AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 2000
REGISTRATION FILE NO. 333-43464
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2/A-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
(AMENDMENT NO. ONE)
The New World Power Corporation
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 5149 52-1659436
--------------------------------------------------------------------------------
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Incorporation Industrial Classification Identification No.)
or Organization) Code Number)
14 Mount Pleasant Drive, Aston, Pennsylvania 19014 Telephone (484) 840-0944
---------------------------------------------------------------------------
(Address and Telephone Number of Principal Executive Offices)
14 Mount Pleasant Drive, Aston, Pennsylvania 19014
--------------------------------------------------------------------------------
(Address of Principal Place of Business or Intended Principal Place of Business)
Frederic A. Mayer, President
The New World Power Corporation
14 Mount Pleasant Drive
Aston, Pennsylvania 19104
(484) 840-0944
With a Copy to:
Frank J. Hariton, Esq.
1065 Dobbs Ferry Road
White Plains, New York 10607
(914) 674-4373
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Agent For Service)
Approximate Date of Proposed Sale to the Public From time to time after the
effective date
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration 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 number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF SECURITIES TO AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
BE REGISTERED REGISTERED MAXIMUM MAXIMUM REGISTRATION
PRICE AGGREGATE FEE**
PER SHARE* OFFERING PRICE*
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 1,671,764 $.65 $1,086,646 $286.87
par value
$.01 per
share
================================================================================================
</TABLE>
* Based on the closing bid price of the Common Stock in the Electronic
Quotation Service operated by the National Quotation Bureau on August 4,
2000.
** Calculated pursuant to Rule 457(h). All fees were be paid on the initial
filing of this registration statement.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective in such date as the Commission, acting pursuant to said Section 8(a)
shall determine.
<PAGE>
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
UNDER ITEM 501 (C) OF REGULATION S-B
ITEM AND NUMBER LOCATION IN PROSPECTUS
---------------------------------------------------------------------------------------------------
<S> <C>
1. Front of Registration Statement Front of Registration Statement
and Outside Front Cover of Prospectus and Outside Front Cover of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information and Risk Factors Prospectus Summary and Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Promoters Management
and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Experts; Counsel
14. Disclosure of Commission Position Not Applicable
on Indemnification For Securities Act Liabilities
15. Organization Within Last Five Years Not Applicable
16. Description of Business Business of the Company
17. Management's Discussion and Analysis Management's Discussion and Analysis
or Plan of Operation
18. Description of Property Business of the Company - Property
19. Certain Relationships and Related Transactions. Certain Transactions
20. Market for Common Equity and Related Market for Common Equity and Related
Stockholder Matters Stockholder Matters
21. Executive Compensation Management - Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements With Not applicable
Accountants on Accounting and
Financial Disclosure
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALES OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
THE NEW WORLD POWER CORPORATION
Common Stock
($.01 par value)
1,671,764 Shares of Common Stock
Offered by Certain Selling Stockholders
THIS PROSPECTUS RELATES TO 1,671,764 SHARES OF COMMON STOCK,
WHICH CONSISTS OF:
(A) 636,364 SHARES ISSUED IN A PRIVATELY NEGOTIATED TRANSACTION WITH AN INVESTOR
IN FEBRUARY 2000.
(B) 150,000 SHARES ISSUED IN CONNECTION WITH THE SETTLEMENT OF LITIGATION IN
JANUARY 1999.
(C) 450,000 SHARES ISSUED IN CONNECTION WITH AN ACQUISITION IN MARCH 2000.
(D) 100,000 SHARES ISSUED IN CONNECTION WITH THE EXTENSION OF A CREDIT FACILITY
IN JULY 1998.
(E) 120,000 SHARES ISSUED UPON EXERCISE OF OPTION IN JANUARY 2000.
(F) 215,400 SHARES ISSUED FOR SERVING AS A DIRECTOR OF THE COMPANY TO VARIOUS
PERSONS IN JANUARY 1999 AND MARCH, 2000.
The shares of Common Stock may be offered for sale, from time to time,
by the Selling Stockholders or by donees, pledgees, transferees, or other
successors in interest through ordinary brokerage transactions in the
over-the-counter market, either directly or through brokers or to dealers, in
private sales, in negotiated transactions, or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. The Company will not
receive any proceeds from the sale of the Common Stock by the Selling
Stockholders. The Selling Stockholders, and not the Company, will pay or assume
all applicable brokerage commissions or other costs of sale as may be incurred
in the sale of such securities. See "Selling Stockholders" and "Plan of
Distribution".
The Company will assume no responsibility for the sale of the shares of
Common Stock of the Selling Stockholders, nor can there be any assurances that a
liquid trading market will exist for the sale of the shares of Common Stock to
be offered by the Selling Stockholders. See "Risk Factors."
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the Electronic Quotation Service operated by the National Quotation
Bureau under the symbol "NWPC". On August 30, 2000, the closing price bid for
the Common Stock on the Electronic Quotation Service was $.85 per share.
------------------------------------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE
PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS".
------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------------------------------------------
The date of this Prospectus is September __, 2000.
1
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements, and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 5th Street, N.W., Washington, DC 20549, and
at the Commission's regional offices located at 13th Floor, Seven World Trade
Center, New York, New York 10048; 10960 Wilshire Boulevard, Suite 1710, Los
Angeles, California 90024, and 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material may be obtained from the Commission at
450 5th Street, N.W., Washington, DC 20549, at prescribed rates. The Company is
an electronic filer under the EDGAR (Electronic Data Gathering and Retrieval)
system maintained by the Commission. The Commission maintains a web site
(http:/www.sec.gov.) on the Internet that contains reports, proxy and
information statements and other information regarding Companies that file
electronically with the Commission. In addition, reports, proxy statements and
other information concerning the Company may be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, DC 20006.
The Company has filed with the Commission a registration statement on
Form SB-2 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"). This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement.
CAUTIONARY STATEMENT
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the securities
Exchange Act of 1934. When used in this document, the words "anticipate",
"estimate", "expect", "intend", and similar expressions are intended to identify
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may vary materially from those set forth in the
forward-looking statements.
2
<PAGE>
PROSPECTUS SUMMARY
THE COMPANY
The New World Power Corporation ("New World" or the "Company") is an
independent power producer that focuses on distributed power solutions,
including renewable and modular generation facilities. The Company sells
electrical capacity and energy to utilities under long-term and medium-term
contracts.
The Company is organized as a holding company. Each electric power
generating facility or discreet group of generating facilities is owned by a
separate subsidiary. Executive management, legal, accounting, financial and
administrative matters are provided at the holding company level. Operations are
conducted at the subsidiary level.
The Company currently owns two wholly-owned subsidiaries, Wolverine
Power Corporation ("Wolverine") and Modular Power Systems LLC ("Modular"). Both
subsidiaries own and operate electric generation facilities in Michigan.
Wolverine owns a 10.5 megawatt ("MW") hydroelectric plant near Edenville,
Michigan; Modular owns 43 MW of mobile, trailer mounted and containerized
diesel-fired electric generating facilities at three sites in Alma, Chelsea and
Coldwater, Michigan. All power from the Wolverine and Modular facilities is sold
to Consumers Power Company ("Consumers"), the regional regulated electric
utility, under long-term and medium-term power purchase agreements ("PPA's").
The Company expects to grow through acquiring or developing
incremental modular and renewable electric power generating facilities. New
World recently acquired Modular in March, 2000. It also expects to make
additional acquisitions or developments of power plants or entities that own
power plants within the next twelve months. There can be no assurance, however,
that the Company can complete any acquisition or development on terms acceptable
to the Company, if at all. In addition, there can be no assurance that the
Company will be able to close any financings to enable it to make acquisitions
or developments.
THE OFFERING
Up to 1,671,764 shares are being offered by the Selling Security
Holders. The Company will not receive any proceeds from the shares being
offered.
SHARES OUTSTANDING
Before and after the offering: 5,124,276
SUMMARY FINANCIAL INFORMATION
The following table sets forth, for the periods and at the dates
indicated, certain summary financial information for the Company. Such data have
been derived from, and should be read in conjunction with, the financial
statements of the Company, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included elsewhere in this Prospectus.
3
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
(Unaudited)
Years ended Six months ended
December 31, June 30,
1999 1998 2000 1999
---- ---- ---- ----
Operating Revenue $ 1,683,024 $ 2,574,465 $ 993,191 $ 773,815
Cost of Operations 905,807 1,333,765 335,553 312,784
----------- ----------- ----------- -----------
Gross Profit 777,217 1,240,700 657,638 461,031
Project Development
Expenses 27,614 93,354 -- 32,673
Selling, General
and Administrative 774,094 1,171,699 357,142 397,678
----------- ----------- ----------- -----------
Operating Income
(loss) (24,491) (24,353) 300,496 32,623
----------- ----------- ----------- -----------
Other Income
(expense) 252,198 201,591 (132,692) 48,837
----------- ----------- ----------- -----------
Income before taxes 227,707 177,238 167,804 81,510
Provision for taxes 10,000 14,007 10,000 2,500
----------- ----------- ----------- -----------
Net income 217,707 163,231 157,804 79,010
=========== =========== =========== ===========
Basic and diluted
earnings per share $ 0.06 $ 0.05 $ 0.03 $ 0.02
=========== =========== =========== ===========
Average weighted
number of shares
of Common Stock
outstanding basic and
diluted 3,797,912 3,479,012 4,880,220 3,797,912
=========== =========== =========== ===========
CONSOLIDATED BALANCE SHEET DATA:
(Unaudited)
December 31, June 30,
1999 1998 2000
---- ---- ----
Working capital (deficit) $ (827,249) $ (339,373) $ (4,888,459)
Total assets 3,553,820 4,739,462 12,175,100
Total liabilities 2,178,212 3,420,741 9,917,789
Stockholders' equity 1,375,608 1,318,721 2,257,311
4
<PAGE>
MANAGEMENT DISCUSSION AND PLAN OF OPERATIONS
INTRODUCTION
The New World Power Corporation ("New World" or the "Company") is an
independent power producer that focuses on distributed power solutions,
including renewable and modular generation facilities. The Company sells
electrical energy to major utilities under long-term and mid-term contracts.
The Company is organized as a holding company. Each electric power
generating facility or discreet group of facilities is owned by a separate
corporate entity. Executive management, legal, accounting, financial and
administrative matters are provided at the holding company level. Operations are
conducted at the subsidiary level.
The Company currently owns and operates two subsidiaries, Michigan
based Wolverine Power Corporation ("Wolverine") and Modular Power Systems LLC
("Modular"). Each subsidiary owns and operates electric generation facilities.
Wolverine owns a 10.50 megawatt hydroelectric plant near Bay City, Michigan;
Modular owns 43 megawatts of mobile, trailer mounted and containerized
diesel-fired electric generating facilities at three sites in Coldwater, Chelsea
and Alma, Michigan. In June 2000, the Company exchanged the ownership of The New
World Power Company Limited located in the United Kingdom for certain
outstanding convertible notes. The New World Power Limited owned a 3-megawatt
wind farm in England, known as Caton Moor.
SHORT TERM STRATEGY
Over the next 12 months New World intends to apply its available
resources to maintain positive earnings from its operating projects, while
further attempting to consummate targeted acquisitions in its core markets.
The Company will continue to maintain its efforts to hold down overhead
and generate profits from existing operations. It also expects to complete
another acquisition within the next twelve months. There can be no assurance,
however, that the Company can maintain profitability or complete any acquisition
on terms acceptable to the Company, if at all. In addition, there can be no
assurance that the Company will be able to close any financings to enable it to
make acquisitions.
FISCAL 1999 COMPARED TO FISCAL 1998
GENERAL
The results of operations for 1999 compared to 1998 reflect continuity
at the operating level. However, the effects of the Company's changes in
business plans are quite notable at the selling, general and administrative
expense level.
REVENUES
Revenues decreased to $1.68 million in 1999 from $2.57 million in 1998
due to the end of Caton Moor's premium priced contract in the United Kingdom
that expired at December 31, 1998. The amount of kWH produced in the UK,
however, remained approximately the same between the years. Revenues in the
United States at Wolverine remained constant between the years.
5
<PAGE>
COST OF OPERATIONS
Costs of operations decreased in 1999 to $0.9 million, as compared to
$1.33 million during the previous year. The reduction is primarily due to the
renegotiated operations and maintenance contract in the UK as well as decreased
labor costs.
PROJECT DEVELOPMENT EXPENSE
The Company continued curtailing its development efforts during the
year to $27,614 in 1999 as compared to $93,354 during the previous year.
SELLING, GENERAL AND ADMINISTRATIVE
These expenses were reduced during 1999 to $0.77 million, as compared
to $1.17 million during the previous year. The reduction is due to the continued
efforts of management to keep overhead costs to a minimum.
OTHER INCOME AND EXPENSES
During the year ended December 31, 1999, the Company recorded other
income-net of $252,198, as compared to $201,591 during the previous year. The
1999 other income is the result of an elimination of a contingency from a
previously recorded asset sale resulting in additional income to the Company of
$300,000, while the previous year other income was the result of gains on 1998
asset sales. In 1998, the Company recorded a gain of $335,073 on the sale of a
Texas wind farm project.
Interest expenses were $152,151 in 1999 as compared to the previous
year's interest expense of $148,035. The Company's overall debt was reduced from
prior year but the Company's effective interest rate on borrowings increased.
THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
attached consolidated condensed financial statements and notes thereto and with
the Company's audited financial statements and notes thereto for the fiscal year
ended December 31, 1999.
REVENUES
Revenues increased to $993,191 for the six months ended June 30, 2000
from $773,815 for the six months ended June 30, 1999. Revenues increased to
$579,060 for the three months ended June 30, 2000 from $316,146 for the three
months ended June 30, 1999. Such increases in revenues were due primarily to the
increase in the revenues generated as a result of the Modular Power Systems
acquisition.
SEASONALITY OF PROJECT REVENUES
Hydroelectric generating revenues are seasonal. The spring in North
America is the time of maximum hydroelectric output, while fall and winter also
experience reasonable flows; the summer months are dry and generally
unproductive. Hydroelectric power production can also vary from year to year
based on changes in meteorological conditions. The Modular Power Systems project
revenues are
6
<PAGE>
primarily generated during the months from June to September in accordance with
its agreements.
COST OF OPERATIONS
The costs of operations increased for the six months ended June 30,
2000 to $335,553 as compared to $312,784 during the six months ended June 30,
1999, primarily as a result of the increased costs associated with the Modular
acquisition. The costs of operations decreased for the three months ended June
30, 2000 to $123,770 as compared to $161,481 during the three months ended June
30, 1999, primarily as a result of the Company's downsizing efforts in the UK.
Wolverine's cost of operations remained constant between the years.
PROJECT DEVELOPMENT EXPENSE
No project development expenses were incurred during the six months
period ended June 30, 2000 or the three month period ended June 30, 2000 since
the Company ended its development efforts, in line with the Company's strategy
of eliminating development risk. Expenses incurred for the six month period
ended June 30, 1999 was $30,680 and for the three month period ended June 30,
1999 was $9,145.
SELLING, GENERAL AND ADMINISTRATIVE
These expenses were reduced during the six months ended June 30, 2000
to $357,142, as compared to $397,678 during the six months ended June 30, 1999.
The decrease was primarily a result of a decrease in personnel at the corporate
level. These expenses increased for the three months ended June 30, 2000 to
$190,554, as compared to $154,362 during the three months ended June 30, 1999.
Included in expenses for the three months ended June 30, 2000 were certain costs
associated with the annual shareholders meeting and additional legal and
professional fees pertaining to the proxy and annual report filings as well as
the preparation of a registration statement.
OTHER INCOME AND EXPENSES
During the six months ended June 30, 2000, the Company recorded other
expense-net of $132,692, as compared to other income-net of $48,837 for the six
months ended June 30, 1999. During the three months ended June 30, 2000, the
Company recorded other expense-net of $99,427, as compared to other income-net
of $51,029 during the three months ended June 30, 1999. Interest expense for the
six months ended June 30, 2000 increased to $184,990 from $66,120 for the six
months ended June 30, 1999. Interest expense for the three months ended June 30,
2000 increased to $147,101 from $34,368 for the three months ended June 30,
1999, in line with the incurring of additional debt for the acquisition of MPS.
The other income for the six and three month periods ended June 30, 1999 was
primarily a result of asset sales.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company finances its operations primarily from
internally generated funds and third party credit facilities. Net cash flow
provided by operations was $1,586,198 for the six month period ended June 30,
2000 and $402,338 was provided by operations for the six month period ended June
30, 1999.
The Company held Convertible Subordinated Notes outstanding totalling
$510,381. The Notes would have matured July 31, 2000, bore interest at 8.00% and
were convertible into shares of the Company's common stock at a price of $8.75
per share. The Notes were in default at March 31, 2000.
7
<PAGE>
In June 2000, the Company entered into a Definitive Agreement with the holders
of the Notes. The Definitive Agreement provided for the Company to exchange its
United Kingdom operations for cash and certain securities including all the
outstanding Convertible Subordinated Notes and accrued interest thereon. The
accrued interest as of the date of the exchange was $51,995 and the Company
recorded an approximate $2,000 gain.
The Company also has a convertible debt instrument which would provide
up to $1.0 million to the Company. The convertible debenture matures on June 30,
2001. The convertible debenture requires interest only payments monthly until
maturity and is convertible into the Company's common stock at $1.00 per share.
The interest rate is 10.3% per annum.
The Company believes that its cash flow from operations will be
sufficient to fund foreseeable working capital and capital expenditure
requirements. However, any restriction on the availability of borrowing under
the line of credit could negatively affect the Company's ability to meet future
cash flow requirements. The Company plans to grow through the acquisition of
complementary businesses. A significant acquisition may require the Company to
secure additional debt or equity financing. While the Company believes it would
be able to secure such additional financing at reasonable terms, there is no
assurance this would be the case.
8
<PAGE>
RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS ARE SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK. THEREFORE, PROSPECTIVE PURCHASERS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AFFECTING THE BUSINESS OF
THE COMPANY, PRIOR TO MAKING ANY INVESTMENT THEREIN, AS WELL AS OTHER
MATTERS SET FORTH ELSEWHERE IN THIS PROSPECTUS.
AVAILABILITY OF CAPACITY AT MODULAR
Modular expects to receive the majority of its revenues from Consumers
in the form of option payments received for providing standby capacity. In the
event the Modular facilities are not available, Consumers may be entitled to
"claw back" all or a portion of such option payments actually paid to Modular.
Modular feels that is has taken adequate steps to assure that its equipment is
in good working order and available for service to Consumers.
SEASONALITY OF REVENUES
Hydroelectric electric generating revenues are seasonal. The spring in
North America is the time of maximum hydroelectric output, while fall and winter
also experience reasonable flows; the summer months are dry and generally
unproductive. Hydroelectric power production can also vary from year to year
based on changes in meteorological conditions.
REGULATION
The Company is subject to federal and state energy laws and regulations
and federal, state and local environmental laws and regulations in connection
with the development and operation of its generating facilities.
NEED FOR ADDITIONAL FINANCING
The Company's plans call for the acquisition or development of
additional generating capacity. To execute these plans, the Company will be
required to obtain additional financing. The availability of either debt or
equity financing to the Company on reasonable terms can not be assured. If the
Company is unable to obtain financing, it will not be able to effect its plans
for growth.
COMPETITION
There is intense competition among independent power producers ("IPPs")
to obtain favorable PPA's with regulated electric utilities and other
institutional purchasers of electrical power. Most IPPs are larger and better
capitalized than the Company. Revenue derived from the Company's existing
electrical generating facilities is sold under long-term or medium-term PPAs.
Therefore, competition with respect to an existing electric generating facility
with a PPA in place is generally not a significant business risk
Competition for acquisitions of existing, operating electric power
facilities is also significant. This competition may significantly reduce the
Company's opportunity to successfully complete any incremental acquisitions.
There are other companies in the business of owning, operating and acquiring
electric power generation facilities that are larger and have more financial
resources than the Company. Furthermore, other large, well-capitalized entities
may choose to enter the industry, creating the potential for significant
additional competition.
9
<PAGE>
DEPENDENCE ON KEY EXECUTIVE OFFICERS AND OTHER QUALIFIED PERSONNEL
The Company is greatly dependent upon the services of Frederic A.
Mayer, its president. Mr. Mayer has an employment agreement with the Company
that runs through January 2003. However, if the Company were to lose Mr. Mayer's
services, no assurance is given that he could be replaced.
EFFECT OF PENNY STOCK RULES
The Common Stock of the Company currently trades on the Electronic
Quotation Service operated by the National Quotation Bureau ("Pink Sheets").
Under the Securities Enforcement and Penny Stock Reform Act of 1990, the Common
Stock is defined as a "penny stock" because its market price is below $5.00.
Additional disclosures are required related to the market for penny stocks and
for broker-dealers to effect trades in a penny stock. In the absence of the
Company's obtaining NASDAQ listing, the Common Stock and the liquidity of an
investment in the Common Stock will be impaired. The Common Stock could not be
included in NASDAQ unless, among other things, the price of the Common Stock
came to exceed $3.00 per share. Accordingly, no assurance can be given that the
Common Stock will be included in NASDAQ in the foreseeable future. Furthermore,
even if the Common Stock were to be included in NASDAQ in the future, no
assurance can be given that the Company will be able to comply with the criteria
for continued listing which include, among other things, stockholders' equity in
excess of $2,000,000 and assets in excess of $4,000,000. Consequently, the
effect of these rules may restrict the ability of broker-dealers to sell the
Common Stock and may affect the ability of holders of Common Stock to sell their
shares in the secondary market.
POSSIBLE ILLIQUIDITY OF SHARES
The market for the Company's Common Stock on the Pink Sheets has at
times been limited and sporadic. The OTC market is smaller than other securities
markets, and prices for OTC securities are not generally published in the news
media. Information about the Company and transactions in the Company's shares
may be more limited on the OTC market. The limitations of the trading market for
the Company's Common Stock and of the OTC Bulletin Board may materially
adversely affect the liquidity of the market for the Company's Common Stock.
LACK OF DIVIDENDS
The Company has never paid any dividends on its Common Stock
and does not anticipate paying any dividends in the foreseeable future. Any
future dividends on the Common Stock will be dependent on the earnings of the
Company, if any, and its financial requirements.
MARKET FOR THE COMMON STOCK AND RELATED MATTERS
There was no established public trading market for the Company's shares
of common stock ("Common Stock") prior to October 23, 1992. After that date, the
Common Stock was quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") System under the symbol NWPC. On March 23, 1994,
the Common Stock was approved for listing on the NASDAQ National Market System.
In November 1996, the Common Stock was approved for listing on the NASDAQ Small
Cap Market System. In July 1997 the Common Stock was delisted from the Small Cap
Market System and is now trading in the Over-The-Counter ("OTC") market as
indicated from time to time in the pink sheets under the symbol NWPC.
The following table sets forth the high and low closing prices for the
Common Stock as reported by NASDAQ during the periods shown below.
*High *Low
Quarter ended March 31, 1998 .25 .06
Quarter ended June 30, 1998 .31 .06
Quarter ended September 30, 1998 .37 .12
Quarter ended December 31, 1998 .19 .19
Quarter ended March 31, 1999 .20 .06
Quarter ended June 30, 1999 .26 .06
Quarter ended September 30, 1999 .75 .25
Quarter ended December 31, 1999 .70 .18
Quarter ended March 31, 2000 .53 .18
Quarter ended June 30, 2000 .70 .45
*The foregoing represents inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
As of June 30, 2000, there were approximately 395 holders of record of Common
Stock.
The Company has not paid any cash dividends on its Common Stock since
its incorporation in June 1989.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends and does not
intend to do so for the foreseeable future. The Company currently intends to
retain all earnings, if any, to finance the continued development of its
business. Any future payment of dividends will be determined solely in the
discretion of the Company's Board of Directors.
10
<PAGE>
USE OF PROCEEDS
The Company will realize no proceeds on the sale of Common Stock by the
Selling Stockholders.
SELLING STOCKHOLDERS
RELATIONSHIP OF SELLING SHAREHOLDERS WITH THE COMPANY
None of the Selling Shareholders currently has, or within the past
three years has had, any position, office, or other material relationship with
the Company or any predecessor or affiliate of the Company except that: (a)
Gerald R. Cummins, Herbert L. Oakes, Jr., Gerard Prevost, Lucien Ruby, Alan W.
Stephens and Gregory J. Sunell, received the shares being sold as compensation
for serving as directors of the Company and either are currently or have been
directors of the Company within the last three years; (b) Dwight C. Kuhns is a
former officer and director of the Company; (c) Alan J. Stephens and Gregory J.
Sunell, directors of the Company, are officers and directors of Synex Energy
Resources, Ltd., a selling stockholder ("SYNEX"); (d) Vitold Jordan is a former
officer of the Company; and (e) John D. Kuhns, the Manager of the Strategic
Electric Power Fund, LLC ("Strategic") was elected a director of the Company at
its most recent annual shareholders meeting on May 17, 2000.
SALES OF THE SHARES BY SELLING SHAREHOLDERS
None of the Selling Shareholders have advised the Company, and the
Company is unable to predict, if, when, and the extent to which they intend to
sell the shares being registered hereunder for their respective accounts.
Notwithstanding the foregoing, for purposes of the following Selling
Shareholders Table, all of the shares are deemed to be offered hereby by the
Selling Shareholders for sale to the public (for purposes of the Selling
Shareholders Table, the "Offering"). Based upon the foregoing assumption, the
following Table sets forth: (i) the number of shares of Common Stock owned by
each Selling Shareholder prior to the Offering (as of the date of this
Prospectus); (ii) the number of shares which it is deemed are being offered for
the account of each Selling Shareholder; (iii) the number of shares of Common
Stock to be owned by each Selling Shareholder after the completion of the
Offering (assuming that all of the Shares are offered and sold in the Offering);
and (iv) based upon the foregoing assumptions, the percentage of the Company's
Common Stock to be owned by each Selling Shareholder after completion of the
Offering. There can be no assurance that any of the Selling Stockholders will
offer for sale or sell any or all of the Common Stock offered by them pursuant
to this Prospectus. Strategic Electric Power Fund, a Selling Stockholder, has
demanded registration of its shares pursuant to a contractual right.
<TABLE>
<CAPTION>
Number of Number of Number of Percentage of
Shares Owned Shares to be Shares Owned Common Stock
Name of Selling Prior to the Sold in the After the to be Owned After
Stockholder Offering Offering Offering the Offering
----------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Strategic Electric
Power Fund, LLC(1) 636,364 636,364 0 0%
Synex Energy
Resources, Ltd.(1) 155,000 100,000 55,000 1.1%
Dwight C. Kuhns 225,000(2) 150,000 75,000(2) 1.5%
Gerald R. Cummins 40,400 40,400 0 0%
Herbert L. Oakes, Jr. 451,851(3) 40,000 411,851 8.0%
Alan W. Stephens(1) 30,000 30,000 0 0%
Gregory J. Sunell(1) 30,000 30,000 0 0%
Gerard Prevost 35,000 35,000 0 0%
Lucien Ruby 35,000 40,000 0 0%
Robert Evans 225,000 225,000 0 0%
Thomas Waters 225,000 225,000 0 0%
Vitold Jordan 381,133 120,000 261,133 5.1%
</TABLE>
(1) Messrs. Stephens and Sunell are respectively Chief Executive Officer and
Vice President of SYNEX.
(2) Includes 75,000 shares issuable upon exercise of an option at $2.00 per
share.
(3) Includes warrants to purchase 191,323 shares held by Mr. Oakes directly or
through various ventures controlled by him.
11
<PAGE>
PLAN OF DISTRIBUTION
As at the date hereof, none of the Selling Security Holders have
advised the Company if, when, and to what extent they intend to sell any of
their shares. In addition, none of the holders of the securities which may be
exercised for, or converted into, the shares have advised the Company if, when,
and to what extent they intend to acquire the Shares and, if they do so, their
intentions respecting the offer and resale of such shares to the public.
Commencing as at the date of this Prospectus, all of the Shares may be
offered and sold by the Selling Shareholders. None of the proceeds from any
sales of the Shares will be received by the Company. The Selling Shareholders
may make such sales or resales from time to time as market conditions permit in
transactions that may take place in the over-the-counter market, including
block trades, ordinary brokers' transactions, privately negotiated transactions
or through sales to one or more broker/dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. In connection with
sales or resales of Shares pursuant to the Registration Statement of which this
Prospectus is a part, a Selling shareholder offering such Shares and brokers and
dealers who participate in the offer and sale of the shares may be deemed
"underwriters" as such term is defined in the Securities Act. In addition,
persons using this Prospectus in the offer and sale of the Shares will be deemed
to be engaged in a "distribution" of the Shares as such term is defined in
Regulation M under the Exchange Act, and will be required to comply with
Regulation M with respect to contemporaneous market activity and other
provisions of such Regulation.
As at the date of this Prospectus, none of the Selling Shareholders
intends to utilize the services of an underwriter in any distribution of the
Shares, should such distribution occur, except insofar as any securities dealer
executing a sell order for any of them may be deemed an underwriter as that term
is defined in the Securities Act. Further, it is intended that if and when any
of the Shares are sold through a dealer, no more than the ordinary and customary
brokerage commission will be paid. Shares purchased by dealers for their own
accounts may be re-offered from time to time at prices obtainable and
satisfactory to such dealers. The names of any participating brokers or dealers,
any applicable commissions or discounts and the net proceeds to the Selling
Shareholders from such sale will be set forth in an applicable Prospectus
Supplement, as required.
The Registration Statement, of which this Prospectus forms a part, must
be current at any time during which a Selling Shareholder sells any of the
shares. Any material changes which the Company, in its sole discretion,
determines should be disclosed prior to the sale of any of the shares will be
set forth in an accompanying supplement to this Prospectus (the "Prospectus
Supplement"). The Company will bear all expenses (other than underwriting
discounts and selling commissions, state and local transfer taxes, and fees and
expenses of counsel or other advisors to the Selling Shareholders) in connection
with the registration of the shares.
The Company has agreed to bear the costs of registering the shares of
Common Stock offered hereby under the Securities Act of 1933, as amended.
12
<PAGE>
Each Selling Shareholder will deliver a Prospectus in connection with
the sale of shares of Common Stock offered hereby.
On or prior to the effective date, each of the Selling Stockholders as
a condition to the inclusion of his shares herein shall be required to represent
and warrant to, and agree with the Company that, during such time as he or she
may be engaged in a distribution of the shares of Common Stock offered
hereunder, such Selling Stockholder will, among other things, (a) not engage in
any stabilization activity in connection with the Company's securities, (b)
furnish each broker or dealer through whom or which he offers securities copies
of the Prospectus, as may be required, (c) inform such broker or dealer as to
the number of shares of Common Stock he is selling, that such securities are
part of a distribution and that he is subject to the provisions of Regulation M
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended ("Exchange Act"), (d) report weekly to the Company all sales, pledges
and other dispositions of the shares of Common Stock covered hereby if any such
shall have occurred, and (e) not bid for, or purchase, any Company securities
other than as permitted under the Exchange Act.
Each of the Selling Stockholders has been advised by the Company that
he or she may not, during any period during which the shares of Common Stock are
being offered, use or disseminate information concerning the Company other than
this Prospectus. In addition, each of the Selling Stockholders has confirmed
that he has no material adverse information with regard to the current and
prospective operations of the Company except as may be disclosed in this
Prospectus, and that the reason prompting the sale of any securities by any
Selling Stockholder is to realize cash from time to time for investment,
business or personal reasons.
The Company has agreed that it will furnish the Selling Stockholders a
reasonable number of copies of this Prospectus.
BUSINESS OF THE COMPANY
New World is an IPP that focuses on distributed power solutions,
including renewable and modular generation facilities. The Company sells
electrical energy and capacity to utilities under long-term and medium-term
contracts.
The Company is organized as a holding company. Each electric power
generating facility or discreet group of generating facilities is owned by a
separate subsidiary. Executive management, legal, accounting, financial and
administrative matters are provided at the holding company level. Operations are
conducted at the subsidiary level.
The Company currently has two wholly-owned subsidiaries, Wolverine and
Modular. Both own and operate electric generation facilities in Michigan.
Wolverine owns a 10.5 MW hydroelectric plant near Edenville, and Modular owns 43
MW of mobile, trailer mounted and containerized diesel-fired electric generating
facilities at three sites in Alma, Chelsea and Coldwater. All power from the
Wolverine and Modular facilities is sold to Consumers under long-term and
medium-term PPA's.
This Prospectus contains "forward looking statements" within the
purview of the federal securities laws. There are numerous risks and
uncertainties surrounding the Company's business plan. There can be no assurance
that the Company will be successful in implementing its business plan, nor can
it be determined with certainty whether the Company will have sufficient capital
to fund operations. In addition, there can be no assurance that the Company can
maintain profitability or complete any acquisitions or developments on terms
acceptable to the Company, if at all.
13
<PAGE>
HISTORY
The Company was incorporated in Delaware in 1989. Following an initial
public offering of its securities in 1992, the Company focused on renewable
energy, including wind farms and hydroelectric plants, selling their electrical
power to electric utility companies under long-term PPAs. However, renewable-
based electric power generating facilities historically have been more expensive
forms of generation. Typically, these forms of generation have required
acceptance by and participation with regulated electric utilities based on their
benign environmental benefits. As deregulation of the electric power industry
became more pronounced in the mid-1990's, these regulated electric utilities
were unwilling or unable to participate in renewable power generating facilities
to the same extent as they had previously. As a result, New World's historical
renewable power business suffered. From 1996 through 1998, the Company sold a
majority of its assets and also repaid a majority of its liabilities, including
over $20 million in non-project related debt and over $8 million in project
related debt. The Company's securities were delisted from NASDAQ; however, the
Company's stock remains publicly traded in the "OTC" market, as reflected from
time to time in the so-called pink sheets.
NEW OPPORTUNITIES FROM DEREGULATION
The deregulation of the domestic electric power industry has
intensified, and new opportunities have arisen for the Company. In particular,
New World's management believes that many regulated electric utilities will face
shortages of electric capacity and energy in certain sectors of their service
territory for periods of time over the next 5 to 10 years. New World intends to
arrange to meet these needs by obtaining and owning relatively small, modular
generating units that can be easily mobilized and de-mobilized.
Therefore, after three years of selling assets and paying down
liabilities, New World recently has begun to expand again. In March 2000, New
World acquired all of the shares of Modular, a Michigan limited liability
corporation.
Modular owned two completed generating facilities, at Coldwater and
Chelsea, Michigan and a project to be constructed at Alma, Michigan. These
facilities are powered by mobile, trailer-mounted or skid-mounted diesel
generating equipment provided by the Caterpillar Corporation ("Cat"). In
addition, Modular was discussing incremental power generation facilities with
Consumers.
New World paid $1.8 million in cash for Modular, issued 450,000 shares
of Common Stock, and assumed approximately $4.5 million of Modular's existing
debt. The Company improved the plant configurations of Chelsea and Coldwater,
and constructed the Alma facility. All improvements and new construction were
done on a timely basis so as to enable Modular to meet its obligations under its
Consumers PPA, which calls for Modular to be available to deliver capacity from
Chelsea and Coldwater by June 1, 2000 and to deliver capacity from Alma by July
1, 2000.
FACILITIES IN OPERATION
The Company currently owns two wholly-owned subsidiaries, Wolverine and
Modular, each of which owns and operates certain electric power-generating
facilities. Each facility is located on a site that is owned or leased on a
long-term basis by a Company subsidiary. The facilities produce electricity that
is sold to utilities under long-term and mid-term PPAs.
14
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
POWER
SUBSIDIARY LOCATION TYPE CAPACITY PURCHASER STATUS
---------- -------- ---- -------- --------- ------
<S> <C> <C> <C> <C> <C>
Modular Alma, Chelsea, and
Coldwater, Michigan Diesel 43 MW Consumers Operating
Wolverine Edenville, Michigan Hydro 10.5 MW Consumers Operating
</TABLE>
WOLVERINE
Wolverine Hydroelectric Facilities. Wolverine owns four hydroelectric
facilities on the Tittabawassee River located near Edenville, Michigan. The
facilities were constructed between 1923 and 1925. One of the facilities was
substantially rebuilt in 1945. The others contain original turbine-generators
and power plant equipment. The facilities have a combined generating capacity of
approximately 10.5 MW. Wolverine's current ten-year moving average production
rate for these facilities is approximately 32.7 million kilowatt-hours ("kwh")
per year.
The power generated at Wolverine is sold to Consumers pursuant to a PPA
that expires in May 2023, but provides for re-negotiation of the energy and
capacity prices every ten years. Commencing in 1996, when the Wolverine contract
was up for re-negotiation, the Company declined to enter into a new, ten-year
price agreement with Consumers, believing that it would be able to negotiate
better rates in the future. The Company believes that the current Wolverine
rates of approximately three cents per kwh are the lowest among the non-utility
generators ("NUGs") in the state.
The development and ownership of hydroelectric power facilities, like
Wolverine, in the United States is governed by the Federal Energy Regulatory
Commission (the "FERC"). In general, all hydroelectric facilities on navigable
waterways must apply for, and receive, licenses. Wolverine applied for its
licenses in 1989 and in September 1998, 30-year licenses to own and operate the
facilities were granted. The licenses stipulate certain operating and water flow
regime conditions. According to these conditions, the Company is required to
modify its method of operation to release a minimum daily flow of water. The
effect of the required modifications is not material on the financial results of
operations.
Wolverine employees perform the operations, maintenance and management
of the four facilities, while major repairs are outsourced.
MODULAR
Modular Diesel Facilities. Modular owns three generating facilities in
Alma, Chelsea, and Coldwater, Michigan.
The Alma facility is a 18.25MW facility, housed in a permanent, 6,000
square foot Butler-type building in the Alma North industrial park. The Alma
generating equipment consists of 5 Cat 3516 diesel engines, two combustion
turbines and related switchgear. While the Alma facilities are housed in a
permanent facility, they are all skid mounted, and can be mobilized in
approximately one week.
15
<PAGE>
The Chelsea facility is a 3.4 MW facility consisting of 3 trailer
mounted Cat 3512's and related switchgear. The trailer mounted generating
equipment at Chelsea can be mobilized in one day.
The Coldwater facility is a 20 MW facility consisting of 10 trailer
mounted Cat 3516's and related switchgear. The trailer mounted generating
equipment at Coldwater can be mobilized in one day.
Capacity and energy from the Alma, Chelsea, and Coldwater facilities is
sold to Consumers under 3 identical PPA's that expire in 2005. Under these
PPA's, Modular is obligated to be available for the delivery of standby capacity
and energy from its facilities from June 1 to October 1 of each year of the PPA.
Consumers is obligated to make an approximately $1.1 million capacity payment to
Modular with respect to Alma facility in January of each year, and an
approximately $1.3 million capacity payment to Modular with respect to the
Chelsea and Coldwater facilities in May of each year. In addition, Consumers is
obligated to pay for up to 400 hours of energy from each facility annually at a
rate of $0.06 per kwh adjusted for fuel prices. Modular is not obligated to sell
more than 400 hours of energy to Consumers from each of its facilities in each
calendar year.
The Company also expects to generate "rental revenues" with respect to
its Alma, Chelsea, and Coldwater facilities in the off season. After October 1,
and prior to June 1, the Company expects to seek parties interested in paying it
rental revenue for any or all of its Modular facilities.
POTENTIAL ACQUISITIONS OR ADDITIONAL DEVELOPMENTS
The Company is currently negotiating with various parties for the right
to acquire, install or develop certain additional, diesel powered electric
generation at various sites in Michigan and elsewhere. There can be no assurance
that it will obtain the agreements it needs in order to successfully implement
these new facilities, or that the Company can obtain the related required
financing.
NON-CORE ASSET SALES COMPLETED IN 1999 AND 2000
New World completed the sale of its last non-core power generation
assets in 1999 and 2000 as follows:
<TABLE>
<CAPTION>
APPROXIMATE
POWER
NAME LOCATION TYPE CAPACITY PURCHASER YEAR OF SALE
---------- -------- ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Caton Moor Lancastershire, England Wind 3.00 MW NORWEB 2000
Makani Uwila Oahu, Hawaii Wind 10.30 MW HECO 1999
Altamont Altamont Pass, CA Wind 20.00 MW PG&E 1999
</TABLE>
OTHER INVESTMENTS
The Company previously owned an 11% interest in Northern Power Systems,
a Vermont-based manufacturer of renewable power generating equipment ("Northern
Power"). In 1999, the Company's interest in Northern Power was redeemed under
the terms of the investment, whereby the Company received $1.00 per share for
each of its Preferred Shares. A total of $129,643 was received by the Company.
16
<PAGE>
REGULATION
The Company is subject to federal and state energy laws and regulations
and federal, state and local environmental laws and regulations in connection
with the development and operation of its generating facilities.
DOMESTIC REGULATION
Federal Regulation: Pursuant to authority granted to the FERC under the
Public Utility Regulatory Policy Act ("PURPA"), the FERC has promulgated
regulations which generally exempt small power production facilities with
capacities of less than 30 MW from the provisions of the Federal Power Act
("FPA") (except for licensing requirements applicable to hydroelectric projects
and certain other matters), the Public Utility Holding Company Act ("PUHCA"),
and state laws respecting rates and financial and organizational regulation of
electric utilities. All of the Company's hydroelectric and wind power generating
facilities are believed to be entitled to the full range of regulatory
exemptions available under PURPA. The Wolverine facilities are subject to
licensing regulation pursuant to the Federal Power Act.
The Energy Policy Act ("EPACT") amended PUHCA to allow IPPs, under
certain circumstances, to own and operate eligible facilities not exempted by
PURPA in the United States or foreign countries without subjecting these
producers to registration or regulation under PUHCA and without jeopardizing the
qualifying status of their existing exempt projects. A company exclusively in
the business of owning or operating generating facilities and selling
electricity at wholesale or retail in a foreign country is also eligible for
this exemption, as long as neither the company nor its subsidiaries sell
electricity to retail customers within the United States.
In the absence of exemptions from the regulations discussed above, the
activities of the Company would be subject to a pervasive framework of federal
and state regulation applicable to public utilities, including regulation of
power sales prices, encumbrances of property, accounting practices and all other
activities deemed necessary and convenient in the regulation of public
utilities. Should this occur, the Company could be subject to regulation as a
public utility holding company under PUHCA, which would have a material adverse
effect on the Company's business. The Company intends to conduct its operations
so that it continues to qualify for the applicable exemptions under PURPA and
PUHCA and has no reason to believe that these exemptions will be changed by
legislative or regulatory action. Congress now has under consideration
legislation that would reduce or eliminate the PUCHA restrictions.
State Regulation: State public utility commissions ("PUCs") have broad
authority to regulate both the price and financial performance of electric
utilities. Since a power sales contract will become a part of a utility's cost
structure (and therefore is generally reflected in its rates), power sales
contracts between an IPP, such as the Company, and a regulated utility, some
PUC's assert and exercise the right to approve these contracts at the outset.
Local Regulation: Local governments in certain jurisdictions require
wind farm operators to apply for and obtain permits before erecting and
installing wind turbine generators. Applications may be considered at a public
hearing. The permits generally terminate after a fixed period of time, although
the permits are revocable for cause. Permits frequently contain numerous
conditions, including safety setback requirements, noise setback requirements,
environmental requirements and annual reporting requirements. The Company
believes that it has or will be able to obtain and renew all necessary permits
subject to any requirements relating to the siting and operation of each
individual wind farm that it may acquire or develop.
17
<PAGE>
Environmental Regulation: The Company is subject to environmental laws
and regulation at the federal, state and local levels in connection with the
development, ownership and operation of its electrical generating facilities.
The laws and regulations applicable to the Company primarily involve
environmental concerns associated with the siting of wind power generating
facilities such as noise, visibility of wind turbines and threats to endangered
or migratory birds or wildlife. Many of such laws and regulations require that
wind turbines be located in remote areas or shielded from view, that turbines
not be located in flyways or in areas where endangered species might be
threatened, or that other mitigating actions be implemented. The Company
believes that its existing electric generating facilities are in compliance with
such environmental laws and regulations. If such laws and regulations are
altered, however, and the Company's facilities are not exempted therefrom, the
Company may be required to incur significant expenses to comply with such laws
and regulations. Furthermore, the existence of certain environmental laws and
regulations may have an adverse effect on the Company's ability to find suitable
sites for new renewable energy generating facilities, although generally
speaking suitable wind resource areas are not near residential areas.
INTERNATIONAL REGULATION
The Company only engages in business in countries that have statutes
which currently permit the private production and sale of electricity. All the
countries in which the Company is currently doing business have such laws.
Certain countries have restrictions on the percentage of a stock a foreign
corporation may own of a domestic corporation and certain countries require
permission of the government to own more than a designated percentage of stock
in a domestic corporation. The Company complies with all such requirements.
COMPETITION
Revenue derived from the Company's existing electrical generating
facilities is sold under PPAs. Therefore, competition with respect to an
existing electric generating facility with a PPA in place is generally not a
significant business risk, with the notable exception of future energy prices.
However, competition for acquisitions of operating electric power
facilities is significant. This competition may significantly reduce the
Company's opportunity to make any such incremental acquisitions. There are other
companies in the business of owning, operating and acquiring electric power
generation facilities that are larger and have more financial resources than the
Company. Furthermore, other large, well-capitalized entities may choose to enter
the industry, creating the potential for significant additional competition.
EMPLOYEES
As of December 31, 1999 and 1998, the Company and its subsidiaries
employed 6 and 8 people on a full time basis, respectively. New World also
contracts with veteran industry consultants from time to time for project
evaluation, restructuring and financing services and advice.
18
<PAGE>
PROPERTIES
The Company leases office space for executive and administrative
functions at 14 Mount Pleasant Drive, Aston, PA 19014, under a six month lease
agreement with month to month extensions.
Wolverine. Wolverine owns approximately 4,000 acres of land, most of
which is under water, in Gladwin and Midland counties in Michigan. Wolverine's
dikes, dams, spillways and power plants are located on this property. Operating
and maintenance personnel are based in a 1,000 square foot Wolverine-owned
building and a 5,000 square foot maintenance and storage facility in Edenville,
Michigan.
Modular. Modular owns approximately four acres of land in Alma
Michigan. The Company leases facilities at Coldwater for $15,000 per year and
pays $1 per year for its Chelsea facility.
Altamont Wind Farm. The Altamont Wind Farm was located on approximately 4,000
acres of leased land in the Altamont Pass, California. The Company owned
approximately 305 miles of power lines, one substation and a 5,000 square foot
maintenance building on the property. This property was sold in 1999.
Makani Uwila Wind Farm. The Makani Uwila Wind Farm was located on approximately
65 acres of leased land on Oahu, Hawaii. Operations at this facility
discontinued in 1996 and the project interest was sold in 1999.
Caton Moor Wind Farm. The Caton Moor Wind Farm was located on approximately 100
acres of leased land in Caton Moor, Lancashire, England. This property was sold
in 2000.
LEGAL PROCEEDINGS
On November 12, 1996, Dwight Kuhns, (ex-president of the Company)
commenced an action against New World in the Superior Court, Alameda County,
California. The action sought damages under a consulting agreement that Mr.
Kuhns had entered into with the Company at the start of January, 1996, following
the termination of his employment with the Company on December 31, 1995.
After trial, the plaintiff was awarded $967,000 in contractual damages
and $1,000,000 in punitive damages on July 24, 1998. The Company entered into a
settlement agreement with the plaintiff on January 1, 1999. An agreement was
made that upon payment of $375,000 and delivery of a $275,000 note together with
150,000 common shares and 75,000 warrants to purchase shares at $2 each, the
Company will obtain full satisfaction of the judgement. The Company has made all
the required payments under the settlement agreement, and a balance of
approximately $165,000 remains outstanding on the note at December 31, 1999.
19
<PAGE>
MANAGEMENT
The directors and executive officers of the Company are as follows:
NAME AGE POSITIONS HELD
---- --- --------------
John D. Kuhns 50 Director
Frederic A. Mayer 42 Director and President
Herbert L. Oakes, Jr. 53 Director
Alan W. Stephens 71 Director
Gregory J. Sunell 41 Director
Mary Fellows 36 Secretary
JOHN D. KUHNS, DIRECTOR. John D. Kuhns, age 50, is not presently a
director. Mr. Kuhns is President of Kuhns Brothers, Inc. ("KBI"), an investment
firm whose affiliates include a licensed broker/dealer and member of the
National Association of Securities Dealers, Inc., and a registered investment
advisor. Mr. Kuhns is the founder of the Company. From April, 1989 until
February, 1996 he was its Chairman and Chief Executive Officer. Mr. Kuhns
received a bachelor's degree from Georgetown University, a Master of Fine Arts
from the University of Chicago and an M.B.A. from Harvard University.
FREDERIC A. MAYER, PRESIDENT AND A DIRECTOR. Mr. Mayer, age 42, was
appointed to the Board in 2000. From May 1998 to early 2000, Mr. Mayer has
served as Vice President - Finance and Secretary/Treasurer of the Company. Prior
to May 1998, Mr. Mayer acted as the Managing Director of Mayer and Associates
and prior to 1995, Mr. Mayer was president of O'Brien Energy Services Company.
Previously, Mr. Mayer was a manager of Coopers and Lybrand. Mr. Mayer graduated
from Pennsylvania State University and is a certified public accountant. Mr.
Mayer was promoted to president in early 2000 (See Note 16 of Notes to Financial
Statements for Subsequent Events).
HERBERT L. OAKES, JR, DIRECTOR. Mr. Oakes, age 53, has been a director
since 1993. He has served as Managing Director of Oakes, Fitzwilliams & Co.
Limited ("OFCO"), a member of the Securities and Future Authority Limited and
the London Stock Exchange, since 1988. Mr. Oakes is also President of H.L. Oakes
& Co., Inc., a corporate advisor and dealer in securities, which he founded in
1982. He also serves on the board of directors of Shared Technologies, Inc. and
Harcor Energy, Inc. He is also a Director/Chairman of Independent Energy. Mr.
Oakes received a BA in Economics from the University of the South.
ALAN W. STEPHENS, DIRECTOR. Mr. Stephens, age 71, has been a director
since 1998. During the past five years, Mr. Stephen's served as the Chairman of
the Board and CEO of Synex International Inc ("SYNEX"), a Toronto stock exchange
company that is active in development and operation of electrical power
facilities and development and marketing of computer software products. Mr.
Stephens received a B Eng. from the University of Western Australia in 1951,
completed BA studies at McGill University in 1964 and is a member of the
Professional Engineers and Geoscientists of British Columbia.
20
<PAGE>
GREGORY J. SUNELL, DIRECTOR. Mr. Sunell, age 47, has been a director
since 1998. During the last five years, Mr. Sunell has acted as vice-president
and Secretary-Treasurer of SYNEX. Mr. Sunell received a Bachelors of Engineering
from the University of British Columbia in 1995 and is a member of the
Professional Engineers and Geoscientists of British Columbia.
MARY E. FELLOWS, SECRETARY. Ms. Fellows, age 36, is Secretary of the
Company. She is a Vice President of KBI. Ms. Fellows was previously an officer
and assistant secretary of the Company from 1993 to 1996.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the four most highly compensated
executive officers of the Company other than the CEO whose salary and bonus
exceeded $100,000 with respect to the fiscal year ended December 31, 1999 and
1998 and who were employed by the Company during the fiscal year ended December
31, 1999 (together with the CEO, the "Named Executive Officers"):
ANNUAL COMPENSATION
NAME AND TERMINATION/
PRINCIPAL POSITION YEAR SALARY BONUS
------------------ ---- ------ ------------
Vitold Jordan CEO 1999 $125,000 $104,167
1998 73,000 25,000
Fred A Mayer VP - Finance 1999 $108,000 $ 45,000
1998 63,000 25,000
OPTION GRANTS TABLE
The following table sets forth certain information regarding stock
option grants made to each of the Named Executive Officers during the fiscal
year ended December 31, 1999 and 1998:
21
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE EXPIRATION FOR OPTION TERM
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
--------------- ----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Vitold Jordan 125,000 55.56% $ .30 (1)
Granted 1998 -- --
Fred Mayer 100,000 44.44% $ .30 (1)
Granted 1998 -- --
</TABLE>
(1) Earlier of seven years or termination from the Company.
(2) During 2000, Mr. Mayer was granted an additional 120,000 options at $.65
pursuant to his employment agreement, dated March 1, 2000. See.
"Compensation-Employment Agreement"
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
The Company accounts for its stock based compensation using the
intrinsic value method prescribed by APB Opinion No. 25, whereby no compensation
cost for stock options is recognized for stock option awards granted at or above
market value.
The weighted average fair value of options granted during 1998
estimated on the date of grant using the Black-Sholes option pricing model was
$.06. The estimate was computed using dividend yield of 0%, expected volatility
of .70%, risk free interest rate of 5.4% and expected life of seven years.
LONG-TERM INCENTIVE AND PENSION PLANS
In April 1993, the Company adopted the 1993 Stock Incentive Plan (the
"1993 Plan") which was approved by the Company's stockholders in May 1993. The
1993 Plan replaced the Company's previous stock option plan, the 1989 Stock
Incentive Plan (the "1989 Plan"), except as to options outstanding under the
1989 Plan. Under the 1993 Plan, the Company may reward to employees, directors
and consultants of the Company and its subsidiaries incentive and non-qualified
stock options, stock appreciation rights, restricted stock grants, performance
awards and any combination of any or all of such awards. The Board of Directors
has delegated its powers under the 1993 Plan to its Compensation Committee (the
"Compensation Committee"). Awards may not be granted under the 1993 Plan after
December 31, 2003.
22
<PAGE>
An aggregate of 500,000 shares of Common Stock may be issued under the 1993
Plan, except that any shares as to which awards granted under the 1989 Plan may
lapse, expire or be canceled be available for issuance under the 1993 Plan. If
any awards expire or terminate for any reason, the shares subject to such awards
are again available for future awards under the 1993 Plan. Awards are not
transferable except by will or the laws of descent and distribution. Whether an
award may be exercised after termination of employment is determined by such
Committee, subject to certain limitations.
EMPLOYMENT AGREEMENTS
Mr. Mayer was promoted to the position of President in March 2000,
under a new three-year employment agreement, dated March 1, 2000 which provides
for a base salary of $132,000 per year with increases to $144,000 and $156,000
per year based upon the Board's determination that certain performance criteria
have been met. If Mr. Mayer's employment is terminated by the Company without
cause, than Mr. Mayer is entitled to receive one year's compensation as a
severance payment and all of his stock options shall vest. In connection with
his new employment agreement, Mr. Mayer was granted 120,000 options of three
year's duration with an exercise price of $.65 which vest over 36 months.
Mr. Fred Mayer was previously the Vice President-Finance of the Company
pursuant to a renewable, two-year, employment agreement commencing May 1, 1998.
His compensation was set at $108,000 base per annum plus an annual bonus based
upon performance determined by the Board. Upon execution of the employment
contract, Mr. Mayer received a past performance bonus of $25,000 and was awarded
100,000 options to purchase Common Stock at 30 cents each, one third vesting at
signature and the balance over two years.
Previously, Mr. Vitold Jordan had been the CEO of the Company pursuant
to a renewable, two-year, employment agreement commencing May 1, 1998. His
compensation was $125,000 base per annum plus an annual bonus based upon
performance determined by the Board. Upon execution of the employment contract,
Mr. Jordan received a past performance bonus of $25,000 and was awarded 120,000
options to purchase Common Shares at 30 cents each, one third vesting at
signature and the balance over two years. Prior to May 1, 1998 and since August
1996 Mr. Jordan acted as the Interim CEO of the Company pursuant to a management
services contract between the Company and the Dominion Bridge Corporation, his
former employer ("DBCO"). During that time, being an employee and officer of
DBCO, Mr. Jordan did not receive any direct compensation from the Company.
Effective January 31, 2000, Mr. Jordan's contract was terminated.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
This report, prepared by the Company's Board of Directors, addressed
the Company's compensation policies with respect to its executive officers for
the fiscal year ended December 31, 1999 and 1998.
Salary. The Compensation Committee is responsible for determining the
salaries of all executive officers of the Company. Salaries paid to executive
officers reflect their responsibilities, diligence and determination in working
toward the achievement of established corporate objectives. Management
compensation guidelines were established by the Compensation Committee in
consultation with independent advisors with experience in the field.
23
<PAGE>
Stock Incentives. The Compensation Committee has full power, discretion
and authority in administering the Company's 1993 Stock Incentive Plan. The
Committee believes that stock ownership by employees, including officers, of the
Company, is important as a means of rewarding outstanding performance and
promoting the achievement of long-term corporate goals by giving those persons a
greater proprietary interest in the Company. No options were granted to officers
or employees of the Company in 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 1, 2000 by (i) each
person known by the Company to own beneficially more than five percent of the
Common Stock of the Company; (ii) each director of the Company, (iii) each
executive officer named in the Summary Compensation Table, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, all shares are owned directly. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.
NAME AND ADDRESS PERCENTAGE OF
OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED CLASS(2)
---------------------- ------------------------- -------------
Hainsford Group Limited(3) 500,000 9.7%
41 Lewisham Park
London, England SE13 6QZ
Alan W. Stephens(4) 40,000 *
Gregory J. Sunell(4) 40,000 *
Synex Energy Resources, Ltd.4) 155,000 3.0%
Herbert L. Oakes, Jr.(5) 491,851 9.6%
Gerald R. Cummins 60,424 1.2%
Gerard Prevost 55,000 1.1%
Strategic Electric Power Fund 636,364 12.4%
Vitold Jordan(6) 381,763 7.4%
Frederic A. Mayer(7) 119,998 2.3%
John D. Kuhns(8) 314,133 6.1%
Dwight Kuhns(9) 225,000 4.3%
Mary E. Fellows 0 *
All Directors and
Executive Officers as a Group
(8 persons) 1,343,636 26.1%
* less than one percent
24
<PAGE>
(1) Each director and executive officer has sole voting power and sole
investment power with respect to all shares beneficially owned by him,
unless otherwise indicated.
(2) Based upon 3,797,912 shares of Common Stock outstanding on December 31,
1999.
(3) Based upon Statement on Schedule 13D filed with the SEC on September 14,
1999.
(4) Messrs. Stephens and Sunell are respectively CEO and Vice President of
SYNEX.
(5) Consists of 260,528 common shares and 191,323 warrants a to purchase common
shares held by Mr. Oakes directly or through ventures controlled by him.
(6) Includes 80,000 shares issuable upon exercise of currently exercisable
options.
(7) Includes 119,998 shares issuable upon exercise of currently exercisable
options.
(8) On February 9, 2000, Mr. Kuhns who is Manager of New Power Associates, the
Member-Manager of Strategic which invested $350,000 in the Company in
exchange for 636,364 shares of Common Stock. As of March 31, 2000, Mr. Kuhns
beneficially owned 1,223,464 shares of Common Stock.
(9) Includes 75,000 shares issuable upon exercise of an option at $2.00 per
share.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and regulations of
the Securities Exchange Commission thereunder require the Company's executive
officers and directors and persons who own more than ten percent of the
Company's stock, as well as certain affiliates of such persons, to file initial
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers. Executive
officers, directors and persons owning more than ten percent of the Company's
stock are required by the Securities and Exchange Commission regulations to
furnish he Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of Forms 3, 4 and 5 and amendments thereto
received by the Company and written representations that no other reports were
required for those persons, the Company believes that certain of the officers
and directors were tardy with certain reports during the past calendar year and
since January 1, 2000. However, the Company is instituting procedures to ensure
that such deficiencies do not recur.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 30, 1998, the Company entered into a loan agreement with SYNEX,
a significant shareholder of the Company which is affiliated with two directors
of the Company -- Messrs. Stephens and Sunell -- that provided the Company with
up to $1.0 million of proceeds from a convertible debt facility. At December 31,
1998, the Company had drawn down $400,000. In 1999, the Company increased its
amount outstanding to SYNEX by another $550,000. The Company does not intend to
draw down additional funds under this facility.
In addition, the Company entered into a participation agreement with
SYNEX, whereby New World can access the engineering expertise and personnel of
Synex, for assistance in project management and evaluation of potential
acquisition candidates. These services are available in accordance with the
rates established in the agreement.
25
<PAGE>
In 1995, the Company entered into an agreement with a unit of Flemings
Capital Management to issue $15,750,000 of its 8% Convertible Subordinated Notes
(the "Convertible Subordinated Notes") due July 31, 2000 and warrants (the
"Warrants") to purchase up to 787,500 shares of its Common Stock pursuant to the
terms of the agreement (the "Flemings Agreement"). Approximately $2,622,000 of
the Convertible Subordinated Notes were issued to OFCO, a company controlled by
Herbert L. Oakes, Jr.. OFCO was still the holder of Convertible Subordinated
Notes with a principal balance of approximately $150,000 on December 31, 1999.
The remainder of the Convertible Subordinated Notes with a principal balance of
approximately $360,000 were purchased from Flemings Capital Management during
1999 by the Hainsford Group Ltd. ("Hainsford"). Herbert L. Oakes is a minority
shareholder of Hainsford. Effective December 1997, the Company restructured the
remaining indebtedness of the Flemings Agreement. (See Note 7 of Notes to
Consolidated Financial Statements for Due to Related Parties and a detailed
explanation of the restructuring).
On June 28, 2000, the Company sold its U.K. operations to Hainsford in
exchange for a complete redemption of the remaining Convertible Subordinated
Notes, plus accrued interest of approximately $535,000, plus approximately
$25,000 in cash.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company currently consists
of (i) 40,000,000 shares of Common Stock, par value $.01 per share, of which
5,124,276 were issued and outstanding on June 30, 2000, and (ii) 5,000,000
shares of Preferred Stock, par value $.01 per share, none of which have been
designated or issued.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders generally, including the election of
directors. Holders of Common Stock do not have cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors if they chose to do so, and in such
event, the holders of the remaining shares will not be able to elect any persons
to the Board of Directors. The holders of Common Stock have no preemptive or
other subscription or conversion rights with respect to any stock issued by the
Company, The Common Stock is not subject to redemption, and the holders thereof
are not liable for further calls or assessments. Holders of Common Stock are
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefore and to share pro-rata in any
distributions to the holders of Common Stock. The transfer agent for the
Company's Common Stock is Equiserve, 150 Royall Street, Canton MA 02021.
PREFERRED STOCK
The Preferred Stock is issuable with such rights, preferences,
privileges and such number of shares constituting each series to be fixed by the
Board of Directors without further action by the holders of Common Stock or
Preferred Stock. The Board of Directors could, without stockholder approval,
issue Preferred Stock with voting and conversion rights, which could dilute the
voting power of the holders of the Common Stock. The issuance of shares of
Preferred Stock by the Board of Directors could be utilized, under certain
circumstances, as a method of preventing a takeover of the Company. As of the
date hereof, the Board of Directors has not authorized any series of Preferred
Stock and has no plans to do so.
26
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon by
Frank J. Hariton, Esq., White Plains, New York.
EXPERTS
The consolidated financial statements of The New World Power
Corporation for the years ended December 31, 1999 and 1998 included in this
Registration Statement of Form SB-2, as amended, of which this Prospectus forms
a part, have been audited by Lazar, Levine & Felix, LLP, independent certified
public accountants, to the extent and for the periods set forth in their report
and are included herein in reliance upon such report given upon the authority of
said firm as experts in accounting and auditing.
STATEMENT OF INDEMNIFICATION
The Company has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Act (the "Delaware Act") which eliminates or limits
the personal liability of a director to the Company or its stockholders for
monetary damages for breach of fiduciary duty under certain circumstances.
Furthermore, under Section 145 of the Delaware Act, the Company may indemnify
each of its directors and officers against his expenses (including reasonable
costs, disbursements and counsel fees) in connection with any proceeding
involving such person by reason of his having been an officer or director to the
extent he acted in good faith and in a manner reasonably believed to be in, or
not opposed to the best interest of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The determination of whether indemnification is proper under the
circumstances, unless made by a court, shall be determined by the Board of
Directors. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
27
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1999 AND 1998
Independent Auditors' Report on the Financial Statements for the Years
Ended December 31, 1999 and 1998 F-2
Consolidated Balance Sheet as of December 31, 1999 F-3
Consolidated Statements of Operations for the Years
Ended December 31, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999 and 1998 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
The New World Power Corporation
We have audited the consolidated balance sheet of The New World Power
Corporation and subsidiaries listed in the accompanying index as of December 31,
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for the years ended December 31, 1999 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position of The
New World Power Corporation and subsidiaries as of December 31, 1999, and the
results of their operations and their cash flows for the years ended December
31, 1999 and 1998 in conformity with generally accepted accounting principles.
/s/ Lazar Levine & Felix LLP
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
April 10, 2000
F-2
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
- ASSETS -
CURRENT ASSETS:
Cash and cash equivalents $ 39,070
Cash restricted in use (Note 3) 7,973
Accounts receivable 157,882
Other current assets 13,201
------------
TOTAL CURRENT ASSETS 218,126
------------
Property, plant and equipment, net (Note 4) 2,809,283
Goodwill, net of accumulated amortization (Note 5) 342,453
Deferred licensing costs 183,958
------------
3,335,694
------------
TOTAL ASSETS $ 3,553,820
------------
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued liabilities (Note 6) $ 452,157
Due to related parties (Note 7) 510,381
Current portion of mortgage payable (Note 8) 82,837
------------
TOTAL CURRENT LIABILITIES 1,045,375
------------
Long-term portion of due to related parties (Note 7) 950,000
Long-term portion of mortgage payable (Note 8) 82,837
Other non-current liabilities 100,000
------------
1,132,837
------------
TOTAL LIABILITIES 2,178,212
------------
COMMITMENTS AND CONTINGENCIES (NOTES 7, 9, 15 AND 16)
STOCKHOLDERS' EQUITY:
Common stock $.01 par value, 40,000,000
shares authorized, 3,797,912 shares issued
and outstanding (Notes 11 and 12) 37,979
Additional paid-in capital 83,210,751
Currency translation adjustments (88,401)
Accumulated deficit (81,784,721)
------------
TOTAL STOCKHOLDERS' EQUITY 1,375,608
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,553,820
============
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATING REVENUE (NOTE 15) $ 1,683,024 $ 2,574,465
COST OF OPERATIONS 905,807 1,333,765
----------- -----------
GROSS PROFIT 777,217 1,240,700
Project development expenses 27,614 93,354
Selling, general and administrative expenses 774,094 1,171,699
----------- -----------
OPERATING LOSS (24,491) (24,353)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (152,191) (148,035)
Interest income 1,622 14,553
Other (Note 2) 402,767 335,073
----------- -----------
TOTAL OTHER INCOME (EXPENSE) 252,198 201,591
----------- -----------
INCOME BEFORE TAXES 227,707 177,238
Provision for income taxes (Note 10) 10,000 14,007
----------- -----------
NET INCOME $ 217,707 $ 163,231
=========== ===========
BASIC AND DILUTED EARNINGS PER SHARE:
Net earnings available to common stockholders $ 0.06 $ 0.05
=========== ===========
Average number of basic common shares outstanding 3,797,912 3,479,012
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
OTHER
COMPREHENSIVE
INCOME
COMMON STOCK PREFERRED STOCK -------------
------------ ---------------------- ADDITIONAL CURRENCY RETAINED
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF PAID-IN TRANSLATION EARNINGS
SHARES PAR VALUE SHARES PAR VALUE CAPITAL ADJUSTMENTS (DEFICIT) TOTAL
--------- --------- -------- ---------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 3,426,512 $34,265 $ -- $ -- $83,028,242 $ (66,058) $(82,165,659) $ 830,790
Currency translation
adjustments on
international
subsidiaries -- -- -- -- -- 200,087 -- 200,087
Issuance of common
stock 126,000 1,260 -- -- 123,353 -- -- 124,613
Net income -- -- -- -- -- -- 163,231 163,231
--------- ------- ------ ------ ----------- --------- ------------ ----------
Balance, December 31, 1998 3,552,512 35,525 -- -- 83,151,595 134,029 (82,002,428) 1,318,721
Currency translation
adjustments on
international
subsidiaries -- -- -- -- -- (222,430) -- (222,430)
Issuance of common
stock 245,400 2,454 -- -- 59,156 -- -- 61,610
Net income -- -- -- -- -- -- 217,707 217,707
--------- ------- ------ ------ ----------- --------- ------------ ----------
Balance, December 31, 1999 3,797,912 $37,979 $ -- $ -- $83,210,751 $ (88,401) $(81,784,721) $1,375,608
========= ======= ====== ====== =========== ========= ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 217,707 $ 163,231
Adjustments to reconcile net earnings to net cash (used in) provided by
operating activities:
Depreciation and amortization 246,084 732,147
Amortization of goodwill 10,000 10,050
Amortization of deferred costs 6,454 6,455
Change in assets and liabilities, net of effect of acquisitions/disposals:
Decrease in accounts receivable 269,009 1,145,162
Decrease in other current assets 17,066 66,570
Increase (decrease) in accounts payable and accrued liabilities: 60,209 (1,630,135)
(Decrease) in non-current liabilities (1,175,000) (208,003)
Other 274,014 375,270
----------- -----------
Net cash flows (used in) provided by operating activities (74,457) 660,747
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment 129,643 --
Capital expenditures (348,811) (101,126)
Investments in and advances to affiliates -- (270)
----------- -----------
Net cash flows (used in) investing activities (219,168) (101,396)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 550,000 275,000
Repayment of long-term debt (552,910) (1,382,504)
Proceeds from issuance of common stock -- 25,000
(Increase) in restricted cash 165,062 466,416
----------- -----------
Net cash flows provided by (used in) financing activities 162,152 (616,088)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (131,473) (56,737)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 170,543 227,280
----------- -----------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 39,070 $ 170,543
=========== ===========
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Common stock issued for payables $ 61,610 $ 98,353
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense $ 105,151 $ 148,035
Interest income 2,062 14,553
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The New World Power Corporation ("the Company") was
incorporated in the State of Delaware in 1989. The Company is
an independent power producer that focuses on distributed power
solutions, including renewable and modular generation
facilities. The Company sells electrical energy to major
utilities under long-term and mid-term contracts.
(a) Basis of Presentation:
The financial statements are prepared in accordance with
generally accepted accounting principles ("GAAP"). The
preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
(b) Principles Of Consolidation:
The consolidated financial statements include the accounts of
The New World Power Corporation and its subsidiaries. All
intercompany balances and transactions have been eliminated.
The Company's policy is to consolidate all companies over which
it exercises control.
(c) Cash And Cash Equivalents:
Cash and cash equivalents include cash on hand, demand deposits
and short-term cash investments that are highly liquid in
nature and have original maturities of three months or less
(See Note 3).
(d) Property, Plant And Equipment:
Property, plant and equipment are carried at cost. Depreciation
is computed using accelerated methods for the Company's
operations in the United Kingdom, and the straight-line method
for all other property, plant and equipment, based upon the
estimated useful lives of the assets. Significant renewals and
betterments are capitalized. Maintenance and repair costs are
expensed.
(e) Facility Development:
The Company may develop new power production facilities or
acquires existing power production facilities for both
operation and development. Accounting for costs incurred in the
development phase is as follows:
New power production facilities. All costs (including
financing, legal and other professional costs, development
period interest on any financing, development period labor and
supply costs, and development period operating costs)
attributed to facilities developed by the Company are deferred,
until the facility is completed and placed in productive
service. At that time, deferred costs are amortized on a
straight-line basis over the expected useful life of the
facility, usually 25-40 years.
Facilities acquired for operation. These facilities are
substantially ready to be placed in productive service when
acquired. The purchase price, along with other acquisition
costs, including financing, legal and other professional fees
are principally assigned to the facility and depreciated over
the expected useful life of the facility. Any identified
intangible recorded, is amortized on a straight-line basis over
a period consistent with the period used for the related
facility depreciation, usually 10-40 years.
F-7
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(e) Facility Development (continued):
Other project deferrals. The Company defers costs, including
professional services and direct labor, incurred for site
inspections, site permits and deposits related to specific
project activities.
(f) Accounting For Long-Lived Assets:
In March of 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("SFAS 121"). This
standard requires that the Company compare estimated expected
future cash flows (undiscounted and without interest charges)
identified with each asset to the carrying amount of such asset
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
For those assets to be disposed of whose estimated fair values
are less than the carrying amount, an impairment would be
recorded, based on the amount by which the carrying values
exceed the estimated fair values less cost to sell. The
estimated fair values are determined based upon market values,
where available, or on the basis of estimated expected future
cash flows discounted at a rate commensurate with the risks
involved.
(g) Goodwill:
Goodwill is the difference between the purchase price and the
fair value of net assets acquired in business combinations
treated as purchases. Goodwill is amortized on a straight-line
basis over the periods benefitted, generally in the range of 10
to 40 years. On a periodic basis, or whenever events or changes
in circumstances warrant, the Company estimates the future
undiscounted cash flows of the businesses to which goodwill
relates to determine whether the carrying value of goodwill has
been impaired, as per SFAS 121.
(h) Revenue and Sales Recognition:
The Company records revenue from the sale of electric power
generated upon the delivery of the electric power to the
purchasing utility. Provisions for doubtful accounts are made
when losses are anticipated.
(i) Foreign Currency Translation:
For foreign subsidiaries whose functional currency is the local
currency, balance sheet accounts are translated at exchange
rates in effect at the end of the year and income statement
accounts are translated at average exchange rates for the year.
Translation gains and losses are included as a separate
component of stockholders equity.
(j) Income Taxes:
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). FAS 109 requires the asset and liability
method of accounting for income taxes rather than the deferred
method previously used under APB Opinion No. 11.
F-8
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(k) Earnings Per Share:
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings Per Share". SFAS 128
requires the disclosure of basic and diluted earnings per share
(EPS). Basic EPS is calculated using income available to common
shareholders divided by the weighted average number of common
shares outstanding during the period. Diluted EPS is similar to
basic EPS except that the weighted average number of common
shares, outstanding is increased to include the number of
additional common shares that would have been outstanding if
the dilutive potential common shares, such as options, had been
issued. Options to purchase 225,000 shares of common stock at
$.30 were outstanding during 1999 and 1998 but were not
included in the computation of the diluted EPS because the
options exercise price was greater than the average market
price of the common shares.
(l) Stock Options:
The Company continues to account for its stock-based
compensation using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees," under which no compensation cost
for stock options is recognized for stock option awards granted
at or above market value. In addition, the Company has adopted
the disclosure requirement of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-based
Compensation."
(m) Reclassifications:
Certain reclassifications have been made to prior year amounts
to conform with the current year presentation.
(n) Comprehensive Income:
In 1997, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes rules for the
reporting of other comprehensive income and its components.
Comprehensive income consists of net income and foreign
currency translation adjustments and is presented in the
Consolidated Statement of Stockholders' Equity. The adoption of
SFAS 130 had no impact on total stockholders' equity.
(o) Concentration Of Credit Risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and
accounts receivable. The Company, from time to time, maintains
cash balances which exceed the federal depository insurance
coverage limit. The Company performs periodic reviews of the
relative credit rating of their bank to lower their risk. The
Company believes that concentration with regards to accounts
receivable is limited due to its customer base being regulated
public utilities.
(p) Segment Data:
The Company has adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information (see Note
13).
F-9
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 2 - SIGNIFICANT BUSINESS CHANGES:
(a) Wolverine Licenses:
The Federal Power Act requires that all hydroelectric
facilities operating on navigable streams obtain a license from
the FERC. The Company's applications for licenses for its
Michigan hydroelectric facilities have been accepted and on
October 16, 1998, the Federal Energy Regulatory Commission
("FERC") issued licenses for all four hydroprojects of the
Wolverine Power Corporation, a subsidiary of the Company. In
addition, the FERC amended one license (Sanford) rescinding its
original order that Sanford operate on a run-of-river basis in
which outflow would equal inflow and allow it to continue to
operate in a peaking mode. The licenses are valid for 30 years.
(b) New World Power Texas Renewable Energy Partnership:
In October 1997, the Company and its joint venture partner DB
Power Inc. entered into an agreement to sell its interests in
the New World Texas Renewable Energy Partnership to York
Research Corporation for $1,500,000. The Company recorded a
gain of approximately $300,000 from the sale, which is included
in the 1998 Consolidated Statement of Operations under the
caption "Other Income (Expense)". The proceeds from the sale
were split 50/50 between the parties in the joint venture and
were received in three installments after certain contingencies
were resolved. An additional payment was received by the
Company upon resolution of a contingency in 1999. The Company
recorded a gain of $300,000 from the resolution of this
contingency, which is included in the 1999 Consolidated
Statement of Operations under the caption "Other Income
(Expense)".
(c) Sale of Tierras Morenas:
The Company had been undertaking, through a Costa Rican
subsidiary in which it had a 35% minority interest, to develop
a wind farm near Lake Arenal, Costa Rica. In May 1996, the
Company's 65% partner in the project entered into an agreement
to sell its interest to a US alternative energy development
company. As a result of the sale, the Company's position in the
project was weakened. In December 1997, the Company received a
capital call on the project, which it could not answer as a
result of its own financial difficulties. Accordingly, the
Company's ownership percentage was diluted to less than 5%. In
1998, the Company negotiated a sale of its interest to the
majority owner of the project for $295,000, recording a gain of
approximately $95,000 which is included in the 1998
consolidated statement of operations under the caption "Other
Income (Expenses)."
(d) Sale Of Arcadian Renewable Power Corporation, Makani Uwila And
New World Power Grid Company:
On March 15, 1999, the Company entered into a definitive
agreement to sell its investments in three subsidiaries to
American Powerhouse, Inc., a Delaware Corporation or its
successors and assigns. The agreement provided for the Company
to exchange its shares in each of the subsidiaries for $100,000
and 1,000,000 common shares (4.0% of the outstanding stock) of
American Powerhouse, Inc. No gain or loss was recorded on the
transaction.
F-10
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 3 - CASH RESTRICTED IN USE:
As a result of the restructuring of the long-term indebtedness
of the Company in December 1997, as well as the Synex financing
(see Note 7), cash at December 31, 1999 in the amount of $7,973
was restricted to making payments for long-term obligations.
NOTE 4 - PLANT, PROPERTY AND EQUIPMENT:
Property, plant and equipment consists of the following as of
December 31, 1999 (000's omitted):
USEFUL LIFE
(YEARS)
-------
Power generation facilities and equipment:
Hydroelectric $3,834 40
Wind:
Owned 3,930 25
Land 401
------
Total 8,165
Less accumulated depreciation and amortization 5,356
------
$2,809
======
Depreciation and amortization expense, for the years ended
December 31, 1999 and 1998 was $246,084 and $732,147,
respectively.
Maintenance and repair expense for the years ended December 31,
1999 and 1998 was $103,777 and $179,294, respectively.
NOTE 5 - GOODWILL:
Goodwill relates to Wolverine Power Corporation's operations
and consists of the following as of December 31, 1999 (000's
omitted):
Subject to 40 yr. straight-line amortization $402
Less accumulated amortization 60
----
Total $342
====
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities consist of the
following as of December 31, 1999 (000's omitted):
Accounts payable $236
Accrued interest expense 47
Accrued liabilities 169
----
Total $452
====
F-11
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 7 - DUE TO RELATED PARTIES:
Amounts due to related parties consists of the following at
December 31, 1999 (000's omitted):
(a) Convertible Subordinated Notes $ 510
(b) Synex 950
------
Total 1,460
Less current portion 510
------
Long-term portion $ 950
======
Convertible Subordinated Notes:
The Company defaulted on its 8% Convertible Subordinated Notes
in July 1997. The default resulted in a significant
restructuring of the indebtedness and the modification of the
maturity date of the indebtedness with the lender, which was
completed in December 1997. The Company reached an agreement
with the holders of the Subordinated Convertible Notes
regarding the restructuring/repayment of the indebtedness. The
agreement consisted of two parts, one with the holders of
approximately $625,000 of Notes including principal and
interest, and the second with the holders of the balance of the
obligation of approximately $4.3 million.
The first agreement involved the transferring of an 89%
interest in the Company's wholly owned subsidiary, New World
Power Vermont (subsequently changing its name to Northern
Power), to Arete Ventures (holders of a portion of the
Subordinated Convertible Notes) in exchange for the elimination
of the total outstanding obligations to that group of
Subordinated Convertible Noteholders. In addition, the Company
retained an 11% interest in the form of a Series A Redeemable
Preferred Stock in Northern Power. The preferred stock consists
of 129,643 shares with a $1.00 redemption value per share and
was redeemed in March 1999.
The second agreement involved the restructuring in December
1997 and reduction of the balance of the outstanding
indebtedness to the holders of the remainder of the
Subordinated Convertible Notes. The Company agreed to amortize
$1,935,000 of indebtedness before December 1998 in varying
monthly installments of principal and interest as agreed by the
parties. In addition, the Company agreed to amortize an
additional $850,000 under a three year note beginning in
January 1998 and continuing through December 2000. The monthly
payment is $26,636 including principal and interest. The
interest rate on the notes is fixed at 8% per annum. The notes
are collateralized by a second mortgage position on Wolverine.
The balance of the indebtedness at the restructure date of
approximately $1,346,000 was eliminated as debt and converted
by the Noteholders into New World Common Stock at a conversion
price of $1.50 per share when the market price of the Company's
common shares trading on the pink sheets was approximately
$0.25 per share. Accordingly, the Company issued approximately
897,400 shares of Common Stock to the Noteholders. As a result
of this restructuring and the issuance of stock, the Company
reclassified the indebtedness due to the Noteholders as amounts
due to related parties at December 31, 1999. At December 31,
1999, the Company is in default under the terms of the
restructured Subordinated Convertible Notes and, accordingly,
has reclassified the entire indebtedness as current. (See Note
16 for Subsequent Events).
F-12
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 7 - DUE TO RELATED PARTIES (Continued):
Synex
In July 1998, the Company closed a convertible debt investment
from Synex Energy Resources Ltd., the power project development
subsidiary of Vancouver-based Synex (TSE:SXI). Synex agreed to
provide up to $1,000,000 to the Company in the form of a
convertible debenture, which matures on June 30, 2001. The
convertible debenture requires interest only payments monthly
until maturity. The debenture provides for the conversion into
the Company's Common Stock at $1.00 per share and the interest
rate is 10.3% per annum. In addition, the investment provided
Synex with warrants to purchase up to 500,000 shares of the
Company's Common Stock at $1.25 per share, which expire on June
30, 2000. Vesting in the warrants only occurs after the entire
$1.0 million has been funded by Synex. The debenture is secured
by a first mortgage position on Wolverine. The investment also
provides for a strategic alliance with Synex and a
Participation Agreement for a minimum term of 18 months, which
would enable the Company to procure resources for project
assessment at rates detailed in the agreement. As part of the
agreement, Synex purchased 100,000 shares of Common Stock from
the Company for $25,000 and, accordingly, their debt is
classified as Due to Related Parties.
The aggregate scheduled maturities and sinking fund
requirements of long-term debt due to related parties as of
December 31, 1999 for each of the next two years, are as
follows (000's omitted):
YEAR AMOUNT
---- ------
2000 $ 510
2001 950
------
Total $1,460
======
NOTE 8 - MORTGAGE PAYABLE:
On November 12, 1996, Dwight Kuhns, ex-President of the Company
and a former member of the Company's Board of Directors,
commenced an action against the Company in the Superior Court,
Alameda County, California alleging among other things the
Company's failure to pay amounts due to Mr. Kuhns under his
consulting agreement entered into at the start of January 1996.
That agreement provided for a stated monthly fee and additional
incentive fees for assisting in the restructuring/asset sales
of the Company. During 1998, plaintiff was granted a judgement
against the Company including penalties in the total amount of
approximately $1.9 million. In December 1998, the Company and
plaintiff entered into negotiations on which to settle his
judgement. In January 1999, the Company and plaintiff reached a
settlement which provided for plaintiff to receive a $75,000
payment upon signing of the agreement and a $25,000 payment due
March 1, 1999. The Company paid those payments. In addition,
the Company executed a promissory note in the principal amount
of $275,000 with interest accruing at 9% per annum, which was
paid in full by December 31, 1999. Further the Company executed
a mortgage note in the principal amount of $275,000 with
interest payable at 7.5%, secured by a third position on
Wolverine. Payments under that mortgage note are to be made in
six equal installments due on June 30 and December 31, of each
year in the amount of approximately $52,000. The Company also
issued 150,000 unregistered shares to plaintiff and a warrant
to purchase 75,000 shares of the Company's Common Stock
exercisable at $2 per share.
F-13
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 8 - MORTGAGE PAYABLE (Continued):
The aggregate scheduled maturities and sinking fund
requirements of the mortgage payable as of December 31, 1999
for each of the next two years, are as follows (000's omitted):
Year Amount
---- ------
2000 $ 83
2001 83
----
Total $166
====
NOTE 9 - OTHER COMMITMENTS AND CONTINGENCIES:
Capital Expenditures
Under the Power Purchase Agreement ("PPA") with Consumers Power
Company ("Consumers"), which expires in 2023, the Company is
required to sell all the power generated from a specified
capacity to Consumers. The PPA provides for revision of prices
every ten years. In 1996, the Company failed to reach an
agreement with Consumers regarding new prices and as a result
the already existing prices continue unchanged. However, the
Company and Consumers now have a right to request the price
renegotiation each year.
In addition, as of December 31, 1995, the Company failed to
meet certain minimum capital expenditure commitments stipulated
in the agreement with Consumers. The under expenditure of
$385,000 at December 31, 1995 is disputed by the Company.
Agreements with DBCO
In April 1998, the Company terminated its interim management
contract with Dominion Bridge as well as other agreements and
associations between the two companies. No additional
compensation was given to terminate those agreements.
Employment Agreements
In May 1998, the Company entered into employment agreements
with the Chief Executive Officer ("CEO") and the Vice
President-Finance of the Company. The terms of the employment
agreements are for two years with an automatic renewal for two
additional years unless terminated by mutual consent. Under the
agreement, the CEO shall receive $125,000 salary per annum,
125,000 stock options exercisable at $.30 (vesting over two
years) and an annual bonus at the discretion of the Board of
Directors. The Vice president-Finance shall receive $108,000
salary per annum, 100,000 stock options exercisable at $.30
(vesting over two years) and an annual bonus at the discretion
of the Board. (See Note 16 for Subsequent Events).
Performance Bond
In connection with the Company's proposal to construct a
hydroelectric facility at Anderson Falls, Argentina, the
Company was required to post a $1 million performance bond. The
Company was unable to complete the project financing primarily
due to local credit downgrading and as a result the
construction was halted. Management is currently seeking a
buyer for this project. Management does not believe the Company
has any exposure with respect to this project.
F-14
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 10 - INCOME TAXES:
As discussed in Note 1, the Company adopted FAS 109 as of
October 1, 1993. Income tax expense (benefit) attributable to
income from continuing operations consists of:
CURRENT DEFERRED TOTAL
------- -------- -----
Year ended December 31, 1999:
U.S. Federal $ -- $ -- $ --
State and local 10,000 -- 10,000
-------- ------ --------
Foreign -- -- --
$ 10,000 $ -- $ 10,000
======== ====== ========
Year Ended December 31, 1998:
U.S. Federal $ -- $ -- $ --
State and local (1,500) -- (1,500)
Foreign 15,507 -- 15,507
-------- ------ --------
$ 14,007 $ -- $ 14,007
======== ====== ========
Differences between the effective federal income tax rate and
the statutory U.S. federal income tax rate for the year ended
December 31, 1999 are as follows:
1999 1998
PERCENTAGE PERCENTAGE
---------- ----------
Statutory U.S. Federal
Income Tax benefit (34.0%) (34.0%)
Temporary difference without
benefit 34.0% 34.0%
----- -----
-- --
===== =====
No current or deferred U.S. federal tax expense or benefit has
been recorded due to the significant consolidated tax loss and
the less than likely realization of deferred tax benefits. The
state, local and foreign tax expense relates to tax expense in
certain jurisdictions where one or more of a Company's
subsidiaries have generated net taxable income on a separate
company basis.
F-15
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 10 - INCOME TAXES (Continued):
The Company and subsidiaries have previously incurred net
operating losses for financial reporting purposes, some of
which may be available as carryforwards to offset future
taxable income. The tax effects of temporary differences and
carryforwards which give rise to future income tax benefits and
payables at December 31, 1999 are as follows:
Non-current assets:
Net operating loss carryforwards $ 14,753,728
Tax credit carryforwards 595,000
Valuation allowance (14,673,748)
------------
Net non-current asset 674,980
Non-current liabilities:
Depreciation 674,980
------------
Net non-current liabilities 674,980
Net deferred tax $ --
============
The tax credit carryforwards of $595,000 expire by 2003. At
December 31, 1999, the Company has net operating loss
carryforwards of approximately $43,400,000 which expires at
various dates through 2019.
A full valuation allowance has been recorded against deferred
tax assets as realization is not considered "more likely than
not" as of December 31, 1999.
NOTE 11 - CAPITAL STOCK:
Common Stock
At December 31, 1999, the Company had outstanding exercisable
warrants of 1,244,447 and 163,956 warrants which were not
exercisable at that date. The outstanding warrants' exercise
prices range from $8.75 to $43.75 at December 31, 1999.
NOTE 12 - STOCK OPTION PLAN:
In May 1993, the Company adopted the 1993 Stock Incentive Plan
(the "1993 Plan") pursuant to which it may issue awards and
options to purchase up to 100,000 shares of common stock to its
employees, directors and consultants. On January 31, 1995, the
Plan was amended, increasing the number of shares authorized
for options under the Plan to 400,000 shares. The 1993 Plan
replaced the Company's 1989 Stock Incentive Plan, except as to
options for 116,813 shares which were then outstanding under
the 1989 Plan. Options to purchase Common Stock at December 31,
1999 and 1998 are shown below.
1999 1998
--------- --------
Options outstanding, beginning
of year $225,000 $ --
Forfeitures during the year -- --
Granted during the year
(at $.30 per share) -- 225,000
-------- --------
Outstanding, end of year
(at a price of $.30) $225,000 $225,000
======== ========
Eligible for exercise,
end of year $145,200 $ 72,600
======== ========
F-16
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 12 - STOCK OPTION PLAN (Continued):
Had compensation expense for the Company's stock-based
compensation plan been determined based on fair value at the
grant date for awards under those plans in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation," the
Company's net earnings and earnings per share would have
remained the same since the fair value at the grant date for
the options issued in 1998 was deemed to be immaterial. The
effects of applying SFAS 123 are not indicative of future
amounts because this statement does not apply to awards granted
prior to fiscal year 1998. Additional stock option awards are
anticipated in future years.
The weighted average fair value of options granted during 1998
estimated on the date of grant using the Black-Scholes option
pricing model was $.06. The fair value of the 1998 options is
estimated on the date of grant using the following assumptions:
dividend yield of 0%, expected volatility of 70%, risk-free
interest rate range of 5.49% and an expected life of seven
years.
NOTE 13 - SEGMENT INFORMATION:
In 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise
and Related Information" ("SFAS 131"). SFAS 131 establishes
standards for reporting information about operating segments
and related disclosures about products and services, geographic
areas and major customers. The Company's operations are
classified into one business segment. Substantially all
revenues result from the sale of electricity generated by wind
farms and hydroelectric plants to major utilities under PPAs.
See Note 1 for Concentration of Credit Risk. The following
table shows assets and other financial information by
geographical area for the years ended December 31, 1999 and
1998, (000's omitted).
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED DECEMBER
DECEMBER 31, 1999 31, 1998
----------------- -------------------
<S> <C> <C>
Geographic revenue:
North America $1,133 $1,002
Europe 550 1,572
------ ------
REVENUE CONSOLIDATING GEOGRAPHIC 1,683 2,574
------ ------
Operating (loss) profit:
North America (235) 635
Europe 211 (659)
------ ------
TOTAL OPERATING PROFIT (LOSS) (24) (24)
------ ------
Identifiable assets:
North America 2,829 3,052
Europe 725 1,687
------ ------
CONSOLIDATED GEOGRAPHIC ASSETS 3,554 4,739
------ ------
Depreciation and amortization:
North America 167 193
Europe 79 539
------ ------
CONSOLIDATED DEPRECIATION AND
AMORTIZATION EXPENSE $ 246 $ 732
====== ======
</TABLE>
F-17
<PAGE>
NOTE 13 - SEGMENT INFORMATION (Continued):
In 1999 and 1998, the Company sold its energy production to two
utility companies which accounted for all of the revenue.
NOTE 14 - FINANCIAL INSTRUMENTS:
By nature, all financial instruments involve risk, generally
market risk, arising from changes in interest rates and credit
risk. Financial instruments that potentially subject the
company to credit risk consist primarily of cash deposits,
accounts receivable, accounts payable and long-term debt.
Statement of Financial Accounting Standards No. 107,
"Disclosure about Fair Value of Financial Instruments", defines
the fair value of a financial instrument as the amount at which
the instrument could be exchanged in a current transaction
between willing parties, other than in a forced liquidation
sale.
1999
-----------------------------
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
-------- ---------
(000'S OMITTED)
Assets:
Cash and cash equivalents $ 39 $ 39
Cash restricted in use 58 58
Liabilities:
Debt due related parties 1,460 --
Mortgage payable 166 --
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments:
Cash and Cash Equivalents, Cash Restricted in use and Notes
Receivable - The carrying amount is a reasonable estimate of
fair value.
Debt Due to Related Parties and Settlement Obligations - It was
not practicable to estimate the fair value of these financial
instruments for 1999. See Notes 7 and 8 for debt and mortgage
terms.
The fair value estimates presented herein are based on
pertinent information available to management as of December
31, 1999. Although management is not aware of any factors that
would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for
purposes of these financial statements since those dates, and
estimates of fair value subsequent to those dates may differ
significantly from the amounts presented herein.
F-18
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 15 - CONCENTRATIONS OF RISK:
The Company derives all of its revenue from the production and
sale of electric power generated from renewable sources. As a
result, the Company is subject to several concentrations of
risk. A significant majority of the Company's revenues are
derived from contracts for the sale of power to regulated
public utilities. Under many of these contracts, the price for
energy is subject to the utilities' "avoided cost". "Avoided
cost" is affected by, among other factors, the availability and
market price of oil, gas, and other energy sources.
Additionally, the Company will have to renegotiate contracts
with the utilities when the present contracts expire. Further,
the renewable energy industry has, in the past, been subject to
legislative and regulatory changes, and will likely continue to
be affected by such factors for the foreseeable future.
NOTE 16 - SUBSEQUENT EVENTS:
(a) Consumers PPA:
The rates under this PPA were subject to renegotiation on
December 31, 1995. The Company decided not to attempt to
renegotiate its contract with Consumers and, as a result, its
contract is continued on a year to year basis under the
conditions of the original contract.
(b) Equity Investment and Strategic Advisory Agreement:
On February 9, 2000, the Company closed an investment from The
Strategic Electric Power Fund, LLC ("Strategic"). Under the
terms of the investment, the Company received cash of $350,000
from Strategic in return for the issuance of 636,364 shares of
the Company's Common Stock.
The Company also entered into a Financial Advisory, Merger and
Acquisition and Strategic Planning Services Agreement with
Kuhns Brothers ("Kuhns Brothers"), an investment firm
affiliated with The Strategic Electric Power Fund. The
Agreement calls for Kuhns Brothers to provide certain services
to the Company and outlines the fee arrangement for completion
of said services. The services include but are not limited to
project financing, equity financing, acquisition services and
strategic advisory services. The agreement is for a term of
twelve months with a monthly payment of $3,500 which is offset
against any financing fees earned by Kuhns Brothers in
accordance with the agreement.
(c) Termination of Employment Contract:
The Company terminated the employment contract of its CEO (See
Note 9 Commitments and Contingencies) effective January 31,
2000. In accordance with the terms of the employment contract,
a severance payment of nine months salary is due and payable
along with any accrued vacation earned. Accordingly, the
Company recorded a liability of approximately $105,000 at
December 31, 1999 for the termination.
(d) Exchange of Convertible Subordinated Indentures for UK
Wind Farm:
On March 17, 2000, the Company entered into a Memorandum of
Acceptance with its Convertible Subordinated Noteholders. The
Memorandum of Acceptance contains terms by which the Company
will exchange its Caton Moor wind farm for cash and certain
securities including all of the outstanding Convertible
Subordinated Notes and accrued interest thereon (See Note 7).
The agreement is subject to due diligence by the Noteholders
and a definitive agreement being agreed upon and executed by
all parties.
F-19
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 16 - SUBSEQUENT EVENTS (Continued):
(e) Acquisition of Project Company in Michigan:
On March 9, 2000, the Company completed the acquisition of
Modular Power Systems, LLC ("MPS"). MPS owns three diesel-fired
peaking facilities in Alma, Chelsea and Coldwater, Michigan.
All of the facilities were constructed in 1999 and 2000. MPS
facilities contain diesel-fueled generating equipment and
related power plant equipment. The power generated at each of
the facilities is sold to Consumers pursuant to mid-term power
purchase agreements commencing June 2000. The purchase price of
the acquisition was $1.8 million and 450,000 shares of common
stock of the Company. The former owners also hold a note
payable with a principal balance of $350,000. The note bears
interest at 5% per annum and matures March 1, 2001. A portion
of the acquisition fund ($700,000) was supplied by the
Strategic Electric Power Fund, LLC. (See Note 16(g) for
subsequent event.) Under the terms of the agreement, the former
owners of MPS will continue to work with the Company to secure
additional power facilities for a minimum of two years. The
balance of the acquisition price was paid in cash. Selected
financial information is as follows:
Property, Plant and Equipment $5,317,926
Note Payable - related party $ 350,000
Note Payable - bank $ 150,000
Capital lease obligations $4,817,926
(f) Employment Agreement:
Effective March 1, 2000, the Company entered into an employment
agreement with its new President. The term of the employment
agreement is for three years with an automatic renewal for
three additional years unless terminated by mutual consent.
Under the agreement, the President shall receive $132,000 in
salary per annum with annual increases of $12,000 per annum,
120,000 stock options exercisable at $.65 (vesting over three
years) and an annual bonus at the discretion of the Board of
Directors. If the employment agreement is terminated without
cause, the President shall receive a termination payment equal
to one year's salary at the rate per annum at the termination
date.
(g) Acquisition Bridge Note:
On March 8, 2000, the Company issued a bridge note in the
amount of $700,000 to the Strategic Electric Power Fund, LLC in
connection with the acquisition of MPS - See Note 16(e). The
Bridge Note bears interest at the rate of 8% per annum and is
payable in cash or stock, and matures December 31, 2000. In
addition, the Strategic Electric Power Fund, LLC is also
entitled to receive certain warrants.
(h) Office Lease:
Effective February 15, 2000, the Company entered into a lease
agreement for office space located in Aston, Pennsylvania. This
lease expires on August 14, 2000 with monthly payments of $800.
F-20
<PAGE>
THE NEW WORLD POWER CORPORATION
Page(s)
-------
Consolidated Condensed Balance Sheets at June 30, 2000 (unaudited)
and December 31, 1999 F-22
Consolidated Condensed Statements of Operations for the Six
Month Periods Ended June 30, 2000 and 1999 (unaudited) F-23
Consolidated Condensed Statements of Operations for the Three
Month Periods Ended June 30, 2000 and 1999 (unaudited) F-24
Consolidated Condensed Statements of Cash Flows for the Six
Month Periods Ended June 30, 2000 and 1999 (unaudited) F-25
Notes to Interim Consolidated Condensed Financial Statements
(unaudited) F-26
F-21
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
JUNE 30, DECEMBER 31,
2000 1999
--------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 16,780 $ 39,070
Cash restricted in use 17,995 7,973
Accounts receivable 78,439 157,882
Other current assets 67,465 13,201
----------- ------------
TOTAL CURRENT ASSETS 180,679 218,126
----------- ------------
Property, plant and equipment, net 11,468,544 2,809,283
Goodwill, net of accumulated amortization 337,453 342,453
Deferred project costs 188,424 183,958
----------- ------------
11,994,421 3,335,694
----------- ------------
TOTAL ASSETS $12,175,100 $ 3,553,820
=========== ============
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 822,284 $ 452,157
Note payable - bank -- --
Due to related parties 1,014,280 510,381
Deferred revenues 2,048,550 --
Current portion of lease obligations 1,101,187 --
Current portion of mortgage obligations 82,837 82,837
----------- ------------
TOTAL CURRENT LIABILITIES 5,069,138 1,045,375
----------- ------------
Long-term portion of due to related parties 1,000,000 950,000
Long-term portion of mortgage obligations 82,837 82,837
Long-term portion of lease obligations 3,765,814 --
Other non-current liabilities -- 100,000
----------- ------------
4,848,651 1,132,837
----------- ------------
TOTAL LIABILITIES 9,917,789 2,178,212
----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
authorized 40,000,000 shares;
5,124,276 and 3,797,912 shares
issued and outstanding 51,243 37,979
Additional paid-in capital 83,832,987 83,210,751
Currency translation adjustments -- (88,401)
Accumulated deficit (81,626,919) (81,784,721)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 2,257,311 1,375,608
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,175,100 $ 3,553,820
=========== ============
See accompanying notes to interim consolidated condensed financial statements.
F-22
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
OPERATING REVENUE $ 993,191 $ 773,815
COST OF OPERATIONS 335,553 312,784
----------- -----------
GROSS PROFIT 657,638 461,031
Project development expenses -- 30,680
Selling, general and administrative expenses 357,142 397,678
----------- -----------
OPERATING INCOME 300,496 32,673
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (184,990) (66,120)
Interest income -- 1,618
Other 52,298 113,339
----------- -----------
TOTAL OTHER INCOME (EXPENSE) (132,692) 48,837
----------- -----------
INCOME BEFORE TAXES 167,804 81,510
Provision for income taxes 10,000 2,500
----------- -----------
NET INCOME $ 157,804 $ 79,010
=========== ===========
BASIC AND DILUTED EARNINGS PER SHARE:
Net earnings from continuing operations available
to common stockholders - Basic $ 0.03 $ 0.02
=========== ===========
- Diluted $ 0.03 $ 0.02
=========== ===========
AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 4,880,220 3,797,912
=========== ===========
AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 4,880,220 3,797,912
=========== ===========
</TABLE>
See accompanying notes to interim consolidated condensed financial statements.
F-23
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
OPERATING REVENUE $ 579,060 $ 316,146
COST OF OPERATIONS 123,770 161,481
----------- -----------
GROSS PROFIT 455,290 154,665
Project development expenses -- 9,145
Selling, general and administrative expenses 190,554 154,362
----------- -----------
OPERATING INCOME (LOSS) 264,736 (8,842)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (147,101) (34,368)
Interest income -- 475
Other 47,674 84,922
----------- -----------
TOTAL OTHER INCOME (EXPENSE) (99,427) 51,029
----------- -----------
INCOME BEFORE TAXES 165,309 42,187
Provision for income taxes 10,000 1,275
----------- -----------
NET INCOME $ 155,309 $ 40,912
=========== ===========
BASIC AND DILUTED EARNINGS PER SHARE:
Net earnings from continuing operations
available to common stockholders
- Basic $ 0.03 $ 0.01
=========== ===========
- Diluted $ 0.03 $ 0.01
=========== ===========
AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 4,780,220 3,797,912
=========== ===========
AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING 4,880,220 3,797,912
=========== ===========
</TABLE>
See accompanying notes to interim consolidated condensed financial statements.
F-24
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 157,804 $ 79,010
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 112,153 134,623
Amortization of goodwill 5,000 2,500
Other, net 88,401 140,241
Amortization of deferred costs 3,227 (14)
Change in assets and liabilities, net of effect of
acquisitions/disposals:
Decrease in accounts receivable 79,443 176,427
(Increase) in other current assets (54,264) (1,185)
Increase (decrease) in accounts payable and accrued liabilities 325,884 (129,264)
(Decrease) in non-current liabilities (100,000) -
Increase in deferred revenue 968,550 -
--------- ---------
Net cash flows provided by operating activities 1,586,198 402,338
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Modular Power Systems, net (541,729) -
Capital expenditures (1,221,967) (27,017)
Deferred project costs and other (7,693) (129,643)
--------- ---------
Net cash flows (used in) investing activities (1,771,389) (156,660)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to related parties 714,000 (103,049)
Payment of mortgage obligation -- (230,031)
Payment of short term notes (175,000) -
Payment of lease obligations (688,077) -
Proceeds from issuance of common stock, net 322,000 -
(Increase) decrease in restricted cash (10,022) 20,333
--------- ---------
Net cash flows provided by (used in) financing activities 162,901 (312,747)
--------- ---------
Net change in cash and cash equivalents (22,290) (67,069)
Cash and cash equivalents at beginning of period 39,070 170,543
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 16,780 $ 103,474
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid $154,047 $ 52,120
Income taxes paid -- 1,618
<FN>
Non-cash transactions:
During the six month period ended June 30, 2000, the Company issued
690,000 shares of common stock valued at $313,500 for services rendered
(see Note 7) and also as part of the purchase price of Modular (see
Note 2).
Capital lease obligations in the amount of $1,598,000 were incurred when
the Company entered into leases for power generation equipment during
the six month period ended June 30, 2000.
See also note 5 for non-cash exchange of United Kingdom operations.
</FN>
</TABLE>
See accompanying notes to interim consolidated condensed financial statements.
F-25
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The New World Power Corporation ("the Company") was incorporated in the State of
Delaware in 1989. The Company is an independent power producer that focuses on
distributed power solutions, including renewable and modular generation
facilities. The Company sells electrical energy to major utilities under
long-term and mid-term contracts.
In the opinion of management, the accompanying unaudited interim consolidated
condensed financial statements of The New World Power Corporation ("the
Company") and its subsidiaries, contain all adjustments of a recurring nature
considered necessary for a fair presentation of the Company's financial position
as of June 30, 2000 and the results of operations and cash flows for the six and
three month periods ended June 30, 2000.
The consolidated condensed balance sheet presented as of December 31, 1999 has
been derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated condensed financial statements and notes
included herein should be read in conjunction with the financial statements and
notes included in the Company's Annual Report on Form 10-KSB.
The results of operations for the six and three month periods, ended June 30,
2000 are not necessarily indicative of the results to be expected for a full
year.
NOTE 2 - SIGNIFICANT BUSINESS CHANGES:
On March 9, 2000, the Company completed the acquisition of Modular Power Systems
LLC ("Modular"). Modular owns three diesel-fired peaking facilities under
construction in Alma, Chelsea and Coldwater, Michigan. Modular facilities
contain diesel-fueled generating equipment and related power equipment. The
power generated at each of the facilities will be sold to Consumers Power
Company ("Consumers") pursuant to mid-term power purchase agreements commencing
June 2000. The purchase price of the acquisition was $1.8 million and 450,000
shares of common stock of the Company along with the assumption of debt of
approximately $4.5 million. The common stock was valued at $0.55 per share,
which was the approximate market value at the date of the acquisition. The
former owners also hold a note receivable with a principal balance of $350,000.
The note bears interest at 5% per annum and matures March 1, 2001. Under the
terms of the agreement, the former owners will continue to work with the Company
to secure additional power facilities for a minimum of two years. This
acquisition was recorded under the purchase method of accounting. Since Modular
was an entity with generation facilities under development, proforma information
for the consolidated statement of operations is not available.
F-26
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(Unaudited)
NOTE 2 - SIGNIFICANT BUSINESS CHANGES (Continued):
As part of the acquisition, the Company assumed two capital leases for
equipment. The assets and liabilities under capital leases are recorded at the
lower of the present value of the minimum lease payments or the fair market
value of the assets.
Minimum annual future lease payments under capital leases as of June 30, 2000
and for each of the next five years and in the aggregate are:
Year Ended June 30, Amount
------------------- ------
2001 $1,453,869
2002 1,158,597
2003 1,875,885
2004 630,282
2005 1,066,683
----------
Total minimum lease payments 6,185,316
Amount representing interest 1,318,315
----------
Present value of minimum lease
payments $4,867,001
==========
The interest rates on the Company's capital leases at June 30, 2000 range from
8% to 10.75%.
NOTE 3 - PLANT, PROPERTY AND EQUIPMENT:
Property, plant and equipment consists of the following as of June 30, 2000
(000's omitted):
Useful Life
(Years)
---------
Power generation facilities and equipment:
Hydroelectric $ 4,341 40
Modular generation facilities 4,523 20
Modular generation facilities under development 4,798 *
-------
Total 13,662
Less accumulated depreciation and amortization 2,193
-------
$11,469
=======
*When put into service these facilities will be depreciated over an estimated
useful life of 20 years.
F-27
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(Unaudited)
NOTE 4 - NOTE PAYABLE-BANK:
During the period ended March 31, 2000, the Company had an unsecured working
capital line of credit with a Bank which matured on May 31, 2000. Maximum
borrowings under this line were $375,000 and the interest rate was 9% per annum.
The note payable was fully repaid in early May 2000.
NOTE 5 - DUE TO RELATED PARTIES:
Amounts due to related parties consists of the following at June 30, 2000 (000's
omitted):
(a) Convertible Subordinated Notes $ -
(b) Synex International 1,000
(c) Strategic Electric Power Fund, LLC 664
(d) Robert Evans/Tom Waters (see Note 2) 350
-------
Total 2,014
Less current portion 1,014
-------
Long-term portion $ 1,000
=======
CONVERTIBLE SUBORDINATED NOTES (A)
The Company defaulted on its 8% Convertible Subordinated Notes in July 1997.
The default resulted in a significant restructuring of the indebtedness and
the Company agreed to amortize an additional $850,000 under a three year note
beginning in January 1998 and continuing through December 2000. The monthly
payment is $26,636 including principal and interest. The interest rate on the
notes is fixed at 8% per annum. The notes are collateralized by a second
mortgage position on Wolverine, a Subsidiary. The balance of the indebtedness
at the restructure date of approximately $1,346,000 was eliminated as debt and
converted by the holders of the Notes into New World common stock at a
conversion price of $1.50 per share when the market price of the Company's
common shares trading in the pink sheets was approximately $0.25 per share.
Accordingly, the Company issued approximately 897,400 shares of common stock
to the holders of the Notes. In June 2000, the Company entered into a
Definitive Agreement with its Convertible Subordinated Noteholders. The
Definitive Agreement provided for the Company to exchange its United Kingdom
operations for cash and all of the outstanding Convertible Subordinated Notes
($510,381 at the date of exchange) and accrued interest thereon ($51,995 at
the date of exchange). The Company recorded an approximate $2,000 gain on the
exchange.
F-28
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(Unaudited)
NOTE 5 - DUE TO RELATED PARTIES (Continued):
SYNEX (B)
In July 1998, the Company obtained a convertible debt investment from Synex
Energy Resources Ltd., the power project development subsidiary of
Vancouver-based Synex (TSE:SXI). Synex agreed to provide up to $1,000,000 to
the Company in the form of a convertible debenture, which matures on June 30,
2001. The convertible debenture requires interest only payments monthly until
maturity. The convertible debenture provides for the conversion into the
Company's common stock at $1.00 per share and its interest rate is 10.3% per
annum. In addition, the investment provided Synex with warrants to purchase up
to 500,000 shares of the Company's Common Stock at $1.25 per share, that
expired on June 30, 2000. Vesting in the warrants only occurs after the entire
$1.0 million has been funded by Synex. The convertible debenture is secured by
a first mortgage position on Wolverine. The investment also provides for a
strategic alliance with Synex and a Participation Agreement for a minimum term
of 18 months, which would enable the Company to procure resources for project
assessment at rates detailed in the agreement. As part of the agreement, Synex
purchased 100,000 shares of common stock from the Company for $25,000 and,
accordingly, their debt is classified as Due to Related Parties.
STRATEGIC ELECTRIC POWER FUND, LLC (C)
In connection with the acquisition of Modular in March 2000, the Company
issued a bridge note in the amount of $700,000 (the "Strategic Bridge Note")
to the Strategic Electric Power Fund, LLC ("Strategic"). The Strategic Bridge
Note, which matures on December 31, 2000, bears interest at 8% per annum and
is payable in cash or in stock. Interest payments are due semi-annually in
arrears on June 30 and December 31. The notes are convertible into shares of
common stock of the Company at the option of the noteholders. The conversion
price of the notes shall be at $.68 per share. The Company repaid $35,780 of
the note as of June 30, 2000.
NOTE 6 - DEFERRED REVENUE:
In March and May of 2000, the Company received two payments from Consumers (see
Note 2) in accordance with the provisions of the Call Option Agreement between
the parties. The payment represents revenues to the Company for having installed
capacity available from June 1 to September 30, 2000. Accordingly, the Company
recorded the payment as deferred revenue and will recognize it as energy
revenues in the periods earned. The Company recognized $322,850 in revenues
under the call options for the period ended June 30, 2000 and expects to
recognize the remainder of the revenues in the third quarter.
F-29
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(Unaudited)
NOTE 7 - STOCKHOLDERS' EQUITY TRANSACTIONS:
In January 2000, the Company issued 120,000 shares of common stock valued at
$30,000 to the Company's directors for services rendered. Also in January 2000,
the Company issued 120,000 of common stock valued at $36,000 to the terminated
CEO as part of his severance package. In March the Company issued 450,000 shares
of common stock valued at $247,500 as part of the purchase price of MPS (see
Note 2).
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
(A) EMPLOYMENT AGREEMENT
Effective March 1, 2000, the Company entered into an employment
agreement with Frederic A. Mayer, its President. Mr. Mayer's employment
agreement is for three years with an automatic renewal for three
additional years unless terminated by mutual consent. Under the
agreement, Mr. Mayer shall receive $132,000 in salary per annum with
annual increases of $12,000 per annum, 120,000 stock options exercisable
at $0.65 (vesting over three years) and an annual bonus at the
discretion of the Board of Directors. If the employment agreement is
terminated without cause, Mr. Mayer shall receive a termination payment
equal to one year's salary at the rate per annum at the termination
date.
(B) OFFICE LEASE
Effective February 15, 2000, the Company entered into a lease agreement
for office space located in Aston, PA. The lease currently expires on
August 14, 2000 with monthly payments of $800.
NOTE 9 - SUBSEQUENT EVENT:
Equipment Purchase/Financing
The Company, through its Modular subsidiary, entered into a purchase
agreement to acquire five units of power generation equipment and
related switchgear from a Caterpillar dealer at a cost of $1,598,000.
The Company took delivery of the units during May 2000 and obtained
financing through Caterpillar Financial Services Corporation in July
2000. Accordingly, the Company reclassified the accounts payable at June
30, 2000 as a capital lease and included the lease in the capital lease
information included in Note 2.
F-30
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or the Representative. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Company since
the date hereof. This Prospectus does not constitute an offer or solicitation by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
Page
Available Information......................................... 2
Cautionary Statement.......................................... 2
Prospectus Summary............................................ 3
Summary Financial Information............................... 3
Managements's Discussion and Plan of Operations. 5
Risk Factors.................................................. 8
Market for the Common Stock and Related Matters............... 10
Dividend Policy............................................... 10
Use of Proceeds............................................... 11
Selling Stockholders.......................................... 11
Plan of Distribution.......................................... 12
Business of the Company....................................... 13
Management.................................................... 20
Executive Compensation........................................ 21
Security Ownership of Certain
Beneficial Owners and Management..................... 24
Certain Relationships and Related Transactions................ 25
Description of Securities..................................... 26
Legal Matters................................................. 27
Experts....................................................... 27
Statement of Indemnification.................................. 27
Index to December 31, 1999 Financial Statements .............. F-1
Index to June 30, 2000 Financial Statements...................F-22
===============================================================================
THE NEW WORLD POWER CORPORATION
PROSPECTUS
1,671,764 SHARES
SEPTEMBER , 2000
===============================================================================
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article Six of the Company's Certificate of Incorporation provides for
indemnification of the Company's officers and directors to the fullest extent
permitted under the General Corporation Law of the State of Delaware ("DGCL").
SECTION 145 of the DGCL, as amended, applies to the Company and the
relevant portion of the DGCL provides as follows:
145. Indemnification of Officers, Directors, Employees and Agents; Insurance.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or 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 him in connection with such action, suit or proceeding 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. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which 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 reasonable cause to believe that his conduct was
unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or 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)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit 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 except that no indemnification shall
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 that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b) of this section, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
II-1
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made (1) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as authorized
in this section. Such expenses (including attorneys' fees) incurred by
other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or 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 any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officer
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in
the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purpose of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee
or agent of the
II-2
<PAGE>
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
The Company maintains insurance for the benefit of its directors and
officers and the directors and officers of its subsidiaries, insuring such
persons against certain liabilities, including liabilities arising under the
securities laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable. Furthermore, the Company has given certain
undertakings with respect to indemnification in connection with this
Registration Statement.
Item 25. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission filing fee $110.75
National Association of Securities
Dealers, Inc. filing fee $541.00
Transfer Agent's fees $ *
Legal fees and expenses $ *
Accounting fees and expenses $ *
Miscellaneous $ *
-------
Total $ *
* To be provided by amendment.
All amounts estimated except for Securities and Exchange Commission and
National Association of Securities Dealers, Inc. filing fee.
As required by agreements between the Company and the Selling
Stockholders, all of these expenses of issuance and distribution will be paid by
the Company.
Item 26. Recent Sales of Unregistered Securities.
In July 1998, the Company issued 100,000 shares of Common Stock to
Synex Energy Resources, Ltd. at $.25 per share in connection with the extension
of a credit facility to the Company by Synex Energy Resources, Ltd. This
transaction was exempt from the registration provisions of the Securities Act of
1933, as amended, by reason of section 4(2) thereof as a transaction by an
issuer no involving any public offering.
In January 1999, an aggregate of 95,400 shares of Common Stock were
issued to four persons in consideration of their having served as directors of
the Company. The shares were valued at $.06 per share.
II-3
<PAGE>
This transaction was exempt from the registration provisions of the Securities
Act of 1933, as amended, by reason of section 4(2) thereof as a transaction by
an issuer no involving any public offering.
In January 1999, 150,000 shares of Common Stock and 75,000 Common Stock
purchase warrants were issued to Dwight Kuhns, a former officer of the Company,
in connection with the settlement of litigation. The shares issued to Mr. Kuhns
were valued at $.10 per share. This transaction was exempt from the registration
provisions of the Securities Act of 1933, as amended, by reason of section 4(2)
thereof as a transaction by an issuer no involving any public offering.
In January 2000, 120,000 shares were issued upon the exercise of an
option by a former officer. The exercise price of the option was $.30 per share.
This transaction was exempt from the registration provisions of the Securities
Act of 1933, as amended, by reason of section 4(2) thereof as a transaction by
an issuer no involving any public offering.
In January 2000, an aggregate of 200,000 shares were issued to
directors for their having served as such. These shares were valued at $.25 per
share. This transaction was exempt from the registration provisions of the
Securities Act of 1933, as amended, by reason of section 4(2) thereof as a
transaction by an issuer no involving any public offering.
In February 2000, 636,364 shares were issued to an investor for $.54
per share in a privately negotiated transaction. This transaction was exempt
from the registration provisions of the Securities Act of 1933, as amended, by
reason of section 4(2) thereof as a transaction by an issuer no involving any
public offering.
In March 2000, 450,000 were issued as a part of an acquisition
transaction. The shares were valued at $.54 per share. This transaction was
exempt from the registration provisions of the Securities Act of 1933, as
amended, by reason of section 4(2) thereof as a transaction by an issuer no
involving any public offering.
In March 2000, 120,000 options with an exercise price of $.65 were
granted to the Company's president in connection with his execution of an
employment agreement. This transaction was exempt from the registration
provisions of the Securities Act of 1933, as amended, by reason of section 4(2)
thereof as a transaction by an issuer no involving any public offering.
Item 27. Exhibits.
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger by and among Arcadian Power Corporation,
an Utah corporation, The New World Power Corporation and Arcadian Power
Corporation, a Delaware corporation, dated as of January 13, 1994.
(Incorporated herein by reference to Exhibit 2.01 to the Company's Form
10-K for the year ended September 30, 1993 (the "1993 10- K")).
2.2 Purchase Agreement, dated as of July 29, 1994, by and between The New
World Power Corporation and Westinghouse Electric Corporation
(Incorporated herein by reference to Exhibit 2.1 to Form 8-K dated
August 30, 1994 (the "August 30, 1994 8-K")).
2.3 Exchange Agreement and Consent, dated as of July 29, 1994, by and
between The New World Power Corporation and Photocomm, Inc.
(Incorporated herein by reference to Exhibit 2.2 to the August 30, 1994
8-K).
II-4
<PAGE>
2.4 Stock Purchase Agreement, dated as of June 27, 1994, by and among The
New World Power Corporation and Solartec S.A., Jose Emilo Salgado,
Nilda Raquel Filoso de Salgado, Fernando J. Salgado and Juan Esteban
Zellner (Incorporated herein by reference to Exhibit 2.1 to the August
30, 1994 8-K).
2.5 Amendment to Stock Purchase Agreement, dated as of July 1, 1994
(Incorporated herein by reference to Exhibit 2.2 to the dated August
30, 1994 8-K).
2.6 Share Purchase Agreement, dated as of June 9, 1994, by and among
Nordtank af 1987 A/S, The New World Power Company Limited and The New
World Power Corporation. (Incorporated herein by reference to Exhibit
2.04(a) to the Company's Form 10-K for the year ended December 31, 1994
(the "1994 10-K")).
2.7 Deed of Variation, dated as of November 3, 1994, by and among Nordtank
af 1987 A/S, The New World Power Company Limited and The New World
Power Corporation. (Incorporated herein by reference to Exhibit 2.04(b)
to the 1994 10-K).
3.1 Third Amended and Restated Certificate of Incorporation of The New
World Power Corporation. (Incorporated herein by reference to Exhibit
3.01 to the Company's Form 10-Q for the quarter ended June 30, 1995
(the "June 30, 1995 10-Q")).
3.2 Amended and Restated By-laws of The New World Power Corporation.
(Incorporated by reference herein to the 1994 10-K.)
4.1 Specimen certificate for Common Stock of the Company. (Incorporated
herein by reference to Exhibit No. 4.01 to the Company's Form S-1,
Registration Statement No. 33-49576 ("Form S-1")).
4.2 Preferred Stock and Warrant Purchase Agreement by and among The New
World Power Corporation, Wolverine Power Corporation and Sundial
International Fund Limited dated as of December 31, 1992. (Incorporated
herein by reference to Exhibit 4.01 to the Company's Form 10-Q for the
quarter ended March 31, 1993 (the "March 31, 1993 10-Q")).
4.3 Form of Wolverine Power Corporation Fourteen Year Variable Rate
Subordinated Debenture Due 2000 and Schedule of Debenture Holders.
(Incorporated herein by reference to Exhibit No. 19.1 to the Company's
Form 10-Q for the quarter ended June 30, 1989 (the "June 30, 1989
10-Q").
4.4 Facility Agreement by and between The New World Power Company (Dyffryn
Brodyn) Limited and Hambros Bank Limited, et. al., dated October 14,
1994. (Incorporated herein by reference to Exhibit 4.04(a) to the 1994
10-K).
4.5 Debenture granted by The New World Power Company (Dyffryn Brodyn)
Limited to Hambros Bank Limited, dated October 14, 1994. (Incorporated
herein by reference to Exhibit 4.04(b) to the 1994 10-K).
4.6 Security Coordination Agreement by and among The New World Power
Company (Dyffryn Brodyn) Limited, The New World Power Company (Caton
Moor) Limited, The New World Power Company (Four Burrows) Limited, The
New World Power Company Limited and Hambros Bank Limited, et. al.,
dated October 14, 1994. (Incorporated herein by reference to Exhibit
4.04(c) to the 1994 10-K).
II-5
<PAGE>
4.7 Mortgage of Shares by and between The New World Power Company Limited
and Hambros Bank Limited, dated October 14, 1994. (Incorporated herein
by reference to Exhibit 4.04(d) to the 1994 10-K).
4.8 Inter-Creditor Deed by and among The New World Power Company (Dyffryn
Brodyn) Limited, The New World Power Corporation, The New World Power
Company Limited and Hambros Bank Limited, et. al., dated October 14,
1994. (Incorporated herein by reference to Exhibit 4.04(d) to the 1994
10-K).
4.9 Cross Guarantee and Debenture by and among The New World Power Company
(Dyffryn Brodyn) Limited, The New World Power Company (Caton Moor)
Limited, The New World Power Company (Four Burrows) Limited and Hambros
Bank Limited, dated October 14, 1994. (Incorporated herein by reference
to Exhibit 4.04(f) to the 1994 10-K).
4.10 Shortfall Undertaking by and between The New World Power Corporation
and The New World Power Company (Dyffryn Brodyn) Limited, dated October
14, 1994. (Incorporated herein by reference to Exhibit 4.04(g) to the
1994 10-K).
4.11 Acknowledgment of Notice of Assignment re: Shortfall Undertaking by The
New World Power Corporation, dated October 14, 1994. (Incorporated
herein by reference to Exhibit 4.04(h) to the 1994 10-K).
4.12 Additional Funding Agreement by and between The New World Power
Corporation and The New World Power Company (Dyffryn Brodyn) Limited,
dated October 14, 1994. (Incorporated herein by reference to Exhibit
4.04(i) to the 1994 10-K).
4.13 Acknowledgment of Notice of Assignment re: Additional Funding Agreement
by The New World Power Corporation, dated October 14, 1994.
(Incorporated herein by reference to Exhibit 4.04(j) to the 1994 10-K).
4.14 Facility Agreement by and between The New World Power Company (Caton
Moor) Limited and Hambros Bank Limited, et. al., dated November 11,
1994. (Incorporated herein by reference to Exhibit 4.05(a) to the 1994
10-K).
4.15 Debenture granted by The New World Power Company (Caton Moor) Limited
to Hambros Bank Limited, dated November 11, 1994. (Incorporated herein
by reference to Exhibit 4.05(b) to the 1994 10-K).
4.16 Mortgage of Shares by and between The New World Power Company Limited
and Hambros Bank Limited, dated November 11, 1994. (Incorporated herein
by reference to Exhibit 4.05(C) to the 1994 10-K).
4.17 Inter-Creditor Deed by and among The New World Power Company (Caton
Moor) Limited, The New World Power Corporation, The New World Power
Company Limited and Hambros Bank Limited, et. al., dated November 11,
1994. (Incorporated herein by reference to Exhibit 4.05(d) to the 1994
10-K).
4.18 Cross Guarantee and Debenture by and among The New World Power Company
(Caton Moor) Limited, The New World Power Company (Dyffryn Brodyn)
Limited, The New World Power Company (Four Burrows) Limited and Hambros
Bank Limited, dated November 11, 1994. (Incorporated herein by
reference to Exhibit 4.05(e) to the 1994 10-K).
II-6
<PAGE>
4.19 Additional Funding Agreement by and between The New World Power
Corporation and The New World Power Company (Caton Moor) Limited, dated
November 11, 1994. (Incorporated herein by reference to Exhibit 4.05(f)
to the 1994 10-K).
4.20 Acknowledgment of Notice of Assignment re: Additional Funding Agreement
by The New World Power Corporation, dated November 11, 1994.
(Incorporated herein by reference to Exhibit 4.05(g) to the 1994 10-K).
4.21 Facility Agreement by and between The New World Power Company (Four
Burrows) Limited and Hambros Bank Limited, et. al., dated March 21,
1995. (Incorporated herein by to Exhibit 4.06(a) reference to the 1994
10-K).
4.22 Debenture granted by The New World Power Company (Four Burrows) Limited
and Hambros Bank Limited, dated March 17, 1995. (Incorporated herein by
reference to Exhibit 4.06(b) to the 1994 10-K).
4.23 Side Letter, dated March 17, 1995, to Security Coordination Agreement
by and among The New World Power Company (Dyffryn Brodyn) Limited, The
New World Power Company (Caton Moor) Limited, The New World Power
Company (Four Burrows) Limited, The New World Power Company Limited and
Hambros Bank Limited, et. al., dated October 14, 1994. (Incorporated
herein by Reference to Exhibit 4.06(C) to the 1994 10-K).
4.24 Mortgage of Shares by and between The New World Power Company Limited
and Hambros Bank Limited, dated March 17, 1995. (Incorporated herein by
reference to Exhibit 4.06(d) to the 1994 10-K).
4.25 Inter-Creditor Deed by and among The New World Power Company (Four
Burrows) Limited, The New World Power Corporation, The New World Power
Company Limited and Hambros Bank Limited, et. al., dated March 17,
1995. (Incorporated herein by reference to Exhibit 4.06(e) to the 1994
10-K).
4.26 Cross Guarantee and Debenture by and among The New World Power Company
(Four Burrows) Limited, The New World Power Company (Dyffryn Brodyn)
Limited, The New World Power Company (Caton Moor) Limited and Hambros
Bank Limited, dated March 17, 1995. (Incorporated herein by reference
to Exhibit 4.06(f) to the 1994 10-K).
4.27 Additional Funding Agreement by and between The New World Power
Corporation and The New World Power Company (Four Burrows) Limited,
dated March 17, 1995. (Incorporated herein by reference to Exhibit
4.06(g) to the 1994 10-K).
4.28 Acknowledgment of Notice of Assignment re: Additional Funding Agreement
by The New World Power Corporation, dated March 17, 1995. (Incorporated
herein by reference to Exhibit 4.06(h) to the 1994 10-K).
5.01 Opinion of Frank J. Hariton*
10.1 Management Agreement between Fayette Energy Corporation and East Rock
Partners, Inc. dated December 1, 1989. (Incorporated herein by
reference to Exhibit No. 10.05(b) to the Company's
Form 10-K for the year ended September 30, 1991 (the "1991 10-K")).
II-7
<PAGE>
10.2 Management Agreement between Wolverine Hydroelectric Corporation and
East Rock Partners, Inc. dated December 1, 1989. (Incorporated herein
by reference to Exhibit No. 10.05(d) to the 1991 Form 10-K).
10.3 The New World Power Corporation's 1989 Stock Incentive Plan.
(Incorporated herein by reference to Exhibit No. 10.09 to the Company's
Form 10-K for the year ended September 30, 1990 (the "1990 10-K")).
10.4 The New World Power Corporation's 1993 Stock Incentive Plan.
(Incorporated herein by reference to Exhibit 10.1 to the Company's Form
10-Q for the quarter ended June 30, 1993 (the "June 30, 1993 10-Q")).
10.5 Lease between White Hollow Farms, Inc. and The New World Power
Corporation, dated as of December 1, 1992. (Incorporated herein by
reference to Exhibit 10.33 to the 1993 10-K).
10.6 Stock Purchase Agreement among The New World Power Corporation,
Photocomm, Inc., Westinghouse Electric Corporation, Programmed Land,
Inc. and Robert R. Kauffman dated as of October 15, 1993. (Incorporated
herein by reference Exhibit A to the Company's Form 8-K dated November
23, 1993 (the "November 12, 1993 8-K")).
10.7 Placement Agent Agreement by and between The New World Power
Corporation and Oakes, Fitzwilliams & Co. Limited, dated November 8,
1993. (Incorporated herein by reference to Exhibit 10.35(a) to the 1993
10-K).
10.8 Warrant issued to Oakes, Fitzwilliams & Co. Limited. (Incorporated
herein by reference to Exhibit 10.35(b) to the 1993 10-K).
10.9 Form of Purchase Agreement by and between The New World Power
Corporation and Purchaser. (Incorporated herein by reference to Exhibit
10.35(C) to the 1993 10-K).
10.10 Form of Warrant issued to Purchaser. (Incorporated herein by reference
to Exhibit 10.35(d)) to the 1993 10-K).
10.11 Schedule of Purchasers. (Incorporated herein by reference to Exhibit
10.35(e) to the 1993 10-K).
10.12 Form of Management Shareholders' Agreement by and among The New World
Power Corporation; John D. Kuhns; Dwight C. Kuhns; Robert W. MacDonald;
Lucien Ruby; Herbert L. Oakes, Jr.; Michael H. Best; Nazir Memon;
Gerald R. Cummins and any other person who agrees to be bound by the
terms of the Agreement, dated as of November 12, 1993. (Incorporated
herein by Reference to Exhibit 10.38 to the 1993 10-K).
10.13 Placement Agent Agreement by and between The New World Power
Corporation and Oakes, Fitzwilliams & Co., Limited, dated February 28,
1994. (Incorporated herein by reference to Exhibit 10.01(a) to the
Company's Form 10-Q for the quarter ended March 31, 1994 (the "March
31, 1994 10-Q")).
10.14 Warrant issued to Oakes, Fitzwilliams & Co., Limited. (Incorporated
herein by reference to Exhibit 10.01(b) to the March 31, 1994 10-Q).
II-8
<PAGE>
10.15 Form of Purchase Agreement by and between The New World Power
Corporation and Purchaser. (Incorporated herein by reference to Exhibit
10.01(C) to the March 31, 1994 10-Q).
10.16 Form of Warrant issued to Purchaser. (Incorporated herein by reference
to Exhibit 10.01(d) to the March 31, 1994 10-Q).
10.17 Schedule of Purchasers. (Incorporated herein by reference to Exhibit
10.01(e) to the March 31, 1994 10-Q).
10.18 Business Alliance Agreement between The New World Power Corporation and
Westinghouse Electric Corporation dated as of June 15, 1994.
(Incorporated herein by reference to Exhibit 10.01 to the Company's
Form 10-Q for the quarter ended June 30, 1994 (the "June 30, 1994
10-Q")).
10.19 Placement Agent Agreement by and between The New World Power
Corporation and Oakes, Fitzwilliams & Co. Limited, dated August 22,
1994. (Incorporated herein by reference to Exhibit 10.01(a) to the
Company's Form 10-Q for the quarter ended September 30, 1994 (the
"September 30, 1994 10-Q")).
10.20 Amendment to Placement Agent Agreement dated August 30, 1994.
(Incorporated herein by reference to Exhibit 10.01(b) to the September
30, 1994 10-Q).
10.21 Warrant issued to Oakes, Fitzwilliams & Co., Limited. (Incorporated
herein by reference to Exhibit 10.01(c) to the September 30, 1994
10-Q).
10.22 Form of Purchase Agreement by and between The New World Power
Corporation and Purchaser. (Incorporated herein by reference to Exhibit
10.01(d) to the September 30, 1994 10-Q). 10.23 Form of Warrant issued
to Purchaser. (Incorporated herein by reference to Exhibit 10.01(e) to
the September 30, 1994 10-Q).
10.24 Schedule of Purchasers. (Incorporated herein by reference to Exhibit
10.01(f) to the September 30, 1994 10-Q).
10.25 Option Agreement by and between The New World Power Corporation and
Robert R. Kauffman, dated as of October 7, 1994. (3) 10.26 0%
Exchangeable Senior Secured Guaranteed Note due 29 December 1995 in the
original principal amount of Two Million Two Hundred Thousand and
No/100 U.S. Dollars issued by The New World Power Company Limited. (3)
10.27 Option Agreement by and among The New World Power Company
Limited, Sundial International Fund Limited and Oakes, Fitzwilliams &
Co., Limited, dated December 30, 1994. (3) 10.28 Guaranty Agreement by
The New World Power Corporation in favor of Sundial International Fund
Limited, dated December 30, 1994. (3)
10.29 Stock Pledge Agreement by and among The New World Power Corporation,
Sundial International Fund Limited and Gilmartin, Poster & Shafto,
dated December 30, 1994. (3)
10.30 Exchange Agreement by and between The New World Power Corporation and
Sundial International Fund Limited, dated December 30, 1994. (3)
10.31 Warrant issued to Sundial International Fund Limited. (3)
10.32 Placement Agent Agreement by and between The New World Power
Corporation and Oakes, Fitzwilliams & Co. S.A., dated February 10,
1995. (3)
II-9
<PAGE>
10.33 Warrant issued to Oakes, Fitzwilliams & Co. S.A. (3)
10.34 Form of Purchase Agreement by and between The New World Power
Corporation and Purchaser, dated February 10, 1995. (3)
10.35 Form of Amendment to Purchase Agreement by and between The New World
Power Corporation and Purchaser, dated February 10, 1995. (3)
10.36 Form of Warrant issued to Purchaser. (3)
10.37 Schedule of Purchasers. (3)
10.38 Subscription Agreement by and between The New World Power Corporation
and Oakes, Fitzwilliams & Co. S.A., dated February 10, 1995. (3)
10.39 Warrant issued to Oakes, Fitzwilliams & Co. S.A. (3)
10.4 Employment Agreement, dated as of August 1, 1995, by and between the
Company and John D. Kuhns. (3)
10.41 Amendment No. 1 to Employment Agreement, dated as of March 1, 1996, by
and between the Company and John D. Kuhns. (3)
10.42 Amendment No. 2 to Employment Agreement, dated as of March 31, 1996, by
and between the Company and John D. Kuhns. (3)
10.43 Amendment Agreement, dated August 3, 1995, between China Chang Jiang
Energy (Group) and the Company. (3)
10.44 Share Transfer Agreement between China Chang Jiang Energy Corporation
(Group) and the Company for the Fujian Chang Ping Hydro Power
Company. (3)
10.45 Consulting Agreement, dated as of February 7, 1996, between The Company
and Glass & Associates, Inc. (3)
10.46 Agreement Engaging the Services of Glass & Associates, Inc. As Interim
Manager, dated April 18, 1996, between the Company and Glass &
Associates, Inc. (3)
10.47 Financial Advisory Services Agreement, dated June 11, 1996, between the
Company and Oakes Fitzwilliams & Co. (3)
10.48 Management Services Agreement with Dominion Bridge, dated August 5,
1996 (3)
10.49 Restructured loan agreements with the Holders of the Convertible
Subordinated Debentures, dated December 1997 (4)
10.50 Convertible Loan Agmt with Synex Energy Resources, Ltd. dated June 30,
1998. (4)
10.51 Settlement Agreement with Condor/Dwight Kuhns, dated
January 1, 1999. (4)
II-10
<PAGE>
10.52 Employment Agreements with Vitold Jordan and Fred Mayer, dated May
1998. (4)
10.53 Equity Investment and Strategic Advisory Agreement with the Strategic
Electric Power Fund LLC and Kuhns Brothers dated February 9, 2000. (5)
10.54 Termination Agreement with Vitold Jordan dated January 31, 2000. (5)
10.55 Acquisition Agreement for Modular Power Systems, LLC dated as of March
9, 2000. (5)
10.56 Employment Agreement with Fred Mayer, dated March 1, 2000. (5)
22.1 Subsidiaries of the registrant. (3)
23.1 Consent of Lazar, Levine & Felix, LLP*
23.2 Consent of Frank J. Hariton (to be included in Exhibit 5.01)
24.1 Power of Attorney - included in Part II
----------------
3) Incorporation by reference herein to the like numbered Exhibit to the 1995
10-K
4) Incorporation by reference herein to the 1998 10-KSB
5) Incorporated by reference to the like numbered exhibit to the 1999 10-KSB.
* Filed herewith.
** To be filed by amendment.
Item 29. Undertakings.
A. Rule 415 Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement or the most recent post-effective
amendment thereof which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; provided,
however, that paragraphs (1)(i) and (1)(ii) do not apply if the registration
statement is on Form S-3, Form S-8, and the information required to be included
in a post-effective amendment by those paragraphs is contained in periodic
reports filed by the Company pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities herein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
II-11
<PAGE>
B. INDEMNIFICATION UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this amended
registration statement to be signed on its behalf by the undersigned in the City
of Aston, State of Pennsylvania on September 1, 2000.
THE NEW WORLD POWER CORPORATION
By: /s/ Frederic A. Mayer
----------------------------
Frederic A. Mayer, President
II-13
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
/s/ Fred A. Mayer Director September 5, 2000
--------------------
John D. Kuhns by
Fred A. Mayer,
Attorney in fact
/s/ Fred A. Mayer Director and President September 5, 2000
--------------------- (Principal Executive, Accounting
Fred A. Mayer, and Financial Officer)
Attorney in fact
Director September 2000
---------------------
Herbert L. Oakes
/s/ Fred A. Mayer Director September 5, 2000
---------------------
Alan Stephens by
Fred A. Mayer,
Attorney in fact
/s/ Fred A. Mayer Director September 5, 2000
---------------------
Gregory Sunell by
Fred A. Mayer,
Attorney in fact
II-14
