<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10 QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended SEPTEMBER 30, 2000
[ ] Transition report pursuant of Section 13 or 15(d) of the Securities
Exchange Act of 1939 for the transition period _____ to ______
COMMISSION FILE NUMBER 000-25973
---------
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
-----------------------------------------
(Exact name of registrant as specified in its charter)
California 68-0406331
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3197 Boeing Road, Cameron Park, Ca. 95682 Telephone 530 677 3233
--------------------------------------------------------------------------------
(Address of Principal Executive Offices, including Registrant's zip code
and telephone number)
NONE
--------------------------------------------------------------
Former name, former address and former fiscal year, if changed
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
The number of shares of the registrant's common stock as of September 30, 2000:
2,194,350 shares.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Balance Sheet 3
(b) Statement of Operations 4
(c) Statement of Changes in Financial Position 5
(d) Statement of Shareholders' Equity 6
(e) Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
Item 3. Risks 9
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults On Senior Securities
Item 4. Submission of Items to a Vote
Item 5. Other Information
Item 6.
(a) Exhibits
(b) Reports on Form 8K
SIGNATURES 11
FINANCIAL DATA SCHEDULE 12
2
<PAGE>
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
September 30, December 31,
2000 1999
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 2,999 $ 3,737
Accounts receivable 10,746 2,455
Inventory 27,562 5,589
------------ ------------
Total current assets 41,307 11,781
Equipment & furniture 28,954 24,812
Depreciation 4,668 3,468
------------ ------------
24,286 21,344
Total assets $ 65,593 $ 33,125
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,300 $ 15,777
Accruals 4,729 3,926
Loans from shareholders 21,567 31,176
------------ ------------
Total current liabilities 34,596 50,879
Shareholders' equity
Common stock (no par value) 20,000,000 shares
authorized; September 30, 2000-2,194,350 issued
and 2,113,100 outstanding; December 31, 1999
-2,034,350 issued and outstanding 170,424 155,424
Treasury stock-81,250 shares (8,125) -
Paid in capital-Treasury stock 157,525 -
Deficit accumulated during development stage (288,827) (173,178)
------------ ------------
Total shareholders' equity 30,997 (17,754)
Total liabilities and shareholders' equity $ 65,593 $ 33,125
============ ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000
AND SEPTEMBER 30, 1999
(UNAUDITED)
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sales $ 14,901 $ 7,529 $ 32,025 $ 8,304
Cost of sales 12,843 2,293 26,741 2,388
--------------- --------------- --------------- ---------------
Gross profit 2,058 5,236 5,284 5,916
Expenses
Payroll 15,873 7,097 33,077 27,424
Patent - - - 470
Research 180 335 34,757 873
Marketing 6,497 970 8,159 1,338
Travel 3,301 970 9,508 3,670
Depreciation 400 - 4,783 -
Office 2,349 947 1,200 3,474
Postage 179 11 1,465 243
Insurance 865 - 1,725 -
Utilities 300 242 443 404
Telephone 1,184 521 3,297 2,320
Rent 2,663 2,488 7,012 7,572
Professional fees 1,160 2,100 11,755 3,661
Taxes - 718 10 1,528
Public offering expense 432 887 1,900 3,310
--------------- --------------- --------------- ---------------
Total expenses 35,383 17,286 119,091 56,287
Loss from operations before
interest and income taxes (33,325) (12,050) (113,807) (50,371)
Interest expense 97 771 1,042 1,650
--------------- --------------- --------------- ---------------
Net loss before income taxes (33,422) (12,821) (114,849) (52,021)
State income tax - - 800 -
--------------- --------------- --------------- ---------------
Net (loss) $ (33,422) $ (12,821) $ (115,649) $ (52,021)
=============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
<TABLE>
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
AND SEPTEMBER 30, 1999
(UNAUDITED)
<CAPTION>
Nine months Nine months
ended ended
September 30, September 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Funds provided from (used for) operations
Net (loss) during development stage $ (115,649) $ (52,021)
Depreciation 1,200 -
Funds provided by (used for) working capital
Inventory (21,973) 1,407
Accounts receivable (8,292) (833)
Accounts payable (7,477) (4,215)
Accruals 803 1,771
Loans (9,609) 15,060
Funds provided by (used for) equipment purchases (4,141) -
Funds provided from (used for) financing activities
Decrease in long term debt - (55,000)
Stock issued for services 34,500 -
Acquisition of treasury stock (8,125) -
Sale of treasury stock 81,625 -
Proceeds from issuance of stock 56,400 93,800
--------------- ---------------
Net funds provided from (used for) all activities (738) (31)
Cash balance at year end 3,737 360
--------------- ---------------
Cash balance at September 30, 2000 $ 2,999 $ 329
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE>
<TABLE>
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
<CAPTION>
Common stock Deficit
--------------------------- accumulated
during
Number of development
shares Amount stage
------------ ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1998 1,497,200 $ 61,623 $ (107,635)
Common stock issued after acquisition 149,900
Common stock issued under 504 offering 366,000 71,001
Common stock issued under 506 offering 21,250 22,800
(Loss) for the nine months (52,021)
------------ ------------ ------------
Balance at September 30, 1999 2,034,350 $ 155,424 $ (159,656)
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Common stock Deficit
--------------------------- Paid in accumulated
capital- during
Number of Treasury development
shares Amount stock stage
------------ ------------ ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1999 2,034,350 $ 155,424 $ $ (173,178)
Common stock issue for treasury shares 160,000 15,000
Common stock received in treasury (205,000)
Common stock issued from treasury for cash
and services, less cost 123,750 157,525
(Loss) for the nine months (115,649)
------------ ------------ ------------ ------------
Balance outstanding at September 30, 2000 2,113,100 $ 170,424 $ 157,525 $ (288,827)
============ ============ ============
Add shares in treasury 81,250 $ 8,125
------------ ============
Balance issued at September 30. 2000 2,194,350
============
The accompanying notes are an integral part of these financial statements.
</TABLE>
6
<PAGE>
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
AND SEPTEMBER 30, 1999
(UNAUDITED)
GENERAL
The Company has been in the development stage since it acquired the
deficit accumulated by Nevada Energy Control Systems, Inc., in developing an
evaporator fan control system. The Company's activities have consisted of
obtaining financing and capital and initiating marketing of the product. The
Company filed a public offering as of June 5, 1998. Since that date, the Company
has sold stock in compliance with an exemption from registration under the
Federal and State Securities laws provided by Regulation D, Rule 504 and Rule
506 of the Securities and Exchange Commission. Due to changes in requirements to
be listed on the over the counter bulletin board by the National Association of
Security Dealers, the Company filed Form 10SB12G on May 2, 1999 with the
Securities and Exchange Commission in order to qualify for listing and is now
listed on NASDAQ OTC Bulletin Board.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. EQUIPMENT AND FURNITURE
Equipment and furniture are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of seven years.
The Company recognizes an impairment loss on a fixed asset when the
asset is no longer useful and the carrying amount of the asset cannot be
realized through sale.
B. INVENTORIES
The Company has adopted the first-in, first-out (FIFO) method of
inventory valuation or market, if that is lower.
C. RESEARCH AND DEVELOPMENT
As a development stage company the Company expenses all research and
development costs.
INVENTORIES
Inventory consists of finished evaporator fan control units and parts.
September 30, December 31,
2000 1999
------------ ------------
Finished goods $ 10,519 $ 1,470
Parts 17,043 4,119
------------ ------------
Total $ 27,562 $ 5,589
============ ============
EQUIPMENT AND FURNITURE
Equipment and furniture consist of testing equipment and office equipment and
furniture.
September 30, December 31,
2000 1999
------------ ------------
Testing equipment $ 15,176 $ 14,116
Office furnishings 13,778 10,696
------------ ------------
Total $ 28,954 $ 24,812
============ ============
7
<PAGE>
INCOME TAXES
The Company has a tax loss carry-forward resulting from the acquisition of
Nevada Energy Control Systems, Inc., of approximately $42,000. It has an
additional tax loss carry-forward resulting from losses in 1998, 1999 and 2000
of $288,827. No operating tax loss carry-forward benefits have been recognized
in the financial statements as realization is uncertain.
RELATED PARTY TRANSACTIONS
Three of the founding stockholders have been active in the running of the
day-to-day business of the Company on a full or part-time basis. They have
received little or no compensation for such work and there is no deferred
compensation payable by the Company.
COMMON STOCK
Shares of common stock issued to acquire Nevada Energy Control Systems Research,
to founders and key people and sold under Rule 506 are restricted.
The Company issued 150,000 shares of stock in payment of a debt with an
agreement by the debtor to return half of the shares if the value on the NASDAQ
OTC Bulletin Board reached a certain level. In accordance with the agreement the
debtor returned 55,000 shares to treasury and such shares have been reissued for
services and cash. Such amounts have been included in "Paid in capital- Treasury
stock".
The Company acquired 150,000 shares of unrestricted stock in treasury, issuing
160,000 shares of restricted stock. The Company has sold 68,750 shares for cash
that have been included in "Paid in capital-Treasury stock".
8
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This analysis contains forward-looking COMMENTS, WHICH are based on current
information. Actual results in the future may differ materially.
The Company is engaged in the business of designing, manufacturing and marketing
energy efficiency and conservation products. The Company's second and third
products, the ART4000N and the ART5000, are currently in production. They are
patented evaporator fan controllers for walk-in refrigerators and freezers,
which can save the consumer from 30-40% in refrigeration energy costs. In
addition, the ART 5000 unit keeps track of energy consumption and savings, and
gives warnings of possible maintenance problems.
During these nine months, the Company's products have qualified for rebate
programs offered to both small and large commercial users of refrigeration by
three of the largest investor-owned utilities in California. These rebate and
incentive programs enable small business owners, in particular, to take
advantage of energy saving equipment, such as the ART Evaporator Fan
Controllers. The Company has begun working with several Manufacturers Sales
Representatives to sell the Company's products on a commission basis, especially
in the geographic areas covered by these utilities.
Also during these nine months, the Company was selected to supply over 20 ART
4000N units to two convenience store chains for testing, through a division of
PG&E Energy Services. Since that test PG&E Energy Services has been sold to
Chevron. The Company has reestablished negotiations with Chevron, however no
contract has been signed.
The San Diego City School District also purchased several ART5000 units to
accompany their earlier installations of 25 ART4000 units in their school
cafeterias.
The Company is completing the design effort on the ART 6000, which offers the
ability to remotely access its cost savings and alarm information. It is planned
to begin shipments of this model in the year 2001.
The Company has had problems with its new 5000 product. The Company has stopped
production of this unit until it has been redesigned to eliminate the problem.
Redesign of the unit should be completed in November, 2000. The Company will
then install and test the unit in three locations.
During the third quarter Robert Schlick joined the Company as an Executive Vice
President working currently in the Marketing area.
The comparison of the third quarter and first nine months of 2000 with the third
quarter and first nine months of 1999 indicates that the Company is spending at
about the same level. Marketing efforts will be stepped up as finances allow.
Item 3. Risks
The Company will continue in its efforts to raise capital so that the ART
Evaporator Fan Controllers can be sold and delivered. There can be no assurance
that the Company will be able to obtain capital.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings NONE
Item 2. Changes in securities and use of proceeds NONE
Item 3. Defaults on senior securities NONE
Item 4. Submission of items to a vote NONE
Item 5. Other information NONE
Item 6.
a) Exhibits NONE
b) Reports on 8K NONE
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Advanced Refrigeration Technologies, Inc.
Dated: November 16, 2000 By: /s/ Charles E. McEwan
---------------------------
Charles E. McEwan, President
Dated: November 16, 2000 By: /s/ Clare C. Schrum
---------------------------
Clare C. Schrum, Chief Financial Officer
11
