AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON JULY 12, 2002
REGISTRATION NO. 333-033890
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment 6 to
FORM SB-2
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Power Save International, Inc.
(Exact name of registrant as specified in its charter)
<s> <c> <c>
NEVADA 3629 88-0227424
(State of (Primary standard industrial (I.R.S. employer
Incorporation) classification code number) identification number)
5800 NW 64 Avenue
Building 26 #109
Tamarac, Florida 33319
Telephone: (954) 722-1615
(Address and telephone number of Registrant's
principal executive offices)
Scott Balmer, Chairman
Power Save International, Inc.
5800 NW 64 Avenue
Building 26 #109
Tamarac, Florida 33319
Telephone: (954) 722-1615
(Name, address, and telephone number of Agent
for Service of Process)
Copies to:
Jody M. Walker, Esq.
7841 South Garfield Way
Littleton, CO 80122
(303) 850-7637
(303) 220-9902 - facsimile
Approximate Date of Commencement of Proposed Sale
to the Public: Effective date of this
registration statement.
2
If any of the securities being registered on this
Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities
Act of 1993, check the following box [ ]
CALCULATION OF REGISTRATION FEE
Title of Each Class Amount of
Securities to be Shares to be Valuation Aggregate Registration
Registered Registered Per Share Valuation Fee
<s> <c> <c> <c> <c>
Common Shares 1,000,000 $5.00 $5,000,000 $1,390.00
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT
OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
3
Power Save International, Inc.
$5,000,000
1,000,000 Common Shares
At $5.00 per Common Share
There is a minimum offering amount
of 100,000 Common Shares
There is no minimum investment amount
Power Save is an original equipment manufacturer
of cogeneration systems.
_________________________
This is our initial public offering and no public
market current exists for our securities. We
have not applied to be listed on any trading
market or exchange.
This offering will terminate on December 31, 2003.
An investment in our securities involves high
risk. Consider carefully the risk factors
beginning on page 8 in the prospectus.
Per
Common Share Minimum Maximum
<s> <c> <c> <c>
Public Price $5.00 $500,000 $5,000,000
Proceeds to Power Save $5.00 $500,000 $5,000,000
*Customary standard commissions will only be paid
if a registered broker-dealer sells our common
shares.
Neither the Securities and Exchange Commission, nor
any state securities commission has approved or
disapproved of these securities or passed upon the
accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal
offense.
4
Table of Contents
Summary of the Offering 6
Risk Factors 7
- We have not conducted any significant
operations to date
- You will experience immediate dilution
- You cannot withdraw your funds after we
obtain the minimum amount of the offering
- Our auditors have expressed a going
concern
- We may be unable to raise additional
capital
- A mass market for small cogeneration
systems may never develop
- We have only manufactured our systems
on a pilot basis
- We are also relying on contractors to
outsource the production of our systems
- Alternatives to our technology could render
our systems obsolete
- We may not be able to protect our
proprietary technology, system designs and
manufacturing processes.
- We have no public market for our common
shares
- Demand for our systems may be lessened
- The value of your investment could be
diluted
- Your vote will not affect the outcome of
any shareholder vote
Forward Looking Statements 12
Power Save 13
Use of Proceeds 28
Dilution 30
Management's Discussion and Analysis
of Financial Condition
and Results of Operations 31
Determination of Offering Price 35
Plan of Distribution 35
Management 36
Principal Shareholders 41
Indemnification 42
Certain Transactions 43
Market for Common Stock and Related
Stockholder Matters 43
Shares Eligible for Future Sale 44
Description of Securities 44
Legal Proceedings 46
Experts 46
5
Interests of Named Experts and Counsel 46
Legal Matters 46
Reports 47
Additional Information 47
Financial Statements 49
Until (90 days after the date of
this prospectus), all dealers effecting
transactions in the common stock, whether or not
participating in this offering, may be required to
deliver a prospectus. This is in addition to the
dealer's obligation to deliver a prospectus when
acting as an underwriter and with respect to their
unsold allotments or subscription.
6
Summary of the Offering
Power Save was incorporated on May 8, 1987 under
the laws of the State of Nevada. Power Save's
principal executive and administrative offices are
at 5800 NW 64 Avenue, Building 26, #109, Tamarac,
FL 33319 - telephone number (954) 722-1615.
Power Save
- designs,
- manufactures,
- sells/leases and
- finances
natural gas fueled cogeneration plants.
Outstanding
Securities 6,414,149 common shares
The Offering A minimum of 100,000
common shares and up to a
maximum of 1,000,000
common shares
No Formal Escrow We have not established a
formal escrow account.
Any funds received will be
held in a separate account
until the minimum offering
amount has been reached.
If the minimum offering
amount is not obtained by
December 31, 2003, the
funds will promptly be
refunded within the next
business day or as soon as
possible after the
termination of the
offering to investors with
interest.
Offering termination December 31, 2003
Public Market There is no public market
for the common shares.
Use of Proceeds The proceeds from this
offering will be used for
- future acquisitions-
$1,500,000
7
- marketing and advertising
-$720,000,
- general and
administrative-$680,350
- inventory/lease financing
-$1,181,950
- website-$10,000
- equipment purchase/lease
-$43,800
Power Save will use the net
proceeds of the offering
over the next twelve months.
No commitment to
purchase common
shares. No commitment by anyone
exists to purchase any of
the common shares we are
offering.
Risk Factors
1. We have not conducted any significant
operations to date and have not generated any
significant revenues. You may lose your entire
investment.
Since our incorporation, our activities have been
principally devoted to positioning ourselves to
achieve our business objectives. We have had no
material operating revenue to date and expect to
incur losses and administrative expenses until we
begin the sales of our products or we receive
revenues from any of our proposed operations. To
date, we have an accumulated deficit of
$1,765,213. If we cannot generate revenues, you
may lose your entire investment.
2. You will experience immediate dilution of at
least 88% of your investment if we raise the
entire offering amount and of at least 98% of your
investment if we raise the minimum offering
amount.
Immediately after the offering, if we raise the
entire amount, the book value per common share
will be $.61 or 88% less than the offering price.
If we only raise $500,000, the book value per
common share will be $08 or 98% less than the
offering price.
8
3. You cannot withdraw your funds after we
obtain the minimum amount of the offering.
If we only raise the minimum offering amount and
do not terminate the offering, you will not be
able to obtain a refund of your funds.
4. Our auditors have expressed a going concern
issue that notes our need for capital and/or
revenues to survive as a business. You may lose
your entire investment.
Our auditors have expressed reservations
concerning our ability to continue as a going
concern. We have incurred losses for the last
several years and require a significant change in
our business operations to reverse this trend.
You may lose your entire investment.
5. We may be unable to raise additional capital
to complete our product development and
commercialization plans. We may never become
profitable and you may lose your entire
investment.
Our product distribution schedule could be delayed
if we are unable to fund our marketing
capabilities. We do not know whether we will be
able to secure additional funding, or funding on
terms acceptable to us, to pursue all of our
marketing plans through the mass-market stage.
6. A mass market for smaller cogeneration
systems may never develop or may take longer to
develop than we anticipate
A mass market may never develop for our systems,
or may develop more slowly than we anticipate.
If a mass market fails to develop or develops more
slowly than we anticipate, we may be unable to
recover the losses we will have incurred to
develop our product and may be unable to achieve
profitability.
The development of a mass market for our systems
may be impacted by many factors, some of which
are out of our control, including:
- the cost competitiveness of
cogeneration systems;
- the future costs of natural gas,
propane and other fuels used by our
systems;
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- consumer reluctance to try a new
product;
- consumer perceptions of our systems'
safety;
- regulatory requirements; and
- the emergence of newer, more competitive
technologies and products.
7. We have only manufactured our systems on a
pilot basis and we do not have manufacturing
experience for cogeneration systems on a
production basis that would provide us with
substantive production data instead of estimates.
To date, we have focused primarily on research and
development and have little relevant experience to
the manufacture of cogeneration systems for the
small business market on a commercial basis. All
of our manufacturing and installation to date has
been on a pilot basis.
Even if we are successful in developing effective
manufacturing capability and processes on an
outsourced basis, we do not know whether we will
do so in time to meet our product
commercialization schedule or to satisfy the
requirements of our distributors or customers.
8. We are also relying on contractors to
outsource the production of our systems. We may
obtain profitable operations if unfavorable
changes in pricing, production shortfalls, etc.
occur. You may lose your entire investment.
Our dependency upon outside manufacturers places
us at risk for unfavorable changes in pricing,
production shortfalls, delayed deliveries, sub-
standard production and other potential problems
associated with not controlling an important part
of the business process.
We have not negotiated long-term contracts with
any manufacturer and are relying instead on the
hoped for easy availability of standard
manufactured components that are widely available
and are therefore exposed if such reliance proves
faulty.
10
9. Alternatives to our technology could render
our systems obsolete. We may never obtain
profitable operations and you may lose your entire
investment.
Our system is only one of a number of alternative
energy products being developed today as
supplements to the electric grid that have
potential commercial industrial applications.
Improvements are also being made to the existing
electric transmission system. Technological
advances in alternative energy products,
improvements in the electric grid or other fuel
cell technologies may render our systems obsolete.
10. We may not be able to protect our
proprietary technology, systems designs and
manufacturing processes. We may never become
profitable and you may lose your entire
investment.
Much of our products and processes are in the
public domain. The manner in which we package,
brand and market our products is our most
distinguishing feature. We do not expect,
therefore, to seek patent protection.
Further, our competitors may independently develop
or patent technologies or processes that are
superior to ours. If we are found to be infringing
on third party patents, we do not know whether we
will be able to obtain licenses to use such
patents on acceptable terms, if at all. Failure to
obtain needed licenses could delay or prevent the
sale of our systems.
We rely, in part, on contractual provisions to
protect our trade secrets and proprietary
knowledge. These agreements may be breached, and
we may not have adequate remedies for any breach.
Our trade secrets may also be known without breach
of such agreements or may be independently
developed by competitors. Our inability to
maintain the proprietary nature of our products
could harm our business, prospects, results of
operations or financial condition.
11. We have no public market for our common
shares. You may not be able to liquidate your
common shares and you may lose your entire
investment.
11
At the present time, there is no public market for
our common stock, nor can there be any guarantee
that such a market will develop, or if developed,
will be sustained. Investors should consider the
purchase of shares to be a long-term investment.
These securities are not yet registered in any
states. Subsequent sale and transfer to residents
of various states may be required to be made only
pursuant to registration or an exemption from
registration in the transferee's state.
12. Demand for our systems may be lessened by
changes in government regulations and electric
utility industry restructuring that we are unable
to predict. We may never become profitable and
you may lose your entire investment.
The market for electricity generation products is
heavily influenced by federal and state
governmental regulations and policies concerning
the electric utility industry. The loosening of
current regulatory standards could deter further
investment in the research and development of
alternative energy sources and could result in a
significant reduction in the potential market
demand for our products. We cannot predict how
the deregulation and restructuring of the industry
will affect the market for small business
cogeneration systems.
We do believe that our product and its
installation will be subject to oversight and
regulation at the local level in accordance with
state and local ordinances relating to building
codes, safety, pipeline connections and related
matters. This regulation may depend, in part, upon
whether a system is placed outside or inside a
building.
13. The value of your investment could be diluted
due to future sales of our stock.
Substantial sales of our common stock in the
public market following this offering, or the
perception by the market that these sales could
occur, could lower our stock price or make it
difficult for us to raise additional equity
capital in the future.
12
After this offering, we will have 7,414,149 shares
of common stock outstanding. Of these shares, the
1,000,000 shares sold in this offering will be
freely tradable. The remaining 6,414,149 shares
are subject to a one-year lock-up agreement.
The holder of the common shares is an officer and
director of Power Save. At Power Save's
discretion, 6,414,149 shares will generally be
available for sale pursuant to Rule 144 one-year
after the offering is fully subscribed or
terminated. We cannot predict if future sales of
our common stock, or the availability of our
common stock for sale, will harm the market price
for our common stock or our ability to raise
capital by offering equity securities.
14. Your vote will not affect the outcome of any
shareholder vote since our principal stockholder
will retain approximately 87% of our outstanding
stock.
Upon the completion of this offering, our
principal stockholder, Scott Balmer, will retain
approximately 87% of our outstanding stock. For
instance, Mr. Balmer would be able to control the
outcome of all stockholder votes, including votes
concerning director elections, charter and by-law
amendments and possible mergers, corporate control
contests and other significant corporate
transactions.
Forward Looking Statements
The statements contained in this prospectus that
are not historical fact are forward-looking
statements which can be identified by the use of
forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or
"anticipates" or the negative thereof or other
variations thereon or comparable terminology, or
by discussions of strategy that involve risks and
uncertainties. We have made the forward-looking
statements with management's best estimates
prepared in good faith.
Because of the number and range of the assumptions
underlying our projections and forward-looking
statements, many of which are subject to
significant uncertainties and contingencies that
are beyond our reasonable control, some of the
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assumptions inevitably will not materialize and
unanticipated events and circumstances may occur
subsequent to the date of this prospectus.
These forward-looking statements are based on
current expectations, and we will not update this
information other than required by law.
Therefore, the actual experience of Power Save,
and results achieved during the period covered by
any particular projections and other forward-
looking statements, should not be regarded as a
representation by Power Save, or any other person,
that we will realize these estimates and
projections, and actual results may vary
materially. We cannot assure you that any of
these expectations will be realized or that any of
the forward-looking statements contained herein
will prove to be accurate.
Power Save
The predecesser company of Power Save was
incorporated on May 8, 1987 in Nevada under the
name Florida Pacific Corporation. In December
1988, Power Save Products was merged into Florida
Pacific and the name was changed to Power Save
International, Inc. In July 1999, Scott Balmer,
the principal shareholder, sold most of his
controlling shares for $150,000 and resigned as an
officer and director. After a change in control
in 1999, the name was changed to Interactive
Music, Inc. At that time, Mr. Balmer entered
into an agreement with the new management to
purchase the assets, liabilities and name "Power
Save International, Inc." for $2,000. Mr. Balmer
contributed the assets and liabilities into a new
corporation named Power Save, Ltd. formed in
Nevada on July 23, 1999 and the name was later
changed to Power Save International, Inc.
For the past two years, Power Save has been
inactive as we have attempted to obtain public
financing for our operations. Upon receipt of
sufficient funding, we will design, sell/lease and
finance fossil-fueled engine-driven air
conditioning, heating, thermal heat recovery and
electric co-generating plants. We will target the
more than 2 million U.S. small businesses that
usually are unable to negotiate attractive utility
rates.
14
A co-generator produces both heat and electricity
from one fuel source. We will provide equipment
that can provide typical savings of 20% to 50% on
annual utility bills for heating, ventilating, air
conditioning known as HVAC on a convenient rental
or lease/purchase basis.
With conventional utility connections in reserve,
our clients will have redundant and secure power
supplies at less cost than organizations that are
solely dependent upon normal utility hookups.
Our natural gas-fired individual unit sales range
from $75,000 to $125,000, with retrofits ranging
between $125,000 and $500,000,on an installed and
connected basis.
Most competition for co-generation has focused on
large-scale industrial users, permitting Power
Save to concentrate on the market for small
businesses. The energy efficiency of
cogeneration systems is approximately twice that
of conventional generation, largely stemming from
our ability to economically use the heat produced,
as referenced in DOE, "Tomorrow's Energy Today",
with important environmental benefits.
Through our founder, Scott Balmer, we have more
than thirty years of development and installation
experience and now intend to develop a national
market for our proven technology. Our original
demonstration test site model, Power Save
International-120, system was installed in 1995 in
Mamaroneck, NY and continues to meet or exceed the
customer's expectations. Our latest Power Save
International-70/50 Combo system was completed in
a commercial office building in Rochester, New
York.
Our basic system module consists of
- a natural gas fueled engine,
- air conditioning compressor,
- electric generator,
- heat recovery unit, and
- micro-processor
Our systems are built in a proprietary manner,
sold outright and/or operated on a turnkey basis
as the Power Save International Combo package of
cogeneration technology. A turnkey basis is
where we handle the whole project beginning with
the design and continuing on with
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- obtaining permits
- installation
- equipment and
after startup and proof of performance, it is
accepted by the client.
Our expansion will be created through a
combination of advertising in the national trade
magazines for outright sales, and direct sales
representatives in selected areas for the
sale/lease of units. We also intend to acquire
suitable HVAC companies that will permit the more
rapid conversion of existing customer bases to our
units.
We have built our systems to date from components
that we have purchased from Ford Motor Company,
Hall Screw and other suppliers. We believe that
ample components are available from normal
commercial sources and we have relied upon
purchase orders without formal contracts or
agreements in place.
Our risk model
We have taken steps to lower the risks that
we take and simultaneously enhance our
expectations of profitability during a period of
rapid growth. We have structured the following
business profile:
- Outright sales are made for cash with a
50% deposit due upon the order, 40% prior to
shipment and the remaining 10% on startup.
- We intend to contract out most
manufacturing and routine maintenance needs to
companies or individuals in the field; the
requirement for a parts inventory will be
outsourced on an as needed basis. There are
several vendors that supply these parts. As these
vendors are easily replacable, we have not entered
into any specific contracts.
We intend to arrange for maintenance with local
HVAC companies and to provide servicing
information to them. We have not presently
developed agreements for this maintenance.
- Unless sold outright, the systems remain
the property of Power Save International and are
easily recoverable, if necessary.
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- Funds from this offering and borrowings
are targeted principally for production and
installations with immediate income.
Marketing
We have examined various factors associated with
our market including
- small business electricity usage,
- ability to pay for our systems,
- power availability and quality,
- fuel sources,
- electricity prices,
- penetration of competing distributed
generation technologies,
- new capacity requirements and
- the cost of new capacity additions.
Based on this evaluation, we intend to target the
following market segments for our systems:
- Business users with annual electricity
costs between ($100,000 to $1,000,000);
- Firms in remote areas with little
available service competition.
- Facilities in high electricity cost
areas.
- Business users where utilities are unable
to efficiently satisfy power needs.
- Strategic partnership possibilities where
natural gas utilities can enhance their sales with
our installations.
We will employ numerous techniques to identify
potential customers such as:
- Advertisements in the trade
publications.
- Maintenance of a Web site that
illustrates our benefits.
- Identify, acquire and support several
profitable and attractive HVAC companies as
subsidiaries.
- Secure motivated sales engineers at each
HVAC subsidiary site and provide evaluation,
design and marketing support. We are specifically
looking for superior market and technologically
specific expertise.
- We will centrally manage the delivery
and installation to allow field personnel to
concentrate on marketing activities.
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A large percentage of the funds raised will be for
- inventory of components,
- finished goods and
- systems site lease financing.
We have determined that there are 20 states where
the difference between the costs of natural gas as
opposed to the costs of electricity creates a
favorable economic situation for the placement of
our systems. The states are as follows:
- New York,
- Vermont,
- New Jersey,
- New Hampshire,
- Massachusetts,
- Connecticut,
- Nevada,
- Missouri,
- Rhode Island,
- Pennsylvania,
- Kansas,
- California,
- Ohio,
- Arizona,
- Missouri,
- New Mexico,
- Mississippi,
- Illinois,
- Michigan, and
- Louisiana.
Upon completion of the offering, we will commence
with a marketing program, which encompasses,
advertisements in the trade magazines backed up by
recruiting qualified systems sales engineers for
each of these marketing areas.
Additionally, in order to have the product
available for placement at sites and eliminate
long lead times, we will order and stock
sufficient components to have 10 basic system
modules on hand as finished goods.
Guaranteed savings plan. The bulk of the
CoGenAirHeat systems as installed will be owned by
us and leased to the sites for a ten-year period
of time on a guaranteed savings basis. Based on
an in-house detailed feasibility study and
economic analysis of the costs of generating
electricity and heat for our system compared to
the client's present and expected costs for
providing equivalent power we will perform at each
site, we will determine, on a case by case basis,
an estimated share of the savings incurred to be
paid to us in lieu of customer payments. In a
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typical application where the economic analysis
has shown savings of $200,000 yearly, Power Save
would receive approximately $1,800-$2,500 per
month after the site has $1,600 in monthly net
savings and all maintenance and amortization
expense has been paid. We will receive a
reduced amount or up to a 100% reduction in this
share if the savings do not materialize.
Sales Strategy
We will implement our marketing plan with an
emphasis on differentiating us from competing
providers of equivalent equipment. Our strategy
is essentially to permanently upgrade and alter
the way HVAC equipment is used by the small end
user market. We generate direct sales of our
units partially through industry advertising,
largely in trade publications. We will also depend
upon contractor sales personnel who have already
established relationships with prime sales
prospects. We will target
- owners,
- operators and
- managers of the properties that are prime
candidates for our systems and seek to leverage
our advertising.
We will also supply a resident cogeneration sales
engineer and support him or her with operating
systems, a defined marketing program and
facilities.
Our line of products is designed for the
cogeneration market. These systems are also known
as CoGenAirHeat units, indicating that they are
- engine-driven air-conditioning,
- refrigeration,
- electric-generation and
- heat recovery units.
We do not expect to be dependent upon a few
customers.
Our on-site sales engineer will develop working
relationships with local utilities and complete
energy audits for prospective customers. Although
the sales cycle to initial system placement may
take up to nine months from the date of the energy
audit, we expect to generate a sustaining backlog
of projected installations. We also anticipate
19
that successful site-performance histories will
serve as valuable referrals and demonstrations for
on-going system sales and acquisitions as well.
Industry background
The bulk of the cogeneration industry today
primarily revolves around large industrial
installations and numerous systems are operating
in the marketplace today. Capital markets have
developed attractive financing mechanisms and
regularly fund such projects. The National Energy
Policy Act of 1992 brought about deregulation in
order to balance out the usage of natural gas and
electricity and alleviate the need to build new
power plants.
Incentive programs that encourage adherence to the
Act constitute an important impetus to our growth.
Because natural gas sales should increase to our
clients, the gas utility in the market of each of
our prospective HVAC licensees/subsidiaries should
be an immediate beneficiary of our installations
and may have an interest in working closely with
us. To the extent that natural gas becomes a more
available power source we anticipate that such
availability will make our natural gas systems
even more attractive.
Power Save International strategy
Our approach has been to overcome the existing
competitive barriers by making cogeneration
technology available to small users and we have
developed:
- a standard line of affordable and
easy to integrate, 100KW to 500 KW cogeneration
modules, with energy efficiency savings;
- a low risk leasing vehicle whose repayment
stream is closely matched to savings and is
compatible with customer needs; and
- administrative policies that can decrease
overhead costs and provide efficient customer
service.
The modular nature of our systems permits us to
fully use HVAC facilities and personnel with other
technological expertise as well as plant and
equipment.
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Our corporate and site engineering staff will
- specify,
- design and
- deliver the cogeneration components and/or
modules to a HVAC facility for their assembly,
installation and continuing maintenance.
The expected increase in site placements and
revenues accompanied by new technology is expected
to significantly improve the competitive position
as well as the stability and capabilities of HVAC
organizations.
Products
Technological developments in
- efficiency,
- size and
- standardize manufacturing of sub-systems
and components
have allowed us to provide our CoGenAirHeat System
for
- commercial,
- industrial and
- large residential equipment of all sizes
and BTU capacities.
We can outsource major manufacturing components,
while producing cost-effective solutions to an
underserved market niche of significant size. At
the time of a sale, we will enter into an
agreement with parties to be selected at that time
to manufacture or assemble the project to our
specifications and with components we specify.
No agreements are in place at this time and we
have no plans to set up our own manufacturing
facility.
We sell complete systems with all the components
necessary to provide full cogeneration power and
heat.
Our products have been fully developed and rest
largely upon combining off the shelf components
into attractive systems. We are not dependent
upon any one supplier for any of our components.
Our standard lease agreement requires us to
provide the installation and services necessary to
operate CoGenAirHeat systems and to otherwise
protect our proprietary information for a period
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of ten years. We will bear the cost of these
installation and services. If we do not meet our
service maintenance obligations under the lease,
the lease terminates and the client will, at their
option, either
- remove equipment and dispose of equipment
with all coasts associated with removal and
disposal to be borne by us, or
- purchase the system from us at the price of
the system's initial installed cost minus
depreciation at the rate of 10% per year or a
purchase price either previously elected by or
available to the client under the lease minus the
service maintenance fees, whichever purchase price
is less.
Competitive advantages
We have formulated our systems and marketing
program so that:
- The customer receives a state of
the art equipment upgrade at no cost by opting to
share the energy savings with us, while the
existing life of his present facility is extended
with efficiency and substantial cost savings, all
under our standard lease agreement and
- The HVAC licensee experiences only
incremental costs under our agreements.
Competition
There are approximately 25 air-conditioning
and/or electric generating manufacturers in the
U.S. that produce engine-drive systems, but we
believe that none have successfully addressed the
millions of small businesses that could use some
form of cogeneration equipment. Current
manufacturers have supplied to, and focused upon,
the large industry segment only, to date.
The significant barriers to this market include:
- long sales and installation cycles;
- complicated due diligence procedures for
system financing, and
- costly operational structure need to expand
quickly into new markets.
We have solved these problems by:
- building standard and easily scalable
modules available in weeks;
22
- providing financing with the proceeds of
this offering, if successful or through private
bulk funding or leasing company sources yet to be
determined; and
- by leveraging the existing assets of HVAC
companies through distribution or acquisition
alignments, we accelerate geographical
penetration.
We will also compete with other distributed
generation technologies including fuel cells and
reciprocating engines, available at prices
competitive with existing forms of power
generation.
We believe that our systems will have a
competitive advantage in that they can be easily
scaled to various business sizes and will be more
efficient in handling the load profile of small
business customers. We also believe that our
systems will be
- quiet,
- environmentally clean,
- efficient and
- relatively inexpensive to install, service
and maintain.
Our systems will also compete with solar and wind-
powered systems.
As a result of targeting small businesses that do
not currently have easy access to cogeneration, we
believe we will lead the competition in this
market area upon successful completion of this
offering.
We differ from our competitors in that most
require dismantling the existing system and
installing a completely new system. Our system
supplements and integrates with the existing
system.
Need for cogeneration
Based on our experience, due to increasing
competitive pressures to cut costs, owners and
operators of industrial and commercial facilities
are actively looking for ways to use energy more
efficiently. One option is cogeneration.
23
Cogeneration is the simultaneous production of air
conditioning, or other shaft power usage,
electricity and useful heat from the same fuel
source. Facilities with cogeneration systems use
them to produce their own electricity, and use the
waste heat for
- process steam,
- hot water heating,
- space heating, and
- other thermal needs.
They may also use excess process heat to produce
steam for electricity production.
Cogeneration currently coexists with a regulated
industry that is going through major structural
changes that may limit its application.
Cogeneration applications
Cogeneration systems have been designed and
built by the larger firms in the industry for many
different applications. We have only two
installed systems, both for smaller users. While
most require dismantling the existing system and
installing a completely new system, our system
supplements and integrates with the existing
system.
Large-scale systems can be built on-site at a
plant, or off-site. Off-site plants need to be
close enough to a steam source to cover the cost
of a steam pipeline. Industrial or commercial
facility owners can operate the plants, or a
utility or a non-utility generator may own and
operate them. Manufacturers use 90% of all
cogeneration systems. Some industries and waste
incinerator operators who own their own equipment
realize sizable profits with cogeneration.
Another large-scale application of cogeneration is
for district heating. Many colleges and cities,
which have extensive district heating and cooling
systems, have cogeneration facilities.
The University of Florida has a 42 Megawatt gas
turbine cogeneration plant built in partnership
with the local utility though we were not involved
in any aspect of this installation. Pictures of
24
the plant as well as descriptions of the system
and other technical references are currently
available on the Internet.
Some large cogeneration facilities were built
primarily by other manufacturers to produce power.
They produce only enough steam to meet the
requirements for qualified facilities under the
Public Utilities Regulatory Act of 1978. If no
steam host is nearby, one can be built. For
example, there are large 80 megawatt or more
plants operating under the Public Utilities
Regulatory Act of 1978, that have large
greenhouses as steam hosts" though these are not
our products. The greenhouses operate without
losing money only because their steam heat is
virtually free of charge.
Many utilities have formed subsidiaries to own and
operate cogeneration plants. These subsidiaries
are successful due to the operation and
maintenance experience that the utilities bring to
them. They also usually have a long-term sales
contract lined up before the plant is built. One
example is a 300 megawatt plant that is owned and
operated by a subsidiary co-owned by a utility and
an oil company though we did not participate in
this project. The utility feeds the power
directly into its grid. The oil company uses the
steam to increase production from its nearby oil
wells.
Cogeneration systems are also available to small-
scale commercial and industrial users of
electricity, our only target market. Small-scale
packaged or modular systems are being manufactured
for commercial and light industrial applications.
Modular cogeneration systems are compact, and can
be manufactured economically.
These systems, ranging in size from 20 to 650
kilowatts produce electricity and hot water from
engine waste heat. It is usually best to size the
systems to meet the hot water needs of a building.
Thus, the best applications are for buildings such
as hospitals or restaurants that have a year-round
need for hot water or steam. They can be operated
continuously or only during peak load hours to
reduce peak demand charges, although continuous
operation usually has the quickest payback period.
25
Cogeneration systems have also been developed for
private residences however this is not a market
that we have an immediate interest in pursuing.
These home-sized cogeneration packages have a
capacity of up to 5 kilowatts. Both natural gas-
fueled and oil-fueled systems exist. They are
capable of providing most of the heating and
electrical needs for a home.
Small-scale cogeneration has not been widely used
in the United States due to the initial cost of
buying and installing the system.
Environmental issues
While cogeneration provides several environmental
benefits by making use of waste heat and waste
products, air pollution is a concern any time
fossil fuels or biomass are burned. The major
regulated pollutants include particulates, sulfur
dioxide and nitrous oxides. Water quality, while a
lesser concern, can also be a problem.
New cogeneration plants are subject to an
Environmental Protection Agency permit process
designed to meet National Ambient Air Quality
Standards. Many states have stricter regulations
than the EPA. This can add significantly to the
initial cost of some cogeneration facilities.
Some cogeneration systems, such as diesel engines,
do not capture as much waste heat as other
systems. Others may not be able to use all the
thermal energy that they produce because of their
location. They are therefore less efficient, and
the corresponding environmental benefits are less
than they could be. The environmental impacts of
air and water pollution and waste disposal are
very site-specific for cogeneration. This is a
problem for some cogeneration plants because the
special equipment such as water treatment, air
scrubbers, etc., required to meet environmental
regulations adds to the cost of the project. If,
on the other hand, pollution control equipment is
required for the primary industrial or commercial
process, cogeneration still can be economically
attractive.
We have configured our products with
considerations of environmental and other
regulatory features in mind. Since our system
supplements and integrates with an existing
26
system, we currently do not believe that we are
subject to any federal and state regulation ---.
We do not have any special costs or impact that
are an effect of complying with any environmental
laws.
Acquisitions
In April 2000, we entered into a contingent
acquisition agreement whereby we would assume all
the ownership, assets and obligations of Mirage Air
Systems, Inc. upon the successful completion of
this offering. The purchase price was four million
dollars payable in shares and cash. The
transaction did not close and was not completed
prior to the expiration of the agreement.
Future market development
Although the number of cogeneration systems
is growing at a steady rate, certain factors have
and will slow the acceleration of cogeneration
activities. These factors include
- the initial cost of buying and bringing a
cogeneration system on-line,
- maintenance costs, and
- environmental control requirements.
Not all electric utilities need the additional
electricity. They may have excess generation
capacity or a stable customer base. This leads to
lower avoided cost rates, which reduces the
viability of cogeneration projects that rely
heavily on power sales to utilities. In addition,
the deregulation, or restructuring, of electric
power generation makes it more attractive for
developers to become independent power producers
and to build electricity only power plants,
instead of cogeneration plants. There has also
been a great deal of pressure from utility and
industrial special interests to repeal or amend
the Public Utilities Regulatory Act of 1978. If
they are successful, it could be difficult for new
cogeneration projects to get off the ground.
Barring that development, improved technology and
cooperation among industries, businesses,
utilities, and financiers should provide impetus
to the continued development of both cogeneration
projects and independent power production
projects.
27
Intellectual property
We intend to trademark and otherwise brand our
services. If successful, our rights to such
trademarks and service marks will last
indefinitely so long as we continue to use and
police the marks and, with respect to registered
marks, to renew filings with the appropriate
government agencies. We consider that marks will
become material to our business.
Web site
As part of our program to secure added clients, we
have provided a Web site that features a variety
of information for sales engineers and customers
alike. Our national web site features information
for HVAC needs of small business and will contain
as well a chat room to allow questions to be
submitted to our personnel. Each HVAC
licensee/subsidiary will also have a Web site that
relates to his particular territory and community
dynamics. We believe continued participation and
promotion of such Web sites will provide the
important marketing advantages.
Employees
As of March 31, 2002, we had 5 individuals who
served on as needed basis only and are unsalaried.
None of these individuals is represented by a
union. We intend to augment our staff in response
to the proceeds of this offering and the success
of our acquisition and marketing strategies.
Properties
Our principal executive and administrative offices
are located at 5800 NW 64th Avenue, Bldg 26 #109,
Tamarac, FL. We currently occupy 1,000 square
feet of space at a monthly cost of $500, on a
month-to-month basis. Upon completion of this
offering we intend to acquire approximately 2,500
square feet in a nearby facility.
28
Use of Proceeds
The following table sets forth our
anticipated use of the proceeds of this offering.
If Minimum Sold If Maximum Sold
Amount % Amount Percent
<s> <c> <c> <c> <c>
$ 500,000 100% $5,000,000 100%
Less offering Expenses:
Legal & Accounting Fees 12,000 2.4% 12,000 .2%
Copying & Advertising 4,000 .8% 4,000 .1%
State and Federal Filing Fees 16,000 3.2% 16,000 .3%
Postage 500 .1% 3,000 .1%
--------- ----------
Net Proceeds $ 467,500 93.5% $4,965,000 99.3%
Use of Net Proceeds:
- - Rent, Utilities, Leases $ 58,200 12.5% $ 116,400 2.3%
- - Payroll:
- - Administrative 150,000 32.1% 300,000 6.0%
- - Professional 75,675 16.3% 351,350 7.1%
- - Insurance 14,500 3.1% 29,000 .6%
- - Equipment Purchase/Lease 14,600 3.1% 43,800 .9%
- - Inventory/Lease Financing 31,025 6.6% 1,181,950 23.8%
- - Advertising/Marketing 46,000 9.8% 720,000 14.5%
- - Corporate Website 10,000 2.1% 10,000 .2%
- - Future Acquisitions 0 0.0% 1,500,000 30.2%
- - Working Capital 67,500 14.4% 712,500 14.4%
--------- ------------
Total Use of Net Proceeds $ 467,500 100.0% $4,965,000 100.0%
We have no plans or intentions to acquire any
assets from officers, directors or principal
stockholders.
No portion of the proceeds will be used to
reimburse an officer, director and principal
stockholder for services already rendered, assets
previously transferred, or moneys loaned or
advanced. The amount shown as advances from
shareholders in the financial statements at
December 31, 1999 were paid in full in February
2000.
We have kept our payments current and have no
added obligations of such a nature. The amount of
payroll varies as a function of the size of the
proceeds of the offering because we intend to hire
additional sales and other personnel if funding
permits.
29
We currently have 5 individuals who serve on an as
needed basis, and are currently uncompensated. We
will expand that number in response to the pace.
We anticipate hiring added personnel as the
offering progresses and operations require.
Payroll is divided into administrative and
professional personnel as a function of the
general nature of the duties performed.
Administrative personnel are categorized as staff
for activities such as payroll, human resources,
secretarial, and clerical while professional
personnel are categorized as engineers and
managers.
Payroll taxes will be incurred by us and are
included in the estimates for payroll above.
Except as detailed under Material Agreements, all
salaries, bonuses and reimbursements are subject
to our earnings and finances.
We are not in default or in breach of any
debenture indebtedness or financing arrangement.
We have no collective bargaining agreements.
However, we may be confronted with such issues as
we develop our workforce.
With the exception of normal operating revenues,
no material amounts of funds from sources other
than this offering are expected to be used in
conjunction with the proceeds from this offering.
Even if we raise only the minimum amount of the
offering, we do not anticipate any liquidity
problems in the next 12 months and will not be in
default or in breach of any note, loan, lease or
other indebtedness or financing. If required, we
will seek additional sources of funds to include
equipment leasing, equity financing, commercial
bank loans and private investors. There can be
no assurances that we will be eligible for such
loans or that private financing will be available
to us.
If we realize less than the maximum amount from
this offering we intend to prioritize our fund
uses in the following order:
- Inventory
- Advertising/Marketing
- Payroll
30
- Working Capital
- Rent, Utilities, Leases
- Corporate Website
- Insurance
We have no plans for acquisitions at the present
time. We will only seek future acquisitions from
funds available to us on a maximum offering basis.
We believe that the proceeds from this offering
will be sufficient to remove the going concern
opinion, even on a minimum basis, and that
proceeds will permit operations to continue for
the next twelve months.
Pending application by Power Save of the net
proceeds of this offering, the proceeds will be
invested in short-term, interest-bearing
instruments.
Dilution
Purchasers of the common stock offered hereby will
experience an immediate and substantial dilution
in the net tangible book value of their common
stock from the offering price.
Our tangible book value as of May 31, 2002 was
$31,605 or $0.01 per share of common stock. Net
tangible book value per share represents the
amount of our tangible net worth divided by the
total number of shares of common stock outstanding
as of May 31, 2002.
The following table illustrates the per share
dilution:
Offering price: $5.00
Minimum Maximum
-------- --------
<s> <c> <c>
Net tangible book value per
common share before the offering $ 0.01 $ 0.01
Increase attributable to new investors .07 .60
Pro forma net tangible book value
per share after the offering .08 .61
Dilution in net tangible book value
per share to new investors $ 4.92 $ 4.39
Dilution as a percentage of offering price 98% 88%
31
Further Dilution. We may issue additional
restricted common shares pursuant to private
business transactions. Any sales under Rule 144
after the applicable holding period may have a
depressive effect upon the market price of our
common shares and investors in this offering.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Trends and Uncertainties. Demand for our systems
will be dependent on, among other things, market
acceptance of the Power Save products and services
and general economic conditions, which are
cyclical in nature. Inasmuch as a major portion
of Power Save's activities will be the receipt of
revenues from the leasing of our systems on a
guaranteed savings basis, Power Save's business
operations may be adversely affected by Power
Save's competitors and prolonged recessionary
periods.
The outcome of the offering is uncertain. We
require the successful completion of the offering
to finance, engineer and market our equipment
properly and to generate sufficient revenues to
allow us to become profitable. If the offering
is unsuccessful, Scott Balmer, a director and sole
shareholder has agreed to provide nominal advances
until alternative funding can be obtained, if any.
Capital and Source of Liquidity. Power Save
requires substantial capital in order to meet our
ongoing corporate obligations and in order to
continue and expand its current and strategic
business plans. Our working capital had been
obtained through
- a loan from Scott Balmer, an officer,
director and major shareholder,
- outright sales of equipment ($239,449 net
since inception and only $6,800 since 1999), and
- through the sale of marketable securities.
Through the issuance of 296,300 shares of our
preferred stock for liquid marketable securities
valued at $592,600 at the time of the exchange, we
have been able to liquidate a portion of these
shares to generate enough cash to satisfy our
working capital requirements and achieve positive
working capital. This allowed us to obtain enough
liquidity to expand our basic operations because
32
we had acquired enough cash to pay our bills in a
timely fashion and seek additional work through
advertising and business contacts.
Prior to this point in time, we did not have the
liquidity to obtain new business and to finance
the work that we had obtained.
For the five months ended May 31, 2002 and 2001
and the year ended December 31, 2001, we did not
engaged in any investing activities.
For the year ended December 31, 2000, we received
proceeds of $362,249 from the sale of marketable
securities resulting in net cash flows provided by
investing activities of $362,249.
The value of the marketable securities decreased
in value from December 31, 1999 to December 31,
2000. This decrease had a negative impact on
our liquidity and planned operations in 2001 due
to the fact that the proceeds from the sale of
marketable securities was the main source of
revenue used to continue our business plan.
For the five months ended May 31, 2002 and 2001
and the year ended December 31, 2001 and the year
ended December 31, 2000, Power Save did not engage
in any financing activities.
For the year ended December 31, 1999, Power Save
received contributed capital of $11,544 resulting
in net cash provided by financing activities of
$11,544.
On a long-term basis, liquidity is dependent on
establishment of operations and receipt of
revenues, additional infusions of capital and debt
financing.
Results of Operations. For the five months ended
May 31, 2002, we had a net loss of $22,653. We
received no revenues. Operating expenses for the
five months ended May 31, 2002 were $22,450 and
consisted of depreciation and amortization of $208
and general and administrative expenses of
$22,242. We had interest expense of $584 and
dividend income of $381 for the five months ended
May 31, 2002.
For the five months ended May 31, 2001, we had a
net loss of $26,923. We received no revenues.
Operating expenses for the five months ended May
31, 2001 were $28,213 and consisted of
33
depreciation and amortization of $208 and general
and administrative expenses of $28,005. We had
interest expense of $925 and dividend income of
$2,215 for the five months ended May 31, 2002.
For the year ended December 31, 2001, we did not
receive any revenues. We had a net loss of
($67,250) for the year ended December 31, 2001.
Operating expenses for that period were $68,709
and consisted of general and administrative
expenses of $68,209 and depreciation and
amortization of $500. We had an interest expense
of 2,171 and we received dividend income of
$3,630.
For the year ended December 31, 2000, we received
revenues of $4,075 for the sale of equipment and
had a gain on the sale of marketable securities of
$167,249. For the year ended December 31, 2000,
the value of marketable securities were written
down $364,326 to their market value, because, in
the opinion of management, the decline in market
value of the securities was considered to be other
than temporary.
For the year ended December 31, 2000 sales
decreased due to the fact that most of our current
efforts are related to the completion of the
offering presented herein. We are additionally
reviewing and analyzing our two test sites to
determine the performance and marketability of our
product line.
For the year ended December 31, 2000, general and
administrative expenses were fairly similar in
nature and amount, as compared to the year ended
December 31, 2000. We expect these to
substantially increase once the offering is
completed and a full marketing and sales program
is initiated. We expect the increase in gross
margins from the sales generated will produce a
net income overall for us.
We have recently launched our web site that we
believe will result in additional sales and
revenues, plus market exposure.
In early 2000, we sold a certain number of shares
of our marketable securities we currently hold for
resale. The proceeds from the sales of these
securities allowed us to
- repay all of a shareholder loan ($218,753)
- reduce our obligations due to the major
shareholder ($5,710) and
34
- provide enough cash to have a current
working capital in excess of $70,000.
We do not have sufficient funds to cover
operations for the next twelve months without
successful completion of at least the minimum
offering. We will rely on additional shareholder
advances to maintain current levels of operations.
Plan of Operation. Since inception, our
operations have been limited to
- developing the concepts,
- developing the marketing program and the
basic mechanical modules,
- and raising needed capital.
Once the offering is completed, we expect to
implement a full marketing plan of our product
line and expect to improve our gross margin
through better pricing on our purchase prices from
outside vendors.
If the offering is successful, we will have the
additional capital required to accelerate our
business plan and expand our operations and
marketing activities. We will seek certain
acquisitions to further expand our planned
operation. However, we will seek stock-based
acquisitions to preserve cash for the operating
activities.
If the offering is unsuccessful, Power Save may
receive additional shareholder advances and will
pursue other capital and debt financing in the
short term that will allow Power Save to pursue
business plan and, with the success of those
efforts, increase revenues. However, there can be
no assurance that Power Save will be able to
obtain equity or debt financing in the future, if
at all.
Realization of funds on a minimum basis in this
offering will permit us added marketing but
require us to seek added distribution assistance
from a corporate partner, if available (though no
such partner has yet been identified).
We have engaged in the above on a small basis in
order to test our systems and develop marketing
and other information. We will commence an
aggressive marketing campaign in order to realize
the implementation of our plans, based on that
test.
35
We believe that the proceeds of even the minimum
offering amount will be sufficient to remove the
going concern opinion and that proceeds will
permit operations to continue for the next twelve
months.
Determination of Offering Price
Because there has been no market for our common
stock, the public offering price has been
arbitrarily determined by our board of directors.
Among the factors considered were our results of
operations, our current financial condition, our
future prospects, the state of the markets for our
products and services, the experience of
management and the economics of the industry
segment in general.
Plan of Distribution
Plan of Distribution. The common shares are being
offered on a self underwritten basis by Scott
Balmer, Chairman of the board of directors of
Power Save.
Consequently, there may be less due diligence
performed in conjunction with this offering than
would be performed in an underwritten offering.
Although Mr. Balmer is an associated person of
Power Save as that term is defined in Rule 3a4-1
under the Exchange Act, he is deemed not to be a
broker for the following reasons:
- he is not subject to a statutory
disqualification under the Exchange Act at the
time of their participation in the sale of our
securities.
- he will not be compensated for his
participation in the sale of our securities by the
payment of commission or other remuneration based
either directly or indirectly on transactions in
securities.
- he is not an associated person of a broker
or dealer at the time of his participation in the
sale of our securities.
The common shares may be offered by selected
broker/dealers if we are able to retain one or
more. Selected broker/dealers, if any, will
receive the standard industry commission.
36
As of the date of this prospectus, no broker has
been retained by us for the sale of securities
being offered. In the event a broker who may be
deemed an underwriter is retained by us, an
amendment to our registration statement will be
filed.
If broker-dealers are involved in the sale of our
securities, the participating broker-dealer must
transmit any funds received immediately to the
escrow account until the minimum sales threshold
is reached.
No Formal Escrow Account. We have not
established a formal escrow account to hold the
funds until the minimum offering amount is
obtained. The funds will be deposited in a
separate account maintained by Power Save. If
the minimum offering amount is not obtained by
December 31, 2003, the funds will promptly be
refunded within the next business day or as soon
as possible after the termination of the offering
to investors with interest.
Investors cannot withdraw their funds if we
successfully sold the minimum amount but have not
yet terminated the offering.
A change in the material terms of the offering
after the effective date of the registration
statement will terminate the original offer and
investors would then be entitled to a refund.
Management, principal shareholders or their
affiliates may not acquire common shares in the
offering.
Offering Period. The offering period will commence
on the date of this prospectus and will terminate
on December 31, 2003.
Management
Directors and executive officers
Name Age Position Term of office
<s> <c> <c> <c>
Scott E. Balmer 76 Chairman of the Board of Directors 1988
Burton H. O'Donald 59 Vice Chairman, CEO, Director 1999
Raymond H. Bolduc II 54 President, COO, CFO
Victor V. Vurpillat, PhD. 69 Vice President, Acquisitions
37
Norman S. Haugen 67 Consultant, Electric Power Programs
Mary Jane Balmer 67 Interim Secretary and Treasurer, Director 1988
Note: Presently all executives serve on an as
needed basis only. Except for Mr. Balmer, this
requirement has been filled on a part-time basis
only, usually requiring less than 2 hours per
week.
No compensation has been granted for such service
and no compensation is due in the future for such
service. They will join us permanently in the
position indicated upon attaining financing.
An officer or director expected to join Power Save
or designate is one who will assume the office no
later than upon completion of the offering.
Our directors are elected for a one-year period at
the annual meeting of our shareholders and can be
re-elected to subsequent terms. Each director
holds office until his successor is elected and
qualified or until his earlier death, resignation
or removal. Our executive officers serve at the
discretion of the Board of Directors.
None of the permanent executives or directors has
or will have any family relationship to any other.
We expect to obtain key life insurance on Scott
Balmer, payable to us. Mary Jane Balmer, the
Interim Secretary and Treasurer, is the wife of
Scott Balmer. Mrs. Balmer intends on resigning
her position once adequate funding for our growth
and hiring of added personnel is secured.
Scott Emerson Balmer is our founder and has
directed Power Save since 1988. He has spent in
excess of 45 years in the HVAC industry and has
designed equipment to fill a variety of niches in
the marketplace.
Since 1988, Balmer and his associates have
concentrated on development of medium capacity
combo system electric generating plants,
cogeneration, and research and development of
natural gas fueled systems. He is a creator of
numerous unique designs in energy saving equipment
including solar and geothermal energy systems.
38
From 1949 to 1961, Mr. Balmer worked for Holland
Furnace Co., beginning as a sales tech trainee,
then branch manager and continuing as division
manager from 1954 to 1961. From 1961 to 1985,
Mr. Balmer was the chief executive officer of a
series of affiliated heating, ventilating and air
conditioning companies: Scott Heating and Air
Conditioning, Duncan Heating, Brown Heating and
Air Conditioning, Heat Cool, Inc. dba Allied Air
Conditioning Service. During 13 of those years,
Mr. Balmer became involved as the inventor or co-
inventor of record and chief executive officer
responsible for the manufacturing and national
marketing of proprietary energy saving equipment,
including solar and geothermal energy systems for
Allied operating out of Florida.
He is the husband of Mary Jane Balmer.
Burton D. O'Donald joined us as CEO in 1998
following three years at the Oxford Acceptance
Company, a sub-prime lender for automobile
financing and ten years at the DME Corporation, an
electromechanical systems manufacturer. He co-
founded Oxford and implemented direct marketing
and support systems for this capital provider. At
DME he was involved in product development, design
engineering and support of marketing. He holds
two Bachelor's degrees from the University of
Pennsylvania and a Master's degree from the
Wharton School.
Raymond H. Bolduc II has been our President, CFO
and COO since December 1998. He has served as an
advisor and participant in major corporate
development programs for Arthur D. Little Company
and has held a variety of executive positions with
firms such as American Express-Latin America. From
January 1994 to September 1996 he served as a
consultant to Renova Group, a South Florida
business planning company, and from 1996 to 1997
as a consultant to Tronco-South Africa, a pre-
fabricated building manufacturer. From 1997 he was
a consultant to Hidden Eyes, Inc., an electronic
security firm and from 1998 to the present he has
served as Manager of Administration and Projects
of Miami Millwrights, an installation contractor
of airport baggage handling systems.
He holds a Bachelor's degree from Rutgers
University and an MBA from Northeastern
University.
39
Victor V. Vurpillat chaired our Executive
Committee from 1995 to 1998 and presently serves
as Vice President, Acquisitions. From 1999 to the
present he has served as a vice-president of 21st
Century Medicine, a firm engaged in anti-aging
research. From 1996 to 1999 he was with
SpanWorks, a joint venture technology funder and
manufacturer of networks at the conference table
for laptop and notebook computers, with Toshiba,
as a founder and board member. From 1992 to 1996
he was the chairman of a biotech engineering
company, Incell. From 1976 to 1990 he served as a
founder and VP for R&D of Safeguard Scientifics,
Inc., a company that served as an early incubator
for many technology firms. He is either a founder,
officer or director of 13 early stage companies
including Novell, Telerate, LV Computer Systems,
Compucom, InCell and IDR-Reuters. He holds 7 U.S.
patents and was granted a PhD by Newport
University.
Norman S. Haugen has served as a consultant to
Power Save since 1988 with compensation paid on a
per job basis. He provides consulting regarding
engine and generator performance of our proposed
systems. He has 40 years of experience in the
power generation field with extensive experience
in the application of cogeneration systems and has
been semi-retired since 1986. He also is
experienced in the manufacturing and servicing of
cogeneration applications.
From 1966-1976, Mr. Haugen was a manager, control
products and electronics field service engineer
for Onan Corporation. Some of the projects he
worked on included:
- 125 KWH Natural Gas Co-Generation System
for Minnegasco, Inc.
- Co-Generation Central Power Plant with 250
KWH of paralleled power generation
- Installation of field modifications to
multi-units prime power total energy natural gas
field for Williams Hardware and Manufacturing
Company
- Installation of a prime power tool energy
co-generation system for Allis Chalmers Implement
Distributor and
- Directed final testing and acceptance of
four 125 KWH natural gas fueled emergency
generators for Union Planters Bank.
40
From 1976-1983, Mr. Haugen was systems manager and
dealer sales and service coordinator for R.B.
Grove, Inc., a company that sold co-generation
systems.
From 1983 to February 1986, Mr. Haugen was
president of Atlantic Power Systems, Inc., a
distributor of a U.S. manufacturer of diesel
engine driven generators.
Mary Jane Balmer has served us exclusively as our
Interim Secretary and Treasurer since 1988.
Prior to 1988, she had previously experience
performing office work as a temporary. She is the
wife of Scott Balmer.
Director compensation
None of our directors received any
compensation for their services as a director
during fiscal year 1999, 2000 or 2001. After
completion of the offering, we will consider a
small stipend for directors who are not employees
of Power Save and/or participation in a stock
option plan. We reimburse all reasonable expenses
incurred in connection with attending meetings of
the Board. Officers serve at the discretion of
the Board and are elected annually. No director
is selected or serves pursuant to any special
arrangement or contract.
Executive compensation
No executives received compensation from
Power Save in 1999, 2000 or 2001.
Any bonuses would be awarded by the Board of
Directors following a review of our performance in
the previous year and a judgment that such bonuses
were warranted. The Board may also choose
additional forms of compensation if our and the
individual's performance both so warranted. The
formula or criteria for determining bonuses past
2000 has not yet been established.
Stock option and exercise prices
We have no stock option plan at the present
time and there are no outstanding stock options
that have been granted to anyone.
41
Employment agreements
We will enter into three-year employment
agreements containing confidentiality and non-
compete provisions with all current officers and
we intend to negotiate similar agreements with new
executive officers. We expect to have these in
place during the fourth quarter 2001. The
employment agreements will specify salary, other
forms of compensation, termination and other
provisions to protect both our rights and those of
the employee.
Each employment agreement also will provide
that the employee is entitled to a bonus as
determined by the board of directors, from time to
time, and options under Power Save's Stock Option
Plan, if adopted. Each Employment Agreement will
provide for a term of three years and is renewable
upon mutual consent. The employment agreements may
be terminated for cause and, in the event of
change in control of Power Save, each employee is
entitled to a lump sum payment equal to the
greater of one year's salary or the baser salary
and benefits that would have been received by the
employee if he/she had remained employed by us the
remainder of the three year term. The employment
agreements also contain confidentiality and non-
competition provisions prohibiting the employee
from competing against us and disclosing trade
secrets and other proprietary information.
Courts have often held that such non-compete
agreements are contrary to public policy and may
easily not be enforceable.
Principal Shareholders
The following table sets forth certain
information with respect to beneficial ownership
of the Common stock as of December 31, 2001 and as
adjusted to reflect the sale of the minimum and
maximum amount of the shares offered hereby, by:
- each person known by us to be the
beneficial owner of more than 5% of our common
stock;
- each of our directors;
- each of our executive officers,
- all our directors and executive officers
as a group, and
- all other stockholders as a group.
42
Prior to After After
Name of Beneficial Owner Offering Minimum Maximum
<s> <c> <c> <c>
Scott Balmer 6,414,149(100%)* 6,414,149(99%) 6,414,149(87%)
Mary Jane Balmer 6,414,149(100%)* 6,414,149(99%) 6,414,149(87%)
Other Investors None
Total 1
Total shares sold in the offering (Min) 100,000
Total shares sold in the offering (Max) 1,000,000
* Scott Balmer and Mary Jane Balmer are married
to each other and report each other's shares as
beneficial owners.
Indemnification
Our bylaws do not contain a provision entitling
any director or executive officer to
indemnification against liability under the
Securities Act of 1933. The Nevada Revised
Statutes allows a company to indemnify its
officers, directors, employees, and agents from
any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal,
administrative, or investigative, except under
certain circumstances.
Indemnification may only occur if a determination
has been made that the officer, director,
employee, or agent acted in good faith and in a
manner, which such person believed to be in the
best interests of the company. A determination may
be made by the shareholders; by a majority of the
directors who were not parties to the action,
suit, or proceeding confirmed by opinion of
independent legal counsel; or by opinion of
independent legal counsel in the event a quorum of
directors who were not a party to such action,
suit, or proceeding does not exist.
Provided the terms and conditions of these
provisions under law are met, officers, directors,
employees, and agents of Power Save may be
indemnified against any cost, loss, or expense
arising out of any liability under the '33 Act.
Insofar as indemnification for liabilities arising
under the '33 Act may be permitted to directors,
officers and controlling persons of Power Save.
Power Save has been advised that in the opinion of
43
the Securities and Exchange Commission, such
indemnification is against public policy and is,
therefore, unenforceable.
Certain Transactions
We currently use office space from a major
stockholder, Mr. Scott Balmer. Mr. Balmer is not
charging us for the use of the office space. We
have recorded contributed capital for the
estimated cost of the space at $500 per month
starting January 1998 with and offset to rent
expense. Mr. Balmer has provided free services to
us. These services included any administrative,
development or marketing services necessary to
promote and develop the business. We have
recorded contributed capital for the estimated
cost of the services at $1,500 per month starting
January 1998 with an offset to officer
compensation. Mr. Balmer has made certain
advances to us on an interest free basis, payable
upon demand. From inception of the loans to
December 31, 1996, we have computed interest on
the advances at 8% and treated the interest of
$70,318 as contributed capital with an offset to
interest expense. From 1997 forward we have
accrued interest on the advances, until paid, as a
liability with an offset to interest expense.
During the period ended December 31, 2000 we paid
off the advances, which at the time were $218,753
and paid down the accrued interest to $32,134.
We believe that all of the transactions set
forth in this document were made on terms of less
favorable to us than could have been obtained from
unaffiliated third parties. We intend that all
future transactions, including loans, between us
and our officers, directors, principal
shareholders and their affiliates will be approved
by a majority of the board of directors, including
any outside directors, and be on terms no less
favorable to us than could be obtained from
unaffiliated third parties. Power Save currently
has no outside directors.
Market for Common Stock and Related
Stockholder Matters
Market Information. Power Save's common stock is
not listed in the pink sheets or in the OTC
Bulletin Board maintained by the NASD.
44
Holders. The approximate number of holders of
record of Power Save's common stock, as of October
31 was one.
Dividends. Holders of Power Save's common stock
are entitled to receive such dividends as may be
declared by its board of directors.
Shares Eligible for Future Sale
Power Save currently has 6,414,149 of common stock
outstanding. Assuming completion of the offering,
there will be 7,614,149 common shares outstanding.
Of these, 6,414,149 common shares, all held by
Scott Balmer, chairman of the board of directors,
will be deemed to be restricted securities.
These common shares are subject to a lock-up
agreement until one-year from the date the offering
is fully subscribed or terminated.
Other securities may be issued, in the future, in
private transactions pursuant to an exemption from
the Securities Act. Rule 144 provides, in essence,
that a person who has held restricted securities
for a period of one year may sell every three
months in a brokerage transaction or with a market
maker an amount equal to the greater of 1% of Power
Save's outstanding shares or the average weekly
trading volume, if any, of the shares during the
four calendar weeks preceding the sale.
The amount of restricted securities which a person
who is not an affiliate of Power Save may sell is
not so limited. Nonaffiliates may each sell
without limitation shares held for two years. Power
Save will make application for the listing of its
Shares in the over-the-counter market. Sales under
Rule 144 may, in the future, depress the price of
Power Save's Shares in the over-the-counter market,
should a market develop. Prior to this offering
there has been no public market for the common
stock of Power Save. The effect, if any, of a
public trading market or the availability of shares
for sale at prevailing market prices cannot be
predicted. Nevertheless, sales of substantial
amounts of shares in the public market could
adversely affect prevailing market prices.
Description of Securities
The authorized capital stock of Power Save
consists of 50,000,000 shares of common stock, par
value $0.001. On December 31, 2001, 6,414,149
45
shares of common stock were issued and outstanding
and there is one holder of the common stock.
50,000,000 preferred shares are authorized and
296,300 have been issued and are outstanding.
All of the currently outstanding shares of common
stock are subject to a lock-up agreement and
therefore cannot be placed upon the market for
one-year from the date of the offering is fully
subscribed or terminated.
The holders of common stock are entitled to
one vote per share on all matters to be voted upon
by the stockholders and do not have cumulative
voting rights. The holders of a majority of the
outstanding shares of common stock represented at
a meeting at which a quorum is present may elect
all directors to be elected at the meeting.
Holders of the common stock may take action
without a meeting of stockholders if a consent in
writing setting forth such action is signed by the
holders of the majority of all outstanding shares
of common stock.
The holders of common stock are entitled to
receive ratably such dividends, if any, as may be
declared from time to time by the Board of
Directors out of legally available funds. In the
event of the liquidation, dissolution or winding
up of Power Save, the holders of common stock are
entitled to share ratably in all assets remaining
after payment of liabilities. There are no
preemptive rights, redemption or sinking fund
provisions applicable to the common stock. All
outstanding shares of common stock are, and the
shares of common stock to be outstanding upon
completion of the offering will be, fully paid and
non-assessable. The dividends and liquidation
rights of holders of common stock are subject to
the rights and preferences of the holders of
shares of any series of preferred stock that Power
Save may issue in the future.
The preferred stock is non-voting, non-dividend
bearing, redeemable by Power Save and convertible
to common stock upon successful completion of this
offering at a conversion price based on the amount
represented by the preferred stock ($.50 per
preferred share) and the equivalent amount of
46
common stock at the underwriting price by the
holder. There are no specific redemption terms,
only the redemption right to Power Save.
No material terms of our by-laws are believed
to exist that would delay, defer or prevent a
change of control of the company. The staggered
terms of our board of directors relate to the time
that they originally agreed to serve and were
elected and do not constitute a barrier to change
in control.
Legal Proceedings
We are not a party to any material
litigation. However, claims and litigation may
arise in the normal course of business.
Experts
The financial statements as of December 31, 2001,
2000 and 1999 included in this prospectus, have
been audited by David T. Thomson P.C., independent
auditors, as stated in their report appearing
herein and have been so included in reliance upon
the report of such firm given upon their authority
as experts in accounting and auditing.
Interests of Experts or Counsel
None of the experts or counsel named in the
prospectus is affiliated with Power Save.
Legal Matters
All legal matters with respect to the issuance of
the securities offered hereby will be passed upon
by the law firm of Jody M. Walker, Littleton,
Colorado.
47
Reports
Pursuant to the Rules and Regulations of the
Securities and Exchange Commission, we will
provide our Investors with Annual Reports
containing audited financial statements, together
with Quarterly Reports containing unaudited
financial statements and Interim Reports
containing information regarding relevant
information about the operations of Power Save.
Additional Information
We have filed a registration statement on
Form SB-2 under the Securities Act with the
Securities and Exchange Commission in Washington,
D.C. with respect to the securities offered
hereby. This prospectus, which constitutes a part
of the registration statement, does not contain
all of the information set forth in the
registration statement and the exhibits and
schedules thereto. For further information with
respect to us and the securities offered hereby,
reference is made to the registration statement
and the exhibits and schedules thereto filed as a
part thereof. Statements contained in this
prospectus as to the contents of any contract or
other document filed as an exhibit to the
registration statement to are not necessarily
complete, and, in each instance, reference is made
to the copy of such contract or document filed as
an exhibit to the registration statement, each
such statement being qualified in all respects by
such reference.
The registration statement, including all
amendments, exhibits and schedules thereto, and
any other documents involved in this filing, may
be inspected without charge at the Public
Reference Room at the office of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the
Securities and Exchange Commission's Regional
Offices at New York, New York 10048, and Northwest
Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661.
Copies of such material may also be obtained at
prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the
48
Securities and Exchange Commission maintains a web
site that contains reports, proxy and information
statements and other information regarding issues
that file electronically with the Commission. The
address of the site is http://www.sec.gov.
Following this registration, we intend to
make an annual report with audited financial
statements available to our shareholders. We
intend to file quarterly and annual reports with
the Commission and other regulatory authorities,
as required by law and regulation.
49
Financial Statements
Page
Independent Auditors' Report 50
Balance Sheets 52
Statements of Operations 54
Statement of Stockholders' Equity 55
Statements of Cash Flows 60
Notes to Financial Statements 63
50
Independent Auditor's Report
Board of Directors and Stockholders
POWER SAVE INTERNATIONAL, INC.
I have audited the accompanying balance sheets of
Power Save International, Inc. (a developmental
stage company) as of December 31, 2001, 2000, and
1999 and the related statements of operations,
stockholders' equity and cash flows for the years
then ended. These financial statements are the
responsibility of the Company's management. My
responsibility is to express an opinion on the
financial statements based on my audits. The
financial statements of Power Save International,
Inc. at August 31, 1996, were audited by other
auditors whose report thereon dated October 29,
1996, expressed an opinion with an explanatory
paragraph as to going concern. The cumulative
information from September 1, 1996 to December 31,
1997 was compiled by other accountants, whose
reports dated at various times during that period,
stated that they did not express an opinion or any
other assurance on those statements.
I conducted my audits in accordance with auditing
standards generally accepted in the United States
of America. Those standards require that I plan
and perform the audit to obtain reasonable
assurance about whether the financial statements
are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well
as evaluating the overall financial statement
presentation. I believe that my audits provided a
reasonable basis for my opinion.
In my opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Power Save International,
Inc. as of December 31, 2001, 2000 and 1999, and
the results of its operations and its cash flows
for the years then ended in conformity with
accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been
prepared assuming that the Company will continue as
a going concern. As discussed in Notes 3 and 4,
the Company is in the development stage and has
sustained significant losses from inception to date
and there is no assurance that the Company can
51
realize sufficient revenues from its products and
services to attain profitable operations. These
matters raise substantial doubt about the Company's
ability to continue as a going concern.
Management's plans regarding those matters is also
discussed in Notes 3 and 4. The financial
statements do not include any adjustments that
might result from the outcome of this uncertainty.
David T. Thomson, P.C.
Salt Lake City, Utah
February 22, 2002
52
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MAY 31, 2002(UNAUDITED) AND
DECEMBER 31, 2001 AND 2000
ASSETS
May 31, December 31, December 31,
2002 2001 2000
------ ----------- -----------
<s> <c> <c> <c>
CURRENT ASSETS: (Unaudited)
Cash $ 41,916 $ 68,532 $ 116,145
Prepaid expenses - - 1,500
Accounts receivable, less allowance
of $3,788 - - -
Marketable securities-available-
for-sale 805 2,781 5,773
---------- --------- ---------
Total Current Assets 42,721 71,313 123,418
---------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost
Equipment 4,112 4,112 4,112
---------- --------- ---------
4,112 4,112 4,112
Less accumulated depreciation 2,945 2,737 2,237
---------- --------- ---------
Net property, plant and equipment 1,167 1,375 1,875
---------- --------- ---------
OTHER ASSETS
Product rights, development costs
and other intangible assets
net of reserve of $244,000 at
May 31, 2002 and December 31,
2001 and 2000 - - -
---------- --------- ---------
Total Other Assets - - -
---------- --------- ---------
TOTAL ASSETS $ 43,888 $ 72,688 $ 125,293
========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 697 $ 3,436 $ 683
Accrued liabilities - stockholder 11,586 23,018 32,134
---------- -------- ---------
Total Current Liabilities 12,283 26,454 32,817
---------- -------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock; 50,000,000 shares
authorized; $.001 par value;
296,300 shares issued and outstanding
at May 31, 2002, December 31, 2001
and 2000 296 296 296
53
Capital stock, $.001 par value;
50,000,000 shares authorized;
6,414,149 shares issued and outstanding
at May 31, 2002 and December 2001 and
2000 6,414 6,414 6,414
Additional paid-in capital 1,854,503 1,844,503 1,820,503
Deficit accumulated during the
development stage (1,824,640)(1,801,987) (1,734,737)
Accumulated other comprehensive
income (loss) (4,968) (2,992) -
--------- --------- ---------
Total Stockholders' Equity 31,605 46,234 92,476
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 43,888 $ 72,688 $ 125,293
========= ========= =========
The accompanying notes are an integral
part of these financial statements
54
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Five Months Five Months Inception
Ended Ended Year Ended Through
May 31, May 31, December 31, December 31, May 31,
2002 2001 2001 2000 2002
------------ ----------- ------------ ------------ -------
(Unaudited) (Unaudited) (Unaudited)
<s> <c> <c> <c> <c> <c>
SALES, Net of Returns,
Allowances and Discounts $ - $ - $ - $ 4,075 $ 591,656
COST OF SALES - - - - 352,207
-------- --------- ---------- ---------- ----------
Gross margin - - - 4,075 239,449
-------- --------- ---------- ---------- ----------
EXPENSES:
Research and development
costs - - - - 119,554
Depreciation and
amortization 208 208 500 500 549,354
Reserve against product
rights - - - - 244,000
General and administrative
expenses 22,242 28,005 68,209 99,683 887,723
-------- -------- --------- --------- ----------
TOTAL OPERATING EXPENSES 22,450 28,213 68,709 100,183 1,800,631
-------- -------- --------- --------- ----------
Net (loss) before other
items (22,450) (28,213) (68,709) (96,108) (1,561,182)
-------- -------- --------- --------- ----------
OTHER INCOME (EXPENSE)
Nonrefundable option
income - - - - 23,000
Gain on sale of marketable
securities - - - 167,249 178,723
Write down of marketable
securities - - - (364,326) (364,326)
Interest expense (584) (925) (2,171) (3,797) (113,694)
Dividend income 381 2,215 3,630 8,601 12,839
-------- -------- -------- -------- ----------
TOTAL OTHER INCOME (LOSS) (203) 1,290 1,459 (192,273) (263,458)
-------- -------- -------- -------- ----------
NET (LOSS) BEFORE TAXES (22,653) (26,923) (67,250) (288,381) (1,824,640)
PROVISIONS FOR INCOME TAXES - - - - -
--------- --------- --------- ----------- -----------
NET INCOME (LOSS) $ (22,653) $ (26,923) $ (67,250) $ (288,381) $(1,824,640)
========= ========= ========= =========== ===========
EARNINGS (LOSS) PER SHARE $ - $ - $ (0.01) $ (0.04)
========= ========= ========= ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,414,149 6,414,149 6,414,149 6,414,149
========= ========= ========= ===========
The accompanying notes are an integral
part of these financial statements
55
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (May 8, 1987) TO MAY 31, 2002
Preferred Stock Capital Stock Additional
------------------- ----------------- Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ ----------
<s> <c> <c> <c> <c> <c>
Issuance of shares for
cash-May 1987 - $ - 100,000 $ 100 $ 2,900
Issuance of shares for
cash-August 1987 - - 63,433 63 279,877
Issuance of shares for
product rights and other
intangible assets - - 33 - -
Sale of shares to the
public for $.30 per share
-restated - - 74,334 74 22,226
Deferred offering costs - - - - (7,892)
Exchange of shares
regarding pooling of
interest of subsidiaries:
Cancellation - - (63,467) (63) 63
Re-issuance - - 396,767 397 (397)
Issuance of shares for
services - - 30,500 31 884
Cancellation of shares-
former officer - - (30,000) (30) (9,970)
Issuance of shares to
A.P.S.I.-merger - - 5,144,000 5,144 39,856
Issuance of shares for
prepaid lease and
working capital - - 449,000 449 249,551
Issuance of shares for
services - - 95,000 95 2,755
Conversion of debt to
preferred stock 50,000 50 - - 499,950
Exchange of preferred
shares for oil and gas
properties 2,000,000 2,000 - - 9,998,000
Issuance of shares for
services - - 154,549 154 4,483
Additional contributed
capital - - - - 70,318
Net loss from inception
Through December 31,
1996 - - - - -
--------- ------- --------- ------ ----------
Balance-December 31,
1996 2,050,000 2,050 6,414,149 6,414 11,152,604
56
Preferred Stock Capital Stock Additional
------------------- ----------------- Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ ----------
<s> <c> <c> <c> <c> <c>
Net loss for the year
ended December 31,
1997 - - - - -
--------- ------- --------- ------ ----------
Balance-December 31,
1997 2,050,000 2,050 6,414,149 6,414 11,152,604
--------- ------- --------- ------ -----------
Additional contributed
capital - - - - 24,000
Cancellation of
preferred shares
for oil and gas
properties and
other outstanding
preferred shares (2,050,000) (2,050) - - (9,997,950)
Net loss for the year
ended December 31,
1998 - - - - -
--------- ------- --------- ------- -----------
Balance-December 31,
1998 - $ - 6,414,149 $ 6,414 $ 1,178,654
--------- ------- --------- ------- -----------
Additional contributed
capital - - - - 35,545
Issuance of preferred
shares for marketable
securities 296,300 296 - - 592,304
Comprehensive income:
Net loss for the year
ended December 31, 1999 - - - - -
Other comprehensive income
(loss)
Unrealized gain on
securities - - - - -
Comprehensive income - - - - -
-------- ------- --------- ------- ----------
Balance-December 31,
1999 296,300 296 6,414,149 6,414 1,806,503
Additional contributed
capital - - - - 14,000
Comprehensive income:
Net loss for the
year ended December
31, 2000 - - - - -
57
Preferred Stock Capital Stock Additional
------------------- ----------------- Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ ----------
<s> <c> <c> <c> <c> <c>
Other comprehensive
income (loss)
Unrealized loss on
securities - - - - -
Comprehensive income
(loss) - - - - -
--------- ------- --------- ------- ----------
Balance-December 31,
2000 296,300 296 6,414,149 6,414 1,820,503
Additional contributed
capital - - - - 24,000
Comprehensive income:
Net loss for the year
ended December 31, 2001 - - - - -
Other comprehensive
income (loss)
Unrealized loss on
securities - - - - -
Comprehensive income
(loss) - - - - -
-------- ------- --------- ------- ----------
Balance-December 31,
2001 296,300 296 6,414,149 6,414 1,844,503
Additional contributed
Capital (Unaudited) - - - - 10,000
Comprehensive income:
Net loss for the five
months ended May 31,
2002(Unaudited) - - - - -
Other comprehensive
income (loss)
Unrealized loss on
Securities (Unaudited) - - - - -
Comprehensive income
(loss) (Unaudited) - - - - -
-------- --------- --------- -------- -----------
Balance-May 31, 2002
(Unaudited) 296,300 $ 296 6,414,149 $ 6,414 $ 1,854,503
======== ========= ========= ======== ===========
The accompanying notes are an integral
part of these financial statements
58
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (May 8, 1987) TO MAY 31, 2002
[Continued]
Deficit
Accumulated Accumulated
During the Other Total
Development Comprehensive Stockholders' Comprehensive
Stage Income Equity Income
------------ ------------ ---------- -------------
<s> <c> <c> <c> <c>
Issuance of shares for
cash-May 1987 $ - $ - $ 3,000
Issuance of shares for
cash-August 1987 - - 279,940
Issuance of shares for
product rights and other
intangible assets - - -
Sale of shares to the
public for $.30 per share
-restated - - 22,300
Deferred offering costs - - (7,892)
Exchange of shares
regarding pooling of
interest of subsidiaries:
Cancellation - - -
Re-issuance - - -
Issuance of shares for
services - - 915
Cancellation of shares-
former officer - - (10,000)
Issuance of shares to
A.P.S.I.-merger - - 45,000
Issuance of shares for
prepaid lease and
working capital - - 250,000
Issuance of shares for
services - - 2,850
Conversion of debt to
preferred stock - - 500,000
Exchange of preferred
shares for oil and gas
properties - - 10,000,000
Issuance of shares for
services - - 4,637
Additional contributed
capital - - 70,318
Net loss from inception
Through December 31, 1996 (979,024) - (979,024) $(979,024)
--------- -------- ---------- ---------
Balance-December 31, 1996 (979,024) - 10,182,044
60
Deficit
Accumulated Accumulated
During the Other Total
Development Comprehensive Stockholders' Comprehensive
Stage Income Equity Income
------------ ------------ ---------- -------------
<s> <c> <c> <c> <c>
Net loss for the year
ended December 31, 1997 (53,554) - (53,554) $ (53,554)
-------- -------- ---------- ---------
Balance-December 31, 1997 (1,032,578) - 10,128,490
Additional contributed
capital - - 24,000
Cancellation of
preferred shares
for oil and gas
properties and
other outstanding
preferred shares - - (10,000,000)
Net loss for the year
ended December 31,
1998 (315,441) - (315,441) (315,441)
--------- --------- ---------- ---------
Balance-December 31,
1998 $(1,348,019) $ - $ (162,951)
---------- --------- ----------
Additional contributed
capital - - 35,545
Issuance of preferred
shares for marketable
securities - - 592,600
Comprehensive income:
Net loss for the year
ended December 31, 1999 (98,337) - (98,337) (98,337)
Other comprehensive income
(loss)
Unrealized gain on
securities - 339,060 339,060 339,060
Comprehensive income - - - $ 240,723
-------- --------- --------- ---------
Balance-December 31,
1999 (1,446,356) 339,060 705,917
Additional contributed
capital - - 14,000
Comprehensive income:
Net loss for the
year ended December
31, 2000 (288,381) - (288,381) $ (288,381)
Other comprehensive
income (loss)
Unrealized loss on
securities - 339,060 (339,060) (339,060)
60
Deficit
Accumulated Accumulated
During the Other Total
Development Comprehensive Stockholders' Comprehensive
Stage Income Equity Income
------------ ------------ ---------- -------------
<s> <c> <c> <c> <c>
Comprehensive income
(loss) - - - $ (627,441)
---------- --------- --------- ----------
Balance-December 31,
2000 (1,734,737) - 92,476
Additional contributed
capital - - 24,000
Comprehensive income:
Net loss for the year
ended December 31, 2001 (67,250) - (67,250) $ (67,250)
Other comprehensive
income (loss)
Unrealized loss on
securities - (2,992) (2,992) (2,992)
Comprehensive income
(loss) - - - $ (70,242)
---------- -------- -------- ---------
Balance-December 31,
2001 (1,801,987) (2,992) 46,234
Additional contributed
Capital (Unaudited) - - 10,000
Comprehensive income:
Net loss for the five
months ended May 31,
2002(Unaudited) (22,653) - (22,653) $ (22,653)
Other comprehensive
income (loss)
Unrealized loss on
Securities (Unaudited) - (1,976) (1,976) $ (1,976)
Comprehensive income
(loss)(Unaudited) - - - $ (24,629)
---------- ------- -------- ---------
Balance-May 31, 2002
(Unaudited) $(1,824,640) $(4,968) $ 31,605
=========== ======= ========
The accompanying notes are an integral
part of these financial statements
61
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
Five Months Five Months Inception
Ended Ended Year Ended Through
May 31, May 31, December 31, December 31, May 31,
2002 2001 2001 2000 2002
------------ ----------- ------------ ------------ -------
(Unaudited) (Unaudited) (Unaudited)
<s> <c> <c> <c> <c> <c>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ (22,653) $ (26,923) $(67,250) $(288,381) $(1,824,640)
Adjustments to
reconcile net loss
to net cash used in
operating activities:
Depreciation and
amortization 208 208 500 500 549,354
Common stock issued
for lease - - - - 225,000
Gain on sale of securities - - - (167,249) (178,723)
Write down of marketable
securities - - - 364,326 364,326
Contributed interest - - - - 70,018
Contributed rent and
officer compensation 10,000 10,000 24,000 14,000 96,000
Reserve against assets
and liabilities - - - - 244,000
Changes in assets and
liabilities:
(Increase) in prepaid
expenses - - 1,500 (1,500) -
(Increase) in accounts
receivable - - - 3,788 -
(Increase) in deferred
offering costs - (2,139) - - -
Increase in accounts
payable (2,739) 31 2,753 (1,373) 697
Increase in accrued
interest 584 925 2,171 1,021 40,600
Increase (decrease) in
advances from
shareholder (12,016) (7,016) (11,287) (224,463) (29,013)
------- ------- ------- -------- -------
Net cash used in
operating activities (26,616) (24,914) (47,613) (299,331) (442,381)
------- ------- ------- -------- -------
62
CASH FLOWS FROM INVESTING ACTIVITIES:
Product rights, development
costs and intangibles - - - - (244,000)
Increase in organization costs - - - - (36,408)
Proceeds from sale of
marketable securities - - - 362,249 401,223
Acquisition of fixed assets - - - - (14,112)
------- ------- ------- ------- -------
Net cash used in
investing activities - - - 362,249 106,703
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock, net - - - - 366,050
Contributed capital - - - - 11,544
------- ------- ------- ------- -------
Net cash provided by
financing activities - - - - 377,594
------- ------- ------- ------- -------
Net Increase (decrease)
in Cash (26,616) (24,914) (47,613) 62,918 41,916
CASH AT BEGINNING PERIOD 68,532 116,145 116,145 53,227 -
------- ------- -------- -------- ---------
CASH AT END OF PERIOD $ 41,916 $ 91,231 $ 68,532 $116,145 $ 41,916
======== ======== ======== ======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Stock issued in exchange
for goods and services
and marketable securities $ - $ - $ - $ - $ 601,002
======= ======== ========= ========= =========
Cash paid for interest $ - $ - $ - $ - $ -
======= ======== ========= ========= =========
Cash paid for income taxes $ - $ - $ - $ - $ -
======= ======== ========= ========= =========
The accompanying notes are an integral
part of these financial statements
63
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 2001
is Unaudited)
NOTE 1 - THE COMPANY
The Predecessor Company of Power Save
International, Inc. (the Company), a Nevada
corporation, was incorporated on May 8, 1987
under the name Florida Pacific Corporation.
In December 1998, Power Save Products was
merged into Florida Pacific and the name was
changed to Power Save International, Inc.
After a change in control in 1999, the name
was changed to Interactive Music, Inc. The
sole shareholder repurchased the assets,
liabilities and transferred them into a new
corporation formed in Nevada on July 22,
1999 whose name was changed to Power Save
International, Inc. The company is currently
consulting, creating and providing
commercial and industrial energy efficient,
engine driven or electrically driven oxygen
plants, air conditioning, refrigeration,
compressed air and electric generating plant
designs and systems, for domestic and export
applications, from a variety of energy
technology related products, developed over
the years. The Company's products are being
sold in the eastern United States.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting
policies of Power Save International, Inc.
(the Company) is presented to assist in
understanding the Company's financial
statements. The financial statements and
notes are representations of the Company's
management, which is responsible for their
integrity and objectivity. These accounting
policies conform to generally accepted
accounting principles and have been
consistently applied in the preparation of
the financial statements.
Accounting method - The Company's financial
statements are prepared using the accrual
method of accounting.
Inventories - Due to the nature of the
Company's business it has no inventories.
All of the systems described in Note 1 are
64
built by outside manufacturers and
subcontractors. The Company pays for these
finished products and provides them to their
customers.
Equipment - Equipment is stated at cost.
Maintenance and repairs are expensed as
incurred. Depreciation is determined using
the straight-line method over the estimated
useful lives of the assets, which is three
to ten years.
Product Rights - Product rights were to be
amortized over revenue generating operations
based on management's expectations of the
life of such technology acquired. In 1998,
the remaining cost of the product rights
were reserved in total leaving a zero
balance at May 31, 2002 and December 31,
2001 and 2000. (see note 5).
Earnings (Loss) Per Share - The Company
adopted Statement of Financial Accounting
Standard No. 128, "Earnings per Share"("SFAS
No. 128"), which is effective for annual
periods ending after December 15, 1997.
Earnings (loss) per share are computed based
on the weighted average number of shares
actually outstanding which was 6,414,149 for
all periods presented. No changes in the
computations of diluted earnings per share
amount are presented since there were no
capital stock transactions that would serve
to dilute common shares.
Income Taxes - The Company accounts for
income taxes using the asset and liability
method. The differences between the
financial statement and tax bases of assets
and liabilities is determined annually.
Deferred income tax assets and liabilities
are computed for those differences that have
future tax consequences using the currently
enacted tax laws and rates that apply to the
period in which they are expected to affect
taxable income. Valuation allowances are
established, if necessary, to reduce
deferred tax asset accounts to the amounts
that will more likely than not be realized.
Income tax expense is the current tax
65
payable or refundable for the period, plus
or minus the net change in the deferred tax
asset and liability accounts.
Statement of Cash Flows - The Company
considers (if and when they have any) all
highly liquid investments with maturities of
three months or less to be cash equivalents.
During 1999 the Company had a non-cash
transaction as explained in Note 9. The
Company had no non-cash investing and
financing transaction during 2002, 2001 and
2000.
Issuance of Shares for Services and Other
Assets - Valuation of shares for services
and other acquired assets were based on the
fair market value of services received.
Use of Estimates - The preparation of
financial statements in conformity with
generally accepted accounting principles
requires management to make estimates and
assumptions that affect the reported amounts
of assets and liabilities and disclosure of
contingent assets and liabilities at the
date of the financial statements and the
reported amounts of revenues and expenses
during the reporting period. Actual results
could differ from those estimates.
Revenue Recognition - The Company's sale of
plant design and revenue from plant
installation is done within a short time
since its plants are designed for small
commercial sites and buildings and are
generally completed within a few months.
The Company recognizes revenue as earned at
the completion of the contract. To date the
Company's contract sales have been from
"outright" sales of its installations. The
Company's business plan proposes a future
contract transaction with its customers
through a method it calls a guaranteed
savings plan. The systems installed under
this method will be owned by the Company and
leased to the sites for a ten-year period.
Power savings incurred by the customer will
be paid to the Company under the lease. The
Company will receive a reduced amount or up
to a 100% reduction in this share if the
savings do not materialize. Since the
Company has no such contracts of this nature
through May 31, 2002, and this future
66
contract method is not applicable to these
financial statements, no revenue has been
recognized under this method and no
potential liability, if any, under this
method has been recorded in these financial
statements
Organization and start-up costs - The
Company has adopted SOP 98-5 "Reporting on
the Costs of Start-up Activities." The SOP
requires costs of start-up activities and
organization costs to be expensed as
incurred.
Comprehensive Income - The Company adopted
Statement of Financial Accounting Standard
No. 130, "Comprehensive Income"("SFAS No.
130"), which is effective for annual periods
ending after December 15, 1997. As provided
by SFAS No. 130, reclassification
adjustments to prior year amounts are
reported in a separate statement of
comprehensive income along with current year
components of comprehensive income.
Reclassifications - Certain prior year
amounts have been reclassified to conform
with May 31, 2002 classifications.
Marketable Securities - Marketable
securities consist of common stock.
Marketable securities are stated at market
value as determined by the most recently
traded price of each security at the balance
sheet date. All marketable securities are
defined as trading securities or available-
for-sale securities under the provisions of
SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
Management determines the appropriate
classification of its investments in
marketable securities at the time of
purchase and re-evaluates such determination
at each balance sheet date. Securities that
are bought and held principally for the
purpose of selling them in the near term are
classified as trading securities and
unrealized holding gains and losses are
included in earnings. Debt securities for
which the company does not have the intent
or ability to hold to maturity and equity
securities are classified as available-for-
sale. Available-for-sale securities are
carried at fair value, with the unrealized
67
gains and losses, net of tax if applicable,
reported as a separate component of
stockholders' equity in accumulated other
comprehensive income. The company at this
time has no trading securities.
Unaudited Interim Information - In the
opinion of management, the unaudited
financial statements reflect all
adjustments, consisting only of normal
adjustments, necessary to present fairly,
the financial position of the Company at May
31, 2002 and the results of operations and
cash flows for the five months then ended.
The results of operations and cash flows for
the five months ended May 31, 2002, should
not necessarily be taken as indicative of
the results of operations and cash flows for
the entire year ended December 31, 2002.
NOTE 3 - BASIS OF PRESENTATION AND
CONSIDERATIONS RELATED TO CONTINUED
EXISTENCE
The Company's financial statements have been
presented on the basis that it is a going
concern, which contemplates the realization
of assets and the satisfaction of
liabilities in the normal course of
business. For the five months ended May 31,
2002, the Company had a net loss of $22,653.
The Company incurred net losses of $67,250
and $288,381 for the years ended December
31, 2001 and 2000, respectively.
Additionally, the Company has incurred
losses of $1,824,640 from inception through
May 31, 2002. These factors, among others,
raise substantial doubt as to the Company's
ability to obtain debt and/or equity
financing and achieve profitable operations.
The Company's management intends to raise
additional operating funds through equity
and/or debt offerings. However, there can
be no assurance management will be
successful in its endeavors. Ultimately,
the Company will need to achieve profitable
operations in order to continue as a going
concern.
These conditions raise substantial doubt
about the Company's ability to continue as a
going concern. The financial statements do
not include any adjustments to
68
reflect the possible future effects on the
recoverability and classification of assets
or the amounts and classification of
liabilities that may result from the outcome
of this uncertainty.
NOTE 4 - DEVELOPMENT STAGE COMPANY
The Company is a development stage company
as defined in Financial Accounting Standards
Board Statement No. 7. It has yet to
commence full-scale operations. For the
five months ended May 31, 2002, the Company
had a loss of $22,653. From inception
through May 31, 2002, the Company did not
have any net income from operations. At the
current time, the Company has $43,888 in
assets and $12,283 in liabilities.
The Company has not yet generated
significant revenue and has begun to fund
its operations through the issuance of
equity. Accordingly, the Company's ability
to accomplish its business strategy and to
ultimately achieve profitable operations is
dependent upon its ability to obtain
additional financing and execute its
business plan. There can be no assurance
that the Company will be able to obtain
additional funding, and, if available, that
the funding will be obtained on terms
favorable to or affordable by the Company.
The Company's management is exploring
several funding options and expects to raise
additional capital through private
placements to continue to develop the
Company's operations around its business
plan. Ultimately, however, the Company will
need to achieve profitable operations in
order to continue as a going concern.
NOTE 5 - PRODUCT RIGHTS
The company acquired certain product rights,
development costs and other intangible
assets at a cost of $244,000 from H.C.
Technology, Inc. (a then related
corporation). These assets were appraised
on September 15, 1987 for $1,480,000 and
such assets include product technology,
employee replacement costs, marketing
programs, trade names, and other assets with
determinable value. Since the acquisition
of these assets was a number of years ago,
69
the valuation carried on the books was
reserved to a zero value at May 31, 2002 and
December 31, 2001 and 2000.
NOTE 6 - LICENSE FEE
The company had a license for a design of a
thermal compression hemispheric jet chiller
to utilize a source of heat to provide
chilled water for use in refrigeration and
air-conditioning systems to reduce the
energy consumption of systems in which they
were to be incorporated. This license fee
has expired and all related costs were fully
amortized at the end of 1998.
NOTE 7 - INCOME TAXES
Deferred income taxes arise from temporary
differences resulting from income and
expense items reported for financial
accounting and tax purposes in different
periods. Deferred taxes are classified as
current or non-current, depending on the
classification of the assets and liabilities
to which they relate. Deferred taxes
arising from temporary differences that are
not related to an asset or liability are
classified as current or non-current
depending on the periods in which the
temporary differences are expected to
reverse.
Amounts for estimated tax and deferred tax
liabilities and assets are as follows:
May 31, December 31, December 31,
2002 2001 2000
------- ------------ ------------
<s> <c> <c> <c>
Tax liability $ - $ - $ -
Use of NOL against deferred
tax liability - - -
Deferred tax assets
Temporary - see below 82,902 82,902 82,880
NOL carryover 380,085 372,383 349,836
Net of valuation allowance (462,987) (455,285) (432,716)
Total $ -0- $ -0- $ -0-
70
The following temporary differences
gave rise to the deferred tax asset are as
follows:
May 31, December 31, December 31,
2002 2001 2000
-------- ------------ ------------
<s> <c> <c> <c>
Tax benefit of reserve against
product rights $ 82,960 $ 82,960 $ 82,960
Tax liability for organization
write-off (58) (58) (80)
Valuation allowance for judgment of
realizability of net deferred
tax benefit in future years (82,902) (82,902) (82,880)
Total $ -0- $ -0- $ -0-
For tax purposes, the Company had available
at December 31, 2001, estimated net
operating loss ("NOL") carryforwards for
regular Federal income tax purposes of
$1,095,243. The balance of estimated NOL
carryforwards through December 31, 2001 of
$1,095,243 will expire as shown below.
Year Ended
December 31,
2002-2004 170,425
2005 162,877
2006 130,190
2007 113,298
2008 108,239
2009 95,943
2010 46,043
2011 76,223
2012 41,855
2013 36,512
2018 47,325
2019 66,313
----------
$1,095,243
==========
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company currently utilizes office space
from a major stockholder of the Company.
The stockholder is not charging the Company
for the use of the office space. The
Company has recorded contributed capital, or
a charge to the liability owed to the
stockholder, for the estimated cost of the
71
space at $500 per month starting January
1998 with and offset to rent expense. The
same stockholder and director of the Company
has provided free services to the Company.
The Company has recorded contributed
capital, or a charge to accrued interest
owed to the stockholder, for the estimated
cost of the services at $1,500 per month
starting January 1998 with an offset to
officer compensation.
The same stockholder, and director had made
certain advances to the Company on an
interest free basis, payable upon demand.
From inception of the loans to December 31,
1996, the Company has computed interest on
the advances at 8% and has treated the
interest of $70,318 as contributed capital
with an offset to interest expense. From
1997 forward the Company had accrued
interest on the advances, until paid, as a
liability with an offset to interest
expense. During the year ended December 31,
2000, the Company paid off the advances,
which at the time were $218,753, and paid
down certain accrued liabilities to $32,134.
During the year ended December 31, 2001, the
Company paid down certain accrued
liabilities to $23,018. During the five
months ended May 31, 2002, the Company paid
down certain accrued liabilities to $11,586.
NOTE 9 - NON-CASH TRANSACTIONS
The following non-cash investing and
financing activities occurred during the
period from inception through May 31, 2002:
During 1991, the Company exchanged 50,000
shares of its preferred stock for certain
license fees valued at $500,000. During
1990, the Company issued certain shares of
its common stock for a prepaid lease valued
at $225,000.
During 1996, the Company exchanged 2,000,000
shares of preferred stock for oil and gas
properties valued at $10,000,000. This
transaction was rescinded. For financial
statement purposes the transaction was
treated as being rescinded in 1998.
72
During 1999, the Company exchanged 296,300
shares of preferred stock for marketable
securities valued at the time of exchange at
$592,600. The value of the securities was
determined by using market quotes for the
stock at the time of the exchange.
NOTE 10 - STOCKHOLDERS' EQUITY
The Company's Preferred Stock is non-voting,
non-dividend bearing, redeemable and
convertible to common stock at the time the
Company and the holders of the preferred
stock deem it appropriate.
The Company and its assets were spun off
from the previously owned parent company
when a majority interest of the common stock
in the old company was sold to a consulting
group by the principal shareholder. The
assets and liabilities were transferred to
the current corporation and all the
activities from inception through May 31,
2002 have remained with the current company.
The Board of Directors has authorized a
stock issuance totaling 1,000,000 shares of
its common stock at $5.00 per share. The
offering will be filed under the Securities
Act of 1933 or an exemption under the Act.
The Company had paid certain offering costs
related to the above mentioned offering
totaling $27,658. These offering costs were
written off because they were over 90 days
old. It is expected that additional legal
and accounting costs will be incurred in
relation to the offering. For the year
ended December 31, 2001, the Company has
paid an additional $8,793 in deferred
offering costs, which were also written off.
If the current offering is successful, any
additional current costs will be offset
against any gross proceeds received.
Otherwise, the costs will be written off to
expense at the time the offering is deemed
unsuccessful or terminated.
The Company has adopted SFAS 130, which
requires presentation of comprehensive
income(net income plus all other changes in
net assets from non-owner sources) and its
components in the financial statements. The
company has changed the format of its
statements of stockholders' equity to
73
present comprehensive income. Accumulated
other comprehensive income or loss shown in
the statements of stockholders' equity at
May 31, 2002, is solely comprised of the
accumulated change in unrealized gains and
losses on marketable securities. There was
no other comprehensive income prior to 1999.
The Company changed it par value for common
and preferred stock from $.03 per share to
$.001 per share. As a result of this
change, common and preferred stock was
reduced and additional paid-in capital was
increased by $194,604. All references in
the accompanying financial statements to
common and preferred stock and additional
paid-in capital have been restated to
reflect the change in par value.
NOTE 11 - MARKETABLE SECURITIES
Marketable securities are carried on the
balance sheet at their fair value. As of
May 31, 2002 and December 31, 2001 and 2000,
the market value of the available-for-sale
securities was $805, $2,781 and $5,773,
respectively. At May 31, 2002 and December
31, 2001 and 2000, the above consisted of 2,
781, 2,781 and 2,781, respectively of common
shares of Cottage Investments, Inc. Cottage
Investments, Inc. underwent a 1 for 133
reverse stock split effective December 17,
2001 and subsequently changed its name to
Paving Stone Corporation. The shares
amounts in this note have been restated to
reflect the shares reverse split
transactions. Of the above difference in
shares amount of 5,717 from 1999 to 2000,
2,781 of the reduction was due to a 1 for 2
reverse stock split and the rest was from
stock sales. At May 31, 2002, the
unrealized holding loss was $1,976 and was
shown as other comprehensive loss. At May
31, 2002, securities classified as
available-for-sale were written down to
their market value. As of May 31, 2002, the
amount of the write down was $369,295. As
of May 31, 2002 and December 31, 2001 and
2000 respectively, the following applies to
the company's available-for-sale securities.
Cost, after recognizing security sales and
write-downs, was $805, $2,781 and $5,773.
Unrealized loss at May 31, 2002 was $1,976,
74
December 31, 2000 was $339,060 and
unrealized gain at December 31, 1999 was
$339,060. Historical cost is used to
compute realized gains. The net unrealized
holding gain or loss on securities available
for sale that has been included in other
comprehensive income during the year ended
December 31, 2000 was a $339,060 holding
loss. No stock was sold during the five
months ended May 31, 2002. The total cost
of the stock sold during the year ended
December 31, 2000 was $195,000.
NOTE 12 - COMMITMENTS
As part of the offering of the Company's
common stock as explained in Note 10, the
Company had signed an underwriting and
selling agreement. The agreement called for
a 5% commission of the gross proceeds of the
offering, contingent upon achieving the
minimum specified in the offering. The
Company was also to pay a due diligence fee
of $4,000 and consulting fee of $5,950 plus
mutually agreed expenses. This agreement
has been terminated.
On April 24, 2000, the Company signed an
agreement for 12 months for publicity and
promotional services. The Company paid a
$3,000 retainer per the agreement of which
$1,500 was prepaid. The Company pays $1,500
per month and the provider of publicity and
promotional services was to receive 1% of
the stock offering described in Note 10.
The agreement was completed during the year
ended 2001 and the prepayment was applied to
services received and was expensed. No
stock was issued under the agreement and the
1% provision no longer applies to the
proposed stock offering.
NOTE 13 - SHARE EXCHANGE AND PURCHASE
AGREEMENT
On April 18, 2000, the Company signed a
share exchange and purchase agreement with
Mirage Air Systems, Inc. (MAS). The
transaction did not close and was not
completed prior to the expiration of the
agreement.
75
PART II
Information Not Required in prospectus
Item 13. Other Expenses of Issuance and
Distribution.
The estimated expenses of this offering, all of
which will be paid by Registrant, are as
follows:
<s> <c>
SEC Registration Fee $2,640
National Association of Securities Dealers, Inc. Fee 1,500
Nasdaq Listing Fee 6,000
Accounting Fees and Expenses 3,000
Registrant's Legal Fees and Expenses 1,500
Blue Sky Expenses and Counsel Fees 7,000
Printing and Engraving Fees 4,000
Transfer Agent and Registrar's Fees and Expenses 1,000
Document Preparation 9,950
Miscellaneous Expenses 7,000
-------
Total $43,590
Item 14 Indemnification.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as
amended (the "Act") may be permitted to
directors, officers and controlling persons of
Registrant pursuant to the provisions of its
Restated Articles of Incorporation, Registrant
has been advised that in the opinion of the
Securities and Exchange Commission such
indemnification is against public policy as
expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other
than the payment by Registrant for expenses
incurred or paid by a director, officer or
controlling person of Registrant in the
successful defense of any action, suit or
proceeding) is asserted by such director,
officer or controlling person in connection with
the securities being registered, Registrant
will, unless in the opinion of its counsel the
matter has been settled by controlling
precedent, submit to a court of appropriate
jurisdiction the question whether such
indemnification by it is against public policy
as expressed in the Act and will be governed by
the final adjudication of such issue.
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The undersigned Registrant hereby
undertakes:
(1) For purposes of determining any
liability under the Securities Act, to treat the
information omitted from the form of prospectus
filed as part of this registration statement in
reliance upon Rule 430A and contained in a form
of prospectus filed by Registrant under Rule
424(b)(1), or (4), or 497(h) under the
Securities Act as part of this registration
statement as of the time the Commission declared
it effective.
(2) For determining any liability under
the Securities Act, to treat each post-effective
amendment that contains a form of prospectus as
a new registration statement for the securities
offered in the registration statement, and that
offering of the securities at that time as the
initial bona fide offering of those securities.
Item 15. Recent Sales of Unregistered
Securities
There have been no recent sale of
securities.
Item 16. Exhibits.
Exhibits listed below are filed as part of the
Registration Statement pursuant to Item 601 of
Regulation S-B
3.1 Articles of Incorporation of Power Save
International, Inc., Amendment dated
October 8, 1999 incorporated by
reference to Form SB-2, File no. 333-
033890.
3.2 By-Laws of Power Save International,
Inc. incorporated by reference to Form
SB-2, File no. 333-033890
3.3 Specimen of Security incorporated by
reference to Form SB-2, File no. 333-
033890.
5.1 Opinion of Counsel.
10.1 Share Purchase Agreement for Mirage Air
Systems, Inc. incorporated by reference
to Amendment 1 to Form SB-2, File no.
333-033890.
10.3 Standard Lease Agreement
10.6 Lock-Up Agreement between the Company
and Balmer [Form] incorporated by
reference to Form SB-2, File no. 333-
033890.
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10.6-1 Amended Lock-Up Agreement between Power
Save and Scott E. Balmer.
23.1 Consent of David T. Thomson, P.C.
23.3 Consent of Attorney
24 Power of Attorney (Signature Page).
99.1 Exclusive Cogeneration Commercial
Distributor-Dealer Marketing License
Agreement Between XYZ Corporation and
Power Save International, Inc.
incorporated by reference to Form SB-2,
File no. 333-033890.
99.2 "The Proof is in the Free Trial Offer
Results, 'No Out of Pocket Cost'"
incorporated by reference to Form SB-2,
File no. 333-033890.
Item 17. Undertakings.
The undersigned Registrant hereby
undertakes:
(1) To file, during any period in which offers
or sales are being made pursuant to Rule 415
under the Securities Act, a post-effective
amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts
or events which, individually or in the
aggregate, represent a fundamental change in the
information in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in the total dollar value of securities
offered, if the total dollar value of securities
offered would not exceed that which was
registered) and any deviation from the low or
high end of the estimated maximum offering range
may be reflected in the form of prospectus filed
with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20% change in the
maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in
the effective registration statement; (iii) To
include any additional or changed material
information on the plan of distribution.
78
(2) For determining liability under the
Securities Act, to treat each post-effective
amendment as a new registration statement
of the securities offered, and the offering of
the securities at that time to be the initial
bona fide offering.
(3) To file a post-effective amendment to
remove from registration any of the securities
that remain unsold at the end of the offering.
Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the
Underwriting Agreement certificates in such
denominations and registered in such names as
required by the Underwriters to permit prompt
delivery to each purchaser.
SIGNATURES
In accordance with the requirements of the
Securities Act of 1933, the registrant certifies
that it has reasonable grounds to believe that
it meets all of the requirements for filing on
Form SB-2, and has duly caused this registration
statement to be signed on its behalf by the
undersigned in the State of Florida on July 11,
2002.
Registrant: Power Save International, Inc.
/s/Scott Balmer, Chairman
- -----------------------------
Scott Balmer
26 POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each
person whose signature appears below does hereby
constitute and appoint Scott Balmer with full
power to act without the other, his true and
lawful attorney-in-fact and agent for him and in
his name, place and stead, in any and all
capacities, to sign any or all amendments to
this Registration Statement and to file the
same, with all exhibits thereto, and other
documents in connection therewith, with the
Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and
perform each and every act and thing requisite
and necessary to be done in and about the
premises in order to effectuate the same, as
fully, for all intents and purposes, as he might
or could do in person, hereby ratifying and
79
confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause
to be done by virtue hereof.
In accordance with the requirements of the
Securities Act of 1933, this registration
statement was signed by the following persons in
the capacities and on the dates stated.
Principal Officers
<s> <c> <c>
/s/ Burton D. O'Donald
- ---------------------- CEO July 11, 2002
Burton D. O'Donald
/s/Raymond H. Bolduc II
- ---------------------- President, COO, CFO July 11, 2002
Raymond H. Bolduc II Controller
/s/Victor V. Vurpillat VP, Acquisitions July 11, 2002
- ----------------------
Victor V. Vurpillat
/s/Mary Jane Balmer Interim Secretary and Treasurer July 11, 2002
- ---------------------- Directors
Mary Jane Balmer
/s/Scott E. Balmer Director July 11, 2002
- ----------------------
Scott E. Balmer
62