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 June 30, 1998
Commission File Number 33-19584
POWERCOLD CORPORATION
(Exact name of registrant as specified in its charter)
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 June 30, 1998, 6,345,796 Common Shares were outstanding, and the
aggregate market value of such shares held by non-affiliates was approximately
$3,966,122
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POWERCOLD CORPORATION
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1: Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997. 3
Consolidated Statement of Operations for Three and Six
Months Ended June 30, 1998 and June 30, 1997. 4
Consolidated Statement of Changes in Stockholders' Equity
for Three Months Ended June 30, 1998 and June 30, 1997. 5
Consolidated Statement of Cash Flows for Three and Six
Months Ended June 30, 1998 and June 30, 1997. 6
Notes to Consolidated Financial Statements at June 30, 1998. 7
Item 2: Management's Discussion and Analysis of 8
Financial Condition and Results of Operations.
PART II. OTHER INFORMATION 13
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 June 30, 1998
(UNAUDITED) AND DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
June 30, DECEMBER 31,
ASSETS 1998 1997
----------- -------------
CURRENT ASSETS:
Cash and cash equivalents $4,042 $2,274
Restricted cash 600,000 600,000
Accounts receivable, net of allowance for doubtful
accounts of $7,718 and $7,718 respectively. 127,449 117,680
Interest receivable from affiliate 58,082
Interest receivable 9,918
Other receivable 4,583
Inventories 40,923 69,082
Prepaid expenses and other current assets 9,036 13,162
Refundable income tax 124,156 124,156
----------- -------------
Total Current Assets 920,107 984,436
OTHER ASSETS:
Investment in securities 206
Investment in securities through affiliate 675,014 597,300
Property and equipment, net 54,294 65,574
Patent rights and related technology, net 474,616 508,153
Goodwill, net 68,424 73,688
----------- -------------
Total Other Assets 1,272,348 1,244,921
TOTAL ASSETS $2,192,455 $2,229,357
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings 427,354 411,108
Accounts payable 170,289 166,954
Accrued expenses 211,937 164,973
Income taxes payable 74,156 74,156
----------- -------------
Total Current Liabilities 883,736 817,191
Commitments
STOCKHOLDERS' EQUITY:
Common Stock - $0.001 par value, 200,000,000
shares authorized, 6,345,749 and 5,995,269
shares issued at June 30, 1998 and
December 31, 1997, respectively 6,346 5,995
Additional paid-in capital 4,308,668 4,099,799
Amount due from shareholders (7,500) (7,500)
Unrealized gain (loss) on securities available for sale (50)
Retained earnings (accumulated deficit) (2,998,795) (2,686,078)
----------- -------------
TOTAL STOCKHOLDERS' EQUITY 1,308,719 1,412,166
----------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,192,455 $2,229,357
=========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
POWERCOLD CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
AND SUBSIDIARIES FOR THE THREE AND SIX MONTH PERIODS
UNAUDITED ENDED JUNE 30, 1998 AND JUNE 30, 1997
- ---------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
<S> <C> <C> <C> <C>
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
SALES REVENUE:
Product Sales $150,916 $22,530 $180,440 $30,747
Services 43,168 48,921 83,542 75,927
---------- ---------- ---------- ----------
Total Revenue 194,084 71,451 263,982 106,674
COST OF REVENUE:
Product Sales 140,361 37,475 193,115 62,654
Services 884 884 500
---------- ---------- ---------- ----------
Total Cost of Revenue 141,245 37,475 193,999 63,154
---------- ---------- ---------- ----------
Gross Margin 52,839 33,976 69,983 43,520
OPERATING EXPENSES:
Sales and Marketing 148,576 73,976 215,458 113,918
General and Administrative 126,559 148,023 234,324 282,789
Research and Development 19,985 49,163
---------- ---------- ---------- ----------
Total Operating Expenses 275,175 241,984 449,782 445,870
---------- ---------- ---------- ----------
Operating Income (Loss) (222,336) (208,008) (379,799) (402,350)
Equity in loss of Unconsolidated
affiliate (100,000) (427,593)
Gain on sale of 35 of interest in
unconsolidated affiliate 37,121 37,121
---------- ---------- ---------- ----------
Income (Loss) Before Other Income (185,215) (308,008) (342,678) (829,943)
OTHER INCOME (EXPENSE):
Interest and Other Income 43,307 50,124 49,089 77,203
Interest and OtherExpense (5,836) (7,711) (12,797) (17,915)
Other Expense (25,504) (6,333) (25,695)
---------- ---------- ---------- ----------
Total Other Income (Expense) 37,471 16,909 29,959 33,593
---------- ---------- ---------- ----------
Income (Loss) Before Provision
For Income Taxes (147,744) (291,099) (312,719) (796,350)
PROVISION (BENEFIT)
For Income Taxes Current (58,080) (124,156)
---------- ---------- ---------- ----------
Net Income (Loss) ($147,744) ($233,019) ($312,719) ($672,194)
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE ($0.02) ($0.04) ($0.05) ($0.11)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES 6,231,507 5,873,873 6,156,525 5,856,170
========== ========== ========== ==========
</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 SIX MONTH PERIODS
UNAUDITED ENDED JUNE 30, 1998 AND JUNE 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
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 April 1, 1997 5,838,269 $5,838 $4,036,633 ($7,500) ($19,626) ($405,620) $3,609,725
Issuance of Common Stock For Accounts
Payable 40,000 40 24,958 24,998
Unrealized gain (loss) on securities as
available for sale (4,312) (4,312)
Net Income (loss) For The Three Month
Period
Ended June 30, 1997 (233,019) (233,019)
---------- -------- ----------- -------- --------- ------------ -----------
Balances At June 30, 1997 5,878,269 $5,878 $4,061,591 ($7,500) ($23,938) ($638,639) $3,397,392
========== ======== =========== ======== ========= ============ ===========
Balances At April 1, 1998 6,143,149 $6,143 $4,136,621 ($7,500) ($134) ($2,851,053) $1,284,077
Issuance of Common Stock For Accounts
Payable 85,000 85 72,165 72,250
Sale of Common Stock 117,647 118 99,882 100,000
Net Income (loss) For The Three Month
Period
Ended June 30, 1998 134 (147,742) (147,608)
---------- -------- ----------- -------- --------- ------------ -----------
Balances At June 30, 1998 6,345,796 $6,346 $4,308,668 $ (7,500) $0 ($2,998,795) $1,308,719
========== ======== =========== ======== ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
POWERCOLD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
AND SUBSIDIARIES FOR THE THREE AND SIX MONTH PERIODS
UNAUDITED ENDED JUNE 30, 1998 AND JUNE 30, 1997
- ------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
<C> <C> <C> <C>
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ($147,742) ($233,019) ($312,717) ($672,194)
Adjustments to reconcile net income (loss)
to net cash used in operating activties
Depreciation and Amortization 24,424 54,440 48,847 108,629
Net loss on sale of securities 25,504 5,100 25,695
Equity in unconsolidated affiliate 100,000 427,593
Common stock issued for expenses 72,250 24,998 109,220 24,998
Changes in assets and liabilities
Trade accounts receivable 12,953 (59,705) (9,769) (32,415)
Interest receivable (9,918) 48,164
Other receivable (4,583) (4,583)
Inventories 11,233 653 28,159 (10,959)
Prepaid expenses and other assets (77) 710 4,126 502
Accounts payable and expenses 2,800 65,246 3,335 80,828
Accrued expenses 28,117 46,964
Income taxes payable (58,080) (174,158)
---------- ---------- ---------- ----------
Net Cash Used By
Operating Activities (10,543) (79,253) (33,154) (221,481)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (6,120) (12,367)
Disposition of property and equipment 1,234
Purchase of certificate of deposit (100,000)
Proceeds from sale of sercurities 585,849 16,858 995,830
Purchase of securities (2,997) (189,881) (27,522) (563,601)
Advances to affiliated company (81,281) (216,768) (71,894) (216,768)
---------- ---------- ---------- ----------
Net Cash Provided (Used) By
Investing Activities (84,278) 173,080 (81,324) 103,094
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 100,000 100,000
Proceeds from short term borrowings 3,643 24,342 28,643 123,508
Proceeds related short term borrow 11,750 11,750
Payments on capital lease
Repayment of short term borrowings (222,543) (12,397) (514,824)
Repayment related short term borrow (15,000)
---------- ---------- ---------- ----------
Net Cash Provided (Used) By
Financing Activities 103,643 (186,451) 116,246 (394,566)
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 8,822 (92,624) 1,768 (512,953)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD (4,780) 645,185 2,274 1,065,512
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $4,042 $552,561 $4,042 $552,561
========== ========== ========== ==========
INTEREST PAID $5,836 $7,711 $12,797 $17,915
INCOME TAXES PAID $50,000
NONCASH INVESTING ACTIVITIES:
Unrelated (loss) on sale of securities $218 ($5,312) $134 ($24,938)
</TABLE>
The accompanying notes are an integral part of these financial statements.
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POWERCOLD CORPORATION AND Notes to Consolidated
SUBSIDIARIES Financial Statements at
(Unaudited) June 30, 1998
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, 1997.
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL BUSINESS
PowerCold is a solution provider of energy efficient products for users of
industrial and commercial refrigeration systems world-wide. The Company
operates across many market sectors from large industrial food processors to
small commercial air conditioning systems. The firm's focus is to give
customers products and systems that allow them to benefit from current changes
occurring in the natural gas and electrical utility marketplace. Refrigeration
is the most energy intensive operation most business operators face. PowerCold
has the opportunity to provide products and systems, that customers require to
take advantage of these changes, to improve profitability by reducing their
operating costs.
Deregulation of the gas and electric utilities will provide continuing
opportunities, creating new markets for more efficient refrigeration systems.
PowerCold has the products, experience and creative ability to package unique
refrigeration systems for the multi-billion dollar refrigeration market. The
Company is acquiring synergistic businesses, and marketing alliances are being
formed with major utility companies and established refrigeration companies for
these products and services.
The Company's business operations are supported by a management team with over
(150) years experience. The Company maintains administrative corporate offices
in Cibolo, Texas, and Philadelphia, Pennsylvania. Engineering and manufacturing
facilities are located in Cibolo, Texas.
Currently there are three wholly owned operating subsidiaries of PowerCold;
RealCold Products, Inc., Nauticon, Inc. and Technicold Services, Inc. These
subsidiaries manufacture, market and provide consulting services for commercial
refrigeration and freezing systems for use world-wide. Nauticon manufactures
and markets a unique product line of patented evaporative heat exchange systems
for the HVAC and refrigeration industry. These companies offer unique and
innovative products, which compliment and secure PowerCold's position in the
refrigeration and air conditioning industry.
RealCold Products, Inc., a wholly owned subsidiary of the Company, located in
Cibolo, Texas, designs and produces unique products and commercial
refrigeration packaged systems for the refrigeration industry. 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
freezer systems.
RealCold Products Packaging - There are proposed alliances with other
refrigeration companies, whereas RealCold Products packages various components
adding value for a total turnkey refrigeration system. Management believes the
Company should improve income and profits as this entity provides the industry
expertise for its custom packaged products.
The Company originally developed and patented the most advanced, cost-effective
and environmentally safe "IQF - Individual Quick Freeze" systems in the
industry. RealCold Products now supports the "Quick Freeze" systems, and plans
to develop the product for the rapidly growing frozen food industry in the
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emerging markets of Asia and Latin America where electrical power is expensive
and often not reliable.
WittCold Systems, Inc., a Wittemann Company and wholly owned subsidiary of
Dover Corporation acquired RealCold Systems Inc., (a former wholly owned
subsidiary of PowerCold), whereas the Company receives a long term royalty
payment. The two combined companies provide world wide market support for
industrial refrigeration systems and merchant CO2 plants. Wittemann is the
world's leading manufacturer of carbon dioxide systems and refrigeration
accessories employed by brewers and other fermentation processors. The
acquisition culminated after a successful (50/50) joint venture between the two
companies for the manufacture and marketing of Merchant Carbon Dioxide Plants
and Refrigeration System Packages. The venture has produced over $8M in sales
revenue. Only the per cent of sales royalty is booked and consolidated by the
Company.
It is management's belief that revenue from the royalty alliance with WittCold
Systems may not be as high as previously projected for 1998, because of the
overseas exchange rate versus the strong US dollar. WittCold relies mainly on
the international market for sales and revenue from its Merchant CO2 systems.
Todate there are over $30M in proposals for new CO2 and industrial
refrigeration systems world wide.
Nauticon, Inc., a wholly owned subsidiary of the Company, manufactures and
markets a product line of patented evaporative heat exchange systems for the
air conditioning and refrigeration industry, which significantly reduces
electric power consumption during peak electrical rate periods for most air
conditioning and refrigeration users. The patented products are innovative and
unique in design, use new material technology, are simple to manufacture, and
have low operating costs. They are used for condensers, fluid coolers, booster
coolers, and cooling towers. Nauticon products may revolutionize the air
conditioning and refrigeration industry; an industry that faces serious changes
for the first time in years due to energy and environmental concerns worldwide.
The product is operating to specifications after delays in product development,
and Nauticon management is excited about the prospects for substantial growth
in revenues for 1998. There are over 130 systems installed to date, and the
Company expects to double growth annually over the next three years. 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 $1M 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 OEM
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.
Primary sales targets are the large OEM refrigeration manufacturers that could
produce and distribute product under their own private label. Besides marketing
direct through agents in the US, other market outlets will be through major
distributors worldwide.
Technicold Services, Inc. (TSI) offers consulting engineering services,
including process safety management compliance and ammonia refrigeration and
carbon dioxide system design. TSI also provides operation, maintenance and
safety seminars for ammonia refrigeration technicians and supervisors. TSI also
publishes a quarterly newsletter, COLD TALK, which reaches over (2000)
refrigeration supervisors and technicians.
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Rotary Power International, Inc. (RPI) - The worlds only manufacturer of
stratified charge rotary engines and large rotary engines. PowerCold currently
owns 30% of RPI and was to acquire 100% of RPI, but the merger between the two
companies was not successful. PowerCold's prime interest is the Industrial
Natural Gas engine business with its compact packaged screw compressor
refrigeration system.
Deregulation of gas and electric utilities is creating major 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. Supermarkets, as the initial target market, have been
estimated to save a minimum of 15% energy savings with one engine per store.
The market includes over 30,000 supermarkets, which consume 4% of the
electrical energy used in the US. Also, through associated overseas markets
there is a complementary demand and need for low cost energy for similar
refrigeration systems in remote areas of the world.
New Acquisitions - The Company is continually seeking related acquisitions and
joint venture partners with synergistic energy efficient products; to enhance
and support its growth plans and goals, and to become a comprehensive industry
wide solution provider for the refrigeration and air conditioning industry.
Over the last ninety days, the Company has signed Letter's of Intent to Acquire
the following two businesses. Formal Agreements are being prepared and will be
consummated when both parties accept the terms and conditions of the final
agreements.
Channel Ice Technologies - The Company plans to acquire, through a newly formed
subsidiary company, Channel Freeze Technologies, Inc., eighty percent (80%) of
the related assets and business of Channel Ice Technologies from Los Angeles,
CA. based Sir Worldwide, LLC for cash, royalties and stock options.
Channel Ice Technologies has a proprietary, patented (8 patents and 3 pending)
multi purpose freezing system that is highly efficient. It can be employed for
freezing virtually any liquid or semi liquid product in a variety of industries
including: ice plants, fish, meat and produce food products, fruit and juice
products, food by-products, recreational snow for theme parks and ski resorts,
plus many other applications. The Channel Ice System was introduced to the
market in 1995, todate there are ten (10) systems produced. Installations are
in Mexico, Japan, the Philippines and the United States. A system is presently
being installed in Singapore and another to be installed in Haiti.
A major new application for the Channel Ice System is in municipal water
systems, pulp and paper plants, refineries and utilities where solids are
economically separated from industrial waste by the freeze/thaw method. The
water in the frozen sludge drains off during thaw and the remaining materials
are then disposed of and recycled at a greatly reduced cost.
Rotary Power Enterprise, Inc. - The Company has agreed to acquire 100% of
Rotary Power Enterprise, Inc. for stock. Rotary Power Enterprise, Inc.
recently signed an Agreement to acquire the Natural Gas Engine Business assets
of Rotary Power International, Inc. (RPI) (OTC BB: RPII). The entire right,
title and interest in and to RPI's Rotary Power Natural Gas and Propane Engine
Business includes the intellectual property, licenses, contracts, inventory and
manufacturing capability for the 65 Series Natural Gas and Propane Fueled
Engines. Included are exclusive agreements with Mazda Motor Corporation and
Hussmann International, Inc). PowerCold owns approximately thirty per cent
(30%) equity interest in RPI, which manufactures and markets rotary engines.
Rotary Power Enterprise will have the exclusive right to sell Mazda rotor
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engines in North America, modified for natural gas and propane applications
except for passenger automobiles and minivan applications. The Company also
plans to have the exclusive right to distribute, market and sell the Series 580
and 40 natural gas/propane engine for stationary industrial/ commercial
applications and oil and gas field applications. Hussmann has the exclusive
right to purchase rotary engines for supermarket rack systems for operation of
refrigeration equipment in North America.
Jack Kazmar will remain as President of Rotary Power Enterprise. Prior to
establishing Rotary Power Enterprise, Mr. Kazmar was a Marketing Consultant
with Rotary Power International from 1993 - 1997. His background and
experience includes over 30 years in the commercial heating, ventilation and
air conditioning equipment industry: Vice President of Sales and Marketing,
ICC, a manufacturer of Desiccant based dehumidification equipment; President
and Co-Founder, Skil-Aire Corporation, a manufacturer of standardized
commercial heating, ventilation and air conditioning products; General Manager,
Fedders Corporation, Residential and Commercial Products Division, Climatrol
and Airtemp Applied; and direct sales and field management with Worthington
Corporation. Mr. Kasmar holds a Bachelor of Science - Mechanical Engineering
from Lafayette College.
The Company's mission is to be a solution provider of energy efficient products
for the multi-billion dollar refrigeration, air condition and power industry.
The Company's goal is to achieve profitable growth and increase shareholder
value - providing superior products and services through related acquisitions
and joint ventures.
Management intends to continue to utilize and develop the remaining intangible
assets of the Company. It is Management's opinion that the Company's cash flow
generated from such intangible assets will not be impaired, and that recovery
of its intangible assets, upon which profitable operations will be based, will
occur.
The Company is currently live on the INTERNET, a worldwide information network.
The real time system will provide anyone, shareholder, investor or customer,
with Company news releases, financial data and product information.
PowerCold Web Page http://www.powercold.com.
RESULTS OF OPERATIONS - Second Quarter 1998
Revenue for the three and six months periods ended June 30, 1998 increased
(272%) to $194,084 and (247%) to $263,982 respectively as compared to $71,451
and $106.674 for the same periods respectively in 1997.
Net Loss for the three and six months periods ended June 30, 1998 decreased
(158%) to ($147,744) and (215%) to ($312,719) respectively as compared to
($233,019) and ($672,194) for the same periods respectively in 1997.
Net Loss per share for the three and six month periods ended June 30, 1998 were
($0.02) and ($0.05) respectively compared to ($0.04) and ($0.11) for the same
periods respectively in 1997. Net loss per share was based on weighted average
number of shares of 6.231,507 for June 30, 1998 compared to 6,156,525 for the
same three month period in 1997.
The Company's Consolidated Balance Sheets as of the second quarter ended June
30, 1998 compared to the second quarter ended June 30, 1997: Total assets
decreased 1.7% to $2,192,455 compared to $2,229,357; total current liabilities
increased 8.1% to $883,736 compared to $817,191; total stockholders' equity
Sequential Page 11 of 14<PAGE>
decreased 7.3% to $1,308,719 compared to $1,412,166; and the Company has no
long term debt.
Company revenues will continue to improve throughout 1998; because of the new
marketing and sales program, the industry acceptance for Nauticon condensers,
and the new packaging program for RealCold Products. The operating loss was
due to general Company operating overhead, and should continue to decrease as
revenue increases. The Company's asset base, as well as revenues, should
continue to grow through new proposed acquisitions.
Management intends to continue to utilize and develop the intangible assets of
the Company. It is Management's opinion that the Company's cash flow generated
from current intangible assets is not impaired, and that recovery of its
intangible assets, upon which profitable operations will be based, will occur.
Management believes that its working capital may not be sufficient to support
both its operations and growth plans for acquisitions and joint ventures for
the near future. Therefore, to support the Company's growth and goals,
management is seeking additional funding for this purpose.
Financial Summary:
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
-------------- ------------- ------------- --------------
Sales/Revenue $194,084 $71,451 $263,982 $106,674
Net Loss ($147,744) ($233,019) ($312,719) ($672,194)
Net Loss Per Share ($0.02) ($0.04) ($0.05) ($0.11)
Shares Outstanding (Avg.) 6,231,507 5,873,873 6,156,525 5,856,170
Total Assets $2,192,455 $2,229,357
Total Liabilities - Current $883,736 $817,191
Total Liabilities - Long Term $0.00 $0.00
Total Stockholders Equity $1,308,719 $2,229,357
"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.
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PART II. 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.
Exhibit (27) - Financial Data Schedule
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POWERCOLD CORPORATION
FORM 10-Q
JUNE 30, 1998
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: August 10, 1998
POWERCOLD CORPORATION
/s/Francis L. Simola
----------------------------
Francis L. Simola
President and CEO
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<TABLE> <S> <C>
<ARTICLE> 5
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