SECURITIES AND EXCHANGE COMMISSION
Washington, D C 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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 Id. No.)
115 CANFIELD ROAD
LA VERNIA, TEXAS 78121
(Address of principal executive offices)
830–779-5223
(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
Indicate the number of shares outstanding of the Registrant's Common Stock, par value $0.001 – 17,831,807 shares outstanding at September 30, 2002.
POWERCOLD CORPORATION
AND SUBSIDIARIES
Form 10Q for the period ended September 30, 2002
INDEX
Page
PART I.
FINANCIAL INFORMATION
Item 1:
Consolidated Financial Statements
3
Table of Contents:
Accountants Review Report
5
Consolidated Balance Sheets
6
Consolidated Statement of Operations – Three Months
8
Consolidated Statement of Operations – Nine Months
9
Consolidated Statement of Stockholders' Equity
10
Consolidated Statement of Cash Flows
13
Notes to Consolidated Financial Statements
15
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations.
34
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings.
41
Item 2.
Changes in Securities.
41
Item 3.
Defaults Upon Senior Securities.
41
Item 4.
Submission of Matters to a Vote of
Security Holders.
41
Item 5.
Other Information.
41
Item 6.
Exhibits and Reports on Form 8-K.
41
Signatures
42
POWERCOLD CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
WILLIAMS & WEBSTER PS
Certified Public Accountants
Bank of America Financial Center
W 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
POWERCOLD CORPORATION
TABLE OF CONTENTS
September 30, 2002
ACCOUNTANT’S REVIEW REPORT
1
FINANCIAL STATEMENTS
Consolidated Balance Sheets
2
Consolidated Statements of Operations
3
Consolidated Statement of Stockholders’ Equity
5
Consolidated Statements of Cash Flows
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
To the Board of Directors
PowerCold Corporation
Cibolo, Texas
ACCOUNTANT’S REVIEW REPORT
We have reviewed the accompanying consolidated balance sheet of PowerCold Corporation as of September 30, 2002 and the related consolidated statements of operations, stockholders' equity, and cash flows for the nine months ended September 30, 2002, 2001, and 2000. All information included in these financial statements is the representation of the management of PowerCold Corporation.
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 making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, 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 the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
The consolidated financial statements for the year ended December 31, 2001 were audited by us and we expressed an unqualified opinion on them in our report dated March 4, 2002. We have not performed any auditing procedures since that date.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company has sustained substantial operating losses in recent years and has used substantial amounts of working capital in its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
November 15, 2002
POWERCOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
September 30, ------------------------------
2002 2001 2000
Unaudited Restated Restated
-------------- -------------- --------------
ASSETS
CURRENT ASSETS
Cash $ 7,129 $ 290,174 $ 106,864
Trade accounts receivable, net of
Allowance 446,192 173,769 38,665
Receivables from related parties - 1,686 -
Inventory 164,495 241,853 241,272
Prepaid expenses 5,750 22,500 307,500
-------------- -------------- --------------
Total Current Assets 623,566 729,982 694,301
-------------- -------------- --------------
OTHER ASSETS
Property and equipment, net 139,584 41,113 19,499
Patent rights and related technology, net 325,027 382,108 459,343
License and technology, Alturdyne 400,000 - -
Goodwill, net 16,866 16,866 27,392
Securities available for sale 389,000 970,000 -
Deposits and prepaid rent 6,336 9,645 7,705
-------------- -------------- --------------
Total Other Assets 1,276,813 1,419,732 513,939
Net assets from discontinued operations - 689,810 572,620
-------------- -------------- --------------
TOTAL ASSETS $ 1,900,379 $ 2,839,524 $ 1,780,860
=============== ============== ==============
See accompanying notes and accountant's review report.
POWERCOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
September 30, ------------------------------
2002 2001 2000
Unaudited Restated Restated
-------------- -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 508,223 $ 232,204 $ 177,725
Account payable - related party - - 10,567
Commissions and royalty payable 55,067 55,067 42,240
Advances from affiliate - - 73,636
Notes payable 34,014 36,329 43,328
Current portion of capital lease payable 3,012 3,018 3,419
-------------- -------------- --------------
Total Current Liabilities 600,316 326,618 350,915
-------------- -------------- --------------
CAPITAL LEASE PAYABLE, net of current
portion 1,815 5,413 6,826
COMMITMENTS AND CONTINGENCIES 149,820 168,300 168,300
STOCKHOLDERS' EQUITY
Convertible preferred stock, Series A,
$0.001 par value; 5,000,000 shares
authorized, 0 shares issued and
outstanding respectively - - -
Common stock, $0.001 par value; 200,000,000
shares authorized, 17,831,807, 16,027,882
and 12,669,383, shares issued and
outstanding, respectively 17,831 16,027 12,669
Additional paid-in capital 12,861,713 10,210,665 8,243,227
Stock options and warrants 384,040 471,980 -
Accumulated deficit (12,504,156) (9,329,479) (7,001,077)
Accumulated other comprehensive income 389,000 970,000 -
-------------- -------------- --------------
Total Stockholder's Equity 1,148,428 2,339,193 1,254,819
-------------- -------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,900,379 $ 2,839,524 $ 1,780,860
=============== ============== ==============
See accompanying notes and accountant's review report.
POWERCOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Three Months Ended September 30,
----------------------------------------------
2002 2001 2000
Unaudited Unaudited Unaudited
-------------- -------------- --------------
REVENUES
Product sales $ 435,201 $ 305,527 $ 200,591
Services 25,258 67,478 -
-------------- -------------- --------------
Total Revenues 460,459 373,005 200,591
-------------- -------------- --------------
COST OF REVENUES
Materials 220,338 184,274 75,220
Direct labor 86,920 72,593 29,632
Manufacturing supplies 3,758 2,792 1,140
Shipping and handling 23,333 19,544 7,978
-------------- -------------- --------------
334,349 279,203 113,970
-------------- -------------- --------------
GROSS PROFIT 126,110 93,802 86,621
-------------- -------------- --------------
OPERATING EXPENSES
Sales 58,466 23,830 23,021
Advertising and marketing 107,745 43,689 42,205
Corporate and administrative 662,076 266,107 257,063
Research and development 96,616 39,717 38,368
Legal and accounting 30,244 11,915 11,510
Occupancy 24,127 11,915 7,674
Depreciation and amortization 18,930 24,048 39,505
-------------- -------------- --------------
Total Operating Expenses 998,204 421,222 419,345
-------------- -------------- --------------
LOSS FROM OPERATIONS (872,094) (327,420) (218,754)
OTHER INCOME (EXPENSES)
Other income - - 3,929
Inventory impairment (143,742) - -
Interest income (expense) (2,764) 1,367 1,579
Interest and financing expense - (2,124) -
Gain on litigation settlement - - 76,400
-------------- -------------- --------------
Total Other Income (Expenses) (146,506) (757) 81,908
-------------- -------------- --------------
LOSS BEFORE INCOME TAX (1,018,600) (328,177) (136,846)
INCOME TAX EXPENSE - - -
-------------- -------------- --------------
Net loss from continuing operations (1,018,600) (328,177) (136,846)
Net loss from discontinued operations - (14,281) (53,952)
-------------- -------------- --------------
NET LOSS (1,018,600) (342,458) (190,798)
OTHER COMPREHENSIVE INCOME
Unrealized gain (loss) on investments (212,400) (388,000) -
-------------- -------------- --------------
COMPREHENSIVE LOSS $ (1,231,000) $ (730,458) $ (190,798)
============== ============== ==============
LOSS PER COMMON SHARE, BASIC AND DILUTED
CONTINUING OPERATIONS $ (0.06) $ (0.02) $ (0.02)
============== ============== ==============
LOSS PER COMMON SHARE, BASIC AND DILUTED,
DISCONTINUED OPERATIONS $ NIL $ NIL $ NIL
============== ============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 16,335,560 14,444,668 11,255,604
============== ============== ==============
See accompanying notes and accountant's review report.
POWERCOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Nine Months Ended September 30,
----------------------------------------------
2002 2001 2000
Unaudited Unaudited Unaudited
Restated Restated
-------------- -------------- --------------
REVENUES
Product sales $ 1,238,490 $ 661,772 $ 293,117
Services 68,459 135,331 14,190
-------------- -------------- --------------
Total Revenues 1,306,949 797,103 307,307
COST OF REVENUES
Material 612,809 338,653 129,704
Direct labor 276,082 151,091 57,868
Manufacturing supplies 17,649 10,420 3,990
Shipping and handling 38,818 20,840 7,981
-------------- -------------- --------------