UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2002
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: 000-31663
American I R Technologies Inc.
------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0440536
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
330 E. Warm Spring Rd, Las Vegas, NV 89119
-------------------------------- -----
(Address of principal executive (Zip Code)
offices)
(702) 215-6455
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since
last report)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 19,984,107
AMERICAN I R TECHNOLOGIES INC.
Table of Contents
Page
PART I - FINANCIAL INFORMATION 1
Item 1. Financial Statements (Unaudited) 2
Balance Sheet March 31, 2001 (Unaudited) 3
Statements of Operations for the Three Months Ended 4
March 31, 2002 and 2001 (Unaudited)
Statements of Cash Flows for the Three Months Ended 5
March 31, 2002 and 2001 (Unaudited)
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis and Plan of Operation 10
PART II - OTHER INFORMATION 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
AMERICAN IR TECHNOLOGIES, INC.
BALANCE SHEET
MARCH 31, 2002
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 1,850
Accounts receivable, net of reserve for bad debt
of $1,000 4,643
Inventory 4,951
Due from officer 29,890
------------
Total current assets 41,334
------------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $5,089 10,115
DEPOSIT 1,360
------------
$ 52,809
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 190,902
Due to related parties 448,823
Notes payable 24,000
Note payable - related party 7,300
------------
Total current liabilities 671,025
------------
STOCKHOLDERS' (DEFICIT)
Preferred stock, Class A, 6%, cumulative, convertible,
$0.001 par value, 5,000,000 shares authorized,
1,945,680 shares issued and outstanding 249,047
Common stock, $0.001 par value, 20,000,000 shares
authorized, 19,984,107 shares issued and outstanding 19,984
Additional paid in capital 1,326,590
Deferred compensation (57,167)
Accumulated (deficit) (2,156,670)
------------
Total stockholders' (deficit) (618,216)
------------
$ 52,809
============
The accompanying notes are an integral part of these financial statements.
3
AMERICAN IR TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended March 31,
2002 2001
------------- -------------
REVENUE $ 9,228 $ 22,212
COST OF GOODS SOLD 361 17,906
------------- -------------
GROSS PROFIT 8,867 4,306
------------- -------------
OPERATING EXPENSES
Non-cash stock compensation 784,602 --
General and administrative 36,706 213,358
------------- -------------
821,308 213,358
------------- -------------
(LOSS) FROM OPERATIONS (812,441) (209,052)
------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (1,000) --
------------- -------------
NET (LOSS) $ (813,441) $ (209,052)
============= =============
PER SHARE INFORMATION:
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(BASIC AND DILUTED) 18,145,352 7,135,267
============= =============
NET (LOSS) PER COMMON SHARE (BASIC AND DILUTED) $ (0.04) $ (0.03)
============= =============
The accompanying notes are an integral part of these financial statements.
4
AMERICAN IR TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended March 31,
2002 2001
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES
Cash flow provided by operating activities $ 9,188 $ 9,126
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets -- (9,796)
-------- --------
Net cash (used in) investing activities -- (9,796)
-------- --------
CASH FLOW FROM FINANCING ACTIVITES
Payments on notes payable (4,000) --
Payments on note payable - related party (5,000) --
-------- --------
Net cash (used in) financing activities (9,000) --
-------- --------
Net increase (decrease) in cash 188 (670)
CASH AT BEGINNING OF PERIOD 1,662 4,243
-------- --------
CASH AT END OF PERIOD $ 1,850 $ 3,573
======== ========
The accompanying notes are an integral part of these financial statements.
5
AMERICAN IR TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP") for interim financial information and Item 310(b) of Regulation S-B.
They do not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. These financial
statements should be read in conjunction with the audited financial statements
of the Company as of December 31, 2001 and for the two years then ended,
including notes thereto, included in the Company's Form 10-KSB.
(2) EARNINGS PER SHARE
The Company calculates net (loss) per share as required by SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding. During the periods presented, common stock
equivalents were not considered, as their effect would be anti-dilutive.
(3) GOING CONCERN
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The Company has experienced significant losses from operations. For the three
months ended March 31, 2002 the Company incurred a net loss of $813,441. In
addition, the Company has a working capital deficit of $629,691, an accumulated
deficit of $2,156,670 and a stockholders' deficit of $618,216 at March 31, 2002.
The Company's ability to continue as a going concern is contingent upon its
ability to expand its operations and secure additional financing. The Company is
pursuing financing for its operations and seeking to expand its operations.
Failure to secure such financing or expand its operations may result in the
Company not being able to continue as a going concern.
6
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
(4) STOCKHOLDERS' (DEFICIT)
The Board of Directors established a "Class A" Preferred Stock with the
following characteristics:
o Cumulative with a stated dividend rate of 6%
o Two votes for each share
o Convertible into 1.6 shares of common stock per share of preferred
stock after July 1, 2002 at the holder's request
During the three months ended March 31, 2002, the Company issued 1,300,000
shares of common stock valued at $88,000 to three individuals for services.
These shares were valued at their fair market value on the date the Company
agreed to issue the shares.
During the three months ended March 31, 2002, the Company issued 5,338,320
shares of common stock and 1,945,680 shares of preferred stock to two officers
and directors of the Company for accrued wages, and bonuses. These shares were
valued at their fair market value on the date the Company agreed to issue the
shares. The Company recognized non-cash stock compensation of $553,613 related
to these issuances for the amount of the fair value of the shares issued in
excess of the amounts due to these officers.
During the year ended December 31, 2001, the Company had issued common stock for
services to be rendered in the future. As of December 31, 2001, the Company had
recorded deferred compensation of $200,156 related to these agreements. During
the three months ended March 31, 2002, the Company has recorded non-cash stock
compensation of $142,989 related to these agreements.
(5) SUBSEQUENT EVENT
On May 29, 2002 the Company entered into a settlement agreement with American
Infrared Technologies, Inc. (Canada) whereby the Company would retain the rights
to utilize, market, and distribute the technology underlying their license
agreement with Canada upon the ownership transfer of the technology to the
President of the Company. Canada, in return, will receive $350,000, of which
$250,555 was owed to Canada as of December 31, 2001. Canada has agreed to
refrain from calling upon any of the Company's customers or disclose any
information regarding the Company for a period of six months. Officers of Canada
have also agreed to forgive all monies owed to them as of May 29, 2002 as well
as return all of their holdings in the Company's stock to the Company.
Payments will be made to Canada through collections on accounts receivable from
a specified customer. Collections from the customer will be placed into a
designated bank account and distribution will be made in the following manner;
70% to the Company, 30% to Canada. If sufficient collections have not been
received to satisfy the $350,000 liability by November 29, 2003, then the
Company has the option of paying the unpaid amount at that date or converting
this amount into a promissory note bearing interest at 5%, payable in 48 monthly
payments.
7
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD LOOKING STATEMENTS
The statements contained in this report that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future developments and
their potential effects upon the Company. There can be no assurance that future
developments affecting the Company will be those anticipated by management.
Actual results may differ materially from those included in the forward-looking
statements.
Overview
The following discussion and analysis covers material changes in the financial
condition of American IR Technologies, Inc. (the "Company" or "us") since year
end December 31, 2001 and a comparison of the results of operations for the
three months ended March 31, 2002 to the same period in 2001. This discussion
and analysis should be read in conjunction with "Management's Discussion and
Analysis or Plan of Operation" included in the Company's Form 10-KSB for the
year ended December 31, 2001.
American IR Technologies Inc. ("American IR") is an operating Company. The
Company's principal business objective is to design, manufacture and market
consumer electronic products that target the home health and safety, and the
quality of life and leisure markets. Initially, the Company developed and
introduced to the market a portable, dedicated-beam, Infra Red sensor
security/monitoring system (Safety Beam(TM)).
Results of Operations
For the three months ended March 31, 2002, we realized a net loss of $813,441,
or $.04 per share, on revenue of $9,228. This compares to a loss of $209,052 on
revenue of $22,212 for the first three months of 2001. During the first quarter
of 2002, we reported relatively minor sales from our business. The decrease in
net sales was due to our focus shifting from marketing our products to major
retailers from catalog sales and our scaling back of operations because of
inadequate working capital.
Cost of goods sold for the three months ended March 31, 2002 and 2001 were $361
and $17,906, respectively. The cost of sales for the three months ended March
31, 2002 is relatively low because we sold inventory during the quarter which
was written down due to impairment as of December 31, 2001. The Company incurred
$821,308 in total operating expenses for the three months ended March 31, 2002
compared to $213,358 for the same quarter in 2001.
General and administrative expenses were reduced to $36,706 for three months
ended March 31, 2002 compared to $213,358 for the same quarter in 2001. The
large decrease in general and administrative expenses is due to the Company's
scaling down of operational activities due to a lack of working capital. We
anticipate continuing in this manner until such time that we receive a major
purchase order or sufficient financing to expand operations. Our primary
expenses for the three months ended March 31, 2002 were contract salaries of
$17,500, rent of $5,847, and telephone of $4,833.
The majority of operating expenses incurred by the Company for the three months
ended March 31, 2002 were in the form of non-cash stock compensation, totaling
$784,602. These expenses consisted of:
o The Company issued 1,300,000 shares of common stock valued at
$88,000 to three individuals for services as compared to $0 for
the same quarter in 2001. Of this amount, $70,000 was for
financial consulting and $18,000 for legal fees. These shares were
valued at their fair market value on the date the Company agreed
to issue the shares.
8
o The Company issued 5,338,320 shares of common stock and 1,945,680
shares of preferred stock to two officers and directors of the
Company for accrued wages, and bonuses as compared to $0 for the
same quarter in 2001. The Chief Executive Officer and Chief
Financial Officer received stock for accrued wages of $140,000 and
bonuses of $536,113. The value of the preferred and common stock
issued was $427,066 and $249,047, respectively. These shares were
valued at their fair market value on the date the Company agreed
to issue the shares.
o During the year ended December 31, 2001, the Company had issued
common stock for services to be rendered in the future. As of
December 31, 2001, the Company had recorded deferred compensation
of $200,156 related to these agreements. During the three months
ended March 31, 2002, the Company has recorded non-cash stock
compensation of $142,989 related to these agreements as compared
to $0 for the same quarter in 2001. These services were for
financial, sales and marketing consulting.
On February 15, 2002 the Board of Directors resolved to establish 2,000,000
Class "A" preferred shares with the following attributes:
o Cumulative Annual Dividend of 6%
o Two votes for each share
o These shares can become convertible after July 1, 2002 at the
ratio of one 1 preferred class "A" share for 1.6 common shares.
Liquidity and Capital Resources
Our capital and liquidity position at March 31, 2002 continued to be poor from
December 31, 2001. Our working capital deficit at March 31, 2002 was $629,691 as
compared to $724,081 at December 31, 2001. This increase in working capital is
largely attributed to the conversion of accrued officers salary into common and
preferred stock during the three months ended March 31, 2002.
At March 31, 2002, we had cash of $1,850 and no current source of capital. We
also reported a negative shareholders' equity, which means that our total assets
were less than our total liabilities and our shareholders would receive nothing
in liquidation.
Our current liabilities of $671,025 consist mainly of accounts payable to our
vendors, due to related parties, and notes payable and notes payable - related
party. We believe that our continued existence is dependent on our ability to
raise additional capital and to achieve profitable operations.
Our operations used $9,188 of cash during the first quarter of 2002. This cash
was spent primarily on payment of vendor invoices. The Company also repaid
$9,000 in principal on loans from 2001 during the quarter.
During the first quarter of 2002, we relied on cash advances to conserve our
remaining cash and sustain operations. For at least the next two to three
quarters we will be reliant on such advances to sustain operations. In the
future, we hope to obtain funding based on sales, although no firm commitments
have been made. We believe that the success of any future financings will depend
in part on our success in building a business model which is attractive to third
parties based on sales to major national retailers.
The Company's anticipated monthly cash needs are $15,000 per month and we expect
to generate this cash through product sales and short-term financing.
9
PART II - OTHER INFORMATION
Legal Proceedings
Not applicable
Changes in Securities and Use of Proceeds
On February 15, 2002 the board of directors, acting under the authority granted
to them under the Articles of Incorporation, and Nevada Revised Statutes 78:195,
set forward the classification of a preferred class of common stock entitled:
Class A .
The par value of the preferred series is $.001. The preferred class of common
stock carries with it preferred voting rights in the proportion of 2.0 votes for
every one share of preferred stock held, cumulative with a stated dividend rate
of 6%, and convertible into 1.6 shares of common stock per share of preferred
stock after July 1, 2002 at the holder's request.
Defaults Upon Senior Securities
Not applicable
Submission of Matters to a Vote of Security Holders
Not applicable
Other Information
Not applicable
Item 6 - Exhibits and Reports of Form 8-K
A. Exhibits
--------
99.1 Chief Executive Officer and Chief Financial Officer
certification pursuant to Section 906 of the Sarbane-Oxley
Act of 2002
B. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
American I R Technologies Inc.
(Registrant)
Date: September 27, 2002
By: /s/ Ron Allen Ryan
- -----------------------
Ronald A. Ryan, Director, Chief Executive Officer, and President
Date: September 27, 2002
By: /s/ R. A. Moss
- ------------------------
R. A. Moss, Director, Secretary, Treasurer, and Principal
Financial and Accounting Officer
10