UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _________________
Commission File Number 0-15379
POWER-CELL, INC.
----------------------------------------------------
Exact name of Registrant as specified in its charter
Colorado 84-1029701
- ---------------------- ----------------------------------
State of Incorporation IRS Employer Identification Number
600 Preston Forest Center
Box 200
Dallas, Texas 75230
214/373-1887
-----------------------------------------------------------
Address and telephone number of principal executive offices
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 filing requirements
for the past 90 days.
Yes X No
The number of shares of common stock of the Registrant outstanding at December
31, 1997 was 6,216,875.
<PAGE>
POWER-CELL, INC.
INDEX
Part I
Financial Information PAGE
Balance sheet - December 31, 1997 (unaudited) 3
Unaudited condensed statements of operations - three and six month
periods ended December 31, 1997 and 1996 and the period from
January 21, 1987 (date of incorporation) to
December 31, 1997 4
Unaudited condensed statements of cash flows - six months ended
December 31, 1997 and 1996 and the period from
January 21, 1987 (date of incorporation) to December 31, 1997 5
Note to condensed financial statements 6
Management's discussion and analysis of financial condition and
results of operations 7
Part II Signature Page 9
2
<PAGE>
POWER CELL, INC.
(a development stage enterprise)
BALANCE SHEET
(Unaudited)
DECEMBER 31,
1997
------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 142
INVESTMENT IN PARTNERSHIP 31,787
-----------
Total assets $ 31,929
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 27,648
ADVANCES PAYABLE 20,000
STOCKHOLDERS' DEFICIT:
Common stock, par value $.0001 per share, 750,000,000
shares authorized; 6,216,875 shares issued and outstanding 622
Additional paid-in capital 1,565,431
Deficit accumulated in the development stage (1,581,772)
-----------
Total Stockholders' Deficit (15,719)
Total Liabilities and Stockholders' Deficit $ 31,929
===========
See accompanying note to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
POWER CELL, INC.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
(Unaudited)
<S> <C> <C>
THREE MONTHS SIX MONTHS PERIOD FROM JANUARY 21,
ENDED ENDED 1987 (DATE OF
DECEMBER 31, DECEMBER 31, INCORPORATION)
-------------- --------------
1997 1996 1997 1996 TO DECEMBER 31, 1997
------ ------ ------ ------ ---------------------
REVENUES:
Interest and other $ -- $ 60 $ -- $ 154 $ 176,724
EXPENSES:
Product development -- -- -- -- 225,478
General and administrative 10,736 5,903 13,826 19,645 1,500,312
Interest -- -- -- -- 32,706
----------- ----------- ----------- ----------- -----------
Total expenses 10,736 5,903 13,826 19,645 1,758,496
----------- ----------- ----------- ----------- -----------
NET LOSS $ (10,736) $ (5,843) $ (13,826) $ (19,491) $ 1,581,772)
=========== =========== =========== =========== ===========
</TABLE>
See accompanying note to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
POWER CELL, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C>
PERIOD FROM
JANUARY 21, 1987
(DATE OF
SIX MONTHS ENDED INCORPORATION)
DECEMBER 31, TO
--------------------
1997 1996 DECEMBER 31, 1997
------ ------ -----------------
OPERATING ACTIVITIES:
Net loss $ (13,826) $ (19,491) $(1,581,772)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization and depreciation -- -- 24,644
Issuance of stock options for services 11,109 24,094
Loss on theft of equipment -- -- 741
Changes in operating asset and liabilities:
Change in other assets (16,400)
Change in accounts payable and accrued
expenses 587 1,300 27,648
----------- ----------- -----------
NET CASH USED IN OPERATING
ACTIVITIES (13,239) (7,082) (1,521,045)
INVESTING ACTIVITIES:
Purchase of office equipment -- -- (8,985)
Investment in limited partnership -- -- (31,787)
----------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES -- -- (40,772)
FINANCING ACTIVITIES:
Capital contribution 12,439 -- 12,439
Advance received -- -- 20,000
Issuance of common stock and exercise of
warrants -- -- 1,533,020
Stock issuance costs -- -- (3,500)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 12,439 -- 1,561,959
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (800) (7,082) 142
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 942 10,372 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 142 $ 3,290 $ 142
=========== =========== ===========
</TABLE>
See accompanying note to financial statements.
5
<PAGE>
POWER CELL, INC.
(A Development Stage Enterprise)
NOTE TO FINANCIAL STATEMENTS
(Unaudited)
A. Basis of Presentation
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed and omitted pursuant to such rules and
regulations, although management believes the disclosures are adequate to
make the information presented not misleading. These interim financial
statements should be read in conjunction with the Company's annual report
and most recent financial statements included in its report on Form 10-KSB
for the year ended June 30, 1997 filed with the Securities Exchange
Commission.
The interim financial information included herein is unaudited; however,
such information reflects all the adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary
for a fair statement of results of operations and cash flows for the
interim periods. The results of operations for the six months ended
December 31, 1997 are not necessarily indicative of the results to be
expected for the full year.
6
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources
On October 21, 1992, the company entered into a limited partnership
agreement (see General Development of Business section for outline of
various contract terms and conditions) with several other limited partners
and a sole general partner to provide for management, funding,
manufacturing and marketing of the Power Cell reserve battery unit on a
worldwide basis. The company initially owned an 11% interest in the limited
partnership, which may increase or decrease due to the occurrence of
certain events. The interest decreased to 7.35% during fiscal 1996 due to
the addition of outside investors, resulting in a pro rata dilution. In
addition, a separate license royalty agreement between the Company and the
limited partnership provides that the Company will receive royalty payments
on all Power Cell units produced and sold in the United States and its
territories. Royalty payments on international sales of Power Cell units
will be paid to individual international rights holders, or their
designees, some of which are affiliates of the Company, and all of which
are limited partners in the partnership, as follows: one-third (33 1/3%) to
J. C. Rambin; one-third (33 1/3%) to Rudy Marich; one-third to Howard
Farkas (75% of 1/3) and Burt Kanter (25% of 1/3). These royalty payments
will be due and payable when, and if, royalty funds are received.
The contract agreement has no provision for direct funding of Power Cell,
Inc. Its earnings, if any, will be derived from an interest in the limited
partnership together with royalties, if any, from the license royalty
agreement.
On July 1, 1996, Reserve Battery Cell, L.P. (Reserve Battery) announced
initial market release in select cities of the Power Cell Reserve Battery
unit. According to Reserve Battery, the product will plug into a cigarette
lighter or attach directly to battery terminals and recharge a battery even
in extreme weather conditions (-10 degrees F to 100 degrees F) in a matter
of minutes. Also, these small units can be stored for years, do not need to
be recharged and never lose their power prior to activation. The Power Cell
has the strength to recharge a battery more than once for a few weeks after
it has been activated. It is a powerful 5 amp Hour battery and, with the
additional purchase of a Power Inverter, will operate small household and
other electronic appliances for hours during a power outage or emergency
situation.
Power Cell, Inc. has received information from Reserve Battery that, as of
June 30, 1996, funds in excess of $4,288,000 had been expended on product
development, capital equipment, operating capital, and marketing
activities.
The Company has been informed by Reserve Battery, Inc. that all marketing
and operations activities have been curtailed as a result of its inability
to source sufficient capital to sustain operation.
Management is currently evaluating its future course of action. To improve
its liquidity, the Company is negotiating for a sale of common shares to an
investor. Also, the developments herein should assist the Company in
reviewing the possibility of affiliating with other companies through
acquisition or merger combinations that would provide a financial basis for
a public or private
7
<PAGE>
placement of debt or equity. There are ongoing discussions and analysis of
several potential candidates that could provide a solution to the financial
requirements of Power Cell, Inc. to proceed as a viable entity and/or an
integral part of an existing operation. The Company had a working capital
deficit as of December 31, 1997 of $27,506.
Results of Operations
The company has been engaged in organizational and capital raising
activities since inception through December 31, 1997. It has not incurred
major operational expenditures. The losses incurred since inception
primarily reflect legal, accounting, and administrative expenses associated
with the preparation of the merger documents and registration statement,
product development and arranging for the manufacture of its battery
charger product for test marketing purposes.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
POWER-CELL, INC.
----------------
(Registrant)
Date: February 11, 1998 /s/ James C. Rambin
-------------------------------
James C. Rambin, President
and Principal Financial Officer
9
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<LEGEND>
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<NAME> Power-Cell, Inc.
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
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