U.S. 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 August 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 000-30313
CENTURY CONTROLS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Utah 41-1294552
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3140 Neil Armstrong Blvd, Suite 226, Eagan, MN 55121
(Address of principal executive offices)
(651) 454-0323
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the
Exchange Act subsequent to the distribution of securities under
a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of August 31, 2000: 4,063,635
shares of common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
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FORM 10-QSB
CENTURY CONTROLS INTERNATIONAL, INC.
INDEX
Page
PART I. Financial Information 2
Consolidated Balance Sheets as of August 3
31 and February 29, 2000
Consolidated Statements of Operations for 5
the Three and Six Months Ended August 31,
2000 and 1999
6
Consolidated Statements of Stockholders'
Equity (Deficit). 7
Consolidated Statements of Cash Flows for
the Three and Six Months Ended August 31, 8
2000 and 1999
Management's Discussion and Analysis of
Financial Condition
PART II. Other Information 9
Exhibits and Reports on Form 8-K 9
Signatures 10
PART I.
Financial Information
In the opinion of management, the accompanying unaudited
financial statements included in this Form 10-QSB reflect all
adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the results of operations
for the periods presented. The results of operations for the
periods presented are not necessarily indicative of the results
to be expected for the full year.
2
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CENTURY CONTROLS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
August 31, February 29,
2000 2000
ASSETS
Current assets:
Cash $ 1,540 $ 5,513
Accounts receivable, trade,
net of allowance for doubtful
accounts of $7,000 and $5,000,
respectively 16,983 31,427
Inventories 81,996 79,399
Prepaid expenses 4,431 4,430
Total current assets 104,950 120,769
Fixed assets 61,789 61,789
Less accumulated depreciation 36,401 33,303
Net fixed assets 25,388 28,486
Other assets:
Inventories, less valuation allowance of
$60,000 and $60,000, respectively 20,000 20,000
Deposit 821 821
Patents, net of accumulated amortization
of $5,727 and $4,917, respectively 24,153 27,866
Total other assets 44,974 48,687
Total assets $ 175,312 $ 197,942
3
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CENTURY CONTROLS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
August 31, February 29,
2000 2000
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 23,821 $ 32,117
Notes payable - stockholders 24,100 23,000
Accounts payable 146,187 145,958
Accrued expenses:
Payroll and related 28,937 12,253
Warranty 3,000 3,000
Interest 7,866 6,866
State minimum fee 100 100
Total current liabilities 234,011 223,294
Long-term debt:
Notes payable, net of current maturities 8,903 12,735
Convertible debenture 81,318 -
Total long-term debt 90,221 12,735
Total liabilities 324,232 236,029
Stockholders' equity (deficit):
Common stock, $.004 par value, 50,000,000
shares authorized 16,255 15,455
Additional paid-in capital 1,270,999 1,254,399
Accumulated deficit (1,436,174) (1,307,941)
Total stockholders' equity (deficit) (148,920) (38,087)
Total liabilities and
stockholders' equity (deficit) $ 175,312 $ 197,942
4
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CENTURY CONTROLS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
August 31, August 31, August 31, August 31,
2000 1999 2000 1999
Net sales $ 43,508 $ 69,605 $ 132,635 $ 248,241
Cost of sales 11,827 26,695 42,400 78,390
Gross profit 31,681 42,910 90,235 169,851
Operating expenses 101,206 111,979 209,410 226,104
Operating income (loss) (69,525) (69,069) (119,175) (56,253)
Other expenses:
Inventory valuation allowance - - - -
Interest expense 5,992 1,152 9,058 4,212
Total other expenses 5,992 1,152 9,058 4,212
Net income (loss) before
income taxes (75,517) (70,221) (128,233) (60,465)
Income taxes - - - -
Net income (loss) (75,517) (70,221) (128,233) (60,465)
Other comprehensive
income (loss) - - - -
Comprehensive income
(loss) $(75,517) $(70,221) $(128,233) $(60,465)
Basic earnings per
share (.02) $ (.02) $ (.03) $ (.02)
Weighted-average number of
shares outstanding 4,063,635 3,863,635 3,929,939 3,863,635
Diluted earnings
per share $ (.02) $ (.02) $ (.03) $ (.02)
Weighted-average number of
shares outstanding 4,063,635 3,863,635 3,929,939 3,863,635
5
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CENTURY CONTROLS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Additional
Number of Paid-In Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balances, March 1, 1998 3,863,635 $ 15,455 $1,254,399 $(1,146,235) $123,619
Net loss - 1999 - - - (13,151) (13,151)
Net loss - 2000 - - - (148,555) (148,555)
Balances, February 29, 2000 3,863,635 15,455 1,254,399 (1,307,941) (38,087)
July 1, 2000 common stock
issued as part of
convertible debt
issuance at $.10 per
share, less offering
costs of $2,600 200,000 800 16,600 - 17,400
Net loss - March 1, 2000 to
August 31, 2000 - - - (128,233) (128,233)
4,063,635 $ 16,255 $1,270,999 $(1,436,174) $(148,920)
</TABLE>
6
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CENTURY CONTROLS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31, August 31, August 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (75,517) $ (70,221) $ (128,233) $ (60,465)
Adjustments to reconcile net
income (loss) to net cash flows
from operating activities:
Depreciation 1,549 1,353 3,098 2,706
Amortization 405 282 810 564
Allowance for doubtful accounts 2,000 - 2,000 -
Decrease (increase) in:
Accounts receivable - trade 29,332 51,530 12,444 45,886
Inventories (3,089) (18,184) (2,597) (18,234)
Prepaid expense 1 - - 340
Increase (decrease) in accounts
payable and accrued expenses (52,482) 34,315 8,787 36,089
Bank overdraft - 4,249 - 4,249
Net cash used by operating activities (97,801) 3,324 (103,691) 11,135
Cash flows from investing activities:
Purchase of fixed assets - (4,396) - (4,396)
Incurrence of patent costs - (673) 2,913 (1,475)
Net cash used by investing activities - (5,069) 2,913 (5,871)
Cash flows from financing activities:
Proceeds from convertible debenture
and common stock, net 97,400 - 97,400 -
Net borrowings on notes
payable - stockholders - - 1,100 -
Payment of long-term debt (864) (4,734) (1,695) (8,778)
Net cash from financing activities 96,536 (4,734) 96,805 (8,778)
Increase (decrease) in cash (1,265) (6,479) (3,973) (3,514)
Cash, beginning of year 2,805 6,479 5,513 3,514
Cash, end of year $ 1,540 $ - $ 1,540 $ -
</TABLE>
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
Results of Operations
Three and Six Months Ended August 31, 2000 and 1999
Century Controls International, Inc. ("Century") had net sales of
$43,508 and $69,605 for the three-months ended August 31, 2000
and 1999, respectively; which represents a 60% decrease from
1999. Net sales for the six-months ended August 31, 2000 were
$132,635, an 87% decrease from $248,241 for the same period in
1999. This decrease is primarily a result of higher than normal
sales to a single customer in 1999 that did not recur in 2000.
Management believes that the net sales in fiscal year 2000 are
consistent with historic levels.
Cost of net sales for the three-months ended August 31, 2000 and
1999 were $11,827 and $26,695, respectively. This decrease is
primarily due to fewer sales of product in 2000. Such costs, as
a percentage of net sales for the three-months ended August 31,
2000 and 1999, were 27% and 38%, respectively. Cost of net sales
for the six-months ended August 31, 2000 and 1999 were $42,400
and $78,390, respectively. Such costs, as a percentage of net
sales for the six-months ended August 31, 2000 and 1999 were 32%
and 31%, respectively.
Operating expenses for the three-months ended August 31, 2000 and
1999 were $101,206 and $111,979, respectively. This represents
an 11% decrease from 1999. Operating expenses for the six-months
ended August 31, 2000 and 1999 were $209,410 and $226,104,
respectively. This represents an 8% decrease from 1999. The high
cost of operating expenses is attributable to increased
commissions to independent distributors, and increased
professional fees necessary to become a reporting company under
the Securities Exchange Act of 1934.
Due to the foregoing, Century suffered operating losses of
$69,525 and $69,069 for the three-months ended August 31, 2000
and 1999, respectively. As for the six-months ended August 31,
2000 and 1999, Century suffered operating losses of $119,175 and
$56,523, respectively. This represents a 111% increase in losses
as compared to the same period in 1999.
Liquidity and Capital Resources
At August 31, 2000, Century had a working capital deficit of
$129,061 as compared to a working capital deficit of $102,525 at
February 29, 2000. Century's ability to continue in existence is
dependent upon obtaining adequate financing and profitable
operations. Management is expanding its product line with a new
low cost microprocessor controller for smaller boilers and a
sequencer program for air compressors, which are expected to
generate additional profitable sales. However, the ability of
Century to bring its products to market will be hampered as long
as Century does not have the working capital necessary to pursue
more aggressive marketing. In July 2000, Century obtained a
bridge loan for $100,000 under a convertible debenture bearing
interest at the rate of 12% per annum that is due July 1, 2002.
The convertible debenture may be converted at the election of the
holder to common stock of the Company at the rate of one share
for $0.25 of principal amount of the debenture. In connection
with the financing, the lender received 200,000 shares of common
stock of the Company and a warrant to purchase 400,000 of common
stock at $0.25 per share, which is exercisable for a term of four
years. The lender is Michael Baghdoian, a principal stockholder
of the Company. The Company is also presently seeking additional
equity financing to fund future operations. Century has not
identified any sources of debt or equity financing and can not
predict whether any such financing will be available to Century
on terms acceptable to Century.
8
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Forward-Looking Statement Notice
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27a of the Securities
Act of 1933 and Section 21e of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are
discussed above and also include general economic factors and
conditions that may directly or indirectly impact the Company's
financial condition or results of operations.
PART II. OTHER INFORMATION
Changes in Securities and Use of Proceeds
In July 2000, Century obtained a bridge loan for $100,000
under a convertible debenture bearing interest at the rate of 12%
per annum that is due July 1, 2002. The convertible debenture
may be converted at the election of the holder to common stock of
the Company at the rate of one share for $0.25 of principal
amount of the debenture. In connection with the financing, the
lender received 200,000 shares of common stock of the Company and
a warrant to purchase 400,000 of common stock at $0.25 per share,
which is exercisable for a term of four years. The investor is
Michael Baghdoian, a principal stockholder of the Company, who
has a pre-existing relationship with the Company and access to
all material information pertaining to the Company and its
financial condition. Protective Group Securities acted as the
sales agent, and received a 13% commission in the transaction.
The debenture was issued in a private transaction, without
registration, in reliance on the exemption provided by Section
4(2) of the Securities Act.
Exhibits and Reports on Form 8-K.
Reports on Form 8-K: The Company filed no reports on Form 8-K
during the quarter ended August 31, 2000.
Exhibits:
Exhibit No. SEC Ref. No. Title of Document
1 (4) Debenture issued to Michael Baghdoian
2 (4) Warrant issued to Michael Baghdoian
3 (27) Financial Data Schedule
9
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SIGNATURES
In accordance with the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CENTURY CONTROLS INTERNATIONAL, INC.
Date: October 16, 2000 By: /s/ Leo Christiansen,
Chief Executive and Financial Officer
10
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