U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended March 31, 1999

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

       For the transition period from _______________ to ________________

                         Commission File Number: 0-29780

                              SOLPOWER CORPORATION
                 (Name of Small Business Issuer in its Charter)


             NEVADA                                               87-0384678
(State or Other Jurisdiction of                                (I.R.S Employer
 Incorporation or Organization)                              Identification No.)


   7309 EAST STETSON DRIVE, SUITE 102
          SCOTTSDALE, ARIZONA                                        85251
(Address of Principal Executive Offices)                           (Zip Code)

                                 (480) 947-6366
                           (Issuer's Telephone Number)

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:

                     COMMON STOCK, $.01 PAR VALUE PER SHARE
                                (Title of Class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     Registrant's revenues for its most recent fiscal year were $82,192.

     The  aggregate  market  value of the Common  Stock  held by  non-affiliates
computed  based on the  closing  price  of such  stock  on  March  31,  1999 was
approximately $17,808,126.

     The  number of shares  outstanding  of the  registrant's  classes of Common
Stock, as of March 31, 1999 was 23,456,560.

     Documents incorporated by reference: None

     Transitional Small Business Disclosure Format (check one): Yes [ ]  No [X].
<PAGE>
                                     PART I

     Except  for  historical  information  contained  herein,  this Form  10-KSB
contains  forward-looking  statements  within the  meaning of Section 27A of the
Securities Act of 1933, as amended (the "SECURITIES ACT") and Section 21E of the
Securities  Exchange Act of 1934, as amended (the  "EXCHANGE  ACT") and Solpower
Corporation  (the  "COMPANY")  intends that such  forward-looking  statements be
subject to the safe harbors created thereby.  Wherever possible, the Company has
identified  these  forward-looking  statements  by words such as  "ANTICIPATES,"
"BELIEVES,"  "ESTIMATES,"  "EXPECTS,"  "INTENDS" and similar  expressions.  Such
forward-looking  statements involve risks and uncertainties and include, but are
not limited to,  statements  regarding future events and the Company's plans and
expectations.  The  Company's  actual  results may differ  materially  from such
statements.  Factors that may cause or contribute to such  differences  include,
but are not limited to, those  discussed in "ITEM 1.  DESCRIPTION  OF BUSINESS -
FACTORS AFFECTING FUTURE  PERFORMANCE" and "ITEM 6. MANAGEMENT'S  DISCUSSION AND
ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF  OPERATIONS,"  as well as those
discussed  elsewhere  herein  and in the  exhibits  hereto and  incorporated  by
reference.  Although the Company  believes that the  assumptions  underlying the
forward-looking  statements herein are reasonable,  any of the assumptions could
prove  inaccurate  and,  therefore,  there can be no assurance  that the results
contemplated in such forward-looking  statements will be realized.  In addition,
as disclosed under "ITEM 1.  DESCRIPTION OF BUSINESS - FACTORS  AFFECTING FUTURE
PERFORMANCE,"  the  business  and  operations  of the  Company  are  subject  to
substantial   risks   which   increase   the   uncertainties   inherent  in  the
forward-looking  statements  included in this Form 10-KSB. The inclusion of such
forward-looking  information  should not be regarded as a representation  by the
Company  or any other  person  that the  future  events,  plans or  expectations
contemplated by the Company will be achieved.

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     The Company has licensed the rights to distribute  and market  SOLTRON,  an
enzyme based fuel enhancing  product,  and SP34E, an ozone safe refrigerant gas,
throughout  North America.  The Company  manufactures  and  distributes  SOLTRON
through  traditional  channels including fuel wholesalers,  oil distributors for
bulk treatment,  automotive  aftermarket stores,  mass merchandising  chains and
directly to licensees.  The Company commenced  manufacturing  SP34E in Canada in
May, 1999 and distribution is expected to be through  wholesale  distributors of
refrigeration  products.  The  Company  has also  the  right  to  acquire  other
international Solpower operations and marketing territories.

     The  Company  was  incorporated  in  Utah  on  June  7,  1982  as  Dynafuel
Corporation.  The Company originally  conducted limited research and development
of an  experimental  fuel using  alcohol and other  chemicals  in a  proprietary
combination  to produce a gasoline  like motor fuel.  The Company  ceased  these
operations  in 1988 and  remained  dormant  until 1995.  In November  1995,  the
Company  acquired  the  marketing  rights  to a  virtual  reality  motion  based
simulator and, in December 1995, changed its name to Virtual Technologies,  Inc.
In July 1996, the Company merged into a newly-formed  subsidiary incorporated in
Nevada to change its  domicile  to the State of Nevada.  During the fiscal  year

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ended March 31, 1997, the Company sold the motion based  simulator  contract and
related assets.

     In November  1996,  the Company  entered  into a licensing  agreement  with
Dominion  Capital  Pty  Ltd.  ("DOMINION  CAPITAL")  to  acquire  the  exclusive
manufacturing,  distribution, marketing and sales rights for the product SOLTRON
in the  United  States,  Canada and  Mexico.  As a result of  entering  into the
licensing  agreement,  Dominion Capital and its affiliates gained control of the
Company. A new Board of Directors was then elected and new management installed.
A corporate philosophy of acquiring and commercializing environmentally friendly
products  was  initiated.  In June  1998,  the  Company  entered  into a  second
licensing   agreement   with   Dominion   Capital  and  acquired  the  exclusive
manufacturing, distribution, marketing and sales rights for the product SP34E in
the United States,  Canada and Mexico. In June 1999, the Company executed letter
of intent  setting  forth its  intent to  acquire  Solpower  Australia  Pty Ltd.
("SOLPOWER  AUSTRALIA"),  an  Australian  affiliate  of  Dominion  Capital  that
manufactures and distributes SOLTRON and SP34E in Australia and New Zealand. The
Company expects to acquire the assets and  liabilities of Solpower  Australia in
exchange for 3,000,000 to 4,000,000  shares of Common Stock of the Company.  The
actual terms of acquisition will be set forth in a definitive agreement which is
subject to approval of the Company's Board of Directors.

PRODUCTS

     SOLTRON.  SOLTRON is an enzyme based liquid fuel enhancing product that was
developed  over a period of 18 years by a group of  scientists  at the  Japanese
Institute of Bio-Energy.  When added to fossil fuels SOLTRON reduces particulate
exhaust  emissions,  improves  fuel  economy,  dispenses  fuel  sludge and other
impurities  and  ultimately  lowers engine  maintenance  costs.  When mixed with
liquid fuels,  SOLTRON changes the fuel's  molecular  structure and improves its
oxygen  absorption  and  combustion  efficiency.  These  enzymes  "FEED"  on the
contaminants  that cause fuel  degradation.  SOLTRON  can be added to all liquid
fossil fuels including  gasoline,  diesel and light and heavy oils either at the
fuel pump or in bulk fuel  tanks.  SOLTRON has been sold  commercially  in Japan
since 1993 and in  Australia  since 1996.  SOLTRON was awarded the 1997 Best New
Aftermarket  Product Award (Chemical) by the Australian  Automotive  Aftermarket
Association.  SOLTRON  will be  marketed  by the  Company in North  America as a
natural  enzyme  product  that will reduce  emissions,  improve fuel economy and
reduce engine maintenance.

     Use data and testing have demonstrated that use of SOLTRON caused increased
fuel  economy,   reduction  of  emissions  and  reduction  of  black  smoke  and
particulate  matter while  controlling  sludge and algae in diesel.  The Company
continues to conduct  field and objective  laboratory  testing of SOLTRON and is
developing a database of independent tests and data regarding the effects of use
of SOLTRON as a fossil fuel additive.

     SP34E.  SP34E is a refrigerant gas developed in Japan by the  Kinoh-Kinzohu
Company as a replacement gas for ozone-depleting fluorinated refrigerants. SP34E
is currently sold in Japan, Canada, Australia and other Asian rim countries. Its
applications  include  utilization  in  automotive,   domestic,  commercial  and
transport  refrigeration  and  air-conditioning  systems  as an  alternative  to
FREON(R)  (R-12) and other  fluorinated  refrigerants.  SP34E generally does not
require replacement of mechanical  components,  removal of mineral and synthetic

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<PAGE>
oils that are found in older  refrigeration  systems  and has a lower  discharge
pressure  and a much  shorter  atmospheric  life span than other  commonly  used
refrigerant gases.

     SP34E is used by  various  companies  in  Australia,  New  Zealand,  Japan,
Thailand and Taiwan.  Significant  use data has been  developed,  the results of
which  consistently show that SP34E is an acceptable direct drop-in  replacement
gas for R-12 and  R-134a  with  improved  operating  characteristics  over other
refrigerant  replacement  gases.  In March of 1999,  the Company  entered into a
joint venture  agreement  with  Protocol  Resource  Management  Inc., a Canadian
company,  to  manufacture  and  distribute  SP34E in Canada and elsewhere in the
Company's  licensed  territory.  The joint  venture  is  operated  as a Canadian
corporation equally owned by the Company and Protocol Resource Management Inc.

SUPPLIERS

     SOLTRON.  SOLTRON  consists of natural  organic enzymes mixed with low odor
base solvent.  SOLTRON enzyme concentrate is supplied exclusively to the Company
by Neway Japan K.K. of Tokyo,  Japan.  Neway Japan K.K. has informed the Company
that it currently  has  sufficient  inventory of enzyme  concentrate  on hand to
supply the  Company's  anticipated  needs  through 1999 and 2000.  Low odor base
solvent is readily available  through local suppliers.  The Company has produced
its own  proprietary  bottle  design for  retail  packaging  and has  selected a
manufacturer  that can produce in both the eastern and western  United States in
quantities to meet the Company's and its licensees' anticipated needs.

     SP34E. The components of SP34E are readily  available  through a variety of
local and national suppliers.

MARKETING STRATEGIES

     SOLTRON.  The fuel  market  may be divided  into  distinct  groups  such as
diesel,  gasoline,  bunker and aviation fuel users.  These groups can be further
sub-divided into distinct user segments: commercial transport fleets, government
fleets,  marine transport fleets,  retail  distribution and industrial.  The EPA
recently  quadrupled the number of  "NON-ATTAINMENT  ZONES" in areas with severe
emission  problems  resulting in certain fleet operators being forced to test or
to start using alternative fuels such as propane or natural gas. New regulations
such as  restricted  hours of service  are also being  considered.  The  Company
believes  that this  increased  regulation  creates  opportunities  for consumer
acceptance of its SOLTRON product and is focusing on all North American markets.
The Company's  objective is to penetrate the fuel treatment  market and increase
fuel  treatment  usage of SOLTRON  over a five year  period  while  establishing
consumer recognition of the SOLTRON brand name.

     The Company intends to exploit its SOLTRON manufacturing,  marketing, sales
and  distribution  rights in the United  States,  Canada  and  Mexico  initially
through direct operation of its Southeast, Southwest and Great Lakes Territories
and to expand into four additional territories. The territories are as follows:

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<PAGE>
     SOLPOWER NORTHEAST            MAINE, VERMONT,  MASSACHUSETTS,  CONNECTICUT,
                                   RHODE ISLAND,  NEW  HAMPSHIRE,  NEW YORK, NEW
                                   JERSEY AND PENNSYLVANIA

     SOLPOWER                      MID-ATLANTIC    DELAWARE,    WASHINGTON   DC,
                                   MARYLAND,  WEST  VIRGINIA,   VIRGINIA,  NORTH
                                   CAROLINA,   SOUTH  CAROLINA,   TENNESSEE  AND
                                   KENTUCKY.

     SOLPOWER CENTRAL              MINNESOTA,   IOWA,  MISSOURI,  NORTH  DAKOTA,
                                   SOUTH DAKOTA,  NEBRASKA,  KANSAS, WYOMING AND
                                   COLORADO.

     SOLPOWER SOUTHEAST            ALABAMA,    ARKANSAS,    FLORIDA,    GEORGIA,
                                   LOUISIANA AND MISSISSIPPI.

     SOLPOWER SOUTH                OKLAHOMA, NEW MEXICO AND TEXAS.

     SOLPOWER GREAT LAKES          OHIO,   INDIANA,   MICHIGAN,   ILLINOIS   AND
                                   WISCONSIN.

     SOLPOWER NORTHWEST            ALASKA,  CANADA,  IDAHO,  OREGON, MONTANA AND
                                   WASHINGTON.

     SOLPOWER SOUTHWEST            ARIZONA, CALIFORNIA, HAWAII, NEVADA AND UTAH.

     SOLPOWER MEXICO               MEXICO.

     The  Company  has  entered  into  a  license   agreement  with  Houston
Mercantile  Exchange,  Inc.  ("HOUSTON  MERCANTILE")  for the South  and  Mexico
Territories.  Houston Mercantile has also entered into an Exclusive Distribution
Agreement  with  Productos  Quimicos  Mardupol  ("MARDUPOL")  of Mexico  City to
distribute  SOLTRON  throughout  Mexico.  The Company  was a party to  licensing
agreements with Masters  Marketing Group, Inc. for the Great Lakes Territory and
with Solpower Southeast  Corporation for the Southeast  Territory but in May and
September of 1999, respectively,  the Company terminated these relationships and
took  back  those   territories,   which  it  currently  operates  as  corporate
territories.  The  Company is  currently  marketing  SOLTRON  using  traditional
marketing channels to develop sales and product awareness before continuing with
the license  marketing  program.  The  Company  will  retain the  marketing  and
distribution rights of the non-licensed territories until such time as it enters
into a licensing agreement covering such territories.

     The license  agreements  define the  territory in which the  licensees  can
manufacture,  distribute, market and sell SOLTRON for a period of five years and
require the  licensees  to purchase  minimum  annual  amounts of SOLTRON  enzyme
concentrate  from the Company.  The  agreements  may be extended  once by either
party for an additional  five year period.  Currently,  the license fee for each
territory varies from $600,000 to $1,800,000.  A 10% down payment on the license
fee is generally required on entering into the agreement and the balance,  which
is evidenced by a promissory note payable over a two year period,  is payable by
charging a premium to the licensees on the SOLTRON enzyme concentrate price. The

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<PAGE>
licensees  are required to contribute  to a national and  territorial  marketing
fund that is administered by the Company to ensure that adequate marketing funds
are  dedicated  to promotion  of the  product.  Annual sales  targets are set to
encourage  licensees  to maximize  sales  efforts.  Licensees  have the right to
appoint independent operators in their territory or utilize a direct sales force
similar to that used by the Company.

     Distribution of SOLTRON in the Company's  Southwest  territory commenced in
June 1998.  Within this  territory,  the Company deploys sales personnel to sell
and create a demand for SOLTRON in all market  segments.  The Company  currently
utilizes oil marketers,  independent  sales  representatives  and a direct sales
force to provide a focused  marketing  effort,  which it  believes  will  expose
SOLTRON  directly  to  prospective  customers.   The  Company  also  anticipates
utilizing  other  traditional  distribution  channels  including an Internet Web
site,  resale  distribution  through small retail  chains,  resale  distribution
through large retail chains,  mass  merchandising,  multi-level  free-enterprise
systems, home network sales,  catalogue and direct mailing, and telemarketing to
develop  a  national   marketing  effort.  The  Company's  overall  goal  is  to
successfully  penetrate and create a substantial demand for SOLTRON in each user
market segment before completing its license marketing program.

     The Company employs Area Sales Managers ("ASM") for the southern California
region of the Company's  Southwest  Territory and for the Great Lakes  Territory
whose sales orders are serviced from the Company's  Phoenix,  Arizona production
facility.  The Southeast  Territory is being developed under a similar marketing
plan. The Company is developing  product awareness at the national level through
advertising  in trade journals and  participation  in  transportation  and other
industry related trade shows. Other activities to promote the Company's products
include the identification and development of operations,  marketing, accounting
and  administrative  systems  to  achieve  efficiency  for the  Company  and its
licensees,  the establishment of a corporate  communications system supported by
an in-house desktop publishing department,  as well as redesign and upgrading of
the corporate  image with new logos,  web site,  product  brochures,  trade show
materials, product labeling and packaging and all related marketing materials.

     SP34E.  SP34E is a direct  drop-in  refrigerant  gas that replaces R-12 and
R-134a refrigerant gases in existing  air-conditioning  and refrigeration units.
Refrigerant gas is widely used in  air-conditioning  and refrigeration  units in
the   residential,    automotive,   commercial   and   transportation   sectors.
Historically,  chlorofluorocarbons ("CFCS"),  hydrochlorofluorocarbons ("HCFCS")
and  hydrofluorocarbons  ("HFCS") have been utilized as refrigerant gasses. CFCs
used as refrigerant  gases include R-12, HCFCs include R-406A,  and HFCs include
R-134a.  Emissions  of these  gases have been proven to cause  depletion  of the
ozone  layer  resulting  in global  warming.  The EPA has banned  production  or
importation  of CFCs,  and  production of HCFCs is scheduled to be phased out in
the United States by 2029. HFCs have not been banned or scheduled for phase-out,
but contain gases that have global  warming  potential  and are  generally  less
effective as a refrigerant gas than CFCs or HCFCs. The Company intends to market
SP34E as an environmentally  safe replacement for R-12 refrigerants with greater
efficiency and less environmental impact than R-134a.

                                       5
<PAGE>
     The  Company has  entered  into a joint  venture  agreement  with  Protocol
Resource  Management  Inc.  ("Protocol")  of  Aurora,  Ontario  Canada,  for the
manufacture  and  distribution of SP34E in Canada and elsewhere in the Company's
licensed  territory.  Protocol  was founded in 1993 and provides a full range of
refrigerant  management  services.  It has expanded to become the largest R-134a
repackaging  operation  in Canada  and has  established  a number of  innovative
refrigerant programs for some of the largest original equipment manufacturers in
the Canadian and U.S. refrigerant industry. The Company anticipates that it will
develop a marketing  strategy for certain  market  segments and also market this
product directly,  similar to the strategy developed by the Company's  affiliate
Solpower Australia.

PRODUCT RIGHTS ACQUISITION AGREEMENTS

     SOLTRON.  The Company acquired the exclusive rights to produce,  market and
distribute  SOLTRON in North America through an agreement with Dominion  Capital
in  consideration  for 5,000,000  shares of the  Company's  Common Stock and the
grant of certain options and payment of cash  consideration upon meeting certain
sales  levels.  The agreement is for a period of five years and is renewable for
an additional five year term.

     SP34E.  The Company  acquired the exclusive  North American  manufacturing,
distribution,  marketing  and sales  rights to SP34E  from  Dominion  Capital in
consideration  of the issuance of 6,000,000 shares of the Company's Common Stock
and the payment to Dominion  Capital of a royalty of $2.25 per kilogram of SP34E
sold by the Company.  The initial  term of the  agreement is for five years from
the date that the Company first achieves sales of SP34E  sufficient to establish
a predictable growth rate (but not later than July 1, 2000), and the Company has
an option to renew the agreement for an additional five year term.

     The Company also has a right of first refusal to commercialize  SOLTRON and
other  products  controlled  by  Dominion  Capital  on a  global  basis  and has
announced  its  intention  to acquire  Solpower  Australia.  Solpower  Australia
manufactures and markets SOLTRON and SP34E throughout Australia and New Zealand.

PROPRIETARY RIGHTS

     The Company  relies on a combination  of trade secret and  copyright  laws,
license, confidentiality and non-compete agreements to establish and protect its
proprietary rights in its products.  There can be no assurance that any license,
confidentiality or non-compete  agreement between the Company and its employees,
consultants and licensees will provide  meaningful  protection for the Company's
proprietary  information in the event of any  unauthorized  use or disclosure of
such proprietary information.

         The Company has applied  with the United  States  Patent and  Trademark
Office  ("USPTO")  for a trademark  registration  for SOLTRON and a service mark
registration for the mark SOLPOWER. Registration of the SOLTRON product has also
been  made  with the EPA.  Dominion  Capital  has  applied  with the  USPTO  for
tradename  registration for SP34E. Solpower Australia has registered SOLTRON and
SP34E with the Australian Patents and Trademarks Office.

                                       6
<PAGE>
COMPETITION

     The Company  competes  with  numerous  well-established  fuel  additive and
chemical  products  companies  that possess  substantially  greater  experience,
financial,  marketing,  personnel and other resources than the Company.  Many of
the Company's competitors have achieved significant  national,  retail and local
brand name and  product  recognition  and engage in  extensive  advertising  and
promotional  programs,  both  generally and in response to efforts by additional
competitors to enter new markets and to introduce new products.

     The Company's ability to compete  successfully will depend on the Company's
success at  penetrating  each  targeted  market  segment with its  product,  the
consumer  acceptance  of its  product and the  Company's  ability to license and
develop new and improved  products.  There can be no assurance  that the Company
will be able to compete successfully,  that its products will meet with consumer
approval, that competitors will not develop and market products that are similar
or  superior  to the  Company's  products  or that the  Company  will be able to
successfully  enhance its products or develop new products meeting with consumer
approval.  The  Company  intends  to  focus  on  the  environmentally   friendly
characteristics of its products in comparison to its competitors' products.

     Some products that may compete directly with the Company's  SOLTRON product
include  STP Fuel  Stabilizer  and STP Diesel Fuel  Treatment  produced by First
Brands Corporation, Slick 50 produced by Slick 50 Products Corporation, Valvtect
VT-5000  produced by Valvtect  Petroleum  Products Corp. and Fuelen  produced by
Fuelen International, Inc. The Company believes that it can successfully compete
with these  products and penetrate  the fuel  additive  market due to the unique
environmentally friendly characteristics and multi-function  applications of its
SOLTRON  product,  such as reduction of exhaust  emissions,  improvement of fuel
efficiency and dispersion of diesel fuel sludge.

     The Company will compete with numerous national and international companies
that produce  refrigerant  gas including  DuPont,  Elf Autochem,  ICI and Allied
Signal.  The Company  believes that the ban and  phase-out of other  refrigerant
gases combined with the environmentally safe characteristics and product utility
of its SP34E product will allow it to compete  successfully  in the  refrigerant
gas market.

PRODUCTION FACILITIES

     The Company leases an approximately  12,000 square foot industrial facility
in Phoenix, Arizona that serves as its production,  warehousing and distribution
plant for its  SOLTRON  product as well as its  territorial  sales  office.  The
facility has capacity to produce  1,000,000  gallons of SOLTRON product per year
and is being  expanded  to produce up to  3,000,000  gallons of SOLTRON per year
which is expected to meet the  Company's  anticipated  needs for product for the
foreseeable  future.  The  Company  anticipates  that  the  expanded  production
facility  will be fully  operational  in November  1999.  See,  "DESCRIPTION  OF
PROPERTY" and "NOTES TO THE FINANCIAL STATEMENTS - Note 8."

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<PAGE>
     The Company has closed the Elkhart,  Indiana SOLTRON  production  facility,
formerly  operated by the Great Lakes and Southeast  licensees and is moving all
the  equipment to its facility in Phoenix,  Arizona in order to meet  production
capacity  expansion at that  location.  The lease on the Elkhart  plant has been
terminated, effective September 1, 1999.

REGULATION

     The use of certain  chemicals and other  substances is subject to extensive
and  frequently  changing  federal,   state,   provincial  and  local  laws  and
substantial regulation under these laws by governmental agencies,  including the
EPA, the Occupational Health and Safety  Administration,  various state agencies
and county and local  authorities  acting in conjunction  with federal and state
authorities.  Among other things, these regulatory bodies impose requirements to
control air, soil and water pollution,  to protect against occupational exposure
to chemicals,  including health and safety risks, and to require notification or
reporting of the storage,  use and release of certain  hazardous  chemicals  and
substances.  The Company has incurred costs of  approximately  $300,000 to cause
its Phoenix facility to meet state and local requirements for the utilization of
these  products  in the  production  of its  SOLTRON  product at this site.  The
Company's  products utilize  chemicals that are classified under applicable laws
as combustible and hazardous  chemicals or substances.  The Company provides all
required label warnings and instructions for the handling of these substances.

     The EPA has established the EPA Motor Vehicle  Aftermarket  Retrofit Device
Evaluation  Program  to  evaluate  the  effects of fully  developed  aftermarket
devices on vehicle emissions and fuel economy. Participation in the program by a
manufacturer  of devices is  voluntary.  EPA  evaluations  of engines,  retrofit
devices,  emission  control  devices and related  products are conducted for the
purpose  of  keeping  policy  makers,  technical  personnel  in  government  and
industry,  and the  general  public  abreast  of  developments  in the  field of
automotive  fuel  economy  and  pollutant  emission  control.  Aftermarket  fuel
additives  are also  included in the  evaluation  program and are required to be
registered  with the EPA Fuels and Energy  Division.  The Company has registered
its SOLTRON  product  under this  program  both as an additive  and for the bulk
treatment of fuels.

     The  Company  will also be  subject  to  regulation  by the  Federal  Trade
Commission  ("FTC") with respect to the marketing of its products.  Although the
FTC has a long history of pursuing enforcement actions against fuel saving, fuel
additive and oil additive products,  the Company believes that it has sufficient
research,  independent testing, use data and scientific evidence to substantiate
the Company's advertising and promotional claims regarding its SOLTRON product.

     The  Company  will be  subject to making  application  to the EPA under the
Significant New Alternatives  Policy  ("SNAP"),  the American Society of Heating
and Air Conditioning Engineers,  Inc. ("ASHRAE") and Underwriters  Laboratories,
Inc.  ("UL(R)") in order to categorize the acceptable uses of itS SP34E product.
The  Company  intends  to make all the  necessary  EPA-SNAP,  ASHRAE  and  UL(R)
submissions prior to marketinG SP34E in the United States and estimates the cost
of obtaining these approvals will be approximately $100,000.

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<PAGE>
     The Company believes that it is in substantial compliance with all laws and
regulations  governing  its material  business  operations  and has obtained all
required licenses and permits for the operation of its business. There can be no
assurance,  in the future,  that the  Company  will be able to comply  with,  or
continue  to comply  with,  current or future  government  regulations  in every
jurisdiction in which it will conduct its material business  operations  without
substantial  cost or  interruption  of its  operations,  or that any  present or
future federal, state, provincial or local environmental  protection regulations
may not restrict the Company's  present and possible future  activities.  In the
event that the Company is unable to comply with such  requirements,  the Company
could  be  subject  to  substantial  sanctions,  including  restrictions  on its
business  operations,  monetary liability and criminal  sanctions,  any of which
could have a material adverse effect upon the Company's business.

EMPLOYEES

     At  September  1, 1999,  the  Company  employed  nine full time  personnel,
including three administrative, one production and five marketing employees. The
Company's employees are not covered by any collective bargaining agreements. The
Company considers its relationship with its employees to be good.

FACTORS AFFECTING FUTURE PERFORMANCE

     LIMITED OPERATING HISTORY.  The Company's current operations have only been
implemented  since  November  1996.  Accordingly,  the  Company  has  a  limited
operating  history  with  respect  to the  distribution  and  marketing  of fuel
additives and is in the process of  developing  its  marketing  strategies  with
respect to its refrigerant gas product.  The Company has had negative cash flow,
operating losses and insufficient  liquidity with respect to current  operations
and  expects to  continue  to have  operating  losses  until its sales  revenues
increase substantially.  The Company will require significant additional capital
to fully implement its business plan and expand its operations.  There can be no
assurance  that the Company  will be able to achieve,  or  maintain,  profitable
operations or positive cash flow at any time in the future.

     NEED  TO  DEVELOP  SALES  AND  PRODUCT   AWARENESS.   Establishment   of  a
distribution  network  sufficient  to supply  customer  demand for the Company's
SOLTRON  product  will be critical to the  success of the  Company.  The Company
anticipates  developing this network  primarily  through  traditional  marketing
channels in the fuel, oil chemical and automotive  aftermarket  industries.  The
Company  has not yet  implemented  its  strategies  with  respect  to its  SP34E
product. Numerous factors, including lack of sufficient inventory or capital, or
failure of the  Company's  products  to generate  sufficient  demand and lack of
sufficient  qualified,  experienced personnel may contribute to the difficulties
the Company will face in establishing an efficient  distribution network for its
products.  While the Company intends to engage qualified  personnel and believes
it is  sufficiently  capitalized,  no assurance  can be given that the Company's
products will be accepted by industrial or retail consumers, that a satisfactory
distribution   network  can  be  established  or  that  the  Company's  proposed
operations will be profitable.

                                       9
<PAGE>
     UNCERTAINTY OF WIDESPREAD MARKET ACCEPTANCE OF PRODUCTS,  LIMITED MARKETING
EXPERIENCE.  The Company is still in the initial stages of marketing SOLTRON and
has not yet commenced marketing of its second product, SP34E. As is typical with
new products, demand and market acceptance for the Company's products is subject
to a high level of uncertainty.  Achieving  widespread market acceptance for its
products  will require  substantial  marketing  efforts and the  expenditure  of
sufficient  funds to create brand  recognition  and customer demand and to cause
potential  customers  to  consider  the  potential  benefits  of  the  Company's
products. The prospects for the Company's product line will be largely dependent
upon the  Company's  ability to achieve  market  penetration.  Achieving  market
penetration will require  sufficient  efforts by the Company to create awareness
of and demand for the Company's  products.  The  Company's  ability to build its
customer base will depend in part on the Company's  ability to locate,  hire and
retain sufficient  qualified  marketing personnel and to fund marketing efforts,
including  advertising.  There can be no assurance  that the Company's  products
will  achieve  widespread  market  acceptance  or that the  Company's  marketing
efforts will result in profitable operations.

     LICENSE FEE RECEIVABLES. The Company intends to primarily market SOLTRON in
its corporate and corporate managed territories, before developing sales through
its license program.  The Company's license  agreements require each licensee to
pay an initial  license fee which is payable 10% by a cash down  payment and the
balance by delivery of a promissory note secured by the licensee's rights in the
license agreement and generally all other assets of the licensee. The promissory
note is payable over a two year period and the Company  charges a premium on the
SOLTRON enzyme concentrate price sold to the licensee and applies the premium to
the  amounts  due under the  promissory  note.  If  minimum  sales  volumes of a
licensee are not sufficient to make scheduled  payments on the promissory  note,
the licensee is responsible for the balance.

     The Company  records  license fee  receivables as an asset. As of March 31,
1999,  the license fee  receivable  consisted  of  $2,400,000  (100%),  due from
Houston  Mercantile.  Houston  Mercantile is currently in default in that it has
failed to meet the minimum sales volume requirements or to otherwise satisfy the
scheduled payment requirements.  However, Houston Mercantile has been successful
in finalizing a distribution  agreement with Mardupol in Mexico. The risk to the
Company of failure of the licensee is enhanced due to the  concentration of only
one licensee comprising the total obligor on the entire receivable amount.

     While  failure  of  performance  or payment  by any  licensee  could have a
substantial  impact on the  license  fee  receivable  amount in the  short-term,
cancellation of the license for a particular territory will allow the Company to
engage in sale of its SOLTRON product  directly in such territory or to remarket
the  territory.  The  Company  has  subsequently  taken back the Great Lakes and
Southeast licenses and is operating these territories as corporate territories.

     VARIABILITY OF OPERATING RESULTS AND VOLATILITY OF COMMON STOCK PRICES. The
Company's  quarterly  operating  results have in the past and are anticipated in
the future to be highly volatile.  While the Company anticipates increased sales
of its products will continue to generate revenue,  the operating results of any
quarterly period as compared to the previous quarter or the same quarter for the
prior period will, in all likelihood, vary significantly.  Default by a licensee

                                       10
<PAGE>
resulting  in a  write-off  of  the  associated  license  fee  receivable  could
dramatically  and adversely affect the Company's total net assets for the period
in which such event occurred.  Significant  variances in operating  results from
period to period  could  result in high  volatility  of the market price for the
Company's Common Stock.

     LIMITED  PRODUCT  LINE.  The  Company  currently  holds the  marketing  and
distribution   rights  to  two  products,   SOLTRON  and  SP34E.  The  Company's
profitability will be dependent upon the market acceptance of these products and
the Company's ability to improve these products and develop additional  products
to meet consumer approval.

     SUPPLY, CAPACITY AND DISTRIBUTION CONSTRAINTS.  In order for the Company to
successfully  market  its  products,  the  Company  must be able to fill  orders
promptly for its sales distributions as well as supplying its licensees with the
SOLTRON  concentrate.  Additionally,  licensees  will have to meet  their  order
demands  promptly.  The ability of the Company and its  licensees  to meet their
supply  requirements  promptly will depend on numerous  factors  including their
ability to  establish  successfully  an  effective  distribution  network and to
maintain adequate  inventories and the ability of the Company's sole supplier to
adequately  produce the SOLTRON  product in volumes  sufficient  to meet demand.
Failure  of the  Company  and its  licensees  to  adequately  supply  product to
retailers or of the  Company's  supplier to adequately  produce  product to meet
demand could materially adversely impact the operations of the Company.

     DEPENDENCE UPON RAW MATERIALS AND SUPPLIERS.  The SOLTRON  concentrate will
be subject to price  fluctuations  based upon supply and demand of such product.
In  addition,  because the product is  produced  in Japan,  fluctuations  of the
relative  value of the yen and  dollar  could  adversely  affect the cost of the
product to the Company.  The Company's  sole supplier of its SOLTRON  product is
Neway Japan K.K.  Interruption of the Company's product supply could result from
several  factors,  such as disruption of supply of raw product,  work stoppages,
strikes or other labor  difficulties,  changes in governmental or  international
regulations  or natural or man caused  disasters  occurring  with respect to its
supplier.  Any increase of costs of the  Company's raw products or disruption of
its supplier could severely affect the Company's business operations.

     RELIANCE ON MANAGEMENT;  LIMITED PERSONNEL. The Company is highly dependent
on the services of its executive  officers,  James H. Hirst and R.L.  (Beau) Van
Deren. Mr. Hirst and Mr. Van Deren are not subject to employment  agreements and
the Company does not maintain any key man life insurance on Mr. Hirst or Mr. Van
Deren.  The loss of the services of Mr. Hirst or Mr. Van Deren or the  inability
to attract or retain alternative or additional  qualified  personnel will have a
materially  adverse affect on the Company.  Attracting  and retaining  qualified
personnel is critical to the Company's business plan. No assurances can be given
that the Company will be able to retain or attract such  qualified  personnel or
agents, or to successfully implement its business plan.

     CAPITAL REQUIREMENTS.  The Company anticipates that additional funding will
be required to meet  management's  growth  objectives  and fully  implement  its
business plan. The Company may seek additional debt or equity financing  through
banks, other financial institutions,  companies or individuals. No assurance can
be given that the Company will be able to obtain any such  additional  equity or

                                       11
<PAGE>
debt financing on  satisfactory  terms or at all. No assurance can be given that
any such  financing,  if obtained,  will be adequate to meet the Company's needs
for the foreseeable  future.  If the Company is not able to successfully  obtain
sufficient  capital,  the  Company's  ability to continue  as a viable  business
enterprise will be substantially impaired.

     MANAGEMENT OF GROWTH. The Company anticipates rapid growth in the future if
its marketing  efforts are successful.  In such event it will require  effective
management  and  resources.  This growth,  if achieved,  will place  significant
strains on the Company's financial,  managerial and other resources.  Failure to
effectively  manage  growth  could  have  a  materially  adverse  effect  on the
Company's business and profitability.

     SEASONAL  FLUCTUATIONS.  The Company's limited  experience  suggests that a
greater  demand  for its SP34E  product  will occur in summer  months,  which is
anticipated to result in more revenues in the Company's  first and second fiscal
quarters  ending  June  30  and  September  30,  respectively.  Fluctuations  in
quarterly operating results may impact the market for the Company's Common Stock
and result in high volatility the price of the Company's Common Stock. This will
be  somewhat  offset  if the  Company  completes  its  acquisition  of  Solpower
Australia Pty Ltd.,  whose  refrigerant  gas sales occur in its summer months of
October through March.

     COMPETITION.  The  markets for fuel  additives  and  refrigerant  gases are
highly competitive.  The Company believes that its products can compete and that
its management's qualifications will enable it to compete effectively.  There is
no assurance that the Company's  business plan can be successfully  implemented.
The Company will compete with established  manufacturers  and distributors  that
have developed brand recognition,  many of which will have significantly greater
operating  history,  name  recognition  and  resources  than the Company.  Other
companies  and  vendors  may also enter into  competition  with the Company as a
result of the  Company's  increased  marketing  efforts.  The lack of  financial
strength of the Company may be a negative  factor for the  Company's  ability to
penetrate its product markets even if the Company's products are superior.

     LIMITED PATENT AND PROPRIETARY INFORMATION PROTECTION. The Company believes
that the  proprietary  processes  used in  production  of its products  does not
infringe on the  proprietary  rights of others.  In the event that the Company's
products infringe the patent or proprietary rights of others, the Company may be
required  to modify its process or obtain a license.  There can be no  assurance
that the  Company  would be able to do so in a timely  manner,  upon  acceptable
terms and  conditions  or at all.  The  failure  to do so would  have a material
adverse effect on the Company.  In addition,  there can be no assurance that the
Company  will have the  financial or other  resources  necessary to prosecute or
defend a patent infringement or proprietary rights action.  Moreover,  if any of
the Company's  products  infringe patents or proprietary  rights of others,  the
Company could,  under certain  circumstances,  become liable for damages,  which
could have a material adverse effect on the Company.  The Company also relies on
proprietary know-how and confidential information and employs various methods to
protect the processes,  concepts,  ideas and  documentation  associated with its
proprietary rights. However, such methods may not afford complete protection and
there can be no  assurance  that  others  will not  independently  develop  such
processes, concepts, ideas and documentation.  Although the Company requires all

                                       12
<PAGE>
of  its  employees  to  sign  non-disclosure,   non-competition  and  inventions
agreements,  there can be no assurance that such  agreements will be enforceable
or will provide meaningful protection to the Company.  There can be no assurance
that the Company will be able to  adequately  protect its trade  secrets or that
other  companies  will  not  acquire  information  that  the  Company  considers
proprietary.  Moreover,  there can be no assurance that other companies will not
independently develop know-how comparable to or superior to that of the Company.

     PRODUCT  ACQUISITION  AGREEMENT.  The  Company's  rights  to a  substantial
portion of its product  lines are  dependent  upon its rights  under the product
acquisition  agreements  with  Dominion  Capital with respect to its SOLTRON and
SP34E products and the process, formulae and other proprietary rights related to
such products.  Any termination or impairment of the rights of Dominion  Capital
to such proprietary  rights or to the rights of the Company under the agreements
would  materially  adversely  affect the Company.  Additionally,  the  Company's
rights to the products under the agreements are limited to a term of five years,
each of which are extendable for an additional five years.

     NEED FOR ADDITIONAL  DEVELOPMENT OF CERTAIN PRODUCTS.  The Company believes
that  development  work on its  SOLTRON  and  SP34E  products  is  substantially
complete.  However,  testing of these  products  in the  United  States has been
limited.  The  Company  anticipates  that its future  research  and  development
activities combined with experience gained from commercial production and use of
the SOLTRON and SP34E products  could result in the need for further  refinement
and development.  There can be no assurance that unforeseen  circumstances  will
not require expensive additional development of the Company's products and their
applications.  In  addition,  the  Company  may  in  the  future  need  to  make
improvements  in  its  product  line  in  order  for  such  products  to  remain
competitive.

     ADEQUACY OF PRODUCT LIABILITY INSURANCE.  The use of the Company's products
entails  inherent  risks of adverse  effects  that could  expose the  Company to
product liability claims. Product liability claims could have a material adverse
effect on the business and financial condition of the Company. While the Company
has obtained  product  liability  insurance,  there can be no assurance that the
Company will be able to maintain such product liability  insurance on acceptable
terms or if  maintained  that such  insurance  will  provide  adequate  coverage
against all potential claims.

     CONTROL  BY  EXISTING  SHAREHOLDERS/FOREIGN   SHAREHOLDERS.  The  Company's
principal  shareholder,  Dominion  Capital,  and its affiliates own or control a
substantial voting block of the Company's outstanding Common Stock. As a result,
these shareholders,  when acting together,  would be able to effectively control
matters  requiring  approval by the  shareholders of the Company,  including the
election of the Company's Board of Directors.

     Dominion  Capital  is  domiciled  in  Australia  and one other  shareholder
holding more than five percent of the Company's  outstanding  stock is domiciled
in the Channel  Islands of  Guernsey.  If the Company or a  shareholder  were to
bring legal  action  against any of these  shareholders,  the  domicile of these
shareholders in foreign jurisdictions may result in the Company or a shareholder
being unable to cause the foreign shareholders to be subject to the jurisdiction
of a court in the  United  States.  While a  shareholder  may be able to proceed

                                       13
<PAGE>
against  a  foreign  shareholder  in  the  jurisdiction  of  that  shareholder's
domicile,  such suits may be prohibitively  expensive and such jurisdictions may
not recognize claims or provide remedies similar to United States courts.

     INTERNATIONAL TRADE. The Company also anticipates engaging in sales in both
Canada and Mexico and will import SOLTRON  concentrate  from Japan.  The Company
also  anticipates  commencement  of  operations  in Australia  through  Solpower
Australia.  Currency  fluctuation and other normal risks of conducting  business
internationally,  including  regulatory  changes and  requirements,  fluctuating
exchange rates, tariffs and other barriers, management difficulties, potentially
adverse  tax  consequences  and  potentially  difficult  legal  enforcement  and
collection  problems  could have a materially  adverse  impact on the  financial
condition of the Company.

     SECURITIES  LAW  COMPLIANCE.  The  Company  has been  involved  in  complex
transactions and in offerings of securities which may have associated compliance
defects by the Company or one or more of its  shareholders.  Current  management
has been involved with the Company since November 1996.  While management is not
aware  that  the  Company  has  failed  to  comply  with  applicable  rules  and
regulations, because management lacks full knowledge of all terms and conditions
of securities offerings by the Company prior to November 1996, no assurances can
be made  that all such  prior  transactions  were in  complete  compliance  with
applicable  federal and state  securities  laws or that a claim with  respect to
non-compliance  will not be made. Costs may be incurred by the Company to defend
any claim of non-compliance  and the Company may be required to offer rescission
rights with respect to sales of its securities  which would severely  affect the
operations and financial condition of the Company.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company leases approximately 1,400 square feet of office space utilized
as its  corporate  offices at 7309 East Stetson  Drive,  Suite 102,  Scottsdale,
Arizona  85251.  The lease is for a term  through  June 30,  2001,  with current
monthly rental payments of approximately $1,960 per month.

     The Company also leases  approximately  12,000 square feet of space at 4247
West Adams,  Suite 2,  Phoenix,  Arizona 85009 that is utilized as its corporate
manufacturing,  warehousing and distribution plant and as a corporate  territory
sales office.  Monthly  lease  payments are  approximately  $4,900 and the lease
expires on September 14, 2002.

     The Company has closed the Elkhart, Indiana SOLTRON production facility and
is moving all the equipment to its facility in Phoenix, Arizona in order to meet
production  capacity expansion at that location.  The lease on the Elkhart plant
has been terminated, effective September 1, 1999.

ITEM 3. LEGAL PROCEEDINGS

     The Company is not currently a party to any pending litigation.

                                       14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The  Company's  Common Stock is traded on the OTC Bulletin  Board under the
symbol  "SLPW." The following  table sets forth the  quarterly  high and low bid
prices per share for the Common Stock, as reported by the OTC Bulletin Board for
the fiscal years  indicated.  On March 31, 1999,  there were  approximately  350
beneficial holders of the Common Stock.


     FISCAL YEAR         QUARTER ENDED               HIGH             LOW
     -----------         -------------               ----             ---

       1997...........June 30, 1996(1)...............$5.75............$4.00


                      September 30, 1996.............$5.109...........$1.25


                      December 31, 1996..............$1.25............$0.25


                      March 31, 1997.................$1.75............$1.125


       1998...........June 30, 1997..................$1.50............$1.50


                      September 30, 1997.............$0.4062..........$0.4062


                      December 31, 1997..............$0.625...........$0.625


                      March 31, 1998.................$2.75............$2.625


       1999...........June 30, 1998..................$3.50............$2.25

                      September 30, 1998.............$2.687...........$1.375


                      December 31, 1998..............$2.50............$1.187


                      March 31, 1999.................$2.625...........$1.281

(1) First Report is May 30, 1996.

     The Company has not paid, and the Company does not currently  intend to pay
cash dividends on its Common Stock in the foreseeable future. The current policy
of the  Company's  Board of  Directors  is to retain all  earnings,  if any,  to
provide funds for operation and expansion of the Company's business.

     The declaration of dividends,  if any, will be subject to the discretion of
the Board of Directors, which may consider such factors as the Company's results
of operations,  financial condition,  capital needs and acquisition  strategies,
among others.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following  discussion  should be read in conjunction with the Company's
financial  statements  and related notes  included  herein.  Certain  statements
contained  herein are not based on  historical  facts,  but are  forward-looking
statements that are based upon  assumptions  about future  conditions that could

                                       15
<PAGE>
prove to be inaccurate.  Actual events,  transactions and results may materially
differ from the anticipated  events,  transactions or results  described in such
statements.

     The Company's  ability to  consummate  such  transactions  and achieve such
events or results is subject to certain risks and uncertainties.  Such risks and
uncertainties  include,  but are not limited to, the existence of demand for and
acceptance of the  Company's  products and  services,  regulatory  approvals and
developments,  economic  conditions,  the impact of competition and pricing, and
other factors  affecting  the  Company's  business that are beyond the Company's
control.

     The Company undertakes no obligation and does not intend to update,  revise
or   otherwise   publicly   release  the  result  of  any   revisions  to  these
forward-looking  statements  that  may be  made  to  reflect  future  events  or
circumstances.

RESULTS OF OPERATIONS

     Management  anticipates a material  rise in revenue  during the next fiscal
year as a result of the Company's direct marketing  activities.  During the past
year,  sales were entirely  related to the sale of the Company's  products,  and
costs were related to  organization  of the  corporate  offices and the business
plan;  locating,  leasing,  permitting  and  equipping  the  Phoenix  production
facility;  financing and investor relations activities;  technology transfer and
requisite trademark, service mark and product registrations;  and achieving full
reporting status under the Securities Exchange Act of 1934.

     YEAR ENDED MARCH 31, 1999 COMPARED TO YEAR ENDED MARCH 31, 1998

     Revenues  for the year ended  March 31,  1999 were  $82,192 as  compared to
$240,000 for 1998, a 65%  decrease.  All revenues for 1999 resulted from product
sales while all of the revenues for 1998 resulted  from  deposits  received from
sales of territorial  licenses.  General and  administrative  costs for the year
ended March 31, 1999 were  $2,077,692  as  compared to  $1,065,379  for the same
period ending March 31, 1998. The 95% increase resulted primarily from increased
marketing efforts and the addition of sales and administrative  support staff at
the Company's corporate offices in Scottsdale, Arizona.

     Cash flow of $1,367,494 was provided from shareholder advances and receipts
for stock  subscriptions  during the year ended March 31,  1999,  as compared to
$574,374  for the year  ended  March  31,  1998,  which was also  provided  from
shareholder advances and placement of the Company's Common Stock.

     As of March 31, 1999, the Company had no material  commitments  for capital
expenditures.  For the year ended March 31,  1999,  the  Company  incurred a net
operating  loss of $2,239,646  compared to a net operating  loss of $823,158 for
the year ended March 31, 1998,  which  contributed to net cash used in operating
activities  of  $1,223,452  and  $290,332 for the years ended March 31, 1999 and
1998, respectively.

                                       16
<PAGE>
     SEASONALITY.  Sales of the Company's SP34E product may be subject to higher
volumes in the summer months resulting in higher revenues in the Company's first
and second fiscal  quarters.  However,  no pattern of sales volumes has yet been
established.

     IMPACT OF INFLATION.  The Company does not believe that inflation will have
any material  impact on its  commercial  activities  for the ensuing year as its
products do not fall under categories that are traditionally affected.

     YEAR 2000  COMPLIANCE.  Management  has  utilized  the latest  versions  of
recognized computer software and therefore believes it will not encounter any of
the  computer  software  problems  contemplated  or  predicted  to  occur at the
entrance into the year 2000.

     OUTLOOK.  The year  ended  March 31,  1999 was a year of  organization  and
planning  for the Company as it devoted its focus to defining  and  implementing
its corporate  plan;  finalizing a  comprehensive  and workable  Master  License
Agreement;  identifying,  negotiation and execution of Master License Agreements
with qualified licensees; negotiation and finalization of financing; negotiation
and finalization of the SP34E product rights  acquisition;  technology  transfer
and requisite trademark,  service mark and product registrations;  and achieving
full reporting status under the Securities Exchange Act of 1934.

     Management  foresees  that  implementation  of the  marketing  plan  at the
corporate  level and by its licensee will result,  by the end of the 2000 fiscal
year, in increased revenues and product acceptance.  An important milestone will
be  acceptance  of the  product  by any one of the  tier one  participants  (100
million  gallons of fuel  consumed  per annum) in the North  American  transport
industry.  Development of the corporate  Marine Division is also  anticipated to
enhance revenues and corporate development.  The introduction of SP34E and other
environmentally   friendly  products  are  expected  to  increase  revenues  and
diversify  its  product  line.  Consolidated  revenues  from the  operations  of
Solpower Australia are also anticipated to enhance revenues.

                                       17
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

                                      INDEX

     Independent Auditors' Report...........................................  19

     Independent Auditors' Report on Prior Year.............................  20

     Balance Sheet at March 31, 1999 and 1998 ..............................  21

     Statement of Operations for the Years Ended
     March 31, 1999 and 1998 ...............................................  23

     Statement of Stockholders' Equity for the Years Ended
     March 31, 1999 and 1998................................................  24

     Statement of Cash Flows for the Years Ended
     March 31, 1999 and 1998................................................  25

     Notes to the March 31, 1999 and 1998
     Financial Statements...................................................  27


     All schedules are omitted  because they are not  applicable or the required
     information is shown in the financial statements or notes thereto.

                                       18
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Solpower Corporation
Scottsdale, Arizona 85251

We have audited the  accompanying  balance  sheet of Solpower  Corporation  (the
Company),  as of  March  31,  1999 and the  related  statements  of  operations,
stockholders'  equity and cash flows for the year then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe  that our audit of the  financial  statements  provides a  reasonable
basis for our opinion.

In our  opinion,  the  financial  statements  present  fairly,  in all  material
respects,  the  financial  position  of the  Company  at March 31,  1999 and the
results  of its  operations  and its cash  flows  for the year  then  ended,  in
conform
ity with generally accepted accounting principles.

/s/  Semple & Cooper

Semple & Cooper, LLP
Phoenix, Arizona
July 30, 1999

                                       19
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Solpower Corporation
Scottsdale, Arizona 85251

We have audited the  accompanying  balance  sheet of Solpower  Corporation  (the
Company),  as of  March  31,  1998  and the  related  statement  of  operations,
stockholders'  equity and cash flows for the year ended  March 31,  1998.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe  that our audit of the  financial  statements  provides a  reasonable
basis for our opinion.

In our  opinion,  the  financial  statements  present  fairly,  in all  material
respects,  the  financial  position  of the  Company  at March 31,  1998 and the
results of its  operations and its cash flows for the year ended March 31, 1998,
in conformity with generally accepted accounting principles.

/s/ Clancy & Co.

Clancy & Company, PLLC
Phoenix, Arizona
July 22, 1998

                                       20
<PAGE>
                              SOLPOWER CORPORATION
                                 BALANCE SHEETS
                             MARCH 31, 1999 AND 1998


                                     ASSETS

                                                        1999             1998
                                                     ----------       ----------
Current Assets
     Cash and Cash Equivalents (Note 2)              $    2,228       $  183,842
     Accounts Receivable (Note 2)                        50,145                0
     Prepaid Expense                                          0            2,917
     Inventory (Notes 2 and 3)                           92,178          101,906
     License Fee Receivable (Note 4)                          0        2,160,000
     Stock Subscription Receivable                            0          600,000
                                                     ----------       ----------
Total Current Assets                                    144,551        3,048,665
                                                     ----------       ----------

Property & Equipment, net (Notes 2 and 5)               399,262          131,942
                                                     ----------       ----------

Other Assets
     Marketing Rights (Note 6)                        2,658,333          358,333
     Security Deposits                                   13,922           14,422
     License Fee Receivable (Note 4)                  2,400,000                0
                                                     ----------       ----------
Total Other Assets                                    5,072,255          372,755
                                                     ----------       ----------

                                                     $5,616,068       $3,553,362
                                                     ==========       ==========

   The accompanying notes are an integral part of these financial statements.

                                       21
<PAGE>
                              SOLPOWER CORPORATION
                           BALANCE SHEETS (CONTINUED)
                             MARCH 31, 1999 AND 1998

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                             1999           1998
                                                          -----------    -----------
<S>                                                       <C>            <C>
Current Liabilities
    Lease Payable - Current (Notes 5 and 7)               $     4,060    $     4,575
    Loans Payable - Related Parties - Current (Note 9)         13,500              0
    Accounts Payable (Note 9)                                 429,409          2,432
    Accrued Expenses (Note 4)                                 213,792              0
                                                          -----------    -----------
Total Current Liabilities                                     660,761          7,007
                                                          -----------    -----------

Long Term Liabilities
    Lease Payable - Noncurrent                                      0          5,167
    Loans Payable - Related Parties - Noncurrent
       (Note 9)                                               407,219         39,725
     Accrued Expense - Noncurrent (Note 4)                     70,000              0
    Deferred Revenue (Note 4)                               2,400,000      2,160,000
                                                          -----------    -----------
Total Long Term Liabilities                                 2,877,219      2,204,892

Total Liabilities                                           3,537,980      2,211,899
                                                          -----------    -----------

Commitments and Contingencies (Note 7)                             --             --

Stockholders' Equity (Note 10)
    Preferred Stock; $0.001 Par Value, 5,000,000 Shares
    Authorized; Issued and Outstanding, None                       --             --

    Common Stock; $0.01 Par Value, 30,000,000 Shares
    Authorized; Issued and Outstanding 23,456,560 and
    17,391,560 at March 31, 1999 and 1998, respectively       234,566        173,916

    Additional Paid in Capital                              6,736,525      4,220,904
    Accumulated Deficit                                    (4,893,003)    (2,653,357)
                                                          -----------    -----------
                                                            2,078,088      1,741,463

    Less: Stock Subscription Receivable                             0       (400,000)
                                                          -----------    -----------

Total Stockholders' Equity                                  2,078,088      1,341,463
                                                          -----------    -----------

Total Liabilities and Stockholders' Equity                $ 5,616,068    $ 3,553,362
                                                          ===========    ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       22
<PAGE>
                              SOLPOWER CORPORATION
                            STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998

                                                       1999            1998
                                                   ------------    ------------
Revenues (Note 4)
  Sales - Product                                  $     82,192    $         --
  License Fees                                               --         240,000
                                                   ------------    ------------
Total Revenues                                           82,192         240,000

Cost of Sales                                           244,874              --
                                                   ------------    ------------

Gross Profit (Loss)                                    (162,682)        240,000

Expenses
  General and Administrative                          2,077,692       1,065,379
                                                   ------------    ------------

Operating Loss                                       (2,240,374)       (825,379)
                                                   ------------    ------------

Other Income (Expense)

  Interest Income                                         2,249           3,405
  Interest Expense                                       (1,521)         (1,184)
                                                   ------------    ------------

Total Other Income (Expense)                                728           2,221
                                                   ------------    ------------

Net Loss Before Provision                            (2,239,646)       (823,158)
   for Income Taxes

Provision for Income Taxes (Note 8)                          --              --
                                                   ------------    ------------

Net Loss                                           $ (2,239,646)   $   (823,158)
                                                   ============    ============

Basic (Loss) Per Share                             $      (0.10)   $      (0.06)
                                                   ============    ============

Weighted Average Number of Shares Outstanding        22,146,765      14,279,231
                                                   ============    ============

   The accompanying notes are an integral part of these financial statements.

                                       23
<PAGE>
                              SOLPOWER CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                      Additional      Stock
                                              Common        Stock      Paid In     Subscription  Accumulated
                                              Shares       Amount      Capital      Receivable       Deficit        Total
                                              ------       ------      -------      ----------       -------        -----

<S>                                           <C>         <C>        <C>          <C>            <C>             <C>
Balance, March 31, 1997                       9,231,560   $  92,316  $1,782,504   $              $ (1,830,199)   $    44,621
Issuance of Common Stock Under Reg D
Private Offering at $.125 per share in
Exchange for Cancellation of Advances
Made to April 1, 1997                         4,160,000      41,600     478,400                                      520,000

Issuance of Common Stock Under Reg S
Placement at $.50 per share,
January 9, 1998                               4,000,000      40,000   1,960,000      (400,000)                     1,600,000

Net Loss, Year Ended March 31, 1998                                                                  (823,158)      (823,158)
                                          -----------------------------------------------------------------------------------
Balance, March 31, 1998                     17,391,560      173,916   4,220,904      (400,000)     (2,653,357)     1,341,463

Issuance of Common Shares at $0.40 per
share for SP34E Marketing Rights             6,000,000       60,000   2,340,000                                    2,400,000
Issuance of Common Stock for Stock
Services Agreement                              50,000          500     149,500                                      150,000
Receipt of Stock Subscription
Receivable funds                                                                      400,000                        400,000
Issuance of Common Stock for Marketing
Services                                        15,000          150      26,121                                       26,271
Net Loss, Year Ended March 31, 1999                                                                 (2,239,646)   (2,239,646)
                                          -----------------------------------------------------------------------------------
Balance, March 31, 1999                     23,456,560     $234,566  $6,736,525   $        --      $(4,893,003)   $2,078,088
                                          ===================================================================================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       24
<PAGE>
                              SOLPOWER CORPORATION
                            STATEMENTS OF CASH FLOWS
                  FOR THE YEARS ENDED MARCH 31, 1999, AND 1998

                                                          1999          1998
                                                       ----------    ----------

Cash Flows From Operating Activities
  Net Loss                                             (2,239,646)     (823,158)

Adjustments to reconcile net loss to net cash
  used by operating activities
  Depreciation and amortization                           166,154       127,477
  Non-cash items                                          176,271       520,000
  Changes in operating assets and liabilities
    Accounts receivable                                   (50,145)            0
    License fee receivable                               (240,000)   (2,160,000)
    Prepaid expenses                                        2,917        (2,917)
    Inventory                                               9,728      (101,906)
    Security deposits                                         500       (12,260)
    Accounts payable                                      426,977         2,432
    Accrued expenses                                      283,792             0
    Deferred revenue                                      240,000     2,160,000
      Net cash used by operating activities            (1,223,452)     (290,332)
                                                       ----------    ----------

Cash Flows from Investing Activities:
  Purchase of property and equipment                     (333,474)     (110,369)
                                                       ----------    ----------
      Net cash used by investing activities              (333,474)     (110,369)
                                                       ----------    ----------

Cash Flows From Financing Activities:
  Proceeds from issuance of common stock
    and repayment of stock subscriptions                1,000,000     1,000,000
  Proceeds from short-term loan                            13,500             0
  Proceeds (payments) on lease payable                     (5,682)        9,742
  Advances from related parties                           367,494      (425,636)
                                                       ----------    ----------
      Net cash provided by financing activities         1,375,312       584,106
                                                       ----------    ----------

   The accompanying notes are an integral part of these financial statements.

                                       25
<PAGE>
                              SOLPOWER CORPORATION
                      STATEMENTS OF CASH FLOWS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998

                                                           1999          1998
                                                       -----------    ----------

Increase (Decrease) in Cash and Cash Equivalents       $  (181,614)   $  183,405
Cash and Cash Equivalents, Beginning of Year               183,842           437
                                                       -----------    ----------

Cash and Cash Equivalents, End of Year                       2,228       183,842
                                                       ===========    ==========

SUPPLEMENTAL INFORMATION
Cash Paid for:
       Interest                                              1,521         1,184
       Income Taxes                                              0             0

Noncash Investing and Financing
  Issuance of 3,529,000 Shares of Common Stock in
  Exchange for a Promissory Note, November 4, 1996               0    $1,000,000

  Issuance of Common Stock in Exchange for
  Cancellation of a Portion of Advances Payable                  0    $  520,000

  Issuance of 6,000,000 Shares of Common Stock for
  Marketing Rights                                     $ 2,400,000             0

  Issuance of 50,000 Shares of Common Stock for
  Service Agreement                                    $   150,000             0

  Issuance of 15,000 Shares of Common Stock for
  Marketing Expense                                    $    26,271             0


   The accompanying notes are an integral part of these financial statements.

                                       26
<PAGE>
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION

Solpower Corporation (the Company), formerly known as Virtual Technologies, Inc.
and Dynafuel  Corporation,  was incorporated under the laws of the State of Utah
on June 7, 1982.

The Company was originally incorporated with an authorized capital of 30,000,000
shares of  common  stock  with a par value of one cent  ($0.01)  per  share.  On
December 12, 1995, the Company amended its articles of  incorporation,  changing
its name to Virtual Technologies,  Inc. authorizing preferred stock of 5,000,000
shares at $.25 par  value.  On July 22,  1996,  the  Company  changed  its legal
domicile to the State of Nevada.  On November 22, 1997, the Company restated the
articles  of  incorporation,  changing  its  name to  Solpower  Corporation  and
changing  its  preferred  stock par value to  one-tenth  of one cent ($.001) per
share.

The Company was in the  development  stage through March 31, 1997. The principal
business  purpose of the  Company is the sales and  distribution  of SOLTRON and
other environmentally friendly products throughout the world.

The Company has the exclusive sales,  distribution,  marketing and manufacturing
rights  for the  United  States,  Mexico  and  Canada to the  Solpower  product,
SOLTRON,  a fuel enhancing  product and SP34E, a universal  drop-in  replacement
refrigerant gas.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES

A. Method of Accounting
The Company's  financial  statements  are prepared  using the accrual  method of
accounting.

B. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash and cash equivalents.

C. Accounts Receivable
The  Company's  accounts  receivable  consist  entirely of amounts due for their
products from dealers and licensees.

The Company follows the allowance method of recognizing  uncollectible  accounts
receivable.  The allowance method recognizes bad debt expense as a percentage of
accounts  receivable based on a review of the individual  accounts  outstanding,
and the Company's prior history of uncollectible  accounts receivable.  At March
31, 1999, no allowance has been provided for uncollectible  accounts  receivable
as, in the opinion of management,  all accounts receivable  outstanding at March
31, 1999 are considered fully collectible.

D. Inventory
Inventory is stated at the lower of cost or market using the first-in, first-out
(fifo)  method.  The  Company  periodically  reviews  its  inventory  and  makes
provisions  for damaged or obsolete  inventory,  if necessary.  No provision for
damaged or obsolete  inventory has been included in the  accompanying  financial
statements.

E. Property and Equipment
Property and  equipment,  stated at cost, is  depreciated  over their  estimated
useful lives as follows:

     Computer and Office Equipment      5 years
     Furniture                          7 years
     Vehicles                           5 years
     Plant Equipment                    7 years
     Leasehold Improvements             5 years or lease term

Depreciation is computed under the straight-line  method for financial statement
purposes and under accelerated methods for income tax purposes.

Repairs  and  maintenance  expenses  are  charged  to  operations  as  incurred.
Betterments or renewals are capitalized as incurred.

The Company is the lessee of a vehicle under a capital lease agreement  expiring
in September, 1997. The asset and liability under the capital lease agreement is
recorded at the lower of the present value of the minimum lease  payments or the
fair value of the asset.  The asset is  depreciated  over its  estimated  useful
life. Depreciation of the asset under the capital lease agreement is included in
depreciation expense, as noted above.

                                       27
<PAGE>
F. Revenue Recognition
Revenues from sales to  distributors  and resellers are recognized  when related
products are shipped.  Revenues from corporate  license  programs are recognized
based on the terms of the license  agreement  with a license fee  receivable and
deferred  revenue  recorded at the  inception of the  agreement.  Revenues  from
consignment sales are recognized when payments are received.

G. Earnings or (Loss) Per Common Share
Earnings  or (loss) per common  share are  computed  based on  weighted  average
number of shares outstanding at the date of the financial statements. The number
of shares used in computing  basic earnings  (loss) per share was 22,146,765 and
14,279,231  for the years ended March 31, 1999 and 1998,  respectively.  Diluted
earnings (loss) per share have not been presented as they are antidilutive.

H. Income Taxes
The Company  accounts  for deferred  income taxes on an accrual  basis under the
liability method in accordance with Statement of Financial  Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." See Note 8.

I. Use of Estimates
Management uses estimates and assumptions in preparing  financial  statements in
accordance with generally accepted  accounting  principles.  Those estimates and
assumptions  affect  the  reported  amounts  of  assets  and  liabilities,   the
disclosure of contingent  assets and liabilities,  and the reported revenues and
expenses.  Actual  results  may vary from the  estimates  that were  assumed  in
preparing the financial statements.

J. New Accounting Announcements
During the year ended March 31, 1998, the Company adopted Statement of Financial
Accounting  Standards  No.  128,  "Earnings  per  Share"  (SFAS No.  128).  This
pronouncement provides a different method of calculating earnings per share than
was required by APB No. 15, Earnings per Share. The adoption of SFAS No. 128 did
not have a material effect on the Company's financial position.

During the year ended March 31, 1998, the Company adopted Statement of Financial
Accounting   Standards  No.  129,   "Disclosure  of  Information  about  Capital
Structure"  (SFAS No. 129).  The  pronouncement  reinstates  various  securities
disclosure  requirements  previously  in effect  under APB No. 15,  Earnings per
Share,  which was  superseded  by SFAS No. 128. The adoption of SFAS No. 129 did
not have a material  effect on the  Company's  financial  position or results of
operations.

K. Fair Value of Financial Instruments
Accounts  receivable,  accounts and loans  payable and accrued  liabilities  are
substantially  current  or bear  reasonable  interest  rates.  As a result,  the
carrying  values  of  these  financial   instruments   approximate  fair  value.
Management believes that license fee receivable and deferred revenue approximate
market due to their short term nature.

L. Advertising
Advertising  costs are expensed as incurred.  Advertising  expense for the years
ended March 31, 1999 and 1998 were $14,689 and $57,410, respectively.

M. Stock-Based Compensation
The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
Accounting   for  Stock   Issued  to   Employees   (APB  25)  and  the   related
interpretations  in accounting  for its employee  stock  options.  Under APB 25,
because the  exercise  price of  employee  stock  options  equals or exceeds the
market  price of the  underlying  stock on the date of  grant,  no  compensation
expense is recorded.  The Company has adopted the disclosure-only  provisions of
Statement of Financial  Accounting Standards No. 123, Accounting for Stock-Based
Compensation (Statement No. 123).

N. Reclassifications
Certain prior year amounts in the  accompanying  1998 financial  statements have
been reclassified to conform to the 1999 presentation.

NOTE 3 - INVENTORY

Inventory at March 31, 1999 of $92,178 consists,  primarily, of the SOLTRON fuel
additive concentrate and a small amount of consignments.  Inventory at March 31,
1998 of $101,906 consisted of a small quantity of twenty five 55 gallon drums of
SOLTRON fuel additive concentrate.

                                       28
<PAGE>
NOTE 4 - LICENSE FEE RECEIVABLE

During the year ended March 31, 1999, the Company entered into two new licensing
agreements  for the sole and  exclusive  use and  distribution  of its  product,
SOLTRON, in the territories as defined below:

SOLPOWER TEXAS - Texas, New Mexico and Oklahoma

SOLPOWER MEXICO - Country of Mexico

On June 30, 1998, the Company entered into an agreement with Houston  Mercantile
Exchange  (licensee)  for the  exclusive  use and  distribution  of its product,
SOLTRON,  in the states of Texas,  Oklahoma  and New Mexico.  The license fee is
$600,000,  with a down  payment of $60,000 due upon signing the  agreement.  The
licensee signed a promissory note for the balance of $540,000 of the license fee
due. The note bears interest at one half percent (0.5%) on the unpaid  principal
balance,  with all unpaid principal and interest due on or before June 30, 2000.
As of the financial  statement  date, no payments have been received in relation
to this  agreement,  therefore  the entire  contract has been  reflected as long
term.

On June 30, 1998, the Company entered into an agreement with Houston  Mercantile
Exchange  (licensee)  for the  exclusive  use and  distribution  of its product,
SOLTRON,  in Mexico.  The  license  fee is  $1,800,000,  with a down  payment of
$180,000 due upon signing the agreement.  The licensee  signed a promissory note
for the balance of $1,620,000 of the license fee due. The note bears interest at
one half  percent  (0.5%)  on the  unpaid  principal  balance,  with all  unpaid
principal  and  interest  due on or before June 30,  2000.  As of the  financial
statement  date, no payments  have been received in relation to this  agreement,
therefore the entire contract has been reflected as long term.

The  licensee is  required to pay the Company the greater of the amount  payable
per the  payment  schedule  in the  agreement  or the product of $5.50 times the
number of liters of  concentrate  shipped by the Company to the licensee  during
the immediately preceding calendar month. As of the financial statement date, no
concentrate has been shipped.

At a minimum,  future annual principal  payments due the Company under the notes
are as follows for the years ending March 31:

                            2001      $2,130,000
                            2002      $  270,000

During the fiscal year ended March 31, 1998,  the Company sold  licenses for the
Great Lakes  Territory  (Ohio,  Indiana,  Michigan,  Illinois and  Wisconsin) to
Master Marketing Group and the Southeast Territory (Florida,  Georgia,  Alabama,
Arkansas,  Mississippi,  and Louisiana) to Solpower  Southeast  Corporation  for
$1,200,000  and  $1,200,000,  respectively.  The Company  reported down payments
totaling $240,000 and a License Fee Receivable of $2,160,000.

On May 14,  1999,  the Company  and Masters  Marketing  Group,  Inc.  (licensee)
mutually agreed to cancel the Master License Agreement,  entered into during the
fiscal  year  ended  March 31,  1998.  Provisions  of the  settlement  agreement
include:

*    The  balance  of the  license  fee  owed  to the  Company  ($1,080,000)  is
     forgiven.
*    The down  payment of  $120,000  made to the  Company  will be repaid to the
     Licensee without interest in 24 equal monthly payments of $5,000.
*    A portion of accounts payable ($10,395) owed to the Company is forgiven.
*    Property  and  receivables  were  received by the  Company in exchange  for
     15,000 shares of Solpower Corporation's Common Stock.

This  transaction  has been  recorded as of March 31, 1999 and the  repayment of
$120,000 included in accrued expenses.

On September 7, 1999, the Company and Solpower Southeast Corporation  (licensee)
mutually agreed to cancel the Master License Agreement,  entered into during the
fiscal  year  ended  March 31,  1998.  Provisions  of the  settlement  agreement
include:

*    The  balance  of the  license  fee  owed  to the  Company  ($1,080,000)  is
     forgiven.
*    The down  payment of  $120,000  made to the  Company  will be repaid to the
     Licensee  without  interest on or before  October 30 , 1999 and the Company
     will issue 20,000 shares of Common Stock to the licensee.

This  transaction  has been  recorded as of March 31, 1999 and the  repayment of
$120,000 included in accrued expenses.

                                       29
<PAGE>
NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at March 31, 1999 and 1998:

                                                      1999           1998
                                                    --------       --------
     Furniture and Fixtures                         $ 52,359       $ 47,436
     Computer and Office Equipment                    66,584         59,872
     Vehicles                                         15,172         15,172
     Plant Equipment                                 106,435         39,538
     Leasehold Improvements                          254,943              0
                                                    --------       --------
              Subtotal                               495,493        162,018
     Less: Accumulated Depreciation                   96,231         30,076
                                                    --------       --------
     Net Book Value                                 $399,262       $131,942
                                                    ========       ========

Depreciation  expense  charged to operations  for the years ended March 31, 1999
and 1998, was $66,515 and $27,477, respectively.

NOTE 6 - LONG-LIVED ASSETS

On November 4, 1996,  the Company  acquired the exclusive  sales,  distribution,
marketing and  manufacturing  rights to the Solpower  product,  SOLTRON,  a fuel
enhancing product, encompassing the North American Market (United States, Mexico
and  Canada),  in  exchange  for  5,000,000  shares  of common  stock  valued at
$500,000.  The contract is for a period of five years. The Company is amortizing
the marketing  rights over the period of the contract.  Management will reassess
annually the estimated useful life and  impairments,  if any, will be recognized
when expected  future  operating  cash flows from the marketing  rights are less
than their carrying  value.  Amortization  charged to operations for each of the
years ended March 31, 1999 and 1998 was $100,000.

On June 17,  1998,  the Company  acquired  the  exclusive  sales,  distribution,
marketing and manufacturing rights to the Solpower product, SP34E (a refrigerant
gas)  encompassing the United States,  in exchange for the issuance of 6,000,000
shares of common  stock  valued at  $2,400,000.  The contract is for a period of
five  years,  and  pursuant to an  Addendum  to the  agreement,  the term of the
agreement shall commence on the Company  achieving ratable sales of SP34E and in
no event  later  than July 1,  2000.  The  Company  intends  to  amortize  these
marketing rights over the period of the contract.  As of the balance sheet date,
March 31,  1999,  no sales have been  recorded,  therefore no  amortization  was
recorded in relation to this transaction.  Management will reassess annually the
estimated useful life and impairments,  if any, will be recognized when expected
future  operating  cash  flows  from the  marketing  rights  are less than their
carrying value.

NOTE 7 - COMMITMENTS

OPERATING  LEASES - The Company leases 1,364 square feet of office space for its
executive  offices in Scottsdale,  Arizona.  The lease expires in June, 2000 and
has a minimum monthly rental obligation of approximately $1,900.

The Company leases  approximately 12,000 square feet of warehouse space, for its
production facility located in Phoenix,  Arizona.  The term of the lease is five
years,  expiring September,  2002. Base rent is approximately  $3,900 per month,
plus  property  rental tax.  The Company also had an option to purchase the real
property and improvements. The option to purchase the property was not completed
during the specified time periods and costs of $35,000 incurred for the purchase
effort were expensed during the year ended March 31, 1999.

The Company entered into a rental agreement for a copier/printing  machine for a
term of 39 months, at $566 per month.

Future  minimal  rental  commitments  on the above leases are as follows for the
years ending March 31:

                   2000               $ 78,377
                   2001               $ 60,731
                   2002               $ 54,849
                   2003               $ 21,271
                                      --------
                                      $215,228
                                      ========

Lease expense charged to operations for the years ended March 31, 1999 and 1998,
was $112,790 and $106,932, respectively.

                                       30
<PAGE>
CAPITAL  LEASES - The  Company  leases a motor  vehicle  under a  capital  lease
agreement  expiring  September,  1999, at a monthly rate of approximately  $500.
Total  payments  remaining  under the lease are $4,413,  with $354  representing
interest.  The  vehicle is  included  in  property  and  equipment  and is being
depreciated over the life of the lease.

Future  minimum lease  payments for the vehicle under capital lease at March 31,
1999 are as follows:

                                                              March 31,
                                                              ---------

     Year Ending March 31, 2000                                $ 4,413
     Less Amount Representing Interest                            (353)
                                                               -------
     Present Value of Net Minimum Lease Payments                 4,060
     Less: Current Portion of Capital Lease Obligation          (4,060)
                                                               -------
                                                                (    0)
                                                               =======

ACCRUED EXPENSES

The Company is making payments of $5,000 per month to Masters Marketing Group to
complete  terms of a  license  fee  agreement  cancellation.  The total of these
payments is $120,000 and will be completed in April 2001 and have been  recorded
as general and administrative expenses for the year ended March 31, 1999.

The Company  will be making  payments  totaling  $120,000 to Solpower  Southeast
Corporation to complete  terms of a license fee  arrangement  cancellation.  The
payments are expected to be completed in October, 1999 and have been recorded as
general and administrative expenses for the year ended March 31, 1999.

NOTE 8 - PROVISION FOR INCOME TAXES

Deferred  income taxes will be  determined  using the  liability  method for the
temporary differences between the financial reporting basis and income tax basis
of the Company's assets and liabilities.  Deferred income taxes will be measured
based on the tax rates  expected to be in effect when the temporary  differences
are included in the Company's  consolidated tax return.  Deferred tax assets and
liabilities  are  recognized  based  on  anticipated   future  tax  consequences
attributable to differences  between  financial  statement  carrying  amounts of
assets and liabilities and their respective tax bases.

At March 31, 1999, deferred tax assets consist of the following:

                                                    1999           1998
                                                  ---------      ---------
     Net operating loss carryforwards             $ 734,000      $ 398,000
     Less: valuation allowance                    $(734,000)     $(398,000)
                                                  ---------      ---------
                                                  $       0      $       0
                                                  =========      =========

For the years ended March 31, 1999 and 1998, the Company  established  valuation
allowances  equal  to the full  amount  of the  deferred  tax  asset  due to the
uncertainty of the utilization of the operating losses in future periods.

At March 31, 1999 and 1998, the Company had federal and state net operating loss
carryforwards   in  the   approximate   amount  of  $4,900,000  and  $2,600,000,
respectively, available to offset future taxable income through 2014.

NOTE 9 - RELATED PARTY TRANSACTIONS

LOANS PAYABLE - RELATED PARTIES

On November 4, 1996,  the Company  entered into an  agreement  with the majority
stockholder of the Company,  Dominion Capital Pty Ltd.,  (Dominion) for a period
of five years.  Dominion  agreed to provide up to  $1,000,000  on an "as needed"
basis  for  operational  costs  and  for the  development  and  construction  of
manufacturing  facilities.  Dominion  was to be  repaid  for the  advances  with
convertible  preferred  shares of the Company.  The note payable was  originally
convertible  into  convertible  preferred stock of the Company.  On November 24,
1997, an addendum was signed by the Company  deleting  this from the  agreement.
The addendum  grants stock options and pay  performance  bonuses based solely on
gross  sales  figures of the  Solpower  product  SOLTRON  in the North  American
market. See Note 10. Additionally, the Company has the option to extend the term
of this  agreement for an additional  period of five years,  unless  canceled by
notice in writing, by either party, with a thirty day notice of cancellation. As
of March 31,  1999 and  1998,  the  Company  had a balance  due to  Dominion  of
$407,219 and $39,725, respectively.

In July 1998,  the Company  entered into an investor  relations  agreement  with
Dominion Capital Securities,  Inc. (DCSI) for a six month period. DCSI agreed to
provide stock promotion in exchange for $125,000 in cash, 50,000 shares of stock
and the option to purchase  100,000 shares of stock at $3.00 per share (See Note
10). The stock and the options were issued during the year ending March 31, 1999
and a balance of $85,000  remains due to Dominion  under the  agreement  and has
been included in accounts payable as of the balance sheet date.

                                       31
<PAGE>
NOTE 10 - EQUITY

STOCK

On April 1, 1997,  the Company issued  4,160,000  shares of common stock under a
REG D private offering in exchange for cancellation of advances payable at $.125
per share, or $520,000.

On January 9, 1998, the Company issued  4,000,000 shares of common stock under a
REG S placement at $.50 per share, or $2,000,000.

On June 17,  1998,  the  Company  issued  6,000,000  shares of  common  stock in
exchange  for  marketing  rights  for 5 years to  SP34E,  at $.40  per  share or
$2,400,000.

On July 1, 1998,  the Company  issued  50,000 shares of common stock in exchange
for marketing services for six months, at $3.00 per share or $150,000.

On May 14, 1999,  the Company  issued  15,000 shares of common stock in exchange
for property and receivables, at $1.75 per share or $26,271.

STOCK OPTIONS AND WARRANTS

On November  24, 1997,  an addendum to the  agreement  with  Dominion to provide
financing (Note 9) was signed by the Company which grants the following  options
to Dominion based solely on the gross sales figures,  for a five year period, of
the Solpower product SOLTRON in the North American Market as follows:

a. Gross sales for the product equaling $10,000,000,  option to purchase 100,000
shares of common  stock at $2.50 per  share,  plus a cash  performance  bonus of
$400,000.

b. Gross sales for the product equaling $20,000,000,  option to purchase 150,000
shares of common  stock at $3.50 per  share,  plus a cash  performance  bonus of
$400,000.

c. Gross sales for the product equaling $50,000,000,  option to purchase 250,000
shares of common  stock at $4.50 per  share,  plus a cash  performance  bonus of
$500,000.

d. Gross sales for the product equaling $100,000,000, option to purchase 250,000
shares of common  stock at $5.00 per  share,  plus a cash  performance  bonus of
$1,000,000.

The contract has an anti-dilution provision,  that in the event that the Company
shall at any time  subdivide the  outstanding  shares of common stock,  or shall
issue a stock dividend on its outstanding  stock, the conversion price in effect
immediately  prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the case the Company shall at any time combine
the  outstanding  shares  of  common  stock,  the  conversion  price  in  effect
immediately  prior  to such  combination  shall  be  proportionately  increased,
effective at the close of business on the date of such subdivision,  dividend or
combination, as the case may be.

The Company has adopted the 1997 Solpower Corporation Stock Option and Incentive
Plan.  Pursuant to the plan,  options to purchase shares of the Company's common
stock may be granted to employees  and  directors.  The Plan  provides  that the
option  price shall not be less than the fair market  value of the shares on the
date of grant,  and that the  options  expire  ten years  after  grant.  Options
generally vest ratably over 3 to 5 year periods.  At March 31, 1999,  there were
2,500,000 shares reserved for options to be granted under the Plan.

On January 30, 1998,  the Company  granted the option to purchase  shares of the
Company's  common stock to certain  individuals  at a purchase price equal to or
greater than 100% of the fair market value of such stock as determined under the
Solpower Corporation Stock Option and Incentive Plan (the Plan) as of this date.
Mr. James H. Hirst was granted  300,000,  Mr. Trond Matteson was granted 150,000
and Mr. Joshua Ward was granted 150,000 shares.  The terms of such options shall
commence  as of  January  30,  1998,  and  expire  on  January  30,  2003 or the
termination  of employment  of Mr. Hirst or the services of Mr.  Matteson or Mr.
Ward.

                                       32
<PAGE>
The options shall vest independently with respect to each grantee based upon two
factors:  (a) the  minimum  market  price  and (b) the  minimum  reported  gross
revenues being achieved as illustrated in the table below:

                  Percentage    Exercise       Minimum        Minimum Reported
                   Amount         Price      Market Price      Gross Revenues
                   ------         -----      ------------      --------------
Hirst               33 1/3%       $1.00          $2.00           $ 6 million
                    33 1/3%       $1.75          $3.00           $ 9 million
                    33 1/3%       $2.50          $4.00           $12 million

Matteson            33 1/3%       $1.00          $2.00           $ 6 million
Ward                33 1/3%       $2.00          $3.00           $ 9 million
                    33 1/3%       $3.00          $4.00           $12 million

The Minimum  Reported Gross Revenues shall have been achieved during a reporting
period which is the lesser of (i) the four quarterly reporting periods preceding
any date on which the  Minimum  Market  Price  exists,  and (ii) that  number of
quarterly  reporting  periods  occurring  subsequent  to the date on which  both
Vesting  Requirements  last were achieved and any date on which the next Minimum
Market Price requirement is achieved.  Additionally, the options of Mr. Matteson
shall not vest before August 1, 1998.

On May 28,  1998,  the  Company  granted  the option to  purchase  shares of the
Company's  common stock to certain  directors at a purchase price for each share
that, with the exception of the  nonqualifying  options,  is equal to or greater
than 100% of the fair market value of such stock as determined under the Plan as
of this date.  Mr. Fraser Moffat III was granted  350,000,  100,000 of which are
nonqualifying,  Mr. Naoya Yoshikawa was granted  100,000,  Mr. Jerry Goddard was
granted 100,000 and Mr. James H. Hirst was granted  100,000.  The options may be
exercised  in whole or in part at any time after the vesting  requirements  with
respect to any option shares has been achieved.  The terms of such options shall
commence as of May 28, 1998,  and expire on May 28, 2003, or the  termination as
directors of the Company.

The options shall vest independently with respect to each grantee, provided each
grantee  is a  director  of the  Company on such  vesting  date,  based upon two
factors:  (a) the  minimum  market  price  and (b) the  minimum  reported  gross
revenues being achieved as illustrated in the table below:

                  Percentage    Exercise       Minimum        Minimum Reported
                   Amount         Price      Market Price      Gross Revenues
                   ------         -----      ------------      --------------
Moffat -
(Incentive
Stock Options)       40%          $3.00         $3.00            $ 6 million
                     40%          $5.00         $5.00            $ 9 million
                     20%          $7.00         $7.00            $12 million
(Nonqualifying
Options)            100%          $2.00         $2.00            $ 4 million

Yoshikawa/           50%          $3.00         $3.00            $ 6 million
Goddard/             50%          $7.00         $7.00            $12 million
Hirst

Van Deren            25%          $1.30         $2.00            $ 6 million
                     25%          $1.60         $3.00            $ 9 million
                     25%          $2.35         $4.00            $12 million
                     25%          $5.00         $5.00            $15 million

With respect to Mr.'s Yoshikawa,  Goddard, and Hirst, the Minimum Reported Gross
Revenues shall have been achieved during a reporting  period which is the lesser
of (i) the four  quarterly  reporting  periods  preceding  any date on which the
Minimum Market Price exists, and (ii) that number of quarterly reporting periods
occurring  subsequent to the date on which both Vesting  Requirements  last were
achieved and any date on which the next  Minimum  Market  Price  requirement  is
achieved.

On May 18, 1998,  Mr. Joshua Ward was  terminated  as a service  provider to the
Company  and the  150,000  options  granted  to Mr.  Ward on January  30,  1998,
terminated on May 18, 1998.

On January 4, 1999, R. L. (Beau) Van Deren,  the  corporate  Secretary/Treasurer
and a member of the Board of Directors was granted  400,000  options to purchase
the common stock of the Company.  The terms of such options commenced on January
9, 1999 and expire on January 9, 2004 or the  termination  of  employment of Mr.
Van Deren.

                                       33
<PAGE>
The  Company's  stock  option and stock grant  transactions  for the years ended
March 31, 1999 and 1998, are summarized as follows:

                                               Number of Option       Options
                                                    Shares             Price
                                                 -----------        -----------
Options Outstanding and Exercisable               16,000,000        $0.20-$0.32
     at March 31, 1997
Cancellation of Options per Amendment            (16,000,000)
     To Marketing Agreement

Options Granted Under Amended                        100,000              $2.50
     Marketing Agreement                             150,000              $3.50
                                                     250,000              $4.50
                                                     250,000              $5.00
Options Granted Under Stock Option                   200,000              $1.00
     and Incentive Plan                              100,000              $1.75
                                                     100,000              $2.00
                                                     100,000              $2.50
                                                     100,000              $3.00
                                                 -----------        -----------
Options Outstanding at March 31, 1998              1,350,000        $1.00-$5.00

Options Terminated on May 18, 1998                  (150,000)       $1.00-$3.00

Options Granted Under Stock Option                   100,000              $1.30
     and Incentive Plan                              100,000              $1.60
                                                     100,000              $2.35
                                                     290,000              $3.00
                                                     240,000              $5.00
                                                     220,000              $7.00
     (Non-qualifying options)                        100,000              $2.00
Options Granted under Marketing Agreement            100,000              $3.00
                                                 -----------        -----------
Options Outstanding at March 31, 1999              2,450,000        $1.30-$7.00
                                                 ===========

Options Exercisable at March 31, 1999                100,000              $3.00

All stock options  issued to employees  have an exercise price not less than the
fair  market  value of the  Company's  common  stock on the  date of  grant.  In
accordance  with  accounting  for such options  utilizing  the  intrinsic  value
method,  there is no related  compensation  expense  recorded  in the  Company's
financial  statements  for  the  years  ended  March  31,  1999  and  1998.  Had
compensation cost for stock-based compensation been determined on the fair value
of the options at the grant dates,  consistent  with the method of SFAS 123, the
Company's  net income and  earnings per share for the years ended March 31, 1999
and 1998 would have been reduced to the pro forma amounts presented below:

                                               Years Ended March 31,
                                            ---------------------------
                                               1999             1998
                                               ----             ----
     NET LOSS:
     As reported                            $(2,239,646)     $(823,158)
     Per common share equivalent            $     (0.10)     $   (0.06)

     Pro forma                              $(2,375,646)     $(823,158)
     Per common share equivalent            $     (0.11)     $   (0.06)

According  to the  Financial  Accounting  Standards  Board  (FASB)  Statement of
Financial  Accounting  Standards  (SFAS) No.  123  (Accounting  for  Stock-Based
Compensation),  the fair value of option  grants is  estimated as of the date of
grant  utilizing  the  Black-Scholes  option-pricing  model  with the  following
weighted  average  assumptions for all grants,  expected life of options of five
(5) years,  risk-free  interest  rates of eight percent (8%), and a zero percent
(0%)  dividend  yield.  The  weighted  average  fair  value at date of grant for
options granted during the year ended March 31, 1999 was $1.36.

                                       34
<PAGE>
WARRANTS

The Company issued warrants in connection with a private  placement  offering in
1998. As of March 31, 1999, there were 4,000,000 warrants outstanding  including
2,000,000  warrants at an exercise prices of $1.50 and 2,000,000  warrants at an
exercise price of $3.00 per share, expiring on January 7, 2000.

NOTE 11 - CONCENTRATIONS

Major  suppliers  for Solpower  Corporation  include the  Japanese  company that
produces the SOLTRON enzyme concentrate. Supply of the SOLTRON concentrate could
be interrupted due to work stoppages, strikes, and governmental or international
regulations.  The solvent used as the suspension agent for SOLTRON, is currently
supplied by a major North American  chemical company.  If a supply  interruption
should  occur,  other  readily  available  solvents,  can  be  substituted.  The
specially  designed,  single  measure  bottles  for retail  sales of Soltron are
currently  being  produced in Australia.  The molds for these unique bottles are
being  shipped to the United States to insure a more locally  available  supply.
Other United States  manufacturers  have the capability to produce the molds and
bottles.  All other  materials for  production  of SOLTRON are available  from a
variety of local providers.

NOTE 12 - YEAR 2000 ISSUE (UNAUDITED)

Like other  companies,  the Company could be adversely  affected if the computer
systems it, its  suppliers  or its  customers  use do not  properly  process and
calculate  date-related  information  and data from the period  surrounding  and
including  January 1, 2000.  This is commonly  known as the "Year  2000"  issue.
Additionally,  this issue could impact non-computer  systems and devices such as
production  equipment,   telephone  systems,  etc.  At  this  time,  because  of
complexities  involved in the issue,  management cannot provide  assurances that
the Year 2000 issue will not have an impact on the Company's operations.

NOTE 13 - SUBSEQUENT EVENTS

On May 14,  1999,  the Company  terminated  its Master  License  Agreement  with
Masters  Marketing Group,  holder of the Great Lakes (Ohio,  Indiana,  Illinois,
Michigan, Wisconsin) license. The Company regains the right to operate the Great
Lakes territory as a corporate  sales territory in exchange for  cancellation of
the  Promissory  Note of  $1,080,000,  issuance  of  15,000  shares of stock and
repayment of the license fee down payment of $120,000. The down payment is to be
repaid at $5,000 per month without  interest.  See Note 4. This  transaction  is
reflected in the financial statements as of March 31, 1999.

On June 7, 1999,  the  Company  announced  its  intention  to  acquire  Solpower
Australia  Pty Ltd. for 3,000,000 to 4,000,000  shares of the  Company's  common
stock.  The  actual  terms of  acquisition  will be set  forth  in a  definitive
agreement which will be subject to approval by the Company's board of directors.

On September 1, 1999, the Company  terminated its lease with D.I. South, Inc. of
Indiana  for the  Elkhart  Plant site.  The plant  equipment  was shipped to the
Phoenix,  Arizona SOLTRON production facility to support the production capacity
expansion.

On September 7, 1999, the Company  terminated its Master License  Agreement with
Solpower  Southeast  Corporation.  The Company  regains the right to operate the
Southeast territory (Alabama,  Arkansas,  Florida, Georgia and Mississippi) as a
corporate sales territory in exchange for cancellation of the Promissory Note of
$1,080,000,  repayment  of the  license  fee down  payment of  $120,000  and the
issuance of 20,000 shares of stock.  The down payment is expected to be refunded
by October 30, 1999. See Note 4. This  transaction is reflected in the financial
statements as of March 31, 1999.

                                       35
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     On March 19, 1999, the Company changed independent  accountants from Clancy
&  Co.  P.L.L.C.  to  Semple  &  Cooper,  LLP,  a  member  of  the  BDO  Seidman
international  alliance.  This  change  was  made in order  to  better  meet the
Company's future auditing and reporting  requirements on an international basis.
The Company had no  disagreements  with the Clancy & Co.,  P.L.L.C.,  who issued
audit  opinions for the  Company's  two previous  annual  financial  statements.
Neither of these two financial  statements contained an adverse or disclaimer of
opinion,  nor were they qualified or modified as to uncertainty,  audit scope or
accounting principles.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

     (A) DIRECTORS AND EXECUTIVE OFFICERS

     The  directors  and  executive  officers  of the  Company,  their  ages and
positions held in the Company are as follows:

     NAME                            AGE         POSITIONS HELD(1)
     ----                            ---         -----------------
     Fraser M. Moffat III            70          Director & Chairman
     James H. Hirst                  52          Director, President and CEO
     R.L. (Beau) Van Deren           50          Director & Secretary/Treasurer
     Jerry W. Goddard                59          Director
     Naoya Yoshikawa                 53          Director

     (1)  All current directors serve until the next annual shareholders meeting
          or their earlier resignation or removal.

     FRASER M. MOFFAT III joined the Company as a Director  and  Chairman of the
Board in May 1998.  Since 1995,  Mr. Moffat has  primarily  managed his personal
investments.  From January 1985 through February 1995, Mr. Moffat was First Vice
President of  Institutional  Sales at Lehman  Brothers,  Inc.  Hamburg,  Germany
office.  From October 1971 to December  1984, Mr. Moffat was a Vice President at
Merrill Lynch, Inc. Previously, Mr. Moffat served in the United States Navy from
1953 to 1956 where he attained  the rank of  Lieutenant  Commander.  Mr.  Moffat
graduated from Williams College in 1951 with a BA degree.

     JAMES H. HIRST has served as Chief  Executive  Officer of the Company since
September  1997, and a Director and President since May 1998. As Chief Executive
Officer and President of the Company,  Mr. Hirst is responsible  for all Company
operations,  licensing arrangements,  product sales and marketing. Mr. Hirst has
served as President of Mesquite Management Ltd. from March 1986 to present where
he has provided  consulting services to early stage companies in connection with
their  operations,  financial  information  systems  and  legal  compliance.  In
performing  his  consulting  services,  Mr.  Hirst  served as a director of Rock
Resources Inc. from November 1996 to October, 1998, as director and President of
Consolidated  Bahn Foods Ltd.  from April 1998 to present,  as a vice  president
from  January  1991 to 1996 and  President  to  October  1996 of  Parisco  Foods
Limited,  as the Chief Executive  Officer from January 1991 to 1997 and director
from  November  1997 to October  1998 of Global Tree  Technologies,  Inc.,  as a
director of Consolidated  Shoshoni Gold Inc. from August 1996 to August 1997, as
the president and director of Consolidated  Newgate  Resources Ltd. from October

                                       36
<PAGE>
1990 to May 1992 and as the  president and director of Yuma Gold Mines Ltd. from
October  1990 to August 1994.  From 1966 to 1980,  Mr. Hirst was a member of the
Royal Canadian Mounted Police - Commercial Crime Section. Mr. Hirst attended the
Canadian  Police  College,  Ottawa,  Ontario,  Canada in 1980 and  completed the
Computer Crime Investigation Course and Senior Investigators Course. He achieved
the rank of  Sergeant  after only 13 years of service  and in 1981  resigned  to
establish his private consulting  business.  In 1979, Mr. Hirst graduated with a
Bachelor of Commerce  (Accounting and Management  Information  Systems) from the
University of British Columbia.

     R.L.  (BEAU)  VAN DEREN has  served as  Director  as well as the  Company's
Secretary  and  Treasurer  since  December  1, 1998.  Mr. Van Deren has been the
Managing  Director - Corporate  Development  for Dominion  Capital Pty Ltd.,  an
affiliate of the Company,  since  November 8, 1998,  and has undertaken his role
with the Company  while also an employee  of Dominion  Capital.  From 1992 until
December  1998,  Mr.  Van Deren was  primarily  involved  in  advising  emerging
businesses and real estate operators and investors as a financial  advisor along
with  practicing law and  accounting on a limited basis.  From 1991 to 1992, Mr.
Van Deren was the Chief Financial Officer and General Counsel of MaxiCare, Inc.,
a seller of medical  products and Medicare  billing  services to nursing  homes.
Prior to 1992,  Mr. Van Deren  practiced tax and corporate law with the law firm
of Scult,  Lazarus & French,  P.C. in Phoenix,  Arizona after practicing  public
accounting  with the Phoenix  offices of Laventhal & Horvath and Touche,  Ross &
Co. Mr. Van Deren received a Juris Doctorate in 1976 and a Bachelor of Science -
Business Administration in 1973 from the University of Arizona.

     JERRY W. GODDARD has served as Director of the Company since November 1996.
Mr.  Goddard has been the  Managing  Director of Prime  Mortgage  Group  Limited
(Australia)   from  1991  to  present  and  is  directly   responsible  for  the
implementation of strategies including fund raising and marketing of the group's
products  to the  financial  community.  Mr.  Goddard  has served as director of
Golden Triangle  Resources Ltd., an Australian  mining company from 1994 through
present.

     NAOYA  YOSHIKAWA has served as Director of the Company since November 1996.
Mr. Yoshikawa served as President of Crest Japan Inc. from 1987 to present.  Mr.
Yoshikawa  has served as a director  of several  companies  in the past  decade,
including the Japan - America Friendship Association from 1989 to present, Japan
Environmental  Protection  Organization from 1991 to present. Mr. Yoshikawa also
served as Chief  Executive  Officer of Dominion  Capital Japan Ltd. from 1996 to
present.  In his  capacity  as General  Manager and Chief  Executive  Officer of
Dominion Capital Japan Ltd., Mr.  Yoshikawa  represents  Solpower  Australia Pty
Ltd. and SOLTRON  operations in Japan.  Mr.  Yoshikawa  has a Masters  Degree in
Economics  and  Business   Administration  and  is  Honorary  Professor  of  the
University of Mindanao for Environment  and  Protection,  as well as holding the
position of President of the Association of Clean Air Devices.

     (B) COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     During the fiscal year ended March 31, 1999, Mr. Van Deren failed to timely
file a report on Form 3 upon  becoming a director of the  Company.  The required
report was filed on September 20, 1999.

ITEM 10. EXECUTIVE COMPENSATION

     The following table reflects all forms of compensation  for services to the
Company for the fiscal years ended March 31,  1999,  1998 and 1997 for the Chief
Executive  Officer of the Company.  No officer of the Company received salary or
bonus in excess of $100,000 for any of these fiscal years.

                                       37
<PAGE>
                           SUMMARY COMPENSATION TABLE

                                                                     LONG TERM
                                        ANNUAL COMPENSATION         COMPENSATION
                                  ------------------------------    ------------
                                                       OTHER           STOCK
                                  FISCAL               ANNUAL         OPTIONS
NAME AND PRINCIPAL POSITION        YEAR    SALARY   COMPENSATION     (SHARES)
---------------------------        ----    ------   ------------     --------


James H. Hirst                     1999      --     $100,000(1)     100,000(2)
Chief Executive Officer            1998      --      $58,333(1)     300,000(2)
                                   1997      --           --             --

----------
(1)  During  the  fiscal  year  ended  March  31,  1999,  Mr.  Hirst  acted as a
     consultant to the Company for the compensation stated.

(2)  The  options  have not yet vested  and have been  allotted  pursuant  to an
     Option Plan with requisite vesting requirements to be achieved.

OPTION GRANTS

     The following table sets forth information  regarding the grants of options
to the Company's executive officers for the fiscal year ended March 31, 1999.

<TABLE>
<CAPTION>
                        OPTION GRANTS IN FISCAL YEAR 1999

                   NUMBER OF SHARES OF        PERCENT OF TOTAL      EXERCISE ON
                 COMMON STOCK UNDERLYING     OPTIONS GRANTED TO      BASE PRICE
    NAME             OPTIONS GRANTED      EMPLOYEES IN FISCAL YEAR    ($/SHARE)   EXPIRATION DATE
    ----             ---------------      ------------------------  -----------   ---------------

<S>                      <C>                        <C>                    <C>      <C>
James H. Hirst           100,000                    20%                    (1)      May 28, 2003

R.L. Van Deren           400,000                    80%                    (2)      Jan. 4, 2004
</TABLE>

----------
(1)  50% Exercisable at $3.00 Per share and 50% exercisable at $7.00 Per share.

(2)  25% Exercisable at $1.30 Per share; 25% exercisable at $1.60 Per share; 25%
     exercisable at $2.35 Per share; and 25% exercisable at $5.00 Per share.

OPTION EXERCISES AND VALUES

         The following table sets forth  information  regarding the exercise and
values of options held by the Company's executive officers as of March 31, 1999.

                                       38
<PAGE>
                          AGGREGATE OPTION EXERCISES IN
               LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

                                               NUMBER OF    VALUE OF UNEXERCISED
                                              UNEXERCISED       IN-THE-MONEY
                                               OPTIONS AT        OPTIONS AT
                                             MARCH 31, 1999    MARCH 31, 1999
                 SHARES ACQUIRED   VALUE      EXERCISABLE/      EXERCISABLE/
    NAME            ON EXERCISE   REALIZED    UNEXERCISABLE     UNEXERCISABLE
    ----            -----------   --------    -------------     -------------

James H. Hirst           0           0          0/400,000          $0/$0

R. L. Van Deren          0           0          0/400,000          $0/$0


EMPLOYMENT AGREEMENTS

     The Company has no employment agreements with its executive officers.

DIRECTOR COMPENSATION

     All authorized  out-of-pocket  expenses incurred by a Director on behalf of
the Company are subject to reimbursement.

STOCK OPTION PLAN

     In  November  1997,  the  Board of  Directors  adopted a Stock  Option  and
Incentive  Plan (the "PLAN"),  which the  shareholders  approved on November 22,
1997.  The purpose of the Plan is to provide a means  through  which the Company
may attract  able  persons to enter the employ of and provide  services  for the
Company  and  to  provide  a  means   whereby   those   persons  upon  whom  the
responsibilities for the successful administration and management of the Company
rest,  and whose  present  and  potential  contributions  to the  welfare of the
Company  are of  importance,  can acquire and  maintain an  ownership  interest,
thereby  strengthening  their  commitment  to the welfare of the Company and the
desire to remain in the employ or service of the Company.  A further  purpose of
the Plan is to  provide  such  persons  with  additional  incentive  and  reward
opportunities  designed to enhance the profitable growth of the Company. So that
the  appropriate  incentive  can be  provided,  the Plan  provides  for granting
options,  incentive stock options,  stock appreciation rights,  restricted stock
awards,  performance shares and dividend equivalents,  or any combination of the
foregoing.  As of March 31, 1999, 1,700,000 stock options had been granted under
the Plan at exercise prices ranging from $1.00 to $7.00 per share.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth,  as of July 1, 1999, the ownership of each
person known by the Company to be the  beneficial  owner of five percent or more
of the Company's Common Stock, each officer and director  individually,  and all
officers and directors as a group. The Company has been advised that each person
has sole  voting  and  investment  power  over the shares  listed  below  unless
otherwise indicated.

                                       39
<PAGE>
   NAME AND ADDRESS                      AMOUNT AND NATURE          PERCENT OF
  OF BENEFICIAL OWNER                       OF OWNERSHIP             CLASS(1)
  -------------------                    -----------------          ----------
Fraser M. Moffat III                                  0                    0%
18 Lake Avenue
Montrose, Pennsylvania

James H. Hirst(2)                                   100                     (3)
7309 East Stetson Drive
Scottsdale, Arizona

R. L. (Beau) Van Deren(2)                           100                     (3)
3330 East Colter Street
Phoenix, Arizona

Jerry W. Goddard                                135,000(4)               0.6%
7309 East Stetson Drive
Scottsdale, Arizona

Naoya Yoshikawa                                     100                     (3)
2-16-42 Takanawa
Minato-Ku, Japan

Angelus, Inc.(5)                              5,000,000(6)              21.3%
Suite IA Hirzel Court
Hirzel Street, St. Peter Port
Guernsey, Channel Islands GYI 2NN

Equitloan Limited(5)                          2,000,000                  8.5%
Box 8111
Gold Coast Mail Centre
Bundall, Queensland 9726
Australia

Peter Voss                                    8,544,950(7)              36.4%
Level 11, Dominion Building
533 Little Londale Street
Melbourne, Victoria 3000
Australia

Dominion Capital Pty Ltd. (7)(8)              7,114,650                 30.3%
3 Hewitt Street
Cheltenham, Australia

All Directors and Officers                      135,300                  0.6%
as a Group (5 persons)

                                       40
<PAGE>
----------
(1)  Based upon  23,456,560  shares of Common Stock being issued and outstanding
     on March 31, 1999.

(2)  Messrs.  Hirst and Van Deren have each been granted  options to purchase up
     to an  additional  400,000  shares of Common  Stock at prices  ranging from
     $1.00 to $7.00 per share upon the market price of  Solpower's  Common Stock
     attaining  certain  levels.   These  options  have  not  vested,   are  not
     exercisable until vested and are not included in the total above.

(3)  Less than 0.1%.

(4)  Includes 100,000 shares held by an entity  associated with Jerry W. Goddard
     over which he has an exercisable control.

(5)  The  beneficial  owners  of  this  entity  are  unknown  to  the  Company's
     management  and are not known to be  affiliated  with any  other  officers,
     directors or principal shareholders of the Company.

(6)  Includes 1,000,000 shares of Common Stock issued and outstanding, 2,000,000
     shares purchasable by exercise of an A Warrant on or before January 7, 1999
     (extended  to  January  7,  2000) at $1.50 per share and  2,000,000  shares
     purchasable  by  exercise  of a B Warrant  on or before  January 7, 2000 at
     $3.00 per share.

(7)  Mr. Peter Voss holds 100 shares directly and controls  Dominion Capital Pty
     Ltd which holds 7,114,650  shares and A1 Financial  Planners Pty Ltd. which
     holds 980,200 shares.  The total reflected  includes 300,000 shares held by
     Mr. Voss' wife and two adult  children and in which Mr. Voss  disclaims all
     beneficial interest and 100,000 shares subject to purchase options at $3.00
     per share held by Dominion Capital  Securities,  Inc., an entity controlled
     by Mr. Voss plus 50,000 shares issued to Dominion Capital Securities, Inc.

(8)  Dominion  Capital has been granted an option to acquire  750,000  shares of
     Common  Stock at prices  ranging from $2.50 to $5.00 per share upon Soltron
     sales revenues attaining certain levels. These options have not vested, are
     not exercisable until vested and are not included in the total above.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On November 4, 1996, the Company entered into an Acquisition Agreement with
Dominion   Capital  for  the   acquisition   of  the  exclusive   manufacturing,
distribution,  marketing  and  sales  rights  in North  America  to the  product
SOLTRON.  The  original  term of the original  agreement  was for five years and
provided that the Company  issue  5,000,000  shares of its Common  Stock,  issue
preferred stock and grant certain options to Dominion  Capital as  consideration
for such rights. On November 22, 1997 the Company  renegotiated the terms of the
Acquisition  Agreement to extend its term for an additional five year period and
eliminate the option and preferred share issuance  granting to Dominion Capital.
The amended  agreement  provided that options and  performance  bonuses would be
payable  to  Dominion  Capital as  follows:  (i) upon  gross  sales for  SOLTRON
equaling $10,000,000, Dominion Capital has the option to purchase 100,000 shares
at $2.50 per share, plus a cash performance  bonus of $400,000;  (ii) upon gross
sales for  SOLTRON  equaling  $20,000,000,  Dominion  Capital  has the option to
purchase  150,000  shares at $3.50 per  share,  plus cash  performance  bonus of
$400,000;  (iii) upon gross  sales for  SOLTRON  equaling  $50,000,000  Dominion
Capital has the option to purchase 250,000 shares at $4.50 per share,  plus cash
performance  bonus of $500,000;  and (iv) upon gross sales for SOLTRON  equaling
$100,000,000,  Dominion  Capital  has the option to purchase  250,000  shares at
$5.00 per share, plus a cash performance bonus of $1,000,000.  Effective May 13,
1998 the Company and Dominion  Capital agreed to an addendum to the  Acquisition
Agreement  of  November  4, 1996 by allowing  the  Company,  on a first right of
refusal basis, an interest in all other territories, except Japan, where SOLTRON
and other  products and services  area  currently  being  commercialized  by the
Dominion  Capital,  on terms and  conditions  to be  negotiated  on a product by
product and a territory by territory basis.

         On November  4, 1996,  the Company  issued  3,520,000  shares of Common
Stock to Dominion  Capital at a price of $0.125 per share. On April 1, 1997, the
Company issued  4,160,000 shares of Common Stock to Dominion Capital in exchange
for  cancellation  of  advances  payable  to  Dominion  Capital in the amount of
$520,000.

                                       41
<PAGE>
     On June 17, 1998,  the Company and Dominion  Capital  entered into a second
Acquisition  Agreement  for  the  acquisition  of the  exclusive  manufacturing,
distribution, marketing and sales rights in North American to the product SP34E.
The  Company  agreed to issue  6,000,000  shares of its  Common  Stock and pay a
royalty of $2.25 for each kilogram of SP34E sold in the Company's territory. The
term of the Acquisition Agreement was for five years with an option renew for an
additional  five years.  On June 12,  1999,  the Company  and  Dominion  Capital
executed an addendum,  effective  January 1, 1999,  delaying the commencement of
the Acquisition  Agreement until the Company  achieves  certain sales volumes of
SP34E, but not later than July 1, 2000.

     On July 1, 1998, the Company  entered into a Client Service  Agreement with
Dominion Capital  Securities,  Inc.,  ("DCSI") an Arizona  corporation,  for the
provision of all investor and corporate  communications services required by the
Company. DCSI is wholly-owned by Peter Voss, who also controls Dominion Capital,
the principal  shareholder of the Company.  The term of the agreement is for six
months and is renewable for further six month periods. In consideration for DCSI
providing the services it will receive  $275,000 of which $125,000 is payable in
cash and the balance in the form of 50,000 shares of the Company's Common Stock.
As further  consideration  DCSI has been granted an option to buy 100,000 shares
of the  Company's  Common Stock at the exercise  price of $3.00 per shares for a
period of two years.

     On March 29, 1999, the Company entered into a Joint Venture  Agreement with
Protocol  Resource  Management  Inc.,  a Canadian  corporation  ("PROTOCOL")  to
manufacture  and  distribute  SP34E in Canada  and  elsewhere  in the  Company's
licensed territory. The joint venture is a Canadian corporation equally owned by
the Company and Protocol.  Protocol  serves as the manager of the joint venture.
The Company is in the process of providing  the necessary  notifications  to the
U.S. Environmental  Protection Agency prior to initiating its marketing strategy
for this product in the United States.

     The Company's general policy for entering into transactions with directors,
officers and  affiliates  of the Company  that have a financial  interest in the
transaction is to adhere to Nevada  corporate law regarding the approval of such
transactions.  In general,  a  transaction  between a Nevada  corporation  and a
director,  officer or  affiliate of the  Corporation  in which such person has a
financial  interest  is not void or voidable if the  interest is  disclosed  and
approved by  disinterested  directors or  shareholders  or if the transaction is
otherwise fair to the corporation.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a) EXHIBITS

2.1(1)    Articles  of  Merger,   merging  Virtual  Technologies  Inc.,  a  Utah
          Corporation,  into Virtual  Technologies  Inc., a Nevada  Corporation,
          dated July 26, 1996.

2.2(1)    Plan of Merger of the Company,  merging Virtual  Technologies  Inc., a
          Utah Corporation into Virtual Technologies Inc., a Nevada Corporation,
          dated July 19, 1996.

3.1(1)    Restated  Articles  of  Incorporation  of Solpower  Corporation  dated
          November 24, 1997.

3.2(1)    Amended and Restated Bylaws of Solpower Corporation dated November 24,
          1997.

10.1(1)   Acquisition  Agreement dated November 4, 1996 between Dominion Capital
          Pty  Ltd.  and  Virtual  Technologies,  Inc.  for the  Distribution  &
          Manufacturing Rights of SOLTRON Product.

                                       42
<PAGE>
10.2(1)   Acquisition  Agreement  amendment  dated  November 24, 1997  outlining
          clarifications and extensions of original Acquisition  Agreement dated
          November 4, 1996.

10.3(1)   Addendum to Acquisition Agreement dated May 13, 1998.

10.4(1)   Acquisition Agreement dated June 17, 1998 between Dominion Capital Pty
          Ltd. and Solpower  Corporation for the Distribution and  Manufacturing
          Rights of SP34E Product.

10.5(1)   Form of Master License Agreement.

10.6(1)   Form of Security Agreement.

10.7(1)   Property Lease Agreement  between Arizona  Industrial  Capital Limited
          Partnership and Virtual Technologies, Inc. dated August 25, 1997.

10.8(1)   Property Lease  Agreement and amendments  between  Scottsdale  Stetson
          Corporation and Virtual Technologies, Inc. dated March 12, 1997.

10.9(1)   First Amendment to Property Lease Agreement between Scottsdale Stetson
          Corporation and Virtual Technologies, Inc.

10.10(1)  Second  Amendment  to  Property  Lease  Agreement  between  Scottsdale
          Stetson Corporation and Virtual Technologies, Inc.

10.11(1)  Commercial  Lease between D.I.  South,  Inc. and Solpower  Corporation
          dated June 1, 1998

10.12(1)  Solpower  Corporation  Stock Option and Incentive  Plan dated November
          22, 1997.

10.13(1)  Territory Licensee Finders Fee Agreement between Virtual Technologies,
          Inc. and Charles C. Van Zee dated November 5, 1997.

10.14(1)  Territory Licensee Finders Fee Agreement between Solpower  Corporation
          and Josh Ward dated February 1, 1998.

10.15(1)  Territory Licensee Finders Fee Agreement between Solpower  Corporation
          and Trond Matteson dated February 1, 1998.

10.16(1)  Client Services  Agreement  between Solpower  Corporation and Dominion
          Capital Securities, Inc. dated July 1, 1998.

10.17     Addendum to June 17, 1998 Acquisition  Agreement  effective January 1,
          1999.

10.18     Joint Venture  Agreement  between  Solpower  Corporation  and Protocol
          Resource Management, Inc. dated March 29, 1999.

10.19     Heads of Agreement between Solpower Corporation and Solpower Australia
          Pty Ltd. dated June 7, 1999.

11.1      Statement re Computation of Per Share Earnings.

                                       43
<PAGE>
16.1(2)   Letter on change in certifying accountant.

21.1      Subsidiaries

23.1      Auditor's Consent from Semple & Cooper, LLP

23.2      Auditor's Consent from Clancy & Company, PLLC

27.1      Financial Data Schedule.

99.1      Assignment,  Settlement and Release between  Solpower  Corporation and
          Masters Marketing Group, Inc. dated May 14, 1999.

99.2      Assignment, Settlement and Release between Solpower Corporation and D.
          I. South, Inc. of Indiana dated September 1, 1999.

99.3      Assignment,  Settlement and Release between  Solpower  Corporation and
          Solpower Southeast Corporation dated September 7, 1999.

----------
(1)  Incorporated  by reference from the Company's Form 10-SB as filed on August
     21, 1998.

(2)  Incorporated  by reference  from the Company's Form 8-K/A as filed on March
     24, 1999.

     (b) REPORTS ON FORM 8-K

     On March 24,  1999,  the  Company  filed a report  on Form  8-K,  which was
subsequently  amended in a report filed on Form 8-K/A on March 25, 1999.  In the
report,  the Company  announced its decision to terminate its relationship  with
Clancy & Co.,  PLLC as the  Company's  independent  public  accountants  and its
selection of Semple & Cooper LLP, a member of the BDO Seidman  Alliance,  as its
new independent public accountant.

                                       44
<PAGE>
     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                      SOLPOWER CORPORATION


Dated: September 24, 1999             By /s/ James H. Hirst
                                         ---------------------------------------
                                         James H. Hirst, Chief Executive Officer


                                      BOARD OF DIRECTORS:

Dated: September 24, 1999                /s/ Fraser M Moffat III
                                         ---------------------------------------
                                         Fraser M. Moffat III, Chairman


Dated: September 24, 1999                /s/ James H. Hirst
                                         ---------------------------------------
                                         James H. Hirst


Dated: September 24, 1999                /s/ R. L. Van Deren
                                         ---------------------------------------
                                         R. L. Van Deren


Dated: September 24, 1999                /s/ Jerry W. Goddard
                                         ---------------------------------------
                                         Jerry W. Goddard

Dated: September 24, 1999                /s/ Naoya Yoshikawa
                                         ---------------------------------------
                                         Naoya Yoshikawa

                                       45