<PAGE> 1
=====================================================================
U S SECURITIES & EXCHANGE COMMISSION
WASHINGTON DC 20549
10-QSB
(Mark One)
[ x ] QUARTERLY REPORT UNDER SECTION 13 or (15) D OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ______________ to _____________
Commission file number 000-25875
EXHAUST TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Washington 91-1970433
(State or other jurisdiction of (IRS Employer Identification
Incorporation or Organization) No.)
230 North Division Street
P. O. Box 2822
Spokane Washington 99220-2822
(Address of principal executive office)
(509) 838-4401
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (D) of the Exchange Act during the past 12 months ( or
for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the
past 90 days. YES [ x ] NO [ ]
As of December 13, 1999 there were 4,692,750 shares of the Registrant's
common stock outstanding.
Transitional Small Business Disclosure Format (check one)
YES [ ] NO [ x ]
=====================================================================
<PAGE> 2
EXHAUST TECHNOLOGIES, INC.
Form 10-QSB
For the Quarter Ended October 31, 1999
INDEX
PART I - Financial Information
Item 1 - Financial Statements:
- Balance Sheet - October 31, 1999
- Statement of Loss - October 31, 1999
- Statement of Cash Flows - October 31, 1999
- Notes To Interim Financial Statements
Item 2 - Management's Discussion and Analysis or Plan of Operation
PART II - Other Information
<PAGE> 3
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
OCTOBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT:
Cash $ 516
Inventory 29,983
Prepaid expenses 10,866
----------
TOTAL CURRENT ASSETS 41,365
----------
EQUIPMENT, net of accumulated
depreciation of $6,715 57,409
----------
OTHER ASSETS:
Licenses, net of accumulated
amortization of $3,486 27,948
Deferred stock offering costs 25,000
----------
TOTAL OTHER ASSETS 52,948
----------
$ 151,722
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT:
Accounts payable $ 36,250
Accrued interest 4,534
Line of credit-related party 177,160
----------
TOTAL CURRENT LIABILITIES 217,944
----------
STOCKHOLDERS' DEFICIT:
Common stock, $.00001 par value;
100,000,000 shares authorized:
4,692,750 shares issued and
outstanding 47
Additional paid-in capital 72,088
Deficit accumulated during the
development stage (138,357)
----------
TOTAL STOCKHOLDERS' DEFICIT (66,222)
----------
$ 151 722
==========
</TABLE>
<PAGE>
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS
<TABLE>
<CAPTION>
Date of
Three Three Nine Inception
Months Months Months (07/21/98)
Ended Ended Ended Through
10/31/99 10/31/98 10/31/99 10/31/99
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ -
-------- -------- --------- ---------
OPERATING EXPENSES
Professional services 8,002 - 49,447 49,447
Research and development 25,347 - 40,518 40,518
Advertising - - 1,300 1,300
Office expense 772 304 2,391 3,050
Amortization 628 678 1,902 3,486
Travel 262 295 262 3,100
Director's fees - 30,000 - 30,000
Dues and subscriptions 275 - 275 275
Supplies 2,647 - 2,647 2,647
-------- -------- --------- ---------
TOTAL OPERATING EXPENSES 37,933 31,277 98,742 133,823
-------- -------- --------- ---------
LOSS FROM OPERATIONS (37,933) (31,277) (98,742) (133,823)
-------- -------- --------- ---------
OTHER EXPENSE:
Interest expense (2,517) - (3,749) (4,534)
-------- -------- --------- ---------
NET LOSS $(40,450) $(31,277) $(102,491) $(138,357)
-------- -------- --------- ---------
NET LOSS PER SHARE -
BASIC AND DILUTED $ (0.01) $ (0.01) $ (0.02)
======== ======== =========
WEIGHTED AVERAGE
NUMBER OF SHARES -
BASIC AND DILUTED 4,692,750 4,500,000 4,687,405
========= ========= =========
</TABLE>
<PAGE> 5
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Nine Date of Inception
Nine Months (07/21/98
Ended Through
10/31/99 10/31/99)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (102,491) $ (138,357)
Adjustments to reconcile net loss
to net cash in operating activities:
Amortization and depreciation 1,902 3,486
Changes in assets and liabilities:
Deposits (25,000) (25,000)
Accounts payable 36,250 36,250
Inventory (21,992) (29,983)
Prepaid expenses (10,866) (10,866)
Accrued interest 3,749 4,534
---------- -----------
Net cash used in
operating activities (118,448) (129,936)
Cash flows from investing activities:
Cash paid for licenses (57,409) (57,409)
Cash paid for property and equipment (15,593) (15,593)
---------- -----------
Net cash used in investing
activities (73,002) (73,002)
Cash flows from financing activities:
Borrowings under line of
credit - related party 154,651 177,160
---------- -----------
Net proceeds from sale of
common stock 10,050 26,294
---------- -----------
Net cash provided by
financing activities 164,701 203,454
---------- -----------
Net increase (decrease) in cash (26,749) 516
Cash, beginning of period 27,265 -
---------- -----------
Cash, end of period $ 516 $ 516
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During Period for:
Interest $ - $ -
========== ===========
Taxes: $ - $ -
========== ===========
Non-Cash Financing Activities:
Common Stock for Licenses: $ $ 15,841
========== ===========
Inventory Advanced Under Line
of credit-related party: $ - $ 7,211
========== ===========
</TABLE>
<PAGE> 6
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
The foregoing unaudited interim financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X
as promulgated by the Securities and Exchange Commission.
Accordingly, these financial statements do not include all of
the disclosures required by generally accepted accounting
principles for complete financial statements. These unaudited
interim financial statements should be read in conjunction with
the audited financial statements for the period ended January
31, 1999. In the opinion of management, the unaudited interim
financial statements furnished herein include all adjustments,
all of which are of a normal recurring nature, necessary for
a fair statement of the results for the interim period
presented.
The preparation of financial statements in accordance with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities known to exist as of the date the financial
statements are published, and the reported amounts of revenues
and expenses during the reporting period. Uncertainties with
respect to such estimates and assumptions are inherent in the
preparation of the Company's financial statements; accordingly,
it is possible that the actual results could differ from these
estimates and assumptions that could have a material effect on
the reported amounts of the Company's financial position and
results of operations.
Operating results for the nine-month period ended October
31, 1999 are not necessarily indicative of the results that may
be expected for the year ending January 31, 2000.
2. Development Stage Operations and Going Concern
The Company has been in the development stage since its
inception. The Company has no recurring source of revenue and
has incurred losses since inception. These factors raise
substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any
adjustments that may be necessary if the Company is unable to
continue as a going concern.
Management of the Company has undertaken certain actions
to address these conditions. Management currently plans to
commence production in fiscal 2000. To this end, management
is currently in negotiations with manufacturers to produce the
Company's products and with marketing representatives to
establish a product channel. Funds required to carry out
management's plans are expected to be derived from future stock
sales or borrowings from the Company's shareholders. There can
be no assurances that the Company will be successful in
executing its plans.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
GENERAL
These discussions contain forward-looking statements containing
words such as "will continue to be," "will be," "continue to,"
"anticipates that," "to be," or "can impact." Management cautions
that forward-looking statements are subject to risks and
uncertainties that could cause the Company's actual results to
differ materially from those projected in forward-looking
statements.
PLAN OF OPERATION
During the next twelve months, we plan to:
1. Complete agreements for the manufacture of the Turbolator
and PHTEM.
2. Initiate manufacturing of the Turbolator and PHTEM.
3. Begin selling the Turbolator and PHTEM.
We have inadequate cash to maintain operations during the next
twelve months. In order to meet our cash requirements we have to
raise additional capital through a stock offering. If the offering
is unsuccessful, we may have to cease operations. Other than the
stock offering, we have no other plans to raise additional capital.
Further, we have not initiated any negotiations for additional
loans, other than a $400,000 line of credit from our president. We
believe that we will need to raise at least $3,000,000 from the
offering in order to maintain operations during the next twelve
months. At October 31, 1999, we owed Mr. Sterling $177,160.
We do not intend to conduct any additional product research or
development. We believe that the Turbolator and PHTEM are ready for
manufacturing and marketing in their current status.
NINE MONTHS ENDED OCTOBER 31, 1999
For the nine months ended October 31, 1999 the Company reported
a net loss of $102,491. The Company is in the development stage and
has been since inception. The operating expenses that were incurred
were for professional costs related to Securities and Exchange
Commission filing fees and preliminary costs advanced towards future
product production. The Company is in the process of obtaining
manufacturers for its products and sales outlets. There have been
no revenues received since inception and no revenues are expected
until management receives the necessary funds to begin production.
FINANCIAL CONDITION AND LIQUIDITY
At October 31, 1999, the Company had $516 of cash. The
Company's sources of cash have been from short-term borrowings from
a related party and from sales of the Company's common stock.
Future funds required to carry out management's plans are expected
to be derived from future stock sales or borrowings from the
Company's shareholders. There can be no assurances that the Company
will be successful in executing its plans.
<PAGE> 8
Impact of Year 2000
The Company is aware of the issues associated with the
programming code in existing computer systems as the millennium
(year 2000) approaches. The "year 2000" problem is pervasive and
complex as virtually every computer operation will be affected in
some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous
data or cause a system to fail. Since the Company is not producing
or maintaining time sensitive operations at present, the year 2000
problem is not anticipated to have a significant impact on the
Company's operations. However, it may have a significant impact on
key suppliers and customers with whom the Company may conduct
business in the future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company knows of no litigation present, threatened or
contemplated or unsatisfied judgment against the Company, its
officers or directors or any proceedings in which the Company, its
officers or directors are a party.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The rights of the holders of the Company's securities have not
been modified nor have the rights evidenced by the securities been
limited or qualified by the issuance or modification of any other
class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There are no senior securities issued by the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters presented to the shareholders for vote
during the nine months ended October 31, 1999.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the quarter ended October
31, 1999.
EXHIBIT
27 Financial Data Schedule
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EXHAUST TECHNOLOGIES, INC.
/s/ Robert E. Sterling
Robert E. Sterling, President
December 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at October 31, 1999 (Unaudited)
and the Consolidated Statement of Income for the nine months ended October 31,
1999 (Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> OCT-31-1999
<CASH> 516
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 29,983
<CURRENT-ASSETS> 41,365
<PP&E> 64,124
<DEPRECIATION> 6,715
<TOTAL-ASSETS> 151,722
<CURRENT-LIABILITIES> 217,944
<BONDS> 0
0
0
<COMMON> 72,135
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 151,722
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 98,742
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,749
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (102,491)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,491)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.01)
</TABLE>
