We (the Company) were incorporated on August 19, 2008, in the State of Nevada, under the name BCO Hydrocarbon, Ltd., for the purpose of acquiring, exploring, and if warranted and feasible, developing natural resource assets. The Company began its business operations by executing a Farm-in Agreement providing the Company with the right to a 50.0% working interest in two Petroleum and Natural Gas Crown leases in Alberta, Canada. On July 25, 2010 the Company acquired all of the shares of Sauer Energy, Inc., a California corporation, and has since changed its business to that of Sauer Energy, Inc. On September 17, 2010, our majority shareholder and sole director approved a name change which was officially effected on October 15, 2010, when we became Sauer Energy, Inc., (SEI) a Nevada corporation.
The Company operated in the oil and gas industry and maintained a right to operate and a right to explore on two Crown Petroleum and Natural Gas Leases in the Province of Alberta. The leases were for 640 gross acres or 320 net acres. The Company planned to appoint Unitech as the operator, but Unitech advised the Company that the commodity price of gas was too low to consider undertaking any exploration activities. Based on that advice, the Company determined not to undertake any exploration activities on the leases until such time as the price of gas improved. We were required under the terms of our farm-in agreement to expend a total of $25,000 prior to January 10, 2010, however, based on the advice from our proposed operator, we were able to negotiate an extension of that commitment until gas prices should improve sufficiently to make exploration development activities advisable. After July 25, 2010, we were able to dispose of our interests in these Crown Petroleum Natural Gas Leases without further liability to us. Due to the limited prospects of its proposed oil and gas activities, the Company sought other acquisition activities and these efforts led to the acquisition of Sauer Energy, Inc. on July 25, 2010.
Our principal products were intended to be petroleum and natural gas and any related saleable by-products. Our initial market was to be the Province of Alberta. We never had any salable oil and gas production or products.
Once we had oil and gas production, we would have relied on the operator of our oil and gas wells to distribute any oil and gas and saleable by-products.
In our former line of business our competition came from other oil and gas companies that were acquiring oil and gas assets that we contemplated acquiring due to its investment potential and capital expenditure. The sources and availability of acquiring oil and gas assets was contingent on our ability to finance opportunities as they became available. Since our financial resources were severely limited during the period we were engaged in the oil and gas business, we were at a distinct disadvantage when competing against companies with significant financing ability and significant asset backed financing.
There were no inherent factors or circumstances associated with the oil and gas industry that would give cause for any patent, trademark or license infringements or violations. We had not entered into any franchise agreements or other contracts that have given, or could give rise to obligations or concessions.
We never had any production, however, our operator was required to have government approvals for all drilling and production activities undertaken in the Province of Alberta and thus, if we had continued in the oil and gas business, we would have been required to ensure that all approvals were granted and complied with. We cannot ascertain what the associated costs might have been.
In Canada, producers of oil negotiate sales contracts directly with oil purchasers, with the result that the market determines the price of oil. The price depends in part on oil quality, prices of competing fuels, distance to market, the value of refined products and the supply/demand balance. Oil exports may be made pursuant to export contracts with terms not exceeding 1 year in the case of light crude, and not exceeding 2 years in the case of heavy crude, provided that an order approving any such export has been obtained from the National Energy Board of Canada (NEB). Any oil export to be made pursuant to a contract of longer duration (to a maximum of twenty-five (25) years) requires an exporter to obtain an export license from the NEB and the issuance of such a license requires the approval of the Governor in Council.
In Canada, the price of natural gas sold in interprovincial and international trade is determined by negotiation between buyers and sellers. Natural gas exported from Canada is subject to regulation by the NEB and the Government of Canada. Exporters are free to negotiate prices and other terms with purchasers, provided that the export contracts continue to meet certain criteria prescribed by the NEB and the Government of Canada. Natural gas exports for a term of less than two years or for a term of 2 to 20
years (in quantities no greater than 30,000 m3/day) must be made pursuant to an NEB order. Any natural gas export to be made pursuant to a contract of longer duration (to a maximum of 25 years) or of a larger quantity requires an exporter to obtain an export license from the NEB and the issuance of such a license requires the approval of the Governor in Council.
The Government of Alberta also regulates the volume of natural gas which may be removed from the province for consumption elsewhere based on such factors as reserve availability, transportation arrangements and market considerations.
The Government of Alberta regulates the royalty percent from Crown mineral leases for petroleum, natural gas and hydrocarbon by-products.
Our oil and gas earned working interest rights would have been subject to numerous federal, provincial and municipal laws and regulations relating to environmental protection from the time oil and gas projects commence until lease sites are abandoned, restored and reclaimed. These laws and regulations govern, among other things, the amounts and types of substances and materials that may be released into the environment, the issuance of permits in connection with exploration, drilling and production activities, the release of emissions into the atmosphere, the discharge and disposition of generated waste materials, offshore oil and gas operations, the abandonment, reclamation and restoration of wells and facility sites and the remediation of contaminated sites. In addition, these laws and regulations may impose substantial liabilities for the failure to comply with them or for any contamination resulting from the operations associated with our assets. Laws and regulations protecting the environment have become more stringent in recent years, and may in certain circumstances impose strict liability, rendering a person liable for environmental damage without regard to negligence or fault on the part of such person. Such laws and regulations may expose us to liability for the conduct of or conditions caused by others, or for our acts which were in compliance with all applicable laws at the time such acts were performed. The application of these requirements or the adoption of new requirements could have a material adverse effect on our financial position and results of operations.
Employees:
We did not have employees in our prior operations, but relied on consultants as required and then management, being the directors and officers, to direct our business. Should we have found an oil and gas property or properties of merit which would require an operator, we would have needed to hire additional staff for operations.
Acquisition of Sauer Energy, Inc. and Related Matters
On July 25, 2010, the Company, Malcolm Albery, its president and sole director (MA) and Dieter Sauer, Jr. (DS) completed a closing (the Closing) under an Agreement and Plan of Reorganization, dated as of June 23, 2010 (the Agreement). The Agreement provided: (a) for the purchase by DS of all of the 7,962,500 shares of the Company owned by MA for $55,200.00; (b) the contribution by DS of all of the shares of Sauer Energy, Inc., a California corporation to the Company; (c) the assignment of certain patent rights related to wind turbine technology held by DS to the Company; and (d) the election of DS to the Companys board of directors. In connection with the Closing, Mr. Sauer was elected President and
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CEO of the Company and two former shareholders of the Company agreed to (i) indemnify the Company against any claims resulting from breaches of representations and warranties by the Company in the Agreement; (ii) to acquire and cause to be returned for cancellation an aggregate of 13,613,500 shares of the Companys common Stock, including all of the shares owned by former officer and director Daniel Brooks and; (3) assume all of the Companys obligations in connection with certain oil and gas leases in Canada.
Due to his acquisition of 7,962,500 shares in connection with the Closing and the return for cancellation of 13,613,500 shares, upon the consummation of the closing under the Agreement, Dieter Sauer, Jr. owned approximately 51.6% of the Companys issued and outstanding shares.
When acquired by BCO in 2010, Sauer Energy, Inc., a California corporation, whose business is described more fully below, was a development stage California corporation formed in 2008 engaged in the design, research and development of vertical axis wind turbine (VAWT) systems. Sauer Energy, Inc., a California corporation, has been wound down and dissolved as of August 2012. The surviving entity is Sauer Energy, Inc., (SEI), a Nevada corporation.
Management believes that SEI
s innovative design and utility makes it highly efficient and cost effective to own and operate. The initial product for release will be the WindCutter, which was designed using the Darrieus principle. These turbines have five aerodynamic airfoils, a proprietary axial-flux permanent magnet generator (PMG) and are pole mounted. Our concept was engineered for durability and simplicity of on-sight assembly and installation.
The certification analysis process was completed with ATA Engineering, Inc. (ATA). The WindCutter was designed to International Electrotechnical Commission Small Wind Turbine International Standards (IEC). Proving reliability of the turbine by analysis and testing, it was subjected to a variety of normal operational as well as abnormal event conditions. It has passed the rigorous testing, as expected. We chose to enter the certification process because it would give us the edge over competitors and ensure the performance and quality that our customers deserve. We are in the process of domestic and global marketing efforts and in the process of bringing in sales to fulfillment.
Growing energy demand, limited availability of non-renewable fossil fuels, heightened climate change concerns and volatile oil and gas prices have all contributed to the increased demand for renewable energy by individuals, businesses, government and non-government organizations worldwide.
Sauer Energy is a renewable energy company engaged in the design and manufacture of small wind turbines that generate clean energy to power residential and commercial customers. We promote energy independence through the use of wind power, an abundant, never ending, renewable, emissions-free energy source that can be captured in small and large scale applications.
We are also focused on the development of products and technologies and promote transparency and accountability.
Sauer Energy developed a multi-faceted growth strategy that takes advantage of the companys relationships with experts in engineering, manufacturing, distribution, marketing and branding. These resources have vast experience in the wind energy sector and they make themselves available to us as independent contractors on an as-needed basis. The key focus factors for the future:
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To become a revenue and profit based operation
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Expansion and development of product portfolio
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A two-tiered sales approach with intensive marketing strategy to targeted customer base.
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Maintaining a cost-effective approach with each vertical market
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Expansion from domestic to global markets
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For SENY stock to move to higher trading platform, e.g. NASDAQ, AMEX, etc.
Proof of Concept
To validate the performance of the WindCutter, Sauer Energy had ATA Engineering, Inc., conduct extensive certification testing and analysis as evidence of its outstanding design, strength, performance and safety. The data gathered has validated the efficiency and viability of the design.
Extruded aluminum blades provide outstanding rigidity as well as better weight distribution and uniformity throughout the blades. The aluminum is anodized for weather resistance and added durability. The aluminum extrusion process has tighter tolerances, better consistency of weight distribution, balance and is extremely cost-effective. It is less expensive in the long run because it has a longer life than composites and also because of its compatibility with the support structure. The WindCutter has achieved maximized performance utility with its proprietary, direct-drive, axial-flux (PMG) that was expressly designed to work in tandem with it.
Our design is based on the Darrieus Gyromill or H-rotor, because our airfoils are asymmetrical and they are straight. Five long, vertical blades are attached to the rotor with a horizontal support system. The airfoil blades use the principle of lift to rotate the shaft, much like the wings on an airplane. This motion spreads the torque evenly over the entire revolution. This type of airfoil has very high efficiency in its conversion of wind to energy, due to its ability to manage turbulent winds at rooftop heights and above, giving it a superior advantage. The lift principle differs from the drag principle because it causes the blades to move at a rate much faster than actual wind speed, known as tip speed ratio.
We have a total of three different prototype designs: WindCutter, WindCharger and WindRider. The WindCharger and WindRider are going through different stages of development.
In the past twenty years, turbine designs have changed radically. Management believes that the WindCutter is bird friendly because SEI VAWTs are much smaller, have a much slower rotation, less space between the blades and birds can easily navigate around them.
Business Model
Sauer Energys business model is straight-forward as it had substantially planned most of the manufacturing functions to be done within its corporate headquarters. The control factor on cost and labor will be to the Companys advantage. The Companys vendor manufacturers are expected to be ISO 9000 and/or ISO 9001 Certified.
SEI will maintain quality control, assembly, testing, shipping and handling as orders flow in.
Corporate Expansion
We are in a production facility, which is significantly larger than the one we occupied initially. In anticipation of the machines we will need for production and the inventory we will have to house, management feels the present building can meet our growing needs.
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We are organizing the implementation of marketing campaigns for impending sales. We have received communications from all over the world expressing the enormous need that exists and the desire to purchase our wind turbines.
The WindCutter turbine is our first product release. Management believes that the demand for it will rise sharply because there is not another VAWT in its class that has achieved the certification analysis accreditation yet.
On May 11, 2012, we purchased 100% of the assets of Helix Wind Corporation (Helix). This acquisition was made with SENY common shares. There was no liability, obligation or debt incurred in the process. Through the purchase, we enhanced our intellectual property portfolio list with all of Helixs intellectual property, including issued patents and patents pending, both domestically and internationally. It is our intention to produce the WindRider turbines, the re-engineered Helix turbines, in-house. We believe that our business plan will be strengthened and this union will create long term synergy as one company. They are expected to produce an additional stream of income for SEI. With sales in 17 countries, we have reason to believe Helixs popularity will not wane. To date, we have received inquiries totaling over $21M for our products, but not all of these inquiries can be expected to result in actual sales.
With regard to the WindCharger, although we had previously agreed to outsource the manufacturing process to VEC Technologies, LLC (VEC) in Pennsylvania, we discovered that the Pennsylvania VEC plant was shut down, thus negating all plans to outsource the manufacturing process to VEC. Accordingly, we have decided to wait until the WindRider is being distributed and installed before we begin the manufacturing process, marketing and distributing the WindCharger.
Intellectual Property
SEI currently holds what it believes is sufficient intellectual property to protect its proposed operations. SEI regards its patents, proprietary technologies, intellectual property, trademarks, domains and copyrights as essential components to its success and branding.
SEI has been issued a design patent, No D597,028 granted July 29, 2009, a utility patent, No 7,798,766, granted September 21, 2010, and a design patent, No D638,358, granted May 24, 2011, for a vertical axis wind turbine that is designed to be reliable, efficient and inexpensive through the process of which was started before the acquisition. In addition, SEI is in process for several patents pending, domestically and internationally, and trademarks at the present time.
Resulting from the HelixWind asset purchase, SEI, acquired a utility patent, No 7,984,110, granted May 24, 2011, a utility plus a utility patent, No 8,084,881, granted December 27, 2011, and a utility patent, No 8,779,616, granted on July 15, 2014, for a vertical axis wind turbine that is designed to be pole mounted, and SEI is continuing the patent process on behalf of the Helix design for several domestic and international patents.
Current Operations and Development Plan
Despite having limited revenues since inception, Sauer Energy has differentiated itself from other entities in small wind because of the following:
a. Rather than incurring the cost of full-time employees, we have forged relationships with like-minded and devoted independent contractors who are experts in the small wind sector and are available to help us on a consulting basis;
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b. Ownership of technology many others buy foreign-made units for resale;
c. The technology itself is set apart by high-efficiency design features;
d. Our engineering consultants have a deep technical understanding of small wind technologies and applications due to years as experts in the small wind sector;
e. High quality outsourced manufacturing that is done by companies that are ISO 9000 compliant;
f. Strong distribution network now being assembled;
g. Commitment to customers and shareholders; and
h. Unwavering focus on business fundamentals.
Our Intended Market
Sauer Energy aims to deliver simple, reliable and cost-effective solutions for residential and commercial customers, particularly for locations with very low or very high wind speeds. Applications range from industrial to residential. Placement, aesthetics, adaptability and portability will dictate which units are appropriate and most efficient for use in different situations. SEI intends to continue to develop and expand its proposed product offerings with new research and development and collaborative efforts.
Current Plan
The main focus for SEI is generating revenues. SEI plans to become a self-sustaining entity. The availability of funding from revenues is expected to enable SEI to develop its other products for release.
The launching of its WindCutter has begun. We have received many inquiries for the WindCutter both domestically and internationally for rural and commercial applications. Energy independence is becoming an integral ingredient being woven into the global future. Our sales and marketing campaign is being implemented at this time. The branding and advertising campaign is also being developed.
We still have the WindCharger and WindRider in our future. We must first ensure the availability of both WindCharger and WindRider turbines. With regard to the WindCharger, due to the closing of VEC Technologies, Inc., we are moving ahead with the WindCutter until such time as another manufacturer has been located and vetted. Potential orders were received via website. SEI plans to work diligently toward testing, verifying, enhancing the performance of and developing the expertise to produce these units domestically.
There are also future plans for the creation of other energy solution products. Sauer Energy is addressing some small wind solutions for very specific applications and is already involved in testing for redundant backup power for both on-grid and off-grid applications for cell phone towers.
Residential
Some of our small VAWT Systems are being designed to be customized to fit almost any building. We foresee our systems being used in residences as back-up power for black outs, to reduce power grid consumption and for generation of power to be inserted into the grid for revenue.
Our End-of-the-line turbine system is a micro power station attached to a number of homes and to the power grid. Several advantages are: maintenance of normal services, no power loss due to impurities in transmission and the excess power can be re-injected into the grid.
Commercial Applications
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Due to their height, large commercial buildings may be especially suitable for VAWT application as they are likely to have relatively steady winds at their roofs and their vertical walls cause the wind to sweep up and over the tops of the buildings.
SEI entered its WindCharger into a pilot test program headed by an industry leader in communication technology. The proposed use of the turbines was on cell phone towers as backup power. The feedback was positive.
It is our intention to design custom proprietary mounting hardware to the commercial market for adaptation to the structure and architecture of existing buildings.
Industrial Applications
The WindCutter will contribute to allowing the industrial sector to satisfy the need for consumption. Furthermore, due to our simplicity of design, they can be manufactured on a large scale in fabrication factories throughout the world.
Oil Rigs and Off-Shore Platforms
Many off-shore locations receive relatively steady reliable winds and our systems could produce a substantial supply of energy, reducing the need for hydrocarbon based electrical generation. Our systems could allow for auxiliary and emergency power needs in addition to maintaining daily functions.
Ships
Ships create an optimum use for our turbine systems. While travelling over water, ships are also powering through the air, thus creating a reliable and steady supply of wind. Turbines could be mounted throughout a ships superstructure to produce continuous supplementary energy to offset fuel consumption or for emergency use. Various candidates include tankers, cruise ships, cargo ships and military vessels. For example, Helix turbines can be seen in San Francisco on a ferry that travels to Alcatraz.
Islands and Other Remote Facilities
Many islands are extremely dependent upon fuel feed generators and importation of the fuel can be costly and generate emissions. Our systems are ideal for islands and other remote facilities as they are being designed to withstand various climates. The advantages are many: flexibility in various locations, ease of installation, strength and durability, virtually no maintenance and their ability to withstand harsh climates.
Communications Towers and Bridges
Various towers and bridges are subject to Federal Aviation Authority requirements to provide 24/7, 365 days per year illumination. Our systems can easily be installed on any tower or bridge. They can operate the tower or bridge lights and/or provide a backup power supply while potentially generating revenue if connected to the power grid.
Lighting billboard signage is an ideal use for deriving backup or primary power from our turbines.
Funding
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After acquiring BCO Hydrocarbon, SEI has raised approximately $9.6M. These funds have been used for research and development of the WindCharger, WindCutter and WindRider. Dieter Sauer, CEO and President of SEI, holds all of the shares that he received at the outset of the BCO and Sauer acquisition and continues to be committed to this project.
Management secured an Equity Purchase Agreement for up to $3 million from another funding source, and through October 12, 2015, had availed itself of $688,520 under this agreement. We have not been to avail ourselves of further funds under this Equity Purchase Agreement after October 31, 2015.
Management secured another Equity Purchase Agreement for up to $3 million from another funding source and through June 28, 2016, had availed itself of $393,610 under this agreement. We have not been to avail ourselves of further funds under this Equity Purchase Agreement after June 28, 2016.
As of December 21, 2015, we entered into two agreements with another financing source. The agreements were the EPA and a Registration Rights Agreement which, taken together, required us to file a registration statement on Form S-1 for the shares of common stock underlying the EPA and subject to various limitations set forth in the EPA, requires them to purchase up to $3,000,000 worth of our common stock at a price equal to 72% of the Market Price of our common stock. The EPA required us to register the resale of the shares to be purchased thereunder under the Securities Act of 1933, as amended, on Form S-1 principally at our expense (although they has paid our legal fees in this connection) and their obligations to purchase our common stock came into effect on February 17, 2016, when the Registration Statement was ordered effective. We realized a total of $393,610 through an EPA with the financing source, entered into on December 21, 2015, before all of the shares available under the registration statement on Form S-1 that became effective on February 17, 2016, were put by us.
As of July 1, 2016, we entered into two more agreements with a different funding source. The agreements were the EPA and a Registration Rights Agreement which, taken together, require us to file a registration statement on Form S-1 for the shares of common stock underlying the EPA and subject to various limitations set forth in the EPA, requires the funding source to purchase up to $3,000,000 worth of our common stock at a price equal to 72% of the Market Price of our common stock. The EPA requires us to register the resale of the shares to be purchased thereunder under the Securities Act of 1933, as amended, on Form S-1 principally at our expense (although this funding source has paid our legal fees in this connection).
We realized a total of $764,500 through an EPA with that financing source, before all of the shares available under the registration statement on Form S-1 that became effective on September 9, 2016, were put by us to financing source.
This funding source finished selling the last shares they received pursuant to the EPA, on March 24, 2017.
As of May 9, 2017, we entered into two more agreements with a different funding source. The agreements were the EPA and a Registration Rights Agreement which, taken together, require us to file a registration statement on Form S-1 for the shares of common stock underlying the EPA and subject to various limitations set forth in the EPA, requires the funding source to purchase up to $3,000,000 worth of our common stock at a price equal to 72% of the Market Price of our common stock. The EPA requires us to register the resale of the shares to be purchased thereunder under the Securities Act of 1933, as amended, on Form S-1 principally at our expense (although this funding source has paid our legal fees in this connection).
We realized a total of $471,398.84 through an EPA with that financing source, before all of the shares available under the registration statement on Form S-1 that became effective on June 5, 2017, were put by us to financing source.
This funding source finished selling the last shares they received pursuant to the EPA, on January 19, 2018.
As of February 16, 2018, we entered into two agreements with GHS Investments, LLC, a Nevada Limited Liability Corporation. The agreements were the EPA and a Registration Rights Agreement
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which, taken together, require us to file a registration statement on Form S-1 for the shares of common stock underlying the EPA and subject to various limitations set forth in the EPA, requires GHS to purchase up to $7,000,000 worth of our common stock at a price equal to 80% of the Market Price of our common stock. The EPA requires us to register the resale of the shares to be purchased thereunder under the Securities Act of 1933, as amended, on Form S-1 principally at our expense and GHSs obligations to purchase our common stock do not come into effect until the Registration Statement is ordered effective.
This prospectus is a part of that Registration Statement.
We have also entered into a $45,000 commitment fee note with GHS that is due November 21, 2018, and bears interest at the rate of 8% per annum. Although GHS has paid our attorney a $5,000 fee in connection with this Registration Statement, we did not receive any cash proceeds from GHS in connection with this note. We will repay this note from our operational revenues or other financing sources and not from funds we realize under the EPA.
Management can give no assurance that any additional capital will be raised or that SEIs VAWTs will be successfully marketed or that, if marketed, they can be marketed profitably.
Future Plans
There are several ideas on the drawing board at Sauer Energy. The time frame within which they are completed will depend upon the availability of funding for such. A few are mentioned herein:
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SEI has plans to make the purchase of renewable energy more accessible to consumers in the current economic climate by offering third-party financing options. In SEIs opinion, this will expand the customer base considerably and create a significant advantage.
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SEI plans to offer an around-the-clock monitoring and data collecting system so that customers can access the actual renewable energy output from their particular turbine.
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SEI has plans for automobile solutions that will enhance the performance of electric vehicles by creating electricity as they are driven.
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SEI plans to make compatible batteries available for the turbine systems for off-grid rural applications, such as water pumping, irrigation, purification and delivery for drinking and/or general use.
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SEI plans to further develop its emergency backup cart that provides electricity to charge batteries and for use in communication, lights, medical equipment, etc. Turbine technology was designed for immediate use, the cart can be a welcome addition to the military and to FEMA for emergency and routine use.
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While our initial turbine designs are smaller scale, we may design large turbine Systems in the future that can be placed off-shore along a coastal environment to catch on and off shore wind. The principles of our turbine systems could be used underwater to take advantage of tidal flows in the ocean, streams and rivers.
In addition to the aforementioned applications, there are several emerging markets for small wind solutions that SEI is pursuing as it continues to diversify and broaden its product portfolio. For example,
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oil and gas producers have become motivated to adopt renewable energy and we plan to address the need for redundant backup power for pumping at remote well head locations.
Small Wind Turbine Industry Overview
Although wind is the largest source of renewable power in the USA, at 5.5%, according to the American Wind Energy Association (AWEA), management believes that wind has barely begun to penetrate its renewable energy market potential. The percentage of global electricity supplied by wind power is 3.7%, with 341,320 wind turbines spinning around the world at the end of 2016. AWEA also reports that Wind surpassed hydropower dams to become the largest source of renewable electric capacity in the U.S., and the fourth largest overall. Further, wind energy in the U.S. powers over 25 million homes.
American wind power is now the #1 source of renewable capacity, thanks to more than 100,000 wind workers across all 50 states, said Tom Kiernan, AWEA CEO, in their February 9, 2017, press release. Growing this made-in-the-USA clean energy resource helps rural communities pay for new roads, bridges, and schools, while bringing back manufacturing jobs to the Rust Belt. With our two-thirds cost reduction over the last seven years, household brands like General Motors, Walmart, and more are buying low-cost wind energy to cut costs and power their businesses. American wind power is on track to double our output over the next five years, and supply 10 percent of U.S. electricity by 2020.
The Global Wind Energy Council (GWEC) reports in its publication,
Global Wind Report: Annual Market Update
that in 2016, installed global capacity, including large wind, was more than 55.6 GW. Wind power also avoided over 637 million tonnes of CO2 emissions globally. There were 52,343 turbines in the U.S. at the end of 2016. The record-setting figure represents a 41% increase for 2016.
According to the Department of Energy,
Distributed Wind Market Report
of 2016
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the number of small wind manufacturers has also contracted. A total of 31 companies reported U.S. revenues in 2012 compared to 16 in 2013, 11 in 2014, and 10 in 2015.
SEI has entered into a strategic alliance with North Wind Power, Inc. (NW), a Canadian corporation located in Newfoundland and Labrador, in eastern Canada. NW has chosen the WindCutter as their primary solution for bringing off-grid power to the Aboriginal communities first, to work in extreme weather conditions and to lower the carbon footprint of diesel in Canada. Negotiations are progressing and management feels that an agreement is in the near future.
Governmental Regulation
There are no Federal-level regulations that specifically control the sale, distribution and installation of small wind turbines beyond general small business regulations. However, each state regulates the sale, installation and interconnection of alternative energy within their state. Utilities are required to interconnect and purchase renewable energy from small wind systems under the Public Utility Regulatory Policies Act of 1978 (PURPA), and individual utilities are permitted to regulate that process.
Rebates and incentives are offered by most states, some by utility companies and some are state and/or federal rebates or tax credits. Although net-metering is not mandatory, it can
assist states in meeting their renewable portfolio standards (RPS) or targets.
Property owners are also able to depreciate their units.
Local zoning laws and regulations may impose special requirements on the installation of our turbines now or in the future, but we are not aware of any specific regulations.
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Competition
SEI has the only turbine in its class to do certification testing and pass. The WindCutter was rigorously tested by ATA Engineering, Inc., and it effectively completed the thorough mechanical engineering review. It successfully met all the criteria per the International Electrotechnical Committee (IEC) Standard IEC 61400-2 for "Small Wind Turbines." It was verified by their high-accuracy engineering analysis to Small Wind Turbine Class 3, which includes sustained 50-year extreme winds of up to 117 mph, as well as worst case gusts stipulated by IEC.
We compete with all energy suppliers, including utilities and manufacturers of energy producing equipment. We are aware of 10 other U.S. small wind turbine companies reporting revenues. A few have longer operating histories or greater name recognition such as Xzeres Corporation, Windside Production Ltd., Windstream Technololgies, and Royall Power. Companies in other countries also produce small wind turbines. We also compete with solar-thermal and solar-photovoltaics systems. However, solar power installations are significantly more expensive than our VAWT Systems and we also feel that our turbine systems are a great complement to those who already employ solar systems, as they can work 24 hours and produce electricity at times when solar is ineffective.
Wind is now the largest producer of renewable electricity in the U.S. at 5.5% of overall capacity. In 2016, 1,115,000 jobs were created globally, with over 102,000 of them in the U.S alone. In third quarter, 2017, U.S. installations were over 8,400 MW, according to AWEA. The industry continues to grow.
For the past nine years, the U.S. has emphasized the need for greater energy efficiency and a more diversified energy portfolio. This led to a collaborative effort involving the Department of Energy, National Renewable Energy Laboratories and others to explore a modeled energy scenario in which wind provides 20% of U.S. electricity by 2030 has been endorsed by the American Wind Energy Association and has become our national goal as well. Currently, we are at 5.5% for wind alone.
Management believes we have the competitive advantage of offering the right product at the right time.
Research and Development
We have focused our research and development on the quality and efficiency of our wind turbine systems. Extensive technical development has been completed and is ongoing. We are targeting our market for sales expansion. Future research and development will be focusing on scaling up our turbine systems for service to larger buildings, like apartment complexes, hospitals and office buildings. We spent approximately $352,000 on research and development in fiscal 2017, and $215,000 in fiscal 2016. Our primary focus now will be on manufacturing, however, we plan to continue research and development. We do not anticipate that our research and development expenditures will continue to rise in the current year if we are able to secure financing so that we have the resources to begin manufacturing.
We have conducted testing at the local airport in real life wind scenarios. This includes on-grid, off-grid and compatibility of electronics with specific load controls. Results have been analyzed in collaboration with wind industry experts and these are factual net test results. What that means is that our design mirrors the design expectations necessary for certification.
In the year ended August 31, 2011, we conducted third party testing at the University of Washington Aeronautical Laboratory, a testing organization under the University's Department of Aeronautics and
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Astronautics. The primary aerodynamic testing facility is the F. K. Kirsten Wind Tunnel. We have done our third-party wind tunnel testing at their facility in the past and look forward to utilizing their facility for continued research and development testing.
Manufacturing
Our facility in Oxnard, California, is well suited for our manufacturing needs. Our headquarters is 26,550 square feet, which is about two and a half times larger than the last facility. Administration, distribution, research and development, prototyping, testing, inventory and light manufacturing is able to be done under one roof. Management is optimistic that this facility is adequate for all the necessary operations. Its location is ideal for international shipping needs as well.
We have begun commercial assembly of turbines. We do not plan to manufacture certain components of our wind turbine systems ourselves and we are outsourcing them. Based upon our preliminary review, we anticipate those components will be available from other sources at reasonable prices.
With regard to the WindCharger, although we had previously agreed to outsource the manufacturing process to VEC Technologies, LLC (
VEC
) in Pennsylvania, we discovered in August, 2014, that the Pennsylvania VEC plant was being shutdown, thus negating all plans to outsource the manufacturing process to VEC. Accordingly, we have decided to wait until the WindCutter turbines are being distributed extensively before we begin the manufacturing process, marketing and distributing the WindCharger.
Employees
As of August 31, 2017, we had 14 independent contractors. We retain a limited number of independent contractors to perform projects on an as needed basis. Due to our preliminary early phase operations, we have not engaged employees to date, but as we enter the manufacturing stage we anticipate that we will hire employees. We believe our relationships with our current independent contractors are good. To implement our business strategy, we expect, over time, continued growth in our independent contractor and infrastructure requirements, particularly as we expand our engineering, sales and marketing capacities going forward. As the company begins to sell wind turbines, we will be restructuring and our officers will become employees of the Company.
Company Philosophy
We strive to embrace, support and enact, within our sphere of influence, a set of core values that define us.
Our Duty to Ourselves
With honesty and integrity at the heart of us as individuals and as a company, our sincerity will be evident.
Our Duty to Each Other
Working as a team with fairness and respect for each other and for our company as a whole will always produce a winning combination.
Our Duty to Our Shareholders
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Our Shareholders are partnering alongside us and placing their faith in us. They share our expectations and vision for growth and diligent use of their investment in us and in our company.
Our Duty to Our Consumers
This business revolves around the Consumers, not the other way around. We must live up to their trust in the quality, value, effectiveness, reliability, and safety of our products, and also in the integrity of what we say and do.
Our Duty to Our Vendors
The list of those with whom we choose to do business is based on clarity, honesty, reliability, accountability and trust. Only then, will our product maintain the standards we have set for quality and dependability our consumers can expect.
Our Duty to Our Dealers and Distributors
These individuals represent our products and our company and deserve all the assistance we can give them. Their reliance on our honest representations regarding our products and our company sits at the center of our relationship with them.
Our Duty to Our Community, Our Nation, and Our World
Our commitment to the environment is paramount. We strive to create products that are least invasive in their output to the atmosphere, at less cost, with the smallest possible carbon footprint.
Management believes that the foregoing commitments will not only enhance the spheres in which we operate but will also result in returns to our investors.