UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2003
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 000-________
AUGRID CORPORATION
(Exact name of registrant as specified in its charter)
AUGRID OF NEVADA, INC.
(Former name of registrant)
Nevada 34-1878390
- ------------------------------ --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2275 East 55th Street
Cleveland, Ohio 44103
(Address of principal executive offices)
(216) 426-1589
(Registrant's telephone number, including area code)
Check 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, and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
As of May 19, 2003, there were 78,216,813 shares of the Registrant's common
stock, par value $0.001 issued and outstanding.
AuGRID CORPORATION
MARCH 31, 2003 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Special Note Regarding Forward Looking Information
.................................................................................
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...................................... 3
Item 2. Management's Plan of Operation............................ 15
Item 3. Controls and Procedures................................... 17
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................. 18
Item 6. Exhibits.................................................. 18
References in this report to the "Company", "we", "us", "our" and similar terms
means AUGRID Corporation, a Nevada corporation.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following cautionary statements identify important factors that could
cause our actual results to differ materially from those projected in the
forward-looking statements made in this Quarterly Report on Form 10-QSB. Any
statements about our beliefs, plans, objectives, expectations, assumptions or
future events or performance are not historical facts and may be
forward-looking. These statements are often, but not always, made through the
use of words or phrases such as "will likely", "are expected to", "should", "is
anticipated", "estimated", "intends", "plans", "projection" and "outlook". Any
forward-looking statements are qualified in their entirety by reference to
various factors discussed throughout this Quarterly Report and discussed from
time to time in our filings with the Securities and Exchange Commission. Among
the significant factors that could cause our actual results to differ materially
from those expressed in the forward-looking statements are:
- - the potential risk of delay in implementing our business plan;
- - the market for products; and
- - the need for additional financing.
Because the factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements, persons should not place undue reliance on any of these
forward-looking statements. In addition, any forward-looking statement speaks
only as of the date on which it is made, and we undertake no obligation to
update any forward-looking statement or statements to reflect events or
circumstances after the date on which the statement is made, to reflect the
occurrence of unanticipated events or otherwise. New factors emerge from time to
time, and it is not possible for us to predict which will arise or to assess
with any precision the impact of each factor on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Independent Accountant's Report
Consolidated Balance Sheets as of March 31, 2003 and
March 31, 2002
Consolidated Statements of Income for the three months ended
March 31, 2003 and 2002
Consolidated Statements of Operations as of March 31, 2003 and
March 31, 2002
Consolidated Statements of Stockholders' Deficit as of
March 31, 2003 and March 31, 2002
Consolidated Statements of Cash Flows for the three months ended
March 31, 2003 and March 31, 2002
Notes to Consolidated Financial Statements
HENRY L. CREEL CO., INC.
Certified Public Accountant
(216)491-0800
Fax (216)491-0803
To the Board of Directors and Stockholders of
AUGRID CORPORATION
Independent Auditor's Report
We have audited the accompanying consolidated balance sheets of AUGRID
CORPORATION (A Nevada corporation in the Development Stage) and subsidiaries as
of March 31, 2003 and 2002, and the consolidated statements of operations,
stockholders' deficit, and cash flows for the years then ended and the period
from interception of the development stage (March 15, 1998) through March 31,
2003. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AUGRID CORPORATION (A Nevada
corporation in the Development Stage) and subsidiaries as of March 31, 2003 and
2002, and the results of its operations and its cash flows for the years then
ended and the period from the inception of the of the development stage (March
15, 1998) through March 31, 2003, in conformity with generally accepted
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The company is a development stage
company engaged in the development and marketing of Flat Panel Display. As
discussed in Note 1 of the financial statements, the company's operating losses
since inception and the deficit accumulated during the development stage raise
substantial doubt about its ability to continue as a going
3
concern. Management's plan concerning these matters are also described in note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainly.
/s/ Henry L Creel Co., Inc
Cleveland, Ohio
March 31, 2003
3587 LEE ROAD
SHAKER HEIGHTS, OHIO 44120
AUGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
As of March 31, 2003 and 2002
ASSETS
CURRENT ASSETS 2003 2002
- -------------- ----------- ------------
Cash $ 2,179 $ 1,974
----------- -----------
Total Current Assets 2,179 1,974
PROPERTY AND EQUIPMENT (Note 1)
Machinery And Equipment 69,119 69,119
Furniture And Fixtures 7,686 7,686
Office Equipment 14,176 14,176
----------- -----------
Total Property At Cost 90,981 90,981
Less: Accumulated Depreciation (65,115) (65,115)
----------- -----------
Net Property and Equipment 25,866 25,866
----------- -----------
OTHER ASSETS
Deposits Building Construction 21,341 21,341
----------- -----------
Total Other Assets 21,341 21,341
----------- -----------
TOTAL ASSETS $ 50,236 $ 49,181
=========== ===========
See independent auditors' report and notes to financial statements.
4
AUGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
As of March 31, 2003 and 2002
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES 2003 2002
- ------------------- ------------ -------------
Accounts Payable $ 66,308 $ 65,558
Accounts Payable to Related Parties (Note 3) 353,000 213,750
------------- -------------
Total Current Liabilities 419,308 279,308
LONG-TERM DEBT
Notes Payable to Stockholders (Note 7) 673,350 673,350
------------- -------------
Long-Term Debt 673,350 673,350
------------- -------------
Total Liabilities 1,092,658 952,658
------------- -------------
STOCKHOLDERS' EQUITY
Preferred Stock $ 0.001 par value
10,000,000 shares authorized and 317,500
shares issued and outstanding 318 318
Common stock- with $0.001 par value
90,000,000 shares
Authorized; Shares outstanding:
Dec 31, 2002 - 13,216,813 shares
Dec 31, 2001 - 64,364,720 shares
Dec 31, 2000 - 58,268,469 shares
Dec 31, 1999 - 49,889,348 shares
Dec 31, 1998 - 46,629,414 shares 13,217 13,217
Additional paid in capital 4,539,459 4,517,459
Deficit accumulated during
the development stage (5,595,416) (5,434,471)
------------- -------------
Total Stockholders' Equity (Deficit) (1,042,422) (903,477)
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 50,236 $ 49,181
============= =============
See independent auditors' report and notes to financial statements.
5
AUGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
For the Years Ended March 31, 2003 and 2002
Cumulative
Inception to
Dec 31,
2003 2002 2003
---------- ---------- -------------
Revenue
Net Sales (Note 1) -0- -0- 524
Cost and Expenses
Write -Off License Agreement (Note 1H) -0- -0- 1,262,908
General and Administrative 170,944 81,060 3,323,208
------------ ------------ -----------
Income (Loss) Before Depreciation (170,944) (81,060) (4,586,592)
Amortization -0- -0- (527,306)
Depreciation (-0-) (4,056) (65,115)
------------ ------------ -----------
Income (Loss) Before Income Taxes (170,944) (85,116) (5,179,013)
Provision for Income Taxes (Note 2) -0- -0- -0-
------------ ------------ -----------
Net Income (Loss) $ (170,944) $ (85,116) $(5,179,013)
============ ============ ===========
Basic and Diluted Loss Per Share $ (.030) $ (.030)
------------ ------------
Weighted Average Shares Outstanding 56,150,281 69,964,720
See independent auditors' report and notes to financial statements
6
AuGRID CORPORATION
AND SUBSIDIARIES
(A Nevada Development Stage Company)
Consolidated Statement of Stockholders' Deficit
As of March 31, 2003 and 2002
Shares of Addit. Accum Accum
Common Common Paid in Prior to After
Stock Stock Capital March 18 March 18 Total
----- ----- ------- -------- -------- -----
Balance at
March 8, 1998 (429,352) (429,352)
Balance at
December 31, 1998 46,629,414 46,629 1,473,469 (429,352) 1,520,098
Net Loss (590,366) 500,380
Balance at
December 31, 1999 49,889,348 50,207 1,945,304 (1,019,718) 975,475
Net Loss (675,719) 300,074
Balance at
December 31, 2000 58,268,469 58,586 3,653,639 (1,695,437) 2,016,470
Net Loss (1,171,377) 845,411
Balance at
December 31, 2001 64,364,720 64,683 3,861,286 (2,866,814) 1,058,837
Net Loss (1,889,445) (840,280)
Reverse Split
50 to 1 (51,147,907)
Net Loss (678,212)
Balance at
December 31, 2002 13,216,813 13,535 4,517,459 (5,434,471) (903,477)
Net Loss (170,944)
Balance at
March 31, 2003 56,150,281 13,535 4,517,459 (429,352) (5,595,416) (1,042,422)
See independent auditors' report and notes to financial statements.
7
AUGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
As of March 31, 2003 and 2002
Cumulative
From the
Inception to
March 31,
2003 2002 2003
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (170,944) $ (85,116) ($5,595,416)
Adjustments to reconcile Net Income to
Net Cash provided by Operating Activities:
Depreciation -0- 4,056 596,421
Changes in Operating Assets and Liabilities Net:
Loss on write-off Other Assets -0- -0- 1,127,959
Increase (Decrease) in Accounts
Payable Related Parties 139,250 -0- 353,000
Increase in Accounts Payables 750 -0- 57,212
------------- ------------- ------------
Net Cash (Used) by Operating Activities (30,944) (81,060) (3,460,824)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Deposits-Building Construction -0- -0- (21,341)
Increase in Licensing Agreement -0- -0- (1,423,542)
Purchase of Property and Equipment -0- -0- (54,849)
------------- ------------- ------------
Net Cash Used in Investing Activities -0- -0- (1,499,732)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Common Stock Issuance 22,000 76,504 3,699,408
Proceeds from Notes Payable- to Stockholders -0- -0- 866,200
------------- ------------- ------------
Net Cash Provided by Financing Activities 22,000 76,504 4,565,608
Increase (Decrease) in Cash and Cash Equivalents (205) (4,566) (30,399)
Cash and Cash Equivalents at Beginning of Year 2,179 7,493 32,373
------------- ------------- ------------
Cash and Cash Equivalents at End of Year $ 1,974 $ 2,937 $ 2,179
============= ============= ============
See independent auditors' report and notes to financial statements.
8
AuGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2003 and 2002
Note 1 Organization and Summary of Significant Accounting Policies
A. Organization
AuGRID CORPORATION, (a Development Stage Company) whose name was
changed from Augrid of Nevada, Inc in August 17, 2002 formed under
the laws of the State of Nevada (the "Company" or "AuGRID"). It is
a development stage company whose primary business is a technology
development firm specializing in Thin Cathode Ray Tube (TCRT)
technology. The Company currently has no operating income and, in
accordance with SFAS #7 is considered a Development Company.
B. Basis of Presentation
The financial records of the Company are maintained on the accrual
basis of accounting. The accompanying financial statements have
been prepared on the going concern basis which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business in accordance with generally accepted
accounting principles.
C. Property and Equipment
All property and equipment is stated at cost. The Company provides
for depreciation, using the straight line method, over the
estimated useful lives of the respective assets, as follows:
Years
-----
Machinery and Equipment $ 69,119 10
Furniture and Fixtures 7,686 10
Office Equipment 14,176 10
----------
Total Property & Equipment $ 90,981
==========
Major renewals and improvements of property and equipment are
capitalized, while replacements, maintenance and repairs which
do not improve or extend the lives of the assets are charged
against current operations.
When property and equipment is disposed of, any gain or loss
is included in current operations.
D. Use of Estimates
The preparation of financial statements in conformity with
general accepted accounting principles require management to
make estimate and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial
statement and the reported amounts of revenue and expenses
during the reported period. Actual results could differ from
those estimates.
9
AuGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2003
Note 1 Organization and Summary of Significant Accounting
Policies (Continued)
E. Going Concern
The Company's financial statements are prepared using the
generally accepted accounting principles applicable to a going
concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for
the Company to continue as a going concern. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the
amount and classification of liabilities which might be
necessary should the company continue as a concern. The
Company's continuation as a going concern is dependent upon
its ability to generate sufficient cash flows to meet its
obligations on a timely basis, to obtain additional financing
as may be required, and ultimately to attain successful
operations. It is management's plan to begin producing sales
in mid 2003.
F. Research and Development Expense
The Company's policy relating to research and development and
patent development cost are expensed when incurred except R&D
machinery, equipment, and facilities which have alternative
future uses either in R&D activities or otherwise. Machinery,
equipment and facilities, which have alternate future uses
should be capitalized. All expenditures in conjunction with an
R&D project, including personnel cost, materials, equipment,
facilities, and intangibles, for which the company has no
alternative future use beyond the specific project for which
the items were purchased, are expensed.
G. Revenue Recognition
The Company has no current source of Revenue.
H. Impairment of Long-Lived Assets & Long-Lived Assets to Be
Disposed Of
Statement of Financial Accounting Standards No. 121,
"Impairment of Long-Lived Assets" (SFAS 121), requires the
Company to review for possible impairment, assets to be held
for use and assets held for disposal, whenever events or
changes in circumstances indicate that the carrying amount may
not be recoverable, and in such event, to record an impairment
loss. The Company adopted SFAS 121 in 1998 and evaluated the
recoverability of long-lived assets at its properties. Initial
adoption of SFAS 121 in 1998 did not have a material impact on
the Company's financial condition or results of operations.
10
AuGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2003 and 2002
Note 1 Organization and Summary of Significant Accounting
Policies ( Continued )
H. Impairment of Long-Lived Assets & Long-Lived Assets to Be
Disposed Of (Cont)
Up to 2000, the Company recorded charges of $1,822,907 from
continuing operations relating to an impairment loss on other
assets. Approximately $1,450,000 was due to a current
Licensing Agreement while $373,383 was due to a prior
Licensing Agreement. The Company's revenue, which was
anticipated from future agreements of this type, had not been
realized as anticipated, therefore resulting in and impairment
loss on intangible assets.
I. Principals of Consolidation
Summit Media LLC
Effective October 31, 2002, the Company acquired 51% of Summit
Media Systems, LLC. It will be used as a distribution chain
for it products. The acquisition was accounted under the
purchase method of accounting. As part of the agreement AuGRID
will not be obligated to pay any additional amounts in 2003 or
2004 based on the agreement. All significant intercompany
accounts and transactions have been eliminated. Subsidiary
losses in excess of the unrelated investors' interest are
charged against the company interest. Changes in the Company's
proportionate share of the subsidiary equity resulting from
the additional equity transaction in the consolidation with no
gain recognition due to the development stage of the
subsidiaries and uncertainty regarding the Company's ability
to continue as a going concern
Note 2 Licensing Agreement
The company has an agreement with Ceravision Limited.
Ceravision has developed and is developing certain technology
relating to ceramic-based field emission flat screen displays
and hold certain patent applications and other intellectual
property rights in relation to such technology and in relation
to manufacturing processes and equipment to produce and sell
such displays and components for incorporation into such
displays. The cost incurred in relation to this licensing
agreement is capitalized. The cost is amortized over a period
of 5 years.
11
AuGRID CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to Financial Statements
As of March 31, 2003 and 2002
Note 3 Accounts Payable to Related Parties
The Company entered into consulting agreements with certain
related parties and stockholders of the Company (the
"Stockholders). The Company has violated its agreements by
being delinquent in its payment to these Stockholders. At
March 30, 2003 the Company owed these Stockholders the
following amounts $37,500, $31,250, $25,000 and $120,000
totaling $213,750. These amounts relate to unpaid consulting
fees and cash advances to the Company made by the Stockholders
which have not been repaid. All amounts are due on demand with
no interest.
Note 4 Income Taxes
There was no provision for Federal Income tax during 2003 or
2002 because of an unexpired net operating loss carry forward.
Carryforward
Year Ended Amount Available to Year
---------- --------- -----------------
December 31, 1998 1,019,718 2013
December 31, 1999 675,719 2014
December 31, 2000 1,171,377 2015
December 31, 2001 1,889,445 2016
December 31, 2002 678,212 2017
March 31, 2003 2018
The Company has a net operating loss carryforward of
$5,434,471 which expires, if unused, in the years 2013 to
2017. The following is a reconciliation of the income tax
benefit computed at the federal statutory rate with the
provision for income taxes for the period ended 2002 and 2003.
2002 2003
---------- ----------
Income tax benefit at the statutory rate (34%) 1,889,445 678,212
Change in valuation allowance
State tax, net of federal benefit
Non included items
--------- ---------
Provision for income taxes 0 0
========= =========
12
AuGRID CORPORATION
AND SUBSIDIARIES
(A Nevada Development Stage Company)
Notes to Financial Statements
As of March 31, 2003 and 2002
Note 5 Capitalization
On March 1, 1998, AuGRID Corporation`s current controlling
stockholders purchased controlling interest in Ironwood
Ventures via the purchase of approximately 4,616,111 shares of
Common Stock of Ironwood Ventures in private transactions;
this represented approximately 62.2 percent (62.2%) of
Ironwood Ventures' issued and outstanding Common Stock.
On March 2, 1998, Ironwood Ventures executed a forward stock
split of its stock, 6.06571228 to 1. In addition, Ironwood
Ventures increased its authorized shares to 90,000,000 common
shares, par value $0.001, 10,000,000 preferred shares, par
value $0.001, and changed its name to Augrid of Nevada, Inc
On March 12, 1998, Ironwood Ventures - now called AuGRID of
Nevada, Inc - executed an asset purchase agreement purchasing
substantially all of the assets of Augrid Corporation, a
Delaware corporation hereinafter referred to as "Augrid of
Delaware", a company under common control by the control
stockholders of the Ironwood Ventures, for 1,000,000 newly
issued shares of the Ironwood Ventures. This was not a third
party, arms length transaction, and due to the development
stage and specialized nature of the assets\technology that
Ironwood Ventures purchased, the Company's management is
unable to determine how this transaction would compare to a
similar arms length transaction. The shares of common stock
were spun off to Augrid of Delaware shareholders on a pro-rate
basis on March 13, 1998.
On August 17, 2002 at the Company's annual shareholders
meeting the company changed its name to AuGRID Corporation and
initiated a 50 to 1 reverse split which decreased the amount
of shares outstanding to 13,216,813 outstanding at March 31,
2003.
13
AuGRID CORPORATION
AND SUBSIDIARIES
(A Nevada Development Stage Company)
Notes to Financial Statements
As of March 31, 2003 and 2002
Note 6 Net Loss Per Share
The Company follows the provisions of Statement of Financial
Accounting Standards No. 128, earnings per share (SFAS 128)
The following table presents the calculation.
Net Loss $ 678,212
Basic:
Weighted average share of
Common stock outstanding 13,216,813
-------------
Basic net loss per share (.05)
Pro forma :
Shares used above 13,216,813
Pro forma adjusted to reflect
Weighted affect of assumed
Conversion of preferred stock 317,500
-------------
Shares used in computing pro forma
Basic net loss per share 13,534,313
-------------
Pro forma basic net loss per share (.04)
Note 7 Notes Payable to Stockholders
Notes payable to stockholders represents demand notes that
matured on 01/28/01 with interest at 12%. The matured notes
were converted into 18 Month Demand notes at 10% interest
totaling $ 673,350
Notes Payable to Stockholders- Long Term $ 673,350
Note 8 Reclassification
Certain balances have been reclassified in the 2001 and from
inception to March 31, 2003 consolidated financial statements
to conform to the 2003 presentation.
14
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
Quarterly Report. Certain statements in this Quarterly Report, which are not
statements of historical fact, are forward-looking statements. See "Special
Note Regarding Forward-Looking Information" on Page 2.
General
The Company is a research and development company in the development stage.
Our predecessor was formed under the name Ironwood Ventures, Inc. ("Ironwood")
by the filing of Articles of Incorporation with the Secretary of State of the
State of Nevada on August 4, 1995. On March 2, 1998, following a change of
control, we changed our name to Augrid of Nevada, Inc. We effectively
commenced operations on March 15, 1998. On August 30, 2002, we changed our
name to AuGRID Corporation.
The Company's executive offices are located at 2275 East 55th Street, II-
Floor, Cleveland, Ohio 44103, and its telephone number is 216.426.1589.
The Company has an exclusive license to use a certain thin cathode ray tube
technology to manufacture and market flat panel display products for the
transportation industry. Although the Company has no current manufacturing or
sales operations utilizing its rights to such technology, it intends, within
the next eighteen months, to begin the manufacturing process as well as
continuing the distribution of LCD, Plasma and other flat panel devices. In
addition, the Company has just signed a letter of intent to acquire an
electronic transaction processing company to complement its distribution
operation.
INDUSTRY BACKGROUND
During the last 25 years, flat-panel displays (small, lightweight, and flat
instruments that display digital information, "FPD") have been undergoing
technological improvements to provide a better quality image. In addition, the
growth of FPD sales is being accelerated by the emerging portable electronic
products market, as evidenced by the vigorous emergence of small, portable
video cameras, portable video games, handheld television sets, video displays
in the rear seats of vans, and personal digital assistants. As FPD sales grow,
however, most customers seem to become dissatisfied with the cost, performance
and availability tradeoffs inherent in the current technology used in FPDs.
This dissatisfaction presents an opportunity for the products and technology
that the Company offers.
PRODUCTS
By employing the use of vacuum microelectronics technology, the Company's
licensor in conjunction with a British Research Facility has developed a very
thin device called field emission display ("FED") that provides a
technological breakthrough in cathode ray tube ("CRT") monitors. These FEDs
are high-resolution, full-color displays with all of the operating
characteristics of a standard cathode ray tube. FEDs are solid-state vacuum
displays that are based on the emission of electrons from a
multiple-thin-film, micron-size, field-emission cathodes arrayed on a
flat-glass substrate. Because the display is matrix addressed, row and
column-patterned electrodes, the advantages of a line-at-a-time digital
address is retained. As a result, the FED becomes a truly flat, low-power
display with high resolution and high brightness; in addition, the patented
spacer technology from the Company's licensor's British facility allows for a
glass thickness of 8 mm, resulting in a FPD that will be thin, light, and
scalable to larger sizes without increasing the glass thickness.
15
This new product will be able to provide a reliable, low-power,
video-addressable color FED at a low cost. It initially will be targeted to
the automotive industry, proven successful with target sales and marketing
goals. The Company will seek and negotiate additional applications, including
computer monitor and on-the-wall television applications.
Initially the Company will produce for the automobile industry, although the
thin cathode ray tube ("TCRT") technology is designed to also meet the demands
of other applications, including outdoor video advertising, television and
computer monitors, as well as commercial, medical and military screen
applications. Management recognizes that the technology will address three
basic market demands - lower cost, power efficiency and performance level. The
Company's goal is to become a broad-based provider of display screens and
monitors. However, the Company does not yet manufacture any products employing
this technology. Currently the Company's products are restricted to those
employing liquid crystal display technology, and these products, although
limited, are beginning to be distributed by a distribution arm formed by the
Company, currently referred to as Summit Media Systems, LLC.
In addition to Summit Media Systems, LLC, AuGRID has also established a west
coast presence with the addition of a microelectronics division, AuGRID
Microelectronics. This division is currently shipping sample products to
qualify pieces for the bio-medical industry.
RESEARCH AND DEVELOPMENT
The Company spent approximately $1,350,000 in 2000 and $100,000 in 2001 for
research and development costs, an aggregate of approximately $1,450,000 for
the last two fiscal years. Although the Company currently is producing no FPD
products and has no customers for such products, it expects that these costs
ultimately will be recovered in the prices it charges for its FPD products.
Of the amount spent in 2000, $1,000,000 was paid to CeraVision Limited as a
part of a $3,000,000 fee for its services in developing certain flat panel
display prototypes and building manufacturing lines for the purpose of
producing such displays. The second $1,000,000 installment of the fee is due
on demand, but CeraVision Limited is withholding demand while the Company is
exploring a strategic business combination. The final $1,000,000 installment
of the fee will not be due until the Company receives the last of ten (10)
prototype production lines complying with certain specifications. The
remaining $350,000 amount in 2000 and the $100,000 amount in 2001 were paid to
CeraVision Limited for other FPD research and development services not covered
by the $3,000,000 fee.
PATENT LICENSE; ROYALTIES
The Company has obtained an exclusive patent license from CeraVision Limited
to use certain ceramic-based field emission flat panel display technologies to
manufacture and market products for the transportation industry. Pursuant to
the terms of the license, the Company will be required to pay royalties to its
licensor. These royalties are based upon production. On July 1, 2001, the
Company became subject to a minimum quarterly royalty payment in the amount of
$500,000, irrespective of production, for the fiscal quarter ended September
30,2001. Although the first payment was due on October 7, 2001, the licensor
has deferred the Company's obligation to make any royalty payments.
MARKETING STRATEGIES
Advertising
16
The Company's goal over the next two years is to create enough visibility to
support its product line in the domestic automobile industries as well as
foreign markets. To accomplish this, the Company will advertise in various
trade publications and business magazines, keeping track of the results to
maximize the return of its advertising expenses and attend trade shows in
America and abroad for distribution of all products including the LCD and
Plasma units being featured by its distribution subsidiary.
Sales
Initially the Company plans to sell directly to 1st and 2nd tier original
equipment manufacturers. Management also has identified several large retail
buying associations, such as NATM Buying Corporation. Each buying association
represents a substantial number of large electronic appliance retailers that
may be interested in acquiring flat-panel screens in large quantities for
regional distribution among buying group members. These channels are currently
being utilized by the distribution arm of AuGRID.
Goals
The worldwide display market is currently $40 billion per year, and it is
projected to be over $60 billion by 2005; the FPD market is approximately $9.5
billion and estimated to be $35 billion by 2005. Management believes its FPD
will have the potential to displace other display technologies because of its
cost effectiveness, efficiency and overall advanced product.
Management also anticipates developing strong ties with major computer
manufacturers, such as Dell, Gateway, Phillips in Europe and IBM in America.
Although these relationships are not currently solidified, the Company's goal
is to become synonymous with leading-edge technology in the laptop and
desk-mounted computer monitor market and the evolving television industry,
such as wall-mounted digital televisions. The Company is committed to the
production and distribution of superior display technology products that are
exclusively designed to change the way people see things.
REGULATION
Existing or probable governmental regulations have not had (and are not
expected to have) any material impact on the Company's operations, and the
costs and effects of compliance with federal, state and local environmental
laws are minimal.
EMPLOYEES
The Company has four full-time employees and no part-time employees. The
Company's management team currently is comprised of four persons, a Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer and a Vice
President of Communications/Secretary. However, through consultation with
advisors and board members, management has identified key personnel who may be
available to fill management positions, as soon as the Company has the funds
to compensate them. These include, but are not limited to, an Executive Vice
President, a Controller, a Vice President of Manufacturing and a Vice
President of Sales. The Company also intends to hire experienced high-tech
sales personnel.
ITEM 3. CONTROLS AND PROCEDURES
As required by new Rules 13a-15 and 15d-15 of the Securities Exchange Act of
1934, within the 90-day period prior to the filing of this report and under
the supervision and with the participation of our management, including our
chief executive officer and chief financial officer, we have evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures. Based on such evaluation, our chief executive officer and chief
financial officer have concluded that such disclosure controls and procedures
are effective in ensuring that material information relating to our company,
including
17
our consolidated subsidiaries, is made known to the certifying officers by
others within our company and our consolidated subsidiaries during the
period covered by this report.
There were no significant changes in our internal controls for financial
reporting or in other factors that could significantly affect such internal
controls subsequent to the date of such evaluation. In connection with the new
rules, we are currently in the process of further reviewing and documenting
our disclosure controls and procedures, including our internal accounting
controls, and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that our systems evolve with our business.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In August 2002, the Company issued 3,759,500 shares of the common stock to
certain of the Company's officers as in return for such officer forgiving the
Company's obligation to pay them back salary in the aggregate amount of
$375,950. The issuance was made in a private transaction, exempt from the
registration requirements under the Securities Act of 1933 under Section 4(2)
under such Act.
In September 2002, the Company issued 1,806,800 shares of the common stock to
certain consultants for providing services to the Company. The issuance was
made in a private transaction, exempt from the registration requirements under
the Securities Act of 1933 under Section 4(2) under such Act.
In September 2002, the Company issued 507,286 shares of the common stock to
certain investors for investing in the Company at the purchase price of $0.10
per share. The issuance was made in a private transaction, exempt from the
registration requirements under the Securities Act of 1933 under Section 4(2)
under such Act.
In April 2003, the Company issued 10,000,00 shares of the common stock to
certain consultants for providing services to the Company. The issuance was
made in a private transaction, exempt from the registration requirements under
the Securities Act of 1933 under Section 4(2) under such Act.
ITEM 6. EXHIBITS
(a) Exhibit 23 - Consent of Certified Public Accountants
(b) Exhibit 99 - Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
In accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, our Chief Executive Officer and Chief
Financial Officer executed the following written statements which statements
accompanied the filing with the Securities and Exchange Commission of this
Report on Form 10-QSB:
18
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AuGRID Corporation
By: /s/ MUHAMMAD J. SHAHEED
-------------------------------------------
Muhammad J. Shaheed, President, Chief Executive
Officer and Chairman
Date: May 20, 2003
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ MUHAMMAD J. SHAHEED
-----------------------------------------------
Muhammad J. Shaheed, Chief Executive
Officer and Chairman (Principal
Executive Officer)
Date: May 20, 2003
By: /s/ MARY F. SLOAT-HOROSZKO
-----------------------------------------------
Mary F. Sloat-Horoszko, Secretary, Director
Date: May 20, 2003
By: /s/ MICHAEL D. YOUNG
-----------------------------------------------
Michael D. Young, Director, COO
Date: May 20, 2003
By: /s/ STAN CHAPMAN
-----------------------------------------------
Stan Chapman, Director, Treasurer, CFO
Date: May 20, 2003
By: /s/ ESSA MASHNI
-----------------------------------------------
Essa Mashni, Director
Date: May 20, 2003
19
CERTIFICATIONS
I, M. J. Shaheed, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of AuGRID Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; 3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report; 4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date");
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; 5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(d) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(e) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and 6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
May 20, 2003
/s/ MJ SHAHEED
-------------------------------------
M. J. Shaheed
Chief Executive officer and President
20
I, Stan Chapman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of AuGRID Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; 3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report; 4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date");
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; 5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
(d) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(e) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and 6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
May 20, 2003
/s/ STAN CHAPMAN
--------------------------
Stan Chapman
Treasurer
21
INDEX TO EXHIBIT
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
23 - Consent of Certified Public Accountants
99 - Certifications of Chief Executive Officer and
Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.