SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2000
Commission File Number 001-15071
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PowerSource Corporation
(Name of Small Business Issuer in its charter)
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Nevada 61-1180504
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3660 Wilshire Blvd, Suite 1104
Los Angeles, CA 90010
(Address of principal executive office)
(213) 383-4443
(Registrant's Telephone Number)
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 of 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 ( ) No ( * )
The number of shares outstanding of each of the issuer's classes of common
stock, as of 9/30/00.
6,147,008 shares of common stock, $.001 par value
PowerSource Corporation
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2000
ITEMS IN FORM 10-QSB
Facing Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed balance sheets.
September 30, 2000 (unaudited) and December 31, 1999
Condensed statements of operations.
for the three months and nine months ended September 30, 2000
and 1999 (unaudited)
Condensed statements of cash flows.
for the three months and nine months ended September 30, 2000
and 1999 (unaudited)
Condensed statements of changes in stockholders' (deficit).
for the nine months ended September 30, 2000 (unaudited)
Notes to condensed financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
POWERSOURCE CORPORATION
CONDENSED BALANCE SHEETS
September 30, 2000 and December 31, 1999
ASSETS
09/30/00 12/31/99
(unaudited)
------------ ------------
CURRENT ASSETS
Cash $ 415,919 $ 1,408
Accounts Receivable, Net 135,499 17,345
Prepaid Expenses 21,674 --
------------ ------------
Total Current Assets $ 573,092 $ 18,753
------------ ------------
PROPERTY AND EQUIPMENT, NET 45,328 55,937
------------ ------------
OTHER ASSETS
Notes Receivable - Officers 30,000 --
Investment In Oil And Gas Properties 13,375 13,375
Deposits 1,774 1,774
------------ ------------
Total Other Assets 45,149 15,149
------------ ------------
Total Assets $ 663,569 $ 89,839
============ ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts Payable And Accrued Expenses $ 814,791 $ 129,938
Accrued Wages 97,453 802,133
Income Taxes Payable 800 800
Interest Payable 16,471 10,000
Loan Payable - In Default At 09/30/00 210,000 65,700
Notes Payable - Computer System (Current Portion) 15,109 14,959
------------ ------------
Total Current Liabilities 1,154,624 1,023,530
------------ ------------
LONG-TERM LIABILITIES
Notes Payable - Computer System 26,503 39,959
Deferred Revenue 423,460 335,775
Long Term Wages And Salaries Payable 704,055 --
------------ ------------
Total Long-Term Liabilities 1,154,018 375,734
------------ ------------
STOCKHOLDERS' (DEFICIT)
Common stock, par value $.001, 50,000,000 authorized,
6,147,008 and 5,661,069 shares issued and outstanding 6,147 5,661
Paid-in capital in excess of par value 925,240 764,520
Preferred stock, par value $100, 10,000,000 authorized,
5,350 shares issued and outstanding 13,375 13,375
Accumulated Deficit (2,587,835) (2,092,981)
------------ ------------
Total Stockholders' (Deficit) (1,643,073) (1,309,425)
------------ ------------
Total Liabilities and Stockholders' (Deficit) $ 665,569 $ 89,839
============ ============
See accompanying notes to condensed financial statements.
POWERSOURCE CORPORATION
CONDENSED STATEMENT OF OPERATIONS
Three and Nine Months Ended September 30, 2000 and September 30, 1999
(Unaudited)
3 Months 9 Months 3 Months 9 Months
Ended Ended Ended Ended
09/30/00 09/30/00 09/30/99 09/30/99
------------ ------------ ------------ ------------
REVENUES
Net Sales $ 726,814 $ 838,661 $ -- $ --
Cost of Sales 532,617 603,330 -- --
------------ ------------ ------------ ------------
Gross Profit 194,197 235,331 -- --
------------ ------------ ------------ ------------
Sales of Marketing Territory 210,000 210,000 -- --
------------ ------------ ------------ ------------
404,197 445,331 -- --
------------ ------------ ------------ ------------
EXPENSES
Selling Expenses 785 51,603 15,348 27,297
General And Administrative Expenses 297,429 871,434 341,118 1,005,925
------------ ------------ ------------ ------------
Total Expenses 298,214 923,037 356,466 1,033,222
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 105,983 (477,706) (356,466) (1,033,222)
------------ ------------ ------------ ------------
OTHER EXPENSES
Interest Expense 7,977 19,147 1,952 5,444
------------ ------------ ------------ ------------
Total Other Expenses 7,977 19,147 1,952 5,444
------------ ------------ ------------ ------------
LOSS BEFORE PROVISON FOR INCOME TAXES 98,006 (496,853) (358,418) (1,038,665)
------------ ------------ ------------ ------------
PROVISION FOR INCOME TAXES -- -- -- --
NET INCOME (LOSS) $ 98,006 $ (496,853) $ (358,418) $(1,038,665)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE $ 0.02 $ (0.08) $ (0.06) $ (0.19)
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING 6,006,825 6,006,825 5,554,964 5,467,747
============ ============ ============ ============
See accompanying notes to condensed financial statements.
CONDENSED STATEMENTS OF CASH FLOWS
Three and Nine Months Ended September 30, 2000 and September 30, 1999
(Unaudited)
3 Months 9 Months 3 Months 9 Months
Ended Ended Ended Ended
CASH FLOWS FROM OPERATING ACTIVITIES: 09/30/00 09/30/00 09/30/99 09/30/99
------------ ------------ ------------ ------------
Net Income (Loss) $ 98,006 $ (496,853) $ (358,417) $(1,038,665)
Adjustment to reconcile net income (loss) to net cash
Used by operating activities
Depreciation 3,536 10,609 3,910 11,359
Changes in operating assets and liabilities
Accounts Receivable (109,531) (118,154) -- --
Note receivable -- (30,000) -- --
Prepaid Expenses 9,263 (21,674) -- --
Deposits -- -- -- (1,774)
Accounts Payable And Accrued Expenses 457,804 684,853 19,941 49,441
Accrued Wages -- (625) 190,377 571,131
Taxes Payable -- -- -- (800)
Interest Payable 7,939 16,471 -- 2,000
Deferred Revenue (63,040) 119,685 72,840 285,835
------------ ------------ ------------ ------------
Net Cash Used By Operating Activities 403,977 164,311 (71,350) (121,474)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Assets -- -- (1,300) (62,014)
------------ ------------ ------------ ------------
Net Cash Used by Investing Activities -- (1,300) (62,014)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable, Net -- 210,000 -- (24,300)
Loan Payable (Computer Lease) (3,381) (13,306) (3,370) 55,722
Common Stock Issued -- 53,506 46,300 154,087
------------ ------------ ------------ ------------
Net Cash Used By Financing Activities (3,381) 250,200 42,947 185,509
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 400,596 414,511 (29,703) 2,022
------------ ------------ ------------ ------------
CASH - BEGINNING OF PERIOD 15,323 1,408 32,345 620
------------ ------------ ------------ ------------
CASH - END OF PERIOD $ 415,919 $ 415,919 $ 2,642 $ 2,642
============ ============ ============ ============
During the Quarter ended September 30, 2000, $65,700 of a note payable
and $10,000 of accrued interest were converted into 221,428 shares of
common stock (see note 3).
In addition, deferred revenues of $32,000 resulting from the sale of
marketing territories were converted into 45,000 shares of common stock
(see note 6).
In 1999, the Company capitalized leased assets and recorded an
offsetting capital lease obligation of $62,565.
See accompanying notes to condensed financial statements.
POWERSOURCE CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Nine Months Ended September 30, 2000
(Unaudited)
Common Stock
Preferred --------------------------- Paid-In Accumulated
Stock Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------ ------------
Balance January 1, 2000 $ 13,375 5,661,069 $ 5,661 $ 764,520 $(2,092,981) $(1,309,425)
Debt & District Conversion 266,428 266 107,434 $ 107,700
Sale of Shares For Cash 201,300 202 53,286 $ 53,488
Net Loss (226,193) $ (226,193)
------------ ------------ ------------ ------------ ------------ ------------
Balance March 31, 2000 13,375 6,128,797 6,129 925,240 (2,319,174) (1,374,430)
Sale of Shares For Cash 18,211 18 18
Net Loss (368,667) (368,667)
------------ ------------ ------------ ------------ ------------ ------------
Balance June 30, 2000 13,375 6,147,008 6,147 925,240 (2,687,841) (1,743,079)
Net Income 98,006 98,006
------------ ------------ ------------ ------------ ------------ ------------
Balance September 30, 2000 13,375 6,147,008 6,147 925,240 (2,589,835) (1,645,073)
============ ============ ============ ============ ============ ============
See accompanying notes to condensed financial statements.
POWERSOURCE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
Note 1 - Basis of presentation
- ------------------------------
The condensed financial statements included herein have been prepared by
PowerSource Corporation (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations; however, the Company believes
that the disclosures are adequate to make the information presented not
misleading.
In the opinion of management, all adjustments necessary to present fairly the
financial position of the Company as of September 30, 2000 and December 31,
1999, and the results of operations and cash flows for the period ended
September 30, 2000 and September 30, 1999 have been included and are of a normal
recurring nature.
Note 2 - Property and equipment
- -------------------------------
Property and equipment consist of the following:
9/30/00 12/31/99
--------- ---------
Furniture and fixtures $ 1,906 $ 1,906
Office equipment 71,323 71,323
--------- ---------
73,229 73,229
Less: Accumulated depreciation (27,901) (17,292)
--------- ---------
$ 45,328 $ 55,937
========= =========
Note 3 - Loan payable
- ---------------------
As of September 30, 2000, loan payable consists of a six-month loan that was due
August, 2000, from Earth Co in the amount of $210,000 at a simple interest rate
of 15%.
On March 1, 2000, the Company issued 221,428 shares of its common stock at $.342
per share as settlement of an unsecured note payable to Senator Associates, Ltd.
for $65,700 with accrued interest of $10,000 (at 7%).
Loan payable consists of:
9/30/00 12/31/99
------- -----------
Earth Co, 2/00 $ 60,000 --
Earth Co, 3/00 60,000 --
Earth Co, 4/00 60,000 --
Earth Co, 5/00 30,000 --
----------- -----------
Total $ 210,000 --
Senator Loan -- $ 65,700
----------- -----------
Total $ 210,000 $ 65,700
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Note 4 -Notes payable
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Notes payable consist of:
9/30/00 12/31/99
----------- -----------
Capital lease obligation
due in 48 monthly installments
of $1,774 per month including
principal and interest at 13.7%
Total $ 41,612 $ 54,918
Less amount current portion 15,109 14,959
----------- -----------
$ 26,503 $ 39,959
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Note 5. Litigation
- -------------------
The Company was a defendant in a lawsuit filed on February 25, 2000 based upon
claims that the Company benefited from the use of certain proprietary or
confidential information obtained or developed by the current president of the
Company during the time he was employed by the plaintiff. This complaint was
settled on March 27, 2001 without any monetary effect. (See PART II., Item 1.).
Management of the Company believed the Company had no liability, and defended
this matter to the fullest extent possible. Accordingly, no loss provision was
made in the accompanying financial statements regarding this matter.
Note 6. Deferred Revenues
- --------------------------
Revenue from sales of marketing territories is deferred until such time as the
specified purchase price is received and any options to exchange interests in
the related limited liability partnerships for equity interests in the Company
have expired or have been waived by the option holder.
Note 7. Employees, Key Officers, and Directors
- ----------------------------------------------
On April 11, 2000, the Board of Directors accepted the resignation of German
Teiltebaum, formerly a Director and CFO of the Company.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 Statements in this filing which are not
historical facts may be considered "forward-looking statements" within the
meaning of Section 21E of the Securities Act of 1934, as amended, including
projected sales based on orders, estimated cost savings and savings that may be
generated from restructuring. The words "believe", "expect", "anticipate",
"estimate", and similar expressions identify forward-looking statements. Any
forward-looking statement involves risk and uncertainties that could cause
actual events or results to differ, perhaps materially, from the events
described in the forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements. The Company undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise. The risks associated
with the Company's forward-looking statements include, but are not limited to,
risks associated with the Company's history of losses and uncertain
profitability, reliance on a large customer, risks associated with competition,
general economic conditions, reliance on key management and production people,
future capital needs, dilution, effects of outstanding notes and convertible
debentures, limited public market, low stock price, and lack of liquidity.
================================================================================
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's financial statements, related notes, and other information
included in this quarterly report of Form 10-QSB.
RESULTS OF OPERATIONS
For the three months ended September 30, 2000, revenues totaled
approximately $727,000. This compares to revenue of $0 for the same three months
in 1999. Expenses totaled approximately $298,000, compared with expenses of
approximately $356,000 for the same three months of 1999. Revenue was
attributable to sales of energy, which started in 2000.
General and administrative expenses the first nine months of 1999 were
attributable entirely to professional fees incurred in the start-up of the
business whereas general and administrative expense for the first nine months of
2000 was attributable to continuing operations of the business. General and
administrative expense in 1999 was higher than 2000 due to equity based
compensation incurred as part of the startup of the business.
Liquidity and Capital Resources
- -------------------------------
On March 8, 2000, PowerSource obtained a surety bond with Cascade
Surety and Bonding, Inc. in the amount of $1.5 million to satisfy Automated
Power Exchange requirements for purchasing power in California.
On June 10, 2000, a bond for $100,000 was obtained from Cascade Surety
and Bonding, Inc. to satisfy the CPUC. In addition, on October 12, 1999, the
Company negotiated a line of credit with Prestige Capital Corporation for
$3,000,000 against accounts receivable. The credit line expired in October 2000.
Cash balance as of 9/30/00 was approximately $416,000.
Inflation
- ---------
The rate of inflation does not have a material impact on the Company's
results of operations and is not expected to have much of an impact in the
future. The primary cost component in energy sold to customers subject to
inflationary pressures, is electrical power. The Company has a contract with its
customers whereby it automatically passes along these costs to the end-use
customers, as the Company incurs them.
Risk Factors
- ------------
California was one of the first states to deregulate the electric
industry to create competition in that industry. Management believes that the
Company has a window of opportunity to develop a network dedicated to providing
electricity at competitive rates. There is no assurance, however, that the
Company will be successful in developing a network of electricity suppliers and
purchasers.
The Company recently commenced its business operations with respect to
the marketing of electricity. There can be no assurance at this time that the
Company will operate profitably or that it will have adequate working capital to
meet its obligations as they become due. The Company believes that its success
will depend in large part on its ability to pool individuals and businesses
together into a common buying group to make larger, more economical purchases of
energy. The Company must implement sophisticated purchasing and billing hardware
systems to conduct its business. There is no assurance that a malfunction of or
failure to properly develop or operate one or more of its computer systems will
not have a material adverse affect on the Company.
Because of the Company's limited resources, it is unlikely that the Company will
conduct an exhaustive investigation and analysis of a power marketing
opportunity before the Company commits its capital or other resources.
Management decisions may be made without detailed feasibility studies,
independent analysis, and market surveys which the Company would likely conduct
if the Company had sufficient resources. Management decisions will be
particularly dependent on information provided by the promoter, owner, sponsor
or others associated with a particular power marketing opportunity seeking the
Company's participation.
The Company's business is speculative and dependent upon the acceptance of the
Company's products and the effectiveness of its marketing program. There can be
no assurance that the Company will be successful or that its business will earn
any revenues or profit.
The Company reflects deferred revenue from affiliated distributors from the sale
of geographic territories in California to independent affiliated and
unaffiliated marketing companies in consideration for a single one time payment.
The Company also expects to earn revenues by selling power to the distributors'
customers at a profit. The deferred revenue on the Company's financial
statements represent the one time initial payment of the distributors to the
Company. There is no assurance that the Company will earn significant revenues
or that investors will not lose their entire investment.
Since the passage of recent utility deregulation laws by the California
legislature, the market for electrical power in the State of California is
intensely competitive. The market is also intensely competitive throughout the
United States. The Company's principal competitors include large utility
companies and a myriad of other independent licensed purchasers and sellers of
electrical power. These competitors have longer operating histories, greater
name recognition, larger installed customer bases, and substantially greater
financial, technical, and marketing resources than the Company. The Company
believes that the principal factors affecting competition in its proposed market
include name recognition, the ability to aggregate customers and purchase and
sell power at a profit, the ability to attract and service customers, and the
ability to find low cost, reliable suppliers. Other than licensing requirements
and the time necessary to enter the market, there are no significant proprietary
or other barriers of entry that could keep potential competitors from providing
competing services in the Company's proposed market. There can be no assurance
that the Company will be able to compete successfully in the future, or that
future competition will not have a material adverse effect on the business,
operating results, and financial condition of the Company.
To manage growth effectively, the Company will need to continue to improve its
operational, financial and management information systems and to hire, train,
motivate and manage a growing number of employees. Competition is intense for
qualified technical, marketing and management personnel. There can be no
assurance that the Company will be able to effectively achieve or management any
future growth, and its failure to do so could have a material adverse effect on
the Company's financial condition and results of operations.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On February 25, 2000, a complaint was filed in the Superior Court of Los Angeles
County by Keystone Energy Services against Edward Douglas Mitchell, the
Company's president, and the Company, alleging fraud, conversion negligence,
misappropriation of trade secrets and unfair business practices. An answer to
the complaint was filed on April 10, 2000. This complaint was settled on March
27, 2001 without any monetary effect to the Company.
There is no other pending or threatened litigation against the Company.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........... None
Item 3. DEFAULTS UPON SENIOR SECURITIES..................... None
Item 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS....................... None
Item 5. OTHER INFORMATION ................................. None
Item 6. EXHIBITS AND REPORTS
Form 8-K
On September 7, 2000, Form 8-K was filed to report the termination and
rescission of the acquisition agreement between the Company and Northstar
Enterprises, LLC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POWERSOURCE CORPORATION
/s/ E. Douglas Mitchell
- --------------------------------
President
/s/ Roman Gordon
- --------------------------------
Chairman of the Board
Dated: July 9, 2001
Los Angeles, California