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, 2001

[ ] 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                            (IRS Employer
     Incorporation or Organization)                          Identification No.)


          4247 West Adams Street
            Phoenix, Arizona                                       85009
(Address of Principal Executive Offices)                         (Zip Code)


                                 ((602)447-9979
                           (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 $1,157,143.

     The  aggregate  market  value of the common  stock  held by  non-affiliates
computed  based  on the  closing  price  of such  stock  on  April  2,  2001 was
approximately $3,500,000.

     The  number of shares  outstanding  of the  registrant's  classes of common
stock, as of March 31, 2001 was 31,255,064.

                    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"). We intend that
the  forward-looking  statements be subject to the safe harbors created by these
statutory  provisions.  Forward-looking  statements include, but are not limited
to, statements regarding future events and our plans and expectations.  Wherever
possible,  we have  identified the  forward-looking  statements by words such as
"ANTICIPATES,"  "BELIEVES,"  "CONTEMPLATES,"  ESTIMATES,"  "EXPECTS," "INTENDS,"
"PLANS,"  "PROJECTS,"  "FORECASTS"  and  similar  expressions.  We may also make
additional  forward  looking  statements  from time to time in filings  with the
Securities and Exchange Commission ("SEC"), in press releases or otherwise.

     Our  forward-looking  statements involve risks and  uncertainties,  reflect
only our current views with respect to future  events and financial  performance
or operations  and speak only as of the date the statements are made. Our 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  "DESCRIPTION  OF  BUSINESS  -  FACTORS  AFFECTING  FUTURE  PERFORMANCE"  and
"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 we believe 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
"DESCRIPTION OF BUSINESS - FACTORS  AFFECTING FUTURE  PERFORMANCE," our business
and operations 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 us or any other  person that the future  events,  plans or
expectations,  financial projections,  performance or acceptance of our products
in the market place will be achieved. We disclaim any obligation to subsequently
revise forward-looking  statements to reflect subsequent events or circumstances
or the occurrence of unanticipated events.

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     We  are  in  the  business  of  producing,  marketing  and  distributing  a
proprietary  enzyme-based  fuel  enhancing  product,   SOLTRON,  an  ozone  safe
alternative  refrigerant,  SP34E,  and the KLEAN range of enzyme based  cleaner,
bio-remediation   and  petroleum  deposit  control  agents.  Our  business  plan
contemplates distribution of these products throughout the United States, Canada
and  Mexico.  SOLTRON is  manufactured  at our  production  facility in Phoenix,
Arizona  and   distributed   through   traditional   channels,   including  fuel
wholesalers,   oil  distributors  for  bulk  treatment,  marine  and  automotive
after-market   stores,   appointed   distributors  and  directly  to  end-users.
Manufacturing  of SP34E is conducted at our  50%-owned  subsidiary in Canada and
distributed  through  wholesale   distributors  of  refrigeration  products  and
automotive aftermarket air conditioning service centers in Canada and the United
States.

     We were originally incorporated in Utah in 1982 as Dynafuel Corporation and
our original  business involved research and development of an experimental fuel
using  alcohol and other  chemicals in a  proprietary  combination  to produce a
gasoline-like motor fuel. In July 1996, we merged into a newly-formed subsidiary
incorporated  in Nevada to change our corporate  domicile.  In November 1996, we
entered into a licensing  agreement  with Dominion  Capital Pty Ltd.  ("DOMINION
CAPITAL") to acquire the exclusive  manufacturing,  distribution,  marketing and

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sales rights for SOLTRON in the United States, Canada and Mexico. As a result of
entering into this  licensing  agreement,  Dominion  Capital and its  affiliates
gained control and a new Board of Directors and new management were installed. A
corporate philosophy of acquiring and commercializing  environmentally  friendly
products  was  initiated.  In June  1998,  we  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 December  2000,  we  acquired  the E*COR  enzyme
division  of Perix  Industries,  Inc.,  including  all the  rights  to the KLEAN
product line.

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.  Use data has shown that,  when added to liquid fossil
fuels,  SOLTRON reduces particulate  exhaust emissions and smoke,  improves fuel
economy,  controls fuel sludge and other impurities and ultimately lowers engine
maintenance  costs. In addition,  when mixed with liquid fuels,  SOLTRON changes
the fuel's molecular structure and improves its oxygen absorption and combustion
efficiency.   The  enzymes  contained  in  SOLTRON  essentially  "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.  We continue  to conduct  field and  objective
laboratory  testing of SOLTRON and are developing a database of independent test
data regarding the effects of use of SOLTRON as a liquid fossil fuel additive.

     We are marketing  SOLTRON in North America as a natural enzyme product that
will reduce  emissions,  improve  fuel  economy and reduce  engine  maintenance.
SOLTRON has been sold  commercially  in Japan since 1993 and in Australia  since
1996 and was awarded the 1997 Best New Aftermarket  Product Award  (Chemical) by
the Australian Automotive Aftermarket Association.  SOLTRON sales have increased
during our last  fiscal  year as a result of product  acceptance  and use in the
marine industry where biological fuel contamination is a persistent problem. New
applications  for SOLTRON in the  treatment of diesel and other heavier fuels in
small power generation plants have also contributed to increased sales.

     SP34E. SP34E is a non-ozone depleting refrigerant developed in Japan by the
Kinoh-Kinzohu   Company  as  a  replacement  for   ozone-depleting   fluorinated
refrigerants  commonly used today.  SP34E is currently sold in Japan,  Australia
and other Asian rim countries.  Significant use data has been developed for this
product,  the  results  of  which  have  consistently  shown  that  SP34E  is an
acceptable  near  "DROP-IN"  replacement  for  CFC-R-12  in  mineral  oil  based
refrigerant  applications.  SP34E  generally  does not  require  replacement  of
mechanical  components  or  removal  of  mineral  oils  that are  found in older
refrigeration   systems.   Applications  of  this  product  include  automotive,
domestic, commercial and transport refrigeration and air conditioning systems as
an alternative to CFC- R-12 (Freon(R)) and other fluorinated refrigerants.

     KLEAN.  The  KLEAN  line  of  products  includes  EZKLEAN,   SOILKLEAN  and
PETROKLEAN.  EZKLEAN is a degreaser,  cleaner and deodorizer that is designed to
promote  cleaning of oils,  fats and grease from  various  surfaces  and is also
effective  in removing  petroleum-based  products  from a variety of  substrates
including  metals.  It also controls and eliminates  odors from organic sources.
SOILKLEAN  is an  accelerator  used  in  bio-remediation  and  is  effective  on
petroleum releases to soil and groundwater. SOILKLEAN has also been effective in
reducing MTBE, chlorinated  hydrocarbons,  PAHs and other recalcitrant compounds
found in  contaminated  soils.  PETROKLEAN is a petroleum  deposit control agent
that has shown  effectiveness  in  removal  of heavy  petroleum-based  deposits.
Applications range from fabric stain removal to rejuvenation of oil wells.

SUPPLIERS

     SOLTRON.  SOLTRON  consists of natural  organic enzymes mixed with low odor
base  solvent.  The enzyme  concentrate  used in the  manufacture  of SOLTRON is
produced  exclusively  by Neway  Japan K.K. of Tokyo,  Japan and  supplied to us
through our  licensing  agreement  with Dominion  Capital.  Neway Japan K.K. has

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informed us that it currently has sufficient  inventory of enzyme concentrate on
hand to supply  our  anticipated  needs  through  2001 and  2002.  Low odor base
solvent is readily  available  through  numerous local  suppliers.  We have also
developed  our own  proprietary  bottle  design  for retail  packaging  and have
selected  manufacturers that can produce our bottles in quantities sufficient to
meet our anticipated needs.

     SP34E.  The  components of SP34E are readily  available from numerous local
and national suppliers.

     KLEAN.  The enzymes used in the KLEAN  products are purchased from Advanced
Bio Catalytics Corporation in Newport Beach, California. Other materials used in
the  manufacture  of the KLEAN  products are generally  available  from numerous
suppliers.

MARKETING STRATEGIES

     We are  developing  new and  improving  existing  products  through  direct
contact with end users.  Other  activities  to promote our products  include the
identification  and  development  of  operations,   marketing,   accounting  and
administrative  systems, all of which we also hope will increase our efficiency.
We have established a corporate  communications  system supported by an in-house
desktop publishing  department and continually  upgrade our corporate image with
improved  logos,  Web site changes,  product  brochures,  trade show  materials,
product labeling and packaging and all related marketing materials.

     SOLTRON.  The fuel  market  may be divided  into  distinct  groups  such as
gasoline,  diesel,  bunker and aviation fuel users.  These groups can be further
subdivided  into distinct user segments,  such as commercial  transport  fleets,
government fleets,  marine transport fleets, retail distribution and industrial.
We believe  that  SOLTRON is able to greatly  benefit  fuel  consumers in all of
these  markets.  Our  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 in each user market
segment.

     The United States  Environmental  Protection  Agency  ("EPA")  designated a
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 continue to be
imposed to regulate fuel  specifications and exhaust emissions.  We believe that
this increased  regulation will create  opportunities for consumer acceptance of
SOLTRON and we are focusing on all North American markets.

     We began  distribution of SOLTRON in June 1998. We originally  attempted to
create  distribution  for SOLTRON through a series of licensing  agreements.  We
terminated  these  licensing  arrangements  in 1999,  and we now  manage all our
manufacturing and distribution systems at the company level, with no outsourcing
or licensing to third  parties.  We are currently  utilizing  distributors,  oil
marketers,  independent  sales  representatives  and direct sales  activities to
provide a  focused  marketing  effort,  which we  believe  will  expose  SOLTRON
directly  to  prospective  customers.  We employ a national  sales  manager  who
develops  and  services   distributors  and  independent  sales  representatives
throughout the United States,  Canada and Mexico.  All sales orders are serviced
from our Phoenix, Arizona production facility. We also utilize other traditional
distribution  channels  including  a Web site and  resale  distribution  through
retail chains such as NAPA.

     SP34E.  Refrigerants are widely used in motor vehicle  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 refrigerants.  CFCs used as refrigerants include R-12, HCFCs include
R-406A, and HFCs include R-134a. Emissions of CFCs and HCFCs 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

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be phased out in the United  States by 2030.  Although  HFCs also contain  gases
that have global warming  potential,  HFCs have not yet been banned or scheduled
for phase-out.  We market SP34E as an environmentally  safe replacement for R-12
refrigerants with greater efficiency and less environmental impact.

     In August 2000 we acquired a 50% interest in Protocol Resource  Management,
Inc.  ("PROTOCOL") of Aurora,  Ontario Canada.  We were previously  engaged in a
joint  venture  for the  manufacture  and  distribution  of SP34E with  Protocol
through Solpower Canada Inc., an Ontario corporation,  owned equally by Protocol
and us. We have  discontinued  the joint  venture  and  account  for  Protocol's
activities  as a  subsidiary.  The  assets  of  Protocol  consist  of plant  and
equipment used by Protocol in its business of refrigerant  blending,  recycling,
repackaging,  conversion  and  distribution  services.  Protocol  is the largest
HFC-R134a  repackaging  operation in Canada and manufactures  leading technology
refrigerant reclamation and blending equipment. Protocol has a fully operational
SP34E  refrigerant  blending  plant capable of producing  over 18,000 tonnes per
annum.  This  facility is currently  producing  and  supplying  SP34E to various
Canadian  customers  including  Canadian  Tire  Corporation,   Canada's  largest
automotive service retailer,  CAMCO Inc., a division of GE, and Canada's largest
appliance OEM service company,  and other major Canadian HVACR  wholesalers with
Canada-wide  distribution.  We obtained Environmental Protection Agency approval
of SP34E in December 2000. See  "REGULATIONS"  below. In January 2001 we entered
into an arrangement with  Environmental  Technologies,  Inc. for distribution of
SP34E in the United States.

     KLEAN. In December 2000 we acquired certain assets of the E*COR division of
Perix Industries,  Inc.,  including the KLEAN brand names of EZKLEAN,  SOILKLEAN
and PETROKLEAN.  Applications for these products include  cleaning,  degreasing,
odor  control,  soil  and  groundwater  remediation,  wastewater  treatment  and
petroleum deposit removal.  All the KLEAN products are environmentally  safe. We
currently market these products through our SOLTRON  distributor  network and by
direct selling.

PRODUCT RIGHTS AGREEMENTS

     SOLTRON.  In 1996, we 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 our  common  stock and the grant of
certain  options and payment of cash  consideration  upon meeting  certain sales
levels.  The agreement was amended in 1997 and has a five-year  term that may be
renewed at our option for an additional  five-year term. We also have a right of
first refusal to commercialize SOLTRON and other products controlled by Dominion
Capital  on a  global  basis,  except  Japan,  on terms  to be  negotiated  on a
territory by territory and product by product basis.

     SP34E.  In June 1998, we acquired the exclusive  rights to produce,  market
and distribute SP34E in North America through an agreement with Dominion Capital
in  consideration  for  6,000,000  shares of our common stock and the payment to
Dominion  Capital of a royalty of $2.25 per  kilogram  (subsequently  amended to
2.5% of gross sales) of SP34E that we sell.  The initial  term of the  agreement
was for five years and was amended in June 1999 to commence on the date we first
achieved  sales of SP34E  sufficient to establish a  predictable  growth rate or
July 1, 2000,  whichever  came first.  This agreement may also be renewed for an
additional five years at our option.

     KLEAN.  We acquired  various assets  comprising the E*COR division of Perix
Industries,  Inc. in  consideration  for 100,000 shares of our common stock. The
assets  included  the  rights  to the  E*COR  name and Web  site,  the  EZKLEAN,
SOILKLEAN, and PETROKLEAN trademarks,  inventory,  proprietary formula, customer
lists and contracts.

PROPRIETARY RIGHTS

     We  rely  on  a  combination   of  trade  secret  and  copyright  laws  and
confidentiality  and  non-compete   agreements  to  establish  and  protect  our
proprietary rights in our products.  However, there can be no assurance that any
confidentiality  or  non-compete  agreement  between  us and  our  employees  or

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consultants will provide meaningful  protection for our proprietary  information
in the  event  of  any  unauthorized  use  or  disclosure  of  such  proprietary
information.

     We have registered the trademark  "SOLTRON" and the service mark "SOLPOWER"
with the United  States  Patent and  Trademark  Office  ("USPTO").  We have also
registered SOLTRON with the EPA for use as an aftermarket  additive and for bulk
fuel treatment.  Dominion Capital has registered "SP34E" as a trademark with the
USPTO.

COMPETITION

     We compete  with  numerous  well-established  fuel  additive  and  chemical
products companies that possess  substantially greater experience and financial,
marketing,  personnel and other  resources  than we do. Many of our  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.

     Some products  already in the  marketplace  that may compete  directly with
SOLTRON include STP Gas Treatment,  STP Diesel Treatment and STP Smoke Treatment
(all  produced by First  Brands  Corporation),  Slick 50  (produced  by Slick 50
Products Corporation), Valvtect VT-5000 (produced by Valvtect Petroleum Products
Corp.) and Fuelon (produced by Fuelon  International,  Inc.). We believe that we
can  successfully  compete with these  products and  penetrate the fuel additive
market  due  to  the  unique   environmentally   friendly   characteristics  and
multi-function  applications of SOLTRON. See "DESCRIPTION OF  BUSINESS-PRODUCTS"
above.

     With  respect  to  SP34E,  we  will  compete  with  numerous  national  and
international  companies  that produce  refrigerants  and blended  alternatives,
including DuPont, Elf Autochem,  ICI and Allied Signal, among others. Certain of
our competitors' products contain HCFCs, the production of which is scheduled to
be phased out. With respect to other products containing HFCs, SP34E may be used
in existing R-12 mineral oil based systems with less costly  conversions of such
systems.   We  believe  that  the   regulatory  ban  and  phase-out  of  certain
refrigerants  combined with the environmentally safe characteristics and product
utility  of SP34E  will  allow us to  compete  successfully  in the  refrigerant
market.  However, there can be no assurance that we will be able to successfully
market SP34E as a viable  alternative to the  refrigerants  that currently enjoy
widespread market acceptance.

     The KLEAN products  compete with other organic based  solvents,  degreasers
and bioremediation  products including Soygold.  We are just commencing with the
marketing of these products and are unable to predict market  acceptance at this
time.

     Our  ability  to  compete  successfully  will  depend  on  our  success  at
penetrating each targeted market segment with our products,  consumer acceptance
of our  products  and our  ability  to  license  and  develop  new and  improved
products.  There  can be no  assurance  that we  will  be  able to  successfully
compete,  that our products will meet with consumer  approval,  that competitors
will not  develop  and  market  products  that are  similar or  superior  to our
products or that we will be able to successfully enhance our products or develop
new products meeting with consumer approval.

PRODUCTION FACILITIES

     Our  primary  production  facility is in Phoenix,  Arizona.  This  facility
serves as our production, warehousing and distribution plant for SOLTRON and the
KLEAN enzyme products,  as well as our administrative  offices. The facility has

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capacity to produce up to 3,000,000  gallons of SOLTRON per year. We expect that
this capacity will meet our needs for SOLTRON into the foreseeable  future.  See
"DESCRIPTION OF PROPERTY" and "NOTES TO THE FINANCIAL STATEMENTS - Note 5."

     Our SP34E  product  is  currently  produced  in Canada by  Protocol  at its
facilities.  Protocol has a fully operational  SP34E refrigerant  blending plant
capable of producing  over 18,000  tonnes per annum.  This facility is currently
producing and supplying SP34E to various Canadian customers.  We anticipate that
this production arrangement will produce sufficient product for the Canadian and
United States market in the foreseeable future.

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.  Since our products  utilize  chemicals  that are  classified  under
applicable  laws as combustible and hazardous  chemicals or substances,  we have
incurred costs of approximately  $500,000 to ensure that the Phoenix facility is
in compliance with state and local  requirements  for the chemicals  utilized in
the  production of SOLTRON.  In addition,  we also provide all required  warning
labels and instructions for the handling of these substances.

     Aftermarket fuel additives are required to be registered with the EPA Fuels
and Energy Division.  We have registered SOLTRON both as an additive and for the
bulk treatment of fuels.

     Like all companies,  we are also subject to regulation by the Federal Trade
Commission  ("FTC") with respect to the marketing of our products.  Although the
FTC has a long history of pursuing enforcement actions against fuel saving, fuel
additive  and oil additive  products,  we believe we have  sufficient  research,
independent  testing,  use data and  scientific  evidence  to  substantiate  our
advertising and promotional claims regarding Soltron.

     We filed an  Information  Notice  with the EPA  under the  Significant  New
Alternatives  Policy ("SNAP") program in order to categorize the acceptable uses
of  SP34E  and in  December  2000,  SP34E  was  added  to the  EPA/SNAP  list of
acceptable  alternatives.  In March of 2001, marketing of SP34E commenced in the
United States.

     EZKLEAN  meets all  requirements  of the Air  Quality  Management  District
("AQMD") of Los Angeles and is certified by the  Southern  California  AQMD as a
clean air solvent. EZKLEAN is acceptable in food grade applications under FDA 21
CFR 178. 3400.  SOILKLEAN has environmental  approval from the State of Florida.
None  of  the  KLEAN  products   contain   hazardous   material,   and  are  all
biodegradable.

     We  believe  that  we are in  substantial  compliance  with  all  laws  and
regulations  governing our material business operations and we have obtained all
required licenses and permits for the operation of our business. There can be no
assurance,  however,  that we will be able to comply with, or continue to comply
with, current or future government regulations in every jurisdiction in which we
may  conduct  material   business   operations   without   substantial  cost  or
interruption  of our operations,  or that any present or future federal,  state,
provincial or local environmental  protection  regulations or other laws may not
restrict our present and future  activities.  In the event that we are unable to
comply with such  requirements,  we could be subject to  substantial  sanctions,
including  restrictions  on our  business  operations,  monetary  liability  and
criminal  sanctions,  any of which could have a material adverse effect upon our
business.

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EMPLOYEES

     At June 30,  2000,  we employed  four full time  personnel,  including  one
administrative,  two  production and one sales  employee.  Our employees are not
covered by any collective bargaining agreements and we consider our relationship
with our employees to be good.

FACTORS AFFECTING FUTURE PERFORMANCE

     LIMITED  OPERATING  HISTORY.  Our current  operations have been implemented
since November  1996, but our business plan has not yet been fully  implemented.
Accordingly,  we have only a  limited  operating  history  with  respect  to the
distribution  and  marketing  of SOLTRON and we are still in the early stages of
marketing SP34E.  Additionally,  we have only just commenced marketing the KLEAN
products,  and have no  current  history  with these  operations,  and have only
limited experience in enzyme product marketing and sales.

     HISTORY OF LOSSES. We have  consistently had negative cash flow,  operating
losses and  insufficient  liquidity with respect to current  operations,  all of
which we expect to continue  until our sales  revenues  increase  substantially.
There  can be no  assurance  that  we will be  able  to  achieve,  or  maintain,
profitable operations or positive cash flow at any time in the future.

     ADDITIONAL  CAPITAL  REQUIREMENT.  We will require  significant  additional
capital to meet our growth  objectives and to fully  implement our business plan
and  expand  our  operations.  While we have  received  capital  infusions  from
Dominion Capital and other investors in the past, there can be no assurance that
these  investments  will continue.  We may also seek  additional  debt or equity
financing through banks, other financial institutions, companies or individuals,
but no assurance can be given that we will be able to obtain any such additional
equity or debt financing on satisfactory terms or at all. Further,  even if such
financing is obtained,  no assurance can be given that such would be adequate to
meet our needs for the foreseeable  future.  If we are unsuccessful in obtaining
sufficient  additional  capital,  our ability to  continue as a viable  business
enterprise will be substantially impaired.

     NEED  TO  DEVELOP  SALES  AND  PRODUCT   AWARENESS.   Establishment   of  a
distribution  network  sufficient to supply  customer demand for SOLTRON will be
critical to our success. We anticipate developing this network primarily through
traditional marketing channels, such as distributors,  in the fuel, oil chemical
and automotive aftermarket  industries.  We have established the distribution of
SP34E through a company with a national network. However, the refrigerant market
is highly competitive and acceptance of our product may require substantial time
and marketing efforts. Numerous factors,  including lack of sufficient inventory
or capital, or failure of our products to generate sufficient demand and lack of
sufficient  qualified,  experienced personnel may contribute to the difficulties
we will face in establishing an efficient distribution network for our products.
While we intend to engage  qualified  personnel  to assist in  establishing  our
distribution  network,  no  assurance  can be given  that our  products  will be
accepted by industrial or retail  consumers,  that a  satisfactory  distribution
network can be established or that our operations will ever be profitable.

     UNCERTAINTY OF WIDESPREAD MARKET ACCEPTANCE OF PRODUCTS,  LIMITED MARKETING
EXPERIENCE.  We are still in the early stages of marketing SOLTRON and SP34E and
have only just  commenced  marketing  the KLEAN product line. As is typical with
new products, demand and market acceptance for our products is subject to a high
degree of uncertainty.  Achieving  widespread market acceptance for our 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 our products.  The prospects for
our product line will be largely  dependent  upon our ability to achieve  market
penetration,  which  will  require  significant  efforts  on our part to  create
awareness of and demand for our products. Our ability to build our customer base
will depend in large part on our ability to locate,  hire and retain  sufficient
qualified  marketing   personnel  and  to  fund  marketing  efforts,   including

                                       8
<PAGE>
advertising. There can be no assurance that our products will achieve widespread
market  acceptance  or that our  marketing  efforts  will  result in  profitable
operations.

     VARIABILITY OF OPERATING RESULTS AND VOLATILITY OF COMMON STOCK PRICES. Our
quarterly  operating  results have in the past been, and are  anticipated in the
future to be, highly  volatile.  While we anticipate that increased sales of our
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.  Significant variances
in operating  results from period to period could result in high  volatility  of
the market price for our common stock.

     LIMITED  PRODUCT  LINE. We currently  hold the  marketing and  distribution
rights to SOLTRON  and SP34E and we only  recently  acquired  the KLEAN range of
enzyme  products.  Our future  success and  profitability  will,  to a very high
degree,  depend upon the market  acceptance of these products and our ability to
improve  these  products  and  develop  additional  products  to  meet  consumer
approval.

     SUPPLY, CAPACITY AND DISTRIBUTION  CONSTRAINTS.  To successfully market our
products,  we must be able to fill orders promptly for our sales. Our ability to
meet our supply requirements  promptly will depend on numerous factors including
our ability to establish  successfully an effective  distribution network and to
maintain adequate  inventories.  The ability of our sole supplier of the SOLTRON
enzyme to adequately  produce the chemicals needed to produce SOLTRON in volumes
sufficient  to meet demand will also affect our ability to produce this product.
Failure to adequately supply products to distributors and retailers or of any of
our  suppliers  to  produce  sufficient  materials  to  meet  our  demand  would
materially adversely impact our operations.

     DEPENDENCE  UPON RAW MATERIALS AND SUPPLIERS.  We are dependent on a single
supplier of the enzyme concentrate needed to make SOLTRON and on other suppliers
of chemicals.  Chemicals are subject to price fluctuations based upon supply and
demand.  In  addition,   because  the  SOLTRON  enzyme  is  produced  in  Japan,
fluctuations in currency values could adversely affect our cost of this product.
Interruption  of our 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 our suppliers.  Any increase in
the costs of our raw materials or disruption of our suppliers could severely and
adversely affect our business operations.

     RELIANCE  ON  MANAGEMENT;  LIMITED  PERSONNEL.   Attracting  and  retaining
qualified personnel is critical to our business plan. In particular, our success
is highly  dependent on the services of our Chief  Executive  Officer,  James H.
Hirst.  We have an employment  agreement in place with Mr. Hirst,  but we do not
maintain key man life insurance. There can be no assurance that we will not lose
the benefit of his services.  The loss of Mr. Hirst's  services or our inability
to attract or retain alternative or additional  qualified personnel would have a
materially  adverse  affect on our business.  No assurances can be given that we
would be able to retain or attract such  qualified  personnel  or agents,  or to
successfully implement our business plan.

     MANAGEMENT  OF  GROWTH.  We  anticipate  growth in the  future,  which will
require effective management of all aspects of our business.  If achieved,  this
growth may place significant strains on our financial, managerial, personnel and
other resources. Failure to effectively manage our anticipated growth could have
a materially adverse effect on our business and profitability.

     SEASONAL  FLUCTUATIONS.  Our limited  experience in the refrigerant  market
suggests that a greater demand for SP34E will occur in summer  months,  which is
anticipated to result in higher revenues in our first and second fiscal quarters
ending June 30 and September  30,  respectively.  Fluctuations  in our quarterly
operating  results  may impact the market for our common  stock and could  cause
high volatility in its trading price.

                                       9
<PAGE>
     COMPETITION. The markets for fuel additives, refrigerants, and enzyme based
cleaning and bio-remediation  products are highly  competitive.  We believe that
our  products  and our  management's  qualifications  will  enable us to compete
effectively in these  markets,  but we cannot give any assurance that we will be
successful. We will be competing with established manufacturers and distributors
that have already  developed brand  recognition and gained consumer  acceptance.
Many of these  competitors  have  significantly  greater  financial,  marketing,
personnel,  managerial and other  resources than we do. New competitors may also
enter these  markets.  Even though we believe our products are superior to those
of our competitors, our lack of financial strength and brand recognition will be
significant  disadvantages to our ability to penetrate and compete in our target
markets.

     LIMITED PATENT AND PROPRIETARY  INFORMATION  PROTECTION.  We do not believe
that our products or our  proprietary  production  processes  infringe on anyone
else's  proprietary  rights,  but we cannot give any assurance that infringement
claims will not be made  against us. If it is  determined  that our  products or
processes do infringe someone else's proprietary rights, we could be required to
modify our  products or  processes  or obtain a license to  continue  our use of
them.  There  can be no  assurance  that we would be able to do this in a timely
manner,  upon  acceptable  terms and  conditions or at all. Our failure to do so
would have a material adverse effect on our business. In addition,  there can be
no assurance  that we would have the financial or other  resources  necessary to
prosecute or defend a patent  infringement or other  proprietary  rights action.
Moreover,  if any of our products or processes were held to infringe  patents or
proprietary  rights of others, we could,  under certain  circumstances,  be held
liable  for  damages,  which  could be  significant  in amount  and which  could
materially  and  adversely  effect our  operations.  We rely on  confidentiality
agreements,  trade secret protection and other methods to protect our processes,
concepts, ideas, documentation and other information related to our products and
proprietary processes. However, these methods may not afford complete protection
and there can be no assurance that others will not independently develop similar
products   and   processes.   All  of  our   employees   are  required  to  sign
non-disclosure,  non-competition and inventions agreements,  but there can be no
assurance that a court would enforce such  agreements or that they would provide
us with any  meaningful  protection.  There can be no assurance  that we will be
able to adequately  protect our trade secrets or that other  companies  will not
acquire information that we consider proprietary.

     PRODUCT  ACQUISITION  AGREEMENT.  Our rights to manufacture  and distribute
SOLTRON and SP34E, as well as the process, formulae and other proprietary rights
related to such products,  are contained in product acquisition  agreements with
Dominion  Capital.  Any  termination  or  impairment  of the rights of  Dominion
Capital to such proprietary rights or to our rights under these agreements would
materially  adversely  affect our  operations.  Additionally,  our  rights  with
respect to our  products  under  these  agreements  are limited to terms of five
years, each of which are extendable.

     NEED FOR ADDITIONAL  PRODUCT  DEVELOPMENT.  We believe that our development
work on SOLTRON,  SP34E and the KLEAN products is  substantially  complete,  but
testing of these  products in the United States has been limited.  We anticipate
that our future research and development activities, combined with experience we
hope to gain from  commercial  production and use of our products will result in
the need for further refinement of our products and development of new products.
Such  refinements  and  development  may be required  for our products to remain
competitive.  There can be no assurance  that we will have the experience or the
resources  necessary to make such  improvements to our product line, which could
have a significant negative impact on our business.

     ADEQUACY OF PRODUCT  LIABILITY  INSURANCE.  The use of our products entails
inherent  risks that could expose us to product  liability  claims,  which could
have a material adverse effect on our business and financial condition. While we
do maintain product  liability  insurance to cover these types of claims,  there
can be no  assurance  that  we  will  be able  to  maintain  such  insurance  on
acceptable terms or, even if maintained, that such insurance would be sufficient
to cover all potential claims.

                                       10
<PAGE>
     CONTROL  BY  EXISTING  SHAREHOLDERS/FOREIGN   SHAREHOLDERS.  Our  principal
shareholder,  Dominion Capital,  and its affiliates own or control a substantial
block of our outstanding common stock. Accordingly,  these shareholders,  acting
together, would be able to effectively control matters requiring approval by our
shareholders,  including  the election of our board of directors and approval of
certain significant transactions. Dominion Capital is domiciled in Australia and
if we or our shareholders were to bring legal action against it, its domicile in
a foreign  country may prevent it from being subject to jurisdiction of a United
States  court.  While  we or our  shareholders  may be able to  proceed  against
Dominion  Capital in an  Australian  court,  such  actions may be  prohibitively
expensive and an Australian  court may not recognize  claims or provide remedies
similar to those available in United States courts.

     INTERNATIONAL  TRADE. We anticipate  selling  SOLTRON,  SP34E and our KLEAN
products in both Canada and Mexico,  as well as  importing  SOLTRON  concentrate
from Japan.  We may also sell the KLEAN  product in other  countries.  This will
expose  our  business  to certain  additional  risks  related to doing  business
internationally,  which could include,  among others,  fluctuations  in currency
exchange rates, changes in both United States and foreign import and export laws
and  regulations,  increases in tariffs,  customs,  foreign tax  liabilities and
other  adverse  United  States  and  foreign  tax   consequences  and  potential
difficulty in contract enforcement.  Risks of conducting  international business
operations could have a negative impact on our overall business.

ITEM 2. DESCRIPTION OF PROPERTY

     We currently lease  approximately  14,000 square feet of space at 4247 West
Adams, Phoenix, Arizona 85009, which houses our SOLTRON and KLEAN manufacturing,
warehousing  and  distribution  plant  and  serves  as  our  administration  and
corporate sales office.  Monthly lease payments are approximately $7,300 and the
lease expires on September 14, 2002. Protocol leases approximately 18,400 square
feet of space at 330 Industrial Parkway South,  Aurora,  Ontario,  Canada, which
houses an SP34E  manufacturing  plant,  warehousing and administrative  offices.
Lease  payments  are  approximately  $4,300  per month and the lease  expires in
September,  2002. We expect these  facilities to meet our needs through at least
the next 12 months.

ITEM 3. LEGAL PROCEEDINGS

     We have been and  currently  are  involved  in  various  legal  proceedings
arising in the normal  course of business.  While the ultimate  outcome of these
various legal proceedings cannot be predicted with certainty,  it is the opinion
of  management  that the  resolution  of these  legal  actions  should  not have
material  effect on our financial  position,  results of operation or liquidity.
There are no legal proceedings pending, or to our knowledge,  threatened,  which
we expect to have any material impact on our business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                       11
<PAGE>
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET AND SHAREHOLDER INFORMATION

     Our  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, 2000,  there were  approximately  350 beneficial
holders of our common stock.

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

2000                June 30, 1999                  $ 2.125            $  1.25
                    September 30, 1999             $  1.75            $ 1.125
                    December 31, 1999              $1.1562            $  0.25
                    March 31, 2000                 $  1.75            $ 0.375

2001                June 30, 2000                  $  1.44            $  0.41
                    September 30, 2000             $  0.88            $  0.31
                    December 31, 2000              $  0.61            $  0.24
                    March 31, 2001                 $  0.41            $  0.16

DIVIDEND POLICY

     We have not paid, and do not currently intend to pay, cash dividends on our
common  stock in the  foreseeable  future.  The  current  policy of the board of
directors is to retain all earnings,  if any, to provide funds for operation and
expansion  of  our  business.  In  addition  to  statutory   requirements,   the
declaration of dividends, if any, will be subject to the discretion of the board
of  directors,  which may consider  such  factors as our results of  operations,
financial condition, capital needs and acquisition strategies, among others.

                                       12
<PAGE>
RECENT UNREGISTERED STOCK ISSUANCES

     On January 26, 2001,  we issued a total of 60,000 shares of common stock to
officers as stock grants pursuant to the terms of their  employment  agreements.
The shares were issued in reliance on the exemption from  registration  provided
by Section 4(2) of the Securities Act.

     On January 26, 2001, we issued 375,000 shares of common stock at a price of
$0.40 per share and  granted a warrant  for the  purchase  of 250,000  shares of
common stock at $0.40 per share. The shares and warrants were issued to Dominion
Capital,  Inc. in settlement of $189,795 owed for investor  relations  services.
These shares were issued in reliance on exemption from registration  provided by
Section 4(2) of the Securities Act.

     On January 26,  2001,  we issued  2,409,373  shares of common  stock at the
issue price of $0.25 per share to settle  various  advances,  loans and accounts
payable in the total amount of $602,343. These shares were issued in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act.

     On January 31, 2001,  we  commenced  an offering of up to 2,500,000  units,
each  consisting  of one share of common of stock and a warrant to purchase  one
share of common stock.  The units were offered in reliance on the exemption from
registration  provided under  Regulation D as  promulgated  under the Securities
Act. The units were offered at $0.20 per unit and warrants were  exercisable for
three  years at $0.20 per share.  As of March 31,  2001,  we had sold  1,000,000
units.  At June 30, 2001, we had sold a total of 1,350,000  units and terminated
the offering.

     On March 15,  2001,  we agreed to issue  130,000  shares of common stock as
settlement of an investor  relations  service  agreement at $0.20 per share. The
shares were issued in reliance on the exemption  from  registration  provided by
Section 4(2) of the Securities Act.

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

     The following  discussion  should be read in conjunction with our financial
statements and related notes included herein.  Certain  statements are not based
on historical  facts,  but are  forward-looking  statements  that are based upon
assumptions  about our  future  conditions  that could  prove to be  inaccurate.
Actual  events,   transactions  and  results  may  materially  differ  from  the
anticipated events, transactions or results described. Our ability to consummate
transactions  and  achieve  events or results  is  subject to certain  risks and
uncertainties,  which  include,  but are not limited to, the existence of demand
for and  acceptance of our  products,  regulatory  approvals  and  developments,
economic  conditions,  the impact of competition and pricing,  and other factors
affecting our business that are beyond our control. See "DESCRIPTION OF BUSINESS
- FACTORS AFFECTING FUTURE PERFORMANCE" above.

     We undertake no obligation and do not intend to update, revise or otherwise
publicly release the result of any revisions to forward-looking  statements that
may be made to reflect future events or circumstances.

INTRODUCTION

     Although we continue to report  significant  losses,  the current  trend of
increasing  SOLTRON  product  sales  and the  introduction  of SP34E  and  KLEAN
products,  together  with the  consolidation  of  income  from our  interest  in
Protocol,  provides an  expectation  that we will achieve  profitability  during
fiscal  year  2002.  The  past  year  was a  year  of  increased  financial  and
operational  efficiency  and a decrease of overhead.  We have  concentrated  our
focus for  SOLTRON on  identifying  distributors  and  developing  direct  sales
activities in new markets such as bulk users and small  generation power plants.
We have also made significant  progress on obtaining requisite approvals for the

                                       13
<PAGE>
sale of SP34E in the United States and appointed a national  distributor for the
product. We have acquired other enzyme-based  products and commenced selling the
KLEAN products through our existing distributor network.

     In August 2000,  we acquired a 50% interest in Protocol,  which  eliminated
the need to build a plant in  Syracuse,  New York,  that was to be  financed  by
privately funded tax exempt bonds.

RESULTS OF OPERATIONS

YEAR ENDED MARCH 31, 2001 COMPARED TO YEAR ENDED MARCH 31, 2000

     Revenues for the year ended March 31, 2001 were  $1,157,143  as compared to
$280,309 in 2000. All revenues for 2001 resulted from product sales. Our cost of
sales  increased  for SOLTRON due to increases in the cost of raw  materials and
the amortization of plant leasehold improvements over the balance of the life of
the lease. The  introduction  and inclusion of the profitable  operations of our
subsidiary, Protocol, resulted in a gross margin of $133,793.

     General  and  administrative  costs for the year ended  March 31, 2001 were
$2,100,546 as compared to  $2,188,549  for the same period ended March 31, 2000.
The 4 % decrease would have been significantly  greater except for the inclusion
of expenses  relating to the  acquisition  of Protocol and the  commencement  of
amortization  of SP34E rights in the amount of $360,000  and resulted  primarily
from  decreased  overhead and  administrative  expenses  through  closure of our
corporate  offices in Scottsdale,  Arizona and consolidation to our plant office
in Phoenix, Arizona.

     For the year ended  March 31,  2001,  we incurred a net  operating  loss of
$2,149,849 or $0.08 per share  compared to a net operating loss of $2,139,788 or
$0.09 per share for the year ended March 31, 2000.  These losses  contributed to
net cash used in operating activities of $1,274,150 and $1,414,979 for the years
ended March 31, 2001 and 2000, respectively.

SEASONALITY

     Sales of our SP34E  product may be subject to higher  volumes in the summer
months  resulting in higher  revenues in our first and second  fiscal  quarters.
However, no pattern of sales volumes has yet been established.

IMPACT OF INFLATION

     We do not  believe  that  inflation  will have any  material  impact on its
commercial  activities  for the ensuing  year as our  products do not fall under
categories that are traditionally affected.

LIQUIDITY AND CAPITAL RESERVES

     Product  sales  did not  provide  sufficient  working  capital  to fund our
operations during the period ended March 31, 2001. We used $1,274,150 of cash in
our operations.  Shareholder  advances in the form of cash secured by promissory
notes and debt by third  parties  provided  $1,371,215,  and an  offering of our
common  stock  during  the year  ended  March 3, 2001,  provided  $200,000.  The
acquisition of Protocol and plant expansion in Phoenix  utilized  $467,848.  For
the year ended March 31, 2000,  $969,473 was provided from shareholder  advances
and  conversion of notes into our common stock.  As of March 31, 2001, we had no
further commitments for capital expenditures.  Some working capital was provided
in relation  to the  acquisition  of  Protocol in the form of cash  secured by a
promissory  note from PICO.  These combined  funded the balance of our financial
operating requirements.

                                       14
<PAGE>
PLAN OF OPERATIONS FOR FISCAL YEAR 2002

     We anticipate that as sales increase we will achieve  profitability  during
fiscal year 2002.  Various cost reductions and elimination of overhead  expenses
that do not impact on the current  financial results will be reflected in fiscal
year 2002. These include closure of our corporate offices in Scottsdale, Arizona
and  consolidation  to our plant office in Phoenix,  Arizona,  and a significant
reduction  in  our  investor  relations  and  administrative  expenses.   Future
activities will be directed towards expanding  existing markets for our products
and  penetrating  new markets.  On completion of a full review of our operations
with the  objective  to  eliminate  the current loss  situation  and  accelerate
profitability   in  fiscal   year   2002,   we  intend  to  conduct  a  complete
reorganization.  This  review will also  consider  product  range,  distribution
channels and corporate structure.

     We are in the final stages of completing the EPA/SNAP requirements in order
to offer SP34E for sale in the United  States.  Early  sales of this  product in
Canada confirm the demand for a non-ozone  depleting  alternative in R12 mineral
oil  based  refrigerant  applications.  Sales of SP34E in  fiscal  year 2001 are
expected  to  play  a  significant   role  in  bringing  us  to   profitability.
Acquisitions of related businesses may also play a key role in the expansion and
growth strategy that management has under review.

                                       15
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

                                      INDEX

Independent Auditors' Report................................................  17

Consolidated Balance Sheets at March 31, 2001 and 2000......................  18

Consolidated Statements of Operations for the Years Ended
  March 31, 2001 and 2000...................................................  19

Consolidated Statements of Stockholders' Equity for the
  Years Ended March 31, 2001 and 2000.......................................  20

Consolidated Statements of Cash Flows for the Years Ended
  March 31, 2001 and 2000...................................................  21

Notes to the March 31, 2001 and 2000 Financial Statements...................  23

                                       16
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To The Stockholders and Board of Directors of
Solpower Corporation

We have  audited  the  accompanying  consolidated  balance  sheets  of  Solpower
Corporation  as of  March  31,  2001  and  2000,  and the  related  consolidated
statements of operations,  changes in stockholders'  equity (deficit),  and cash
flows for the years then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Solpower Corporation
as of March 31,  2001 and 2000,  and the results of its  operations,  changes in
stockholders' equity (deficit),  and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 11 to
the  consolidated  financial  statements,  the Company has incurred  significant
losses and at March 31, 2001,  the Company had a deficiency in working  capital.
These  conditions  raise  substantial  doubt as to the ability of the Company to
continue as a going  concern.  These  consolidated  financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.


/s/ Semple and Cooper, LLP

Semple and Cooper, LLP
Phoenix, Arizona
June 15, 2001

                                       17
<PAGE>
                              SOLPOWER CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                          2001                2000
                                                                     ------------         ------------
<S>                                                                  <C>                  <C>
                                     ASSETS
Current Assets:
  Cash and cash equivalents                                          $     14,259         $     34,299
  Accounts receivable                                                     375,640               79,726
  Inventory                                                               538,253               21,624
  Tax credit receivable                                                    23,108                   --
  Prepaid expenses                                                         33,341                   --
                                                                     ------------         ------------
       Total Current Assets                                               984,601              135,649

Property & Equipment, net                                                 559,538              377,762
Other Assets:
  Marketing licenses, net                                               2,098,333            2,558,333
  Deferred income tax asset                                                54,838                   --
  Goodwill, net                                                           320,593                   --
  Other                                                                    10,833                   --
                                                                     ------------         ------------
       Total Assets                                                  $  4,028,736         $  3,071,744
                                                                     ============         ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Bank revolving line of credit                                      $    216,917         $         --
  Current portion of long-term debt                                        42,264                   --
  Loans payable to related parties                                             --              130,390
  Accounts payable - trade                                                649,430              330,093
                   - related parties                                       95,461              107,118
  Customer deposits                                                        63,336                   --
  Accrued expenses                                                        289,562              309,929
                                                                     ------------         ------------
       Total Current Liabilities                                        1,356,970              877,530

Long-Term Liabilities:
  Notes payable, less current portion                                     694,447                   --
  Loans payable to related parties, less current portion                  403,379              212,114
                                                                     ------------         ------------
       Total Liabilities                                                2,454,796            1,089,644
                                                                     ------------         ------------

Minority interest                                                          74,007                   --
                                                                     ------------         ------------

Commitments and Contingencies                                                  --                   --

Stockholders' Equity:
  Preferred stock; $0.001 par value, 5,000,000 shares authorized;
   issued and outstanding, none                                                --                   --
  Common stock; $0.01 par value, 100,000,000 shares authorized;
   issued and outstanding 31,255,064 and 27,316,066, respectively         312,551              273,161
  Common stock subscribed                                                 256,000                   --
  Additional paid in capital                                           10,120,179            8,741,730
  Accumulated deficit                                                  (9,182,640)          (7,032,791)
  Foreign currency translation adjustment                                  (6,157)                  --
                                                                     ------------         ------------
       Total Stockholders' Equity                                       1,499,933            1,982,100
                                                                     ------------         ------------
                                                                     $  4,028,736         $  3,071,744
                                                                     ============         ============
</TABLE>
     The Accompanying Notes are an Integral Part of the Financial Statements

                                       18
<PAGE>
                              SOLPOWER CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED MARCH 31, 2001 and 2000


<TABLE>
<CAPTION>
                                                             2001                2000
                                                         ------------        ------------
<S>                                                      <C>                 <C>
Revenues:
  Fuel additive                                          $    314,180        $    280,309
  Refrigerant and cylinders                                   842,963                  --
                                                         ------------        ------------
                                                            1,157,143             280,309
                                                         ------------        ------------
Cost of Sales:
  Fuel additive                                               409,556             231,408
  Refrigerant and cylinders                                   613,794                  --
                                                         ------------        ------------
                                                            1,023,350             231,408
                                                         ------------        ------------
Gross Profit                                                  133,793              48,901

Expenses
  General and administrative                                2,100,546           2,188,549
                                                         ------------        ------------
Operating Loss                                             (1,966,753)         (2,139,648)
                                                         ------------        ------------
Other Income (Expense)
  Interest income                                                 502                  --
  Foreign exchange rate                                        23,143                  --
  Settlement costs                                            (86,000)                 --
  Interest expense                                           (316,429)               (140)
                                                         ------------        ------------
       Total Other Income (Expense)                          (378,784)               (140)
                                                         ------------        ------------
Net Loss Before Provision for Income Taxes,
 Minority Interest and Extraordinary Item                  (2,345,537)         (2,139,788)

Provision for Income Taxes                                     38,144                  --

Extraordinary Item - Relief of Debt                           131,095                  --

Minority Interest                                              26,449                  --
                                                         ------------        ------------
Net Loss                                                 $ (2,149,849)       $ (2,139,788)
                                                         ============        ============
Basic Loss Per Share:
  Loss from Operations available to stockholders         $      (0.08)       $      (0.09)
  Extraordinary Item                                               --                  --
                                                         ------------        ------------

Net Loss Per Share                                       $      (0.08)       $      (0.09)
                                                         ============        ============

Weighted Average Number of Shares Outstanding              28,414,286          23,498,729
                                                         ============        ============
</TABLE>

     The Accompanying Notes are an Integral Part of the Financial Statements

                                       19
<PAGE>
                              SOLPOWER CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED MARCH 31, 2001 AND 2000


<TABLE>
<CAPTION>
                                        COMMON STOCK        ADDITIONAL      COMMON                    CUMULATIVE
                                  ----------------------     PAID IN        STOCK      ACCUMULATED   TRANSLATION
                                    SHARES       AMOUNT      CAPITAL      SUBSCRIBED     DEFICIT       ACCOUNT      TOTAL
                                    ------       ------      -------      ----------     -------       -------      -----
<S>                              <C>           <C>         <C>             <C>         <C>            <C>        <C>
Balance, March 31, 1999           23,456,560    $234,566   $ 6,736,525    $     --    $(4,893,003)   $    --    $ 2,078,088

Issuance of common stock
 for lease terminations               35,000         350        39,640          --             --         --         39,990
Issuance of common stock
 for license terminations             50,000         500        55,740          --             --         --         56,240
Issuance of common stock for
  investor relation services         120,000       1,200       118,800          --             --         --        120,000
Cancellation of stock
 certificate                         (11,824)       (118)         (236)         --             --         --           (354)
Conversion of debt to equity         166,330       1,663       126,261          --             --         --        127,924
Conversion of convertible
 notes to common stock             3,500,000      35,000     1,665,000          --             --         --      1,700,000
Loss, year ended March 31, 2000           --          --            --          --     (2,139,788)        --     (2,139,788)
                                  ----------    --------   -----------    --------    -----------    -------    -----------

Balance, March 31, 2000           27,316,066     273,161     8,741,730          --     (7,032,791)        --      1,982,100

Issuance of common stock
 pursuant to employment
 agreements                          270,000       2,700       153,106          --             --         --        155,806
Issuance of warrants for
 financing costs                          --          --       182,000          --             --         --        182,000
Issuance of common stock in
 settlement of marketing
 agreements                          784,625       7,846       306,004          --             --         --        313,850
Conversion of debt and
 liabilities to equity             2,784,373      27,844       764,294          --             --         --        792,138
Issuance of common stock for
 purchase of assets                  100,000       1,000        18,818          --             --         --         19,818
130,000 common shares subscribed
 for settlement of investor
 relation services agreement         130,000       1,300        24,700          --             --         --         26,000
Common stock subscriptions
 received                                 --          --            --     256,000             --         --        256,000
Repurchase and cancellation
 of common stock                    (130,000)     (1,300)      (70,473)         --             --         --        (71,773)
Loss, year ended March 31, 2001           --          --            --          --     (2,149,849)        --     (2,149,849)
Increase in cumulative
 translation account                      --          --            --          --             --     (6,157)        (6,157)
                                  ----------    --------   -----------    --------    -----------    -------    -----------

Balance, March 31, 2001           31,255,064    $312,551   $10,120,179    $256,000    $(9,182,640)   $(6,157)     1,499,933
                                  ==========    ========   ===========    ========    ===========    =======    ===========
</TABLE>

     The Accompanying Notes are an Integral Part of the Financial Statements

                                       20
<PAGE>
                          SOLPOWER CORPORATION
            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
              FOR THE YEARS ENDED MARCH 31, 2001 and 2000

                                                      2001             2000
                                                   -----------      -----------

Net Loss                                           $(2,156,006)     $(2,139,788)

Other comprehensive income, net of tax
   Foreign currency translation adjustment               6,157               --
                                                   -----------      -----------

Comprehensive loss                                 $(2,149,849)     $(2,139,788)
                                                   ===========      ===========

     The Accompanying Notes are an Integral Part of the Financial Statements

                                       21
<PAGE>
                              SOLPOWER CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED MARCH 31, 2001 AND 2000


                                                         2001           2000
                                                      -----------   -----------
Cash Flows From Operating Activities:
  Net loss                                            $(2,149,849)  $(2,139,788)
  Adjustments to reconcile net loss to net cash
   used by operating activities:
   Depreciation and amortization                          731,457       207,175
   Non-cash transactions                                  661,173       343,800
   Minority interest                                      (26,449)           --
   Changes in operating assets and liabilities:
    Accounts receivable                                  (127,060)      (29,581)
    Tax credit receivable                                   1,651            --
    Prepaid expenses                                      (11,437)           --
    Inventory                                             (94,293)       70,554
    License fee receivable                                     --     2,400,000
    Security deposits                                          --        13,922
    Deferred income tax asset                             (54,396)           --
    Accounts payable - trade                               60,253       (14,316)
                     - related parties                    (66,570)      107,118
    Customer deposits                                     (85,090)           --
    Accrued expenses                                     (113,540)       26,137
    Deferred revenue                                           --    (2,400,000)
                                                      -----------   -----------
          Net Cash Used by Operating Activities        (1,274,150)   (1,414,979)
                                                      -----------   -----------
Cash Flows from Investing Activities:
  Cash acquired in acquisition                             69,041            --
  Investment in subsidiary                               (338,900)           --
  Capital expenditures                                   (128,948)      (85,675)
                                                      -----------   -----------
          Net Cash Used by Investing Activities          (398,807)      (85,675)
                                                      -----------   -----------
Cash Flows From Financing Activities:
  Payment on capital lease                                     --        (4,060)
  Net increase in bank revolving of credit                130,367            --
  Common stock subscriptions received                     200,000            --
  Proceeds from convertible notes payable                      --       820,000
  Proceeds from notes payable                             507,845        67,500
  Loans from related parties                              863,370       969,473
  Payments on notes payable                                    --       (67,500)
  Payments to related parties                             (48,665)     (252,688)
                                                      -----------   -----------
          Net Cash Provided by Financing Activities     1,652,917     1,532,725
                                                      -----------   -----------

Increase (Decrease) in Cash and Cash Equivalents          (20,040)       32,071
Cash and Cash Equivalents, Beginning of Year               34,299         2,228
                                                      -----------   -----------
Cash and Cash Equivalents, End of Year                $    14,259   $    34,299
                                                      ===========   ===========

     The Accompanying Notes are an Integral Part of the Financial Statements

                                       22
<PAGE>
                              SOLPOWER CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                   FOR THE YEARS ENDED MARCH 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                  2001             2000
                                                                                ---------        ---------
<S>                                                                             <C>               <C>
SUPPLEMENTAL INFORMATION:
Cash Paid for:
  Interest                                                                      $ 17,983         $    140
  Income taxes                                                                  $     --         $     --

Noncash Investing and Financing:
  Issuance of common stock for lease terminations                               $     --         $ 39,990
  Issuance of common stock for license terminations                             $     --         $ 56,240
  Issuance of common stock for investor relation services                       $     --         $120,000
  Cancellation of 11,824 shares of common stock                                 $     --         $   (354)
  Issuance of common stock for conversion of debt                               $     --         $127,924
  Issuance of common stock and warrants for settlement costs and
    related interest                                                            $521,850         $     --
  Issuance of common stock for compensation                                     $155,806         $     --
  Relief of debt                                                                $(81,595)        $     --
  Issuance of common stock for liabilities                                      $111,687         $     --
  Fixed assets received as payment of accounts receivable                       $(35,000)        $     --
  Common stock subscribed for financing costs                                   $ 56,000         $     --
  Repurchase and cancellation of common stock for accrued liability             $(71,773)        $     --
  Other                                                                         $  4,198         $     --
</TABLE>

     The Accompanying Notes are an Integral Part of the Financial Statements

                                       23
<PAGE>
                              SOLPOWER CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED MARCH 31, 2001 AND 2000


--------------------------------------------------------------------------------
                                     NOTE 1
           DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------

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.  and  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.  On December 11, 2000, at the Annual  Shareholders'  Meeting,
shareholders approved an amendment to the Company's articles of incorporation to
increase the authorized shares of common stock to 100,000,000.

DESCRIPTION OF BUSINESS

The principal  business  purpose of the Company is the sales and distribution of
SOLTRON,  a fuel  enhancing  product and SP34E, a replacement  refrigerant,  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
and SP34E.

ACQUISITIONS

During  the  year  ended  March  31,  2001,  the  Company  acquired  50%  of the
outstanding  stock of Protocol  Resource  Management  Inc.  and entered into and
purchased the E*COR enzyme division assets of Perix Industries, Inc. (Note 4)

PRINCIPLES OF CONSOLIDATION

The consolidated  balance sheet of the Company includes the accounts of Solpower
Corporation  and Protocol  Resource  Management Inc.  ("PROTOCOL"),  a 50% owned
Canadian  subsidiary  as of  March  31,  2001.  The  consolidated  statement  of
operations  for the year ended March 31, 2001  includes the activity of Protocol
from the date of  acquisition,  August 30,  2000  through  March 31,  2001.  All
significant  inter-company  transactions  and accounts  have been  eliminated in
consolidation.

PERVASIVENESS OF ESTIMATES

The preparation of the  consolidated  financial  statements,  in conformity with
generally  accepted  accounting  principles  in  the  United  States,   requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

REVENUE RECOGNITION

Revenues from sales to  distributors  and resellers are recognized  when related
products  are shipped.  Revenues  from  consignment  sales are  recognized  when
payments are received.

                                       24
<PAGE>
CASH AND CASH EQUIVALENTS

All short-term  investments  purchased with an original maturity of three months
or less are considered to be cash equivalents. Cash and cash equivalents include
cash on hand and amounts on deposit with a financial institution.

ACCOUNTS RECEIVABLE

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,
2001  and  2000 an  allowance  has  been  provided  for  uncollectible  accounts
receivable in the amounts of $4,438 and $0, respectively.

INVENTORY

Inventory at March 31, 2001 and 2000  consists,  primarily,  of the SOLTRON fuel
additive  concentrate and replacement  refrigerant gases and related  canisters,
and 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.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is provided for on the
straight-line  and declining  balance methods over the estimated useful lives of
the assets.  Maintenance and repairs that neither materially add to the value of
the  property  nor  appreciably  prolong  its life are  charged  to  expense  as
incurred. Betterments or renewals are capitalized when incurred.

Estimated useful lives of the assets are as follows:

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

RESEARCH AND DEVELOPMENT COSTS

All research and development costs, with the exception of capital  expenditures,
are expensed in the period incurred.  Capital expenditures incurred for research
and development activities are included in fixed assets.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews long-lived assets for impairment  whenever events or changes
in  circumstances   indicate  the  carrying  amount  of  an  asset  may  not  be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future  undiscounted  net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets  exceeded the fair value of the assets.  Assets to
be disposed of are  reported at the lower of the  carrying  amount or fair value
less costs to sell.

GOODWILL

Goodwill represents the excess of the purchase price over the fair values of the
net assets acquired and is being  amortized on a  straight-line  basis over five
years. On an ongoing basis, management reviews the valuation and amortization of
goodwill,  taking into  consideration any events and  circumstances  which might

                                       25
<PAGE>
have impaired the fair value. Goodwill is written down to the recoverable amount
when  declines in value are  considered  to be other than  temporary  based upon
expected future cash flows.

INCOME TAXES AND INVESTMENT TAX CREDITS

Deferred  income taxes are provided on an asset and  liability  method,  whereby
deferred tax assets are  recognized  for deductible  temporary  differences  and
operating loss and tax credit  carry-forwards,  and deferred tax liabilities are
recognized for taxable  temporary  differences.  Temporary  differences  are the
differences between the reported amounts of assets and liabilities and their tax
basis.  Deferred tax assets are reduced by a valuation  allowance  when,  in the
opinion of management,  there is uncertainty of the utilization of the operating
losses in future  periods.  Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.

Scientific  research and  development  investment  tax credits are recorded on a
project by project  basis in the period  when the  Company  has  determined  the
related research and development expenditures qualify for the tax incentives.

BASIC LOSS PER COMMON SHARE

Basic  loss per  common  share is  computed  based on  weighted  average  shares
outstanding and excludes any potential dilution from stock options, warrants and
other  common  stock  equivalents.  Basic loss per share is computed by dividing
loss available to common  shareholders by the weighted  average number of common
shares  outstanding  for the period.  Diluted net loss per common share reflects
potential  dilution from the exercise or  conversion  of securities  into common
stock or from other  contracts to issue common  stock.  As of March 31, 2001 and
2000  diluted  net loss per  common  share is not  included,  as the  effect  of
including these shares is anti-dilutive.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Accounts  receivable,  accounts and loans payable,  customer  deposits,  line of
credit,  and accrued  liabilities are  substantially  current or bear reasonable
interest rates. As a result, the carrying values of these financial  instruments
approximate fair value.

FOREIGN CURRENCY TRANSLATION

Account  balances and  transactions  denominated  in foreign  currencies and the
accounts of the  Corporation's  foreign  operations  have been  translated  into
United  States funds,  as follows:  (i) assets and  liabilities,  if any, at the
rates of  exchange  prevailing  at the  balance  sheet  date;  (ii)  revenue and
expenses  at  average  exchange  rates for the  period in which the  transaction
occurred;  (iii)  exchange  gains  and  losses  arising  from  foreign  currency
transactions  are included in the  determination of net earnings for the period;
and  (iv)  exchange  gains  and  losses  arising  from  the  translation  of the
Corporation's  foreign  operations  are  deferred  and  included  as a  separate
component of stockholders' equity.

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 (SFAS No. 123).

                                       26
<PAGE>
--------------------------------------------------------------------------------
                                     NOTE 2
                             PROPERTY AND EQUIPMENT
--------------------------------------------------------------------------------

Property and equipment consists of the following at March 31, 2001 and 2000:

                                                      2001              2000
                                                   -----------        ---------
Furniture and Fixtures                             $    63,715        $  52,359
Computer and Office Equipment                           93,453           66,584
Plant Equipment                                        541,513          109,181
Leasehold Improvements                                 452,436          337,872
                                                   -----------        ---------
                                                     1,151,117          565,996
Less: Accumulated Depreciation                         (591579)        (188,234)
                                                   -----------        ---------

                                                   $   559,538        $ 377,762
                                                   ===========        =========

Depreciation  expense  charged to operations  for the years ended March 31, 2001
and 2000, was $228,130 and $107,175, respectively.

--------------------------------------------------------------------------------
                                     NOTE 3
                                MARKETING RIGHTS
--------------------------------------------------------------------------------

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  contract.  Management  will  reassess
annually the estimated  useful life and  impairment,  if any, will be recognized
when expected  future  operating  cash flows from the marketing  rights are less
than their carrying value.

On June 17,  1998,  the Company  acquired  the  exclusive  sales,  distribution,
marketing  and  manufacturing   rights  to  the  Solpower   product,   SP34E  (a
refrigerant)  encompassing the North American Market (United States,  Mexico and
Canada), 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 is  amortizing  these  marketing  rights  over the period of
contract.  Management  will  reassess  annually  the  estimated  useful life and
impairment,  if any will be recognized when expected future operating cash flows
from the marketing rights are less than the carrying value.

Amortization  charged to  operations  for each of the years ended March 31, 2001
and 2000 was $460,000 and $100,000, respectively.

--------------------------------------------------------------------------------
                                     NOTE 4
                                  ACQUISITIONS
--------------------------------------------------------------------------------

ACQUISITION OF PROTOCOL RESOURCE MANAGEMENT INC.:

On August  30,  2000,  the  Company  acquired  50% of the  outstanding  stock of
Protocol Resource Management Inc., a private Ontario corporation with offices in
Aurora,  Ontario,  Canada.  PICO  Holdings,  Inc.,  a NASDAQ  listed  California
corporation,  acquired the  remaining  50%  interest in Protocol  under the same
agreement.  Protocol and the Company were previously  engaged in a joint venture
for the manufacture and  distribution of SP34E through  Solpower Canada Inc., an
Ontario Corporation, owned equally by Protocol and the Company.

                                       27
<PAGE>
The amount paid for the acquisition was $1,500,000  (CAN),  $1,016,700  (US), in
the form of $1,000,000 (CAN),  $677,800 (US), cash at closing, of which half was
paid by the Company and half by PICO Holdings, Inc., and promissory notes due on
the second and third  anniversaries  of the closing date. The promissory note in
the amount of $500,000 (US) was issued by PICO. The Company issued a note in the
amount of $250,000 (CAN),  $123,206(US),  to PICO which represented  one-half of
the amount of the note issued by PICO in the Protocol acquisition.  In the event
that the annual average EBITDA (Earnings Before  Interest,  Taxes,  Depreciation
and  Amortization)  of Protocol for first two years following  closing is not at
least  $250,000  (CAN),  $123,206  (US),  the amount of the  second  anniversary
payment will be reduced based on a formula.  In the event that the annual EBITDA
of Protocol for third year  following  closing is not at least  $250,000  (CAN),
$123,206 (US), the amount of the third anniversary  payment will also be subject
to reduction based on a formula.

The funds used by the  Company to  complete  its  portion  of  acquisition  were
provided in the form of two loans from PICO in the aggregate  amount of $623,206
(US). The shares of Protocol held by the Company as a result of the  acquisition
secure the loan. The Company granted PICO a warrant to purchase 1,000,000 shares
of its common  stock at $0.43  (110% of the market  price on the date funds were
advanced).  The terms of the $500,000 (US)  promissory  note is for three years,
with interest at LIBOR plus 2%, payable semi-annually. (Note 7)

ACQUISITION OF E*COR ASSETS

On December 22, 2000, the Company  purchased the E*COR enzyme division assets of
Perix  Industries,  Inc., of California.  The Company issued 100,000  restricted
shares of common stock to Perix in consideration for enzyme inventory,  existing
contracts and outstanding contract bids, brand names and proprietary formula.

--------------------------------------------------------------------------------
                                     NOTE 5
                                   COMMITMENTS
--------------------------------------------------------------------------------

OPERATING LEASES

The Company  terminated  its lease for  executive  office  space in  Scottsdale,
Arizona, effective March 31, 2001.

The Company leases office  equipment under a 39-month lease expiring March 2002.
Rental payments are $566 per month plus rental taxes.

During the year ended March 31,  2001,  the Company  leased two  vehicles  under
thirty-six  month lease  agreements.  The monthly rental  obligation under these
agreements is $965.

The  Company  leases  warehouse  space for its  production  facility  located in
Phoenix,  Arizona. The term of the lease is five years, expiring September 2002.
On December 15, 2000,  the Company  entered into an Amendment to Lease for 2,739
sq. ft of additional office space at this production facility,  commencing March
1, 2001.  The  Amendment to Lease also grants the Company an option to renew the
lease  for an  additional  5 years at the  expiration  of the  current  lease in
September  2002,  for both the  production  facility and the  additional  office
space.  The base  monthly  rental for both the  production  and office  space is
approximately $7,040, plus CAM charges and property rental tax.

Protocol Resource Management leases various equipment, vehicles and office space
in Canada. Monthly lease payments total $5,313. The leases expire through 2004.

                                       28
<PAGE>
Minimum future rental payments for all  non-cancelable  operating  leases having
original or remaining lease terms in excess of one year as of March 31, 2001 are
as follows:

     YEAR ENDING
     MARCH 31,
     ---------
       2002                                      $ 183,226
       2003                                         59,772
       2004                                         10,460
       2005                                          7,037
                                                 ---------

                                                 $ 260,495
                                                 =========

Lease expense charged to operations for the years ended March 31, 2001 and 2000,
was $142,051 and $194,814, respectively.

CONVERTIBLE PROMISSORY NOTE:

On September 18, 2000, the Company issued a $400,000 Convertible Promissory Note
to Dominion  Capital Pty Ltd.  The note matures on  September  18, 2001,  and is
convertible  into common shares of the Company at the lesser of the market price
on the date conversion notice is given to the Company or $0.40 per share for the
amount of principal  outstanding  at  conversion.  The note bears interest at 8%
percent per annum, payable quarterly in arrears (Note 8).

OTHER COMMITMENTS:

Effective March 1, 2000, the Company  entered into an employment  agreement with
Mark S. Robinson for an initial term of three (3) years. The agreement  provides
for a base salary of $130,000  per annum;  accommodation,  automobile,  medical,
social security  allowances and such other terms and conditions as may be agreed
upon  from  time to time;  500,000  stock  options  pursuant  to the  terms  and
conditions of the Solpower  Corporation Stock Option and Incentive Plan and such
vesting requirements as established by the compensation committee; a stock grant
of 50,000 common  shares  effective  March 1, 2000;  and monthly stock grants of
10,000  shares  effective  the  first  day of each  month  for  the  term of the
agreement,  such shares to be issued quarterly  provided agreed upon performance
requirements are fulfilled.  A total of 150,000 common shares were issued to Mr.
Robinson as of March 31, 2001. Mr. Robinson  ceased  employment with the Company
effective March 31, 2001, and ceased to be a director and officer of the Company
effective March 31, 2001. The stock options  granted to Mr. Robinson  terminated
effective April 30, 2001, and the stock grants to Mr. Robinson ceased  effective
March 31, 2001. (Note 9)

Effective April 1, 2000, the Company  entered into an employment  agreement with
James H. Hirst for an initial term of three (3) years.  The  agreement  provides
for a base salary of $126,000 per annum;  automobile,  medical,  social security
allowances  and such other terms and  conditions as may be agreed upon from time
to time;  500,000  stock  options  pursuant to the terms and  conditions  of the
Solpower   Corporation   Stock  Option  and  Incentive  Plan  and  such  vesting
requirements  as established  by the  compensation  committee;  a stock grant of
50,000 common shares effective April 1, 2000; and monthly stock grants of 10,000
shares effective the first day of each month for the term of the agreement, such
shares to be issued quarterly provided agreed upon performance  requirements are
fulfilled.  A total of 130,000 common shares were issued to Mr. Hirst during the
year. On March 27, 2001, the Company agreed to Mr. Hirst returning the shares to
the Company and to carry the associated  liability  until such time as Mr. Hirst
requested the shares be re-issued.  Effective March 31, 2001 the stock grants to
Mr. Hirst ceased. (Note 9)

--------------------------------------------------------------------------------
                                     NOTE 6
                                  INCOME TAXES
--------------------------------------------------------------------------------

Deferred  income taxes will be determined  using the asset and 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  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.

                                       29
<PAGE>
At March 31, 2001 and 2000, deferred tax assets on United States reported losses
consist of the following:

                                                     2001               2000
                                                 -----------        -----------
     Net operating loss carryforwards            $ 1,370,000        $ 1,055,000
     Less: valuation allowance                    (1,370,000)        (1,055,000)
                                                 -----------        -----------

                                                 $        --        $        --
                                                 ===========        ===========

At March 31, 2001 and 2000,  the Company had United States federal and state net
operating  loss  carry-forwards  in the  approximate  amount of  $9,100,000  and
$7,000,000,  respectively,  available to offset future taxable  income  expiring
through 2021 and 2020, respectively.

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will not be realized.  The ultimate realization of deferred tax assets is
dependent  upon the  generation of future  taxable  income during the periods in
which those temporary  differences become deductible.  Management  believes that
the inability to  utilize net  operating  loss  carry-forwards  to offset future
taxable  income  within  the  carryforward  periods  is more  likely  than  not.
Accordingly,  a 100%  valuation  allowance  has been  recorded  against  the net
deferred tax assets.

Protocol Resource  Management Inc., the 50% owned Canadian  subsidiary,  reports
its income under Canadian taxation regulations. The company has operating losses
approximating  $68,000  (US) and  $104,000  (US) and  expire  in 2007 and  2008,
respectively.

At March 31, 2001,  deferred  tax assets in US dollars on the Canadian  reported
losses consist of the following:

     Net operating loss carryforwards                       $54,838
     Less: valuation allowance                                   --
                                                            -------

                                                            $54,838
                                                            =======
--------------------------------------------------------------------------------
                                     NOTE 7
                                      DEBT
--------------------------------------------------------------------------------

LINE OF CREDIT

Protocol has a revolving  line of credit  limited to the  approximate  amount of
$254,000 (US). The line of credit bears interest at bank prime plus one percent,
and is secured by a General  Security  Agreement  registered  under the Canadian
Personal  Property  Securities Act. The current balance on the line of credit is
$216,917  (US).  The Company is  currently in breach of the debt to tangible net
worth covenant on the line of credit.

                                       30
<PAGE>
NOTES PAYABLE

As of March 31, 2001 consolidated notes payable consist of the following:

                                                                         2001
                                                                         ----
Prime plus 2.5% demand loan from the Bank of
Montreal with predetermined fixed monthly
repayment terms; secured by a general security
agreement and a first floating charge on
specific fixed assets.                                                $ 105,660

Note payable to PICO Holdings, Inc.; interest at
LIBOR plus 2% per annum payable semi-annually;
principal and accrued interest due August, 2003;
secured by common stock.                                                500,000

Note payable to PICO Holdings, Inc. with imputed
interest at 8% per annum.; principal payments due
August, 2002 and 2003 based on annual average
EBITDA. (Note 4)                                                        131,051
                                                                      ---------
                                                                        736,711
Less: current portion of long-term debt                                 (42,664)
                                                                      ---------

                                                                      $ 694,447
                                                                      =========

A schedule of future  minimum  principal  payments  due on the  long-term  notes
payable at March 31, 2001, is as follows:

     YEAR ENDING
      MARCH 31,
      ---------
        2002                                                          $  42,264
        2003                                                            107,789
        2004                                                            586,658
                                                                      ---------
                                                                        736,711
        Less: current portion of long-term debt                         (42,264)
                                                                      ---------

                                                                      $ 694,447
                                                                      =========

--------------------------------------------------------------------------------
                                     NOTE 8
                           RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

CONVERTIBLE NOTES PAYABLE

During  the year  ended  March 31,  2000 the  Company  issued  $1,500,000  in 6%
Convertible Notes Payable of which $1,065,000 were issued to entities related to
Dominion Capital Pty Ltd., the Company's majority stockholder. The notes were to
mature on September  30, 2000,  and were  convertible  into common shares of the
Company at the issue price of $1.00 per share for each $1.00 of principal  owed.
On December 31, 1999, the Note Agreement was amended to $0.50 per share for each
$1.00 of principal owed. The notes would automatically  convert in the event the
Company's  shares  traded at $1.75 or higher for ten  consecutive  days.  At the
election of the Note Holders,  the  Convertible  Notes Payable were converted to
3,000,000  common shares of the Company during April,  2000. The transaction has
been reflected in the financial statements as of March 31, 2000.

In addition,  during the year ended March 31, 2000 the Company issued a $200,000
6% Convertible Note Payable to Dominion Capital Pty Ltd., the Company's majority
stockholder.  The note was to mature on December 31, 2000,  and was  convertible
into common shares of the Company at the issue price of $0.40 per share for each
$0.40 of principal owed. The note would  automatically  convert in the event the
Company's  shares  traded at $1.75 or higher for ten  consecutive  days.  At the
election of the Note  Holder,  the  Convertible  Note  Payable was  converted to
500,000 common shares of the Company  during April 2000.  This  transaction  has
been reflected in the financial statements as of March 31, 2000.

                                       31
<PAGE>
LOANS PAYABLE TO 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.  On November 24, 1997, an addendum
was signed by the  Company  deleting  this  provision  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.
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, 2001 and
2000,  the Company had a balance  due to  Dominion  of  $400,000  and  $110,718,
respectively. During the year ended March 31, 2001 the $110,718 was converted to
common stock. (Note 9)

In July 1998,  the Company  entered into an investor  relations  agreement  with
Dominion Capital  Securities,  Inc., a related entity, for a six month period to
provide investor  relations  activities in exchange for $125,000 in cash, 50,000
shares of common stock,  and 100,000 stock options at an exercise price of $3.00
per share.  The  Company  renewed  the  agreement  in  consideration  of monthly
payments of $30,000 per month for the period July 1, 1999  through  December 31,
1999. The agreement  provided for payment in cash of $90,000 and common stock in
the amount of $90,000 for  services.  In addition,  the  agreement  provided for
payments for services of $15,000 per month from January 1, 2000 through June 30,
2000,  payable in cash of $60,000 and common  stock of $30,000.  As of March 31,
2000,  the Company had a balance  payable under the agreement of $130,390  which
included  additional  expenses  incurred by Dominion  Capital  Securities,  Inc.
during the year ended March 31, 2000.  During the year ended March 31, 2001, the
$130,390 was converted to common  stock.  For the years ended March 31, 2001 and
2000,  the  Company  recorded  investor  relations  expenses in relation to this
agreement in the amounts of $148,266 and $225,000, respectively. (Note 9)

On December 20, 2000,  the Company  agreed to issue a total of 375,000 shares of
common  stock and  warrants  to  purchase  250,000  shares  of  common  stock in
cancellation  of debt owing to  Dominion  Capital,  Inc.  Of the shares  issued,
125,000 were issued to Trond Matteson and 250,000 shares were issued to Dominion
Capital,  Inc.  All  warrants  were  issued  to  Dominion  Capital,  Inc and are
exercisable  at $0.40 per share and expire on December  31,  2002.  The investor
relations agreement was terminated effective December 31, 2000.

During the year ended March 31, 2000, Intavest Pty Ltd. ("INTAVEST"),  a related
party  entered into an  investment  banking  services  agreement  with  National
Capital Merchant Group,  Inc. for the benefit of the Company.  During May, 2000,
Intavest  transferred  45,000  shares  of the  Company's  common  stock  held by
Intavest as payment under the agreement.  The agreement was canceled in December
1999 and as of March 31, 2000 the  company  agreed to repay  Intavest  and had a
payable to Intavest  in the amount of  $90,000.  During the year ended March 31,
2001 the $90,000 was converted to common stock.

As of March 31, 2001 and 2000 the  Company  has a balance  due to Peter Voss,  a
stockholder  and  director,  in the amount of $3,379 and $11,396,  respectively.
Management believes that the balance due is long-term in nature.

--------------------------------------------------------------------------------
                                     NOTE 9
                                     EQUITY
--------------------------------------------------------------------------------

STOCK ISSUED FOR SERVICES AND DEBT

On September 1, 1999,  the Company agreed to issue 20,000  restricted  shares of
common  stock in  exchange  for  cancellation  of a  commercial  lease and other
settlement consideration, at $1.50 per share, or $30,000.

                                       32
<PAGE>
On September 7, 1999,  the Company agreed to issue 20,000  restricted  shares of
common  stock in exchange  for  cancellation  of a license  agreement  and other
settlement consideration, at $1.687 per share, or $33,740.

On November 7, 1999,  the Company  agreed to issue 30,000  restricted  shares of
common  stock in exchange  for  cancellation  of a license  agreement  and other
settlement consideration, at $.75 per share, or $22,500.

On November 8, 1999,  the Company  agreed to issue 15,000  restricted  shares of
common stock in exchange for early  termination of a commercial  lease agreement
and other settlement consideration, at $.67 per share, or $9,990.

On March 13, 2000,  the Company  agreed to issue  120,000  restricted  shares of
common stock to Dominion Capital Securities, Inc., a related entity, in exchange
for  investor  relations  services  for  eight  months,  at $1.00  per  share or
$120,000.

On April 19, 2000,  the Company  issued  3,500,000  restricted  shares of common
stock in relation to the conversion of the $1,700,000 Convertible Notes Payable.
This transaction was reflected in the financial statements at March 31, 2000.

On June 28, 2000, the Company issued 166,330  restricted  shares of common stock
in settlement of various outstanding accounts payable in the aggregate amount of
$127,924.  This  transaction was reflected in the financial  statements at March
31, 2000.

On June 28, 2000, the Company issued 80,000 restricted shares of common stock to
Mr. Robinson and 70,000 to Mr. Hirst as part of their  compensation  under their
employment agreements.

On August 18, 2000, the Company issued 500,000 restricted shares of common stock
to Solpower Southeast  Corporation in discharge of debt,  accrued interest,  for
repayment  of certain  expenses  related to the Elkhart,  Indiana  plant and for
purchase  of  equipment.   The  shares  were  issued  at  $0.40  per  shares  in
cancellation of the $200,000 obligation.

On August 18, 2000, the Company issued 284,625 restricted shares of common stock
to Masters  Marketing Group,  Inc. The shares were issued at $0.40 per shares in
cancellation of $113,850 of debt and interest.

On November 16, 2000,  the Company  issued  30,000  restricted  shares of common
stock to each of Mr. Robinson and Mr. Hirst pursuant to stock grants under their
employment agreements.

On January 26, 2001,  the Company  issued  375,000  restricted  shares of common
stock at the  issue  price of $0.40 per  share,  and  granted  a share  purchase
warrant for 250,000  restricted  shares of common stock at the exercise price of
$0.40 per share,  expiring  December 31, 2002, in settlement of $189,795 owed to
Dominion Capital, Inc., for the provision of investors relations services.  This
transaction  resulted in the Company  receiving  relief of debt in the amount of
$81,595.

On January 26, 2001, the Company issued  2,409,373  restricted  shares of common
stock at the issue price of $0.25 per share to settle  various  advances,  loans
and accounts payable for a total of $602,343.

On January 26, 2001, the Company issued 30,000 restricted shares of common stock
to each of Mr.  Robinson  and Mr.  Hirst  pursuant to stock  grants  under their
employment agreements.

On March 15, 2001,  the Company  agreed to issue  130,000  restricted  shares of
common stock in settlement of an investor  relations  service  agreement at $.20
per share.

COMMON STOCK GRANTS

On October 26, 1998, a grant of 25,000 restricted shares under the Plan was made
to a former employee. The former employee was employed by the Company on each of
the vesting dates and is therefore vested in all shares granted. As of March 31,
2001 no shares have been issued as the result of this grant and a liability  has
been recorded for the value of the shares at the vesting dates.

                                       33
<PAGE>
On March 1, 2000, subject to an employment  agreement,  a grant of 50,000 common
shares  was  made to Mark  Robinson,  President.  In  addition,  the  employment
agreement  provides for a grant of 10,000  restricted  shares of common stock at
the  first of each  month,  commencing  April 1,  2000,  during  the term of Mr.
Robinson's  employment.  Such shares are to be issued quarterly  provided agreed
upon performance requirements are fulfilled. On June 28, 2000, 80,000 restricted
shares of common stock were issued to Mr. Robinson under this agreement. On each
of November 16, 2000, and January 26, 2001,  30,000  restricted shares of common
stock were issued to Mr.  Robinson  under this  agreement.  Effective  March 31,
2001, the stock grant to Mr. Robinson under this agreement ceased.

On April  1,  2000,  subject  to an  employment  agreement,  a grant  of  50,000
restricted  common  shares  was made to  James  Hirst,  Secretary/Treasurer.  In
addition,  the employment  agreement  provides for a grant of 10,000  restricted
shares  of common  stock at the first of each  month,  commencing  May 1,  2000,
during  the  term  of Mr.  Hirst's  employment.  Such  shares  are to be  issued
quarterly provided agreed upon performance  requirements are fulfilled.  On June
28,  2000,  70,000  restricted  shares of common  stock were issued to Mr. Hirst
under this agreement. On each of November 16, 2000, and January 26, 2001, 30,000
restricted shares of common stock were issued to Mr. Hirst under this agreement.
On March 27, 2001, the Company agreed to Mr. Hirst  returning  130,000 shares to
the Company and to carry the associated  liability  until such time as Mr. Hirst
requested the shares be re-issued.  Effective March 31, 2001 the stock grants to
Mr. Hirst ceased.  As of the balance sheet date, March 31, 2001, the Company has
recorded  a  liability  for the  value of the  shares  due Mr.  Hirst  that were
returned.

On August 24, 2000, subject to employment by the Company's  subsidiary,  a grant
of 250,000  restricted  common  shares was made to James  Flowers,  President of
Protocol.  Such shares are to be issued annually  commencing August 24, 2001, in
equal amounts of 50,000 shares.

On September 1, 2000,  subject to  employment  by the Company,  a grant of up to
100,000  restricted  shares was made to Matthew  Cohen,  National Sales Manager.
Such shares are to be issued subject to certain minimum annual gross revenues of
SOLTRON being achieved by December 31, 2001.

PRIVATE OFFERING

On January 31, 2001 the Company  commenced a private  unit  offering  under Rule
501(a) of Regulation D under the Securities Act of 1933. The offering was for up
to  2,500,000  units of the  Company  at a price of $0.20  per  unit.  Each unit
consists of one restricted  common share in the capital stock of the Company and
one (1)  non-transferable  share  purchase  warrant.  Each warrant  entitles the
purchaser to purchase a further one (1)  restricted  common share in the capital
stock of the  Company  on or  before  thirty-six  (36)  months  from date of the
offering at a price of $0.20 per share, after which time the warrant expires. As
of March 31, 2001, the Company had received  subscriptions  for 1,000,000  units
and closed the offering on June 30, 2001, when it had received subscriptions for
a total of 1,350,000 units. The purchasers therefore collectively have the right
to  receive  1,350,000  restricted  common  shares in the  capital  stock of the
Company and the right to  purchase an  additional  1,350,000  restricted  common
shares in the capital stock of the Company.

As of March 31, 2001, the Company had sold 1,000,000 restricted shares of common
stock in the aforementioned offering. These shares have been reflected as common
stock subscribed in the accompanying financial statements.

STOCK WARRANTS

On August 23,  2000,  the  Company  issued a warrant to PICO  Holdings,  Inc. to
purchase  1,000,000 shares of restricted common stock at $0.43 per share.  (Note
4)

On January 26, 2001, the Company issued a warrant to Dominion  Capital,  Inc., a
related party, to purchase  250,000  restricted  shares of common stock at $0.40
per share. (Note 7)

                                       34
<PAGE>
On January 31, 2001, the Company  commenced a private  offering which  contained
provisions for warrants attached to the common share units sold. As of March 31,
2001,  warrants to purchase 1,000,000  restricted shares of common stock at $.20
per share were issued in relation to the offering.

A summary of total stock warrants outstanding is as follows:

                                                                    WEIGHTED
                                                    NUMBER OF        AVERAGE
                                                    WARRANTS      EXERCISE PRICE
                                                    --------      --------------
     Outstanding at March 31, 1999                         --       $      --
     Granted                                               --              --
     Forfeited                                             --              --
                                                    ---------       ---------

     Outstanding at March 31, 2000                         --              --
     Granted                                        2,250,000             .32
     Forfeited                                             --              --
                                                    ---------       ---------

     Outstanding at March 31, 2001                  2,250,000       $     .32
                                                    =========       =========

               WARRANTS OUTSTANDING                       WARRANTS EXERCISABLE
      ------------------------------------------         ----------------------
                                    WEIGHTED
                                     AVERAGE
     EXERCISE                       REMAINING
     PRICE PER       NUMBER        CONTRACTUAL              NUMBER      EXERCISE
      SHARE        OF SHARES     LIFE (IN YEARS)         EXERCISABLE      PRICE
      -----        ---------     ---------------         -----------      -----
      $.20        1,000,000            2.8                1,000,000       $.20
      $.40          250,000            1.8                       --       $.40
      $.43        1,000,000            2.4                1,000,000       $.43
                 ----------                              ----------

                  2,250,000                               2,000,000
                 ==========                              ==========

STOCK OPTIONS

On November 24, 1997,  an addendum to the agreement  with  Dominion  Capital Pty
Ltd., a related entity,  to provide financing (Note 8) 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.

                                       35
<PAGE>
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.

INCENTIVE STOCK OPTION PLAN

The Company has adopted the 1997 Solpower Corporation Stock Option and Incentive
Plan (the  "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,
2001,  there were 5,000,000  shares reserved for options to be granted under the
Plan.

On January 30,  1998,  the  Company  granted  options to purchase  shares of the
Company's  common stock to certain  individuals  at a purchase price equal to or
greater than the fair market value of such stock as determined under 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.

On May 18, 1998,  Mr. Joshua Ward was  terminated  as a service  provider to the
Company and the 150,000 options were canceled.

On May 28, 1998, the Company granted options under the Plan to certain directors
at  a  purchase   price  for  each  share  that,   with  the  exception  of  the
non-qualifying  options,  is equal to or greater  than 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  non-qualifying,  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.

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  under the
Plan.  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. The terms are
similar to those  options  granted to other members of the board of directors in
1998.

On  February   15,  2000,   R.  L.  "Beau"  Van  Deren   resigned  as  corporate
Secretary/Treasurer and a member of the Board of Directors, however he continues
to provide  consulting  services  to the  Company.  Consequently  250,000 of the
options  granted  to Mr.  Van Deren  were  canceled  and  150,000  options  were
retained.

On March 1, 2000, the Company entered into an employment agreement with Mr. Mark
Robinson.  The  agreement  provides  for the  issuance of 500,000  options at an
exercise  price of $1.00 per share,  which expire  April 2005.  The options vest
based on minimum  market  price and reported  gross  revenue  levels.  The stock
options granted to Mr. Robinson terminated effective April 30, 2001.

On April 1, 2000,  the Company  entered into an  employment  agreement  with Mr.
James Hirst. The agreement  provides for  cancellation of all previously  issued
options and the  issuance of 500,000  options at an exercise  price of $1.00 per
share,  which expire April 2005.  The options vest based on minimum market price
and reported gross revenue levels.

On August 24, 2000, the Company  granted  options to purchase  250,000 shares of
the Company's common stock to Mr. James Flowers,  President of Protocol Resource
Management  Inc.  The options  vest  provided  the grantee is an employee of the

                                       36
<PAGE>
Corporation,  its  subsidiaries,  and/or  affiliates  as of the date any vesting
requirement is achieved for the Grantee's rights in the applicable option shares
to vest.

The aforementioned options 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:

                  PERCENT    EXERCISE     MARKET    REPORTED        EXPIRATION
GRANTEE            AMOUNT      PRICE      PRICE   GROSS REVENUES       DATE
-------            ------      -----      -----   --------------       ----
Hirst and            20%       $1.00      $1.00    $ 1 million     April, 2006
Robinson             20%       $1.00      $2.00    $ 2 million     April, 2006
                     20%       $1.00      $3.00    $ 3 million     April, 2006
                     20%       $1.00      $4.00    $ 4 million     April, 2006
                     20%       $1.00      $5.00    $ 5 million     April, 2006
Flowers              20%       $ .55         --              --    August, 2003
                     20%       $ .55         --              --    August, 2004
                     20%       $ .55         --              --    August, 2005
                     20%       $ .55         --              --    August, 2006
                     20%       $ .55         --              --    August, 2007
Matteson             33 1/3%   $1.00      $2.00    $ 6 million     January, 2003
                     33 1/3%   $2.00      $3.00    $ 9 million     January, 2003
                     33 1/3%   $3.00      $3.00    $ 12 million    January, 2003
Moffat -             40%       $3.00      $3.00    $ 6 million     May, 2003
Incentive            40%       $5.00      $5.00    $ 9 million     May, 2003
Options              20%       $7.00      $7.00    $ 12 million    May, 2003
Dominion            100%       $3.00      $3.00    $ 6 million     July 1, 2003

Non-Qualifying
  Options           100%       $2.00      $2.00    $ 4 million     May, 2003
Yoshikawa,           50%       $3.00      $3.00    $ 6 million     May, 2003
  and Goddard        50%       $7.00      $7.00    $ 12 million    May, 2003
Van Deren           100%       $1.30      $2.00    $ 6 million     May, 2003

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.  As of March 31, 2001,  50,000  options'
minimum vesting requirements have been met.

A summary of the activity of the Plan is as follows:

                                                                    WEIGHTED
                                                NUMBER OF           AVERAGE
                                                 OPTIONS         EXERCISE PRICE
                                               ----------          ----------
Outstanding at March 31, 1999                   2,350,000          $     3.47
Granted                                           650,000                2.56
Forfeited                                        (400,000)              (1.07)
                                               ----------          ----------

Outstanding at March 31, 2000                   2,600,000                3.49
Granted                                           750,000                 .85
Forfeited                                        (400,000)              (2.56)
                                               ----------          ----------
Outstanding at March 31, 2001                   2,950,000          $     2.52
                                               ==========          ==========

                                       37
<PAGE>
Additional  information  about  outstanding  options to purchase  the  Company's
common stock as of March 31, 2001 is as follows:

             OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
 -----------------------------------------         ------------------------
                               WEIGHTED
                               AVERAGE
EXERCISE                      REMAINING
PRICE PER      NUMBER        CONTRACTUAL              NUMBER        EXERCISE
 SHARE       OF SHARES     LIFE (IN YEARS)         EXERCISABLE        PRICE
 -----       ---------     ---------------         -----------        -----
 $ .55         250,000          4.4                  50,000            $.55
 $1.00       1,050,000          4.8                      --           $1.00
 $1.30         150,000          2.7                      --           $1.30
 $2.00         150,000          2.0                      --           $2.00
 $2.50         100,000           .6                      --           $2.50
 $3.00         350,000          2.2                      --           $3.00
 $3.50         150,000           .6                      --           $3.50
 $4.50         250,000           .6                      --           $4.50
 $5.00         350,000          1.1                      --           $5.00
 $7.00         150,000          2.2                      --           $7.00
            ----------                              -------
             2,950,000                               50,000
            ==========                              =======

The 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,  2001  and  2000.  Had
compensation cost for stock-based compensation been determined based on the fair
value of the options at the grant dates  consistent with the method of SFAS 123,
the  Company's  net loss for the years  ended March 31, 2001 and 2000 would have
been reduced to the pro forma amounts presented below:

                                                  2001               2000
                                               -----------        -----------
     Net Loss:
     As reported                               $(2,149,849)       $(2,139,788)
     Pro forma                                 $(2,149,849)       $(2,139,788)

     Loss per common share:
     As reported                               $     (0.08)       $     (0.09)
     Pro forma                                 $     (0.08)       $     (0.09)

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  four  (4)  years,
risk-free interest rates of eight percent (8%), and a zero percent (0%) dividend
yield.

The full impact of  calculating  compensation  cost for stock options under SFAS
No.  123 is not  reflected  in the pro forma net loss  amounts  presented  above
because compensation cost is reflected over the vesting period.

                                       38
<PAGE>
--------------------------------------------------------------------------------
                                     NOTE 10
                                 CONCENTRATIONS
--------------------------------------------------------------------------------

Major suppliers for the Company  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
supplied  by a major  North  American  manufacturer.  All  other  materials  for
production of SOLTRON are available from a variety of local providers.

All supplies for the  manufacture of SP34E are readily  available from a variety
of manufacturers in North America. Protocol has a 7 year supply history with one
of these manufacturers.

During the years ended  March 31,  2001 and 2000 the  Company  had one  customer
representing approximately 45% and 64% of sales, respectively.

--------------------------------------------------------------------------------
                                     NOTE 11
                                  GOING CONCERN
--------------------------------------------------------------------------------

The accompanying  consolidated  financial statements have been prepared assuming
that the  Company  will  continue as a going  concern,  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business.  The Company has experienced  significant  losses and negative cash
flows from operations for the year ended March 31, 2001,  which have resulted in
a deficiency in working capital of approximately  $372,000 as of March 31, 2001,
and an accumulated deficit of approximately $9,200,000.

There can be no  assurance  that the Company will be able to continue as a going
concern in view of its financial  condition.  The Company's  continued existence
will depend upon its ability to obtain sufficient additional capital in a timely
manner to fund its  operations  and to further  develop its  long-term  business
plan. Any inability to obtain additional  financing will have a material adverse
effect on the Company, including possibly requiring the Company to significantly
reduce or cease its operations.

These  factors  raise  substantial  doubt  about the  ability of the  Company to
continue  as a going  concern.  The  consolidated  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

                                       39
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                    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 Solpower,  their ages and positions
are as follows:

        NAME                      AGE        POSITIONS HELD(1)
        ----                      ---        -----------------
        Fraser M. Moffat III      71         Director, Chairman
        Peter D. Voss             53         Director, Vice Chairman
        James H. Hirst            54         Director, President, CEO
        Jerry W. Goddard          61         Director
        Naoya Yoshikawa           55         Director

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

     FRASER M.  MOFFAT III joined  Solpower  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. in Hamburg,  Germany.
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.

     PETER D. VOSS joined  Solpower as a Director and Vice Chairman in September
1999. From 1988 to the present, Mr. Voss has been Chairman and Managing Director
of Dominion  Capital Pty Ltd.,  part of the Voss Group of  Companies,  that have
diversified  international  financial  interests  and have  owned  and  operated
companies  involved  in  food,  beverage,  forestry,   viticulture,   livestock,
international trading and real estate. From 1981 to 1987, Mr. Voss held a senior
management  role as general  manager of  Coca-Cola  Amital.  Mr. Voss has been a
consultant  to industry  and  government  bodies in  Australia,  Canada,  China,
Indonesia, Japan, Korea and the United States.

     JAMES H. HIRST has served as President and CEO since April, 2001. He served
as Secretary/Treasurer from March 2000 to April 2001, as Chief Executive Officer
of Solpower from  September  1997 to March 2000,  as President  from May 1998 to
March 2000 and as a Director  from May 1998 to present.  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 March 2001, as a vice  president from January
1991 to 1996 and as 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

                                       40
<PAGE>
Consolidated  Shoshoni  Gold  Inc.  from  August  1996 to  August  1997,  as the
president and director of Consolidated  Newgate Resources Ltd. from October 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 and in 1981 resigned to establish his private  consulting
business.  In 1979,  Mr. Hirst received a Bachelor of Commerce  (Accounting  and
Management Information Systems) degree from the University of British Columbia.

     JERRY W. GODDARD has served as Director of Solpower  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 Solpower 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 and
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

     The  following  information  relates to reports  under Section 16(a) of the
Exchange Act that were not timely filed by officers,  directors  and  beneficial
owners of 10% or more of  Solpower's  common  stock during the fiscal year ended
March 31, 2001.  This  information is based on a review of Section 16(a) reports
furnished to Solpower.

     Mark S.  Robinson  failed to timely file three reports on Form 4 related to
stock grants  received.  A Form 5 to report the delinquent  filings was also not
timely filed. The required report was filed in August 2001.

     James H.  Hirst  failed to timely  file four  reports  on Form 4 related to
stock  grants and a deferred  compensatory  arrangement.  A Form 5 to report the
delinquent  filings was also not timely filed.  The required report was filed in
August 2001.

     Dominion  Capital  failed  to  timely  file two  reports  related  to three
transactions.  These reports  related to the conversion of two notes into shares
of  Solpower  common  stock on April 28,  2000 and the  conversion  of debt into
shares of Solpower common stock on December 29, 2000. Dominion Capital failed to
timely file a Form 4 related to these  transactions  and to timely file a Form 5
to report the delinquent Form 4 filings. The required report was filed in August
2001.

     Peter Voss failed to timely file two reports related to eight transactions.
As a control person of Dominion  Capital,  Mr. Voss was required to file reports
related to the Dominion Capital transactions described above. Additionally,  Mr.
Voss failed to timely file Form 4s related to the issuance of 250,000  shares to
Dominion  Capital,  Inc. in  cancellation  of debt on  December  24,  2000,  the
issuance of 430,000  shares on April 28, 2000 and 420,000 shares on December 29,
2000 in  cancellation  of debt to  Intavest  Pty Ltd.,  the  issuance of 100,000
shares in  cancellation  of debt on April 28, 2000 to A1 Financial  Planners Pty
Ltd., and the issuance of 394,294 shares in cancellation of debt on December 29,
2000 to Bio Engineering Pty Ltd. As a control person of these entities, Mr. Voss
was required to report  these  transactions.  A Form 5 to report the  delinquent
filings was also not timely filed. The required report was filed in August 2001.

                                       41
<PAGE>
     Fraser M.  Moffat III failed to timely file one report on Form 4 related to
the issuance of 35,826  shares in  cancellation  of debt on December 29, 2001. A
Form 5 to report the delinquent  filings was also not timely filed. The required
report was filed in August 2001.

ITEM 10. EXECUTIVE COMPENSATION

     The following table reflects all forms of compensation for the fiscal years
ended March 31, 2001, 2000 and 1999 for the two highest paid officers.  No other
person  received  salary or bonus in excess of $100,000  for any of these fiscal
years.

                           SUMMARY COMPENSATION TABLE

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

Mark S. Robinson                  2001       --       $171,885(1)     500,000(2)
Chief Executive Officer           2000       --             --             --
                                  1999       --             --             --

James H. Hirst                    2001       --       $197,773(3)     500,000(2)
Secretary/Treasurer               2000       --       $100,000        100,000
                                  1999       --       $100,000        300,000(4)

----------
(1)  Includes  $130,000 cash payments and $47,885 as stock grants for consulting
     services.
(2)  The  options  have not yet vested  and have been  allotted  pursuant  to an
     Option  Plan  with  requisite  vesting  requirements  to be  achieved.  Mr.
     Robinson's options expired on April 30, 2001.
(3)  Includes  $126,000 cash payments and $71,773 as stock grants for consulting
     services.
(4)  These options were canceled upon grant of option to acquire  500,000 shares
     in fiscal year 2001.

OPTION GRANTS

     The following table sets forth information  regarding the grants of options
to executive officers for the fiscal year ended March 31, 2001.

                        OPTION GRANTS IN FISCAL YEAR 2001

<TABLE>
<CAPTION>
                    NUMBER OF SHARES   % OF TOTAL COMPENSATION
                   UNDERLYING OPTIONS     OPTIONS GRANTED IN
    NAME                GRANTED              FISCAL YEAR        EXERCISE PRICE    EXPIRATION DATE
    ----                -------              -----------        --------------    ---------------
<S>                   <C>                       <C>                 <C>           <C>
Mark S. Robinson      500,000 (1)                40%                 $1.00         April 1, 2005
James H. Hirst        500,000 (1)                40%                 $1.00         April 1, 2005
</TABLE>

----------
(1)  EXPIRED APRIL 30, 2001.

                                       42
<PAGE>
OPTION EXERCISES AND VALUES

     The  following  table sets forth  information  regarding  the  exercise and
values of options held by executive officers as of March 31, 2001.

                          AGGREGATE OPTION EXERCISES IN
               LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                                           VALUE OF UNEXERCISED
                                                               NUMBER OF UNEXERCISED        IN-THE-MONEY OPTIONS
                                                             OPTIONS AT MARCH 31, 2001        AT MARCH 31, 2001
                      SHARES ACQUIRED                        -------------------------    -------------------------
     NAME              ON EXERCISE         VALUE REALIZED    EXERCISABLE/UNEXERCISABLE    EXERCISABLE/UNEXERCISABLE
<S>                          <C>                 <C>              <C>       <C>                  <C>
Mark S. Robinson             0                   0                  0/500,000 (1)                  $0/$0
James H. Hirst               0                   0                  0/500,000                      $0/$0
</TABLE>

----------
(1)  Expired April 30, 2001

EMPLOYMENT AGREEMENTS

     We had employment  agreements  with Mr. Robinson and Mr. Hirst effective in
fiscal year 2001.  These  agreements  are  intended to be for an initial term of
three years.  Base salary of $130,000 has been set for Mr. Robinson and $126,000
for Mr.  Hirst.  In  addition,  Mr.  Robinson  and Mr. Hirst are each to receive
options to purchase 500,000 shares at $1.00 per share,  subject to vesting,  and
stock grants initially of 50,000 shares and 10,000 shares per month  thereafter.
The stock grants to Mr. Robinson  commenced as of March 1, 2000 and to Mr. Hirst
as of April 1, 2000.  The  option  grants  were  effective  April 7,  2000.  Mr.
Robinson ceased employment  effective March 31, 2001, and resigned as a director
and officer on that date. The stock options granted to Mr.  Robinson  terminated
effective  April 30, 2001,  and the stock  grants to Mr.  Robinson and Mr. Hirst
ceased effective March 31, 2001.

DIRECTOR COMPENSATION

     All authorized  out-of-pocket  expenses incurred by our directors on behalf
of Solpower 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 to attract  employees  and
service  providers  and  to  reward  persons   responsible  for  the  successful
administration  and  management of Solpower.  Another  purpose of the Plan is to
provide such persons with additional incentive and reward opportunities designed
to enhance profitable growth. 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. In 1999, the Plan was amended

                                       43
<PAGE>
by the Board of  Directors  to increase the number of shares that can be granted
under the Plan to 2,500,000  shares of Solpower  common stock. In 2000, the Plan
was further  amended by the board of Directors and approved by the  shareholders
to increase the number of shares that can be granted under the Plan to 5,000,000
shares of Solpower  common stock.  As of March 31, 2001,  2,950,000  options had
been committed 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, 2001, the ownership of each
person  known by us to be the  beneficial  owner of five  percent or more of our
Common  Stock,  each  officer and  director  individually,  and all officers and
directors as a group.  We have been advised that each person has sole voting and
investment power over the shares listed below unless otherwise indicated.

      NAME AND ADDRESS                       AMOUNT AND NATURE       PERCENT OF
     OF BENEFICIAL OWNER                       OF OWNERSHIP           CLASS (1)
     -------------------                       ------------           ---------
     Fraser M. Moffat III (2)                      35,826                0.1%
     18 Lake Avenue
     Montrose, Pennsylvania

     James H. Hirst(2)                            130,100(3)             0.4%
     7309 East Stetson Drive
     Scottsdale, Arizona

     Jerry W. Goddard                             135,000(4)             0.4%
     7309 East Stetson Drive
     Scottsdale, Arizona

     Naoya Yoshikawa (2)                              100                 (5)
     2-16-42 Takanawa
     Minato-Ku, Japan

     PICO Holdings, Inc. (6)                    2,500,000                  8%
     875 Prospect Street, Suite 301
     La Jolla, California 92037

     Dominion Capital Pty Ltd. (7)(8)           8,773,910                 28%
     39 De Havilland Road
     Mordialloc 3195
     Victoria, Australia

     Peter Voss (7)(8)                         12,928,104                 41%
     39 De Havilland Road
     Mordialloc 3195
     Victoria, Australia

     All Directors and Officers                13,229,127                 42%
     as a Group (5 persons)

----------
(1)  Based upon 31, 255,064 shares of common stock being issued and outstanding
     on July 31, 2001.
(2)  Mr. Hirst has been granted options to purchase up to an additional 500,000
     shares of common stock at $1.00 per share upon the market price of the
     common stock attaining certain levels. Mr. Moffat has been granted options
     to purchase up to 350,000 shares of common stock at prices ranging from
     $2.00 to $7.00 per share upon the market price of the common stock
     attaining certain levels. Messrs. Goddard and Yoshikawa have each been
     granted options to purchase up to 100,000 shares of common stock at prices
     ranging from $3.00 to $7.00 per share upon the market price of the common
     stock attaining certain levels. These options have not vested, are not
     exercisable until vested and are not included in the total above.

                                       44
<PAGE>
(3)  Includes 130,000 shares issuable under a deferred compensation arrangement.
(4)  Includes 100,000 shares held by an entity associated with Mr. Goddard over
     which he has an exercisable control.
(5)  Less than 0.1%.
(6)  PICO Holdings, Inc. is a diversified holding company listed on NASDAQ under
     trading symbol PICO.
(7)  Mr. Voss controls Dominion Capital Pty Ltd which holds 8,773,910 shares, A1
     Financial Planners Pty Ltd. which holds 1,140,200 shares, Intavest Pty Ltd.
     which holds 1,550,000 shares, Bio Engineering Pty Ltd. which holds 394,244
     shares and Dominion Capital, Inc. which holds 370,000 shares and warrants
     to purchase an additional 250,000 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.
(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, we entered into an Acquisition Agreement with Dominion
Capital for the  acquisition  of the  exclusive  North  American  manufacturing,
distribution,  marketing  and sales rights  SOLTRON.  The  original  term of the
agreement was for five years and provided that we issue 5,000,000  shares of our
common  stock,  issue  preferred  stock and grant  certain  options to  Dominion
Capital as consideration  for these rights. On November 22, 1997 we renegotiated
the terms of the Acquisition Agreement to extend its term for an additional five
year  period and  eliminate  the  required  option  grants and  preferred  share
issuances.  The amended agreement provided that options and performance  bonuses
would be payable to Dominion  Capital as follows:  (i) upon gross  revenues from
sales of  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 revenues from sales of 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 revenues from sales of
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 revenues from sales of 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 we entered into an
addendum to the Acquisition  Agreement in which we were granted a right of first
refusal to acquire  manufacturing,  distribution,  marketing and sales rights to
SOLTRON in all other  territories  (other than Japan) where  SOLTRON and certain
other  products and  services are  currently  being  commercialized  by Dominion
Capital.  The terms and conditions of any such acquisitions are to be negotiated
on a product by product and a territory by territory basis.

     On  November 4, 1996,  we issued  3,520,000  shares of our common  stock to
Dominion  Capital at a price of $0.125 per share. On April 1, 1997, we issued an
additional  4,160,000 shares of our common stock to Dominion Capital in exchange
for  cancellation  of  advances  payable  to  Dominion  Capital in the amount of
$520,000 ($0.125 per share).

     On June 17,  1998,  we entered  into a second  Acquisition  Agreement  with
Dominion   Capital  for  the   acquisition  of  the  exclusive   North  American
manufacturing,  distribution,  marketing and sales rights to SP34E. We agreed to
issue  6,000,000  shares of our common stock and pay a royalty of $2.25 for each
kilogram of SP34E sold in North America. The term of this Acquisition  Agreement
is for five years,  beginning when we achieve  specified sales volumes of SP34E.
We have an option to extend the term of this  agreement for an  additional  five
years. Effective January 1, 1999, we entered into an addendum to the Acquisition
Agreement  delaying  the  commencement  of the  Acquisition  Agreement  until we
achieve certain sales volumes of SP34E, but not later than July 1, 2000.

                                       45
<PAGE>
     On July 1, 1998, we entered into a Client  Service  Agreement with Dominion
Capital,   Inc.  (formerly  Dominion  Capital  Securities,   Inc.),  an  Arizona
corporation  ("DCI"),  for the  provision  of all of our  required  investor and
corporate communications services. DCI is wholly-owned by Mr. Peter Voss, who is
also one of our directors and the controlling  shareholder of Dominion  Capital,
our  principal  shareholder.  The term of the  agreement is renewable  every six
months. For its services,  DCI initially received $275,000 of which $125,000 was
paid in cash with the balance paid with 50,000  shares of our common  stock.  We
renewed our agreement with DCI in  consideration  of monthly payments of $30,000
per month for six  months,  payable  $90,000 in cash and by  issuance  of 90,000
shares of common stock for services  rendered through December 31, 1999. We have
agreed to make  payments  of $15,000 per month,  payable  $60,000 in cash and by
issuance of 30,000 shares of common stock for services for the period of January
2000 through June 2000. Effective December 31, 2000, we terminated the agreement
with Dominion Capital, Inc., and settled all outstanding amounts by the issuance
of 125,000  shares of common  stock to Trond  Matteson,  an employee of Dominion
Capital,  Inc.;  the  issuance  of 250,000  shares of common  stock to  Dominion
Capital,  Inc., and the issuance of a warrant to Dominion Capital,  Inc., to buy
250,000 shares of common stock at $0.40 per share expiring on December 31, 2002.

     On September 30, 1999, we issued  $680,000 in 6% Convertible  Notes Payable
to Dominion Capital and a total of $265,000 of these notes to two other entities
controlled  by Peter Voss as  consideration  for prior  advances  and payment of
certain of our operating expenses.  These notes were convertible into our common
stock at $0.50 per share and were  converted  to  1,950,000  shares on April 28,
2000.

     On December 31, 1999, we issued a $200,000 6%  Convertible  Note Payable to
Dominion Capital as  consideration  for prior advances and payment of certain of
our operating expenses. This note was convertible into our common stock at $0.40
per share and was  converted to 500,000  shares of our common stock on April 28,
2000.

     On December 29, 2000, we issued  482,260 shares of common stock to Dominion
Capital and 814,294 to two other  entities  controlled by Peter Voss. The shares
were  issued at $0.25 per share in  cancellation  of  accounts  payable for cash
advances and product purchases.

     Our general policy for entering into transactions with directors,  officers
and affiliates 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.

                                       46
<PAGE>
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.

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.

10.7(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 and  amendments  between
          Scottsdale Stetson Corporation and Virtual Technologies, Inc.

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

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

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

10.17(2)  Addendum to June 17, 1998 Acquisition  Agreement  effective January 1,
          1999.

10.18(2)  Joint Venture  Agreement  between  Solpower  Corporation  and Protocol
          Resource Management, Inc. dated March 29, 1999.

10.19(2)  Heads of Agreement between Solpower Corporation and Solpower Australia
          Pty Ltd. dated June 7, 1999.

10.20(3)  Note  Agreement for the Issuance of up to $1,500,000 of 6% Convertible
          Notes,  between  Solpower,  Dominion  Capital  and  other  signatories
          thereto, dated September 24,1999.

10.21(3)  Amendment to the Note  Agreement  for the Issuance of up to $1,500,000
          of 6% Convertible Notes, between Solpower,  Dominion Capital and other
          signatories thereto, dated December 31,1999.

10.22(3)  Note  Agreement  for the Issuance of up to $200,000 of 6%  Convertible
          Notes, between Solpower and Dominion Capital, dated December 31,1999.

10.23(5)  Share Purchase Agreement dated August 21, 2000 among Solpower and Pico
          Holdings, Inc. ("Pico") and James W. Flowers,  Patricia G. Flowers and
          Florcor, Inc.

                                       47
<PAGE>
10.24(5)  Shareholders  Agreement dated August 28, 2000 among Protocol  Resource
          Management, Inc., Pico and Solpower

10.25(5)  Nonnegotiable  Secured  Promissory  Note in the  principal  amount  of
          $500,000 dated August 28, 2000 issued by Solpower to Pico

10.26(5)  Nonnegotiable  Secured  Promissory  Note in the  principal  amount  of
          $250,000 dated August 28, 2000 issued by Solpower to Pico

10.27(5)  Warrant dated August 28, 2000 issued by Solpower to Pico

10.28(6)  Nonnegotiable  Secured  Convertible  Promissory  Note in the principal
          amount of  $500,000  dated  September  18,  2000  issued  by  Solpower
          Corporation to Dominion Capital Pty Ltd.

10.29(6)  Amendment to Lease between Arizona Industrial Capital, LP and Solpower
          Corporation dated December 15, 2000.

10.30(6)  Agreement for the Sale of Assets  between Perix  Industries,  Inc. and
          Solpower Corporation dated December 19, 2000.

10.31(6)  Letter Re:  Settlement of Client Services  Account  Agreement  between
          Dominion Securities,  Inc. and Solpower Corporation dated December 20,
          2000.

10.32(6)  Letter Re:  Agreement for  Conversion of Debt into Shares between Bell
          Capital Corporation and Solpower Corporation dated December 29, 2000.

10.33(6)  Letter  Re:  Agreement  for  Conversion  of Debt into  Shares  between
          Dominion Capital Pty Ltd. and Solpower  Corporation dated December 29,
          2000.

10.34(6)  Letter  Re:  Agreement  for  Conversion  of Debt into  Shares  between
          Intavest Pty Ltd. and Solpower Corporation dated December 29, 2000.

10.35(6)  Letter Re:  Agreement for  Conversion of Debt into Shares between Kurt
          Kramarenko and Solpower Corporation dated December 29, 2000.

10.36(6)  Letter Re: Agreement for Conversion of Debt into Shares between Fraser
          Moffat and Solpower Corporation dated December 29, 2000.

10.37(6)  Letter Re:  Agreement for  Conversion of Debt into Shares  between Bio
          Engineering Pty Ltd. and Solpower Corporation dated December 29, 2000.

21.1      Subsidiaries

23.1      Auditor's Consent from Semple & Cooper, LLP

99.1(2)   Assignment,  Settlement and Release between  Solpower  Corporation and
          Masters Marketing Group, Inc. dated May 14, 1999.

99.2(2)   Assignment, Settlement and Release between Solpower Corporation and D.
          I. South, Inc. of Indiana dated September 1, 1999.

                                       48
<PAGE>
99.3(2)   Assignment,  Settlement and Release between  Solpower  Corporation and
          Solpower Southeast Corporation dated September 7, 1999.

99.4(4)   Assignment,  Settlement and Release between  Solpower  Corporation and
          Houston Mercantile Exchange, Inc. dated November 7, 2000.

----------
(1)  Incorporated by reference from Solpower's Form 10-SB as filed on August 21,
     1998.
(2)  Incorporated by reference from Solpower's Form 10-KSB as filed on September
     24, 1999.
(3)  Incorporated by reference from Solpower's Form 10-QSB as filed on December
     10, 1999.
(4)  Incorporated by reference from Solpower's Form 10-KSB as filed on August
     17, 2000.
(5)  Incorporated by reference from Solpower's Form 10-QSB as filed on November
     20, 2000.
(6)  Incorporated by reference from Solpower's Form 10-QSB as filed on February
     20, 2001.

(b)  REPORTS ON FORM 8-K.

     None.

                                       49
<PAGE>
                                   SIGNATURES

     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: August 6, 2001                 By /s/ James H. Hirst
                                         ---------------------------------------
                                         James H. Hirst, Chief Executive Officer

                                      BOARD OF DIRECTORS



Dated: August 6, 2001                 /s/ Fraser M Moffat III
                                      ------------------------------------------
                                      Fraser M.  Moffat III, Chairman



Dated: August 6, 2001                 /s/ James H. Hirst
                                      ------------------------------------------
                                      James H. Hirst



Dated: August 6, 2001                 /s/ Jerry W. Goddard
                                      ------------------------------------------
                                      Jerry W. Goddard



Dated: August 6, 2001                 /s/ Naoya Yoshikawa
                                      ------------------------------------------
                                      Naoya Yoshikawa



Dated: August 6, 2001                 /s/ Peter D. Voss
                                      ------------------------------------------
                                      Peter D. Voss

                                       50