Sequential Page 11 of 13
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBER 33-19584
POWERCOLD CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 23-2582701
(State of Incorporation) (IRS Employer
Identification No.)
103 GUADALUPE DRIVE
CIBOLO, TEXAS 78108
(Address of principal executive offices)
210-659-8450
(Registrant's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months
(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. (X) Yes ( ) No
The number of shares outstanding of the Registrant's Common Stock, par value
$0.001, at September 30, 2000 was 11,730,383.
Transitional Small Business Disclosure Format: ( ) Yes (X) No
<PAGE> 1
POWERCOLD CORPORATION
AND SUBSIDIARIES
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
Independent Accountants' Report 3
Consolidated Statement of Financial Position as of
September 30, 2000 and December 31, 1999. 4
Consolidated Statement of Operations for Three and Nine
Months Ended September 30, 2000 and September 30, 1999. 5
Consolidated Statement of Cash Flows for Three and Nine
Months Ended September 30, 2000 and September 30, 1999. 6
Notes to Consolidated Financial Statements at September 30, 1999. 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 8
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.
<PAGE> 2
R. E. BASSIE & CO., P.C.
R. E. BASSIE & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL CORPORATION
6776 Southwest Freeway, Suite580
Houston, Texas 77074-2107
Tel: (713) 266-0691 Fax: (713) 266-0692
E-Mail: [email protected]
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
The Board of Directors and Stockholders
PowerCold Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
PowerCold Corporation and Subsidiaries as of September 30, 2000, and the related
condensed consolidated statements of operations and cash flows for the
three-month and nine-month periods ended September 30, 2000. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
The accompanying condensed financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
condensed financial statements (and Note 2 to the annual financial statements
for the year ended December 31, 1999 (not presented herein), certain conditions
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2 (and
Note 2) to the respective financial statements.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of PowerCold Corporation and
Subsidiaries as of December 31, 1999, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 30, 2000, we expressed an
unqualified opinion on those consolidated financial statements and included an
explanatory paragraph concerning matters that raise substantial doubt about the
Company's ability to continue as a going concern. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1999 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ R. E. Bassie & Co., P.C.
Houston, Texas
November 17, 2000
<PAGE> 3
POWERCOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
2000 1999
(Audited)
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 279,875 $ 14,464
Trade accounts receivable, net of allowance
for doubtful accounts of $0 in 2000 and
$81,778 in 1999 150,828 152,154
Refundable income taxes - 52,222
Inventories 58,756 34,993
Prepaid expenses 62,111 69,347
------------- -------------
Total current assets 551,570 323,180
------------- -------------
Property and equipment, net 23,558 29,229
Patent rights and related technology, net 1,074,048 1,166,554
Goodwill, net 107,502 115,398
------------- -------------
Total assets $ 1,756,678 $ 1,634,361
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 605,484 778,258
Commissions payable 42,240 42,240
Advances from affiliates 159,778 365,254
Short-term borrowing 21,378 21,378
Current installments of long-term debt 3,564 3,564
------------- -------------
Total current liabilities 832,444 1,210,694
Long-term debt, less current installments 9,609 9,609
------------- -------------
Total liabilities 842,053 1,220,303
------------- -------------
Stockholders' equity:
Convertible, preferred stock, Series A, $.001
par value, $1,000,000 in liquidation,
1,250,000 shares authorized, issued and
outstanding at December 31, 1999 - 1,250
Common stock, $.001 par value. Authorized
200,000,000 shares: issued and outstanding,
11,730,383 shares at September 30, 2000 and
7,876,641 shares at December 31, 1999 11,730 7,876
Additional paid-in capital 7,388,554 6,044,092
Accumulated deficit (6,477,159) (5,629,660)
------------- -------------
923,125 423,558
Less receivable for stock subscription (8,500) (9,500)
------------- -------------
Total stockholders' equity 914,625 414,058
Commitments and contingent liabilities - -
------------- -------------
Total liabilities and stockholders' equity $ 1,756,678 $ 1,634,361
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
POWERCOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and nine months ended September 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
Three months ended periods Nine months ended periods
ended September 30, ended September 30,
-------------------------- --------------------------
2000 1999 2000 1999
Restated Restated
(Reviewed) (Unaudited) (Reviewed) (Unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 200,591 $ 159,715 $ 293,117 $ 299,509
Services - 17,436 14,190 49,259
------------ ------------ ------------ ------------
Total revenues 200,591 177,151 307,307 348,768
------------ ------------ ------------ ------------
Cost of revenues
Product sales 113,970 83,197 189,669 271,484
Services - - 9,876 244
------------ ------------ ------------ ------------
Total cost of revenues 113,970 83,197 199,545 271,728
------------ ------------ ------------ ------------
Gross margin 86,621 93,954 107,762 77,040
Operating expenses:
Sales and marketing 99 63,935 99 312,269
General and
administrative 420,019 105,825 865,469 415,685
Research and development - 37,616 - 68,025
Amortization expense 55,917 35,103 100,402 105,307
Depreciation expense 1,098 5,186 5,671 15,089
------------ ------------ ------------ ------------
Total operating expenses 477,133 247,665 971,641 916,375
------------ ------------ ------------ ------------
Operating loss (390,512) (153,711) (863,879) (839,335)
Other income (expenses):
Interest income 1,579 - 1,579 32,826
Gain on litigation
Settlement 76,400 - 76,400 -
Interest expense - (16,929) (11,984) (42,341)
Other 3,929 (1,424) 2,607 -
------------ ------------ ------------ ------------
Total other income
(expenses) 81,908 (18,353) 68,602 (9,515)
------------ ------------ ------------ ------------
Loss before provision
for income taxes (308,604) (172,064) (795,277) (848,850)
Provisions for income
Taxes - - (52,222) -
------------ ------------ ------------ ------------
Net loss $ (308,604) $ (172,064) $ (847,499) $ (848,850)
============ ============ ============ =============
Net loss per share
(basic and diluted) $ (0.03) $ (0.02) $ (0.08) $ (0.13)
============ ============ ============ =============
Weighted average
common shares 11,255,604 7,438,943 9,609,521 7,174,407
============ ============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
POWERCOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
2000 1999
(Reviewed) (Unaudited)
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (847,499) $ (848,850)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 106,073 120,396
Common stock issued for operating expenses 190,066 112,130
(Increase) decrease in operating assets:
Accounts receivable 1,326 (143,795)
Related party receivable - (2,390)
Interest receivable - 9,918
Refundable income taxes 52,222 -
Inventories (23,763) (10,852)
Prepaid expenses and other current assets 7,236 (8,435)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (172,774) 25,004
------------- -------------
Net cash used in operating activities (687,113) (746,874)
------------- -------------
Cash flows from investing activities:
Purchase of property and equipment - (15,638)
Increase (decrease) in advances from affiliate (205,476) 371,833
Redemption of certificate of deposit - 400,000
Proceeds from sale of securities
available for sale - 32,500
------------- -------------
Net cash provided by (used in) investing
Activities (205,476) 788,695
------------- -------------
Cash flows from financing activities:
Proceeds from short-term borrowings - 49,404
Repayment of short-term borrowings - (438,760)
Proceeds from note payable - 40,000
Proceeds from issuance of shares under
private placement 1,158,000 300,100
------------- -------------
Net cash provided by (used in) financing
Activities 1,158,000 (49,256)
------------- -------------
Net increase (decrease) in cash 265,411 (7,435)
Cash at beginning of year 14,464 23,391
------------- -------------
Cash at end of year $ 279,875 $ 15,956
============= =============
Supplemental schedule of cash flow information:
Interest paid $ 11,984 $ 42,341
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
POWERCOLD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
The unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and, in the opinion of
management, reflect all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation for each of the periods presented. The
results of operations for interim periods are not necessarily indicative of
results to be achieved for full fiscal years.
As contemplated by the Securities and Exchange Commission (SEC) under Rules of
Regulation S-B, the accompanying consolidated financial statements and related
footnotes have been condensed and do not contain certain information that will
be included in the Company's annual consolidated financial statements and
footnotes thereto. For further information, refer to the Company's 1999 audited
consolidated financial statements and related footnotes.
(2) OPERATIONAL STATUS
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company has
sustained substantial operating losses in recent years and for the nine-month
period ended September 30, 2000, and the Company has used substantial amounts of
working capital in its operations. At September 30, 2000, current liabilities
exceed current assets by $280,874 and intangible assets comprise a material
portion of the Company's assets. The recovery of these intangible assets is
dependent upon achieving profitable operations and favorable resolution of the
matter discussed in this note. The ultimate outcome of these uncertainties
cannot presently be determined. Management is actively seeking additional
equity financing. Additionally, management believes that the prior years
acquisitions will lead to the overall structure necessary to fulfill the
Company's strategic plans.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, and the success of its future operations. Management believes that
actions presently being taken to obtain additional equity financing and
increasing sales provide the opportunity to continue as a going concern.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
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.
GENERAL FINANCIAL ACTIVITY
POWERCOLD CORPORATION - 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 taking
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) year's experience. The Company maintains administrative corporate offices
in Cibolo, Texas, and Philadelphia, Pennsylvania. Engineering and manufacturing
facilities are located in Cibolo, Texas.
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.
POWERCOLD COMPANIES:
REALCOLD PRODUCTS, INC. - designs and manufactures unique energy efficient
packaged products for the refrigeration industry. RealCold Products also
supports Rotary Power Enterprise and Alturdyne Energy Systems by engineering and
packaging their products. RealCold Products also supports Channel Freeze
Technologies by designing and packaging their accompanying refrigeration
systems. There are proposed alliances with other refrigeration companies,
whereas RealCold Products will package various components adding value for a
total turnkey industrial refrigeration system.
<PAGE> 8
NAUTICON INC. - manufactures and markets a product line of patented evaporative
heat exchange systems for the HVAC and refrigeration industry. Nauticon
Evaporative Condenser Line of Products include new innovative configurations; EV
Cool Air Conditioners up to 80 tons, EV Chill Water Chillers 0.75kw per ton,
40-80 tons with chilled water pumps included and multiple compressors, and EV
Frig medium temperature +18F up to 420,000 BTU/hr, low temperature -20F up to
360,000 BTU/hr, and low ambient temperature control standard. The new patented
products are innovative and unique in design, use new material technology, is
simple to manufacture, and have a low operating cost. They are used for
condensers, fluid coolers, subcoolers, and cooling towers. Nauticon products
can save power cost in the refrigeration industry by 20% to 30%, and are
environmental friendly, making these units contribute to the utilities needs to
reduce power demand and support the environment. There are over 170 customer
systems installed.
TECHNICOLD SERVICES, INC. - 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.
ROTARY POWER ENTERPRISE, INC. - was formed as a PowerCold entity to support the
Natural Gas Business from Rotary Power International. The business includes:
assets including intellectual property, inventory and manufacturing capability;
a marketing agreement for marketing the natural gas engine screw compressor
systems to supermarkets; the North American rights to the small 65 series Mazda
natural gas engine block, subject to Mazda Agreement; and a Distributor and
Manufacturing License Agreement for the Rotary Power 580 series engines form
Rotary Power International, Inc. The Company has delivered fourteen 65 HP
engines and one 500 HP engine on a major sales agreement for OEM applications
for the oil and gas industry in Western Canada. The sales agreement for (100
small 65 HP and 60 large 500 HP) natural gas engines valued some $5 million are
scheduled for delivery to a major Canadian oil and gas operation in Western
Canada.
CHANNEL FREEZE TECHNOLOGIES, INC. - was formed as a PowerCold subsidiary to
support the assets of a proprietary patented and economical multi-purpose
freezing system, suitable for virtually any liquid or semi-liquid product, that
is inherently more efficient than prior technologies in a variety of industries
including; block ice - for ice plants, fish and produce industries; food and
food byproducts - for food suppliers and their leftover byproducts, fruit and
juice products. The most notable new application is for highly efficient
management of liquid and semi-liquid industrial waste products for municipal
water, pulp and paper plants and utilities. The freeze-thaw process; waste is
frozen, the water in the frozen sludge drains almost immediately during thaw,
and the remaining materials are than disposed of at greatly reduced cost,
recycled or sold.
ALTURDYNE ENERGY SYSTEMS - A PowerCold Company formed to support the marketing
and manufacturing of natural gas engine driven water chillers. The Company also
has a Strategic Alliance with Alturdyne for manufacturing and marketing their
respective products. The added expertise of RealCold Products' engineering and
manufacturing enhances the existing chiller business, where there are some 140
chiller systems installed.
Alturdyne is an innovative manufacturer of standby diesel generator sets,
turbine and rotary generator sets, pumps and natural gas engine-driven chillers.
Alturdyne's strength lies in its power engineering personnel, who are
knowledgeable in the generator set business, telephone company applications,
small turbines, rotaries and chillers. Alturdyne's added expertise is in the
design and production of rotary engines.
<PAGE> 9
RESULTS OF OPERATIONS - THIRD QUARTER 2000
Revenue for the three months period ended September 30, 2000 increased 12% to
$200,591 from $177,151 for the same period ended September 30, 1999.
Revenue for the six months period ended September 30, 1999 decreased 12% to
$307,307 from $348,768 for the same period ended September 30, 1998.
Current revenue backlog for product delivery in the fourth quarter is $296,794.
Management believes that product sales and revenues will continue to improve
because of new marketing and sales programs being implemented and because of the
numerous proposals that are continually being quoted to prospective customers
for all product lines. The decrease in total revenue was attributed to a
reduction in services. Gross margins will continue to improve as sales volume
increases and manufacturing methods improve.
The Company's sales and revenue for the fourth quarter and into next year should
continue to increase due to the increased volume of customer proposals for the
newly designed Nauticon Evaporative Condenser Line of Products, which include EV
Cool, EV Chill and EV Frig. Currently there are customer sales proposal
quotations for 61 Nauticon units for some $1.4 M.
The Company has enhanced its Channel Freeze system design, which includes new
features that simplifies standard product manufacture costs and provides the
customer greater production capacity. The Company finally envisions a greater
market opportunity with its newly designed product for freezing block ice and
various food products. The Company is delivering its latest new product for
customer installation this quarter, and has 16 sales proposal quotations out to
customers for some $3.6 M.
Net Loss for the three months period ended September 30, 2000 increased 44% to
$308,604 from $172,064 for the same period ended September 30, 1999.
Net Loss for the six months period ended September 30, 2000 was $847,499 and
about the same as $848,850 for the same period ended September 30, 1999.
Net Loss per share for the three months period ended September 30, 2000
increased to $0.03 from $0.02 for the same period ended September 30, 1999.
Net Loss per share for the six months period ended September 30, 2000 decreased
to $0.08 from $0.13 for the same period ended September 30, 1999. Net loss per
share was based on weighted average number of shares of 11,255,604 for September
30, 2000 compared to 7,438,943 for the same three-month period in 1999.
The increased current quarter loss for general and administrative operating
expense was due to consolidation of sales and marketing expense, increase of
sales and marketing activity, and maintaining general Company operating overhead
including additional specific engineering and marketing costs for Nauticon and
Channel Freeze product lines. The Company has restructured its operations to
comply with its current product line of Evaporative Condensers. Effective as of
the first quarter of 2000, Jack Kazmar took over as COO of the PowerCold
consolidated operations. Mr. Kazmar has over 40 years operating experience in
the refrigeration and energy business.
The Company's Consolidated Balance Sheet as of the second quarter ended
September 30, 2000 compared to year end December 31, 1999: Total assets
increased 0.6% to $1,756,678 compared to $1,634,361; total liabilities decreased
32% to $842,053 compared to $1,220,303; total stockholders' equity increased
10.1% to $914,625 compared to $414,058.
The increase in assets was primarily due to an increase in inventory of Nauticon
raw materials for production. The decreasing liabilities were supported by a
reduction of accounts payable and advances from affiliate.
<PAGE> 10
Effective August 31, 2000, The Company, Nauticon, Inc. and Robert E. Jenkins
agreed upon a full and final settlement of the lawsuit titled Nauticon, Inc. et
al Vs Robert E. Jenkins Cause No. 97-13035, in the 53rd District court of Travis
County, Texas. Nauticon had been continually hindered by major operating and
legal expenses due to previous inept management in the operations of Nauticon.
Because of the major operating losses and outstanding accounts payable incurred
by previous management, Nauticon does not have sufficient resources to continue
operations. Therefore Nauticon is now currently in the process of restructuring
its accounts payables with its vendors. The new Nauticon product line of
evaporative condensers, developed by RealCold Products, are manufactured and
marketed by RealCold Products. Nauticon technology was licensed to RealCold
Products for a two and one half per cent (2 1/2%) royalty fee on product sales.
Channel Freeze sales and revenue continues to be slow, because of the limited
marketing experience and lack of product credibility in the marketplace. The
Company has enhanced its Channel Freeze system design, which includes new
features that simplifies standard product manufacture costs and provides the
customer greater production capacity. The Company finally envisions a greater
market opportunity with its newly designed product for freezing block ice and
various food products. The Company's first new enhanced designed system is in
production for an order delivery to Japan. Management believes that the product
is now ready for customer delivery and acceptance and foresees an increase in
new business.
A Non-Exclusive Manufacturing License Agreement, dated as of the 16th day of
August, 2000, was executed by and between Rotary Power Enterprise, Inc., a
wholly owned subsidiary of the Company, the Licensee, and Rotary Power
International, Inc., a Delaware Corporation, as Licensor, has granted to the
Licensee a non-exclusive license and right to manufacture, install, service and
warranty the Licensor's Carbureted Natural Gas Fueled 580 Series Rotary Engine.
The Company issued a total of 912,602 shares of new common restricted stock
during the third quarter ending September 30, 2000: 692,602 shares for a private
placements; 220,000 shares for services rendered the Company. Historically the
Company issues restricted common shares for private placement funding on a
negotiated basis up to minimum of a 50% discount off the then current share
price, and the Company also issues restricted common shares for expenses and
service rendered based on a discount up to a 50% off the share price within the
quarter issued according to the value of the service.
The Company has engaged J. E. Liss & Company, as the Company's non-exclusive
investment banking agent, to provide the Company with financial advisory and
consulting services, relating to, among other things, the development of a
strategic financial and business plan for the Company, acquisitions,
divestitures, restructurings, recapitalizations, consolidations, formation of
joint ventures and negotiations with lenders and other potential providers of
capital.
Management believes that its working capital may not be totally sufficient to
support both its current operations and growth plans for additional acquisitions
and joint ventures for the near future. Management has implemented a new
operating plan providing guidance for cash management and revenue growth. Also
during the past few months the Company has raised private placement capital for
current production cash requirements, and foresees continued private placement
funding to meet production needs for the remainder of the year. The Company is
also currently seeking investor proposals to obtain additional major financing
to support its future growth plans and acquisitions.
<PAGE> 11
The current status of Company acquisitions is dependent on the success of
investor funding. PowerCold signed a Letter of Agreement (December 1998), to
acquire a division of Alturdyne that produces natural gas engine driven water
chillers. Todate the transaction has not been finalized pending funding. The
two companies operate as a joint alliance for the sales of engine and generator
products.
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.
During the past few months the Company has raised private placement capital for
current production requirements, and foresees continued funding to meet future
production needs.
PART 11. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Effective August 31, 2000, The Company, Nauticon, Inc. and Robert E. Jenkins
agreed upon a full and final settlement of the lawsuit titled Nauticon, Inc. et
al Vs Robert E. Jenkins Cause No. 97-13035, in the 53rd District court of Travis
County, Texas.
Management of the Company recently made the decision to file suit against Sir
WorldWide relating to the acquisition of the Channel Ice product and related
patents. After a prolonged debate referencing the virtues of the Channel Ice
product, the Company is seeking damages for product misrepresentation and
breaches of the contract. The Company has incurred financial losses, since the
asset acquisition in September 1998, because of product design and product
credibility in the marketplace.
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.
8-K Filed September 18, 2000
<PAGE> 12
POWERCOLD CORPORATION
FORM 10-QSB
SEPTEMBER 30, 2000
SIGNATURES
In accordance with 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.
POWERCOLD CORPORATION
/s/ Francis L. Simola
------------------------------------
FRANCIS L. SIMOLA, PRESIDENT AND CEO
DATE: NOVEMBER 17, 2000
