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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 JUNE 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 June 30, 2000 was 10,817,781.
Transitional Small Business Disclosure Format: ( ) Yes (X) No
<PAGE>
POWERCOLD CORPORATION
FORM 10-QSB
JUNE 30, 2000
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED AND REVIEWED)
Independent Accountants Report 3
Consolidated Balance Sheets as of
June 30, 2000 and December 31, 1999 4
Consolidated Statement of Operations for Three Months
Ended June 30, 2000 and June 30, 1999. 5
Consolidated Statement of Operations for Six Months
Ended June 30, 2000 and June 30, 1999. 6
Consolidated Statement of Cash Flows for Six Months
Ended June 30, 2000 and June 30, 1999. 7
Notes to Consolidated Financial Statements
at June 30, 2000. 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 9
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.
SIGNATURE PAGE 14
<PAGE> 2
R. E. BASSIE & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL CORPORATION
7171 Harwin Drive, Suite 306
Houston, Texas 77036-2197
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 June 30, 2000, and the related
condensed consolidated statements of operations and cash flows for the
three-month and six-month periods ended June 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 15 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 15) 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
August 11, 2000
<PAGE> 3
POWERCOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
2000 1999
(Audited)
--------------- ---------------
<S> <C> <C>
Assets
Current assets:
Cash $ 157,364 $ 14,455
Trade accounts receivable, net of allowance for
doubtful accounts of $81,778 in 2000 and 1999 82,171 150,791
Receivable from Channel Freeze Technologies 274,910 274,910
Receivable from related parties 1,312 1,312
Refundable income taxes - 52,222
Inventories 34,993 34,993
Prepaid expenses 69,347 69,347
--------------- ---------------
Total current assets 620,097 598,030
--------------- ---------------
Investment in affiliate 621,092 621,092
Property and equipment, net 19,942 24,301
Patent rights and related technology, net 348,849 374,003
Goodwill, net 110,134 115,398
--------------- ---------------
Total assets $ 1,720,114 $ 1,732,824
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses 573,516 672,533
Commissions payable 67,298 67,298
Advances from affiliates 391,870 365,254
Short-term borrowing 21,378 21,378
Current installments of long-term debt 3,564 3,564
--------------- ---------------
Total current liabilities 1,057,626 1,130,027
Long-term debt, less current installments 9,609 9,609
--------------- ---------------
Total liabilities 1,067,235 1,139,636
--------------- ---------------
Stockholders' equity:
Convertible, preferred stock, Series A, $.001
par value, $1,000,000 in liquidation, 1,250,000
shares authorized, issued and outstanding - 1,250
Common stock, $.001 par value. Authorized
200,000,000 shares: issued and outstanding,
10,817,785 shares in 2000 and 7,876,641 in 1999 10,818 7,876
Additional paid-in capital 6,631,465 6,044,092
Accumulated deficit (5,980,904) (5,451,530)
--------------- ---------------
661,379 601,688
Less receivable for stock subscription (8,500) (8,500)
--------------- ---------------
Total stockholders' equity 652,879 593,188
Commitments and contingent liabilities - -
--------------- ---------------
Total liabilities and stockholders' equity $ 1,720,114 $ 1,732,824
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
POWERCOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
2000 1999
(Reviewed) (Unaudited)
--------------- ---------------
<S> <C> <C>
Revenues:
Product sales $ 63,818 $ 72,829
Services - 5,220
--------------- ---------------
Total revenues 63,818 78,049
--------------- ---------------
Cost of revenues
Product sales 40,754 153,819
Services - (43,550)
--------------- ---------------
Total cost of revenues 40,754 110,269
--------------- ---------------
Gross margin 23,064 (32,220)
Operating expenses:
General and administrative 150,098 108,678
Sales and marketing - 83,280
Research and development - 14,361
Depreciation and amortization expense 15,863 26,052
--------------- ---------------
Total operating expenses 165,961 232,371
--------------- ---------------
Operating loss (142,897) (264,591)
Other income (expenses):
Interest income - 24,207
Interest expense (667) (10,930)
--------------- ---------------
Total other income (expense) (667) 13,277
Loss before provision for income taxes (143,564) (251,314)
--------------- ---------------
Provisions for income taxes (52,222) -
Loss before losses of unconsolidated
Affiliates (195,786) (251,314)
Equity in loss of unconsolidated affiliates - (31,399)
--------------- ---------------
Net loss $ (195,786) $ (282,713)
=============== ===============
Net loss per share $ (0.01) $ (0.04)
=============== ===============
Weighted average common shares 9,871,389 7,242,517
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
POWERCOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
2000 1999
(Reviewed) (Unaudited)
--------------- ---------------
<S> <C> <C>
Revenues:
Product sales $ 92,526 $ 139,794
Services 14,190 31,823
--------------- ---------------
Total revenues 106,716 171,617
--------------- ---------------
Cost of revenues
Product sales 75,699 188,287
Services 9,876 244
--------------- ---------------
Total cost of revenues 85,575 188,531
--------------- ---------------
Gross margin 21,141 (16,914)
Operating expenses:
General and administrative 450,210 212,360
Sales and marketing - 173,498
Research and development - 30,409
Depreciation and amortization expense 34,777 51,546
--------------- ---------------
Total operating expenses 484,987 467,813
--------------- ---------------
Operating loss (463,846) (484,727)
Other income (expenses):
Interest income - 34,250
Interest expense (13,306) (25,412)
--------------- ---------------
Total other income (expense) (13,306) 8,838
Loss before provision for income taxes (477,152) (475,889)
--------------- ---------------
Provisions for income taxes (52,222) -
Loss before losses of unconsolidated
affiliates (529,374) (475,889)
Equity in loss of unconsolidated
affiliates - (66,966)
--------------- ---------------
Net loss $ (529,374) $ (542,855)
=============== ===============
Net loss per share $ (0.05) $ (0.08)
=============== ===============
Weighted average common shares 10,186,853 7,039,946
=============== ===============
See accompanying notes to consolidated financial statements.
<PAGE> 6
POWERCOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
</TABLE>
<TABLE>
2000 1999
(Reviewed) (Unaudited)
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (529,374) $ (542,855)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 34,777 51,546
Equity loss in unconsolidated affiliate - 66,966
Common stock issued for operating expenses 139,065 98,830
(Increase) decrease in assets:
Accounts receivable 68,620 (51,316)
Refundable income taxes 52,222 -
Other receivables - (148,540)
Inventories - 8,883
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (99,017) 56,769
--------------- ---------------
Net cash used in operating activities (333,707) (459,717)
--------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment - (15,638)
Increase in advances from affiliate 26,616 329,224
Proceeds from sale of securities
available for sale - 32,500
--------------- ---------------
Net cash provided by investing activities 26,616 346,086
--------------- ---------------
Cash flows from financing activities:
Proceeds from short-term borrowings - 49,404
Repayment of short-term borrowings - (2,063)
Payment on note payable - (100,000)
Proceeds from issuance of shares
under private placement 450,000 200,100
--------------- ---------------
Net cash provided by financing activities 450,000 147,441
--------------- ---------------
Net increase in cash 142,909 33,810
Cash at beginning of year 14,455 21,781
--------------- ---------------
Cash at end of year $ 157,364 $ 55,591
=============== ===============
Supplemental schedule of cash flow information:
Interest paid $ 13,306 $ 26,600
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
POWERCOLD CORPORATION Notes to Consolidated
AND SUBSIDIARIES Financial Statements at
(Unaudited) June 30, 2000
--------------------------------------------------------------------------------
(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 six-month
period ended June 30, 2000, and the Company has used substantial amounts of
working capital in its operations. At June 30, 2000, current liabilities exceed
current assets by $437,529 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 year's 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> 8
POWERCOLD CORPORATION
FORM 10-QSB
JUNE 30, 2000
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 will also support Channel Freeze
Technologies by designing and packaging their accompanying refrigeration
systems. Management believes that the recent acquisition of Channel Freeze and
Alturdyne Energy Systems should provide improved revenues and profits (subject
<PAGE> 9
to sufficient working capital) for RealCold Products in 2000, based upon its
expertise in custom manufacturing systems. There are proposed alliances with
other refrigeration companies, whereas RealCold Products will package various
components adding value for a total turnkey refrigeration system.
NAUTICON INC. - manufactures and markets a product line of patented evaporative
heat exchange systems for the HVAC and refrigeration industry. 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%, making these
units contribute to the utilities needs to reduce power demand. There are over
150 systems installed in the US.
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 (September 1998) as a new PowerCold
entity to acquire the Natural Gas Business from Rotary Power International. The
agreement includes: the business assets including intellectual property,
inventory and manufacturing capability; a marketing agreement with one of the
world's largest supplier of supermarket refrigeration equipment, 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 an exclusive Distributor 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 its major sales
agreement with Kem Equipment Company, an engine packager for OEM applications
for the oil and gas industry in Western Canada. The Sales Agreement is for (100
small 65 HP and 60 large 500 HP) natural gas engines valued some $5 million.
The major application is for oil and gas field systems. The initial (160)
engines are scheduled for delivery to a major Canadian oil and gas operation in
Western Canada.
CHANNEL FREEZE TECHNOLOGIES, INC. - was recently formed (September 1998) as a
PowerCold subsidiary to acquire 80% of the assets of Channel Ice Technologies.
Channel Ice produces 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 - PowerCold recently signed a Letter of Agreement
(December 1998), to acquire a division of Alturdyne that produces natural gas
engine driven water chillers. The Company also announced a Strategic Alliance
with Alturdyne for manufacturing and marketing of their respective products.
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. Their capabilities and experience in
developing low cost, customer power packages that meet specific needs have
<PAGE> 10
POWERCOLD CORPORATION
FORM 10-QSB
JUNE 30, 2000
established Alturdyne's excellent reputation in the industry. Alturdyne's added
expertise is in the design and production of rotary engines.
Alturdyne Energy Systems, as an Alturdyne division installed over (140) chillers
systems. The manufacturing operations have been moved to the Company's facility
in Cibolo, Texas. The added expertise of RealCold Products engineering and
manufacturing should enhance the existing chiller business.
RESULTS OF OPERATIONS - SECOND QUARTER 2000
Revenue for the three and six months periods ended June 30, 2000 decreased
(18.2%) to $63,818 and (37.8%) to $106,716 respectively as compared to $78,049
and $171,617 for the same periods respectively in 1999.
The Company's revenue, even though it decreased for the same periods in 1999,
should continue to increase in 2000 due to the increased volume of customer
proposals for the newly redesigned Evaporative Condenser Line of Products, which
include EV Cool, EV Chill and EV Frig. The current revenue backlog is $318,000.
The Company had to cancel some $1.7M in customer orders during the last quarter
of 1999 and first quarter 2000 and because there was insufficient capital to
produce product. The working capital shortage was mainly due because of the
large amounts of Company funds that was used for the promotion and support of
the new Channel Freeze business. 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.
Net Loss for the three and six months periods ended June 30, 2000 decreased
(22.1%) to ($195,786) and (2.5%) to ($529,374) respectively as compared to
($282,713) and ($542,885) for the same periods respectively in 1999. Net Loss
per share for the three and six month periods ended June 30, 2000 was ($0.01)
and ($0.5) and decreased respectively compared to $(0.04) and ($0.08) for the
same periods respectively in 1999. Net loss per share was based on the weighted
average number of common shares of 10,186,853 for June 30, 2000 compared to
7,039,946 for June 1999.
The Company had to write off the refundable income taxes of $52,222, because the
IRS did allow refund because of a change in the alternate minimum tax
recalculation. Therefore included with losses was an unaccountable loss of
$52,222. The current operating loss, due to maintaining general Company
operating overhead including additional engineering and marketing costs for
Nauticon and Channel Freeze product lines, has steadily decreased and will
continue to be a loss until the revenue increases as stated in the revenue
comments above. 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 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 June 30,
2000 compared to the second quarter ended June 30, 1999: Total assets decreased
0.7% to $1,720,114 compared to $1,732,824; total current liabilities decreased
6.4% to $1,067,235 compared to $1,139,636; total stockholders' equity increased
10.1% to $652,879 compared to $593,188.
The Company had to write off the refundable income taxes of $52,222, because the
IRS did allow refund because of a change in the alternate minimum tax
recalculation. A major portion of the outstanding accounts payable liability is
<PAGE> 11
POWERCOLD CORPORATION
FORM 10-QSB
JUNE 30, 2000
carried forward primarily from the prior inefficient Nauticon management
operations. The Company is currently in the process of restructuring the
Nauticon accounts payables with its vendors. The major reason for the large
allowance for doubtful accounts is attributed to one large uncollected Nauticon
order. The Company is in the legal process of collecting this outstanding
payable.
Nauticon has been continually hindered by major operating and legal expenses due
to previous inept management. Because of the major operating losses incurred by
previous management, Nauticon does not have sufficient resources to continue
operations, therefore the Company has ceased Nauticon's operations. The
Nauticon product technology was licensed to RealCold Products for a two and one
half per cent (2 1/2%) royalty fee on product sales. This new marketing
operating procedure has no effect on the consolidated operations of the Company
because both Nauticon and RealCold Products are wholly owned entities of
PowerCold.
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's first new enhanced designed system is in production for an order
delivery to Japan. Channel Freeze Management believes that the product is now
ready for customer delivery and acceptance and foresees an increase in new
business.
The Company issued a total of 1,892,785 shares of new common restricted stock
during the second quarter ending June 30, 2000: 100,000 shares for a private
placements; 1,250,000 outstanding preferred shares were converted into 1,354,785
shares of new common restricted stock; 438,000 shares for expenses and
consulting 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.
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. Under new operating management a new
operating plan has been installed 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.
The current status of any 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.
<PAGE> 12
POWERCOLD CORPORATION
FORM 10-QSB
JUNE 30, 2000
PART 11. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Management of the Company has come to terms with the former president and
director of Nauticon in connection with the Company's acquisition of Nauticon in
August 1996. Final settlement should be completed within the next sixty (60)
days, and will be disclosed at that time.
Related to this matter is the ownership of certain patents. It is the opinion of
management that this matter will not have any adverse effect on the Company,
because the Company legally acquired all the assets of Nauticon including the
patents in exchange for stock. The former president of Nauticon has filed a
counter claim against the Company and two Company Executives/Directors. Because
of these matters and other financial and managerial problems within Nauticon
since the acquisition, and continued lack of operating capital and bad debts,
certain claims have been filed against Nauticon and some of the Companies.
Management of the Company has 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.
The Company will be filing a Form 8-K relating to this matter.
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 April 5, 2000
<PAGE> 13
POWERCOLD CORPORATION
FORM 10-QSB
JUNE 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 Date: August 15, 2000
FRANCIS L. SIMOLA
PRESIDENT AND CEO
