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SECURITIES & EXCHANGE COMMISSION
WASHINGTON DC 20549
Form 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or (15)D OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
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)
As of May 18, 2000 there were 4,692,750 shares of the Registrant's
common stock outstanding.
Transitional Small Business Disclosure Format (check one)
YES [ ] NO [ X ]
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PART I
ITEM 1. Financial Statements.
EXHAUST TECHNOLOGIES, INC.
Form 10-QSB
For the Quarter Ended April 30, 2000
INDEX
PART I - Interim Financial Information (Unaudited)
Item 1 - Interim Financial Statements:
- Balance Sheets - April 30, 2000 and January 31,
2000
- Statements of Loss - Three months ended April 30,
2000 and 1999
- Statements of Cash Flows - Three months ended
April 30, 2000 and 1999
- Notes To Financial Statements
Item 2 - Management's Discussion and Analysis and Plan
of Operation
PART II - Other Information
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EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
APRIL 30, 2000
April 30, January 31,
2000 2000
(Unaudited)
---------- -----------
ASSETS
CURRENT:
Cash $ 1,627 $ 352
Accounts receivable 31,697 -
Inventory 115,958 108,545
----------- ----------
TOTAL CURRENT ASSETS 149,282 108,897
----------- ----------
EQUIPMENT, net of accumulated
depreciation of $9,309 101,192 95,186
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OTHER ASSETS:
Licenses, net of accumulated
amortization of $9,371 22,062 23,562
Deferred stock offering costs 73,893 39,300
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TOTAL OTHER ASSETS 95,955 62,862
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$ 346,429 $ 266,945
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT:
Accounts payable $ 100,859 $ 34,955
Accrued interest 20,353 9,503
Line of credit-related party 424,664 345,266
----------- ----------
TOTAL CURRENT LIABILITIES 545,876 389,724
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STOCKHOLDERS' DEFICIT:
Common stock, $.00001 par value,
100,000 shares authorized,
4,692,750 shares outstanding 47 47
Additional paid-in capital 102,088 102,088
Deficit accumulated during the
development stage (301,582) (224,914)
----------- ----------
TOTAL STOCKHOLDERS' DEFICIT (199,447) (122,779)
----------- ----------
$ 346,429 $ 266,945
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EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS
(Unaudited)
Three Three Date of
Months Months Inception
Ended Ended (07/21/98)
April 30, April 30, Through
1999 2000 04/30/00
--------- --------- ----------
SALES $ - $ 37,853 $ 37,853
COST OF SALES - 30,946 30,946
--------- --------- ----------
Gross profit - 6,907 6,907
--------- --------- ----------
OPERATING EXPENSES:
Professional services 22,173 25,104 89,734
Research and
development - 25,322 69 ,25
Advertising 1,300 13,600 37,266
Office expense 925 194 3,608
Compensation - - 30,000
Amortization 550 1,500 9,371
Travel - 666 9,872
Director's fees - - 30,000
Dues and subscriptions - 2,880 3,155
Supplies - 65 2,711
Repairs - 800 800
Depreciation - 2,594 2,594
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Total operating
expenses 24,948 72,725 288,136
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Loss from operations (24,948) (65,818) (281,229)
Interest expense (450) (10,850) (20,353)
--------- --------- ----------
Net loss $ (25,398) $ (76,668) $ (301,582)
========= ========= ==========
Net loss per share-
basic and diluted $ (0.01) $ (0.02)
========= =========
Weighted average
number of shares-
basic and diluted 4,682,385 4,692,750
========= =========
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EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
Three Three Date of
Months Months Inception
Ended Ended (07/21/98)
April 30, April 30, Through
1999 2000 04/30/00
--------- --------- ----------
Cash flows from
operating activities:
Net loss $ (25,398) $ (76,668) $ (301,582)
Adjustments to
reconcile net loss
to net cash used in
operating activities:
Amortization and
depreciation 550 4,094 11,965
Contributed services - - 30,000
Issuance of common
stock for services - - 30,000
Changes in assets and
liabilities:
Accounts receivable - (31,697) (31,697)
Accounts payable 7,516 65,904 100,859
Inventory (1,030) (7,413) (108,747)
Accrued interest 450 10,850 20,353
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Net cash used in
operating activities (17,912) (34,930) (248,849)
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Cash flows from
investing activities:
Cash paid for licenses (6,600) - (15,592)
Cash paid for property
and equipment - (8,600) (103,786)
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Net cash used in
investing activities (6,600) (8,600) (119,378)
--------- --------- ----------
Cash flows from
financing activities:
Borrowings under line
of credit-related
party - 79,398 417,453
Net proceeds from sale
of common stock 10,050 - 26,294
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EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
Concluded
(Unaudited)
Three Three Date of
Months Months Inception
Ended Ended (07/21/98)
April 30, April 30, Through
1999 2000 04/30/00
--------- --------- ----------
Deferred stock
offering costs - (34,593) (73,893)
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Net cash provided by
financing activities 10,050 44,805 369,854
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Net increase (decrease)
in cash (14,462) 1,275 1,627
Cash, beginning of
period 27,265 352 -
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Cash, end of period $ 12,803 $ 1,627 $ 1,627
========= ========= ==========
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
========= ========= ==========
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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 SX 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 year ended January 31,
2000. 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 three-month period ended April 30, 2000 are
not necessarily indicative of the results that may be expected for the
year ending January 31, 2001.
2. DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
The Company has been in the development stage since its inception. The
Company has incurred losses since inception. While the Company has
commenced selling its product, sales have not been sufficient to pay
expenses. 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.
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EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
Management of the Company has undertaken certain actions to address
these conditions. Management has commenced operations and has found
companies to manufacture its products. Funds required to carry out
management's plans are expected to be derived from future stock sales,
borrowings from the Company's shareholders or sales of its products.
There can be no assurances that the Company will be successful in
executing its plans.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
This Quarterly Report on Form 10-QSB, including the information
incorporated by reference herein, includes "forward looking statements"
within the meaning of section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All of the
statements contained in this Quarterly Report on Form 10-QSB, other
than statements of historical fact, should be considered forward
looking statements, including, but not limited to, those concerning the
Company's strategies, objectives and plans for expansion of its
operations, products and services and growth in demand for the
Company's services. There can be no assurance that these expectations
will prove to have been correct. Certain important factors that could
cause actual results to differ materially from the Company's
expectations (the "Cautionary Statements") are disclosed in the annual
report filed on Form 10-KSB. All subsequent written and oral forward
looking statements by or attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by such
Cautionary Statements. Investors are cautioned not to place undue
reliance on these forward looking statements, which speak only as of
the date hereof and are not intended to give any assurance as to future
results. The Company undertakes no obligation to publicly release any
revisions to these forward looking statements to reflect events or
reflect the occurrence of unanticipated events.
Plan of Operation
During the next twelve months, we plan to expand our markets and
aggressively promote our products.
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. The line of credit has
been used and the president has advanced funds in excess of the line of
credit to allow the company to continue operations. At April 30, 2000,
we owed Mr. Sterling $424,664. 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.
Three months ended April 30, 2000 (unaudited) compared to the three
months ended 30, 1999 (unaudited)
During the three months ended April 30, 2000, the Company began to
sell limited quantities of its products. The Company recognized total
revenue in the first quarter of 2000 of approximately $38,000 as
compared to $-0- for the same period of the prior year. The Company
has discounted its product prices to its initial customers, which has
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reduced revenues and contributed to a lower gross margin than
management expects for future periods. In addition, due to the limited
sales for the period ended April 30, 2000, the Company has not been
able to take advantage of purchasing components with volume discounts
or efficiently use its production staff or facilities which increases
the cost of its products. As the Company ramps up its production
efforts, the Company expects to reduce product costs and efficiencies
should be gained through economies of scale. However, there can be no
assurances that such efficiencies or other cost controls can be
implemented, and if implemented will result in an increased gross
margin.
Operating Expenses:
Operating expenses include those costs incurred to bring the
Company's product to market relative to research and development,
sales, marketing, and general administration. Operating expenses
increased for the three months ended April 30, 2000 to a approximately
$73,000 from approximately $25,000 for the same three-month period in
1999. The increase of $48,000 for the three month period was primarily
due to the Company ramping up operations operations to begin sales
efforts related to initial market penetration. Specifically, for the
three months ending April 30, 2000, professional expenses increased
approximately $3,000, advertising, increased approximately $12,000 and
general and administrative expenses increased $7,000. Additionally, the
Company incurred costs in 2000 related to research and product
development of approximately $25,000, which was necessary to finalize
development of the product for market introduction.
Net Loss:
Primarily as a result of the foregoing factors, the Company's net
loss was approximately $76,000 and $25,000, respectively, for the three
month period ended April 30, 2000 and 1999.
Financial Condition and Liquidity
At April 30, 2000, the Company had $1,627 of cash. The majority
of 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.
Some cash has been received as a result of sales of products. 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.
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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 three months ended April 30, 2000.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Exhibit No Description
27 Financial Data Schedule.
No reports on Form 8-K were filed for the quarter ended April 30,
2000.
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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.
Dated this 14th day of May, 2000.
EXHAUST TECHNOLOGIES, INC.
BY: /s/ Robert E. Sterling
Robert E. Sterling, President and
Chief Executive Officer
