior to this offering, there has been no public market for our common
stock. We will be applying to list our common stock on the Over the Counter
Bulletin Board Market.
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THE PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. SEE SECTION ENTITLED "RISK FACTORS" ON PAGES 7 - 14.
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Maximum Offering Price Per Share
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<S> <C> <C>
Public Offering Price $250,000 $0.25
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Underwriting Discounts and Commissions $0 $0.00
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Proceeds, before expenses, to the Company $250,000 $0.25
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The Date Of This Prospectus Is July 21, 2000
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SUMMARY
All references in this prospectus to "we", "us", "ours" and "Q Power" are
intended to refer to Q Power, Inc.
This summary highlights selected information from this registration statement.
It does not contain all of the information that may be important to you. You
should carefully read the entire document and the other documents referred to in
this registration statement. Together, these documents will give you all the
information that investors should consider before investing in our common stock.
Our Business
We intend to design, develop, manufacture and market a consistent and reliable
electrical backup power supply for the telecommunication industry. We intend to
develop and market a high performance uninterruptible power supply ("UPS") that
employs a flywheel and magnetic bearings. Our flywheel system will be based upon
proprietary designs developed by Chris Gabrys, the Company's President. Chris
Gabrys has assigned to the Company the intellectual property rights he owns,
relating to the flywheel system. We initially intend to develop a 2,000
Watt-hour flywheel system ("eBattery 2/2"). The eBattery 2/2 is intended to
provide backup power for telecommunication equipment. We intend to commercialize
a flywheel energy storage system that provides a highly reliable, low-cost and
non-toxic replacement for chemical-based batteries used in conventional UPS
systems. With the explosive growth of the Internet and its underlying
infrastructure, electrical power quality and reliability have become essential
to provide both individuals and businesses with a continuous connection to their
communication provider.
We believe flywheel energy storage systems (FESS) represent an alternative to
backup power provided by chemical based batteries, which have been commonly used
in telecommunication applications. Over the 20 year life of the FESS, the per
Watt cost is lower than the per Watt cost of a chemical-based battery over the
same period.
We believe that FESS units have recently emerged as a feasible technology due to
the availability of such key items as:
o new advances in high strength, low weight (composite)
materials for flywheel rotor construction,
o low friction bearings (e.g., magnetic), and
o low cost, high quality electronics.
Flywheel systems offer the following potential advantages over chemical-based
batteries:
o lower maintenance requirements,
o less sensitivity to outdoor temperatures,
o lower cost of over life of the flywheel system,
o the ability to readily determine the existing storage
capacity, and
o minimal environmental disposal problems.
We are a development stage company and were incorporated to develop, design,
manufacture and market a flywheel system ("Flywheel System"). We are presently
continuing research and development activities related to the design,
development and testing of our Flywheel System. We believe our current cash
resources are sufficient to fund our initial research and development activities
relating to the Flywheel System over the next 3 months. If we receive the
maximum proceeds of this offering, we believe we will be able to complete
initial prototype development. If we receive less than the maximum proceeds, it
will be necessary to raise additional funds to complete a prototype and conduct
limited trials
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of the Flywheel System. Should the development of the prototype or testing of
the prototype take more time than anticipated, or if the results of testing
requires significant modifications to the Flywheel System, sufficient funds may
not be available to enable the Flywheel System to be completed. If we do not
have sufficient funds to complete our initial development, we will have to cease
activity until additional funds become available (see "Risk Factors"). Should we
develop a prototype flywheel system that in our opinion will be marketable, we
will need a minimum of $1.0 million to complete our research and development,
conduct final testing on a marketable product, and initiate marketing
activities. We have no commitment for this funding and there can be no assurance
that this or any other funding will become available to us. We have entered into
a development and manufacturing agreement with Innovative Magnetic Technologies,
d.b.a. CalNetix Inc. to manufacture the bearing components of our Flywheel
System. We are in discussions with Toray Composites (America) Inc. to build the
flywheel rotor of our Flywheel System, however, there can be no assurance that
we will be able to negotiate an agreement.
We have only recently commenced operations and have no revenue. Since inception,
we have been engaged in developing our corporate structure, planning operations,
capital raising activities, and developing our Flywheel System. There can be no
assurance that our cash needs will not exceed estimates, which could have a
material adverse effect on the business and financial condition of the Company.
Offering
Offering Price: $0.25 per share of common stock.
Securities Being Offered: Up to 1,000,000 shares of common stock. See
section entitled "Description of Securities."
Securities Outstanding
Prior to the Offering: 10,486,800 shares of common stock were
issued and outstanding as of the date of
this prospectus.
Use of Proceeds: We intend to use the net proceeds for working
capital and other general corporate purposes.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus and any other filings we may make with the United States Securities
and Exchange Commission in the future before investing in our common stock. If
any of the following risks occur, our business, operating results and financial
condition could be seriously harmed. The trading price of our common stock could
decline due to any of these risks, and you may 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.
An investment in our common stock may involve additional risks and uncertainties
not described below.
WE ARE A DEVELOPMENT STAGE COMPANY.
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The Company was incorporated on March 8, 2000 and has limited operating history
upon which prospective investors can evaluate its performance. Prospective
investors should understand that an investment in a development stage business
is significantly riskier than an investment in a business with more extensive
operating history. There can be no assurances that Q Power will ever operate
profitably. Our operations are subject to all of the risks inherent in the
establishment of a new business enterprise. The likelihood of our success must
be considered in light of the problems, expenses, difficulties, complications
and delays frequently encountered in connection with a development stage
company, particularly a company developing new products in the uninterruptible
power supply market. Our strategy is based upon a number of projections and
assumptions, including, without limitation, projections and assumptions relating
to:
o the size of the UPS market
o our ability to design and development a commercially feasible
product
o the need for our product
o the price sensitivity of the marketplace
o the cost to acquire customers o the viability of the
intellectual property used to develop our Flywheel System.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS MAY FAIL.
Our business plan calls for significant expenses in connection with the
development and manufacturing of our intended product. In addition, we
anticipate that revenues from operations will not be realized until sometime
after the development of our product is complete. We will require additional
financing in order to complete development, manufacturing and marketing of our
product. We do not currently have any arrangements for financing and we can
provide no assurance that we will be able to find such financing when needed.
Obtaining additional financing will be subject to a number of factors,
including:
(i) market conditions;
(ii) investor acceptance of our business plan; and
(iii) investor sentiment.
These factors may make the timing, amount, terms or conditions of additional
financing unavailable to us. If we are unsuccessful in obtaining financing in an
amount necessary to complete development, manufacturing and marketing of our
products, then we will not be able to earn revenues and our business will fail.
THIS IS A BEST EFFORTS OFFERING.
This Offering is made on an "any and all best efforts" basis. Because the
Offering is made on an "any and all best efforts" basis, there can be no
assurance that all or any of the Shares offered hereunder will be sold. If the
maximum offering amount (the "Maximum Offering") is not sold, the Company may
experience additional financial pressures that will involve risks for the
Company, such as the failure to develop our product for commercial use; that
will not be present if the Maximum Offering is achieved. In that event, the
Company may be forced, under certain circumstances, to seek additional capital
as required in order to conduct additional research and development and/or
marketing activities or will be limited in its rate of growth by the
availability of internally generated capital, if any.
WE MAY NEVER COMPLETE THE RESEARCH AND DEVELOPMENT OF A COMMERCIALLY VIABLE
FLYWHEEL BASED UPS SYSTEM.
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We do not know when or whether we will successfully complete research and
development of a commercially viable flywheel based UPS system. We are currently
engaged in research and development of intellectual property for a test and
evaluation system. We must complete substantial additional research and
development on our system before we may have a commercially viable product.
OUR BUSINESS IS DEPENDENT ON THE UNCERTAIN MARKET ACCEPTANCE OF OUR INITIAL
PRODUCT AND IF THIS MARKET DOES NOT EXPAND AS WE ANTICIPATE, OR IF ALTERNATIVES
TO OUR PRODUCT ARE SUCCESSFUL, OUR BUSINESS WILL SUFFER.
The market for uninterruptible power supply products for the telecommunication
industry is rapidly evolving and it is difficult to predict its potential size
or future growth rate. Most of the organizations that may purchase our products
have invested substantial resources in their existing power systems and, as a
result, may be reluctant or slow to adopt a new approach. Moreover, our product
is an alternative to existing UPS defined systems and may never be accepted by
our customers, may be too cost prohibitive or may be made obsolete by other
advances in power quality technologies.
Improvements may also be made to the existing alternatives to our product as
well as the emergence of newer, more competitive technologies and products,
which could render our product less desirable or obsolete. If the 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 never be
able to achieve profitability.
WE ARE DEPENDENT ON THIRD PARTY SUPPLIERS FOR THE DEVELOPMENT AND SUPPLY OF KEY
COMPONENTS FOR OUR PRODUCTS.
We have formed a relationship with one supplier of our key components. We do not
know when or whether we will secure relationships with suppliers of the
remainder of our required components and subsystems for our flywheel based UPS
system. We do not know whether we will be able to develop such relationships on
terms that will allow us to achieve our objectives. Our business, prospects,
results of operations, or financial condition could be harmed if we fail to
secure relationships with entities that will supply the required components for
our systems. Once we establish relationships with third party suppliers, we will
rely on them to provide components for our flywheel based UPS system.
A current or future supplier's failure to develop and supply components to us,
or the quantity needed, will harm our ability to manufacture our flywheel based
UPS system. In addition, to the extent the processes that our suppliers use to
manufacture components are proprietary, we may be unable to obtain comparable
components from alternative suppliers.
OUR MANAGEMENT HAS NO EXPERIENCE MANUFACTURING FLYWHEEL BASED UPS SYSTEMS ON A
COMMERCIAL BASIS.
To date, we have focused primarily on research and development and have no
experience manufacturing flywheel based UPS systems. We are currently searching
for a suitable assembly and manufacturing facility and are continuing to develop
our manufacturing capability and processes. We do not know whether or when:
o we will be able to develop efficient, low-cost manufacturing
capability and processes,
o we will be able to meet our quality, price, engineering,
design and production standards, or
o we will be able to achieve production volumes required to
successfully market our flywheel based UPS systems.
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Even if we are successful in developing our manufacturing capability and
processes, we do not know whether we will do so in time to satisfy the
requirements of any potential customers.
WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL TO COMPLETE OUR PRODUCT DEVELOPMENT
AND COMMERCIALIZATION PLANS.
Our product development and commercialization schedule could be delayed if we
are unable to fund our research and development activities or the development of
our manufacturing capabilities. We expect that our current cash will be
sufficient to fund our activities through September 2000. We will need to raise
additional funds to achieve commercialization of our product. We do not know
whether we will be able to secure additional funding, or funding on terms
acceptable to us, to pursue our commercialization plans.
WE FACE INTENSE COMPETITION AND MAY BE UNABLE TO COMPETE SUCCESSFULLY.
The market for backup power supplies are intensely competitive. There are many
companies engaged in all areas of backup power production in the United States,
Canada. These firms are engaged in forms of backup power production including
flywheel UPS systems. All of these entities have substantially greater
financial, research and development, manufacturing and marketing resources than
we do. We also compete with companies that are developing applications,
commercial and otherwise, using other types of flywheel based UPS systems. All
of our competitors are much larger than we are. If these competitors decide to
focus on the development of a flywheel based UPS system, they may develop a
viable flywheel based UPS system more quickly and effectively than we can.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY BE UNABLE TO
COMPETE.
Our products rely on our proprietary technology, and we expect that future
technological advancements made by us will be critical to sustain market
acceptance of our products. Therefore, we believe that the protection of our
intellectual property rights is, and will continue to be, important to the
success of our business. Consequently, our ability to compete effectively will
depend, in part, on our ability to protect our proprietary technology, system
designs and manufacturing processes. Unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology. Monitoring unauthorized use
of our intellectual property is difficult, and we cannot be certain that the
steps we may take will prevent unauthorized use of our technology. In addition,
the measures we undertake may not be sufficient to adequately protect our
proprietary technology and may not preclude competitors from independently
developing products with functionality or features similar to those of our
products.
OUR EFFORTS TO PROTECT OUR INTELLECTUAL PROPERTY MAY CAUSE US TO BECOME INVOLVED
IN COSTLY AND LENGTHY LITIGATION WHICH COULD SERIOUSLY HARM OUR BUSINESS.
In recent years, there has been significant litigation in the United States
involving patents, trademarks and other intellectual property rights. Although
we have not been involved in intellectual property litigation, we may become
involved in litigation in the future to protect our intellectual property or
defend allegations of infringement asserted by others. Legal proceedings could
subject us to significant liability for damages or invalidate our intellectual
property rights. Any litigation, regardless of its outcome, would likely be time
consuming and expensive to resolve and would divert management's time and
attention. Any potential intellectual property litigation also could force us to
take specific actions, including:
o cease selling our products that use the challenged
intellectual property;
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o obtain from the owner of the infringed intellectual property
right a license to sell or use the relevant technology or
trademark, which license may not be available on reasonable
terms, or at all; or
o redesign those products that use infringing intellectual
property or cease to use an infringing trademark.
OUR FUTURE PLANS COULD BE HARMED IF WE ARE UNABLE TO ATTRACT OR RETAIN KEY
PERSONNEL.
We have attracted a highly skilled management team. If we develop a prototype
that we believe is marketable, we will require a significant increase in the
number of employees and outside contractors. Our future success, therefore, will
depend, in part, on attracting and retaining additional qualified management and
technical personnel. We do not know whether we will be successful in hiring or
retaining qualified personnel. Our inability to hire qualified personnel on a
timely basis, or the departure of key employees, could harm our expansion and
commercialization plans.
WE DEPEND ON OUR EXECUTIVE OFFICERS.
The Company's future performance depends upon the continued service of executive
officers, in particular, the services of Dr. Christopher Gabrys, the Company's
President, and Mr. Joel Bloomer, the Company's Chairman of the Board of
Directors. The lose of services of one or more of the Company's executive
officers, could have a materially adverse effect on the Company's business,
operating results and financial condition.
INSIDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER OUR COMPANY AFTER THIS
OFFERING AND COULD DELAY OR PREVENT A CHANGE IN CORPORATE CONTROL.
Upon completion of this offering, our executive officers and directors, and
their respective affiliates, will beneficially own, in the aggregate,
approximately 88% of our outstanding common stock. As a result, these
stockholders will be able to exert significant control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions.
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES
AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
Prior to this offering, there has been no public market for our common stock.
Although we intend to apply to have our common stock quoted on the Over the
Counter Bulletin Board market, a trading market for our shares may never develop
or be sustained following this offering. The initial public offering price for
our common stock has been determined by us and may not be indicative of the
market price for these shares following this offering. If you purchase shares of
common stock, you may not be able to resell those shares at or above the initial
public offering price. If a market develops, the market price of our common
stock may fluctuate significantly in response to numerous factors, some of which
are beyond our control, including the following:
o actual or anticipated fluctuations in our operating results;
o changes in market valuations of other technology companies,
particularly those that sell products used in UPS systems;
o announcements by us or our competitors of significant
technical innovations, acquisitions, strategic partnerships,
joint ventures or capital commitments;
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o introduction of technologies or product enhancements that
reduce the need for flywheel energy storage systems;
o the loss of one or more suppliers; and
o departures of key personnel.
WE MAY BE SUBJECT TO LITIGATION IF OUR STOCK PRICE IS VOLATILE.
Our stock price may be volatile due to numerous factors, including those listed
above. In addition, the stock market has recently experienced extreme volatility
that often has been unrelated to the performance of particular companies. These
market fluctuations may cause our stock price to fall regardless of our
performance. 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, and
results of operations or financial condition.
PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER
MORE DIFFICULT.
Provisions in our certificate of incorporation and by-laws and in the Delaware
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. 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.
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 11,486,800 shares of
common stock outstanding. Of these shares, 1,000,000 shares sold in this
Offering will be freely tradable. All of the remaining 10,486,800 shares are
subject to Rule 144 under the Act, which governs the resale of restricted
securities. Sales of securities in reliance upon Rule 144 can only be made in
accordance with the terms of that rule, which permits limited resale of
securities that have been held for one year and essentially unlimited resales
after two years for non-affiliates of the Company under certain conditions.
However, unless and until the Company registers its securities under the Act and
files the required reports under the Securities Exchange Act of 1934, as
amended, resale under Rule 144 of securities held for one year is not permitted.
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.
WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE NET PROCEEDS FROM THIS
OFFERING.
Our Board of Directors and our management will have broad discretion over the
use of the net proceeds of this offering. Investors will be relying on the
judgment of our Board of Directors and our management regarding the application
of the net proceeds of this offering.
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"PENNY STOCK" RULES MAY MAKE SELLING THE COMPANY'S SECURITIES DIFFICULT.
The Securities and Exchange Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that the system provides current price and volume
information with respect to transactions in such securities). The penny stock
rules require broker-dealers to deliver, prior to any transaction in a penny
stock, certain information to their customers and to comply with other
requirements which may have the effect of reducing the level of trading activity
in a penny stock and make it more difficult to sell such stock.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks
and uncertainties. These forward-looking statements are not historical facts,
but rather are based on our current expectations, estimates and projections
about our industry, our beliefs and assumptions. Words including "may," "could,"
"would," "will," "anticipates," "expects," "intends," "plans," "projects,"
"believes," "seeks," "estimates" and similar expressions are intended to
identify forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties and other
factors, some of which are beyond our control, are difficult to predict and
could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties are
described in "Risk Factors" and elsewhere in this prospectus. We caution you not
to place undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this prospectus. We are not obligated
to update these statements or publicly release the result of any revisions to
them to reflect events or circumstances after the date of this prospectus or to
reflect the occurrence of unanticipated events.
PLAN OF DISTRIBUTION
The Company may terminate this Offering for any reason at any time
during its pendency for any reason whatsoever. Shares of the Common Stock will
be marketed on a first come first serve, "any and all best efforts" basis,
through certain directors and executive officers of the Company, none of whom
will receive any commissions or other form of remuneration based on the sale of
the shares. In addition, the Company may engage sales agents who are members of
the National Association of Securities Dealers Inc. to sell shares on a best
efforts basis. The Company anticipates that if sales agents are retained, such
persons would be paid sales commissions not exceeding 10% of the aggregate
dollar amount of Common Stock sold by the sales agents as well as certain other
marketing-related expenses. As soon as practicable, but no more than 10 business
days after receipt of a subscription to purchase shares of Common Stock, the
Company will accept or reject such subscription. Subscriptions not rejected by
the Company within this 10 day period shall be deemed accepted. Once a
subscription is accepted by the Company, it cannot be withdrawn by the
subscriber. Subscriptions to purchase shares of Common Stock can be made by
completing the Subscription Agreement attached to this prospectus as Appendix A
and delivering the same to the Company at 535 Westgate Drive, Napa, California
94558. Full payment of the purchase price must accompany the subscription.
Failure to pay the full subscription price shall entitle the Company to
disregard the subscription. No Subscription Agreement is binding until accepted
by the Company, which may, in its sole discretion, refuse to accept any
subscription for shares, in whole or in part, for any reason whatsoever. Unless
otherwise agreed by the Company, all subscription amounts must be paid in United
States currency by check, bank draft or money order payable to "Q Power, Inc." A
subscription will be accepted in writing by the Company in the Form of
Acceptance attached to this Prospectus.
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DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no public market for the Common
Stock. The offering price of $0.25 per share in this Offering has been
determined by the Company based on a number of factors, including prevailing
market conditions, the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, and the consideration
of the above factors in relation to the market valuation of other similar
companies in the United States. In the event a market should develop for the
Common Stock after completion of this Offering, there can be no assurance that
the market price for the Common Stock will not be lower than the offering price
in this Offering.
USE OF PROCEEDS
Assuming the sale of all 1,000,000 shares, the gross proceeds to be
received by the Company from this Offering will be $250,000, before the
deduction of offering expenses payable by the Company estimated at $79,800. All
of the net proceeds of this Offering will be contributed to the capital of the
Company and used for research and development purposes related to the Company's
product. Pending such uses, the Company expects that the net proceeds of this
Offering will be invested by the Company in a variety of short and
intermediate-term interest-bearing assets, such as obligations of the United
States government and its agencies, and other permitted investments. After this
Offering, the Company will not pay any salaries until such time as it may secure
additional funds of at least $500,000.
CAPITALIZATION
The following table sets forth the capitalization of the Company
derived from its audited balance sheet at May 31, 2000 and the adjusted
capitalization of the Company as of such date to give effect to the sale of the
Offering:
After
Actual Offering
Debt:
Short Term Debt --- ---
--- ---
Total Debt --- ---
--- ---
Stockholders' Equity (Deficit):
Preferred Stock ($0.001 par value) --- ---
Common Stock ($0.001 par value) $ 10,487 $ 11,487
Additional Paid In Capital 228,313 397,513
Retained Earning (Deficit) (18,844) (18,844)
-------- --------
Total Stockholders' Equity (Deficit) 219,956 390,156
------- -------
Total Capitalization $ 219,956 $ 390,156
========= =========
MARKET FOR COMMON EQUITY
There is presently no public market for our common stock. We anticipate
applying for trading of our stock with the Over the Counter Bulletin Board (OTC:
BB) upon the effectiveness of the registration statement of
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which this prospectus forms a part. However, we can provide no assurance that
our shares will be traded on the OTC: BB Market or if traded, that a public
market will materialize.
SELECTED FINANCIAL INFORMATION
The following summary financial data of the Company for the period
March 8, 2000 (inception) to May 31, 2000, has been prepared by our management
and is qualified in its entirety by, and should be read in conjunction with our
audited financial statements contained elsewhere in this prospectus.
For the period
March 8, 2000 (inception)
to May 31, 2000
Statement of Operations:
Revenue $ ----
-------------
Earnings (Loss) from Operations $ (18,844)
-------------
Net Income (Loss) $ (18,844)
-------------
After
Actual Offering
Balance Sheet:
Current Assets $236,829 $407,029
Working Capital 219,196 389,396
Total Assets 237,589 407,789
Total Liabilities 17,633 17,633
Total Stockholders' Equity 219,956 390,156
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements, the notes to the financial statements and the other financial
information contained elsewhere in this prospectus.
The Company commenced operations in March 2000. The Company is a
development stage company and has generated no revenues. We focused our efforts
on raising funds, developing management, administrative infrastructure, research
and development and establishing strategic relationships with manufacturers.
Revenue. We intend to derive revenue from the sale of our flywheel based system.
To date, we have not generated any revenues from the sale of our flywheel
system.
Operating Expenses. Total operating expenses for the period March 8, 2000
(inception) to May 31, 2000 were $18,844 and consisted of general administrative
expenses and costs related to research and development and efforts to raise
funds.
Liquidity and Capital Resources. The Company used private equity financing
aggregating approximately $250,000 to finance its operational losses since
inception.
We anticipate that if the entire Offering is raised, available cash
resources, will be sufficient to meet anticipated working capital and capital
expenditure requirements for at least the next 6 months.
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<PAGE>
Our need for additional cash depends upon numerous factors, including the
expectation that the Company will continue to incur net losses. We cannot assure
you that any additional financing that may be needed will be available on terms
favorable to the Company.
BUSINESS
Company Background
Q Power, Inc. has its principal offices at 535 Westgate Drive, Napa, California
and was incorporated in Delaware in March 2000.
The worldwide demand for high quality electricity has been increasing rapidly in
recent years, driven in large part by the growth in the use of computers, the
Internet and telecommunication products. In a study conducted by the University
of Texas, they projected that the U.S. Internet economy would grow to $507
billion in 1999, an increase of 68% over 1998. Customers are far less tolerant
of voltage disturbances, such as sags and surges, and power outages because such
power disturbances disrupt business operations and employee productivity.
Therefore, to ensure continuous service and prevent losses from power outages,
corporations will need to add a reliable and quality power supply to protect
their communications equipment. We project the uninterruptible power supply
(UPS) sales for telecommunication and the Internet are expected to reach $800
million in the U.S. and $2 billion worldwide over the next three years.
We are a development stage company, incorporated for the express purpose of
developing, designing, manufacturing and marketing a flywheel based UPS system.
We are presently continuing research and development activities related to the
design, development and testing of a flywheel system ("Flywheel System"). Our
Flywheel System will be based upon proprietary designs developed by Christopher
Gabrys, the Company's President. Dr. Gabrys has assigned to the Company his
intellectual property rights in the flywheel system. We believe our current cash
resources are sufficient to fund our research and development activities
relating to the Flywheel System over the next 3 months. If we receive less than
the maximum proceeds, it will be necessary to raise additional funds to complete
a prototype and limited trials of the Flywheel System. Should the development of
the prototype or testing of the prototype take more time than anticipated, or if
the results of testing require significant modifications to the Flywheel System,
sufficient funds may not be available to enable the Flywheel System to be
completed. If we do not have sufficient funds to complete our initial
development, we will have to cease activities until additional funds become
available (see "Risk Factors"). Should we develop a prototype flywheel system
that in our opinion will be marketable, we will need a minimum of $1.0 million
to complete our research and development, conduct final testing on a marketable
product, and initiate marketing activities. We have no commitment for this
funding and there can be no assurance that this or any other funding will become
available to us. We have entered into a development and manufacturing agreement
with Innovative Magnetic Technologies, d.b.a. CalNetix Inc. to manufacture the
bearing components of our Flywheel System. We are in discussions with Toray
Composites (America) Inc. to build the flywheel rotor of our Flywheel System,
however, there can be no assurance that we will be able to negotiate an
agreement with them.
The Company has not yet begun operations and has no revenue. Since inception,
the Company has been engaged in developing a corporate structure, planning
operations, capital raising activities, and developing our Flywheel System.
Although we believe that the proceeds from this Offering will satisfy the
Company's cash requirements for the next 6 months, there can be assurance that
actual cash needs will not exceed estimates, which could have a material adverse
effect on the business and financial condition of the Company.
14
<PAGE>
We intend to develop and market a high performance uninterruptible power supply
for the telecommunication industry that employs a flywheel and magnetic
bearings. We intend to provide a highly reliable, low-cost and non-toxic
replacement for chemical-based batteries currently used in UPS systems in the
telecommunication industry. With the explosive growth of the Internet and its
underlying infrastructure, electrical power quality and reliability have become
essential to providing the communications connection to the Internet. In
addition, over the estimated 20-year life of the Flywheel System, our Flywheel
Systems costs, including initial costs and maintenance expenses, is per
Watt-hour less than a chemical-based battery over the same time period.
Flywheel Systems In General
Flywheel energy storage systems (FESS) represent an alternative to more
conventional chemical-based batteries, which have been used in telecommunication
applications. The flywheel system generates electrical power as follows:
o When commercial electrical power is available, the FESS
operates as an electric motor which causes the rotor
(flywheel) to spin or to continue spinning.
o The spinning flywheel stores a certain amount of kinetic
energy. The amount of energy stored is dependent on the speed
of revolution and upon the inertia, i.e., the higher the speed
and the higher the inertia, the greater the kinetic energy.
o If commercial power is interrupted, the flywheel continues to
spin thereby "reversing" the motor and providing electric
power. Thus the flywheel acts as a generator.
o The amount of power that is generated depends upon the design
of the motor generator. The length of the time that the power
is available depends upon the kinetic energy storage capacity
of the flywheel.
FESS units have recently emerged as a feasible technology due to the
availability of such key items as:
o new advances in high strength, low weight (composite)
materials for rotor construction,
o low friction bearings (e.g., magnetic), and
o low cost, high quality electronics.
The Company believes that the flywheel system offers users the following
advantages over chemical-based batteries:
o lower maintenance requirements,
o less sensitivity to outdoor temperatures,
o the ability to readily determine the existing storage
capacity, and
o minimal environmental disposal problems.
The following is a detailed description of a flywheel system:
o A rotor is the mechanical component, or flywheel, that stores
the energy in the form of kinetic energy. Rotors may be
constructed of conventional materials, such as high quality
steel, or advanced composites, including graphite or glass
fiber, or may be constructed using a combination of such
material technologies. The geometry, mass, and rotational
speed determine
15
<PAGE>
the amount of stored energy. Although the rotor axis is
typically oriented vertically, in some FESS designs the axis
may be oriented in other directions, including horizontal.
o The motor/generator is used for converting electrical energy
to mechanical, for initial storage, as well as for
re-converting the mechanical energy to electrical, upon loss
of primary power. The size of the motor/ generator determines
the power input and output capability.
o The power electronics are the electrical components that
perform the required AC, DC, and variable frequency AC
conversions to control the speed of the motor and extract the
rotor energy, when required.
o The bearings are the low-friction support system for the
rotor. Bearings may be mechanical or magnetic, or a
combination.
o The containment is the physical housing for the rotor and
other mechanical components, including bearings and the
motor/generator. The housing contains the basic mechanical
components, maintaining the vacuum, and serves as the
principle barrier in case of a failure.
o A FESS control unit contains the power electronics and
electrical system used to provide monitoring and alarms for
the FESS unit. These components are located in a housing
(equipment shelf or closure) separate from the FESS primary
unit. The control unit may be installed internally (within a
cabinet or structure) or externally (outdoors, above or
below-ground).
Limitations of Non-Flywheel UPS Systems
Non-flywheel, or conventional, UPS devices have evolved out of a combination of
diesel engines, generators, automobile batteries and UPS electronics. We believe
that these devices have resulted in UPS systems that are less efficient, less
reliable and more expensive than they could be. The chemical-based batteries,
which provide temporary power for the UPS system are the weakest, yet most used
component of conventional power quality and reliability solutions. Using
chemical-based batteries have numerous problems, including:
Cost
o Batteries must be regularly inspected, generally every three
months, to detect problems. Batteries also require periodic
testing to determine their power output capacity, which
degrades over time.
o Regardless of usage, batteries have a limited useful life and
must be replaced every 1 to 7 years, depending upon the type
of use, environment and other factors.
o Unless cooled by costly air conditioning systems, a battery's
life will rapidly degrade, making them especially
uneconomically feasible in hot weather climates.
Reliability
o Batteries are prone to heat buildup and corrosion which leads
to a high rate of battery failure.
o When batteries are repeatedly used at or near their maximum
power output, power output capacity rapidly decreases,
reducing the batteries' effectiveness over time.
Environmental
o Batteries contain toxic materials such as lead and sulfuric
acid, creating costly disposal problems from state and federal
environmental regulations governing battery disposal.
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<PAGE>
Beyond the specific problems associated with chemical-based batteries, existing
UPS systems contain inefficiencies inherent in any system that was not designed
as an integrated solution. Specifically, the major components of these systems
do not come from a single reliable source. Separate companies manufacture,
market and service the genset, UPS electronics and batteries. This lack of a
single-source supplier makes installation, maintenance and failure analysis more
difficult, costly and complex. Therefore, the end user must assume the
responsibility to integrate and monitor the system.
Telecommunication Network Overview
Any communication, voice or data, (excluding wireless networks) travels over
communication lines that are connected by both "inside" and "outside" stations.
An "inside" station refers to the equipment that handles the switching and
routing functions and is housed within a structure or building with a controlled
environment ("Central Office"). The "outside" stations are used to connect
customers to the switching and routing equipment in the Central Office and are
subject to the elements, making them far more susceptible to power interruptions
and much more difficult to maintain. An outside station is any one of the
following: (i) a remote terminal, which is a small cabinet located by the curb
of a street ("RT"), (ii) a utility pole or (iii) a unit connected directly to a
customer's home. Each station needs back-up power to keep all the electronics
installed, within the station, running continuously so that the lines of
communications do not break down.
Market Analysis
The worldwide demand for high quality electricity has been increasing rapidly in
recent years, driven in large part by the growth in the use of the Internet and
telecommunication products. The Electric Power Research Institute, from a 1999
study, estimates that power disturbances cost U.S. businesses more than $30
billion each year. Our products will be targeted at the telecommunication market
for UPS. We believe that our product will provide a superior alternative to
conventional chemical-based batteries.
Telecommunications Market
Traditionally, a string of chemical-based batteries, or battery plants, has
served as the backup power needs of the telecommunication industry. However, new
alternatives, with more reliable power solutions, are increasingly being
reviewed to replace such systems. As part of the power quality and reliability
market, according to the Darnell Group Inc., the U.S. telecommunication UPS
market exceeded $280 million in 1998 and is expected to grow to over $800
million by 2003. This market is made up of five distinct segments:
o The cable television market (CATV) in the United States is
dominated by four operators, AT&T, AOL/Time Warner, Comcast,
and Cox Communications.
o Computer Telephony Integration (CTI) technology allows an
individual to use a telephone line simultaneously for voice
and computer data communication and allows individual office
personnel to manage telephone calls from their personal
computer.
o Local Multipoint Distribution Service (LMDS) companies provide
two-way wireless broadband technology that enables
communication providers to quickly and inexpensively provide
high margin bandwidth services to businesses and homes.
Competitive Local Exchange Carriers (CLECs), such as
Convergent Communications, cellular companies, such as Sprint
PCS, and Internet service providers, such as Earthlink, are
potential customers of our flywheel system.
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<PAGE>
o Digital subscriber lines (DSL) allow high-speed/broadband
Internet connections over existing copper telephone wires. DSL
is offered by such companies as SBC Communications, US West,
Bell South and Bell Atlantic.
o Internet telephony (IT) technology allows companies such as
Quest, ICG and Cincinnati Bell, to use the Internet to offer
communication services such as voice, facsimile, and
voice-messaging applications.
Products
The Company initially intends to design, develop and offer a 2,000 Watt-hour UPS
flywheel system. The Company has named this system the "eBattery 2/2". The
eBattery 2/2 is intended to provide the backup power requirements for remote
stations within a telecommunication network. Each station requires a UPS system
that will be placed underground at each station. Based on the advantages of our
Flywheel System, the eBattery 2/2 is intended to be superior to the current
chemical-based batteries.
The eBattery 2/2 will be comprised of seven main components: (i) a high-strength
composite flywheel, (ii) a magnetic bearing system, (iii) a high-efficiency
motor/generator, (iv) power electronics, (v) a vacuum system, (vi) a containment
structure, and (vii) a system monitor. The flywheel is the component that
physically stores the energy. We have specified a design that will provide for a
15,000 cycle, 20-year life span. The magnetic bearings will support the flywheel
thus eliminating any physical contact. Bearing life and reliability is therefore
nearly infinite because there is no contact or friction between the spinning and
non-spinning parts. The motor/generator provides torque through generation of a
rotating magnetic field. A sealed containment chamber will house the composite
flywheel, the magnetic bearing system and the motor/generator. A vacuum chamber
around the flywheel will prevent the flywheel from overheating from aerodynamic
drag (air friction). The vacuum is necessary because it is anticipated that the
flywheel will have a peripheral speed in excess of Mach 2. Air molecules hitting
the flywheel surface would quickly overheat the flywheel. This effect is similar
to that experienced by a spacecraft entering the atmosphere. The total system
functionality will be continuously monitored and controlled by an electronic
system monitor that will be designed to shut the system down if a problem arises
with the system.
The foundation for our technological advantage will be based upon a Mach 2+,
high-strength composite flywheel that is levitated by an advanced magnetic
bearing system coupled with a high-efficiency motor/generator. We believe that
our Flywheel System will have the following competitive advantages over
traditional chemical-based battery powered UPS systems:
o 100% protection from power fluctuations
o Estimated 20 year service life
o Very low maintenance costs
o Impervious to high power draws
o Wide operating temperature range (Climate control often needed
for batteries)
o Estimated 4 times faster recharge rate than batteries
o Lifetime energy efficiency - greater than 90%
o Environmentally benign (Used batteries are considered
hazardous waste)
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Sales and Marketing Strategy
Q Power's marketing strategy will focus on establishing and enhancing
recognition of our Flywheel System's cost and performance benefits. Initially,
we will focus on the computer telephony integration (CTI) and cable television
(CATV) providers. Achieving the desired level of market penetration may involve
providing customers with trial units.
Our sales strategy is predicated upon direct sales and utilizing an integrated
customer/supplier Internet distribution network. Customer relationships will
continue to be formed and maintained with attention given to application detail
and customer satisfaction. Expansion into the non-telecommunication resale
market will be explored after establishing a substantial presence in the core
markets.
Intellectual Property
The Company intends to apply for a number of patents, relating to our Flywheel
System, with the United States Patent and Trademark Office under the design and
functionality standard for patents. In addition Christopher Gabrys, the
Company's President, has assigned certain patents and pending patents relating
to the flywheel system, he has an interest in to the Company. A patent gives the
owner exclusive use for twenty years. The Company and Christopher Gabrys intend
on applying for additional patents as the Company fully develops more products
and components for the UPS system. The Company has entered into confidentiality
agreements with all employees to protect the Company's intellectual property,
including any copyrights, patents and trade secrets that the Company may have or
may be working on. There can be no assurances that the Company will be issued
any patents for any part of the UPS system it intends to develop. The Company's
failure to secure any patent or protect its intellectual property may have a
materially adverse effect on the business, financial position and operations of
the Company.
Manufacturing
The Company intends to rely on subcontractors to manufacture the components from
the Company's designs that make up the Flywheel System. The Flywheel System's
design is intended to standardize the manufacturing process. We intend to
assemble and test the Flywheel System internally. In addition, we intend to
build an assembly plant for the such purposes upon sufficient funding and the
successful development and test of the Flywheel System.
The Company has entered into strategic relationships with a technology supplier,
CalNetix, to manufacture and supply magnetic bearings for the Flywheel System.
CalNetix, a privately held company located in Torrance, California, will develop
and manufacture the magnetic bearings for the eBattery 2/2. CalNetix is a
recognized industry leader in the design and manufacture of commercial magnetic
bearings. The CalNetix agreement provides that the Company and CalNetix will
work together to test and develop the magnetic bearings for our Flywheel System.
Upon the successful development of a flywheel system, CalNetix will be the
exclusive supplier of the proprietary magnetic bearings for the Company. In
addition, we will be the exclusive buyer of the proprietary magnetic bearings
from CalNetix. There can be no assurance that the companies will develop a
marketable product.
We are in discussion with Toray Composites (America) Inc. of Tacoma, Washington
to manufacture the composite flywheel rotor. The Company believes that it will
successfully execute an agreement with Toray to have Toray develop and
manufacture a flywheel rotor for the Company. However, there can be no assurance
that we will be able to negotiate a manufacturing and development agreement with
Toray. The Company's inability to find other manufacturers and suppliers for the
flywheel rotor, if there is no
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<PAGE>
agreement with Toray, and for additional components of the Flywheel System would
have a materially adverse effect on the Company's financial position and
operations.
Competition
The power quality and reliability market is extremely competitive. The Company
competes with other flywheel based UPS manufacturers and chemical-based battery
UPS manufacturers. We will compete directly with companies developing and
manufacturing flywheel based UPS system, including Active Power, Inc., Beacon
Power Corporation and Trinity Flywheel Power, all of which are much larger, and
have significantly more resources than the Company. We will also be directly
competing with chemical-based battery UPS manufacturers, which are more
established and have the largest market share.
We have limited financial, marketing, technical and other resources that are
necessary to implement our business plan. Our success will depend upon our
ability to develop a UPS product that will enable us to compete on the basis of
performance, reliability and price. There can be no assurance that the Company
will be able to compete successfully in the UPS industry. Many of our current
and potential competitors have significantly greater financial, marketing,
technical and other resources than we do. Our competitors will most likely be
able to devote greater resources to the development, promotion and sale of their
UPS systems than will Q Power.
Employees
Currently, the Company does not have any full-time employees, except for the
current officer of the Company. Upon sufficient additional funding and the
completion of an operational prototype flywheel system, the Company intends to
hire approximately 7 people, comprised of sales persons, business development
people, assembly personnel and an administrative staff. Labor costs will be
minimized by outsourcing functions when practical.
Chris Gabrys, President, Joel Bloomer, Chairman and Rick Campbell, Vice
President are currently designing the Flywheel System on a full-time basis. None
of these officers are currently paid a salary. Upon sufficient funding and
development of a successful prototype, the Company intends to commence the
payment of salaries for each of these officers. The Company believes that
Messrs. Gabrys', Bloomer's and Campbell's experience and expertise in the
engineering and flywheel industries will enable them to be successful in
developing the Flywheel System. The Company relies heavily on these officers to
complete the Flywheel System. Each officer has signed a Confidentiality and
Non-disclosure agreement with the Company. The unavailability of either Messrs.
Gabrys, Bloomer or Campbell would set back the developmental time frame of the
Flywheel System and would have a materially adverse effect on the Company's
business, financial position and proposed operations.
Legal Proceedings
We are not involved in any pending, or to our knowledge, threatened legal
proceedings. We may from time to time become a party to various legal
proceedings arising in the ordinary course of business.
DESCRIPTION OF PROPERTY
The Company maintains offices at, the home of Mr. Bloomer, the Company's
Chairman, and currently pays no rent:
535 Westgate Drive
Napa, California 94558
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The Company intends to obtain office space subsequent to the development and
design of a final prototype of the FESS.
MANAGEMENT
The following table sets forth the names, ages (as of May 31, 2000) and
positions of all directors and executive officers of the Company.
Name Age Position
------- ---- ---------
Joel Bloomer 60 Chairman of the Board of Directors
Christopher Gabrys 29 President, Director
Rick Campbell 29 Vice President
Scott Kostiuk 29 Secretary, Treasurer
Joel Bloomer, Chairman of the Board
Mr. Bloomer has served as Q Power's Chairman of the Board since its inception.
He has worked as a consultant to Toray Composites (America) Inc., TCA, for
business since 1994. Mr. Bloomer has 35 years experience with the aerospace
industry in composite materials, structural design, dynamic analysis,
manufacturing process development and business development activities. He is a
graduate of the University of Washington with a M.S. in Aeronautical
Engineering.
Dr. Chris Gabrys, President
Dr. Gabrys is a founder of Q Power, Inc. and has served as the President since
its inception. Since 1996, Dr. Gabrys has worked as both a consultant and as a
senior engineer of composite development at Toray Composites (America) Inc. At
TCA, Dr. Gabrys commercialized his revolutionary composite manufacturing process
and established the state-of-the-art in flywheel design. Dr. Gabrys is
considered an expert in the composite flywheel industry and has several patents
pending. Dr. Gabrys' leadership efforts have made TCA the recognized price and
performance leader (>80% market share) in the composite flywheel rotor industry.
Dr. Gabrys also has experience in magnetic bearing development and system
design. Dr. Gabrys earned a Ph.D. in Engineering Science and Mechanics from The
Pennsylvania State University in 1996.
Dr. Rick Campbell, Vice President
Dr. Campbell has served as Q Power's Vice President since its inception. Prior
to joining Q Power, Dr. Campbell was a project leader in the research and
development efforts of Accuride Corporation from 1999 to 2000. From 1997 to
1999, Dr. Campbell served on the development team of Lockheed Martin as a senior
engineer for the X-33 SSTO (Single-Stage-to-Orbit) project, receiving
recognition for technical excellence. From 1997 to 1999, Dr. Campbell was also
involved with research and development efforts for the Space Shuttle with
Lockheed Martin. Dr. Campbell earned a Ph.D. in Engineering Science and
Mechanics from The Pennsylvania State University in 1997.
Scott Kostiuk, Secretary and Treasurer
Mr. Kostiuk has been the company's Secretary and Treasurer since its inception.
From October 1998 to February 2000, Mr. Kostiuk has served as the Secretary and
Treasurer of Zeppelin Software Inc, a
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wireless communications company. From November 1994 to 1999, Mr. Kostiuk served
as the Secretary and Treasurer of The Plant Software Inc., a computer software
development and publishing company. Mr. Kostiuk attended the University of
Toronto, graduating with a B.A. Degree in 1993.
EXECUTIVE COMPENSATION
From March 8, 2000 (inception) through May 31, 2000, there was no cash
compensation paid to any of our officers or directors. Directors are reimbursed
for their expenses in attending board meetings. The following table sets forth
the compensation for the 4 officers of the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
----------------------------------------------------------------------------
Annual Expected
Name and Compensation Total Compensation
Principal Position Year Salary Compensation for 2000-2001*
--------------------------------- -------------- -------------- -------------------- -------------------------
<S> <C> <C> <C> <C>
Joel Bloomer 1999 $0 $0 $ 0
Chairman & Director
Christopher Gabrys 1999 $0 $0 $ 0
President & Director
Rick Campbell 1999 $0 $0 $ 0
Vice President
Scott Kostiuk 1999 $0 $0 $ 0
Secretary, Treasurer
</TABLE>
* Upon sufficient additional funding of $500,000, the Company will initially
commence paying each officer a salary of $15,000.
Stock Option Grants
We have not granted any stock options.
Employment Agreements
No employment agreements have been entered into by and between the Company and
any of its officers or employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 31, 2000, information as to:
(a) the beneficial ownership of our common stock by (i) each person serving as a
director of the Company on such date, (ii) each person who qualifies as a "named
executive officer" as defined in Item 402(a)(2) of Regulation S-B under the
Exchange Act, and (iii) all of such directors and executive officers of the
Company as a group; and (b) each person known to the Company as having
beneficial ownership of more than ten percent (10%) of our common stock.
As of May 31, 2000, we had 10,486,800 shares of common stock issued and
outstanding.
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<TABLE>
<CAPTION>
Beneficial After the
Name and Address Ownership of Percent of Maximum
of Beneficial Owner Capital Stock (1) Common Stock Offering
------------------- -------------- ------------ --------
<S> <C> <C> <C>
Joel K. Bloomer (2) 3,400,000(3) 32.4% 29.6%
Christopher Gabrys (2) 3,104,000 29.6% 27.0%
Rick Campbell (2) 640,000(4) 6.1% 5.6%
Scott Kostiuk (2) 3,000,000(5) 28.6% 26.1%
All directors and executive officers as a group
(4 persons) 10,144,000 96.7% 88.3%
</TABLE>
(1) The securities "beneficially owned" by an individual are determined
in accordance with the definitions of "beneficial ownership" set forth in the
rules of the Securities and Exchange Commission and may include securities owned
by or for the individual's spouse and minor children and any other relative who
has the same home, as well as securities to which the individual has voting
rights or investment power or had the right to acquire beneficial ownership
within sixty (60) days after June 30, 2000. Beneficial ownership may be
disclaimed as to certain of the securities.
(2) Except as otherwise noted, the address of each person is c/o Q
Power, Inc., 535 Westgate Drive, Napa, California 94558.
(3) All of such shares are held by Mr. Bloomer's spouse, Elaine L.
Collins.
(4) Includes 140,000 shares owned by Mr. Campbell's parents, David R.
and Bonnie D. Campbell.
(5) All of such shares are owned by Richebourg, Inc., a corporation in
which Mr. Kostiuk is the principal. Richebourg, Inc. has an address at Fort
Nassau Centre, Marlborough Street, PO Box N-4875, Nassau, Bahamas.
RELATED TRANSACTIONS
None of our directors or officers, or any person who beneficially owns, directly
or indirectly, shares carrying more than 10% of the voting rights attached to
our outstanding shares of common stock has, since our date of incorporation, had
any material interest, direct or indirect, in any transaction with us or in any
presently proposed transaction that has or will materially affect us.
DESCRIPTION OF SECURITIES
General
Upon the closing of the Offering, the Company will have authorized capital stock
of 100,000,000 million shares, of which 90,000,000 million shares will be
designated as Common Stock, $0.001 par value and 10,000,000 million shares will
be designated as Preferred Stock, $0.001 par value. As of the date of this
prospectus, the Company has 10,486,800 shares of Common Stock issued.
Common Stock
All shares are fully paid and non-assessable. All shares are equal to
each other with respect to voting, liquidation, and dividend rights. Special
stockholder meetings may be called by the officers or directors, or upon the
request of holders of at least one-tenth (1/10) of the outstanding shares.
Holders of shares are entitled to one vote at any stockholders' meeting for each
share they own as of the record date set by the Board of Directors. Holders of
shares are entitled to receive such dividends as may be declared
23
<PAGE>
by the Board of Directors out of funds legally available therefore, and upon
liquidation are entitled to participate in a distribution of assets available
for such distribution to stockholders. There are no conversion, preemptive or
other subscription rights or privileges with respect to any share, except for
registration rights granted to a certain number of stockholders. Reference is
made to the Company's Certificate of Incorporation and its bylaws as well as to
the applicable Statutes of the State of Delaware for a more complete description
of the rights and liabilities of holders of shares. It should be noted that the
bylaws may be amended by the board of directors without notice to the
shareholders. The shares of the Company do not have cumulative voting rights,
which means that the holders of more than fifty percent (50%) of the shares
voting for election of directors may elect all the directors if they choose to
do so. In such event, the holders of the remaining shares aggregating less than
fifty percent (50%) will not be able to elect directors. Holders of our common
stock have no pre-emptive rights, no conversion rights and there are no
redemption provisions applicable to our common stock.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will be
passed upon for us by Rosenman & Colin LLP, New York, New York.
EXPERTS
Our balance sheet as of May 31, 2000 and the related statements of operations
and Stockholders' equity for the period March 8, 2000 (inception) to May 31,
2000, appearing elsewhere in this prospectus, have been included herein in
reliance on the report of Freeman & Davis LLP, given on the authority of said
firm as experts in accounting and auditing.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Audited Financial Statements:
Balance Sheet as of May 31, 2000
Statement of Operations for the period
March 8, 2000 (inception) to May 31, 2000
Statement of Cash Flows for the period March 8, 2000
(inception) to May 31, 2000
Statement of Stockholders' Equity for the period
March 8, 2000 (inception) to May 31, 2000
Notes to Audited Financial Statements
Consent of Freeman & Davis LLP to use its Report on Audited
Financial Statements
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have had no changes in or disagreements with our accountants since our
incorporation in 2000.
24
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 under the Act with the
Securities and Exchange Commission with respect to the shares of our common
stock offered by this prospectus. This prospectus is filed as a part of the
registration statement and does not contain all of the information contained in
the registration statement and exhibits and reference is hereby made to such
omitted information. Statements made in this registration statement are
summaries of the terms of these referenced contracts, agreements or documents
and are not necessarily complete. Reference is made to each exhibit for a more
complete description of the matters involved and these statements shall be
deemed qualified in their entirety by the reference. You may inspect the
registration statement and exhibits and schedules filed with the Securities and
Exchange Commission at the Securities and Exchange
Commission's principle office in Washington, D.C. Copies of all or any part of
the registration statement may be obtained from the Public Reference Section of
the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. The Securities and Exchange Commission also maintains a web site
(http://www.sec.gov) that contains reports, proxy statements and information
regarding registrants that file electronically with the Commission. For further
information pertaining to us and our common stock offered by this prospectus,
reference is made to the registration statement.
<PAGE>
Q Power, Inc.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MAY 31, 2000
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS:
BALANCE SHEET F-2
STATEMENT OF OPERATIONS F-3
STATEMENT OF CASH FLOWS F-4
STATEMENT OF STOCKHOLDERS' EQUITY F-5
NOTES TO FINANCIAL STATEMENTS F-6 - 8
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors of
Q Power, Inc.:
We have audited the accompanying balance sheet of Q Power, Inc., a
Delaware corporation, as at May 31, 2000 and the related statements of
operations, cash flows and stockholders' equity for the period March 8, 2000
(inception) to May 31, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Q Power, Inc. as at May 31,
2000, and the results of its operations and its cash flows for the period March
8, 2000 (inception) to May 31, 2000 in conformity with generally accepted
accounting principles.
Freeman & Davis LLP
New York, New York
June 20, 2000
F-1
<PAGE>
Q POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MAY 31, 2000
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C> <C>
Cash $191,932
Prepaid professional fees 44,897
----------
TOTAL CURRENT ASSETS $236,829
EQUIPMENT - Net of accumulated depreciation of $40 760
--------
$237,589
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses payable $17,400
Due to related parties 233
----------
TOTAL CURRENT LIABILITIES $ 17,633
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value per share:
Authorized and unissued 10,000,000 shares
Common stock, $0.001 par value per share:
Authorized 90,000,000 shares
Issued and outstanding 10,486,800 shares $ 10,487
Additional paid-in capital 228,313
Deficit accumulated during the development stage (18,844)
----------
TOTAL STOCKHOLDERS' EQUITY 219,956
--------
$237,589
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Q POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
MARCH 8, 2000 (INCEPTION) TO MAY 31, 2000
REVENUE $ -
---------
EXPENSES
Research and development expenses 10,586
General and administrative expenses 8,218
Depreciation 40
--------
TOTAL EXPENSES 18,844
--------
NET LOSS $(18,844)
========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Q POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
MARCH 8, 2000 (INCEPTION) TO MAY 31, 2000
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $(18,844)
Adjustments to reconcile net loss to net cash used in
in operating activities:
Noncash item:
Depreciation of equipment 40
Increase in prepaid professional fees (44,897)
---------
NET CASH USED IN OPERATING ACTIVITIES (63,701)
---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Payments for the purchase of equipment (800)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 256,200
Advances from related parties 233
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 256,433
---------
CASH AT MAY 31, 2000 $191,932
========
SUPPLEMENTAL INFORMATION ABOUT
CASH PAYMENTS IS AS FOLLOWS:
Cash payments of interest $ -
Cash payments for income taxes $ -
SUPPLEMENTAL INFORMATION ABOUT
NONCASH FINANCING ACTIVITIES:
Expenses of an offering of the Company's common stock
financed by accrued expenses payable $17,400
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Q POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
MARCH 8, 2000 (INCEPTION) TO MAY 31, 2000
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
---------------------- ADDITIONAL DURING THE
PAID-IN DEVELOPMENT
TOTAL SHARES AMOUNT CAPITAL STAGE
-------- -------- ------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Common stock issued for cash $ 9,500 9,500,000 $ 9,500 $ $
Common stock issued in a securities offering,
net of estimated expenses of $17,400 229,300 986,800 987 228,313
Net Loss - March 8, 2000 (inception) to May 31, 2000 (18,844) (18,844)
--------- ---------- --------- ----------- ---------
Balance - May 31, 2000 $219,956 10,486,800 $10,487 $228,313 $(18,844)
======== ========== ========= ============ =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Q POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF DEVELOPMENT STAGE ACTIVITIES
Q Power, Inc. ("Company") was organized on March 8,
2000 under the laws of the State of Delaware. The Company is
presently in its development stage and intends to become a
developer and manufacturer of breakthrough flywheel based
power solutions. The Company's mission is to develop, market
and sell a backup power supply for the electrical power
quality and reliability industry. There can be no assurance
that the Company will achieve its goals.
OFFERING OF THE COMPANY'S COMMON STOCK
In May 2000, the Company completed an offering of
986,800 shares of its common stock at an offering price of
$.25 per share to qualified investors. Pursuant to the
offering, the Company received $246,700, less estimated costs
of approximately $17,400 associated with the offering, for net
proceeds of $229,300. The offering was made pursuant to the
exemptions from registration with the Securities and Exchange
Commission (SEC) provided by Regulation D, Rule 506, of the
1933 Act, and under applicable state laws, rules and
regulations.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
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.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the
Company to concentrations of credit risk, as defined by
Statement of Financial Accounting Standards No. 105, consist
principally of cash.
The Company maintains its cash balances in a financial
institution located in Kent, Washington. The balances are
insured by the Federal Deposit Insurance Corporation up to
$100,000. As at May 31, 2000, bank statement balances in
excess of such insurance is approximately $100,000.
F-6
<PAGE>
Q POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PLANT AND EQUIPMENT
Plant and equipment are stated at cost, less
accumulated depreciation. The cost of major improvements and
betterments to existing plant and equipment are capitalized,
while maintenance and repairs are charged to expense when
incurred. Upon retirement or other disposal of plant and
equipment, the profit realized or loss sustained on such
transaction is reflected in income. Depreciation is computed
on the cost of plant and equipment on the straight-line
method, based upon the estimated five year useful life of the
assets.
INCOME TAXES
The Company has incurred a net operating loss for
federal income tax purposes during the initial interim period
March 8, 2000 to May 31, 2000. Such loss in the approximate
amount of $10,000 is available as a deduction from income
otherwise subject to federal income taxes. Part or all of the
loss may be utilized in the Company's current year, but is
dependent upon the outcome of its operations during the
remainder of such year. If the net operating loss is not
applied in the current year, it may be carried forward for
twenty years and applied to income subject to tax in the
applicable future years.
The Company has adopted Statement of Financial
Accounting Standards No. 109, "Accounting For Income Taxes",
which requires the recognition of deferred tax assets and
liabilities for future tax consequences attributable to
differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases. No deferred tax assets are recognized in the balance
sheet as at May 31, 2000 in connection with the Company's net
operating loss inasmuch as a full valuation allowance has been
established by management.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income", which established standards for reporting and display
of comprehensive income and its components in the financial
statements. Besides net income, SFAS No. 130 requires the
reporting of other comprehensive income, defined as revenues,
expenses, gains and losses that under generally accepted
accounting principles are not included in net income. As at
May 31, 2000, the Company had no items of other comprehensive
income and as a result, no additional disclosure is included
in the financial statements.
F-7
<PAGE>
Q POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
NOTE 2. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimate of the fair value of each class of financial
instruments for which it is practicable to estimate that value is
based on the following methods and assumptions:
CASH, ACCRUED EXPENSES PAYABLE AND DUE TO RELATED PARTIES:
The carrying amounts of these items are assumed to be a
reasonable estimate of their fair value due to their
short-term nature.
F-8
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF
ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT
RELY ON IT. WE ARE NOT MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS
DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.
-----------------------
1,000,000 Shares
Common Stock
Q Power, Inc.
-----------------------
Prospectus
------------------------
TABLE OF CONTENTS
PAGE
Summary.......................................................3
Risk Factors..................................................
Plan of Distribution..........................................
Determination of Offering Price...............................
Use of Proceeds...............................................
Capitalization................................................
25
<PAGE>
Market for Common Equity......................................
Selected Financial Data.......................................
Management's Discussion and...................................
Analysis of Financial Condition...............................
Business......................................................
Description of Property.......................................
Management....................................................
Executive Compensation........................................
Security Ownership of Certain.................................
Beneficial Owners and Management..............................
Related Transactions..........................................
Description of Securities.....................................
Dividend Policy...............................................
Legal Matters.................................................
Experts.......................................................
Index to Financial Statements.................................
Changes in and Disagreements with Accountants.................
Where You Can Find More Information...........................
Financial Statments ..........................................
------------------------
PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. LIMITATION ON LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation includes certain provisions
permitted pursuant to the Delaware General Corporation Law ("DGCL") whereby
officers and directors of the Company shall be indemnified against certain
liabilities to the Company or its stockholders. The Certificate of Incorporation
also limits to the fullest extent permitted by the DGCL a director's liability
to the Company or its stockholders for monetary damages for breach of fiduciary
duty of care as a director, including gross negligence, except liability for (i)
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of the laws, (iii) under Section 174 of the DGCL (relating
to unlawful payments of dividends or unlawful stock repurchases or redemptions)
or (iv) any transaction from which the director derives an improper personal
benefit. This provision of the Company's Certificate of Incorporation has no
effect on the availability of equitable remedies, such as injunction or
rescission. The Company believes that these provisions will facilitate the
Company's ability to continue to attract and retain qualified individuals to
serve as directors and officers of the Company.
Limitations on Liability of Directors. Under Section 145 of the Delaware General
Corporation Law, a corporation may indemnify a director, officer, employee or
agent of the corporation (or a person who is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In the
case of an action brought by or in the right of a corporation, the corporation
may indemnify a director, officer, employee or agent of the corporation (or a
person who is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) against expenses (including attorneys'
26
<PAGE>
fees) actually and reasonably incurred by him if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification may be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent a court finds that, in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper.
Indemnification for Directors and Officers. Under Delaware law, a corporation
may indemnify its present and former directors and officers for a variety of
court or administrative proceedings. We have adopted a provision which requires
us to indemnify and hold harmless any person involved in any action, suit or
proceeding because that person is or was a director or officer of ours. This
provision does not, however, require us to indemnify an officer or director in a
proceeding they initiate without the authorization of our directors.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of ours
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission indemnification for
liabilities is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
Insurance for Directors and Officers. Under Delaware law, a corporation may
obtain insurance on behalf of its directors and officers against liabilities
incurred by them in those capacities. We have adopted a provision which permits
us to maintain insurance to protect us and our directors and officers against
expenses, liabilities and losses whether or not we would have the power to
indemnify these persons under Delaware law. We intend to have in place at or
promptly after the closing of this offering a directors' and officers' liability
and company reimbursement liability insurance policy.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated costs of this offering are as follows:
Securities and Exchange Commission registration fee $ 300
Transfer Agent Fees 2,000
Accounting fees and expenses 7,000
Legal fees and expenses 65,000
Blue Sky fees and expenses 3,500
Miscellaneous 2,000
---------
Total $ 79,800
=========
We will pay all expenses of this offering listed above.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, the Company has issued unregistered securities to a limited
number of persons as described below.
(1) Upon the inception of the Company in March 2000, the Company issued
9,500,000 shares of common stock at a subscription price of $0.001 per share to
the founding stockholders.
27
<PAGE>
(2) The Company offered for sale Common Stock of the Company pursuant
to Rule 506 of Regulation D of the Securities Act of 1933. The 506 private
placement began in March 2000 and was completed as of May 31, 2000. The offering
was for up to 1,000,000 shares at an offering price of $0.25 per share. The
Company had sold 986,800 shares of Common Stock for a total of $246,700, before
deduction of offering expenses totaling $17,400. The shares were sold to 14
accredited investors. Chris Gabrys and Rick Campbell, officers of the Company,
solicitated stockholders, and no documentation was given out.
ITEM 27. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Certificate of Incorporation of Q Power, Inc.
3.2 Amendment to Certificate of Incorporation of Q Power, Inc.
3.3 By-Laws of Q Power, Inc.
4.1 Specimen of Common Stock Certificate
5.1 Opinion of Rosenman & Colin LLP
10.1 Product Purchase Agreement, dated May 24, 2000, by and between the
Company and CalNetix.
23.1 Consent of Freeman & Davis LLP
23.2 Consent of Rosenman & Colin LLP (included in Exhibit 5.1)
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes to file, during any period in which
offers or sales are being made, a post-effective amendment to this registration
statement to (i) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) reflect in the prospectus any facts or events
arising after the effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration statement;
and (iii) include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in the registration statement.
That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
For determining any liability under the Securities Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) of (4), or 497(h) under the Securities Act
as part of this registration statement as of the time it was declared effective.
To remove from registration by means of a post-effective amendment any of the
securities being registered hereby which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities, other than the
payment by us of expenses incurred or paid by
28
<PAGE>
one of our directors, officers, or controlling persons in the successful defense
of any action, suit or proceeding, is asserted by one of our directors,
officers, or controlling persons in connection with the securities being
registered, we 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 is against public policy as expressed
in the Securities Act, and we will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Registration Statement on Form SB-2 and
has authorized this registration statement to be signed on its behalf by the
undersigned in the City of Napa, State of California on July 21, 2000.
Q POWER, INC.
By: /s/ Christopher Gabrys
--------------------------------
Christopher Gabrys
President
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears
below constitutes and appoints Christopher Gabrys, his true and lawful
attorney-in-fact, as agent with full power of substitution and resubstitution
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 to such attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
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 their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons and in the
capacities and on the dates indicated.
/s/ Christopher Gabrys July 21, 2000
------------------------------
Christopher Gabrys President and Director
/s/ Joel Bloomer July 21, 2000
------------------------------
Joel Bloomer Chairman of the Board of
Directors
/s/ Scott Kostiuk July 21, 2000
------------------------------
Scott Kostiuk Secretary and Treasurer
29
