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, 2004

[ ] 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.)

        307 East 22nd Street
           San Pedro, CA                                            90731
(Address of principal executive offices)                          (Zip Code)

                                 (888) 289-8866
                           (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 [ ] No [X].

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 the fiscal year ended March 31, 2004 were $689,588.

The aggregate market value of the common stock held by  non-affiliates  computed
based on the  closing  price of such stock on March 31,  2004 was  approximately
$1,515,952.

The number of shares outstanding of the registrant's classes of common stock, as
of March 31, 2004 was 50,912,127 shares. No shares of the registrant's preferred
stock were outstanding.

Documents incorporated by reference: None.

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

                                   ----------

                        INDEX TO THE FORM 10-KSB FOR THE
                        FISCAL YEAR ENDED MARCH 31, 2004


ITEM 1.  DESCRIPTION OF BUSINESS............................................  1

ITEM 2.  DESCRIPTION OF PROPERTY............................................ 11

ITEM 3.  LEGAL PROCEEDINGS.................................................. 12

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 12

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........... 12

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......... 13

ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS.................................. 16

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE............................................... 42

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT; AUDIT
         COMMITTEE FINANCIAL EXPERT; CODE OF ETHICS......................... 42

ITEM 10. EXECUTIVE COMPENSATION............................................. 43

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 45

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 47

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K................................... 49

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES............................. 50
<PAGE>
                                     PART I

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

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  ("EXCHANGE  ACT").  We  intend  that  the
forward-looking  statements  be  subject  to the safe  harbors  created by these
statutory provisions.

Forward-looking  statements involve risks and uncertainties and include, but are
not  limited  to,  statements  of future  events,  our  plans and  expectations,
financial  projections  and  performance  and  acceptance  of our product in the
marketplace.  We may make additional written or oral forward-looking  statements
from  time to time in  filings  with  the  Securities  and  Exchange  Commission
("SEC"),  through  press  releases  or  otherwise.  Wherever  possible,  we have
identified  these  forward-looking  statements  by  words  such  as  "BELIEVES,"
"ANTICIPATES,"   "CONTEMPLATES,"   "EXPECTS,"  "INTENDS,"  "PROJECTS,"  "PLANS,"
"FORECASTS,"  "ESTIMATES" and similar expressions.  These statements reflect our
current views about future events and financial  performance  or operations  and
are  applicable  only as of the date the statements are made. Our actual results
may  differ  materially  from  these  statements.  Factors  that  may  cause  or
contribute to differences  include,  but are not limited to, those  discussed in
"DESCRIPTION  OF  BUSINESS  -  FACTORS   AFFECTING   FUTURE   PERFORMANCE"   and
"MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF  Operations," as well as those
factors discussed elsewhere in this Form 10-KSB and in any exhibits attached.

Although  we  believe  that  the  assumptions   underlying  our  forward-looking
statements  in this Form 10-KSB are  reasonable,  any of the  assumptions  could
prove  inaccurate.  There can be no assurance that the results  contemplated  in
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  forward-looking  information  should  not be  regarded  as a
representation  that  the  future  events,  plans  or  expectations,   financial
projections  and  performance  or acceptance of our products and services in the
marketplace will be achieved.  We disclaim any obligation to subsequently revise
forward-looking  statements to reflect any change in our  expectations or due to
the occurrence of unanticipated events.

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

We are in the business of producing,  marketing and distributing  SOLTRON(R),  a
proprietary  enzyme-based  fuel enhancing  product and SP34E(TM),  an ozone safe
alternative  refrigerant.  Our business  plan  contemplates  distributing  these
products on a worldwide basis.

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<PAGE>
Solpower was 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
sales rights for SOLTRON(R) in the United States, Canada and Mexico. As a result
of entering into this licensing  agreement,  Dominion Capital and its affiliates
gained control of Solpower 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(TM) 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.  KLEAN  is  a  line  of  enzyme-based   cleaners  and
bio-remediation  and petroleum deposit control agents. We discontinued the KLEAN
product line in the fiscal year ended March 31, 2003.

On January 31, 2003, we acquired the outstanding shares of Virtual  Technologies
for 6,000,000 shares of our  unregistered,  restricted common stock. As a result
of  this  acquisition,   we  gained  the  exclusive,   worldwide  manufacturing,
distribution,   marketing   and  sales  rights  to  SP34E(TM)  and  the  related
refrigerant gas products, SP22E-A, SP22E-B and SP22E-C.

On  February  20,  2003,  we acquired  the  exclusive  worldwide  manufacturing,
distribution,   marketing  and  sales  rights  to  SOLTRON(R)   pursuant  to  an
Acquisition  Agreement with Dominion  Capital,  under which we issued  9,000,000
shares of our  restricted  common  stock.  During the year ended March 31, 2004,
management  determined that this asset was impaired for accounting  purposes and
wrote-off the  capitalized  amounts  related to these  rights.  We still control
these marketing rights and continue to market our SOLTRON(R) product.

PRODUCTS

We market and distribute SOLTRON(R),  a proprietary  enzyme-based fuel enhancing
product and license the production and distribution of SP34E(TM),  an ozone safe
alternative  refrigerant.  We  currently  distribute  these  products  primarily
through sales channels in the United States,  Central  America,  American Samoa,
Europe and Australia.

SOLTRON(R). SOLTRON(R) 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(R) 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(R) changes
the fuel's molecular structure and improves its oxygen absorption and combustion
efficiency.   SOLTRON(R)'S   enzymes  are  naturally  powerful  surfactants  and
dispersants.  Damaging  fuel  contaminants  such as  sludge,  fungi and mold are
broken  down and lose  their  ability  to stick to tank  walls  and  lines.  The
resulting  microscopic  particulate is combusted,  while larger contaminants are
filtered out. The dispersion of microbial contamination reduces corrosive attack
on fuel tanks, pumps and injectors. SOLTRON(R) can be added to all liquid fossil

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<PAGE>
fuels including gasoline, diesel and light and heavy oils at the fuel pump or in
bulk  fuel  tanks  and  has  gained  acceptance  in the  marine  industry  where
biological fuel contamination is a persistent problem.

SOLTRON(R) is marketed as a natural enzyme  product that will reduce  emissions,
improve fuel economy and reduce  engine  maintenance.  SOLTRON(R)  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.

SP34E(TM).  SP34E(TM) is a non-ozone depleting refrigerant developed in Japan by
the  Kinoh-Kinzohu  Company as a  replacement  for  ozone-depleting  fluorinated
refrigerants  commonly  used prior to newly  enacted  environmental  regulations
phasing out ozone-depleting  fluorinated  refrigerants.  Through our subsidiary,
Virtual  Technologies Pty Ltd., we currently market and sell SP34E(TM) in Japan,
Australia, New Zealand and other Pacific Rim countries. Significant use data has
been developed for this product,  the results of which have  consistently  shown
that  SP34E(TM) is an  acceptable  near  "DROP-IN"  replacement  for CFC-R-12 in
mineral oil based refrigerant applications. SP34E(TM) generally does not require
replacement  of mechanical  components or removal of mineral oils that are found
in  older  refrigeration   systems.  This  product  may  be  used  in  domestic,
automotive,   residential,   commercial  and  transport  refrigeration  and  air
conditioning systems as an alternative to CFC-R-12 (Freon) and other fluorinated
refrigerants.  In Australia,  SP-AUTO, a specific version of SP34E(TM), has been
developed  specifically for the automotive  segment of the market.  This product
has an  ultraviolet  dye  blended  into the  product  for easy  leak  detection.
SP34E(TM) has been listed by the U.S. Environmental  Protection Agency under its
Significant New Alternatives Program ("SNAP"),  as an acceptable  alternative to
ozone-depleting substances.

SUPPLIERS

SOLTRON(R).  SOLTRON(R)  consists of natural organic enzymes mixed with low odor
base solvent.  The enzyme  concentrate  used in the manufacture of SOLTRON(R) 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
indicated  that it will be able to supply the enzyme  concentrate  in sufficient
quantities  to meet our  anticipated  needs.  Low odor base  solvent  is readily
available  through  numerous  local  suppliers.  We contract on a specific order
basis with third  parties to blend and bottle this  product.  We do not have any
long-term  contracts for our blending and bottling,  but believe these  services
are readily available.  We have also developed our own proprietary bottle design
for retail packaging.

SP34E(TM).  The  components  of SP34E(TM)  are readily  available  from numerous
local, national and international suppliers throughout the world.

MARKETING STRATEGIES

We monitor  acceptance  of our  existing  products  through  direct  contact and
feedback  with the end users.  We have  established  a corporate  communications
system supported by an in-house desktop publishing department that enables us to
upgrade our corporate  image with  improved  logos,  Web site  updates,  product
brochures, product labeling and packaging and all related marketing materials.

                                       3
<PAGE>
SOLTRON(R).  The  fuel  market  may be  divided  into  distinct  groups  such as
gasoline,  diesel and bunker fuel users.  These groups can be further subdivided
into distinct user segments,  such as commercial  transport  fleets,  government
fleets, marine transport fleets, retail and industrial distribution.  We believe
that SOLTRON(R) is able to benefit fuel consumers in all of these markets.

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 biodiesel,  ethanol, 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(R).  We are currently focusing on all North American markets, as well
as developing a global marketing plan to exploit  opportunities in international
territories  that use lower grade fuels that can better benefit from  SOLTRON(R)
and where higher fuel prices better reflect the economies of SOLTRON(R)'S use.

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(R)  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.  We also  utilize  other  traditional  distribution  channels
including a Web site and resale distribution through retail chains such as NAPA.
In addition,  through  private  labeling  arrangements,  we also sell SOLTRON(R)
through Ocean Bio-Chem,  Inc. (dba Starbrite)  under the brand name  "Startron,"
and through Xtra Export Trade under the brand name "XBee," throughout all of the
European Union countries.

SP34E(TM).  Refrigerants  are  widely  used in  motor  vehicle,  commercial  and
residential   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 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 obtained
Environmental  Protection  Agency  approval of SP34E(TM) in December  2000.  See
"REGULATIONS"  below. We market SP34E(TM) as an environmentally safe replacement
for R-12  refrigerants with greater  efficiency and less negative  environmental
impact.

We are not  currently  marketing  SP34E(TM)  in  North  America,  and are in the
process of formulating a marketing plan to reintroduce the product in the United
States, and our subsidiary,  Virtual Technologies (Australia) Pty Ltd. ("VIRTUAL
TECHNOLOGIES"),  is responsible for marketing and sales of SP34E(TM) and related
refrigerant gases worldwide. In Australia and New Zealand, SP34E(TM) is produced
and sold  pursuant  to a licensing  agreement  with A-Gas  (Australia)  Pty Ltd.
("A-GAS").  Pursuant  to  that  agreement,  dated  November  28,  2002,  Virtual

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<PAGE>
Technologies  granted A-Gas the license to the SP34E(TM)  formulation  and brand
name,  together  with  exclusive   manufacturing  and  distribution  rights  for
SP34E(TM) in Australia and New Zealand. Also pursuant to the agreement,  Virtual
Technologies  leased certain plant and equipment necessary for the production of
SP34E(TM)  to A-Gas.  In return,  A-Gas pays Virtual  Technologies  a royalty of
$4.75 per  kilogram  of  SP34E(TM)  sold,  with such  royalties  being paid on a
monthly basis. The initial term of the agreement is five years and automatically
renews  for  successive  three-year  periods  unless  terminated  by  one of the
parties.

PRODUCT RIGHTS AGREEMENTS

SOLTRON(R).  In 1996,  we acquired the exclusive  rights to produce,  market and
distribute  SOLTRON(R)  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 had a  five-year  term that was
renewable at our option for an additional  five-year term. On February 20, 2003,
we acquired the exclusive worldwide manufacturing,  distribution,  marketing and
sales rights to SOLTRON(R)  pursuant to an  Acquisition  Agreement with Dominion
Capital,  under which we issued 9,000,000 shares of our restricted common stock.
Under that agreement, we obtained exclusive rights to SOLTRON(R) for a period of
twenty years, with an option to renew for an additional twenty years, subject to
termination for good cause.

SP34E(TM). In June 1998, we acquired the exclusive rights to produce, market and
distribute SP34E(TM) 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(TM)  that we sell.  The term of the  agreement
commenced  on July 1, 2000,  continues  for five years and is  renewable  for an
additional  five years at our option.  On January  31,  2003,  we  acquired  the
outstanding  shares  of  Virtual   Technologies  for  6,000,000  shares  of  our
restricted  common  stock.  As a  result  of this  acquisition,  we  gained  the
exclusive, worldwide manufacturing,  distribution, marketing and sales rights to
SP34E(TM)  and the  related  refrigerant  gas  products,  SP22E-A,  SP22E-B  and
SP22E-C. As discussed above under "MARKETING  STRATEGIES,"  Virtual Technologies
has licensed  SP34E(TM) and granted  exclusive  manufacturing  and  distribution
rights in Australia and New Zealand to A-Gas.

PROPRIETARY RIGHTS

We rely on a combination of trade secret and copyright laws and  confidentiality
and  non-competition  agreements to establish and protect our proprietary rights
in our products.  However, there can be no assurance that any confidentiality or
non-competition  agreement  between us and our  employees  or  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(R)" and the service mark "SOLPOWER(R)"
with the United  States  Patent and  Trademark  Office  ("USPTO").  We have also
registered  SOLTRON(R)  with the EPA for use as an aftermarket  additive and for
bulk fuel treatment.

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<PAGE>
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(R)  include  STP(R) Gas  Treatment,  STP(R) Diesel  Treatment and STP(R)
Smoke  Treatment  (all  produced by First  Brands  Corporation),  Lucas Oil Fuel
Treatment (produced by Lucas Oil Products, Inc.), Slick 50(R) (produced by Slick
50  Products  Corporation),   Valvtect(R)   Dieselguard  (produced  by  Valvtect
Petroleum  Products  Corp.) and  Fuelon(R)  (produced  by Fuelon  International,
Inc.). These fuel additives make similar claims of performance  benefits but are
based upon older conventional  chemical  technologies.  We believe SOLTRON(R) is
the only enzyme-based fuel technology currently on the market, and we believe it
offers a  greater  range  of  benefits  at a lower  cost  than our  competitor's
conventional chemical additives.  Based on SOLTRON(R)'S  penetration in the West
Coast recreational marine industry,  we believe we can differentiate  SOLTRON(R)
from our  competitors'  products,  successfully  compete with them and penetrate
additional fuel additive markets. See "DESCRIPTION OF BUSINESS-PRODUCTS" above.

With  respect  to  SP34E(TM),   we  will  compete  with  numerous  national  and
international  companies  that produce  refrigerants  and blended  alternatives,
including  DuPont(R),  Elf Autochem,  Imperial  Chemical  Industries  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(TM)  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(TM) 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(TM)  as a viable
alternative  to  the  refrigerants   that  currently  enjoy  widespread   market
acceptance.  We are not currently  marketing SP34E(TM) in the United States, but
our  subsidiary,  Virtual  Technologies,  is  developing  a plan  for  marketing
SP34E(TM) throughout the world, including in the United States.

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.

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<PAGE>
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.  We
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(R) 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(R).

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(TM) and in December  2000,  SP34E(TM) was added to the EPA/SNAP list of
acceptable alternatives.

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.

EMPLOYEES

At  March  31,  2004,  we  employed  two  full  time  personnel,  including  one
administrative  and one sales  personnel.  Our  employees are not covered by any
collective  bargaining  agreements  and we consider  our  relationship  with our
employees to be good. Virtual Technologies has two employees.

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<PAGE>
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(R) and, through Virtual  Technologies,  we
are  formulating  a new  marketing  plan for  SP34E(TM) in the United States and
elsewhere throughout the world.

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 financing is
obtained,  no assurance  can be given that such  financing  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 create and supply  customer demand for SOLTRON(R) will be
critical to our future success. We anticipate  developing this network primarily
through  distributors  with established  distribution  channels in the fuel, oil
chemical and automotive aftermarket industries.  We unsuccessfully  attempted to
establish  the  distribution  of  SP34E(TM)  through a company  with a  national
network. However, the refrigerant market is highly competitive and acceptance of
our product will require  substantial  additional  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 MARKET ACCEPTANCE OF PRODUCTS,  LIMITED MARKETING EXPERIENCE.  We
are still in the early  stages of  marketing  SOLTRON(R)  and  SP34E(TM).  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

                                       8
<PAGE>
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 advertising.  There can be no assurance that our products will achieve
widespread market acceptance or that our marketing efforts will result in future
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(R) and SP34E(TM).  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.

SUPPLY,  CAPACITY  AND  DISTRIBUTION  CONSTRAINTS.  To  successfully  market our
products, we must be able to fill orders promptly for our shipment.  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(R)  enzyme to adequately  produce the enzymes  needed to produce
SOLTRON(R) 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(R)  and on other
suppliers of chemicals.  Chemicals are subject to price  fluctuations based upon
supply and demand.  In addition,  because the  SOLTRON(R)  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.  Mr.
Hirst is an at-will  employee  and 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.

                                       9
<PAGE>
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(TM)  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.

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 proprietary
rights of others, 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.

                                       10
<PAGE>
PRODUCT  ACQUISITION  AGREEMENT.  We own the worldwide rights to manufacture and
distribute SOLTRON(R) and SP34E(TM), as well as the process,  formulae and other
proprietary  rights  related to such products,  pursuant to 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.

NEED FOR ADDITIONAL PRODUCT DEVELOPMENT. We believe that our development work on
SOLTRON(R)  and  SP34E(TM)  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
financial  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.

CONTROL   BY   EXISTING   SHAREHOLDERS/FOREIGN   SHAREHOLDERS.   Our   principal
shareholder,   formerly  Dominion  Capital,  and  now  Australian   Agricultural
Management Pty Ltd.,  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 and Australian  Agriculture
Management  Pty Ltd. are 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  these  entities  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 currently  anticipate  selling SOLTRON(R) and SP34E(TM)
worldwide,  as well as importing  SOLTRON(R)  concentrate from Japan.  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 our  corporate  offices and  warehouse  space in San Pedro,
California pursuant to a month-to-month  leases, for which we pay rent of $1,050
per month.

                                       11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

In the past we have been  involved in various legal  proceedings  arising in the
normal  course  of  business.  The  ultimate  outcome  of  these  various  legal
proceedings  had no  material  effect  on our  financial  position,  results  of
operation  or  liquidity.  There  are no legal  proceedings  pending,  or to our
knowledge,  threatened,  that we  expect  to have  any  material  impact  on our
business.

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

None.

                                     PART II

ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 MARKET AND SHAREHOLDER INFORMATION

Our common  stock is traded on the  Bulletin  Board Pink Sheets under the symbol
"SLPW.PK." The following  table sets forth the quarterly high and low bid prices
per share for the common  stock,  as reported by the Bulletin  Board Pink Sheets
for the fiscal years indicated.  On March 31, 2004, there were approximately 400
beneficial holders of our common stock.

     Fiscal Year        Quarter Ended               High              Low
     -----------        -------------               ----              ---

     2003............June 30, 2002..................$0.10............$0.05
                     September 30, 2002.............$0.09............$0.001
                     December 31, 2002..............$0.08............$0.001
                     March 31, 2003.................$0.10............$0.01

     2004............June 30, 2003..................$0.08............$0.01
                     September 30, 2003.............$0.08............$0.01
                     December 31, 2003..............$0.15............$0.03
                     March 31, 2004.................$0.12............$0.001

The prices set forth in this table  represent  quotes between dealers and do not
include  commissions,  markups  or  markdowns,  and  may  not  represent  actual
transactions.

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 September 22, 2003, we issued 1,000,000  restricted shares of common stock to
Matthew  Cohen,  our General  Manager of Marketing  and Technical  Services,  as
compensation for services.  The shares were issued in reliance on exemption from
registration provided by Section 4(2) of the Securities Act.

On September 22, 2003, we issued 500,000  restricted  shares of common shares to
Fraser  Moffat III as  compensation  for his services as a director.  The shares
were issued in reliance on exemption from registration  provided by Section 4(2)
of the Securities Act.

On September 22, 2003, we issued  100,000  restricted  shares of common stock to
Steven Bagby,  an independent  contractor,  as  compensation  for services.  The
shares  were  issued in  reliance on  exemption  from  registration  provided by
Section 4(2) of the Securities Act.

On September 22, 2003, we issued  100,000  restricted  shares of common stock to
Kevin Delaney,  an independent  contractor,  as compensation  for services.  The
shares  were  issued in  reliance on  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(R) product sales,  together with the consolidation of income
from our  wholly-owned  subsidiary,  Virtual  Technologies Pty Ltd., gives us an
expectation  that we will  continue  to reduce  our  operating  losses.  Virtual
Technologies  will determine a plan of action and marketing  implementation  for
the  SP34E(TM)  product  line for the  fiscal  year  2005.  Because  of  limited
operating capital,  we anticipate no material increase in sales in these product
lines in fiscal  year 2005.  During the year ended  March 31,  2004,  management
continued to reduce operating overhead and maintain operational  efficiency with
a minimum of administrative  overhead.  We currently are concentrating our focus
on the  SOLTRON(R)  product  line by  identifying  additional  distributors  and

                                       13
<PAGE>
developing  direct sales activities in new markets such as international  sales,
bulk users,  small  generation  power plants and commercial uses in metropolitan
city fleets. Virtual Technologies concentrates its efforts on SP34E(TM) sales in
Australia and new international markets.

During our  fiscal  years  ended  March 31,  2004 and 2003,  we have been in the
middle  stages  of  being  a  development  company,  seeking  to  ascertain  the
appropriate mix of products for future marketing and  distribution.  We began to
explore   distribution  and  marketing  of  our  products  through   established
distributors,  both wholesale and retail.  Through this methodology we attempted
to cut costs, increase revenue and increase profits. Although total revenues may
decrease  initially  as a result  of  utilizing  distributors,  we  believe  our
revenues,  profits  and cash flow will  increase in the long term as a result of
this  methodology  as more  distributors  penetrate  the markets and sell to end
users of our products.

We intend to seek listing on the OTC Bulletin Board,  which may provide a better
ability to attract investors. We are in process of completing our Securities Act
filings to enable our listing for trading on the OTC Bulletin  Board.  We intend
to raise  capital  to  provide  cash flow and to  expand  our  present  business
segments.  We  also  have  outstanding  warrants  and  stock  options  that,  if
converted, will provide cash flow for working capital.

RESULTS OF OPERATIONS

YEAR ENDED MARCH 31, 2004 COMPARED TO YEAR ENDED MARCH 31, 2003

Consolidated  revenues  for the year  ended  March  31,  2004 were  $689,588  as
compared to $951,195 for the year ended March 31, 2003. The decrease in revenues
of $261,607 was mainly  attributable to decreased  SOLTRON(R) sales amounting to
$562,317 in the United  States.  This  decrease was offset by an increase in the
SP34E(TM) sales from our wholly-owned subsidiary amounting to $300,710. The year
ended March 31, 2003 includes  revenues of our  wholly-owned  subsidiary for the
period February 1, 2003 to March 31, 2003 which amounted to $64,593.

Consolidated  gross  profit rose from 49.9% for the year ended March 31, 2003 to
61.7% for the year ended  March 31,  2004.  This  increased  consolidated  gross
profit  percentage of 12% is mainly due to a higher gross profit margin attained
on the SP34E(TM) revenue and the gross revenue from this segment represented 53%
of total gross  revenue for the year ended  September 30, 2004 as compared to 7%
for the year ended September 30, 2003. The gross profit percentage on SOLTRON(R)
revenues for the current year ended increased 8.8% from 48.5% for the prior year
ended to 57.3% for the current year ended.  The increase in the SOLTRON(R) gross
profit is mainly  attributable to the elimination of the production  overhead at
the Phoenix,  Arizona location. The total gross profit earned for the year ended
March 31, 2004  decreased  $48,982 to  $425,334 as compared to $474,316  for the
year ended March 31,  2003.  This  decrease is  attributable  to the decrease in
sales of the SOLTRON(R) segment.

Consolidated  general and administrative costs for the year ended March 31, 2004
were  $885,949 as compared to $574,365 for the same period ended March 31, 2003,
or an increase of $311,584. This increase is mainly attributable to inclusion of
general and administrative  expenses of our wholly-owned subsidiary for the full
year  ended  March 31,  2004,  which  amounted  to  $228,171  and for the period

                                       14
<PAGE>
February  1, 2003 to March 31, 2003 for the  previous  year,  which  amounted to
$37,746. The increase also was comprised of a $119,700 charge that resulted from
the impairment of an intangible  asset  (SOLTRON(R)  marketing  rights) that was
written off at March 31, 2004.

For the year ended March 31, 2004, we incurred a net operating  loss of $485,296
or $0.01 per share compared to a net loss of $112,021 or $0.00 per share for the
year ended March 31, 2003. These losses  contributed to the decrease in net cash
provided by  operating  activities  of $39,377 for the year ended March 31, 2003
and the increase in utilization to $220,777 for the year ended March 31, 2004.

IMPACT OF INFLATION

We do not believe that inflation will have any material  impact on  SOLTRON(R)'s
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 provide  sufficient  working  capital to fund our  operations
during the period ended March 31,  2004.  Operations  utilized  $220,777 of cash
during this  period.  Additional  liquidity  was  provided by the sale of common
stock, financing notes payable for equipment and advances from a major customer.
During this same period for the previous  reporting  period,  $39,377 was mainly
provided by operations  mainly from proceeds  from notes  payable,  common stock
sales and the sale of equipment. As of March 31, 2004, we had no commitments for
capital expenditures

                                       15
<PAGE>
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS

                                      INDEX

Report of Independent Registered Public Accounting Firm.....................17

Consolidated Balance Sheets at March 31, 2004 and 2003......................18

Consolidated Statements of Operations for the Years Ended
March 31, 2004 and 2003.....................................................19

Consolidated Statements of Comprehensive Loss for the Years Ended
March 31, 2004 and 2003.....................................................20

Consolidated Statements of Stockholders' Equity for the Years Ended
March 31, 2004 and 2003.....................................................21

Consolidated Statements of Cash Flows for the Years Ended
March 31, 2004 and 2003.....................................................22

Notes to the March 31, 2004 and 2003 Consolidated Financial Statements......23

                                       16
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
Solpower Corporation

We have  audited  the  accompanying  consolidated  balance  sheets  of  Solpower
Corporation  and  Subsidiaries  as of March  31,  2004 and 2003 and the  related
consolidated   statements  of  operations,   comprehensive   loss,   changes  in
stockholders'  equity,  and cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  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
and  Subsidiaries at March 31, 2004 and 2003, and the results of its operations,
changes in  stockholders'  equity and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 10 to
the  consolidated  financial  statements,  the Company's  significant  operating
losses and negative working capital raise substantial doubt about its ability to
continue  as a going  concern.  The  consolidated  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.


                                               /s/ Semple & Cooper, LLP
Phoenix, Arizona
February 28, 2005

                                       17
<PAGE>
                              SOLPOWER CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                          2004                   2003
                                                                      ------------           ------------
<S>                                                                   <C>                    <C>
                                     ASSETS
Current Assets:
  Cash and cash equivalents                                           $     96,487           $     71,790
  Accounts receivable                                                      142,379                 60,641
  Inventory                                                                131,045                 87,346
  Prepaid expenses                                                           5,030                  6,440
                                                                      ------------           ------------
      Total Current Assets                                                 374,941                226,217

Property & Equipment, net                                                   63,081                 54,250

Other Assets:
  Marketing licenses, net of amortization                                       --                119,700
  Receivables from related parties                                              --                 25,666
  Goodwill                                                                  75,291                 75,291
                                                                      ------------           ------------
      Total Assets                                                    $    513,313           $    501,124
                                                                      ============           ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
  Current portion of long-term debt                                   $     31,622           $     19,513
  Vendor advances                                                          351,030                 78,263
  Accounts payable - trade                                                 347,801                285,488
  Accounts payable - related parties                                       267,716                216,197
  Accrued interest - related party                                          30,800                  7,167
  Accrued expenses                                                         169,436                148,961
                                                                      ------------           ------------
      Total Current Liabilities                                          1,198,405                755,589

Long-Term Liabilities:
  Notes payable, less current portion                                       12,267                 34,818
  Loans payable to related party                                           471,365                471,365
                                                                      ------------           ------------
      Total Liabilities                                                  1,682,037              1,261,772
                                                                      ------------           ------------

Commitments and Contingencies                                                   --                     --

Stockholders' Deficit:
  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 50,912,127 and 49,212,127, respectively          509,122                492,122
  Additional paid-in capital                                            10,764,858             10,712,158
  Common stock subscribed                                                    5,000                     --
  Accumulated deficit                                                  (12,450,412)           (11,965,116)
  Foreign currency translation adjustment                                    2,708                    188
                                                                      ------------           ------------
      Total Stockholders' Deficit                                       (1,168,724)              (760,648)
                                                                      ------------           ------------
      Total Liabilities and Stockholders' Deficit                     $    513,313           $    501,124
                                                                      ============           ============
</TABLE>
               The Accompanying Notes are an Integral Part of the
                       Consolidated Financial Statements

                                       18
<PAGE>
                              SOLPOWER CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

                                                  2004                 2003
                                              ------------         ------------

Net Revenues                                  $    689,588         $    951,195

Cost of Revenues                                   264,254              476,879
                                              ------------         ------------

Gross Profit                                       425,334              474,316

Expenses
  General and administrative                       766,249              568,891
  Impairment of intangible asset                   119,700                5,474
                                              ------------         ------------
Operating Loss                                    (460,615)            (100,049)
                                              ------------         ------------

Other Income (Expense):
  Interest income                                        1                  804
  Loss on disposition of fixed assets                   --               (3,752)
  Interest expense                                 (29,780)             (37,854)
  Relief of debt                                     9,685               31,098
                                              ------------         ------------
      Total Other Income (Expense)                 (20,094)              (9,704)
                                              ------------         ------------

Net Loss Before Provision for Income Taxes        (480,709)            (109,753)

Provision for Income Taxes - Subsidiary             (4,587)              (2,268)
                                              ------------         ------------

Net Loss                                      $   (485,296)        $   (112,021)
                                              ============         ============

Basic and Diluted Loss Per Share:             $       0.01         $         --
                                              ============         ============
Weighted Average Number
 of Common Shares Outstanding                   50,103,930           36,114,845
                                              ============         ============

               The Accompanying Notes are an Integral Part of the
                       Consolidated Financial Statements

                                       19
<PAGE>
                              SOLPOWER CORPORATION
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                   FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

                                                     2004                2003
                                                  ---------           ---------

Net Loss                                          $(485,296)          $(112,021)

Other Comprehensive Income (Loss), Net of Tax:
  Foreign currency translation adjustment             2,520                 188
                                                  ---------           ---------

Comprehensive Loss                                $(482,776)          $(111,833)
                                                  =========           =========

               The Accompanying Notes are an Integral Part of the
                       Consolidated Financial Statements

                                       20
<PAGE>
                              SOLPOWER CORPORATION
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                   FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                            Additional        Common
                                                                 Common Stock                Paid In          Stock
                                                            Shares          Amount           Capital        Subscribed
                                                            ------          ------           -------        ----------
<S>                                                   <C>               <C>             <C>                <C>
Balance, March 31, 2002                                  33,231,919        $332,320        $10,611,689        $   --
Common stock issued for compensation and services           280,000           2,800              8,750            --
Conversion of liabilities to common stock                   400,208           4,002             30,219            --
Common stock sold by exercise of call options               300,000           3,000             12,000            --
Purchase of subsidiary with common stock                  6,000,000          60,000             19,800            --
Purchase of marketing rights with common stock            9,000,000          90,000             29,700            --
Increase in cumulative translation account                       --              --                 --            --
Loss, year ended March 31, 2003                                  --              --                 --            --
                                                         ----------        --------        -----------        ------

Balance, March 31, 2003                                  49,212,127         492,122         10,712,158            --

Shares issued for marketing/consulting services           1,700,000          17,000             52,700            --
Stock subscriptions received                                     --              --                 --         5,000
Change in translation account                                    --              --                 --            --
Loss, year ended March 31, 2004                                  --              --                 --            --
                                                         ----------        --------        -----------        ------

Balance, March 31, 2004                                  50,912,127        $509,122        $10,764,858        $5,000
                                                         ==========        ========        ===========        ======

                                                                            Cumulative
                                                          Accumulated       Translation
                                                            Deficit           Account           Total
                                                            -------           -------           -----
Balance, March 31, 2002                                  $(11,853,095)        $   --        $  (909,086)
Common stock issued for compensation and services                  --             --             11,550
Conversion of liabilities to common stock                          --             --             34,221
Common stock sold by exercise of call options                      --             --             15,000
Purchase of subsidiary with common stock                           --             --             79,800
Purchase of marketing rights with common stock                     --             --            119,700
Increase in cumulative translation account                         --            188                188
Loss, year ended March 31, 2003                              (112,021)            --           (112,021)
                                                         ------------         ------        -----------

Balance, March 31, 2003                                   (11,965,116)           188           (760,648)

Shares issued for marketing/consulting services                    --             --             69,700
Stock subscriptions received                                       --             --              5,000
Change in translation account                                      --          2,520              2,520
Loss, year ended March 31, 2004                              (485,296)            --           (485,296)
                                                         ------------         ------        -----------

Balance, March 31, 2004                                  $(12,450,412)        $2,708        $(1,168,724)
                                                         ============         ======        ===========
</TABLE>
               The Accompanying Notes are an Integral Part of the
                       Consolidated Financial Statements

                                       21
<PAGE>
                              SOLPOWER CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                       2004                2003
                                                                    ---------           ---------
<S>                                                                 <C>                 <C>
Cash Flows From Operating Activities:
  Net loss                                                          $(485,296)          $(112,021)
  Adjustments to reconcile net loss to net cash
   provided (used) by operating activities:
     Impairment of intangible asset                                   119,700               5,474
     Depreciation and amortization                                     13,020              87,890
     Non-cash transactions                                             92,584             (19,548)
     Change in cumulative translation account                           2,520                 188
     Net loss (gain) on sale of assets                                     --               3,752
     Changes in operating assets and liabilities:
       Accounts receivable                                            (87,112)             68,360
       Prepaid expenses                                                 1,410               1,339
       Inventory                                                      (43,699)            (62,951)
       Receivable from related parties                                 (1,529)               (707)
       Accounts payable - trade                                        71,998             (21,298)
                      - related parties                                51,519              66,532
       Customer deposits                                                   --             (50,160)
       Accrued expenses                                                20,475              39,878
       Accrued interest - related parties                              23,633              32,649
                                                                    ---------           ---------
          Net Cash Provided (Used) by Operating Activities           (220,777)             39,377
                                                                    ---------           ---------
Cash Flows from Investing Activities:
  Cash acquired in acquisition                                             --              25,026
  Capital expenditures                                                (21,851)            (17,172)
  Proceeds from sale of equipment                                          --              22,950
                                                                    ---------           ---------
          Net Cash Provided (Used) by Investing Activities            (21,851)             30,804
                                                                    ---------           ---------
Cash Flows From Financing Activities:
  Proceeds from sale of common stock, warrants, and option                 --              15,000
  Proceeds from stock subscriptions                                     5,000                  --
  Increase in installment notes payable                                20,142              17,413
  Net customer increases (payments) on advances                       272,767             (31,737)
  Payments on installment notes payable                               (30,584)             (2,610)
                                                                    ---------           ---------
          Net Cash Provided (Used) by Financing Activities            267,325              (1,934)
                                                                    ---------           ---------

Increase in Cash and Cash Equivalents                                  24,697              68,247
Cash and Cash Equivalents, Beginning of Year                           71,790               3,543
                                                                    ---------           ---------
Cash and Cash Equivalents, End of Year                              $  96,487           $  71,790
                                                                    =========           =========
</TABLE>
               The Accompanying Notes are an Integral Part of the
                       Consolidated Financial Statements

                                       22
<PAGE>
                              SOLPOWER CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                  2004                2003
                                                               ----------          ---------
<S>                                                            <C>                 <C>
SUPPLEMENTAL INFORMATION:
Cash Paid for:
  Interest                                                     $       --          $      --
                                                               ==========          =========

  Income taxes                                                 $       --          $      --
                                                               ==========          =========
Non-cash Investing and Financing:
  Purchase of subsidiary with common stock                     $       --          $  79,800
                                                               ==========          =========
  Issuance of common stock for conversion of debt              $       --          $  34,221
                                                               ==========          =========
  Purchase of world marketing rights for common stock          $       --          $ 119,700
                                                               ==========          =========
  Issuance of common stock for compensation                    $   69,700          $  11,550
                                                               ==========          =========
  Relief of debt                                               $   (9,685)         $ (31,098)
                                                               ==========          =========
  Write off receivables from related parties                   $   32,569          $      --
                                                               ==========          =========
</TABLE>
               The Accompanying Notes are an Integral Part of the
                       Consolidated Financial Statements

                                       23
<PAGE>
--------------------------------------------------------------------------------
                                     NOTE 1
           DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------

                                    BUSINESS

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.

NATURE OF OPERATIONS

The principal  business  purpose of the Company is the sales and distribution of
SOLTRON(R), a fuel enhancing product and SP34ETM, a replacement refrigerant, and
other environmentally friendly products throughout the world.

The Company has the  exclusive  worldwide  sales,  distribution,  marketing  and
manufacturing rights to the products,  SOLTRON(R),  a fuel-enhancing product and
to SP34ETM, SP22E-A, SP22E-B and SP22E-C, refrigerant gas products.

ACQUISITIONS

During  the  year  ended  March  31,  2003,  the  Company  acquired  100% of the
outstanding  stock of Virtual  Technologies  (Australia) Pty Ltd. The subsidiary
was acquired by the issuance of 6,000,000  shares of restricted  common stock by
the  Company.   This  acquisition   delivers  the  exclusive   worldwide  sales,
distribution,  marketing  and  manufacturing  rights to the  products,  SP34ETM,
SP22E-A, SP22E-B and SP22E-C, refrigerant gas products.

During the year ended March 31, 2003, the Company  acquired the worldwide rights
to the product SOLTRON(R) by the issuance of 9,000,000  restricted shares of its
common stock. These rights include the exclusive worldwide sales,  distribution,
marketing and manufacturing rights to the product,  SOLTRON(R), a fuel-enhancing
product.  In the year ended March 31, 2004, the value of these rights was deemed
impaired and the costs  associated  with these  rights were  written  off.  (See
Impairment of Long-Lived Assets)

DISCONTINUANCE OF KLEAN

During the year ended March 31, 2003, the Company discontinued its KLEAN line of
products  and  wrote-off  the  unamortized  balance  of  $5,474  related  to the
acquisition of this product line. The write off is presented in the Consolidated
Statements of  Operations  as impairment of intangible  asset for the year ended
March 31, 2003.

                                       24
<PAGE>
GOING CONCERN AND MANAGEMENT PLANS

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, 2004,  which have resulted in
a deficiency in working  capital of  approximately  $823,000 and an  accumulated
deficit of approximately $12,450,000 as of March 31, 2004. (See Note 10)

During the year ended March 31, 2003, the  management  continued to downsize the
operation to a minimum and reduce  operating  overhead.  In September  2002, the
Company did not renew its Phoenix lease at its production  facility,  eliminated
the plant and administrative  staff and negotiated a favorable outsource program
for the production of the Company's SOLTRON(R) product line.

During our fiscal  years ended March 31, 2004 and 2003,  the Company has been in
the  middle  stages as a  development  company  seeking to find the right mix of
products for future marketing and distribution. The Company has begun to explore
the total  distribution  and  marketing  for its  products  through  established
distributors,  both  wholesale  and retail.  The Company  anticipates  that this
methodology  will  enable it to cut  costs,  increase  the  revenue  stream  and
increase  profits.  Although sales may decrease  initially with certain revenues
going  to the  benefit  of the  distributors,  we  believe  that  the  Company's
revenues,  profits  and cash flow will  increase in the long term as a result of
this methodology as more  distributors  penetrate and sell through the end users
of these products.

The Company will seek to list its stock for trading on the OTC  Bulletin  Board,
which may give the Company a better  ability to attract  investors.  The Company
intends to raise capital to provide cash flow and to expand it present  business
segments.  Also, the Company has outstanding warrants and stock options that, if
converted, will provide cash flow for working capital.

                         SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The  consolidated  balance  sheets of the  Company  at March  31,  2004 and 2003
includes the accounts of Solpower  Corporation and Virtual  Technologies Pty Ltd
(Australia) ("VIRTUAL"),  a wholly-owned Australian subsidiary. The consolidated
statement of operations  for the year ended March 31, 2003 includes the activity
of Solpower  Corporation  for the entire year and the  activity of Virtual  from
January  31,  2003,  the  date of  acquisition,  through  March  31,  2003.  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.

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.

                                       25
<PAGE>
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.

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,
2004  and  2003 an  allowance  has  been  provided  for  uncollectible  accounts
receivable in the amounts of $-0- and $-0-,  respectively.  The Company does not
have a formal policy to charge interest on late payments of receivable amounts.

CONCENTRATION OF CREDIT RISK

The Company  sells its products and extends  credit to various  customers  based
upon their financial  condition.  Exposure to losses on accounts  receivables is
principally  dependent  on each  customer's  financial  condition.  The  Company
monitors its exposure for credit losses and maintains  allowances  for potential
losses when required.

During the current and prior fiscal  years,  one customer  accounted for 76% and
88% of the Company revenues,  respectively.  The customer referred to is a major
distributor of SOLTRON(R) product.

INVENTORY

Inventory at March 31, 2004 and 2003  consists of the  SOLTRON(R)  fuel additive
concentrate,  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.  Ordinary 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. When assets are
retired or disposed,  the cost and accumulated  depreciation are eliminated from
the account and any gain or loss is reflected in the statement of operations.

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

                                       26
<PAGE>
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.  The Company had no
research and development for the years ended March 31, 2004 and 2003.

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.

During the year ended March 31, 2003,  management  determined to discontinue its
KLEAN line.  As a result,  the costs  associated  with the KLEAN  rights  became
impaired and the Company wrote-off the unamortized  capitalized costs associated
with this product. The provision for impairment of this asset amounted to $5,474
for the year ended March 31, 2003.

During the year  ended  March 31,  2004,  management  determined  that the costs
associated with the marketing licenses for SOLTRON(R) became impaired when sales
for this product line decreased substantially for the year ended March 31, 2004,
as compared to the sales for the previous year ended.  Accordingly,  the Company
wrote-off  the  balance  associated  with this  license at March 31,  2004.  The
provision for impairment of this license amounted to $119,700 for the year ended
March 31, 2004.

GOODWILL

Goodwill represents the excess of the purchase price over the fair values of the
net assets acquired.  On an ongoing basis,  management  reviews the valuation of
goodwill,  taking into  consideration any events and  circumstances  which might
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.  The subsidiary with which this asset is associated
with at March 31, 2004 was  purchased  on January  31, 2003 and in  management's
opinion there is no impairment of the fair value at March 31, 2004.

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.
The  Company  had no such  expenditures  for the years  ended March 31, 2004 and
2003.

                                       27
<PAGE>
COMPREHENSIVE INCOME (LOSS)

Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  130,  REPORTING
COMPREHENSIVE INCOME,  establishes  requirements for disclosure of comprehensive
income and its components, which include, among other items, unrealized gains or
losses from marketable  securities and foreign currency translation  adjustments
that previously were only reported as a component of stockholders'  equity.  The
Company  had  components  of  comprehensive  income  (loss)  during the  periods
presented.

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, 2004 and
2003  diluted  net loss per  common  share is not  included,  as the  effect  of
including these shares is anti-dilutive.

At March 31,  2004,  stock  options  representing  600,000  common  shares  were
outstanding  with excise prices  ranging  between $0.25 and $1.00.  The weighted
average  exercise price for  outstanding  options was $0.88.  At March 31, 2004,
stock warrants  representing  1,567,500  common shares were  outstanding with an
exercise price at $0.20.

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  transactions
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.

The Company purchased its wholly-owned Australian subsidiary on January 31, 2003
and the foreign  currency  translation  adjustment  account is  presented in the
stockholders' equity section.

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 ("SFAS") No. 123,  "Accounting for
Stock  Based  Compensation,"  as  amended  by  SFAS  No.  148,  "Accounting  For
Stock-Based Compensation - Transition & Disclosure."

The following  table  illustrates  the pro forma effect on net income (loss) and
earnings  per  share if the  Company  had  applied  the fair  value  recognition
provisions of FASB Statement No. 148, "Accounting For Stock-Based Compensation -
Transition & Disclosure, An Amendment To FASB Statement No. 123," to stock-based
employee compensation.

                                       28
<PAGE>
                                                        Year Ended March 31,
                                                       2004             2003
                                                    -----------      -----------
                                                    (Unaudited)      (Unaudited)

Net loss, as reported                               $  (485,296)      $(112,021)
Deduct: Total stock-based employee compensation
 expense determined under fair value based method
 for all awards, net of related tax effects                  --              --
                                                    -----------       ---------

Pro forma net loss                                  $  (485,296)      $(112,021)
                                                    ===========       =========
Loss per share:
  Net loss per share, as reported                   $     (0.01)      $      --
                                                    ===========       =========
    Net loss per share, pro forma                   $     (0.01)      $      --
                                                    ===========       =========

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 1.3 to 5  years,
risk-free  interest rates of five percent (5%), 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

Transactions in equity instruments with non-employees for goods and services are
accounted for by the fair value method.

RECENT ACCOUNTING PRONOUNCEMENT

In November  2004, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standards  No. 151 (SFAS 151),  "Inventory
Costs."  SFAS 151  amends the  guidance  in APB No.  43,  Chapter 4,  "Inventory
Pricing,"  to clarify  the  accounting  for  abnormal  amounts of idle  facility
expense,  freight,  handling  costs,  and wasted material  (spoilage).  SFAS 151
requires that those items be recognized as current period charges  regardless of
whether they meet the criteria of "so abnormal." In addition,  SFAS 151 requires
that  allocation  of fixed  production  overheads to the costs of  conversion be
based on the normal capacity of the production facilities. SFAS 151 is effective
for financial  statements issued for fiscal years beginning after June 15, 2005.
The  adoption  of SFAS 151 is not  expected  to have a  material  effect  on the
Company's financial position or results of operations.

In December 2004, the FASB issued  Statement of Financial  Accounting  Standards
No. 153 (SFAS  153),  "Exchanges  of  Nonmonetary  Assets."  SFAS 153 amends the
guidance in APB No. 29,  "Accounting  for  Nonmonetary  Assets."  APB No. 29 was
based on the principle that  exchanges of nonmonetary  assets should be measured
on the fair  value  of the  assets  exchanged.  SFAS 153  amends  APB No.  29 to
eliminate the exception for nonmonetary  exchanges of similar  productive assets
and replaces it with a general  exception  for exchanges of  nonmonetary  assets
that do not have commercial substance if the future cash flows of the entity are
expected  to  change  significantly  as a result  of the  exchange.  SFAS 151 is
effective for financial  statements issued for fiscal years beginning after June
15, 2005. The adoption of SFAS 153 is not expected to have a material  effect on
the Company's financial position or results of operations.

In December 2004, the FASB revised Statement of Financial  Accounting  Standards
No. 123 (SFAS  123(R)),  "Accounting  for  Stock-Based  Compensation."  The SFAS
123(R)  revision  established  standards for the accounting for  transactions in
which an entity  exchanges  its equity  instruments  for goods or  services  and
focuses  primarily on accounting  for  transactions  in which an entity  obtains

                                       29
<PAGE>
employee services in share-based  payment  transactions.  It does not change the
accounting guidance for share-based payment transactions with parties other than
employees.  For public entities that do not file as small business issuers,  the
revisions to SFAS 123 are  effective as of the beginning of the first interim or
annual  reporting  period that begins after June 15, 2005.  For public  entities
that file as small business issuers,  the revisions to SFAS 123(R) are effective
as of the beginning of the first interim or annual  reporting period that begins
after December 15, 2005. For non-public entities,  the revisions to SFAS 123 are
effective as of the beginning of the first annual  reporting  period that begins
after  December  15,  2005.  Management  has not yet  determined  the effects of
adopting  this  statement  on the  Company's  financial  position  or results of
operations.

--------------------------------------------------------------------------------
                                     NOTE 2
                             PROPERTY AND EQUIPMENT
--------------------------------------------------------------------------------

Property and equipment consists of the following at March 31, 2004 and 2003:

                                                   2004                  2003
                                                ---------             ---------

Furniture and Fixtures                          $   3,181             $   1,586
Computer and Office Equipment                      22,350                22,350
Plant Equipment                                    76,216                55,960
                                                ---------             ---------
                                                  101,747                79,896
Less: Accumulated Depreciation                    (38,666)              (25,646)
                                                ---------             ---------

                                                $  63,081             $  54,250
                                                =========             =========

Depreciation  expense  charged to operations  for the years ended March 31, 2004
and 2003, was $13,020 and $82,270, 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(R),  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 amortized the
marketing  rights  over  the  original  period  of the  contract.  The  original
marketing  rights were fully  amortized  at March 31,  2002.  The  contract  was
automatically  renewed  effective  November 2001 at no additional cost outlay to
the Company.

On June 17,  1998,  the Company  acquired  the  exclusive  sales,  distribution,
marketing  and  manufacturing  rights  to  the  Solpower  product,   SP34ETM  (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 SP34ETM and in no event later than July 1,
2000.  The  Company was  amortizing  these  marketing  rights over the period of
contract.

                                       30
<PAGE>
During the year  ended  March 31,  2002,  management  determined  that the costs
associated  with the  marketing  licenses for SP34ETM  became  impaired when the
Company sold its 50% interest in its subsidiary,  which manufactured the SP34ETM
for the Company.  Accordingly, the Company wrote off the balance associated with
these rights at March 31, 2002.

The  Company  acquired  100% of the  outstanding  stock of Virtual  Technologies
(Australia)  Pty Ltd on January 31,  2003.  The  subsidiary  was acquired by the
issuance of 6,000,000  shares of  restricted  common stock by the Company with a
valuation of $79,800.  This acquisition  delivers the exclusive worldwide sales,
distribution,  marketing  and  manufacturing  rights to the  products,  SP34ETM,
SP22E-A, SP22E-B and SP22E-C, refrigerant gas products.

On February  20,  2003,  the Company  acquired the  exclusive  worldwide  sales,
distribution, marketing and manufacturing rights to the SOLTRON(R) product. This
purchase was made by the issuance of 9,000,000 shares of restricted common stock
of the Company  with a valuation  of  $119,700.  During the year ended March 31,
2004,  management  determined  that the  costs  associated  with  the  marketing
licenses  for  SOLTRON(R)  became  impaired  when  sales for this  product  line
decreased  substantially  for the year ended March 31, 2004,  as compared to the
sales for the  previous  year  ended.  Accordingly,  the Company  wrote-off  the
$119,700 associated with this license at March 31, 2004.

Amortization  charged to operations for marketing licenses for each of the years
ended March 31, 2004 and 2003 was $-0- and $-0-, respectively.

--------------------------------------------------------------------------------
                                     NOTE 4
                                   COMMITMENTS
--------------------------------------------------------------------------------

OPERATING LEASES

The Company  did not renew  their  operating  lease in  September  2002 on their
warehouse and  production  facility in Phoenix,  Arizona,  as part of their cost
reduction program.

During the year ended March 31,  2002,  the Company  leased two  vehicles  under
thirty-six  month lease  agreements.  The monthly rental  obligation under these
agreements  was $965 and the  obligations  expired  during the fiscal year ended
March 31, 2004.

The Company  currently has no minimum future rental payments for  non-cancelable
operating leases.

The Company currently leases office and warehouse space in San Pedro, California
on a month to month basis at $1,050 per month.

Lease expense charged to operations for the years ended March 31, 2004 and 2003,
was $31,363 and $72,914, respectively.

CONVERTIBLE PROMISSORY NOTE

On September 18, 2000, the Company issued a $400,000 Convertible Promissory Note
to Dominion  Capital Pty Ltd. The note was to mature 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.  The note was unpaid at
December 11, 2002,  with accrued  interest on the note  amounting to $71,365 and
the note and accrued  interest  was  assigned  by  Dominion  Capital Pty Ltd. to
Australian  Agriculture  Management  Pty Ltd.  Pursuant to the provisions of the

                                       31
<PAGE>
Assignment and Amendment of Debt  Agreement,  the interest rate was reduced from
8% to 5%, quarterly  payments of $64,813 are to be made, and the conversion rate
was reduced from $0.40 per common share to $0.10 per common share.  The due date
of the note was also  extended an  additional  twenty-four  (24) months from the
date of the  Agreement  signing on November 22, 2002.  As of March 31, 2004,  no
payments  have  been  made on this  obligation.  The  Company  is  currently  in
negotiations  with  Australian  Agriculture  Management  Pty Ltd.  to extend the
maturity of this note or to convert it into common shares.

OTHER COMMITMENTS

Effective April 1, 2000, the Company  entered into an employment  agreement with
James H. Hirst for an initial term of three (3) years. The arrangement  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 ended March 31, 2001.  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.

Since April 1, 2003,  Mr. Hirst has been  working as an at-will  employee and no
formal  employment  agreement is in place currently.  The agreement for the year
ended March 31, 2004  provided  for a base salary of $120,000  per annum,  along
with automobile,  medical and relocation  expense  reimbursement.  Mr. Hirst has
been accruing part of his salary in order to minimize monthly cash outlay by the
Company and reduced his salary to $72,000 per annum effective April 1, 2004.

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

Deferred  income taxes are 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.

At March 31, 2004 and 2003, deferred tax assets on United States reported losses
consist of the following:

                                                 2004                  2003
                                             -----------           -----------

     Net operating loss carry-forwards       $ 1,576,000           $ 1,616,000
     Less: valuation allowance                (1,576,000)           (1,616,000)
                                             -----------           -----------

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

At March 31, 2004 and 2003,  the Company had United States federal net operating
loss  carry-forwards  in the approximate  amount of $11,975,000 and $11,489,000,
respectively,  available to offset future taxable income  expiring  through 2024

                                       32
<PAGE>
and 2023,  respectively.  At March 31,  2004 and 2003,  the  Company had Arizona
state net operating loss  carry-forwards in the approximate amount of $7,563,000
and $9,316,000 respectively,  available to offset future taxable income expiring
through 2009 and 2008, respectively.

In assessing the 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.

Virtual Technologies Pty Ltd., the wholly-owned  Australian subsidiary,  reports
its income  under  Australia  taxation  regulations.  The  company  has  pre-tax
operating income  approximating  $5,600 (US) and related accrued corporate taxes
of  approximately  $4,600  (US) for the  fiscal  year ended  March 31,  2004 and
pre-tax  operating  income  approximating  $6,900 (US) and related accrued taxes
approximating $2,300 (US) for the fiscal year ended March 31, 2003.

--------------------------------------------------------------------------------
                                     NOTE 7
                           RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

CONVERTIBLE LOAN PAYABLE TO RELATED PARTY

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. The note was unpaid at December
11, 2002,  with accrued  interest on the note  amounting to $71,365 and the note
and accrued  interest was assigned,  by Dominion  Capital Pty Ltd. to Australian
Agriculture Management Pty Ltd. Pursuant to the provisions of the Assignment and
Amendment  of Debt  Agreement,  the  interest  rate was  reduced  from 8% to 5%,
quarterly  payments of $64,812.87 are to be made,  and the  conversion  rate was
reduced  from $0.40 per common share to $0.10 per common  share.  The due of the
note was also  extended an additional  twenty-four  (24) months from the date of
the  Agreement  signing on November 22, 2002.  As of March 31, 2004, no payments
have been made on this obligation. The Company is currently in negotiations with
Australian Agricultural Management Pty Ltd. to either extend the maturity of the
note or convert it into common shares.

PURCHASE OF VIRTUAL TECHNOLOGIES (AUSTRALIA) PTY LTD.

Effective  January  31,  2003,  the  Company  issued  6,000,000  shares  of  its
unregistered,  restricted  Common Stock pursuant to the terms the Share Purchase
and  Sale  Agreement  with  Virtual  Technologies   (Australia)  Pty  Ltd.  This
acquisition delivers the exclusive worldwide sales, distribution,  marketing and

                                       33
<PAGE>
manufacturing  rights to the  products,  SP34E,  SP22E-A,  SP22E-B and  SP22E-C,
refrigerant gas products.

PURCHASE OF SOLTRON(R) WORLDWIDE RIGHTS

On February 20, 2003, the Company  acquired the worldwide  rights to the product
SOLTRON(R)  under the terms of the  Acquisition  Agreement,  by the  issuance of
9,000,000  restricted  shares of its common  stock to Dominion  Capital Pty Ltd.
This  acquisition   delivered  the  exclusive  worldwide  sales,   distribution,
marketing and manufacturing  rights for the enzyme technologies for the product,
SOLTRON(R),  a fuel-enhancing product. The costs associated with these marketing
rights were  written off as of March 31,  2004 due to a  determination  that the
value of these assets was impaired.

--------------------------------------------------------------------------------
                                     NOTE 8
                               SHAREHOLDER EQUITY
--------------------------------------------------------------------------------

STOCK ISSUED FOR SERVICES AND DEBT

On April 11, 2002, the Company issued 100,000  restricted shares of common stock
for services.

On April 26, 2002, the Company issued 300,208  restricted shares of common stock
in settlement of outstanding account payable.

On April 26, 2002, the Company issued 180,000  restricted shares of common stock
to employees for termination pay.

On June 4, 2002, the Company issued  100,000  restricted  shares of common stock
for services.

On September 22, 2003, the Company issued 1,700,000  restricted shares of common
stock for services.

COMMON STOCK SOLD

On  June 4,  2002,  the  Company  issued  300,000  shares  of its  unregistered,
restricted  common  stock at $0.05 per share  pursuant  to the  exercise  of two
outstanding call options.

COMMON STOCK ISSUED FOR ACQUISITIONS

On August 28,  2002,  the  Company  issued  40,000  shares of its  unregistered,
restricted  common stock in exchange for the formula and know-how related to its
PETROKLEAN product.

Effective  January  31,  2003,  the  Company  issued  6,000,000  shares  of  its
unregistered,  restricted  common  stock  pursuant  to the  terms  of the  Share
Purchase and Sale Agreement with Virtual Technologies  (Australia) Pty Ltd. This
acquisition delivers the exclusive worldwide sales, distribution,  marketing and

                                       34
<PAGE>
manufacturing rights to the SP34E(TM),  SP22E-A, SP22E-B and SP22E-C refrigerant
gas products.

On February 20, 2003, the Company  acquired the worldwide  rights to the product
SOLTRON(R),  under the terms of the  Acquisition  Agreement,  by the issuance of
9,000,000 unregistered restricted shares of its common stock to Dominion Capital
Pty Ltd. This acquisition delivered the exclusive worldwide sales, distribution,
marketing and manufacturing  rights for the enzyme technologies for the product,
SOLTRON(R), a fuel-enhancing product.

COMMON STOCK GRANTS

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 the 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, 2004 and
2003,  the Company has recorded a liability  for the value of the shares due Mr.
Hirst that were returned.

STOCK WARRANTS

On December 20, 2000, 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 and the warrant expired on December 31, 2002, unexercised.

On January 31, 2001,  the Company  commenced a private  offering that  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 $0.20
per share were issued in relation to the offering. Additional common share units
were sold under this offering during period April 1, 2001 through  September 24,
2001  amounting  to 567,500  and  additional  warrants  were  issued to purchase
567,500  restricted  shares of common stock at $0.20 per share.  Warrants issued
under the  offering  originally  expired  on January  31,  2004 and the Board of
Directors subsequently extended the expiration date to July 30, 2005.

                                       35
<PAGE>
A summary of total stock warrants outstanding is as follows:

                                                                Weighted
                                             Number of           Average
                                             Warrants         Exercise Price
                                             --------         --------------
     Outstanding at March 31, 2001           2,250,000             0.32

     Granted                                   567,500             0.20
     Forfeited                              (1,000,000)           (0.43)
                                            ----------
     Outstanding at March 31, 2002           1,817,500             0.23

     Granted                                        --               --
     Forfeited                                (250,000)           (0.40)
                                            ----------
     Outstanding at March 31, 2003           1,567,500             0.20

     Granted                                        --               --
     Forfeited                                      --               --
                                            ----------
     Outstanding at March 31, 2004           1,567,500           $ 0.20
                                            ==========

               Warrants Outstanding                    Warrants Exercisable
     -----------------------------------------        ------------------------
                                    Weighted
                                    Average
      Exercise                     Remaining
     Price Per      Number        Contractual           Number        Exercise
       Share       of Shares    Life (In Years)      Exercisable       Price
       -----       ---------    ---------------      -----------       -----
      $0.20       1,567,500           1.3             1,567,500        $0.20

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(R) 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.

                                       36
<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.  No  options  became  exercisable  under  this
agreement and the option agreement expired on November 24, 2002.

On January 23, 2002,  the Company issued a call option for $1,000 for the option
to purchase  200,000 shares of restricted  common stock at $0.15 per share.  The
option expires on July 23, 2003.  Effective  April 26, 2002, the Company amended
the exercise price of the call option to $0.05 per share and the call option was
exercised on June 4, 2002.

On April 12, 2002,  the Company  issued a call option for the option to purchase
100,000 shares of restricted common stock at $0.05 per share. The option expires
on October 12, 2003. On June 4, 2002 the call option was exercised.

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 up to ten years
after grant.  Options generally vest ratably over 3 to 5 year periods.  At March
31, 2004,  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. Ward was  terminated  as a service
provider to the Company and the 150,000 options were canceled. On April 1, 2000,
under terms of an  employment  agreement  with Mr.  Hirst,  the 300,000  options
granted on January 30, 1998 were canceled.  On December 31, 2000,  Mr.  Matteson
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

                                       37
<PAGE>
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 April
1, 2000, under the terms of an employment  agreement with Mr. Hirst, the 100,000
options granted were canceled.  On November 11, 2001, Mr. Goddard  resigned as a
member of the Board of Directors and the 100,000  options granted to Mr. Goddard
were canceled.  On February 4, 2003, Mr.  Yoshikawa  resigned as a member of the
Board of  Directors  and the  100,000  options  granted  to Mr.  Yoshikawa  were
canceled.

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 4, 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,   Mr.  Van  Deren   resigned   as   corporate
Secretary/Treasurer  and as 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. Mr. Van Deren's remaining 150,000 options expired on January 4, 2004.

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 7, 2006.  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
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.  Upon the sale of  Protocol  to PICO  Holdings,  Inc.,  150,000  of the
options  granted to Mr. Flowers were  terminated  effective  March 31, 2002, and
100,000  had  vested at the time of the sale.  On June 29,  2002,  Mr.  Flowers'
vested options expired unexercised.

On September 5, 2001,  the Company  granted  options to purchase an aggregate of
350,000 shares of the Company's common stock to five employees.  The options may
be exercised in whole or in part at any time after the vesting  requirements are
achieved.  These options vest based on minimum  market price and reported  gross
revenue level. On April 26, 2002,  250,000 of these options were canceled as the
employees related to these options left the employ of the Company.

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:

                                       38
<PAGE>
<TABLE>
<CAPTION>
                        Percent     Exercise     Market        Reported         Expiration
       Grantee          Amount        Price      Price      Gross Revenues         Date
       -------          -------       -----      -----      --------------         ----
<S>                       <C>        <C>         <C>         <C>               <C>
Hirst                     20%        $1.00       $1.00       $1 million        April, 2006
                          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          --               --        June, 2002
                          20%        $ .55          --               --        June, 2002
Cohen, Glass,             100%       $0.25       $1.00       $1 million        September, 2004
Starita, Cesena &
Lambrechtsen
Moffat -
  Incentive               40%        $3.00       $3.00       $6 million        May, 2003
   Options                40%        $5.00       $5.00       $9 million        May, 2003
                          20%        $7.00       $7.00       $12 million       May, 2003
  Non-Qualifying
   Options               100%        $2.00       $2.00       $4 million        May, 2003
Yoshikawa                 50%        $3.00       $3.00       $6 million        February, 2003
                          50%        $7.00       $7.00       $12 million       February, 2003
Van Deren                100%        $1.30       $2.00       $6 million        January, 2004
</TABLE>

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,  or (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.

A summary of the option activity is as follows:

                                                                     Weighted
                                              Number of              Average
                                               Options            Exercise Price
                                               -------            --------------
     Outstanding at March 31, 2001            2,700,000              $  2.53

     Granted                                    550,000              $  0.21
     Forfeited                                 (750,000)             $ (1.45)
                                             ----------

     Outstanding at March 31, 2002            2,500,000              $  2.35

     Granted                                    100,000              $  0.05
     Exercised                                 (300,000)             $ (0.05)
     Forfeited                               (1,200,000)             $ (3.14)
                                             ----------

     Outstanding at March 31, 2003            1,100,000              $  1.88

     Granted                                         --                   --
     Forfeited                                 (500,000)             $ (3.09)
                                             ----------

     Outstanding at March 31, 2004              600,000              $  0.88
                                             ==========

                                       39
<PAGE>
Additional  information  about  outstanding  options to purchase  the  Company's
common stock as of March 31, 2004 is as follows:

              Options Outstanding                     Options Exercisable
   -------------------------------------------    ---------------------------
                                   Weighted
                                   Average                           Weighted
   Exercise                       Remaining                          Average
   Price Per     Number          Contractual         Number          Exercise
     Share      of Shares      Life (In Years)    Exercisable         Price
     -----      ---------      ---------------    -----------         -----
     $0.25       100,000               4                --            $0.25
     $1.00       500,000             2.0                --            $1.00
                 -------                            ------
                 600,000             1.7                --            $0.88
                 =======                            ======

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,  2004  and  2003.  Had
compensation cost for stock-based compensation been determined based on the fair
value of any options at the grant dates  consistent with the method of SFAS 123,
the  Company's  net loss for the years  ended March 31, 2004 and 2003 would have
been as presented in the pro forma amounts in Note 1. No options were granted to
employees for the years ended March 31, 2004 and 2003.

--------------------------------------------------------------------------------
                                     NOTE 9
                                 CONCENTRATIONS
--------------------------------------------------------------------------------

Major suppliers for the Company  include the Japanese  company that produces the
SOLTRON(R)  enzyme  concentrate.  Supply of the SOLTRON(R)  concentrate could be
interrupted due to work stoppages,  strikes,  and  governmental or international
regulations.  The  solvent  used as the  suspension  agent  for  SOLTRON(R),  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(R)
are  currently  supplied  by a major  North  American  manufacturer.  All  other
materials for  production of  SOLTRON(R)  are available  from a variety of local
providers.

All  supplies for the  manufacture  of SP34E(TM)  are readily  available  from a
variety of manufacturers worldwide.

                                       40
<PAGE>
--------------------------------------------------------------------------------
                                     NOTE 10
                                  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, 2004,  which have resulted in
a deficiency in working capital of approximately  $823,000 as of March 31, 2004,
and an accumulated deficit of approximately $12,450,000.

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.

--------------------------------------------------------------------------------
                                     NOTE 11
                                SEGMENT REPORTING
--------------------------------------------------------------------------------

The following table is a summary of operations and other  financial  information
by major segment:

FISCAL YEAR 2004                       Soltron(R)     SP34E(TM)     Consolidated
----------------                       ----------     ---------     ------------
Net Revenues                           $ 324,285      $ 365,303      $ 689,588
Cost of Revenues                         138,230        126,024        264,254
                                       ---------      ---------      ---------

Gross Profit                             186,055        239,279        425,334

General and Administrative Expenses      538,078        228,171        766,249
Impairment of intangible asset           119,700             --        119,700
                                       ---------      ---------      ---------

Segment Operating (Loss) Profit         (471,723)        11,108       (460,615)

Net Interest Expense                     (24,315)        (5,464)       (29,779)
Relief from Debt                           9,685             --          9,685
Income Taxes                                  --         (4,587)        (4,587)
                                       ---------      ---------      ---------

Net Segment (Loss) Profit              $(486,353)     $   1,057      $(485,296)
                                       =========      =========      =========
Accounts Receivable                    $  30,500      $ 111,879      $ 142,379
                                       =========      =========      =========

Inventory                              $ 131,045      $      --      $ 131,045
                                       =========      =========      =========

Total Assets                           $ 249,593      $ 263,720      $ 513,313
                                       =========      =========      =========

Capital Expenditures                   $      --      $  21,851      $  21,851
                                       =========      =========      =========

Depreciation and Amortization          $     532      $  12,488      $  13,020
                                       =========      =========      =========

                                       41
<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;  AUDIT  COMMITTEE  FINANCIAL
        EXPERT; CODE OF ETHICS

(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              75              Director, Chairman
     James H. Hirst                    58              Director, President, CEO

----------
(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.

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 from March 1981 to
present has provided  consulting services to early stage companies in connection
with their operations,  financial  information systems and legal compliance.  In
1979,  Mr.  Hirst  received a Bachelor of Commerce  (Accounting  and  Management
Information Systems) degree from the University of British Columbia.

(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

                                       42
<PAGE>
10% or more of  Solpower's  common  stock during the fiscal year ended March 31,
2004. This  information is based on a review of Section 16(a) reports  furnished
to Solpower.

Fraser M. Moffat III failed to timely file a report on Form 4 related to 500,000
shares on September 22, 2003. A Form 5 to report the delinquent  filing was also
not timely filed. The required report was filed in May 3, 2005.

James H.  Hirst  failed to timely  file a report  on Form 4 related  to  775,500
shares  acquired by his wife. A Form 5 to report the delinquent  filing was also
not timely filed. The required report was filed in April 29, 2005.

Peter Voss failed to timely  file a report on Form 4 related to the  disposition
of 140,000  shares by  BioEngineering  Pty Ltd on December 15, 2003. A Form 5 to
report the delinquent  filing was also not timely filed. The required report was
filed in May 5, 2005.

AUDIT COMMITTEE FINANCIAL EXPERT

We have not appointed an audit committee and, accordingly,  do not have an audit
committee financial expert. Due to the small size of our board of directors, the
audit  committee  function is performed by the full board. We have determined to
defer  creation  of an audit  committee  and  engagement  of an audit  committee
financial  expert until such time as our business  operations  have grown and an
increase to the size of the board of directors is warranted.

CODE OF ETHICS

In February of 2005, the Board of Directors adopted a Code of Ethics meeting the
requirements  of  Section  406 of the  Sarbanes-Oxley  Act of 2002.  Our Code of
Ethics is publicly  available  on our web site at  www.solpower.com.  If we make
substantive amendments to the Code of Ethics or grant any waiver,  including any
implicit waiver, we will disclose the nature of such amendments or waiver on our
web site or in a report on Form  8-K.  We will  provide  to any  person  without
charge,  upon request,  a copy of such Code of Ethics.  Persons  wishing to make
such a request should contact James H. Hirst,  President,  307 East 22nd Street,
San Pedro, California 90731, telephone: (888) 289-8866.

ITEM 10. EXECUTIVE COMPENSATION

The  following  table  reflects all forms of  compensation  for the fiscal years
ended  March  31,  2004,  2003 and 2002 for the sole  officer.  No other  person
received salary or bonus in excess of $100,000 for any of these fiscal years.

                                       43
<PAGE>
                           SUMMARY COMPENSATION TABLE

                                                                     Long Term
                                         Annual Compensation       Compensation
                                                       Other           Stock
                               Fiscal                  Annual         Options
Name and Principal Position     Year     Salary     Compensation     (Shares)
---------------------------     ----     ------     ------------     --------
James H. Hirst                  2004                  $104,100          --
Chief Executive Officer         2003        --        $130,820          --
 & President                    2002        --        $149,248          --

OPTION GRANTS

The following  table sets forth  information  regarding the grants of options to
executive  officers  for the fiscal  year ended  March 31,  2004.  There were no
grants of options to  executive  officers  for the fiscal  year ended  March 31,
2004.

                        OPTION GRANTS IN FISCAL YEAR 2001

<TABLE>
<CAPTION>
                                             % of Total
                  Number of Shares          Compensation
                  Underlying Options     Options Granted in      Exercise      Expiration
    Name              Granted               Fiscal Year           Price           Date
    ----              -------               -----------           -----           ----
<S>                   <C>                       <C>               <C>               <C>
James H. Hirst        500,000                   40%               $1.00       April 1, 2006
</TABLE>

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, 2004.

                          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, 2004     at March 31, 2004
                       Shares Acquired                              Exercisable/              Exercisable/
    Name                on Exercise         Value Realized         Unexercisable             Unexercisable
    ----                -----------         --------------         -------------             -------------
<S>                            <C>                  <C>               <C>                         <C>
James H. Hirst                 0                    0                 0/500,000                   $0/$0
</TABLE>

EMPLOYMENT AGREEMENTS

We had an  employment  agreement  with Mr. Hirst  effective in fiscal year 2001.
This  agreement  was to be for an initial term of three  years.  Base salary has
been set at  $126,000.  In  addition,  Mr.  Hirst  received  options to purchase

                                       44
<PAGE>
500,000  shares  at $1.00 per  share,  subject  to  vesting,  and  stock  grants
initially of 10,000 shares per month thereafter. The stock grant commenced as of
April 1, 2000. The option grants were effective  April 7, 2000. The stock grants
to Mr. Hirst ceased effective March 31, 2001.

Mr. Hirst  continued his  employment  under his contract  during the fiscal year
ended March 31, 2003 and was an at-will employee during the year ended March 31,
2004.

DIRECTOR COMPENSATION

All  authorized  out-of-pocket  expenses  incurred by our directors on behalf of
Solpower are subject to reimbursement.  Mr. Moffat was granted 500,000 shares in
September  2003 for past  services.  These  shares were valued at  approximately
$20,500 at the date of issuance.

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 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 $0.25 to $7.00 per share.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth,  as of March 31, 2004,  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.

                                       45
<PAGE>
Name and Address                           Amount and Nature         Percent of
of Beneficial Owner                          of Ownership             Class (1)
-------------------                          ------------             ---------
Fraser M. Moffat III (2)
18 Lake Avenue
Montrose, Pennsylvania                           535,826                1.1%

James H. Hirst (2)
7309 East Stetson Drive
Scottsdale, Arizona                            3,905,600 (3)            7.7%

Naoya Yoshikawa
2-16-42 Takanawa
Minato-Ku, Japan                               3,000,100 (4)            5.9%

Power Business Co Ltd.
2-16-42 Takanawa
Minato-Ku, Japan                               3,000,000                5.9%

Australian Agricultural and Property
Management Pty Ltd. (5)
c/o 13 Malcolm Court
Mt.  Waverly, Victoria 3189
Australia                                      6,146,910               12.5%

Greg Stewart
307 East 22nd Street
San Pedro, CA 90731                            2,942,000 (6)            6.0%

Dominion Capital Japan Pty Ltd. (7)(8)
39 De Havilland Road
Mordialloc 3195
Victoria, Australia                            2,627,000                5.2%

Peter Voss (7)(8)
39 De Havilland Road
Mordialloc 3195
Victoria, Australia                            9,391,194               18.4%

K. M. Voss
39 De Havilland Road
Mordialloc 3195
Victoria, Australia                            3,000,000                5.9%

                                       46
<PAGE>
Name and Address                           Amount and Nature         Percent of
of Beneficial Owner                          of Ownership             Class (1)
-------------------                          ------------             ---------
Les Woolridge
Victoria
Australia                                      3,000,000                5.9%

All Directors and Officers
as a Group (5 persons)                         4,441,426                8.7%

----------
(1)  Based upon  50,912,127  shares of common stock being issued and outstanding
     on March 31, 2004.
(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 level. These options have not vested, are not exercisable
     until vested and are not included in the total above.
(3)  Includes 130,000 shares issuable under a deferred compensation  arrangement
     and 775,500  shares held by Mr.  Hirst's wife in which Mr. Hirst  disclaims
     all beneficial ownership.
(4)  Includes  3,000,000  shares  held  by  Power  Business  Co Ltd.  is a Japan
     corporation controlled by Mr. Yoshikawa.
(5)  Australian  Agricultural  Management Pty Ltd. is an Australian  corporation
     controlled by Nick Corcoris.
(6)  Mr. Stewart  controls Purse Seine Soma,  Inc.,  which holds 100,000 shares.
     The total includes  warrants to purchase 250,000 common shares at $0.20 per
     share.
(7)  Mr. Voss controls  Dominion Capital Pty Ltd., which holds 2,627,000 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
     114,294 shares and Dominion Capital,  Inc., which holds 370,000 shares. The
     total reflected  includes  3,300,000  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(R) 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(R).  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(R)  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(R)   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(R) 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(R)  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,

                                       47
<PAGE>
marketing and sales rights to SOLTRON(R)  in all other  territories  (other than
Japan) where  SOLTRON(R)  and certain other  products and services are currently
being commercialized by Dominion Capital.

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(TM).  We agreed to issue
6,000,000  shares  of our  common  stock  and pay a  royalty  of $2.25  for each
kilogram  of  SP34E(TM)  sold in North  America.  The  term of this  Acquisition
Agreement is for five years,  beginning when we achieve  specified sales volumes
of  SP34E(TM).  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 July 1, 2000.

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 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.

Effective  January 31, 2003, the Company acquired 100% of the outstanding  stock
of Virtual Technologies  (Australia) Pty Ltd. The subsidiary was acquired by the
issuance of 6,000,000  shares of  restricted  common stock by the Company.  This
entity is controlled by Mr. Peter Voss.

On February 20, 2003, the Company  acquired the worldwide  rights to the product
SOLTRON(R) by the issuance of 9,000,000 restricted shares of its common stock to
Dominion Capital Pty Ltd. This entity is controlled by Mr. Peter Voss.

On September 22, 2003, the Company issued 1,000,000  restricted shares of common
stock to Matthew Cohen, the Company's General Manager of Marketing and Technical
Services,  as compensation  for services.  The shares were issued in reliance on
exemption from registration provided by Section 4(2) of the Securities Act.

On September 22, 2003, the Company issued  500,000  restricted  shares of common
shares to Fraser  Moffat III, a director of the  Company,  as  compensation  for
services.  The shares were issued in reliance  on  exemption  from  registration
provided by Section 4(2) of the Securities Act.

                                       48
<PAGE>
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.

         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.

         10.12(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.

                                       49
<PAGE>
         10.17(2)    Addendum to June 17, 1998 Acquisition  Agreement  effective
                     January 1, 1999.

         10.29(3)    Amendment to Lease between Arizona Industrial  Capital,  LP
                     and Solpower Corporation dated December 15, 2000.

         10.30(4)    Agreement between Virtual Technologies (Australia) Pty Ltd.
                     and A-Gas  (Australia)  Pty Ltd.,  dated  August 20,  2002,
                     relating to the  Australia and New Zealand  production  and
                     distribution of SP34E(TM).

         10.31(4)    Acquisition    Agreement   between   Virtual   Technologies
                     (Australia)  Pty  Ltd.  and  Dominion   Capital  Pty  Ltd.,
                     effective  January  31,  2003,  relating  to the  worldwide
                     rights to SP34E(TM) and other related refrigerant gases.

         10.32(4)    Acquisition  Agreement  between  Solpower  Corporation  and
                     Dominion   Capital  Pty  Ltd.,  dated  February  20,  2003,
                     relating  to  the   acquisition  of  worldwide   rights  to
                     SOLTRON(R).

         21.1        Subsidiaries

         31          Certifications required by Rule 13a-14, as adopted pursuant
                     to Section 302 of the Sarbanes-Oxley Act of 2002.

         32          Certification  of Chief  Executive  Officer  and  Principal
                     Accounting Officer pursuant to 18 U.S.C.ss.1350, as adopted
                     pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

----------
(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 February
     20, 2001.
(4)  Incorporated  by reference from  Solpower's Form 10-KSB as filed on May 26,
     2005.

     (b) REPORTS ON FORM 8-K.

     None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table summarizes the aggregate fees billed by Semple & Cooper, LLP
for the fiscal years ended March 31, 2004 and 2003:

                                                    Year Ended March 31,
                                                   2004               2003
                                                 -------            -------
     Audit Fees (1)                              $15,000            $15,000
     Audit-Related Fees (2)                           --                 --
     Tax Fees (3)                                     --                 --
                                                 -------            -------
     Total                                       $15,000            $15,000
                                                 =======            =======

----------
(1)  Fees for audit  services  billed in fiscal years 2004 and 2003 consisted of
     audit of Solpower Corporation's annual financial statements.

                                       50
<PAGE>
In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      SOLPOWER CORPORATION


Dated: May 31, 2005                   By /s/ James H. Hirst
                                         ---------------------------------------
                                         James H. Hirst, Chief Executive Officer

                                      BOARD OF DIRECTORS


Dated: May 31, 2005                      /s/ Fraser M. Moffat III
                                         ---------------------------------------
                                         Fraser M. Moffat III, Chairman


Dated: May 31, 2005                      /s/ James H. Hirst
                                         ---------------------------------------
                                         James H. Hirst

                                       51