UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[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
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period to
Commission File Number 0-27147
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COOL CAN TECHNOLOGIES, INC.
__________________________________________________
(Exact name of small Business Issuer as specified in its charter)
MINNESOTA 95-4705831
- ------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
SUITE 206, 4505 LAS VIRGENES ROAD
CALABASAS, CA 91302
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (818) 871-9999
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NOT APPLICABLE
_____________________________________________________________________
(Former name, former address and former fiscal nine months, if changed since
last report)
Check whether the issuer (1) 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 issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days: [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 19,352,966 SHARES COMMON STOCK
OUTSTANDING AS OF MAY 6, 2002.
1
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B, and,
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders' equity in conformity with accounting principles generally accepted
in the United States of America. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. Operating results for the nine months ended March 31, 2002
are not necessarily indicative of the results that can be expected for the year
ending June 30, 2002.
2
COOL CAN TECHNOLOGIES, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
March 31, June 30,
ASSETS 2002 2001
------------ ----------
(Unaudited) (Audited)
Cash $ 240 $ 1,515
Intangibles 37,400 39,200
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$ 37,640 $ 40,715
============ ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable $ 82,433 $ 71,885
Accounts payable, stockholders 176,640 108,640
Due to stockholders 142,232 296,732
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Total current liabilities 401,305 477,257
STOCKHOLDERS' DEFICIT:
Preferred Stock - -
Common stock 664,769 279,769
Accumulated deficit (1,028,434) (716,311)
------------ ----------
(363,665) (436,542)
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$ 37,640 $ 40,715
============ ==========
Note: The balance sheet at June 30, 2001 has been taken from the audited
financial statements at that date, and has been condensed.
See Notes to Condensed Financial Statements.
3
COOL CAN TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
-------------------------- --------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues $ - $ - $ - $ -
Administrative pre-opening and
development expenses 42,281 98,852 312,123 232,438
------------ ------------ ------------ ------------
Net loss $ (42,281) $ (98,852) $ (312,123) $ (232,438)
============ ============ ============ ============
Loss per common share $ (.01) $ (.01) $ (.02) $ (.01)
============ ============ ============ ============
Loss per common share assuming dilution $ (.01) $ (.01) $ (.02) $ (.01)
============ ============ ============ ============
Weighted average outstanding shares 19,352,966 18,127,966 18,877,966 18,127,966
============ ============ ============ ============
See Notes to Condensed Financial Statements.
4
COOL CAN TECHNOLOGIES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31
----------------------
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(312,123) $(232,438)
Amortization 1,800 1,800
Stock option compensation expense 120,000 -
Increase in accounts payable 20,548 4,752
Increase in accounts payable, stockholders 68,000 -
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Net cash used in operating activities (101,775) (226,066)
CASH FLOWS FROM FINANCING ACTIVITIES:
Accounts payable, stockholders 50,500 260,500
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 50,000 -
Net decrease in cash (1,275) 34,434
Cash and savings:
Beginning of period 1,515 579
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End of period $ 240 $ 35,013
========== ==========
Non-cash financing and investing activities:
Conversion of debt to common stock $ 205,000
==========
Conversion of payable to common stock $ 10,000
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See Notes to Condensed Financial Statements.
5
COOL CAN TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Financial Statements:
The condensed balance sheet as of March 31, 2002, the statement of operations
and cash flows for the periods ended March 31, 2002 and 2001 have been prepared
by the Company, without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and changes in cash flows at March
31, 2002 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's June 30, 2001 audited financial statements.
The results of operations for the period ended March 31, 2002 are not
necessarily indicative of the operating results for the full year.
Note 2. Stockholders' Equity:
During the nine months March 31, 2002, stockholders' equity changed for a net
loss of $312,123 and for the issuance of common stock for $385,000.
Note 3. Stock Compensation:
The Company has adopted the provisions of FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation - an
interpretation of APB Opinion No. 25" ("FIN44"). FIN 44 clarifies the accounting
consequence of various modifications to the terms of previously fixed stock
options or awards.
On September 21, 2001, the Company repriced 3,550,000 stock options to $.60 per
share. In October, 2001, the Company repriced 1,050,000 stock options to $.31
per share for directors and employees. 500,000 of these options were exercised
at $.31 per share. In addition, the Company issued 600,000 shares of common
stock in exchange for $60,000 in debt at November 30, 2001.
Note 4. Other:
The Company has entered into a funding agreement with a stockholder of the
Company whereby the stockholder has been granted the right to provide up to
$1,000,000 of funding over a 12-month period. The purchase price for any shares
purchased pursuant to the funding arrangement will equal 75% of the average
closing price of the Company's common shares for the 10 day period immediately
preceding receipt by the Company of notice of intention to fund. Any shares
purchased will be restricted shares.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
FORWARD LOOKING STATEMENTS
The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties, including statements
regarding the Company's capital needs, business strategy and expectations. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"expect", "plan", "Intend", "anticipate", "believe", estimate", "predict",
"potential" or "continue", the negative of such terms or other comparable
terminology. Actual events or results may differ materially. In evaluating
these statements, you should consider various factors, including the risks
outlined in the Risk Factors section below, and, from time to time, in other
reports the Company files with the SEC. These factors may cause the Company's
actual results to differ materially from any forward-looking statement. The
Company disclaims any obligation to publicly update these statements, or
disclose any difference between its actual results and those reflected in these
statements. The information constitutes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
OVERVIEW
We are in the business of developing and marketing a patented unique proprietary
technology which will allow for the licensing and manufacture of a commercially
viable self-chilling beverage container product.
Our proposed product is referred to by us as the "Cool Can" product and consists
of a module for insertion in an aluminium beverage container that incorporates a
cartridge of liquid carbon dioxide ("CO2") that is held in place by a cartridge
holder. The module consists of proprietary technology for which we have been
granted patent protection. The module would be inserted in an aluminium
beverage container during an automated canning process. Containers
incorporating the Cool Can product would be identified and sold as self-chilling
beverage containers. To start the chilling process, a consumer would pull the
tab off the container as with a regular non-chilling beverage container. When
the tab on the lid of the beverage container is pulled by the consumer, a valve
mechanism within the container releases the compressed liquid CO2. The escaping
CO2 forms into small particles of frozen snow at extremely cold temperatures and
rapidly imparts a chilling action to the beverage. The targeted result is that
the consumer may purchase a beverage at room temperature and enjoy it cold
without having to purchase it from a cooler or purchase ice to cool the
beverage.
Our Cool Can product is presently in the development stage. We have not
finalized commercialization of our Cool Can product and we have not yet achieved
any sales of our Cool Can product.
7
PLAN OF OPERATION
Our plan of operations over the past nine months has been to further the
development of our beverage chilling technology by undertaking development of
prototypes, market testing and the pursuit of discussions with potential
licensors. We have been unable to pursue this plan of operations due to our
lack of financing. This lack of financing has prohibited us from achieving
significant progress on the development and testing of prototypes of
self-chilling beverage container modules incorporating our technology.
As a result of this inability to pursue our plan of operations, we have entered
into negotiations with Balsam Ventures Inc. for the exclusive worldwide
licensing rights for our beverage chilling technology. The terms of the proposed
agreement are under negotiation. It is anticipated that any license agreement
would involve a combination of cash payments and ongoing royalty payments to us.
The agreement may also involve development expenditure commitments by Balsam.
These discussions are currently in the negotiation stage. No definitive
agreements have been executed to date and there is no assurance that any
definitive agreements will be executed.
If we do not conclude any agreement with Balsam, then our plan of operations for
the next twelve months will include the following components, subject to our
achieving the required financing:
1. The first phase will be to proceed with product development and
production of samples of our self-chilling beverage container modules. This
phase will include the following elements:
(a) Product fabrication, including testing and studying design concepts,
making required design modifications, developing and building a fully
functioning prototype self-chilling beverage container.
(b) Follow on prototype development including, analysis, testing and fine
tooling required for production and finalizing all production drawings and
specifications.
(c) Producing high-volume production cost estimates and methods, including
estimation of tooling costs, sourcing production facilities and requesting bids
for tender from potential manufacturers of component parts and analysis and cost
estimates for projected method of assembling of chilling module.
2. The second phase of our plan of operations involves consultation and
feedback with all parties involved in the production and handling of our planned
self-chilling beverage container. This phase would be undertaken upon
completion of phase one, as outlined above. Consultation would include
consultation with aluminum can manufacturers, filler manufacturers, beverage
canners and recycling entities. The focus of the consultation would be to
determine what auxiliary equipment will be required for production of our
planned self-chilling beverage containers and to develop blueprints and
estimated costs for full-scale production.
8
3. The third phase of our plan of operations is to market and pursue
licensing of our Cool Can technology. This phase is anticipated to include
presentation of product-ready samples to the beverage industry. We would seek
out qualified candidates for licensing of the product in various countries
and/or territories. We plan to approach beverage manufacturers for joint
venture opportunities in order to drive consumer trials and to sample test the
finished product in the market.
We will not be able to proceed with our plan of operations unless we achieve
significant additional financing. If we achieve sufficient additional
financing, of which there is no assurance, then the estimated cost and timeframe
for completion of each of the above components of our plan of operations will be
as follows:
1. Product development is estimated to be completed over a timeframe of nine
months, commencing upon us achieving the required financing, at an estimated
cost of $200,000.
2. Consultation feedback is estimated to take place over a timeframe of nine
months following completion of phase one at an estimated cost of $100,000.
3. Marketing and licensing will follow phase two and is estimated to take
nine months at an estimated cost of $100,000.
We currently have a cash position of $240 as at March 31, 2002. In addition, we
have a current working capital deficit of $401,065 as at March 31, 2002.
Accordingly, we will require additional financing in order to proceed with our
plan of operations (see "Liquidity and Capital Resources" below). If we achieve
financing that is less than that required to pursue our stated plan of
operations, then we will scale back our plan of operations to concentrate solely
on the product development phase of our plan of operations. In this event, we
will pursue product development to the extent of our financial resources.
We have only been able to undertake minimal activities towards the development
of pursuing our stated plan of operations to develop and commercialize our Cool
Can Technology during the first nine months of our current fiscal year. As
discussed above, we will not be able to proceed with our plan of operations
unless we achieve significant additional financing.
RESULTS OF OPERATIONS
REVENUES
We did not earn any revenues during the nine months ended March 31, 2002 or the
year ended June 30, 2001. We do not anticipate earning revenues until such time
as we have completed commercial development of products incorporating our Cool
Can technology or until we are able to generate revenues through license
agreements for our technology of which there is no assurance. We are presently
in the development stage of our business and we can provide no assurance that we
will be able to complete commercial development, successfully sell or license
products incorporating our Cool Can technology once development is complete or
enter into any revenue generating license arrangements.
9
OPERATING EXPENSES
Our operating expenses were $312,123 for the nine months ended March 31, 2002,
compared to operating expenses of $232,438 for the nine months ended March 31,
2001. Our operating expenses for the nine months ended March 31, 2002 included a
stock option compensation expense in the amount of $120,000. Our operating
expenses for the nine months ended March 31, 2002 exclusive of the stock option
compensation expense consisted primarily of: (i) product development expenses in
the approximate amount of $16,400; (ii) consulting fees accrued to Mr. Bruce
Leitch, our chief executive officer, in the amount of $76,500 and (iii) legal
and accounting expenses in the amount of $38,500 incurred in connection with our
reporting obligations under the Securities Exchange Act of 1934 and our
financing activities. We did not incur any product development expenses during
the three months ended March 31, 2002.
We anticipate that our operating expenses will increase significantly if we are
able to obtain the financing necessary to continue with the development of our
Cool Can product and technology in accordance with our plan of operations.
NET LOSS
We recorded a net loss of $312,123 for the nine months ended March 31, 2002,
compared to a net loss of $232,438 for the nine months ended March 31, 2001.
Our net loss was comprised entirely of operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
We had cash on hand of $240 as at March 31, 2002, compared to $1,515 as at June
30, 2001. We had a working capital deficit of $401,065 as at March 31, 2002,
compared to $475,742 as at June 30, 2001.
We were dependent on loans from certain of our shareholders during the nine
months ended March 31, 2002, a private placement of our common stock and
exercises of stock options to finance our business operations. Loans from
shareholders decreased to $142,232 as at March 31, 2002 from $296,732 as at June
30, 2001. These loans are outstanding as demand loans with no fixed date for
repayment. There is no assurance that we will be able to obtain any additional
loans from shareholders. We completed the issuance of 1,100,000 shares of our
common stock for aggregate proceeds of $215,000 during the three months ended
December 31, 2001 pursuant to the exercise of stock options. The proceeds of
these issuances were used to reduce our outstanding debt to shareholders and to
pay outstanding accounts liabilities. Accrued but unpaid consultant fees
payable to our president, Mr. Bruce Leitch, increased to $176,640 as at March
31, 2002 from $108,640 as at June 30, 2001.
We sold an additional 125,000 shares of our common stock at a price of $0.40 per
share to Bay Financial S.A., a private investor, pursuant to Regulation S of the
Securities Act of 1933 during the three months ended December 31, 2001. The
proceeds of this sale were applied to our ongoing product development program
and to general working capital
10
purposes. This sale was completed pursuant to a funding arrangement with Bay
Financial whereby we granted Bay Financial the right to provide up to $1,000,000
of funding over a 12-month period. The purchase price for any shares purchased
pursuant to the funding arrangement will equal 75% of the average closing price
of the shares of our common stock for the 10 day period immediately preceding
receipt by us of notice of intention to fund from the investor. Any shares
purchased will be restricted shares. Bay Financial did not purchase any
additional shares during the three months ended March 31, 2002 and has not
purchased any additional shares since March 31, 2002. There is no assurance that
Bay Financial will exercise its right to purchase any additional shares of our
common stock under this funding arrangement.
Our current monthly operating expenses are approximately $12,000 per month. Our
current cash reserves are only sufficient to enable us to operate for an
additional one month as we have no sources of income or financing. In addition,
we require approximately $400,000 in order to carry out our plan of operations
over the next twelve months. Due to our inability to finance our business
operations, we are pursuing the exclusive license agreement with Balsam
Ventures. There is no assurance this agreement will be concluded or will
generate revenues for us if concluded.
Based on our current financial position, we require immediate additional
financing if we are to continue as a going concern and to finance our business
operations. We anticipate that any additional financing would be through the
sales of our common stock or through a strategic partnership arrangement whereby
a partner would fund further development of our technology. We do not have any
arrangements in place for the sale of any of our securities and we have not
entered into any strategic partnerships to date. There is no assurance that we
will be able to raise the additional capital that we require to continue
operations. In the event that we are unable to raise additional financing on
acceptable terms, we will not be able to pursue commercialization of our
technology.
We anticipate that we will continue to incur losses for the foreseeable future,
as we expect to incur substantial product development, marketing and operating
expenses in implementing our plan of operations. Our future financial results
are uncertain due to a number of factors, many of which are outside of our
control. These factors include, but are not limited to:
A. our ability to develop a commercially marketable Cool Can product or to
enter into a revenue generating license agreement for our technology;
B. the success of our planned license agreements for the Cool Can technology
that we develop;
C. our ability to raise additional capital necessary to implement our
business strategy and plan of operation;
D. our ability to compete with other chilled beverage container technology;
and
E. the success of any marketing and promotional campaign which we conduct
for the our Cool Can product once development is complete.
11
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are described in Note 1 to the financial
statements included in our annual report for the year ended June 30, 2001. The
accounting policies used in preparing our interim 2002 condensed financial
statements are the same as those described in our annual report. Our critical
accounting policies are those both having the most impact to the reporting of
our financial condition and results, and requiring significant judgements and
estimates. Our critical accounting policies include those related to
stock-based compensation and intangibles.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
We did not complete any sales of our common stock during our fiscal quarter
ended March 31, 2002.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to our security holders for a vote during the fiscal
quarter ending March 31, 2002.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
None.
REPORTS ON FORM 8-K
None.
12
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-QSB to be signed on
its behalf by the undersigned, thereunto duly authorised.
COOL CAN TECHNOLOGIES, INC.
By: /s/ Bruce Leitch
___________________________________
Bruce Leitch
President, Secretary and Treasurer
(Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)
Director
Date: May 10, 2002