<PAGE> 1
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________ to ________
Commission file number ____________________________
CASH CAN INCORPORATED
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 75-2371682
- --------------------------------------------- ------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
5020 Service Center Drive, San Antonio, Texas 78218
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(415) 564-4770
- --------------------------------------------------------------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (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. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 14,717,784
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
1232
<PAGE> 2
CASH CAN INCORPORATED
FORM 10-QSB
Quarter ended June 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I Financial Information . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . 18
Part II Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 3
CASH CAN INCORPORATED
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
For Period From August 8, 1992 (Inception) to June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Common stock Paid in Paid in Capital Development
Shares Amount Capital Notes Receivable Stage
--------------- ------------ ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at Aug. 8, 1992 (Inception)
Recapitalization of Cash Can Inc. 21,000,000 $ 2,100 $ 117,900 $ $
Merger of Cash Can Inc. & Market
Investments Inc. at Dec 31, 1992 16,500,000 1,650 (1,523)
Cancellation of shares (14,857,500) 1,486 1,486
Net Loss (216,769)
--------------- ------------ ------------- ---------------- ------------
Balance at December 31, 1992 22,642,500 2,264 117,863 216,769
Cancellation of shares (19,249,996) (1,925) 1,925
Stock exchanged for services 67,500 7 19
Stock exchanged for intangible assets 275,000 28 172
Issuance of stock for cash 40,000 4 43,996
Accretion: redeemable preferred stock (107,143)
Net Loss (1,095,527)
--------------- ------------ ------------- ---------------- ------------
Balance, December 31, 1993 3,775,004 378 56,932 1,312,296
Issuance of stock for cash, other assets,
services and repayment of debt 1,113,535 10 6,772,125 (2,338,016)
Warrants exercised 580,000 58 289,942
Accretion: redeemable preferred stock (127,983)
Net Loss (937,199)
--------------- ------------ ------------- ---------------- ------------
Balance, December 31, 1994 5,468,539 546 6,976,143 (2,338,016) (2,249,495)
Issuance of stock for cash, services
and repayment of debt 2,877,817 288 985,623 48,790
Warrants exercised 100,000 10 49,990
Accretion: redeemable preferred stock (142,856)
Net Loss (4,299,503)
--------------- ------------ ------------- ---------------- ------------
Balance, December 31, 1995 8,446,356 $ 844 $ 7,868,900 $ (2,289,226) $(6,548,998)
Issuance of stock for cash, services
and repayment of debt 150,000 15 20,620
Warrants exercised 121,428 12 17,188
Accretion: redeemable preferred stock (35,714)
Net Loss (80,628)
--------------- ------------ ------------- ---------------- ------------
Balance, March 31, 1996 8,717,784 $ 871 $ 7,870,994 $ (2,289,226) $(6,629,626)
Issuance of stock for cash, services
and repayment of debt 6,000,000 600 299,400
Accretion: redeemable preferred stock (35,714)
Net Loss (148,601)
--------------- ------------ ------------- ---------------- ------------
Balance, June 30, 1996 14,717,784 $ 1,471 $ 8,134,680 $ (2,289,226) $(6,778,227)
--------------- ------------ ------------- ---------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
CASH CAN INCORPORATED
(A Development Stage Company)
Statement of Cash Flows
Quarters Ended June 30, 1996 and 1995
And Period August 8, 1992 (inception) Through June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Inception
June 30 Through
1996 1995 June 30, 1996
---------- ---------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $(148,601) $(236,585) $ (6,778,227)
---------- ---------- --------------
Adjustments to reconcile net loss to
Net cash used in operating activities:
Depreciation and amortization 3,536 3,359 46,754
Bad debt provision 0 0 214,621
Write off of prepaid advertising 0 0 2,500,000
Write off of common stock investment 0 0 577,500
Consulting fees exchanged for common stock 0 0 435,780
(Increase) decrease in accounts receivable, trade 0 31,850 (143,980)
(Increase) decrease in inventory 0 0 (123,775)
(Increase) decrease in accrued interest receivable 0 0 0
(Increase) decrease in deposits (11,472) 0 (17,097)
(Increase) decrease in deferred expenses 15,000 15,000 (225,000)
(Increase) decrease in notes receivable, trade 0 0 (105,000)
Increase (decrease) in accounts payable, trade (3,621) 51,075 208,753
Increase (decrease) in withholding taxes payable 373 (3,450) 0
Increase (decrease) in interest payable 4,375 (7,025) 54,040
Increase (decrease) in accrued expenses 8,000 (7,552) 317,178
Increase (decrease) in accrued salaries payable 4,000 66,785 (125,280)
Increase (decrease) in consulting fees payable 0 0 415,000
Increase (decrease) in deferred income 0 0 255,500
---------- ---------- --------------
Total adjustments 20,191 150,042 4,284,994
---------- ---------- --------------
Net cash used for operating activities (128,410) (86,543) (2,493,233)
---------- ---------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
CASH CAN INCORPORATED
(A Development Stage Company)
Statement of Cash Flows
Quarters Ended June 30, 1996 and 1995
And Period August 8, 1992 (inception) Through June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Inception
June 30 Through
1996 1995 June 30, 1996
---------- ---------- --------------
<S> <C> <C> <C>
Cash flows from investing activities:
Purchase of property & equipment (13,647) 0 (75,985)
Organizational cost 0 0 (5,127)
Advances to EDP 0 687 (112,676)
Advances to employees (30,700) 0 (57,435)
Acquisition of intangible assets 0 0 (300)
Repayments of advances to employees 0 (1,850) (8,760)
---------- ---------- --------------
Net cash used by investing activities (44,347) (1,163) (260,283)
---------- ---------- --------------
Proceeds from financing activities:
Proceeds from notes payable 0 0 466,930
Repayments of notes payable 0 (79,600) (21,704)
Redeemable convertible preferred stock
exchanged for assets 0 0 100
Issuance of common stock 300,000 129,085 1,396,927
Advances from CPF 21,411 0 50,846
Advances from EDP 0 43,862 1,010,671
---------- ---------- --------------
Net Cash provided by financing activities 321,411 93,347 2,903,770
---------- ---------- --------------
Net Increase (decrease) in cash 148,629 (10,045) 150,247
Cash at beginning of period 1,619 (516) 0
---------- ---------- --------------
Cash at end of period $ 150,247 $ (10,561) $ 150,247
---------- ---------- --------------
Supplemental disclosure of cash flow information:
Income tax paid $ - $ - $ -
Interest paid $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
CASH CAN INCORPORATED
(A Development Stage Company)
Statement of Cash Flows
Quarters ended June 30, 1996 and 1995
And Period August 8, 1992 (inception) Through June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Inception
June 30 Through
1996 1995 June 30, 1996
---------- ---------- --------------
<S> <C> <C> <C>
Supplemental disclosure of non-cash investing
and financing activities:
Issuance of common stock in exchange for repayment
of notes payable and accrued interest, including
$290,000 upon the exercise of warrants $ 0 $ 86,000 $ 2,862,530
Issuance of common stock for notes receivable 0 0 2,289,226
Issuance of common stock in exchange for repayment
of advances from EDP 0 0 920,360
Issuance of common stock in exchange for consulting
services 0 40,003 520,780
Issuance of common stock for investment in common
stock of ACI 0 0 577,500
Accretion of redeemable preferred stock 35,714 35,714 428,569
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
CASH CAN INCORPORATED
(A Development Stage Company)
Balance Sheets
June 30, 1996 and December 31, 1995
(Unaudited)
Assets
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
---------- -------------
<S> <C> <C>
Current assets:
Cash $ 150,247 $ 4,757
Accounts receivable, trade, net of
$88,480 allowance 0 0
Advances to EDP, net of $21,141 allowance 0 0
Advances to employees 66,195 8,760
Deposits 17,097 5,625
Deferred consulting (note 8) 36,000 36,000
---------- -------------
Total current assets 269,539 55,142
---------- -------------
Property and equipment, at cost, net of
$42,654 and $36,606 of accumulated
depreciation, respectively 32,607 25,732
---------- -------------
Other Assets:
Notes receivable, trade, net of $105,000
allowance (note 3) 0 0
Organizational costs, net of accumulated
amortization of 4,100 and 3,075, respectively 1,027 2,052
Deferred consulting (note 8) 189,000 219,000
Intangible assets 300 300
---------- -------------
190,327 221,352
---------- -------------
$ 492,473 $ 302,226
---------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 8
CASH CAN INCORPORATED
(A Development Stage Company)
Balance Sheets
June 30, 1996 and December 31, 1995
(Unaudited)
Liabilities and Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
----------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $ 84,594 $ 74,419
Advances from CPF (note 11) 50,864 0
Withholding taxes payable 0 3,484
Accrued interest payable 22,136 13,386
Accrued expenses 82,740 79,400
Accrued salaries payable 65,158 53,162
Notes payable, stockholder (note 11) 115,000 115,000
Consulting fees payable (note 8) 174,000 144,000
----------- -------------
Total current liabilities 594,492 482,851
----------- -------------
Consulting fees payable,
net of current portion (note 8) 165,000 195,000
----------- -------------
Commitments and contingencies - -
Deferred revenue (note 6) 200,000 200,000
----------- -------------
Preferred stock, redeemable, $.0001 par value 464,283 392,855
1,000,000 shares authorized, ----------- -------------
100,000 shares issued & outstanding
Stockholders' equity (deficit):
Common shares
30,000,000 authorized; $ .0001 par value;
14,717,784 and 8,446,356 shares
issued & outstanding, respectively 1,471 844
Paid in capital in excess of par 8,134,680 7,868,900
Notes receivable, common stock (note 3) (2,289,226) (2,289,226)
Deficit accumulated during development stage (6,778,227) (6,548,998)
----------- -------------
(931,302) (968,480)
----------- -------------
$ 492,473 $ 302,226
----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 9
CASH CAN INCORPORATED
(A Development Stage Company)
Statement of Operations
Quarters Ended June 30, 1996 and 1995
And period August 8, 1992 (inception) Through June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Quarters ended Six months ended Inception
June 30 June 30 Through
1996 1995 1996 1995 June 30, 1996
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Sales $ 379 $ 0 $ 14,379 $ 40,000 $ 1,317,559
Cost of goods sold 0 0 0 21,750 821,686
------------ ------------ ------------ ------------ --------------
Gross profit 379 0 14,379 18,250 495,873
------------ ------------ ------------ ------------ --------------
Operating Expenses:
Salaries, benefits, & P/R taxes 4,000 130,942 11,996 271,474 1,228,498
Rent 16,328 7,325 22,694 27,723 286,136
Consulting & professional fees 86,633 94,744 141,295 103,796 1,438,219
Selling & promotion 6,175 13,832 13,075 14,596 201,252
Depreciation 3,024 3,359 6,049 7,493 42,655
General & administrative 28,274 29,936 39,066 50,810 1,007,446
Amortization 512 257 1,024 740 40,099
------------ ------------ ------------ ------------ --------------
144,946 280,395 235,199 476,632 4,244,305
------------ ------------ ------------ ------------ --------------
(Loss) from operations (144,567) (280,395) (220,820) (458,382) (3,748,432)
Other income (expenses):
Interest income 341 46,191 341 90,864 141,840
Advertising income 0 0 0 0 4,007
Advertising credits impairment (not 0 0 0 0 (2,500,000)
Loss on investment (note 4) 0 0 0 0 577,500
Interest expense (4,375) (4,375) (8,750) (5,750) (61,009)
------------ ------------ ------------ ------------ --------------
Net loss $ (148,601) (238,579) (229,229) $ (373,268) $ (6,778,227)
============ ============ ============ ============ ==============
Net loss per share $ (0.02) $ (0.03) $ (0.02) $ (0.06) $ (1.02)
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 10
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
1. ORGANIZATION AND BUSINESS
The Company, a development stage company, was incorporated as Market
Investments, Inc. under the laws of the State of Delaware on March 18, 1991,
with the purpose of merging with an ongoing business and/or acquiring a
company. On December 31, 1992, Market Investments, Inc. exchanged 21,000,000
shares of previously unissued common stock for all of the outstanding common
stock of Cash Can, Inc., a development stage company. As part of the
transaction, two holders of Market Investments, Inc. common stock returned an
aggregate of 14,857,500 shares to Market Investments, Inc. For accounting
purposes the transaction has been accounted for as a reverse acquisition.
Since Market Investments, Inc. was a public "shell" with no operations the
transaction has not been considered a business combination and accordingly no
pro forma financial statements have been presented. In April 1993, the Company
changed its name to "Cash Can Incorporated" (CCI).
The Company is engaged in recycling and marketing activities on a
local, regional, and national level. The Company's first product is the Cash
Can automated aluminum redemption center (hereinafter referred to as a "Cash
Can"). Placed in locations convenient to the consumer, this attractive,
patented machine accepts aluminum beverage cans and returns cash to the
consumer on a per-can basis. It is a high-volume, large-capacity system which
is computer-controlled and operates 24 hours a day, seven days a week.
The Company's continued existence is dependent upon its ability to
resolve its liquidity problems, principally by obtaining additional debt
financing and equity capital. While pursuing additional debt and equity
funding, the Company must continue to operate on limited cash flow from
internal sources. The Company has experienced recurring losses from operations
although significant operating overhead reductions were made in the latter part
of 1994 and again in 1995.
The Company plans to aggressively market its product and cover short
term cash needs through sales and private placements of Company stock. Longer
term cash needs will be met through a proposed public offering expected to
occur in 1996.
The financial statements included herein have been prepared by Cash
Can Incorporated, pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and footnote disclosures,
normally included in financial statements prepared in accordance with generally
accepted accounting principals, have been condensed or omitted pursuant to such
SEC rules and regulations, nevertheless, the Company that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes there to included in the Company's Annual Report. In the
opinion of the management, all adjustments, including normally occurring
adjustments necessary to present fairly the financial position of the Company
with respect to the interim financial statements, and of the results of its
operations for the period ended June 30, 1996 have been included.
Footnote page 1
8
<PAGE> 11
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash flows
For purposes of the statement of cash flows, cash includes all short
term, highly liquid investments with a maturity of three months or less.
Inventory
The Company values inventory at the lower of cost (first-in,
first-out) or market. Inventory consists of parts and partially completed Cash
Can units which are currently the only manufactured product of the Company.
During 1993, the Company acquired the patent for production of such units and
began manufacturing operations until mid 1995 when the manufacturing of the
units was sub-contracted out. Inventory at December 31, 1994 represents raw
materials of $55,986 and work in process of $101,917. During 1995, the Company
charged to expense $161,942 of obsolete and unsalable inventory items, $123,775
of which related to old and disputed accounts payable, vendors (Note 11). At
December 31, 1995 and June 30, 1996, the Company did not have any inventory.
Organizational costs
Organization costs are being amortized on a straight-line basis over
five years beginning in 1993.
Property and equipment
Property and equipment are stated at cost. The cost of maintenance
and repairs is charged to operations when incurred. The Company provides
depreciation using the straight-line method over expected useful lives ranging
from 5 to 7 years. Leasehold improvements are amortized using the
straight-line method over the life of the lease.
Redeemable preferred stock
Accretions of the redemption value of nonparticipating redeemable
convertible preferred stock are provided on the interest method in amounts
sufficient to equal the mandatory redemption value at the redemption date. The
stock is classified on the balance sheet apart from stockholder's equity due to
the stock's redeemable feature (Note 8).
Consulting services
No shares were issued for consulting services during the quarter ended
June 30, 1996. During the quarter ended March 31, 1996, the Company issued
1,189,000 common stock shares in exchange for consulting services valued at
$414,780.
Footnote page 2
9
<PAGE> 12
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
During the quarter ended March 31, 1995 the Company issued 150,000 common
shares in exchange for consulting services valued at $21,000. The Company is
determining the validity of these consulting contracts and may cancel the
shares issued and/or take other action, including litigation, if the required
consulting services have not occurred.
3. NOTES RECEIVABLE
During 1994, the Company sold five hundred thousand shares of
restricted stock to EDP and its management and customers (Note 11) for $6.00
per share. Approximately one million dollars of the proceeds was applied to
reduce debt with the balance paid with short term notes due within one year,
with interest at 7.75% per annum and secured by the securities purchased. In
addition, outstanding warrants representing 580,000 common stock shares were
exercised by EDP and its management and customers for notes receivable totaling
$290,000. At December 31, 1995 and 1994 the Company has recorded these notes
receivable, along with accrued interest of $139,109 (fully reserved) and
$48,790, respectively, as a reduction of stockholders' equity. The Company has
made demand for payment on EDP, its management and customers and intends to
fully pursue collection of these notes receivable.
During 1995 and the first quarter of 1996, the collectibility of the
notes receivable became uncertain, however they were not reserved because they
are reflected as a reduction to stockholders' equity, the non collection of
which would not affect other financial statement categories (Note 15).
4. INVESTMENT IN COMMON STOCK
During 1994, the Company exchanged a total of 150,000 shares of its
common stock for 150,000 common shares of American Capital Investor Corporation
(ACI) of Newport Beach, California. The shares were exchanged at a fair market
value of $3.85 per share which is based upon ACI's book value at September 30,
1994. This investment, which represents 4% of ACI outstanding shares, is
accounted for by the cost method. The fair value of this financial instrument
at December 31, 1994 approximated its cost.
During 1995, the realization of this investment became questionable
and prior management of the Company attempted to cancel the transaction and
return the shares in exchange for the return of its shares from ACI. The
Company is now seeking the return of the ACI shares and the recovery of its
investment. Accordingly, the Company adjusted the carrying value of its
investment to $0, management's estimate of the net realizable fair value of
this financial instrument at December 31, 1995 and June 30, 1996.
5. ADVERTISING COSTS
During 1994, the Company purchased $2,500,000 of television
advertising on the American Independent Network (AIN) in exchange for a note
payable due in November 1996, with interest at 9.0% and secured by AIN credits.
AIN credits are redeemable for blocks of television air time based on
prevailing market rates. On December 28, 1994, the note payable, which had
been factored by the holder to an unrelated party, was exchanged for 250,000
common stock shares of the Company.
Pursuant to Statement of Position 93-7, the Company will expense
Footnote page 3
10
<PAGE> 13
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
advertising costs as incurred. As of December 31, 1995 and 1994, no
advertising expenses have been incurred. Furthermore, no advertising cost has
been incurred during the period ended March 31, and June 30, 1996.
During 1995 the Company was not able to confirm these credits. In
1996 it was determined that the Company had been deceived when purchasing the
credits. Presently, an investigation is being performed concerning the
validity of the credits. Accordingly, the carrying value of the credits has
been charged against income.
6. DEFERRED REVENUES
Deferred revenues at December 31, 1995 and 1994, consists of $0 and
$40,000, respectively, in franchise deposits for the rights to operate a Cash
Can aluminum redemption center and $200,000 and $225,000, respectively, in
deposits on the purchase of individual Cash Can units. At March 31, and June
30, 1996 deferred revenues for the purchase of units remained at $200,000.
Revenue from these orders will be recorded at the time of delivery of
product to the purchasers. While these purchase orders represents the
purchasers' intent, and the Company expects the purchasers to purchase each
order, due to the possibility of unforeseen events that may impair the ability
of a purchaser or the Company to complete the order, all or none of the revenue
represented by these orders may be realized by the Company.
7. EMPLOYEE BENEFIT PLANS
The Company established a defined contribution profit sharing and
salary reduction plan during 1993. Pursuant to the provisions of Internal
Revenue Code Section 401(k), the plan prototype has received a favorable
determination letter from the Internal Revenue Service. Employees are 100%
vested in all personal salary reduction contributions and related earnings.
Through December 31, 1994, the Company had made no contributions to the plan
and the plan was terminated in October 1995.
The Company also established a nonqualifying employee benefit plan to
purchase life and disability insurance for certain officers and key employees.
For the years ended December 31, 1995 and 1994, Company contributions included
in benefits expense totaled $0 and $2,100, respectively. No contributions have
been made during 1996 and none are expected to be made during the remainder of
1996.
8. LICENSE AGREEMENT AND PATENT ACQUISITION
In February 1993 the Company entered into an exclusive license
agreement with Recycle Technologies, Inc. (RTI) of Billings, Montana, the
patent licensee of the device know as "Collector of Empty, Used Recyclable
Beverage Cans" covered by United States Patent No. 4,989,507. Under the terms
of the agreement, RTI granted the Company the exclusive, nontransferable right
and license to market and sell the Cash Can device throughout North America.
However, the Company decided it would be better to own the patent directly and
manufacture the Cash
Footnote page 4
11
<PAGE> 14
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
Can units rather than pay royalties through the license agreement.
Accordingly, during 1993 the Company acquired the patent for the manufacture of
the Cash Can device from Gadar Industries, Inc. In exchange for the patent,
the Company issued 100,000 shares of its non- participating, mandatory
redeemable, convertible preferred stock and 125,000 of its unregistered common
stock shares. The preferred shares and the patent were recorded at $100, the
par value of the preferred shares, which approximates fair market value. The
stock is redeemable by the Company at any time or may be converted by the
holder into 1 share of common stock for each 2 shares of preferred held;
however, redemption is mandatory at the end of seven years. Accretion of the
redemption value of the preferred shares of $1,000,000 is provided for on the
interest method over the seven year redemption period. For the years ended
December 31, 1995 and 1994, accretion of the redemption value totaled $142,856
and $127,983, respectively and during the period ended June 30, 1996 the
accretion of the redemption value totaled $35,714.
The Company also entered into an agreement to purchase consulting
services from Bill Rhodes, the president of Gadar Industries, Inc. The terms
of the agreement provide for payments of $3,000 per month over a 24 month
period and payments of $5,000 over the subsequent 60 month period. At December
31, 1995 and 1994, $255,000 and $309,000, respectively and at June 30,1996
$240,000 of the remaining payments are recorded as deferred consulting fees
although the Company is investigating the validity of this agreement.
In connection with the acquisition of the patent for production of
Cash Can units, the Company also canceled its license agreement with Recycle
Technologies, Inc. and acquired related trademark and trade secrets from
Recycle Technologies, Inc. in exchange for 425,000 shares of common stock.
These assets have been valued at $200 and are recorded as intangible assets.
9. LOSS PER SHARE AND STOCK SPLIT
Loss per share amounts are based on the weighted average number of
common stock shares and common stock equivalents outstanding (9,693,657,
5,468,539 and 4,624,159 for the periods ended June 30, 1996 and 1995 and from
inception through June 30, 1996, respectively). For loss per share purposes,
the net loss was increased by the accretion on redeemable preferred stock (Note
2). No effect has been given to the assumed exercise of stock warrants and
fully diluted earnings per share amounts are not presented because the effects
would be antidilutive.
On March 8, 1993, the Company's Board of Directors effected a 3 for 1
stock split and on August 1, 1994 the Company's Board of Directors effected a 2
for 1 reverse stock split. The weighted average number of shares outstanding,
per share amounts, common stock share and stock warrant data have been
retroactively restated for all periods presented.
10. COMMITMENTS AND CONTINGENCIES
Leases
The Company conducts its operations from facilities in San Antonio,
Texas and it leases various equipment under noncancellable operating leases,
which expire through May 1996. For the years ended December 31, 1995 and 1994
and for the period August 8, 1992 (inception) through December 31, 1995, rent
expense under these leases totaled $48,343, $67,895 and $211,437, respectively.
Footnote page 5
12
<PAGE> 15
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
Minimum future rental payments required under the above operating
leases are as follows.
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------
<S> <C>
1996 $ 11,250
1997 -
1998 -
-------
$ 11,250
=======
</TABLE>
Vendors and former officers/employees
At December 31, 1995, the Company made adjustments to its general
accounts reducing accounts payable, trade by $123,775, representing old and/or
disputed amounts. The Company also made adjustments to its general accounts
reducing accrued salaries payable by $339,944, representing accrued salaries
not properly authorized by the board of directors. No salaries were accrued to
former officers during the period ended March 31, and June 30, 1996.
No claims have been made for these amounts but it is uncertain what
claims might arise in the future, if any, and therefore the amount of these
adjustments the Company ultimately might be required to pay. The accompanying
financial statements do not contain any reserve for this contingency.
Litigation
The Company is the plaintiff in a lawsuit with a competitor involving
patent infringement. The competitor has filed a counter claim seeking $58,900
in relief. Although the Company expects to prevail in this case, it is not
possible to estimate the outcome. No accrual for any possible loss has been
reflected in the accompanying financial statements.
Guaranty
The Company guaranteed an equipment lease payable to a company, which
provided lease financing for units sold by the Company. At May 31, 1996 and
December 31, 1995, the Company was obligated to make good on a lease guarantee
of $30,622 and $0, respectively.
11. RELATED PARTY TRANSACTIONS
EDP Capital Group, Ltd. (EDP)
Footnote page 6
13
<PAGE> 16
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
EDP Capital Group, Ltd. (EDP) is a related party by virtue of the
relationships of the former management of the Company and EDP, and the fact
that EDP purported to act as the Company's "investment banker" and "financial
advisor" from December 1992 through February 1996.
The general manager of EDP throughout that period was Jon J. King,
whose son Michael served as President, Chief Executive Officer and Chairman of
the Company from December 1992 through February 1996. During that same period
the Company's corporate secretary, Elizabeth W. Moore, the sister-in-law of
Jon J. King, was Vice President, Secretary, Director and a stockholder of EDP.
Joseph King, another son of Jon J. King, was an Officer, Director and a
stockholder of EDP. Eddie Moore, who served as President and Chief Executive
Officer of the Company during part of 1995 and 1996, is married to Elizabeth W.
Moore.
Agreements for EDP to act as investment banker and financial advisor
of the Company were executed on December 8 and 20, 1992, respectively, and were
rescinded effective May 1, 1993. During that period a total of $114,000 was
paid by the Company to EDP for such services. After the termination of these
agreements EDP continued to act as a consultant to the Company and was paid
fees of approximately $80,000.
Also during this period, EDP caused one of its affiliates,
Entertainment Development Partners, Inc. (EDPI), to sub-lease office space to
the Company for which the Company paid $73,622 of rental payments.
Also during this period, EDP and various of its affiliates acted as
escrows to sell to the public shares of the Company's common stock owned by
others, principally entities having indicated places of business outside of the
United States (offshore entities). None of the proceeds from the sale of those
shares, an amount currently unknown, inured to the benefit of the Company.
While EDP acted as consultant to the Company, it engaged in
transactions with the Company, some of which involved loans and payments for
services and was involved in most of the Company's transactions. EDP and its
management also arranged to hire persons and firms who purportedly acted as
"consultants" to the Company. Consideration paid to such consultants include
amounts paid in cash and warrants and shares of the Company's common stock.
Some of such shares and warrants were the subject of registration statements
filed on Form S-8 by the Company with the Securities and Exchange Commission
during 1995.
The Company is currently reviewing each of the consulting agreements
to determine whether the Company received adequate consideration and to
determine whether those agreements were properly authorized.
The Company is also undertaking a review of the past transactions with
EDP to determine what impropriety existed.
During 1994, EDP and Michael King executed promissory notes to the
Company in the amounts of $165,000 and $82,500, respectively. These amounts
are past due and the Company has made demands for payment for these notes
receivable. The Company is pursuing legal assistance in this matter.
During 1994, EDP arranged for various offshore entities, believed to be
Footnote page 7
14
<PAGE> 17
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
related to EDP and its affiliates, to purchase common stock shares of the
Company. Payment was in the form of promissory notes with principal amounts
totaling $4,264,226. The notes are past due and demand for payment has been
made by the Company, which will continue to pursue collection of these notes.
During the years ended December 31, 1995 and 1994, EDP made various
non-interest bearing expenditures to the Company totaling $75,020 and $336,243,
respectively for investment banking services, cash advances, and expense
reimbursements. During 1994 these advances were reduced by $920,360 in
exchange for five hundred thousand shares of restricted stock (Note 2). EDP is
owned by a family member of the Company's chairman. As of December 31, 1995
and 1994 the balance of advances payable, EDP totaled $91,535 and $16,515,
respectively.
As of December 31 1995 and 1994 the Company also had non-interest
bearing advances receivable from EDP of $112,676 and $82,760, respectively.
At December 31, 1995, the collectibility of the advances receivable
became uncertain. The Company offset the $112,676 advances receivable by the
$91,535 advances payable and reserved for doubtful collection the remaining
$21,141 receivable balance although the Company intends to pursue collection of
these advances, including litigation if necessary.
Stockholders
During 1994 and 1993, the Company acquired additional working capital
by issuing notes payable to various stockholders. These notes generally were
due within six months, unsecured and with interest at 8.0% to 10.0%. During
1995 and 1994, $75,000 and $255,000, respectively of these notes, plus $9,150
and $21,530, respectively of accrued interest, were repaid through the issuance
of common stock.
The remaining notes payable are in default with interest presently
accruing at 10.0% to 18.0% and one creditor has obtained a judgement for the
principal balance, accrued interest and attorney fees totaling $87,163.
At December 31, 1995 accrued interest payable on these notes totaled
$13,386 and $4,375 for the period ended June 30, 1996.
12. INCOME TAXES
The Company uses the accrual method of accounting for tax and
financial reporting purposes. At December 31, 1995, the Company had net
operating loss carryforwards for financial and tax reporting purposes of
approximately $6,500,000. These carryforwards expire between the years 2006
and 2010 and are further subject to the provisions of Internal Revenue Code
Section 382.
Pursuant to Statement of Financial Accounting Standards No. 109, the
Company has recognized a deferred tax asset in the amount of $2,226,000 which
has been offset by a valuation allowance in the same amount, as follows:
<TABLE>
<CAPTION>
Inception
Year Ended Year Ended through
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Beginning balance $ 765,000 $ 446,000 $ -
</TABLE>
Footnote page 8
15
<PAGE> 18
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
<TABLE>
<S> <C> <C> <C>
Increase during period 1,461,000 319,000 2,226,000
---------- -------- ----------
Ending balance $2,226,000 $ 765,000 $ 2,226,000
========= ======== ==========
</TABLE>
13. STOCK WARRANTS
In March 1993, the Board of Directors recognized a need to adjust the
capital structure of the Company to become more equitable to the public
shareholders. Certain major shareholders were asked to surrender for
cancellation a total of 19,249,996 shares of their common stock to facilitate
the subject adjustment and as consideration, an aggregate of 265,000 common
stock warrants were issued to the shareholders who surrendered their stock.
The warrants issued entitle the shareholders to acquire one share of common
stock for one warrant plus $0.25. The 19,249,996 shares were surrendered and
canceled leaving, immediately after the cancellation, 3,392,504 common stock
shares issued and outstanding. The Company is investigating if adequate
consideration was given for the issuance of the warrants and may cancel them if
such is the case.
The following is a schedule of the activity relating to the Company's
stock warrants:
<TABLE>
<CAPTION>
Inception
through
1995 1994 Dec. 31, 1995
---- ---- -------------
<S> <C> <C>
Warrants outstanding at
beginning of year 425,000 595,000 -
Warrants issued during year:
Officers and directors - 50,000 230,000
EDP (Note 11) - - 150,000
Others 1,427,500 360,000 2,052,500
Warrants exercised during year:
Officers and directors - ( 180,000) ( 180,000)
EDP - ( 150,000) ( 150,000)
Others ( 300,000) ( 250,000) ( 550,000)
Warrants expired during year ( 85,000) - ( 85,000)
---------- ---------- ----------
Warrants outstanding at end
of year 1,467,500 425,000 1,467,500
========== ========== ==========
</TABLE>
The warrants expire between November 1996 and August 1998 and are
exercisable at prices from $.20 to $8.00 per warrant.
14. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of its cash, accounts
receivable, trade, notes receivable, notes payable, stockholders and investment
in restricted common stock (Note 4).
Cash
The Company maintains its cash in bank and other deposit accounts
which,
Footnote page 9
16
<PAGE> 19
Cash Can Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts and dose not believe it is subject to any credit
risks involving its cash.
Accounts receivable, trade
The Company extends credit, secured by the Cash Can units, to its
customers, most of whom are located in Texas. During 1995, the collectibility
of the accounts receivable, trade became uncertain and management fully
reserved for doubtful collection the receivables, carrying them at their net
realizable amounts.
Notes receivable
Notes receivable are past due and in default, bear interest at 7.75%
per annum and are secured by the Cash Can unit or common stock. The Company
believes the fair value of these financial instruments are zero.
Notes payable
Management believes the carrying value of their notes payable
represents the fair value of these financial instruments because their terms,
now in default, are similar to those in the lending market for comparable loans
with comparable risks.
15. SUBSEQUENT EVENTS
In April, 1996, an option to purchase preferred stock shares of the
Company was issued to Coast Pacific, Inc. of San Francisco, California, at a
per share price equal to 60% of the trading price of the Company's common
stock. In May, 1996, the Company issued 6,000,000 shares of its common stock
for $300,000 cash to an offshore buyer pursuant to an exemption from
registration under Regulation S of the Securities Act of 1933, as amended.
Notes receivable
During 1996, the Company discovered that an additional $1,975,000 of
notes receivable were issued in exchange for common stock in 1994 (Note 3) but
the common stock was not issued. The Company will issue the common stock when
the notes are paid. Accordingly, the Company has reserved this amount because
of the uncertainty of the notes being collected.
Other matters
In March, 1996, the Company, EDP and some former officers, directors,
consultants, affiliates and offshore entities were named as defendants in an
action brought by a stockholder, alleging violations of the Racketeer Influenced
and Corrupt Organization Act ("RICO") 18 USC section 1961, et seq., in the
United States District Court for the Southern District of Ohio. No damages were
sought from the Company and the Company was later dismissed as a defendant.
In 1996, the Company made demand for payment from EDP, Michael King
and various offshore entities for the $4,264,226 principal of notes payable to
the Company. To date, no responses have been received.
Footnote page 10
17
<PAGE> 20
ITEM 2 MANAGEMENT'S DISCOUNT AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company was incorporated as Market Investments, Inc. under the
laws of the State of Delaware on March 18, 1991, with the purpose of merging
with an ongoing business and/or to acquire a company. Effective December 31.
1992, Market Investment, Inc. exchanged 14,000,000 shares of previously
unissued common stock for all of the outstanding common stock of Cash Can,
Inc., a development-stage company. As part of the transaction, two holders of
Market Investments, Inc. common stock returned an aggregate of 9,905,000 shares
to Market Investments, inc. For accounting purposes the acquisition has been
treated as a recapitalization of Cash Can, Inc., with Cash Can, Inc. as the
acquirer, and a subsequent issue of stock for cash (a reverse acquisition).
Since Market Investments, Inc. was a public "shell" with no operations, this
transaction has not been considered a business combination and, accordingly, no
pro forma financial statements have been presented. The occurrence of the
first financial activity of Cash Can, Inc., August 8, 1992 will be used as the
inception date for the purpose of reporting results of operations for the
Company. In April 1993, the Company changed its name to its present name Cash
Can Incorporated. The Company also holds a wholly owned subsidiary, Aluminum
Processing, Inc., which was formally known as Cash Can, Inc. which has been
completely inactive since December 31, 1992.
The Company is engaged in recycling and promotional marketing
activities on a local, regional, national and intends eventually to do so at
the international level. The Company's strategy is to bring quality products
and services to the marketplace to provide consumers, merchants, manufacturers,
and investors alike an opportunity to become involved in the recycling
industry.
Eddie E. Moore submitted his resignation as President and CEO of the
Company by letter dated February 9, 1996. Michael J. King stated on February
21, 1996 that he submitted his resignation as Chairman of the Board of Director
effective February 23, 1996. At a Special Meeting of the Company's Board of
Directors held on February 26, 1996, the remaining directors, Robert A.
Phillips and Eugene L. Fry, accepted the resignations of Eddie E. Moore and
Michael J. King and appointed Arthur E. Juhl to fill the vacancy on the Board
of Directors by appointing him Chairman of the Board and also appointing him
President and Chief Executive Officer. The Board of Directors granted Arthur
E. Juhl the autonomous power to, among other things, appoint replacement Board
members to fill any vacancies resulting from resignations.
On March 19, 1996, in separate letters, Eugene L. Fry and Robert A.
Phillips resigned as Directors. On March 20, 1996, the Board of Directors
accepted the resignations of Eugene L. Fry and Robert A. Phillips as Directors
and appointed Alan Khoo and Thomas R. Malanca as to fill the vacancies created
by the resignations.
18
<PAGE> 21
DESCRIPTION OF PRODUCT
The Cash Can automated aluminum redemption center (the "Cash
Can"), a patented device, is the Company's first product. Currently there are
Cash Can units operating in the states of Georgia, Texas, Minnesota, Missouri
and Florida, and the countries of Venezuela and Argentina.
The Cash Can is a large cylinder approximately 14 feet tall and eight
feet in diameter, shaped and painted like a soft drink beverage can. The
Company charges an advertising fee for displaying graphic brand depiction on
each unit. The Cash Can The Cash Can is a large cylinder approximately 14 feet
tall and eight feet in accepts aluminum used beverage containers ("UBC's") from
consumers and returns cash based on the going exchange rate. The Cash Can may
also be programmed to dispense coupons, tokens and other promotional items.
The Cash Can's footprint (base) occupies ground area equivalent to
one parking space. Its base spreads its weight evenly to avoid improvements to
be made to the parking lot upon which it is placed.
At waist level, on the front of the machine there is a recessed
transaction panel which contains clear, visible instructions on how to operate
the Cash Can. At the top of the panel, a lighted electrical display ("LED")
board scrolls further information for use of the machine, as well as other
appropriate advertising messages. Below the instruction panel, there is a
recessed stainless steel basin in which a large bag of aluminum cans is placed.
When the first can is placed in the deposit slot, an optical sensor triggers
the machine into action. No buttons or switches need to be operated making for
simple operations without mechanical tripping devices to malfunction. The
stainless steel basin is drained with a removable grill for fast and easy
cleaning.
Management believes the machine is vandal and burglar resistant; the
exterior is fabricated from 3/16 inch plate steel, and the access door includes
a continuous hinge, a three point locking system, as well as a dead-bolt. The
interior workings of the Cash Can are comprised of standard conveyor systems,
motors, and blowers which are readily available nationwide. No special
knowledge of high-tech machinery is needed by an operator. The machine's
sturdy construction results in long-life and minimal on-going maintenance other
than regular cleaning.
The machine's size allows for a large storage compartment, which
holds 30,000 UBC's or 1,100 pounds of aluminum, preventing the need for daily
servicing of the machine and thereby reducing service expenses. Furthermore,
the large internal size allows for easy access to all internal components, so
maintenance may be performed quickly. The overhead UBC storage compartment can
easily and quickly be unloaded through a simple gravity chute into a trailer or
other hauling device.
The Cash Can has the capability to be monitored through the computer
system via modem uplink. A servicer/operator can remotely monitor such
functions as the number of transactions since the last servicing, the number of
cans in storage, the amount of coins paid out, mechanical interruptions,
average number of transactions, total number of cans ever recycled and other
reports. To access the Cash Can computer system, an operator may utilize the
system's host software on an office personal computer ("PC") and can then
review the performance of a machine or to poll several units.
19
<PAGE> 22
A typical recycling transaction involves a customer emptying a bag
of aluminum cans into the exterior UBC basin of the Cash Can. As the customer
feeds the first can into the deposit slot at the corner of the basin, the first
can trips an optic switch inside the deposit slot. The UBC stream is
transported through the system primarily by air after it leaves the initial
conveyor which sorts out steel or tin cans with a magnetic system. Weighted
cans or other items too heavy to be carried by the air stream are rejected.
This includes metal cans missed by the magnetic system and plastic or glass
beverage containers. Light weight trash, such as paper and leaves are removed
by an air classification process and dropped into an internal receptacle. The
Cash Can operates quietly and does not disturb neighboring business or
residents.
The machine processes approximately 120 cans per minute. After the
customer has completed depositing the last can, cash is dispensed based on a
posted per can basis into a coin bin. Additionally, the customer receives a
receipt which details the date and time of transaction, number of cans
recycled, amount paid for cans, and a thank you message. The receipt may also
contain several discount coupons which the customer may use for a various
discounts on purchased merchandise. The Company charges a fee to the
advertising entity to dispense coupons.
The Cash Can can also be programmed to dispense a voucher instead of
cash which can be redeemed inside the store where the machine is located for
credit on a purchase. This is the typical system in states which have enacted
bottle redemption legislation ("Bottle Bill States"). (Currently, there are
nine states that have "bottle bills": Connecticut, Delaware, Iowa, Maine,
Massachusetts, Michigan, New York, Oregon and Vermont. Additionally,
California has passed legislation that is similar to a bottle bill, and Florida
has implemented an advance disposal fee on containers that are recycled at a
rate of less than 50 percent.) Should the machine's coin dispenser run out of
money or jam, an IOU. receipt will be printed with instructions on who to call
for a refund or to report a service interruption.
The new management of the Company has developed a design for a second
generation reverse vending machine which is approximately eight feet by five
feet in dimensions as compared to the much larger size of its first generation
units. There will also be an approximately 14 feet by eight feet version, and
the new design calls for a machine that will be built primarily out of
fiberglass instead of metal and will come in two sections so that it is easier
to assemble and move. The Company is negotiating with Pacific Atlantic Group
("PA") to finance the construction of a plant in Mexico to manufacture these
units. There can be no assurance that such negotiations will result in a final
contract or that such contract will be upon favorable terms to the Company.
As of February, 1996, the new management representing the Company is
also involved in negotiations with PAG to provide financing for the
construction of additional reverse vending machines ("RV"). The construction
would occur in Argentina where PAG would build and own a manufacturing plant
and would be in charge of selling the RV machines to local customers under an
arrangement whereby the Company would receive a royalty of approximately
$2,000-$3,000 per unit plus a to be negotiated percentage of advertising income
derived from advertising placed on the units. There can be no assurance that
these negotiations will result in a binding contract or that such contract will
be upon the terms described herein.
20
<PAGE> 23
Subsequent to March 31, 1996, the Company entered into a marketing and
licensee agreement with Pacific Atlantic Group ("PAG"). PAG is currently
conducting research and development activity in order to facilities the design
of a Cash Can unit which will applied to a large target market segment. Due to
financing and specific site requirement for the physical placement of a Cash
Can unit, many potential customers were precluded. PAG in working to overcome
these huddles. The result is anticipated by management to be a product which
will allow the Company to receive licensee fees and royalties and furthermore
resulting in a reduced level of business risk to the Company. This may be
achieved by eliminating the Company's need to secure working capital and
manufacturing assets while allowing the Company to continued with marketing
activities.
LIQUIDITY & CAPITAL RESOURCES
As a development stage company, a significant amount of the
funds utilized by the Company were from financing activities. The Company does
not have any line of credit or other line of credit or other financing
arrangement with any financing institutions. During the quarters ended March
31, and June 30, 1996, the Company relied upon debt and equity funds to sustain
business operations. As such, the Company's sources of external financing are
and have been limited.
Historically, the Company has relied upon shareholders and
venture capital investors to fund business operations and the Company must
continue to do so in the foreseeable future.
The Company's continued existence is dependent upon its
ability to generate cash flow from debt or equity sources. There is no
guarantee that the Company can secure adequate cash flow to sustain business
operations. Failure to obtain additional working capital funds would adversely
affect the Company's liquidity in the foreseeable future.
The Company intends to cover short term cash needs through
short-term debt, accounts payable financing, and possible sales and/or
licensing of proprietary technology. Subsequent to June 30, 1996, the Company
has been involved in negotiations with parties whose intent is to secure the
sale and placement of Cash Can units or utilize the license of components of
Cash Can owned technology to benefit the Company. The Company may receive
license and royalty fees. Recognition of revenue from sales and license
agreements is dependent upon the parties ability to obtain sales and/or
advertising contracts. While pursuing additional financing and/or sales
revenues, the Company must continue to operate on limited cash flow.
During the quarter ended March 31, 1996, the Company sold two
units which were placed in the Springfield, Missouri metro area. The units
were repossessed from an operator in the Salt Lake City area who failed to
fulfill the purchase agreements. The two units were partially complete when
sold and held at no inventory value as the Company had no valuation basis for a
true market value for repossessed and/or used Cash Can units. As such, there
was no cost of goods sold on the sale of $14,000. During the quarter ended
June 30, 1996, the Company had incidental sales of accumulated aluminum
beverage cans for $379. This sale of beverage cans is not currently a part of
normal business activity. During comparable periods of 1995, the Company had
sales of $40,000 during the fist quarter of 1995 and none during the second
quarter of 1995.
21
<PAGE> 24
The Company had a net loss from operating activities of
($148,601) for the period ended June 30, 1996 and a net loss of ($80,628) for
the period ended March 31, 1996. The resulting net loss for the six month
period ended June 30, 1996 was ($229,229). During the second quarter of 1996,
expenses increased as new management increased business activity which was
expensed for the period. The Company's management expects expenses to remain
at higher levels than recent periods due to increased efforts to move forward
with the Company's business plan and marketing efforts.
Depreciation and amortization expenses were similar for the
comparable periods ended during 1995 and 1996. During the period ended March
31, 1996, the Company exchanged $21,000 in consulting fees for common stock and
none in the period ended June 30, 1996. During the first and second quarters
of 1996, there was no operation activity in accounts receivable trade,
inventory, and notes receivable trade. Accounts payable, trade increased by
$14,180 during the period ended March 31, 1996 and decreased by ($3,627) during
the period ended June 30, 1996. Deposits increased by $11,472 during the
period ended June 30, 1996, primarily due to a security deposit placed on a new
office in San Francisco which was subsequently occupied in July of 1996.
During the period ended March 31, 1996, new management assumed
control of the Company. Also during the first quarter of 1996, general
business activity levels were less than the similar period of 1995 and as a
result the Company has fewer personnel members on the payroll. Accrued
salaries for the period ended June 30, 1996 increased by $4,000 resulting in
accrued salaries payable for the six months ended June 30, 1996 of $65,158.
Accrued salaries payable for the reporting period ended June 30, 1995 increased
by $66,785.
At June 30, 1995 and 1996 the Company had notes payable to
shareholders of $115,000. During the period ended June 30, 1996 there notes
were in default and a subsequent increase in applied interest payable for the
respective periods increased from $3,625 to $4,375.
Accrued expenses for the period ended June 30, 1996 increased
by $8,000 as a result of increased business activity compared to a decline in
accrued expenses of ($7,552) for the similar period of 1995.
During March 1996, the Company entered into a consulting
agreement with Coast Pacific Financial for assistance in market development and
locating financing sources for sales and working capital. Coast Pacific
Financial, of San Francisco, California, subsequently advanced $29,435 to the
Company for service and operating funds during the period ended March 31, 1996
and an additional $21,411 for similar services during the period ended June 30,
1995.
22
<PAGE> 25
PART II -- Other Information
Not Applicable
23
<PAGE> 26
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CASH CAN INCORPORATED
--------------------------------------
(Registrant)
Date October 16, 1996 /s/ ARTHUR E. JUHL
--------------------------- --------------------------------------
(Signature)
Arthur E. Juhl
President, Chief Executive Officer
Acting Chief Financial Officer
and Chairman
24
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 150,247
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 109,621
<INVENTORY> 0
<CURRENT-ASSETS> 269,539
<PP&E> 32,607
<DEPRECIATION> 42,654
<TOTAL-ASSETS> 492,473
<CURRENT-LIABILITIES> 594,492
<BONDS> 0
464,283
0
<COMMON> 1,471
<OTHER-SE> 8,134,680
<TOTAL-LIABILITY-AND-EQUITY> 492,473
<SALES> 379
<TOTAL-REVENUES> 379
<CGS> 0
<TOTAL-COSTS> 144,946
<OTHER-EXPENSES> 4,375
<LOSS-PROVISION> 109,621
<INTEREST-EXPENSE> 4,375
<INCOME-PRETAX> 720
<INCOME-TAX> 0
<INCOME-CONTINUING> (148,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (148,601)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
