I. INTRODUCTION

Distributed Power, Inc. (formerly, The New World Power Corporation) ("DPI" or the "Company") is an independent power producer that focuses on distributed power solutions. The Company sells electrical capacity and energy to industrial and commercial customers under long-term power purchase agreements ("PPA's").

The Company is organized as a holding company. Each electric power generating facility or discreet group of facilities is owned by a separate corporate entity. Executive management, legal, accounting, financial and administrative matters are provided at the holding company level. Operations are conducted at the subsidiary level.

Prior to August 2003 but subsequent to 1997, the Company owned and operated three subsidiaries including Wolverine Power Corporation ("Wolverine"), Modular Power Systems, LLC ("Modular") and the New World Power Company Limited ("New World Co. Ltd"). Each subsidiary owned and operated electric generation facilities. Wolverine owned 4 hydroelectric generating facilities with an aggregate capacity of 10.5 megawatts, headquartered near Edenville, Michigan; Modular owned 43 MW of mobile, trailer mounted and containerized diesel-fired electric generating facilities at three sites in Coldwater, Chelsea and Alma, Michigan; and New World Co Ltd owned a 3 MW wind farm in England, known as Caton Moor.

In August 2003, the Company sold Wolverine (see Note 16 of Notes to Financial Statements). On July 15, 2002, the Company transferred 100% of its ownership in Modular to certain contractors (the "Modular Contractors") as part of a litigation settlement (see Note 7 of Notes to Financial Statements). In June 2000, the Company exchanged the ownership of the New World Co Ltd located in the United Kingdom for certain outstanding convertible notes.

II. HISTORY

The Company was incorporated in Delaware in 1989. Following an initial public offering of its securities in 1992, the Company focused on renewable energy, including wind farms and hydroelectric plants, with power output sold to major utility companies under long- term contracts. The founding management of the Company sold control during 1995, and from 1996 through 1999 following a change in its business plan, the Company sold a majority of its assets. The Company's securities were delisted from NASDAQ National Market due to non-compliance with the minimum $1.00 bid requirement for continue listing, and were listed on the "OTC" Bulletin Board. In 2000, the Company again changed its business plan to begin developing "distributed generation plants", or electric power plants that produce and sell electricity near the consumer, through its Modular subsidiary. The Company developed, installed and operated approximately 43 MW of modular, mobile generating plants powered by Caterpillar diesel equipment. Unfortunately, following an initial period of profitability, CMS terminated its contract with Modular, additional Modular facilities that the Company planned to build and operate were cancelled, and the Company had to again change its business direction. In 2002, the Company's securities were delisted from the NASDAQ "OTC" Bulletin Board due to delinquent quarterly and annual SEC filings, and were listed on the "Pink Sheets".

In late 2002, the Company formed a new management team to pursue the development of distributed generation selling electric power and energy directly to industrial and commercial customers in areas characterized by high retail rates.

Recently Completed Subsidiary Sales Approximate Power Name Location Type Capacity Purchaser Year of sale

New World Co Ltd United Kingdom Wind 3.00 MW NORWEB 2000 Modular Michigan Diesel 43.00 MW CMS 2002 Wolverine Michigan Hydro 10.50 MW CMS 2003

III. RECENT OPERATIONS

Until sold in 2003, 2002 and 2000 respectively, the Company owned its subsidiaries Wolverine, Modular and the New World Co Ltd, all of which contained electric power generating assets that sold their output to local electric utilities

Wolverine

Wolverine Hydroelectric Facilities. Wolverine owned four hydroelectric facilities on the Tittabawassee River near Edenville, Michigan. The facilities were constructed between 1923 and 1925. One of the facilities was substantially rebuilt in 1945. The others contain original turbine-generators and power plant equipment. The facilities have a combined generating capacity of approximately 10.5 MW. Wolverine's current ten-year moving average hydroelectric production rate for these facilities is approximately 33.0 million kilowatt hours ("kWh") per year.

The power generated at Wolverine is sold to Consumers, the local electric utility pursuant to a PPA that expires in May 2023, but provides for re-negotiation of the energy and capacity prices every ten years. Commencing in 1996, when the Wolverine contract was up for re-negotiation, the Company declined to enter into a new, ten-year price agreement with Consumers, believing that it would be able to negotiate better rates in the future.

Presently, the implementation of the electric power deregulation process in Michigan is delayed primarily because of a regulatory challenge by the utilities. The prevailing retail consumer rates are eight to nine cents per kWh, while Consumers signed the majority of the important industrial customers to long term, direct supply agreements. The prevailing non-utility generators ("NUG"s) rates are six cents per kWh. The parent of Consumers, following its conversion of a nuclear plant into a fossil fuel plant, owns approximately 90 % of NUG capacity in the area serviced by Consumers.

The development and ownership of hydroelectric power facilities, like Wolverine, in the United States is governed by the Federal Energy Regulatory Commission (the "FERC"). In general, all hydroelectric facilities on navigable waterways must apply for, and receive, licenses. Wolverine applied for its licenses in 1989 and in September 1998, 30-year licenses to own and operate the facilities were granted. The licenses stipulate certain operating and water flow regime conditions. According to these conditions, the Company is required to modify its method of operation to release a minimum daily flow of water. The effect of the required modifications is not material on the future results of operations.

Wolverine employees perform the operations, maintenance and management of the plants, while major repairs are contracted out.

The Company sold Wolverine to a third party in August 2003.

Modular

Modular Diesel Facilities. Modular owned three generating facilities developed in 1999 and 2000 and located in Alma, Chelsea and Coldwater, Michigan ("Modular I").

The Alma facility was a 19.6 MW facility, housed in a permanent, 6,000 square foot Butler-type building in the Alma North Industrial Park. The Alma generating equipment consisted of five Caterpillar 3516B diesel engine generator sets, two combustion turbines and related switchgear.

The Chelsea facility was a 3.4 MW facility consisting of 3 trailer mounted Caterpillar 3512 diesel generator sets and related switchgear. The trailer mounted generating equipment at Chelsea was able to be mobilized in one day.

The Coldwater facility was a 20 MW facility consisting of nine trailer-mounted and/or containerised Caterpillar 3516's, one Cummins generator set and related switchgear.

Capacity and energy from the Modular I facilities was sold to Consumers under 2 similar PPAs that expired in 2005 ("the Modular I PPA's"). Pursuant to the Modular I PPAs, Modular was obligated to be available for the delivery of standby capacity and energy from its facilities from June 1 to September 30 of each year of the PPAs (May 1 for the Alma facility). Consumers was obligated to make a capacity payment of approximately $1.1 million to Modular with respect to the Alma facility in January of each year and an approximately $1.3 million capacity payment with respect to the Coldwater and Chelsea facilities in May of each year. In addition, if called on to run by Consumers, Consumers was obligated to pay Modular for up to 400 hours of energy produced and sold from each facility (Coldwater and Chelsea) (450 hours at Alma) annually at a rate described in the Modular I PPAs, which was adjusted for fuel prices. Modular was not obligated to sell more than 400 hours of energy to Consumers from the Coldwater and Chelsea facilities and 450 hours of energy from the Alma facility in each calendar year.

The Company also from time to time generated additional energy revenues with respect to its Alma, Chelsea and Coldwater facilities in the off-season. After October 1, and prior to June 1, the Company sought parties interested in paying to contract any or all of its Modular's power generation equipment/facilities. For the years ended December 31, 2001 and 2000, the Company generated approximately $10,000 and $500,000, respectively from power generation equipment contracted by another utility.

On December 14, 2000, the Company signed a new one-year PPA to provide 46.4 MW of capacity and related energy from new, incremental facilities ("Modular II") to Consumers pursuant to a new, one-year PPA ("the Modular II PPA"). The Company was negotiating to purchase certain interests, including an existing 5-year contract and certain equipment, sites and interconnection rights to permanently develop and construct the Modular II project. The Modular II PPA with Consumers required the Company to provide 46.4 MW of peaking capacity for the period from May 1, 2001 through September 30, 2001 when called upon to supply. Under the Modular II PPA the Company was to supply capacity and energy from any available source including its Modular I facilities. The Company received $2,784,000 from Consumers for capacity provided pursuant to the Modular II PPA, which it appropriately recorded as deferred revenues in the financial statements at December 31, 2000 and recognized the revenues over the periods earned. The Company hoped to extend the Modular II PPA for an incremental five years and with such extended PPA in place, the Company expected to finance and build permanent facilities. The Company retained agents to petition Consumers for an extension of the PPA. During 2001, the Company expended funds to pay the Modular Contractors for the development, procurement and construction of permanent Modular II facilities, including the acquisition of the necessary permits to begin construction of the facilities as well as the procurement of essential long lead-time equipment and other items for the facilities, totalling approximately $2.0 million. The Company tried to obtain the right to the five-year extensions of the Modular II PPA. The Company was unable to obtain the means to successfully complete the above tasks for Modular II. The Company was forced to cancel the planned construction of Modular II and reduce the costs of its development and procurement expenditures to date to net realizable value. During 2001, the Company recorded approximately $1.8 million in additional expense to reflect the write down to net realizable value of these costs. The Company accordingly has written down to net realizable value the expenditures and obligations incurred on Modular II to date. (See Note 3 of Notes to Financial Statements).

In late July and early August 2001, Michigan suffered through extremely hot conditions. Accordingly, Modular received notice to provide electricity to Consumers pursuant to the PPAs (both Modular I and Modular II). Because Modular II was not fully operational and also because of certain equipment failures at Modular I, the Company was subject to liquidated damages payable to Consumers in the amount of approximately $750,000 which was reflected as an expense in the Company's financial statements.

In January 2002, Consumers and Modular agreed to resolve their disagreements through an arrangement whereby Consumers released the Company with respect to any liquidated damages or overpayments owed it in exchange for the Company cancelling the Modular I PPA and releasing Consumers from any monies owed the Company in the later years of the Modular I PPA.

The Company transferred Modular to the Modular Contractors in July 2002.

The New World Power Company Limited

Caton Moor Wind Farm. The New World Co Ltd owned and operated a 3 MW wind farm at Caton Moor, Lancashire in northwest England. The project company, commissioned in 1994, along with its UK parent company was exchanged for certain outstanding convertible notes in June 2000 and is no longer owned or operated by the Company.

IV. CURRENT STATUS

The Company currently does not own any electric generating assets. It is negotiating to acquire certain existing distributed generation power plants; however it has yet to enter into any definitive transactions. The Company is also seeking to develop new facilities. Both the existing plants the Company is seeking to acquire as well as the new facilities it is planning to develop are consistent with the Company's business plan to focus on distributed power facilities under 1 megawatt that sell their output to industrial and commercial customers located next to the generating facilities.

Resource Energy Corporation Technology

At the end of 2003, the Company acquired, for a maximum of 2,322,976 shares of the Company's common stock, the membership interests of Resource Energy Corporation ("Resource"). Resource did not generate any revenues in 2003.

The Company acquired Resource for its technology, which the Company believes is deployable in distributed generation projects, as follows:

1) Resource technology harnesses low-grade waste heat to produce electric power and energy. Most useful waste heat is "high-grade", that is, heat at temperatures equivalent to or exceeding 1000(degree) Fahrenheit, as well as certain rare densities and pressures. The vast majority of waste heat is "low-grade", that is, heat at low temperatures (200(degree) Fahrenheit), densities, and pressures. Most low-grade heat is not used productively but simply dissipated into the atmosphere;

2) Resource technology harnesses low-grade waste heat very efficiently. The Company's gross conversion of waste heat to useful electric output is approximately 25%, and net of system parasitic loads is approximately 22%; and

3) Resource technology is extremely cost-effective. The Resource Energy system costs a fraction of other, comparable equipment with similar efficiencies, uses no fuel, has few moving parts, most of which are "off the shelf" components, and is scalable. The Company expects to continue to develop the Resource technology for commercial use, and begin to deploy projects using the Resource technology in 2005. The Company also acquired Resource's commitment from certain Resource investors to invest up to $1 million into Resource. This commitment is assumable by the Company. If the committed funds are not invested, the shares of common stock issued to Resource would be reduced by as much as 1,275,000 shares.

V. REGULATION

The Company is subject to federal and state energy laws and regulations and federal, state and local environmental laws and regulations in connection with the development and operation of its generating facilities.

Domestic Regulation

Federal Regulation: Pursuant to authority granted to the FERC under the Public Utility Regulatory Policy Act ("PURPA"), the FERC has promulgated regulations which generally exempt small power production facilities with capacities of less than 30 MW from the provisions of the Federal Power Act ("FPA") (except for licensing requirements applicable to hydroelectric projects and certain other matters), the Public Utility Holding Company Act ("PUHCA"), and state laws respecting rates and financial and organizational regulation of electric utilities. All of the Company's hydroelectric generating facilities are believed to be entitled to the full range of regulatory exemptions available under PURPA. The Wolverine facilities are subject to licensing regulation pursuant to the Federal Power Act.

The Energy Policy Act ("EPACT") amended PUHCA to allow independent power producers, under certain circumstances, to own and operate eligible facilities not exempted by PURPA in the United States or foreign countries without subjecting these producers to registration or regulation under PUHCA and without jeopardizing the qualifying status of their existing exempt projects. A company exclusively in the business of owning or operating generating facilities and selling electricity at wholesale or retail in a foreign country is also eligible for this exemption, as long as neither the company nor its subsidiaries sell electricity to retail customers within the United States.

In the absence of exemptions from the regulations discussed above, the activities of the Company would be subject to a pervasive framework of federal and state regulation applicable to public utilities, including regulation of power sales prices, encumbrances of property, accounting practices and all other activities deemed necessary and convenient in the regulation of public utilities. Should this occur, the Company could be subject to regulation as a public utility holding company under PUHCA, which would have a material adverse effect on the Company's business. The Company intends to conduct its operations so that it continues to qualify for the applicable exemptions under PURPA and PUHCA and has no reason to believe that these exemptions will be changed by legislative or regulatory action. Congress now has under consideration legislation that would reduce or eliminate the PUCHA restrictions.

State Regulation: State public utility commissions ("PUCs"), including Michigan, have broad authority to regulate both the price and financial performance of electric utilities. Since a power sales contract will become a part of a utility's cost structure (and therefore is generally reflected in its rates), power sales contracts between an independent power producer ("IPP"), such as the Company, and a regulated utility, some PUC's assert and exercise the right to approve these contracts at the outset.

Local Permits: Local governments in certain jurisdictions require IPP's to apply for and obtain permits before erecting and installing generators. Applications may be considered at a public hearing. The permits generally terminate after a fixed period of time, although the permits are revocable for cause. Permits frequently contain numerous conditions, including safety setback requirements, noise setback requirements, environmental requirements and annual reporting requirements. The Company believes that it has or will be able to obtain and renew all necessary permits subject to any requirements relating to the siting and operation of each sites.

Environmental Regulation: The Company is subject to environmental laws and regulation at the federal, state and local levels in connection with the development, ownership and operation of its electrical generating facilities. The laws and regulations applicable to the Company primarily involve environmental concerns associated with the siting of the generating facilities such as noise and visibility. The Company believes that its existing electric generating facilities are in compliance with environmental laws and regulations applicable to them. If such laws and regulations are altered, however, and the Company's facilities are not exempted there from, the Company may be required to incur significant expenses to comply with such laws and regulations. Furthermore, the existence of certain environmental laws and regulations may have an adverse effect on the Company's ability to find suitable sites for new energy generating facilities. 7

International Regulation

The Company currently only engages in business in the United States.

Competition

Revenue derived from the Company's existing electrical generating facilities is sold under PPAs. Therefore, competition with respect to an existing electric generating facility with a PPA in place is generally not a significant business risk in the near term, with the notable exception of future energy prices. However, the rates the Company might obtain on future PPAs will be affected by prevailing utility price at the time the rates are set.

Competition for acquisitions of operating electric power facilities is significant. This competition may significantly reduce the Company's opportunity to make any incremental acquisitions. There are other companies in the business of owning, operating and acquiring electric power generation facilities that are larger and have greater financial resources than the Company. Furthermore, other large, well-capitalized entities may choose to enter the independent power producing industry, creating the potential for significant additional competition.

Employees

As of December 31, 2003, the Company employed 3 people. As of December 31, 2002 and 2001, the Company and its subsidiaries employed 7 people on a full time basis and 2 persons on a part-time basis. The Company also contracts with industry consultants from time to time for project evaluation, restructuring and financing services and advice.