AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON April 30, 2003
REGISTRATION NO. 333-033890
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment 12 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, 2004.
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
- We will receive a reduced amount or up to a
100% reduction in revenue
- We may lose the equipment or be liable for
additional amounts
- 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
- If Scott Balmer, an officer and director,
fails to provide promised funding
- 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 12
Use of Proceeds 25
Dilution 27
Management's Discussion and Analysis
of Financial Condition
and Results of Operations 28
Determination of Offering Price 30
Plan of Distribution 30
Management 32
Principal Shareholders 35
Indemnification 36
Certain Transactions 37
Market for Common Stock and Related
Stockholder Matters 37
5
Shares Eligible for Future Sale 37
Description of Securities 38
Legal Proceedings 39
Experts 39
Interests of Named Experts and Counsel 39
Legal Matters 39
Reports 39
Additional Information 40
Financial Statements 41
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, 2004, 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, 2004
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
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- 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 $1,840,468. If we cannot generate
revenues, you may lose your entire investment.
2. Since our revenue will be derived from the amount of savings over
10%, our projected revenue will be reduced if the client savings on
their utility bills are not as much as projected in the lease
agreement.
Our revenues will be, increased or reduced proportionally each month
based on the current year monthly utility costs. Under the lease
agreement, the client will pay us the amount saved on their utility
bill in excess of a 10% savings. If the savings are not as much as
projected, we will receive the difference, if any, between the actual
amount saved minus all maintenance and amortization expense and the 10%
savings amount.
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3. We may lose the equipment if the savings are not met under the
guaranteed savings plan.
Based on the terms of the lease agreement, if it was determined that
the savings would not be met, we could, at our option,
- operate the system until lease end at a loss,
- remove the equipment, or
- leave the equipment and absorb the loss.
The equipment that has been incorporated into a client's previous
system may have to be left at the client's site as the cost or ability
to remove it from the site could be prohibitive.
4. You will experience immediate dilution of at least 86.6% of your
investment if we raise the entire offering amount and of at least 98.6%
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 $.67 or 86.6% less than the offering
price. If we only raise $500,000, the book value per common share
will be $.07 or 98.6% less than the offering price.
5. 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.
6. 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.
7. 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.
8. If Scott Balmer, an officer and director, fails to provide
promised funding, we would not be able to continue operations until
further funding is obtained, if at all.
9
If the minimum offering amount is not obtained, Scott Balmer, a
director and sole shareholder has agreed to provide advances up to
$20,000 until alternative funding can be obtained, if any. Power Save
is financially unable to enforce its legal rights to the funds promised
by Mr. Balmer. If Mr. Balmer does not provide the promised funds, we
would not be able to continue operations until further funding is
obtained, if at all.
9. 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;
- 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.
10. 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.
11. 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.
10
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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.
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.
12
17. 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 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. To obtain personal
funds, Scott Balmer, the principal shareholder, sold most of his
controlling shares in July 1999 to Impact Consulting Group, Inc., a
non-affiliate, for $150,000 and resigned as an officer and director.
After this change in control, the name was changed to Interactive
Music, Inc. At the same time, Mr. Balmer entered into an agreement
with the new management to purchase the assets, liabilities and name
13
"Power Save International, Inc." for $2,000 so he could continue to
pursue development and marketing of the technology. 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.
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
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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
- 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 replaceable, we have not entered into any specific
contracts.
During the last three years, we have had no revenues, contracts or
deposits received. If any deposits are received, they will be
immediately utilized to order and pay for the materials and labor to
build the system.
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.
- Funds from this offering and borrowings are targeted
principally for production and installations with immediate income.
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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.
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,
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- 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.
We will not enter into a lease agreement unless the feasibility study
shows it will be a profitable transaction. The lease agreement terms
will be based upon the prior 12 months utility bills the client and the
utility companies have certified as being correct. Under the lease
agreement, the client will pay us the amount saved on their utility
bill in excess of a 10% savings. Determined on a case-by-case basis,
our revenues will be, increased or reduced proportionally each month
based on the current year monthly utility costs. If the savings are
not as much as projected, we will receive the difference, if any,
between the actual amount saved minus all maintenance and amortization
expense and the 10% savings amount. If the savings are less than 10%,
we will not receive any revenue.
In a typical application where the economic analysis has shown
estimated savings of approximately 12.5% or $16,667 monthly, Power Save
would receive approximately 2.5% of the savings or $3,333 per month
minus all maintenance and amortization expenses. The amount we would
17
receive would decrease if the projected savings are less than 12.5% or
$16,667 monthly. If the savings are 10% or less, we will not receive
any revenue for that month under the lease agreement.
Revenue under the future contract will not be recognized until it is
realized or realizable and earned. The earning process takes place on
a month to month basis when it is determined whether or not the 10%
savings on the utility bill is being met or not. If the savings is
met then the revenue is earned and recognized. If there is no
savings, then the revenue is not recognized and a liability would exist
and be recorded by the company. The signed leased agreement with its
provisions would satisfy the SAB 101 criteria regarding "pervasive
evidence of an arrangement exists"; the monthly analysis as to savings
would satisfy the SAB 101 criteria regarding "delivery has occurred or
services have been rendered"; and the provisions of the contract will
be such and agreed to by both parties so that the savings amount is
clear and determinable which would satisfy the SAB 101 criteria
regarding "the sellers price to the buyer is fixed and determinable".
If it is determined that the savings under the plan would not be met
then revenue would not be recognized by the company because it is not
realized or realizable and earned as per SAB 101.
Additionally, if it was determined that the savings would not be met,
the equipment would either be pulled from the location and a total loss
would be booked on this job. Or secondly, the equipment may be left at
the job site and the company would be liable for the difference between
any savings and the lease liability for the equipment.
Power Save would review the job analysis and determine what caused the
lack of savings, the fuel costs, the function of the equipment or a
miscalculation of the factors on the job.
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.
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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 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.
19
The modular nature of our systems permits us to fully use HVAC
facilities and personnel with other technological expertise as well as
plant and equipment.
Our corporate and site engineering staff will
- specify,
- design and
- deliver the cogeneration components and/or modules to a HVAC
facility for their assembly, installation and continuing maintenance.
The expected increase in site placements and revenues accompanied by
new technology is expected to significantly improve the competitive
position as well as the stability and capabilities of HVAC
organizations.
Products
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 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
20
- 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;
- 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.
21
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.
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
22
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 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.
23
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 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.
24
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.
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.
25
Employees
As of September 30, 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.
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.
26
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.
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
- Working Capital
27
- 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 September 30, 2002 was $14,436 or $0.002
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 September 30, 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 $ 0.002 $ 0.002
Increase attributable to new investors .068 .668
Pro forma net tangible book value
per share after the offering .07 .67
Dilution in net tangible book value
per share to new investors $ 4.93 $ 4.33
Dilution as a percentage of offering price 98.6% 86.6%
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.
28
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 at least the minimum offering to finance, engineer and
market our equipment properly and to generate sufficient revenues to
allow us to become profitable. If the minimum offering amount is not
obtained, Scott Balmer, a director and sole shareholder has agreed to
provide advances up to $20,000 until alternative funding can be
obtained, if any. We do not have the funds to pursue legal rights, if
any, to enforce Mr. Balmer's oral promise if he fails to provide the
promised funding.
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 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 year ended December 31, 2002, we purchased marketable
securities for $20,056, acquired fixed assets of $1,366 and received
proceeds from the sale of marketable securities of $2,861. As a
result, net cash used in investing activities for the year ended
December 31, 2002 was $18,561.
For the year ended December 31, 2001, we did not engaged in any
investing activities.
29
The value of the marketable securities decreased in value from December
31, 1999 to December 31, 2002. This decrease had a negative impact
on our liquidity and planned operations in 2001 and 2002 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 year ended December 31, 2002 and 2001, Power Save did not
engage in any financing activities.
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 year ended December 31, 2002, we had a
net loss of $58,689. We received no revenues. Operating expenses for
the year ended December 31, 2002 were $56,442 and consisted of
depreciation and amortization of $614 and general and administrative
expenses of $55,828. We had interest expense of $1,074 and dividend
income of $512and a loss on sale of marketable securities of $1,685 for
the year ended December 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.
We have recently launched our web site that we believe will result in
additional sales and revenues, plus market exposure.
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.
30
Under the lease agreement, the client will pay us the amount saved on
their utility bill in excess of a 10% savings. If the savings are not
as much as projected, we will receive less revenue than projected or we
may not receive any revenue at all.
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.
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. He will not use electronic methods to promote the
offering Mr. Balmer will distribute the prospectus in person or
through the U.S. mail system.
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:
31
- 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.
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, 2004, 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, 2004.
32
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
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.
33
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.
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
34
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.
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.
35
Executive compensation
No executives received compensation from Power Save in 2000, 2001
or 2002.
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.
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 June 30, 2002 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;
36
- 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.
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 the Securities and Exchange Commission, such
indemnification is against public policy and is, therefore,
unenforceable.
37
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.
Holders. The approximate number of holders of record of Power Save's
common stock, as of April 30 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.
38
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 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
39
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 common stock at the underwriting price ($5.00) by the holder
or 1/10 of a common share for each preferred share. 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, 2002, 2001 and 2000
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.
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.
40
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 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.
41
Financial Statements
Page
Independent Auditors' Report 42
Balance Sheets 43
Statements of Operations 45
Statement of Stockholders' Equity 46
Statements of Cash Flows 47
Notes to Financial Statements 53
42
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 development stage company) as of December 31,
2002, 2001 and 2000 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, 2002, 2001 and 2000, 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 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 are 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
April 22, 2003
43
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 2002, 2001 AND 2000
ASSETS
December 31, December 31, December 31,
2002 2001 2000
------------ ------------ -----------
CURRENT ASSETS:
Cash $ 4,581 $ 68,532 $ 116,145
Prepaid expenses - - 1,500
Accounts receivable, less
allowance of $3,788 at
December 31, 2002, 2001 and 2000 - - -
Marketable securities-available
for-sale 11,451 2,781 5,773
----------- ----------- -----------
Total Current Assets 16,032 71,313 123,418
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost
Equipment 5,478 4,112 4,112
----------- ----------- -----------
5,478 4,112 4,112
Less accumulated depreciation 3,351 2,737 2,237
----------- ----------- -----------
Net property, plant and
equipment 2,127 1,375 1,875
----------- ----------- -----------
OTHER ASSETS
Product rights, development
costs and other intangible
assets, net of reserve of
$244,000 at December 31, 2002,
2001 and 2000 - - -
----------- ----------- -----------
Total Other Assets - - -
----------- ----------- -----------
TOTAL ASSETS $ 18,159 $ 72,688 $ 125,293
=========== =========== ===========
44
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,746 $ 3,436 $ 683
Accrued liabilities
stockholder 8,708 23,018 32,134
----------- ----------- -----------
Total Current Liabilities 13,454 26,454 32,817
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock; 50,000,000
shares authorized; $.001 par
value; 296,300 shares issued
and outstanding at December 31,
2002, 2001 and 2000 296 296 296
Capital stock, $.001 par value;
50,000,000 shares authorized;
6,414,149 shares issued and
outstanding at December 31,
2002, 2001 and 2000 6,414 6,414 6,414
Additional paid-in capital 1,868,503 1,844,503 1,820,503
Deficit accumulated during the
development stage (1,860,676) (1,801,987) (1,734,737)
Accumulated other comprehensive
income (loss) (9,832) (2,992) -
----------- ----------- -----------
Total Stockholders' Equity 4,705 46,234 92,476
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 18,159 $ 72,688 $ 125,293
=========== =========== ===========
The accompanying notes are an integral part of these financial
statements
45
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Inception
Year Ended Through
December 31, December 31, December 31, December 31,
2002 2001 2000 2002
------------ ------------ ------------ ------------
<s> <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 614 500 500 549,760
Reserve against product rights - - - 244,000
General and administrative
expenses 55,828 68,209 99,683 921,309
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 56,442 68,709 100,183 1,834,623
----------- ----------- ----------- -----------
Net (loss) before other items (56,442) (68,709) (96,108) (1,595,174)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Nonrefundable option income - - - 23,000
Gain/(loss) on sale of
marketable securities (1,685) - 167,249 177,038
Write down of marketable
securities - - (364,326) (364,326)
Interest expense (1,074) (2,171) (3,797) (114,184)
Dividend income 512 3,630 8,601 12,970
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (LOSS) (2,247) 1,459 (192,273) (265,502)
----------- ----------- ----------- -----------
NET (LOSS) BEFORE TAXES (58,689) (67,250) (288,381) (1,860,676)
----------- ----------- ----------- -----------
PROVISIONS FOR INCOME TAXES - - - -
NET INCOME (LOSS) $ (58,689) $ (67,250) $ (288,381) $(1,860,676)
----------- ----------- ----------- -----------
EARNINGS (LOSS) PER SHARE $ (0.01) $ (0.01) $ (0.04)
----------- ----------- -----------
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,414,149 6,414,149 6,414,149
=========== =========== ===========
The accompanying notes are an integral part of these financial
statements
46
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (May 8, 1987) TO DECEMBER 31, 2002
Additional
Preferred Stock Capital Stock 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
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
47
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
========= ======== ========= ======= ===========
48
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (May 8, 1987) TO DECEMBER 31, 2002
continued
Deficit
Accumulated Accumulated
During The Other Total
Development Comprehensive Stocklholder Comprehensive
Stage Income Equity Income
----------- ------------- ------------ -------------
<s> <c> <c> <c> <c>
Issuance of shares for cash
May 1987 $ - $ - $ 3,000
Issuance of shares for cash
August 1987 - - 279,940
Issuance of shares for product
rights and other intangible
assets - - -
Sale of shares to the public
for $.30 per share-restated - - 22,300
Deferred offering costs - - (7,892)
Exchange of shares regarding
pooling of interest of
subsidiaries:
Cancellation - - -
Re-issuance - - -
Issuance of shares for services - - 915
Cancellation of shares-former
officer - - (10,000)
Issuance of shares to A.P.S.I.
merger - - 45,000
Issuance of shares for prepaid
lease and working capital - - 250,000
Issuance of shares for services - - 2,850
Conversion of debt to preferred
stock - - 500,000
Exchange of preferred shares
for oil and gas properties - - 10,000,000
Issuance of shares for
services - - 4,637
Additional contributed capital - - 70,318
Net loss from inception through
December 31, 1996 (979,024) - $ (979,024) $ (979,024)
--------- ------------- ------------ ----------
Balance-December 31, 1996 (979,024) - 10,182,044
Net loss for the year ended
December 31, 1997 (53,554) - (53,554) $ (53,554)
--------- ------------- ------------ ----------
Balance-December 31, 1997 (1,032,578) - 10,128,490
49
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)
=========== ============= ============
The accompanying notes are an integral part of these financial
statements
50
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (May 8, 1987) TO DECEMBER 31, 2002
continued
Additional
Preferred Stock Capital Stock Paid-in
Shares Amount Shares Amount Capital
--------- -------- --------- ------- -----------
<s> <c> <c> <c> <c> <c>
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 - - - - -
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 - - - - 24,000
Comprehensive income:
Net loss for the year ended
December 31, 2002 - - - - -
Other comprehensive income (loss)
Unrealized loss on securities - - - - -
Comprehensive income (loss) - - - - -
--------- -------- --------- ------- -----------
Balance-December 31, 2002 296,300 $ 296 6,414,149 $ 6,414 $ 1,868,503
========= ======== ========= ======= ===========
51
Part 2 POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION (May 8, 1987) TO DECEMBER 31, 2002
<s> <c> <c> <c> <c>
Deficit
Accumulated Accumulated
During The Other Total
Development Comprehensive Stocklholder Comprehensive
Stage Income Equity Income
----------- ------------- ------------ -------------
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)
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
52
Additional contributed capital - - 24,000
Comprehensive income:
Net loss for the year ended
December 31, 2002 (58,689) - (58,689) $ (58,689)
Other comprehensive income (loss)
Unrealized loss on securities - (6,840) (6,840) (6,840)
Comprehensive income (loss) - - - $ (65,529)
------- ------- --------- ----------
Balance-December 31, 2002 $(1,860,676) (9,832) $ 4,704
=========== ============= =============
The accompanying notes are an integral part of these financial
statements
53
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Inception
Year Ended Through
December 31, December 31, December 31, December 31,
2002 2001 2000 2002
------------ ------------ ------------ ------------
<s> <c> <c) <c> <c>
CASH FLOWS FROM OPERATON
ACTIVITIES
Net income (loss) $ (58,689) $ (67,250) $ (288,381) $(1,860,676)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 614 500 500 549,760
Common stock issued for lease - - - 225,000
Gain on sale of securities 1,685 - (167,249) (177,038)
Write down of marketable
securities - - 364,326 364,326
Contributed interest - - - 70,018
Contributed rent and officer
compensation 24,000 24,000 14,000 110,000
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 accounts payable 1,310 2,753 (1,373) 4,746
Increase in accrued interest 1,074 2,171 1,021 41,090
Increase (decrease) in
advances from shareholder (15,384) (11,287) (224,463) (32,381)
----------- ----------- ----------- ----------
Net cash used in operating
activities (45,390) (47,613) (299,331) (461,155)
----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable
securities (20,056) - - (20,056)
Product rights, development
costs and intangibles - - - (244,000)
Increase in organization costs - - - (36,408)
Proceeds from sale of marketable
securities 2,861 - 362,249 404,084
Acquisition of fixed assets (1,366) - - (15,478)
----------- ----------- ----------- ----------
Net cash used in investing
activities (18,561) - 362,249 88,142
----------- ----------- ----------- ----------
54
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 (63,951) (47,613) 62,918 4,581
CASH AT BEGINNING PERIOD 68,532 116,145 53,227 -
----------- ----------- ----------- -----------
CASH AT END OF PERIOD $ 4,581 $ 68,532 $ 116,145 $ 4,581
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Stock issued in exchange for
goods and services and
marketable securities $ - $ - $ - $ 601,002
=========== =========== =========== ===========
Stock issued in exchange
for license fee $ - $ - $ - $ 500,000
=========== =========== =========== ===========
Cash paid for interest $ - $ - $ - $ -
=========== =========== =========== ===========
Cash paid for income taxes $ - $ - $ - $ -
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial
statements
55
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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 and 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 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 December 31,
2002, 2001 and 2000. (see note 5).
56
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY continued
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 were 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 are determined
annually. Deferred income tax assets and liabilities are computed for
those differences that have future tax consequences using the currently
enacted tax laws and rates that apply to the period in which they are
expected to affect taxable income. Valuation allowances are
established, if necessary, to reduce deferred tax asset accounts to the
amounts that will more likely than not be realized. Income tax expense
is the current tax payable or refundable for the period, plus or minus
the net change in the deferred tax asset and liability accounts.
Statement of Cash Flows - The Company considers (if and when they
have any) all highly liquid investments with maturities of three months
or less to be cash equivalents. During 1999 the Company had a non-cash
transaction as explained in Note 9. The Company had no non-cash
investing and financing transactions during 2002 and 2001.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
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
57
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES-continued
Company's contract sales have been from "outright" sales of its
installations. Any deposits received from plant installations are
immediately utilized to order and pay for the material and labor to
build the systems. During the past two years the Company has received
no deposits for plant 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 December 31, 2002, and this future 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 December 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
58
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES-continued
securities are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and
losses, net of tax if applicable, reported as a separate component of
stockholders' equity in accumulated other comprehensive income. The
company at this time has no trading securities.
NOTE 3 - BASIS OF PRESENTATION AND CONSIDERATIONS RELATED
TO CONTINUED EXISTENCE
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Company incurred net losses of $58,689, $67,250 and
$288,381 for the years ended December 31, 2002, 2001 and 2000,
respectively. Additionally, the Company has incurred losses of
$1,860,676 from inception through December 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 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. From inception through December 31, 2002, the
Company did not have any net income from operations. At the current
time, the Company has $18,159 in assets and $13,454 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
59
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - DEVELOPMENT STAGE COMPANY continued
assurance that the Company will be able to obtain additional funding,
and, if available, that the funding will be obtained on terms favorable
to, or affordable by the Company. The Company's management is
exploring several funding options and expects to raise additional
capital through private placements to continue to develop the Company's
operations around its business plan. Ultimately, however, the Company
will need to achieve profitable operations in order to continue as a
going concern.
NOTE 5 - PRODUCT RIGHTS
The company acquired certain product rights, development costs and
other intangible assets at a cost of $244,000 from H.C. Technology,
Inc. (a then related corporation). These assets were appraised on
September 15, 1987 for $1,480,000 and such assets include product
technology, employee replacement costs, marketing programs, trade
names, and other assets with determinable value. Since the acquisition
of these assets was a number of years ago, the valuation carried on the
books was reserved to a zero value at December 31, 2002, 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.
60
Amounts for estimated tax and deferred tax liabilities and assets
are as follows:
December 31, December 31, December 31,
2002 2001 2000
------------ ------------ -------------
<s> <c> <c> <c>
Tax liability $ - $ - $ 18,850
Use of NOL against deferred
tax liability - - 18,850
Deferred tax assets
Temporary - see below 209,212 209,189 206,751
NOL carryover 423,479 403,587 450,671
Net of valuation allowance (632,691) ( 612,776) (657,422)
Total $ -0- $ -0- $ -0-
The following temporary differences gave rise to the deferred tax
asset at December 31, 2002, 2001 and 2000.
December 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 benefit of securities write-down 126,287 126,287 123,871
Tax liability for organization
write-off ( 35) ( 58) (80)
Tax liability of option income - - -
Valuation allowance for judgment of
realizability of net deferred tax
benefit in future years (209,212) (209,189) (206,751)
Total $ -0- $ -0- $ -0-
For tax purposes, the Company had available at December 31, 2002,
estimated net operating loss ("NOL") carry-forwards for regular Federal
income tax purposes of $1,245,526. The balance of estimated NOL carry-
forwards through December 31, 2002 of $1,245,526 will expire as shown
below.
Year Ended
December 31,
2002 $ 8
2003 13,546
2004 156,871
2005 162,877
2006 130,190
2007 113,298
2008 108,239
2009 95,943
61
POWER SAVE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES(Continued)
2010 46,043
2011 76,223
2017 41,855
2018 36,512
2019 47,325
2020 91,217
2021 66,874
2022 58,505
-------------
$1,245,526
=============
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 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 $74,318 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, 2002 and 2001, the Company
paid down certain accrued liabilities to $8,708 and $23,018
respectively.
During the year ended December 31, 2002 the Company paid $3,000 to
the son of the above mentioned stockholder for promotional services
rendered.
NOTE 9 - NON-CASH TRANSACTIONS
The following non-cash investing and financing activities occurred
during the period from inception through December 31, 2002:
62
POWER SAVE INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - NON-CASH TRANSACTIONS continued
During 1991, the Company exchanged 50,000 shares of its preferred stock
for certain license fees valued at $500,000. During 1990, the Company
issued certain shares of its common stock for a prepaid lease valued at
$225,000.
During 1996, the Company exchanged 2,000,000 shares of preferred stock
for oil and gas properties valued at $10,000,000. This transaction was
rescinded. For financial statement purposes the transaction was
treated as being rescinded in 1998.
During 1999, the Company exchanged 296,300 shares of preferred stock
for marketable securities valued at the time of exchange at $592,600.
The value of the securities was determined by using market quotes for
the stock at the time of the exchange.
NOTE 10 - STOCKHOLDERS' EQUITY
The Company's Preferred Stock is non-voting, non-dividend bearing,
redeemable and convertible to common stock at the time the Company and
the holders of the preferred stock deem it appropriate.
The Company and its assets were spun off from the previously owned
parent company when a majority interest of the common stock in the old
company was sold to a consulting group by the principal shareholder.
The assets and liabilities were transferred to the current corporation
and all the activities from inception through December 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. Any offering costs
older than 90 days old are being written off immediately.
63
POWER SAVE INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - STOCKHOLDERS' EQUITY continued
The Company has adopted SFAS 130, which requires presentation of
comprehensive income(net income plus all other changes in net assets
from non-owner sources) and its components in the financial statements.
The company has changed the format of its statements of stockholders'
equity to present comprehensive income. Accumulated other
comprehensive income or loss shown in the statements of stockholders'
equity at December 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 has 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 December 31, 2002, 2001 and 2000, the market value of the
available-for-sale securities was $11,451, $2,781 and $5,773,
respectively. At December 31, 2002, the above consisted of 2,781
shares of PVNG, 2,000 shares of APIEF, 2,000 shares of SNG, 4,000
shares of TTPT, 200 shares of USON and 600 shares of WWCA. At December
31, 2001 and 2000, the Company's marketable securities consisted only
of 2,781 shares of Cottage Investments, Inc.(PVNG). 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 December 31, 2001Paving Stone Corporation securities, classified as
available-for-sale were written down to their market value because in
the opinion of management, the decline in market value of the
securities is considered to be other than temporary. As of December
31, 2002, the amount of the write down was $364,326. As of December
31, 2002, 2001 and 2000 respectively, the following applies to the
company's available-for-sale securities. Cost, after recognizing
security sales and write-downs, was $21,284, $5,773 and $5,773.
Unrealized loss at December 31, 2002 was $9,832, at December 31, 2001
was $2,993 and 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 loss on securities
available for sale that has been included in other comprehensive income
64
POWER SAVE INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - MARKETABLE SECURITIES continued
during the year ended December 31, 2002, 2001 and 2000 was a $6,840,
$2,992 and $339,060. There were no net unrealized holding gains on
securities available for sale in other comprehensive income during the
years ended December 31, 2002, 2001, and 2000. The total cost of the
stock sold during the year ended December 31, 2002, 2001, 2000 were
$4,546, $-0- and $195,000. The proceeds from stock sold in 2002 were
$2,861.
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.
65
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.
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.
66
(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.
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.
99.3 Subscription Agreement
67
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
pursuant to Rule 415 under the Securities Act, a post-effective
amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the
Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in the total dollar value of
securities offered, if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and
Exchange Commission (the "Commission") pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; (iii) To include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, to
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
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 April 30, 2003
Registrant: Power Save International, Inc.
/s/Scott Balmer, Chairman
- -----------------------------
Scott Balmer
68
26 POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Scott Balmer with full
power to act without the other, his true and lawful attorney-in-fact
and agent for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration
Statement and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises
in order to effectuate the same, as fully, for all intents and
purposes, as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them,
may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates stated.
Principal Officers
<s> <c> <c>
/s/ Burton D. O'Donald
- ---------------------- CEO April 30, 2003
Burton D. O'Donald
/s/Raymond H. Bolduc II
- ---------------------- President, COO, CFO April 30, 2003
Raymond H. Bolduc II Controller
/s/Victor V. Vurpillat VP, Acquisitions April 30, 2003
- ----------------------
Victor V. Vurpillat
/s/Mary Jane Balmer Interim Secretary and Treasurer April 30, 2003
- ---------------------- Directors
Mary Jane Balmer
/s/Scott E. Balmer Director April 30, 2003
- ----------------------
Scott E. Balmer