SECURITIES AND EXCHANGE COMMISSION
Washington, D C 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
Commission File Number 33-19584
POWERCOLD CORPORATION
(Exact name of registrant as specified in its charter)
Formerly
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION
Nevada 23-258270
(State of Incorporation) (IRS Employer Identification No.)
103 GUADALUPE DRIVE
CIBOLO, TEXAS 78108 210-659-8450
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Sections 12(b) of the Act: NONE
Securities registered pursuant to Sections 12(g) of the Act: NONE
Common Stock, $0.001 Par Value OTC Bulletin Board
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X NO .
------- ------
As of September 30, 1997, 5,943,269 Common Shares were outstanding, and the
aggregate market value of such shares held by non-affiliates was approximately
$1,075645
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INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1: Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996. 3
Consolidated Statement of Operations for Three and Nine
Months Ended September 30, 1997 and September 30, 1996. 4
Consolidated Statement of Changes in Stockholders' Equity
for Three Months Ended September 30, 1997 and September 30, 1996. 5
Consolidated Statement of Cash Flows for Three and Six
Months Ended September 30, 1997 and September 30, 1996. 6
Notes to Consolidated Financial Statements at September
30, 1997. 7
Item 2: Management's Discussion and Analysis of 8
Financial Condition and Results of Operations.
PART II. OTHER INFORMATION 12
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
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<TABLE>
<CAPTION>
POWERCOLD CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL
AND SUBSIDIARIES POSITION AT SEPTEMBER 30, 1997
(UNAUDITED) AND DECEMBER 31, 1996.
- ------------------------------------------------------------------------------------------------
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SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $67 $457,552
Cash, invested through related party 467,737 607,960
Restricted cash 400,000 300,000
Accounts receivable, net of allowance for doubtful
accounts of $9,798 and $2,080 respectively. 131,879 48,588
Refundable income tax 50,000
Inventories 84,622 69,096
Prepaid expenses and other current assets 19,703 19,012
------------ ------------
Total Current Assets 1,154,008 1,502,208
------------ ------------
OTHER ASSETS:
Investment in securities available for sale 288,584 724,312
Investment in affiliate 1,000,000
Restricted cash 200,000 200,000
Property and equipment, net of accumulated depreciation 70,853 71,447
Patent rights and related technology, net 1,051,186 1,155,986
Goodwill, net of accumulated amortization 448,020 491,892
------------ ------------
Total Other Assets 2,058,643 3,643,637
------------ ------------
TOTAL ASSETS $3,212,651 $5,145,845
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings, related parties $11,750 $15,000
Short-term borrowings 453,359 799,502
Accounts payable and accrued expenses 184,879 137,661
Accrued expenses 164,097
Income taxes payable 124,156
------------ ------------
Total Current Liabilities 814,085 1,076,319
------------ ------------
Commitments
STOCKHOLDERS' EQUITY:
Common Stock - $0.001 par value, 200,000,000
shares authorized, 5,943,269 and 5,838,269
shares issued at September 30, 1997 and
December 31, 1996, respectively 5,943 5,838
Additional paid-in capital 4,083,651 4,036,633
Amount due from shareholders (7,500) (7,500)
Unrealized gain (loss) on securities available for sale (5,792) 1,000
Retained earnings (accumulated deficit) (1,677,736) 33,555
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,398,566 4,069,526
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $3,212,651 $5,145,845
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
POWERCOLD CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS FOR
AND SUBSIDIARIES THE THREE AND NINE MONTH PERIODS ENDED
UNAUDITED SEPTEMBER. 30, 1997 AND SEPTEMBER. 30, 1996
- ---------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
<S> <C> <C> <C> <C>
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
Sales Revenue:
Product Sales $160,879 $52,329 $191,626 $1,236,352
Services $45,386 $43,783 $121,313 $113,286
------------- ------------- ------------- -------------
Total Revenue 206,265 96,112 312,939 1,349,638
Cost of Revenue:
Product Sales 159,160 6,448 221,814 729,928
Services 2,539 38,675 3,039 132,135
------------- ------------- ------------- -------------
Total Cost of Revenue 161,699 45,123 224,853 862,063
------------- ------------- ------------- -------------
Gross Margin 44,566 50,989 88,086 487,575
Operating Expenses:
Sales and Marketing 66,015 90,723 179,933 295,002
General and Administrative 199,776 180,322 482,565 500,838
Research and Development 16,129 4,592 65,292 65,806
------------- ------------- ------------- -------------
Total Operating Expense 281,920 275,637 727,790 861,646
------------- ------------- ------------- -------------
Operating Income (Loss) (237,354) (224,648) (639,704) (374,071)
Equity in loss of unconsolidated affiliate (427,593)
Write off of unconsolidated affiliate (789,175) (789,175)
------------- ------------- ------------- -------------
Income (Loss) Before Other Income (1,026,529) (224,648) (1,856,472) (374,071)
Other Income (Expenses):
Interest and Other Income (3,417) 3,047 73,786 18,650
Interest and Other Expense (6,028) (486) (23,943) (3,531)
Other Expense (3,123) (33) (28,818) (633)
Gain on sale of subsidiary 2,888,513 2,888,513
------------- ------------- ------------- -------------
Total Other Income (Expense) (12,568) 2,891,041 21,025 2,902,999
------------- ------------- ------------- -------------
Income (Loss) Before Provision
For Income Taxes (1,039,097) 2,666,393 (1,835,447) 2,528,928
Provision (Benefit) for income taxes
For Income Taxes Current 190,804 (124,156) 190,804
------------- ------------- ------------- -------------
Net Income (Loss) ($1,039,097) $2,475,589 ($1,711,291) $2,338,124
============= ============= ============= =============
Net Income (Loss) per share ($0.18) $0.44 ($0.29) $0.42
============= ============= ============= =============
Weighted average number of shares 5,903,160 5,619,269 5,872,005 5,565,750
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
POWERCOLD CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND SUBSIDIARIES FOR THE THREE AND NINE MONTH PERIODS
UNAUDITED ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------
UNREALIZED GAIN
ADDITIONAL AMOUNTS (LOSS) ON
COMMON STOCK PAID-IN DUE FROM SECURITIES ACCUMULATED
STOCK AMOUNT CAPITAL STOCKHOLDERS FOR SALE (DEFICIT) TOTAL
----------- -------- ----------- ----------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances At July 1, 1996 5,619,269 $5,619 $3,927,350 ($7,500) ($2,312,658) $1,612,811
Net Income For The Three Month Period
Ended September 30, 1996 2,475,589 2,475,589
----------- -------- ----------- ----------- --------- ------------ ------------
Balances At September 30, 1996 5,619,269 $5,619 $3,927,350 ($7,500) $162,931 $4,088,400
=========== ======== =========== =========== ========= ============ ============
Balances At July 1, 1997 5,878,269 $5,878 $4,061,591 ($7,500) ($23,938) ($638,639) $3,397,392
Issuance of Common Stock For Accounts Payable 65,000 65 22,060 22,125
Unrealized gain (loss) on securities as
available for sale 18,146 18,146
Net Income For The Three Month Period
Ended September 30, 1997 (1,039,097) (1,039,097)
----------- -------- ----------- ----------- --------- ------------ ------------
Balances At September 30, 1997 5,943,269 $5,943 $4,083,651 ($7,500) ($5,792) ($1,677,736) $2,398,566
=========== ======== =========== =========== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
POWERCOLD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
AND SUBSIDIARIES FOR THE THREE AND NINE MONTH PERIODS ENDED
UNAUDITED SEPTEMBER. 30, 1997 AND SEPTEMBER. 30, 1996
- -------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
<S> <C> <C> <C> <C>
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ($1,039,097) $2,475,589 ($1,711,291) $2,338,124
Adjustments to reconcile net income (loss)
to net cash used in operating activities
Depreciation and Amortization 54,470 103,787 163,099 218,501
Net loss on sale of securities 3,123 28,818
Provision for doubtful accounts 7,718 7,718 805
Equity in unconsolidated affiliate 427,593
Write off investment in affiliate 789,175 789,175
(Gain) Loss on sale of subsidiary (2,888,513) (2,888,513)
Common stock issued for expenses 22,125 47,123 210,535
Changes in assets and liabilities
Trade accounts receivable (58,594) 238,811 (91,009) 382
Inventories (4,567) 870,354 (15,526) (2,145)
Prepaid expenses and other assets (1,193) 20,297 (691) 20,134
Accounts payable 93,485 (103,662) 154,946 (302,940)
Accrued expenses 37,002 11,068 56,369 14,224
Deferred revenue (963,795) (46,357)
Income taxes payable 190,804 (174,156) 190,804
Cash used by subsidiary sold (80,357) (80,357)
------------- ------------- ------------- -------------
Net cash used by
operating activities (96,353) (125,617) (317,832) (326,803)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,466) (8,169) (13,833) (19,543)
Purchase of certificate of deposit (100,000)
Proceeds from sale of securities 94,407 1,090,237
Purchase of securities (126,518) (690,119)
Advances to unconsolidated affiliate (216,768)
Proceeds from sale of subsidiary 2,800,000 2,800,000
Capital contribution to subsidiary (100,000) (100,000)
------------- ------------- ------------- -------------
Net Cash Provided by (Used) by
investing activities (33,577) 2,691,831 69,517 2,680,457
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in loans from officers (243,603) (42,406)
Proceeds from short term borrowings 45,173 90,000 168,681 90,000
Proceeds from related parties 11,750
Payments on capital lease (4,719)
Repayment of short term borrowings (514,824)
Repayment from related parties (15,000)
------------- ------------- ------------- -------------
Net Cash Provided (Used) By
Financing Activities 45,173 (153,603) (349,393) 42,875
------------- ------------- ------------- -------------
NET Increase (Decrease) in cash and (84,757) 2,412,611 (597,708) 2,396,529
cash related party
CASH AND CASH EQUIVALENTS
RELATED PARTY BEGINNING OF PERIOD 552,561 142,535 1,065,512 158,617
------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS
RELATED PARTY END OF PERIOD $467,804 $2,555,146 $467,804 $2,555,146
============= ============= ============= =============
INTEREST PAID $6,026 $486 $23,943 $3,531
INCOME TAXES PAID $50,000
NONCASH INVESTING ACTIVITIES:
Unrelated (loss) on sale of securities $18,146 ($6,792)
</TABLE>
The accompanying notes are an integral part of these financial statements.
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POWERCOLD CORPORATION Notes to Consolidated
AND SUBSIDIARIES Financial Statements at
(Unaudited) September 30, 1997
- ------------------------------------------------------------------------
The condensed consolidated financial statements of PowerCold Corporation and
Subsidiaries included herein have been prepared without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Although,
certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted, PowerCold Corporation believes that the disclosures are adequate to
make the information presented not misleading. The condensed consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in PowerCold Corporation's annual report
on Form 10-K for the fiscal year ended December 31, 1996.
The condensed consolidated financial statements included herein reflect all
normal recurring adjustments that, in the opinion of the management, are
necessary for a fair presentation. The results for the interim periods are not
necessarily indicative of trends or of results to be expected for a full year.
Restatement of September 30, 1996 Operating Results:
During the quarter ended September 30, 1996, the Company reported a gain on the
sale of a wholly-owned subsidiary, RealCold Systems, Inc. The gain was
reported at $4,886,525, before income taxes. The sale price for the subsidiary
included $2,000,000 which is a minimum guaranteed royalty "percent of sales"
from the purchase. At December 31, 1996, in connection with the Company's
annual audit, it was concluded that the $2,000,000 should not have been
included in the sales price but rather recognized as royalty income, as
received.
Consequently, the Statements of Operations, Changes in Stockholders' Equity and
Cash Flows for the three and nine month periods ended September 30, 1996, have
been amended to conform to the treatment of the transaction in the annual
report for the year ended December 31, 1996. The effect of this amendment for
both three month and nine month periods ended September 30, 1996, was to reduce
net income after income taxes and earnings per share by $1,318,688 and $.24
respectively, from that previously reported.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
In December 1996 the Company agreed in principal to merge/acquire Rotary Power
International, Inc. The Company initially acquired a 30% equity interest in RPI
(2M shares of common stock for $1M), and proposed a merger of the companies in
a stock for stock transaction, whereby RPI would become a wholly owned
subsidiary of the Company.
A Plan of Agreement and Merger was signed with Rotary Power International, Inc.
("RPI") on March 21, 1997 subject to RPI shareholder approval. Each
shareholder of RPI will receive .363 shares of the Company's common stock
(1.56M shares) upon shareholder approval.
There were two major reasons for the acquisition of RPI. - The refrigeration
industry desires packaged refrigeration systems and RPI'S engines add growth
value to our products along with packaging ability. Current deregulation of gas
and electric utilities is creating major competitive changes in energy use and
costs. RPI'S natural gas engines enhance the customers' economic benefits by
reducing energy costs while supporting the environment with a clean burning
energy source. Through associated markets overseas there is a complementary
demand and need for energy, (portable generators) and for refrigeration and CO2
systems in remote areas of the world. RPI primarily marketed engines to the US
government and has had muti-million dollar revenue years. The Company now had
the opportunity to commercialize a proven product, that has tens of millions of
dollars and years of development experience behind it.
Packaging of refrigeration systems for supermarkets - RPI has an exclusive
alliance agreement with Hussmann Corporation, the world's largest supplier of
supermarket refrigeration equipment, for marketing RPI'S energy efficient 65
series natural gas engine to supermarkets. Currently 65 series natural gas
engines have been installed in seven supermarkets providing a minimum of 15%
energy savings per store. The estimated 30,000 supermarkets consume 4% of the
energy use in the US.
Because of the ongoing deregulation of the gas and electric utilities
competition will create new markets for more efficient energy use especially
for commercial refrigeration systems. The Company would have the products
(Nauticon condensers and RPI engines) and management has the experience and
creative ability to package refrigeration systems for the multi-million dollar
commercial refrigeration market. The Company was forming marketing alliances
with major utility companies and well established refrigeration companies in
the business.
Prior to the decline of RPI as set forth below, RPI was the world's only
manufacturer of stratified charge rotary engines and large rotary engines. RPI
was the internationally recognized leader in the development and
commercialization of rotary engines (15-3000 horsepower) for use in industrial,
marine and hybrid-electric vehicular markets. RPI was formed by Richard M.H.
Thompson, affiliates of Loeb Partners Corporation and management in October
1991 to buy the assets and business of the Rotary Engine Division of John Deere
Technologies International, Inc. In 1984, John Deere had bought the Rotary
Engine Division from Curtiss-Wright Corporation, which had operated it since
1958.
Sequential Page 8 of 13<PAGE>
Subsequent Events - On July 21, 1997, the Company and Rotary Power
International, Inc. agreed to the First Amendment to the Plan and Agreement of
Merger. The Parties agreed to amend Section 1.2 - The Closing by extending the
Agreement an additional forty five (45) days.
The First Amendment to the Plan and Agreement of Merger, the extension on the
Plan and Agreement of Merger between the Company and Rotary Power
International, Inc., expired on September 5, 1997, accordingly, the Plan and
Agreement of Merger is no longer in effect.
Since the Company initially entered into an Agreement to merge with Rotary
Power International, Inc., there was a continuing deterioration in Rotary
Power's negative cash flow from operations. Funding provided by the Company,
that initially invested $1,000,000 in equity and the $1,000,000 in proceeds
from bondholders, was not sufficient to support daily cash flow needs through
the first (5) months of 1997. The Company did not have any obligation to
support Rotary Power with any additional financing. In early May the Company
voluntarily loaned Rotary Power $100,000 for back due rent on the building,
$75,000 for the May interest payment on bond debt, and on June 19, 1997 the
Company loaned Rotary Power an additional $41,767 due employees for payroll. In
June 1997 Management decided not to loan Rotary Power any additional funds for
two reasons; the uncertainty of Rotary Power's collateral for the Company's
financing and after receiving documentation from Company's General Counsel
based on his investigation of Rotary Power, which recently uncovered probable
misrepresentation of material financial information by RPI to PowerCold in
December 1996 and thereafter. Currently Rotary Power is in default on accounts
payable due vendors, payments to the landlord, and payments to the bondholders
Trustee. Consequently, Rotary Power International, Inc. requires additional
funding for its daily operations. Therefore, the economic viability and long-
term future of Rotary Power International, Inc. depends on its ability to
obtain additional sources of financing, and there can be no assurance that such
financing can be obtained on acceptable terms or at all. Due to the
uncertainties and risks of lack of financing, Rotary Power may not continue as
a "going concern" and creditors may force Rotary Power into a reorganization
under Federal Bankruptcy. Management of the Company continues to evaluate the
deteriorating condition of Rotary Power and the feasibility of additional
financing from investors. If the Plan and Agreement of Merger, extended an
additional (45) days, was approved by Rotary Power shareholders the Company
would have re-evaluated the feasibility of Rotary Power's products and
organization.
On July 9, 1997, Company Counsel was notified by Counsel for the Trustee for
the NJEDA Bonds, that Rotary Power International, Inc. was prohibited from
entering into a merger transaction unless it first meets certain conditions,
set forth in the prior Bondholders Loan Agreement with Rotary Power
International, Inc. Management of the Company also become aware that filings
with the Securities and Exchange Commission on behalf of the Company by Rotary
Power International, Inc. contained false and misleading statements.
RealCold Products, Inc., a wholly owned subsidiary of the Company, designs and
packages commercial refrigeration and freezer systems. RealCold Products was
reorganized with its new name in March 1997, replacing RealCold Systems Inc.
and RealCold Maintenance Systems, Inc. RealCold Products supports all
engineering and manufacturing of commercial refrigeration packages and its
freezer systems.
Management believes there is no substantial market in the US for the ReelFrez
food freezing system, (a RealCold product), because of the ban on the use of
certain refrigerants. Some countries continue to use these refrigerants, and a
recent market study projects a need for thousands of food freezing systems in
Sequential Page 9 of 13<PAGE>
third world countries. Management is seeking overseas alliances for the
freezing system.
It is management's understanding that future revenue from the royalty alliance
with WittCold Systems may not be as high as previously projected for next year,
because of the overseas exchange rate versus the strong US dollar. WittCold
relies mainly on the international market for sales and revenue from its CO2
systems. Todate there is a backlog of over $35M of proposals out for new CO2
and industrial refrigeration systems world wide.
Nauticon, Inc., a wholly owned subsidiary of the Company, manufactures and
markets evaporative heat exchange systems. The product is operating to
specifications and Nauticon management is excited about the prospects for
substantial growth in revenues. There are some 70 systems installed to date.
Nauticon recently installed 35 condensers at a new shopping center in
California. There is the potential for an additional 50 systems for other
shopping centers. The initial order was very competitive, whereas the
application test ran on site for four weeks. Todate there are over $500K of
proposals out for new system orders projected over the next few months.
Nauticon now has 16 distributors throughout the US, and is in negotiations with
some of the largest refrigeration manufactures for product manufacturing and
marketing alliances. The prospects for these alliances, if negotiated
successfully, should support a revenue growth that will far exceed current and
future revenue projections.
Early this year Nauticon hired a new Sales Manager for its line of evaporative
heat exchange systems. After a few short months as Nauticon's Sales Manager,
Mr. Reece's sales and marketing skills attributed to significant orders and
revenue for Nauticon. Mr. Reece was recently appointed Vice president of
Marketing for Nauticon. Subsequently, Mr. Thomas F. Reece has been elected a
Director and appointed President of Nauticon, Inc., effective October 30, 1997.
Mr. Reece came to Nauticon with a very credible background in sales, marketing
and administration of industrial related products. Prior to accepting the
position of Sales Manager for Nauticon, Mr. Reece held successful positions
over the last ten years as a Product Manager, Director of Sales and most
recently Vice President of Sales, Marketing and Administration for Conservatrol
Sales, Greensboro, NC. Mr. Reece's background and experience will support and
enhance Nauticon's position in the industry.
The Company is continually seeking other related acquisitions and joint venture
partners to enhance and support its growth plans and goals. Current
negotiations are with (3) such entities. The Company is also seeking national
and international alliances with agents, distributors and related synergistic
companies to build a comprehensive industry wide refrigeration and food
freezing company.
The Company is currently live on the INTERNET, a world wide information
network. The real time system will provide anyone, shareholder, investor or
customer, with Company news releases, financial data and product information.
Access PowerCold home page on the INTERNET by addressing
http://www.powercold.com
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RESULTS OF OPERATIONS - Third Quarter 1997
Revenue for the three and six months periods ended September 30, 1997 was
$206,265, an increased of 214%, and $312,939, a decrease of 431%, respectively
as compared to $96,112 and $1,349,638 for the same periods respectively in
1996.
Net Income (Loss) for the three and six months periods ended September 30, 1997
was ($1,039,097) and ($1,711,291) respectively as compared to $2,475,589 and
$2,338,124 for the same periods respectively in 1996. Net Income (Loss) per
share for the three and six month periods ended September 30, 1997 was ($0.18)
and ($0.29) respectively compared to $0.44 and $0.42 for the same periods
respectively in 1996. Net Income (Loss) per share was based on weighted average
number of shares of 5,872,005 for September 30, 1997 compared to 5,565,750 for
the same nine month period in 1996.
The Company's Consolidated Balance Sheets as of the third quarter ended
September 30, 1997 compared to the third quarter ended September 30, 1996:
Total assets decreased 30.6% to $3,212,651 compared to $4,632,226; total
liabilities decreased 33.9% to $814,085 compared to $1,231,138; total
stockholders' equity decreased 29.6% to $2,398,566 compared to $3,407,088; and
the Company has no long term debt.
The operating loss was due to the acquisition and reorganization of Rotary
Power, maintaining general Company operating overhead including additional
enhancements to the Nauticon product line and the move to new plant facilities
in Texas. Management wrote off the remaining $789,175 of Rotary Power
International, Inc., an unconsolidated affiliate, in the third quarter. That
concluded the entire write off and loss of $1,216,768 for Rotary Power
International, Inc.
Effective as of January 1, 1997, the Company received from WittCold Systems,
Inc., under the RealCold Systems sale agreement, a "percentage amount" payment
on product sales for the next ten years. The company has received approximately
$45K in royalty payments and has accrued some $20K to date. There are over $35M
of proposals are out for new systems world wide.
Consolidated gross sales and revenues should continue to improve through the
fourth quarter of 1997 and for the following year 1998, because of the new
marketing and sales program for Nauticon condensers.
Financial Summary:
Three Months Ended Nine Months Ended
Sept 30, 1997 Sept 30, 1996 Sept 30, 1997 Sept 30,1996
------------- ------------- ------------- ------------
Sales/Revenue $206,265 $96,112 $312,939 $1,349,638
Net Income (Loss) ($1,039,097) $2,475,589 ($1,711,291) $2,338,124
Net Income (Loss) Per Share ($0.18) $0.44 ($0.29) $0.42
Shares Outstanding (Avg.) 5,903,160 5,619,269 5,872,005 5,565,750
Total Assets $3,212,651 $4,632,226
Total Liabilities $814,085 $1,231,138
Total Stockholders Equity $2,398,566 $3,407,088
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"Safe Harbor" Statement
Forward looking statements made herein are based on current expectations of the
Company that involves a number of risks and uncertainties and should not be
considered as guarantees of future performance. These statements are made under
the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. The factors that could cause actual results to differ materially include;
interruptions or cancellation of existing contracts, impact of competitive
products and pricing, product demand and market acceptance risks, the presence
of competitors with greater financial resources than the Company, product
development and commercialization risks and an inability to arrange additional
debt or equity financing.
PART 11. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information.
None.
Item 6 Exhibits and Reports on Form 8-K.
Form 8-K filed July 23, 1997 - Disagreement with Rotary Power
Form 8-K filed September 30, 1997 - Cancel Rotary Power Merger
Exhibit (27) - Financial Data Schedule
Sequential Page 12 of 13<PAGE>
POWERCOLD CORPORATION
FORM 10-Q
SEPTEMBER 30, 1997
Signature
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1997
POWERCOLD CORPORATION
/s/Francis L. Simola
--------------------------
Francis L. Simola
President and CEO
Sequential Page 13 of 13<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
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