SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission file number 0-18260
THE NEW WORLD POWER CORPORATION
(Exact name of registrant as specified in its charter)
--------------------
DELAWARE 52-1659436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14 MOUNT PLEASANT DRIVE
ASTON, PENNSYLVANIA 19014
(484) 840-0944
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
-----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _______________
Commission File Number 0-18260
---------------------
The New World Power Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1659436
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14 Mount Pleasant Drive, Aston, Pennsylvania 19014
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (484)-840-0944
------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- --------------------------------------------------------------------------------
None Not Applicable
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes____ No X.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on December 31, 1999 was $649,547 based on the closing price of
$.25 per share. The number of shares outstanding of the registrant's Common
Stock as of December 31, 1999 was 3,797,912.
DOCUMENTS INCORPORATED BY REFERENCE:
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
PART I Page
<S> <C>
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 9
Item 6. Management's Discussion and Analysis
of Results of Operations 9
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 11
PART III
Item 9. Directors and Executive Officers of the Registrant 12
Item 10. Executive Compensation 16
Item 11. Security Ownership of Certain
Beneficial Owners and Management 19
Item 12. Certain Relationships and Related Transactions 21
PART IV
Item 13. Exhibits and Reports on Form 8-K 23
Index to Consolidated Financial Statements and
Financial Statement Schedule F-1
Signatures S-1
</TABLE>
<PAGE>
PART 1
ITEM 1. BUSINESS
I. 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 operates two wholly owned subsidiaries, Michigan
based Wolverine Power Corporation ("Wolverine") and The New World Power Company
(Caton Moor) Limited ("Caton Moor") in the United Kingdom. Wolverine is a
10.5-megawatt hydroelectric plant and Caton Moor owns and operates a 3-megawatt
wind farm.
This report contains "forward looking statements" within the purview of
the federal securities laws. There are numerous risks and uncertainties
surrounding the Company and management'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, however,
that the Company can maintain profitability or complete any acquisitions on
terms acceptable to the Company, if at all.
II. 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, with power output sold to
major utility companies under long term contracts. From 1996 through 1998
following a change in its business plan, 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 due to non-compliance; however,
the Company's stock remains publicly traded in the "OTC" market, as reflected
from time to time on the so-called pink sheets.
1
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RECENTLY COMPLETED ASSET SALES
<TABLE>
<CAPTION>
Approximate Power
Name Location Type Capacity Purchaser Year of sale
<S> <C> <C> <C> <C> <C>
Makani Uwila Oahu, Hawaii Wind 10.30 MW HECO 1999
Altamont Altamont Pass, Calif Wind 20.00 MW PG&E 1999
</TABLE>
As a consequence of the Company's restructuring, as well as its analysis
of current market conditions in the electric power industry, the Company intends
in the future to focus its resources on the operation of its projects and
identification and evaluation of targeted operating projects for future
acquisition.
2
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III. CURRENT STATUS
INDEPENDENT POWER PROJECTS IN OPERATION
The Company currently owns two electric power-generating facilities. Each
facility is located on a site that is owned or leased on a long-term basis by a
project company subsidiary. The facilities produce electricity that is sold to
utilities under long-term power purchase agreements ("PPA"s).
<TABLE>
<CAPTION>
Approximate Power
Name Location Type Capacity Purchaser Status
<S> <C> <C> <C> <C> <C>
Wolverine Midland, Michigan Hydro 10.50 MW Consumers Operating
Caton Moor Lancashire, England Wind 3.00 MW NORWEB Operating
</TABLE>
WOLVERINE
Wolverine Hydroelectric Facilities. Wolverine owns four hydroelectric
facilities on the Tittabawassee River near Midland, 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-megawatt ("MW"). Wolverine current ten-year moving average hydroelectric
production rate for these facilities is approximately 32.7 million-kilowatt
hours ("kWh") per year.
The power generated at Wolverine is sold to Consumers Power Company
("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.
At this time, the implementation of the deregulation process in Michigan
is delayed primarily because of a regulatory challenge by the utilities. The
prevailing retail consumer rates are eight to nine cents per kilowatt hour
("kWh"), while Consumers signed the majority of the important industrial
customers to long term, direct supply agreements. The prevailing non-utility
generators ("NUG"s) rates are six cents per kWh. Approximately 90 % of NUG
capacity in the territory is owned by the parent of Consumers, following its
conversion of a nuclear plant into a fossil fuel plant.
The Company believes that the current Wolverine rates of approximately
three cents per kWh are the lowest among the NUGs in the state. In 1996, at the
time of the most recent price renegotiations, Consumers was purchasing power
from Hydro Ontario at approximately 2.5 cents per kWh, which adversely affected
the outcome of the negotiations for Wolverine. At this time, the Company does
not intend to renegotiate the rates with Consumers until approval of
deregulation in Michigan and completion of the proposed Ontario Hydro break-up.
3
<PAGE>
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 future results of
operations.
Wolverine employees perform the operations, maintenance and management of
the plant, while major repairs are contracted out.
CATON MOOR
Caton Moor Wind Farm. Caton Moor owns and operates a 3 MW wind farm at
Caton Moor, Lancashire in northwest England. The project, commissioned in 1994,
uses 10 Windmaster 300 kW wind turbine generators. The Company believes that the
wind resource at this site is the best among the wind farms developed by the
Company in the UK, averaging 8.38 meters per second at hub height.
The project was developed pursuant to a 1991 renewable non-fossil fuel
obligation PPA with NFPA and NORWEB plc, a regional electric utility ("Norweb").
The fixed, premium price period of the contract expired on December 31, 1998.
Caton Moor has entered into a new, 27 month PPA with NORWEB, following a
competitive bid process with utilities and power marketers. The effective rates
under this agreement are approximately three pence per kWh, or approximately 4.5
cents.
Equipment maintenance is outsourced to Border Wind, an independent
contractor under annual agreements. In 1997, Caton Moor suffered two gearbox
failures and in both instances the cost of repairs was passed onto the insurance
company, together with lost revenue recovery claims. Since commissioning, the
project has experienced no environmental or permitting problems. See Note 16 for
Subsequent Events.
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.
4
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SEASONALITY OF PROJECT REVENUES
Hydroelectric and wind farm 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. The best season wind season in the United Kingdom is
typically from October to March. Both hydroelectric and wind 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.
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 independent power
producers, 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.
5
<PAGE>
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 independent power producer ("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 Permits: 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.
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.
6
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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.
ITEM 2. PROPERTIES
ADMINISTRATIVE
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.
INDEPENDENT POWER PRODUCTION
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.
7
<PAGE>
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 is located on approximately 100
acres of leased land in Caton Moor, Lancashire, England.
ITEM 3. LEGAL SETTLEMENT
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 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 NWPCE.
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
*The foregoing represents inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
As of December 31, 1999 and 1998, there were approximately 300 holders of record
of Common Stock.
The Company has not paid any cash dividends on its Common Stock since its
incorporation in June 1989.
ITEM 6. MANAGEMENT DISCUSSION AND PLAN OF OPERATIONS
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.
9
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The Company will continue to maintain its efforts to hold down overhead
and generate profits from existing operations. It also expects to complete
acquisitions within the next 12 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 the
Company will be able to close any financings to enable it to make acquisitions.
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 administartive 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.
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.
10
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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.
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements for the Company begin on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with our auditors which
are required to be reported herein.
11
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following sets forth certain information with respect to the
Directors of the Company:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FIRST YEAR
NAME FOR THE PAST FIVE YEARS AGE BECAME A DIRECTOR
AND CURRENT PUBLIC DIRECTORSHIPS
<S> <C> <C> <C>
GERALD R. CUMMINS DIRECTOR AND CHAIRMAN OF THE BOARD. 73 1990
Mr. Cummins has been a director since October 1990 and
a private investor and independent business
consultant for more than five years. He served as
chairman of The New York State Thruway Authority. He
was the campaign manager for the Honorable Hugh L.
Carey, the former Governor of New York. Mr. Cummins
received a bachelor's degree from Manhattan College.
HERBERT L. OAKES, JR DIRECTOR. 53 1993
Mr. Oakes 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.
</TABLE>
12
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<TABLE>
<S> <C> <C> <C>
GERARD PREVOST DIRECTOR AND VICE CHAIRMAN OF THE BOARD 60 1996
Mr. Prevost is an independent business investor and
business advisor. Prior to July 1997 and since August
1996, Mr. Prevost was Managing Partner of Dominion
World Power; an energy projects independent joint
venture between the Company and Dominion Bridge Power,
Inc. During the previous 33 years Mr. Prevost served in
many positions with the Hydro Quebec, where he served
as the president of Nouveler, an investment arm of the
utility and vice president of the operations and
equipment division of the utility. Mr. Prevost's career
with Hydro Quebec was interrupted for four years starting
in 1988 when he served as deputy minister of energy for
the Province of Quebec. Mr. Prevost received an MBA from
Laval University in Quebec City.
</TABLE>
13
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<TABLE>
<S> <C> <C> <C>
ALAN W. STEPHENS DIRECTOR. 71 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
GREGORY J. SUNELL DIRECTOR. 47 1998
During the last five years, Mr. Sunell has
acted as vice-president and Secretary-Treasurer of Synex.
Mr. Sunell received a B Eng. from the University of
British Columbia in 1995 and is a member of the
Professional Engineers and Geoscientists of British
Columbia
LUCIEN RUBY DIRECTOR. 56 1990
Since 1985, Mr. Ruby has been the
Managing General Partner of Quest Ventures, a San
Francisco-based venture capital firm. Currently, Mr.
Ruby serves on the board of directors of various
privately held corporations. Mr. Ruby received a B.S.C.E.
from Duke University and an MBA from Harvard University.
</TABLE>
14
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EXECUTIVE OFFICERS
The following table contains the name, position, biographical information
and age of each executive officer of the Company who is not a director.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME FOR THE PAST FIVE YEARS AGE
AND CURRENT PUBLIC DIRECTORSHIPS
<S> <C> <C>
VITOLD JORDAN CHIEF EXECUTIVE OFFICER/PRESIDENT. 45
From May 1998 to present, Mr. Jordan has served as Chief Officer and
President of the Company and since August 1996, Mr. Jordan was
the Interim CEO pursuant to a management services contract
with Dominion Bridge Corporation ("DBCO"), where from January 1995
till April 1998, Mr. Jordan was president of Dominion Bridge
Technology, Inc. and an officer of DBCO. Prior to 1995, Mr. Jordan
served as a Managing Partner of the Professional Services at AT&T
GIS Canada. Mr. Jordan is a graduate of Laval University and a
chartered accountant. Mr. Jordan's contract was terminated in
January 1999 (See Note 16 of Notes to Financial Statements for
Subsequent Events).
FREDERIC A. MAYER VICE PRESIDENT-FINANCE. 41
From May 1998 to present, 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).
</TABLE>
15
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ITEM 10. 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").
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Termination/
Principal Position Year Salary Bonus
<S> <C> <C> <C>
Vitold Jordan 1999 $125,000 $104,167
CEO 1998 73,000 25,000
Fred A Mayer 1999 $108,000 $45,000
Vice President-Finance 1998 63,000 25,000
</TABLE>
16
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OPTION GRANTS TABLE.
The following table sets forth certain information regarding stock option
grants made to each of the Named Executive Officers during the fiscal year ended
December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Option Grants in Fiscal Year 1999 and 1998
Individual Grants Potential Realizable
Name Number of % of Total Exercise Expiration Value at
Securities Options Granted Price ($/sh) Date Assumed Annual
Underlying to Employees Rates of Stock Price
Options Fiscal Year Appreciation
Granted (#) for Option Term
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 - -
<FN>
(1) Earlier of seven years or termination from the Company.
</FN>
</TABLE>
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").
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Awards may not be granted under the 1993 Plan after December 31, 2003. 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. Vitold Jordan has been the CEO of the Company pursuant to a
renewable, two-year, employment agreement commencing May 1, 1998. His
compensation is set at $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 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.
Mr. Fred Mayer has been the Vice President-Finance of the Company
pursuant to a renewable, two-year, employment agreement commencing May 1, 1998.
His compensation is 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.
Mr. Mayer was promoted to the position of President in March 2000, under a
new three-year employment agreeement. (See Note 16 for Subsequent Events).
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
18
<PAGE>
Compensation Committee in consultation with independent advisors with experience
in the field.
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.
ITEM 11. SECURITY OWNERSHIP.
The following table sets forth information concerning ownership of the
Common Stock of the Company outstanding as at December 31, 1999, by (i) each
person known by the Company to be the beneficial owner of more than five percent
of the Common Stock, (ii) each director, (iii) each of the Named Executive
Officers and (iv) by all directors and executive officers of the Company as a
group. Unless otherwise indicated, each stockholder has sole voting power and
sole dispositive power with respect to the indicated shares.
NAME AND ADDRESS SHARES BENEFICIALLY OWNED** PERCENTAGE
OF BENEFICIAL OWNER(1) OF CLASS(2)
Hainsford Group Limited (3) 500,000 13.2%
41 Lewisham Park
London, England SE13 6QZ
Alan W. Stephens (4) 10,000 *
Gregory J. Sunell (4) 10,000 *
Synex (4) 155,000 4.1%
Herbert L. Oakes, Jr.(5) 451,851 11.9%
Gerald R. Cummins 20,024 *
Gerard Prevost 20,000 *
Vitold Jordan (6) 381,763 10.0%
Frederic A. Mayer (7) 66,667 1.8%
19
<PAGE>
John D. Kuhns (8) 314,133 8.3%
All Directors and Executive Officers
as a Group (8 persons) 1,115,305 29.8%
* less than one percent.
(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 66,667 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 the Strategic Electric Power Fund, LLC 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.
20
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 30, 1998, the Company entered into a loan agreement with Synex
that provided the Company with up to $1.0 million of proceeds from a convertible
debt facility. At December 31, 1998, the Company had only drawn down $400,000.
In 1999, the Company increased its amount outstanding to Synex by another
$550,000.
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.
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 "8% 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. Approximately $2,622,000 of the 8% Convertible
Subordinated Notes were issued to OFCO. OFCO, is a company controlled by Herbert
L. Oakes, Jr.. OFCO was still the holders 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 Fleming 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 Fleming Agreement. (See Note 7 of Notes to Consolidated
Financial Statements for Due to Related Parties and a detailed explanation of
the restructuring).
21
<PAGE>
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, during the fiscal year
ended December 31, 1999, all filing requirements applicable to its executive
officers, directors and owners or more than ten percent of the Company's stock
were complied with.
22
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
EXHIBIT DESCRIPTION
NUMBER
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).
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")).
23
<PAGE>
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).
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).
24
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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).
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).
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")).
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")).
25
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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).
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")).
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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)
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)
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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)
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.
10.54 Termination Agreement with Vitold Jordan dated January 31, 2000.
10.55 Acquisition Agreement for Modular Power Systems, LLC dated as of March 9,
2000.
10.56 Employment Agreement with Fred Mayer, dated March 1, 2000.
10.57 Exhibit 27 - Financial Data Schedule.
22.1 Subsidiaries of the registrant. (3)
- -----------------
3) Incorporation by reference herein to the 1995 10-K
4) Incorporation by reference herein to the 1998 10-KSB
* Filed herewith.
REPORTS ON FORM 8-K
None.
28
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THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-KSB
FOR YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C>
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
</TABLE>
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>
<TABLE>
<CAPTION>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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>
Common Stock Preferred Stock
------------------------------ ----------------------------- Additional
Amount of Number of Amount of Paid-in
Number of Shares Par Value Shares Par Value Capital
------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 3,426,512 $ 34,265 $ - $ - $ 83,028,242
Currency translation adjustments on
international subsidiaries - - - - -
Issuance of common stock 126,000 1,260 - - 123,353
Net income - - - - -
------------- ------------ ------------- ------------ -------------
Balance, December 31, 1998 3,552,512 35,525 - - 83,151,595
Currency translation adjustments on
international subsidiaries - - - - -
Issuance of common stock 245,400 2,454 - - 59,156
Net income - - - - -
------------- ------------ ------------- ------------ -------------
BALANCE, DECEMBER 31, 1999 3,797,912 $ 37,979 $ - $ - $ 83,210,751
============= ========== ========= ========== ============
</TABLE>
<TABLE>
<CAPTION>
Other
Comprehensive
Income
------------
Currency Retained
Translation Earnings
Adjustments (Deficit) Total
---------------- ------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1997 $ (66,058) $(82,165,659) $ 830,790
Currency translation adjustments on
international subsidiaries 200,087 - 200,087
Issuance of common stock - - 124,613
Net income - 163,231 163,231
---------------- ------------- ---------------
Balance, December 31, 1998 134,029 (82,002,428) 1,318,721
Currency translation adjustments on
international subsidiaries (222,430) - (222,430)
Issuance of common stock - - 61,610
Net income - 217,707 217,707
---------------- ------------- ---------------
BALANCE, DECEMBER 31, 1999 $ (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
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 mortg age 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
<TABLE>
<CAPTION>
Current Deferred Total
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998
Percentage Percentage
<S> <C> <C>
Statutory U.S. Federal Income Tax benefit (34.0%) (34.0%)
Temporary difference without benefit 34.0% 34.0%
----- -----
- -
===== =====
</TABLE>
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
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
============= ==========
</TABLE>
F-16
<PAGE>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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>
THE NEW WORLD POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
<TABLE>
<CAPTION>
1999
-----------------------------
Estimated
Carrying Fair
Amount Value
----------- ---------
(000's omitted)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 39 $39
Cash restricted in use 58 58
Liabilities:
Debt due related parties 1,460 -
Mortgage payable 166 -
</TABLE>
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of New World Power included in Form 10-KSB for the year
ended December 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 39,070
<SECURITIES> 0
<RECEIVABLES> 157,882
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 218,126
<PP&E> 2,809,283
<DEPRECIATION> 246,084
<TOTAL-ASSETS> 3,553,820
<CURRENT-LIABILITIES> 1,045,375
<BONDS> 0
0
0
<COMMON> 37,979
<OTHER-SE> 1,337,629
<TOTAL-LIABILITY-AND-EQUITY> 3,553,820
<SALES> 1,683,024
<TOTAL-REVENUES> 1,683,024
<CGS> 905,807
<TOTAL-COSTS> 801,708
<OTHER-EXPENSES> 404,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,191
<INCOME-PRETAX> 227,707
<INCOME-TAX> 10,000
<INCOME-CONTINUING> 217,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 217,707
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
