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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2017

or


[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ______________ to ______________


Commission File Number: 001-09370


PWRCOR, INC.

(Exact Name of Registrant as Specified in the Charter)


Delaware

 

13-3186327

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

 

60 E. 42nd Street, 46th Floor

 

 

New York, NY

 

10165

(Address of Principal Executive Offices)

 

(Zip Code)


(212) 796-4097

(Registrant’s telephone number, including area code)



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [  ]


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]  No [  ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer [  ]

Accelerated filer [  ]

Non-accelerated filer [  ] (Do not check if a smaller reporting company)

Smaller reporting company [X]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):  Yes [  ]  No [X]


As of August 11, 2017, there were 200,739,432 shares of the registrant’s common stock outstanding.





TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Balance Sheets As Of June 30, 2017 (Unaudited) And December 31, 2016

4

Statement of Operations for the Three and Six Months ended June 30, 2017 and 2016 (Unaudited)

5

Statement of Stockholders’ Equity for the Six Months Ended June 30, 2017 (Unaudited)

6

Statement of Cash Flows for the Six Months Ended June 30, 2017 and 2016 (Unaudited)

7

Notes to Financial Statements (Unaudited)

8

Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operations.

14

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

16

Item 4. Controls and Procedures.

16

PART II. OTHER INFORMATION

17

Item 1. Legal Proceedings

17

Item 1A. Risk Factors.

17

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

17

Item 3. Defaults Upon Senior Securities

17

Item 4. Mine Safety Disclosure

17

Item 5. Other Information

17

Item 6. Exhibits

17

SIGNATURES

18






















2




PART I. FINANCIAL INFORMATION


Item 1. Financial Statements



PwrCor, Inc.


Financial Statements

For the Six Months Ended

June 30, 2017










































3




PwrCor, Inc.


Balance Sheet



 

June 30,

2017

 

December 31,

2016

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Cash

$

79,794

 

$

90,764

Accounts receivable

 

250,718

 

 

258,151

Prepaid expenses and deposits

 

84,465

 

 

84,670

Total Current Assets

 

414,977

 

 

433,585

 

 

 

 

 

 

Intangible asset - license agreement

 

20,464

 

 

21,094

 

 

 

 

 

 

Fixed asset - engines, net of accumulated depreciation

 

11,638

 

 

13,754

 

 

 

 

 

 

Total Assets

$

447,079

 

$

468,433

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Accounts payable and accrued expenses

$

442,396

 

$

336,650

Deferred Income

 

-

 

 

34,587

Total Current Liabilities

 

442,396

 

 

371,237

 

 

 

 

 

 

Common stock, $0.001 par value: 325,000,000 shares

  authorized; 200,739,432 shares issued and outstanding

  at June 30, 2017 and December 31, 2016

 

200,739

 

 

200,739

Additional paid-in capital

 

311,147

 

 

311,147

Retained earnings (deficit)

 

(507,203)

 

 

(414,690)

Total Stockholders’ Equity

 

4,683

 

 

97,196

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

$

447,079

 

$

468,433














See notes to financial statements



4




PwrCor, Inc.


Statement of Operations

(Unaudited)



 

Three Months Ended

June 30

Six Months Ended

June 30

 

2017

 

2016

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

INCOME

 

 

 

 

 

 

 

 

 

 

Project Management

$

235,632

 

$

245,331

$

467,234

 

$

474,032

Engine Business

 

27,290

 

 

-

 

57,732

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Total Income

 

262,922

 

 

245,331

 

524,966

 

 

474,032

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

Consulting fees

 

176,567

 

 

189,959

 

344,284

 

 

371,394

General and Administrative

 

90,979

 

 

41,339

 

177,748

 

 

81,606

Legal and other professional fees

 

18,397

 

 

13,619

 

95,447

 

 

41,277

 

 

 

 

 

 

 

 

 

 

 

Total Expenses

 

285,943

 

 

244,917

 

617,479

 

 

494,277

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

$

(23,021)

 

$

414

$

(92,513)

 

$

(20,245)

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) per Common Share

$

0.00

 

$

0.00

$

(0.00)

 

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding

 

200,739,432

 

 

200,512,159

 

200,739,432

 

 

200,512,159




















See notes to financial statements



5




PwrCor, Inc.


Statement of Stockholders’ Equity

For the Six Months Ended June 30, 2017

(Unaudited)



 

 

Common Stock

 

Additional

 

Retained

 

Total

 

 

Number of

Shares

 

Amount

 

Paid-in

Capital

 

Earnings

(Deficit)

 

Stockholders’

Equity

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2016

 

200,739,432

$

200,739

$

311,147

$

(414,690)

$

97,196

Net Income (Loss)

 

-

 

-

 

-

 

(92,513)

 

(92,513)

Balance, June 30, 2017

 

200,739,432

$

200,739

$

311,147

$

(507,203)

$

4,683


































See notes to financial statements



6




PwrCor, Inc.


Statement of Cash Flows

(Unaudited)



 

Six Months Ended

June 30

 

2017

 

 

2016

 

 

 

 

 

 

NET INCOME (LOSS)

$

(92,513)

 

$

(20,245)

Adjustments to reconcile net income (loss) to net cash

provided by operating activities

 

 

 

 

 

    Depreciation and amortization

 

3,421

 

 

8,991

Changes in Assets and Liabilities

 

 

 

 

 

    Decrease (increase) in accounts receivable

 

7,433

 

 

79,974

    Increase (decrease) in accounts payable and accrued expenses

 

105,747

 

 

-

    Increase (decrease) in deferred revenue

 

(34,587)

 

 

-

    Decrease (increase) in prepaid expenses and deposits

 

(471)

 

 

(9,152)

      Total Adjustments

 

81,542

 

 

(21,355)

 

 

 

 

 

 

        Net Cash Provided (Used) by Operating Activities

 

(10,970)

 

 

(41,599)

 

 

 

 

 

 

 

 

 

 

 

 

Cash, beginning of period

 

90,764

 

 

119,167

 

 

 

 

 

 

Cash, end of period

$

79,794

 

$

77,568






















See notes to financial statements



7



PwrCor, Inc.


Notes to Financial Statements

June 30, 2017

(Unaudited)


1. Organization and Nature of Business


PwrCor, Inc. (the “Company” or “PwrCor”) was until the first quarter of 2017 named Receivable Acquisition and Management Corporation (“RAMCO”) and doing business as Cornerstone Sustainable Energy.  RAMCO, a public reporting entity, was in the business to purchase, manage and collect defaulted consumer receivables.  RAMCO ceased investments in distressed consumer credit portfolios in September 2007 and since then was in the process of running off existing portfolios.


Sustainable Energy LLC (“Sustainable LLC”) is a New York limited liability company formed on July 26, 2010. Sustainable LLC is involved in developing and improving the efficiency of energy infrastructure using a combination of traditional and advanced technologies. On March 29, 2013, Sustainable LLC contributed certain assets and liabilities into a newly formed entity, Sustainable Energy Industries, Inc. (“Sustainable”). At the time, Sustainable LLC had a license agreement with a third party involving manufacturing and licensing, and limited assets, liabilities and operations.


Cornerstone Program Advisors LLC (“Cornerstone”) is a Delaware limited liability company formed on January 5, 2009. Cornerstone is an energy infrastructure project management company focused on healthcare and higher learning institutions.


As a result of a reverse merger acquisition between the Company, Cornerstone, and Sustainable during 2013, the Company adopted a business plan to build on the business of Cornerstone and Sustainable in energy infrastructure and alternative energy.


In January 2017, the Company’s shareholders approved a name change to PwrCor, Inc., which became effective in March 2017.


Note 2. Significant Accounting Policies


Basis of Presentation and Use of Estimates


The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates required to be made by management include recognition of income for work completed and unbilled to customers, the allowance for doubtful accounts, and the valuation of the License Agreement. Actual results could differ from those estimates.


The Company believes that funds generated from operations, together with existing cash and cash infusions by major stockholders, will be sufficient to finance its operations for the next twelve months, but are likely to be insufficient to fund all of its contractual obligations and to fund growth.  The Company expects to seek additional capital to cover any working capital needs and its contractual obligations, and to fund growth initiatives in its identified markets.  However, there can be no assurance that any new debt or equity financing arrangement will be available to the Company when needed on acceptable terms, if at all.  The continued operations of the Company are dependent on its ability to raise funds, collect accounts receivable, and generate revenue.






8



PwrCor, Inc.


Notes to Financial Statements

June 30, 2017

(Unaudited)


2. Significant Accounting Policies (continued)


Unaudited Financial Statements


The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. The unaudited financial statements should be read in conjunction with those financial statements included in the Company’s Form 10-K for the year ended December 31, 2016.  In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and six months ended June 30, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.


Cash


The Company continually monitors its positions with, and the credit quality of, the financial institutions it invests with. From time to time, however briefly, the Company maintains balances in operating accounts in excess of federally insured limits.


Accounts Receivable


Receivables are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. At June 30, 2017, no allowance for doubtful accounts has been provided.


Income Recognition


The Company recognizes income from the sale of services and products when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related income is reasonably assured.


The Company principally derives income from fees for services generated on a project-by-project basis. Prior to the commencement of a project, the Company reaches agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is the Company’s policy to obtain written agreements from new clients prior to performing services. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed-upon fee structure. Income for services rendered is recognized on a time and materials basis or on a fixed-fee or capped-fee basis in accordance with accounting and disclosure requirements for income recognition.


Fees for services that have been performed, but for which the Company has not invoiced the customers, are recorded as unbilled receivables.


Income for time and materials contracts are recognized based on the number of hours worked by the Company’s subcontractors at an agreed upon rate per hour, and are recognized in the period in which services are performed. Income for time and materials contracts is billed monthly or in accordance with the specific contractual terms of each project.






9



PwrCor, Inc.


Notes to Financial Statements

June 30, 2017

(Unaudited)


2. Significant Accounting Policies (continued)


Income from engine sales contracts is recognized under the percentage of completion method, measured by the percentage of total costs incurred to date to estimated total costs for each contract.  This method is used because management considers expended costs to be the best available measure of progress on these contracts.  Provisions for estimated losses on uncompleted contracts are made in the period in which the losses are determined.  Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.  Deferred income represents the net amount due, or received, under contract terms in excess of the work completed to date.


Fixed Assets


Fixed assets are being depreciated on the straight line basis over a period of five years.


License Agreement


The cost of the license agreement (see Note 4) is being amortized on a straight-line basis over 20 years.  The license agreement is tested annually for impairment or earlier if an indication of impairment exists.  The Company believes that the license agreement has not been impaired.


Income Taxes


The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by the tax authorities. Management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2012 - 2015).


Basic and Diluted Net Income (Loss) per Share


The Company computes income (loss) per share in accordance with “ASC-260”, “Earnings per Share” which requires presentation of both basic and diluted income (loss) per share on the face of the statement of operations. Basic income (loss) per share is computed by dividing net income available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive income (loss) per share excludes all potential common shares if their effect is anti-dilutive.


The Company has no potential dilutive instruments and accordingly basic income (loss) and diluted income per share are the same.


Recent Accounting Pronouncements


In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09 "Revenue from Contracts with Customers" (Topic 606) ("ASU 2014-09"). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is not permitted. The Company will adopt ASU 2014-09 during the first quarter of fiscal 2018. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company's financial position or results of operations.



10



PwrCor, Inc.


Notes to Financial Statements

June 30, 2017

(Unaudited)


2. Significant Accounting Policies (continued)


In August 2014, the FASB issued Accounting Standards Update No. 2014-15: “Presentation of Financial Statements--Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company has adopted ASU 2014-15, and accordingly management has assessed its ability to meet its obligations as they become due over the next twelve months.  Based on management’s assessment of the Company’s expected future revenue and expenses, management believes the Company can continue to operate as a going concern.


All other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.


3. Related Party Transactions


Consulting Fees


Certain stockholders of the Company and entities affiliated with management perform services for customers and were compensated at various rates. Total consulting expenses incurred by these stockholders and entities amounted to $265,458 and $272,949 for the six months ended June 30, 2017 and 2016, respectively.  Amounts payable to these stockholders and entities at June 30, 2017 and 2016 totaled $128,444 and $184,383, respectively.


4. License Agreement


During the period from late 2010 to late 2012, Sustainable LLC entered into a series of agreements including a renewable 20-year engine technology License Agreement (the “Contracts”) with a third party licensor (the “Licensor”) that had developed engines capable of converting low grade heat into other forms of energy. Under the terms of the Contracts, Sustainable LLC obtained exclusive, renewable 20-year license rights in the engines developed by the Licensor (the “License Agreement”) as well as the rights to develop, manufacture and integrate such engines into its projects.


The exclusive market rights of the License Agreement provide that Sustainable LLC make a cash payment of $200,000 and issue common stock in Sustainable representing a small minority ownership position in the Company, along with periodic quarterly payments of $25,000 commencing six months after the initial $200,000 payment.  These payments reset to $50,000 per quarter after three payments, and are subject to further resets to up to $100,000 depending on engine sales volume.  Under certain circumstances, engine royalty fees and referral fees can increase the quarterly payment from time to time.  In the event of non-payment, Sustainable, LLC retains a non-exclusive license subject to royalty fees.




11



PwrCor, Inc.


Notes to Financial Statements

June 30, 2017

(Unaudited)


4. License Agreement (continued)


On May 15, 2013, in connection with the Merger (see Note 1), Sustainable LLC assigned the Contracts to Sustainable.  The Company, after acquiring 100% ownership interest in Sustainable, LLC issued 2,435,430 shares to the Licensor which represents a small minority position in the Company as required under the terms of the License Agreement.  At the time of issuance, these shares were valued at $48,709 representing the fair value of the RAMCO shares.


In addition, during the fiscal year ended December 31, 2013, the Company made payments of $13,000 that were applied against the required initial $200,000 cash payment as stated under the terms of the License Agreement.


At June 30, 2017, the License Agreement has been presented on the balance sheet net of accumulated amortization of $41,245.


In the event the Company elects not to pay for exclusivity under the License Agreement, no cash payment or periodic increasing payments are due.


In connection with a November 5, 2013, proceeding commenced by the Securities Division of the Arizona Corporation Commission (the “ACC”) the Company learned that the Licensor had been classified as dissolved by the Delaware Division of Corporations after March 1, 2010 for failure to pay franchise taxes to the State of Delaware, and similarly classified by the ACC as of approximately the same time.


In performing due diligence in regard to the status of the Licensor, the Company subsequently also learned that two United States patents that were licensed to the Company under the License Agreement have been classified as expired due to the Licensor’s failure to pay maintenance fees thereon.  In conjunction with the Licensor, in April 2015, the Company arranged for the principal United States patent to be reinstated, and it is now again in effect. In addition, the Company had been informed by Licensor’s management that steps were being taken to have the Delaware dissolution remedied, but may not be successful.


To the best of the Company’s knowledge at present, none of these issues presents a near-term hindrance to the Company’s continued focus on establishing and growing its engine technology business, and the international patent rights remain intact.  However, although the Company has obtained previously described rights to all forms of intellectual property covering the engine technology that is the subject of the Contracts, at this time there can be no assurance that the foregoing matters will not have a material adverse effect on the Company’s operations.


After careful assessment, the Company has concluded that no adjustment to the value of the Contracts or amounts due thereunder should be made at the current time.


The Company periodically performs an analysis of its contractual rights and arrangements and establishes asset value based on that analysis.


5. Concentrations


The Company grants credit in the normal course of business to its customers.  The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk.


Two customers accounted for 90.1% and 9.9%, respectively, of total project management income during the six months ended June 30, 2017, and two customers accounted for 96.2% and 2.9%, respectively, during the six months ended June 30, 2016.


Two project management customers accounted for 85.5% and 5.2%, respectively, of total accounts receivable at June 30, 2017, and for 92.5% and 5.7%, respectively, at June 30, 2016.



12



PwrCor, Inc.


Notes to Financial Statements

June 30, 2017

(Unaudited)


6. Commitments


Engine Agreement


On December 27, 2016, the Company entered into an agreement with Modoc County, California, to supply its PwrCor™ engine as part of a demonstration project that will convert ultra low-grade heat into electricity.  The heat will be obtained from a geothermal hot spring which comes to the surface at temperatures of approximately 190° F.


Funding was arranged by Modoc County via a grant from the California Energy Commission with the Company entitled to revenues of up to $123,624. The Company has estimated that the total costs to be incurred in connection with this contract will be $163,049, thus resulting in a $39,425 loss.  This total loss amount has been recognized in the accompanying statement of operations for the period ended June 30, 2017.  The project will be managed by Warner Mountain Energy, which specified the PwrCor™ engine, and is expected to be completed by the fall of 2017.


7. Subsequent Events


Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued, and determined there were none to report.






























13




Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operations.


The following management’s discussion and analysis should be read in conjunction with the Company’s historical consolidated financial statements and the related notes thereto included in our audited financial statements for the year ended December 31, 2015, and the notes thereto.  The management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this quarterly report. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this quarterly report.


Overview


On May 15, 2013, Receivable Acquisition & Management Corporation, a Delaware corporation completed the acquisition of Cornerstone Program Advisors LLC, a Delaware limited liability company (“Cornerstone”) and Sustainable Energy Industries, Inc., a Delaware corporation (“Sustainable”), and the Company assumed the operations of each of these entities (the “Merger”).  Receivable Acquisition & Management Corporation had operated as a business purchasing and collecting upon defaulted consumer receivables; those operations were ceased and collections on any remaining receivables are being run off.  Cornerstone has been in the business of managing energy infrastructure projects, specializing in the non-profit marketplace.  Sustainable is in the business of developing, marketing, and implementing clean tech technologies.  Shareholders approved a name change to PwrCor, Inc. at the shareholder meeting in January, 2017.  The Company has refocused on managing energy infrastructure projects and developing applications for an environmentally benign heat conversion technology with particular focus on the geothermal and independent power production markets.


Results of Operations


During the three and six month periods ended June 30, 2017, the Company had a net loss of ($23,021) and ($92,513), respectively, on revenues of $262,922 and $524,966, respectively, versus net income of $414 and net (loss) of ($20,245) on revenues of $245,331 and $474,032, respectively, in the three and six month periods ended June 30, 2016.  The net loss in the most recent three month period in 2017 as compared to the corresponding period last year was due primarily to costs of parts and materials to be used in the engine to be delivered to Modoc County.  The larger net loss in the six month period in 2017 as compared to the corresponding period last year was due to both an increase in professional fees associated with our shareholder meeting and stockholder communications as well as the increased costs associated with the Modoc County project noted previously.


Revenue


Revenues from the Company’s major customer showed a slight decline of approximately 4% while the margin of project management revenue over the corresponding cost of subcontracted consultants for such projects has increased from 2016 to 2017 due primarily to client coverage of direct related expenses.  This gross profit for the six month period ended June 30, 2017, was 21% of revenues, versus 20% for the corresponding period in 2016.


Revenue increased 7% and 11%, respectively, for the three and six month periods ended June 30, 2017, as compared to the corresponding periods from 2016. This is primarily due to recognition of revenue on the Modoc County project.





14



Operating Expenses


Total operating expenses for the three and six month periods ended June 30, 2017 were $285,943 and $617,479 respectively, versus $244,917 and $494,277, respectively, during the three and six month periods ended June 30, 2016.  The 17% increase in operating expenses in the three month period in 2017, as well as the 25% increase in operating expenses in the six month period in 2017, against the corresponding periods in 2016, are due to an increase in professional fees associated with our shareholder meeting and stockholder communications, as well as the increased costs associated with the Modoc County project noted above.


Consulting Expenses


The Company outsources a significant portion of its project management, oversight and advisory activities to a carefully selected group of small firms, individuals and subcontractors with expertise specific to the projects underway.  As of the quarter ended June 30, 2017, the Company was using six such consulting resources. Consulting expenses consistently constitute the bulk of operating costs for the project advisory and management business activities of the Company, and accordingly generally track revenue.


Liquidity and Capital Resources


As of June 30, 2017, the Company had a working capital deficit of ($27,419) versus working capital of $62,348 as of the year ended December 31, 2016.  The change to a deficit was primarily due to an increase in accrued costs, mostly associated with the Modoc County project.


For the period ended June 30, 2017, the Company had cash of $79,794 versus $90,764 at December 31, 2016.  For the six months ended June 30, 2017, net cash (used) by operating activities was ($10,970) versus net cash (used) by operating activities of  ($41,599) for the six months ended June 30, 2016.  The improvement in net cash from operating activities was primarily due to an increase in accounts payable and accrued costs.


For the six months ended June 30, 2017, there was no net cash provided or used by financing or investing activities, unchanged from the six months ended June 30, 2016.


The Company believes that funds generated from operations, together with existing cash and cash infusions by major stockholders, will be sufficient to finance its operations for the next twelve months, but are likely to be insufficient to fund all of its contractual obligation and to fund growth.  The Company has been exploring options and alternatives for raising additional capital to cover any working capital needs and its contractual obligation, and to fund growth initiatives in its identified markets.  However, there can be no assurance that the Company will be able to raise sufficient capital on acceptable terms.  The continued operations of the Company are dependent on its ability to collect its receivables and increase revenues.


Income Taxes


The Company did not record any income tax provision for the six month period ended June 30, 2017, and does not expect any material income tax liability for the period.  There were no income and related taxes for 2016 paid in the quarter ended June 30, 2017.


Critical Accounting Policy & Estimates


Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.



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Actual results may differ from these estimates under different assumptions and conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the condensed consolidated financial statements included in this quarterly report.


Off-Balance Sheet Arrangements


The Company has no off-balance sheet arrangements.


Item 3. Quantitative and Qualitative Disclosures about Market Risk.


The Issuer is not required to provide the information called for in this item due to its status as a Smaller Reporting Company.


Item 4. Controls and Procedures.


Evaluation of disclosure controls and procedures


The term “disclosure controls and procedures” is defined in Rules 13(a)-15e and 15(d) - 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2017. He has concluded that, as of June 30, 2017, our disclosures, controls and procedures were effective to ensure that:


(1)

Information required to be disclosed by the Company in reports that it files or submits under the act is recorded, processed, summarized and reported, within the time periods specified in the Commissions’ rules and forms; and


(2)

Controls and procedures are designed by the Company to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management including the principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding financial disclosure.


This term refers to the controls and procedures of a Company that are designed to ensure that information required to be disclosed by a Company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the required time periods. Management continues to take steps to improve its controls and procedures, and expects, further, that the growing scale of the business will enable the Company to obtain additional resources to assist in that effort.


Changes in Internal Control over Financial Reporting


There were no changes in the Company’s internal control over financial reporting or in any other factors that could significantly affect these controls during the quarter ended June 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.











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PART II. OTHER INFORMATION


Item 1. Legal Proceedings


The Company is not a party to any material pending legal proceedings or a proceeding being contemplated by a governmental authority nor is any of the Company’s property the subject of any pending legal proceedings or a proceeding being contemplated by a governmental authority except as set forth in our Annual Report on Form 10-K for December 31, 2016 from which there have been no material changes.


Item 1A. Risk Factors.


Subsequent to June 30, 2017, the Company received a demand letter from the principal of the Licensor claiming that an aggregate total of $1,104,367 was due to the Licensor under the License Agreement, and to the principal for consulting work.  The Company and its counsel believe that the claims are without merit and would vigorously defend any potential lawsuit.


Item 2. Unregistered Sale of Equity Securities and Use of Proceeds


None.


Item 3. Defaults Upon Senior Securities


None.


Item 4. Mine Safety Disclosure


Not Applicable.


Item 5. Other Information


None.


Item 6. Exhibits


Exhibit

Number

 

Exhibit Title

31.1

 

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

 

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS *

 

XBRL Instance Document

101.SCH *

 

XBRL Taxonomy Schema

101.CAL *

 

XBRL Taxonomy Calculation Linkbase

101.DEF *

 

XBRL Taxonomy Definition Linkbase

101.LAB *

 

XBRL Taxonomy Label Linkbase

101.PRE *

 

XBRL Taxonomy Presentation Linkbase


In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.


* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.




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SIGNATURES


In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed by the undersigned, thereunto duly authorized.


 

 

PWRCOR, INC.

 

 

 

Date:  August 11, 2017

By:

/s/ Thomas Telegades

 

Name:

Thomas Telegades

 

Title:

Chief Executive Officer

 

 

Interim Chief Financial Officer

 

 

(Principal Executive Officer, Interim Principal Financial Officer

and Principal Accounting Officer)








































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