U.S. Securities and Exchange Commission
Washington, D.C. 20549
---------------------
Form 10QSB
---------------------
Quarterly Report Under Section 13 or 15(d)
of the Securities exchange Act of1934
For Quarter Ending June 30, 1999
Commission File Number 001-15071
PowerSource Corporation
(Name of Small Business Issuer in its charter)
---------------------
Nevada 61-1180504
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3660 Wilshire Boulevard, Suite 1104
Los Angeles, California 90010
(Address of principal executive office) (Zip Code)
(213) 383-4443
(Registrant's Telephone Number)
Indicate by Check mark whether the registration (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 92) has been subject to
such filing requirements for the past 90 days.
Yes * No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Weighted Number of shares are 5,480,761 of common stock, no par value.
Page 1
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 Statements in this discussion 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.
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, related notes and other information
included in this quarterly report of Form 10-QSB.
Part I. Financial Information
Quarter Ended June 30, 1999
GENERAL
The following financial information is submitted in response to the
requirements of FORM 10-QSB and does nor purport to be financial statements
prepared in accordance with generally accepted accounting principles. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted, although the Company believes the disclosures that are
made are adequate to make the information presented not misleading. Further, in
the opinion of the management, the interim financial statements reflect fairly
the financial position and results of operations for the period indicated.
The results of operations for the quarter ended as stated above are not
necessarily indicative of results to be expected for the entire year ending
fiscal year ending December 31st.
Page 2
Item 1. Financial Statements
The balance sheet of PowerSource Corp. (the "Company") as of the Quarter
stated above, and the related statement of income and changes in financial
position and note thereto are incorporated herein by reference to the Company's
quarterly report.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
For the quarter revenues totaled $210,000. This represents an increase from
zero revenues from the previous quarter. Expenses this quarter totaled $263,219,
which translates to a loss from operations this quarter of $53, 219. This loss
is due primarily from the expenditures in personnel, software, and computer
equipment to prepare for expected increased future customer sales.
Liquidity and Capital Resources
- ---------------------------------
The Company has access to a Letter of Credit of $26,000 to be placed with
Banker Trust, (a U.S. Bank), as trustee for the benefit of the Automated Power
Exchange, Inc. At this time there are no borrowing against the line.
Inflation
- ---------
The rate of inflation does not have a material impact of the Company's
results of operations and is not expected to have much of an impact in the
future. The primary cost component in goods sold to customers subject to
inflationary pressures is electrical power. The contract the Company has with
its customers is that these costs are automatically passed along to the end-use
customers as the Company incurs them.
Page 3
Part II. Other Information
Item 1. Legal Proceedings - None
Item 2. Change in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a vote of Security Holders - None
Item 5. Other Information
Other Information
- ------------------
The Company was approved for trading by the NASD and opened at $5.37 before
closing at $5.00 per share on June 30, 1999 on very little volume.
Item 6. Exhibit EX-27
SIGNATURES
Pursuant to the requirements of the Securities and 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
- ----------------------
E. Douglas Mitchell
President
/s/ Roman Gordon
- ----------------------
Roman Gordon
Chairman of Board
Dated: November 01, 1999
Los Angeles, California
Page 4
Powersource Corporation
BALANCE SHEET
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
ASSETS
6/30/99 12/31/98
- -- -- -- -- --
CURRENT ASSETS:
Cash and cash equivalents .................. $ 29,826 620
Accounts receivable ........................ 182,100 199,500
Letter of credit ........................... 26,000 26,000
------ ------
Total current assets ............. 237,926 226,120
EQUIPMENT, FIXTURE AND FURNITURE: 58,543 8,640
OTHER ASSETS:
Organization expenses ...................... 3,500 4,000
Investment in oil and gas properties ....... 535,000 535,000
Deferred interest .......................... 20,368 -
-------
Total other assets ............... 558,868 539,000
------- -------
$855,337 $773,760
======== ========
Powersource Corporation
BALANCE SHEET
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
(Continued)
LIABILITIES AND STOCKHOLDER'S EQUITY
6/30/99 12/31/98
- -- -- -- -- --
CURRENT LIABILITIES:
Accounts payable ............................. $ 29,527 $ 36,028
Payroll tax payable .......................... 596 542
Income tax payable ........................... - 800
Interest payable ............................. 8,400 5,600
Notes payable - Computer System (Current Portion) 21,289 -
------ ------
Total current liabilities .................... 59,812 42,170
LONG-TERM LIABILITIES
Notes payable - Computer System
(Net of current portion) ..................... 53,222 -
Notes payable ................................ 93,700 -
Total long-term liabilities .................. 146,922 -
STOCKHOLDER'S EQUITY:
Common stock, par value $ .001,
50,000,000 shares authorized, 5,408,161
shares issued and outstanding including ...... 5 ,408 5,408
Paid-in Capital in excess of par value ....... 221,959 128,781
Preferred stock, par value $ 100
5,350 shares issued and outstanding .......... 535,000 535,000
Retained earnings (accumulated deficit) ...... (113,764) (54,399)
-------- --------
Total stockholder's equity ................... 648,603 614,790
-------
$ 855,337 $773,760
========= =========
Powersource Corporation
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
6/30/99 12/31/98
- -- -- -- -- --
REVENUES:
Net sales ............................ $ 210,000 $ 210,000
Cost of sales......................... 0 0
- -
Total revenues ......................... 210,000 210,000
EXPENSES:
Selling expenses ..................... 17,889 26,911
General and administrative expenses .. 245,330 231,088
------ ------
Total expenses .................. 263,330 257,999
------ ------
Loss from operation ............. (53,219) (47,999)
OTHER INCOME (LOSS) (EXPENSE)
Interest expense .................... (5,346) (5,600)
------ ------
Income(loss) before provision for income taxes (58,565) (53,599)
PROVISION FOR INCOME TAXES ................. 800 800
--- ---
Net Income(loss) .................... (59,365) (54,399)
ACCUMULATED DIFICIT - JANUARY 1, 1999 ...... (54,399) (1,356)
------- -------
PRIOR PERIOD ADJUSTMENT .................... - 1,356
ACCUMULATED DIFICIT - END OF PERIOD ........ $(113,764) $(54,399)
========= =========
Earnings (loss) per Common Share (0.021) (0.010)
WEIGHTED NUMBER OF SHARES OUTSTANDING 5,480,761 5,408,161
Powersource Corporation
STATEMENT OF CASH FLOWS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
6/30/99 12/31/98
- -- -- -- -- -
CASH FLOWS FROM OPERATING ACTIVITIVES:
Net income ..................................... $ (59,365) $ (54,399)
Adjustment to reconcile net income to net
cash provide (used) by operating activities:
Amortization ................................... 500 1000
Depreciation ................................... 7,076 2,024
Decrease (increase) in:
Accounts receivable ............................ 17,400 (199,500)
Note receivable ................................ - (26,000)
Deferred interest .............................. (20,368) -
Organization expenses .......................... - (5,000)
Increase (decrease) in)
Accounts payable ............................... (6,500) (36,028)
Payroll tax payable ............................ 53 542
Interest payable ............................... 2,800 5,600
Income tax payable.............................. (800) 800
Loan payable................................... 74,511 -
-----
Net cash provided (used) by operating activities 15,307 (238,905)
====== ======
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of assets ................... (56,979) (10,664)
Investment in oil and gas property ...... - (535,000)
------- -------
Net cash provided (used) by operating activities - (238,905)
Net cash provided (used) by investing activities (56,979) -
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable .................................. (22,300) 116,000
Issuing common stock ........................... 61,065 134,189
Issuing preferred stock ........................ - 535,000
Additional paid in capital ..................... 93,178 -
------
Net cash provided (used) by financing activities 70,878 785,189
NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS 29,206 620
CASH AND CASH EQUIVALENTS - JANUARY 1, 1999 .... 620 -
--- ---- ---
ASH AND CASH EQUIVALENTS - END OF PERIOD ....... $ 29,826 620
=== ===
Powersource Corporation
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
AS OF DECEMBER 31, 1998 AND 1997
- --------------------------------
COMMON PAID-IN
STOCK CAPITAL IN PREFERRED RETAINED
SHARES AMOUNT EXCESS OF PAR STOCK EARNINGS TOTAL
------ ------ ------------- ----- -------- -----
Balance January 1, 1998 ...................... 1,356,000 $ 1,356 1,268,475 $(1,698,336) $(1,356)
Forgivness of Due to parent company .......... (1,356) (1,268,475) 1,698,338 428,505
---------- ---------- ----------
BALANCE ON DECEMBER 31,1997......................... 1,356,000 1,356 $ (1,356) $ 0
Founders shares issued May 12, 1998.......... 3,642,004 3,642 -- -- -- --
Sales of option shares pursuant to ...........
Re organization agreement: Feb. 12, 1998 ..... 169,157 169 $ 42,310 -- -- 42,479
---------- ---------- ----------
Sale of 5,350 shares pursuant to
Re organization agreement: Feb. 12,1998 ...... -- -- $ 535,000 535,000
---------- ---------- ----------
Sales of additional option shares from Sep. 16
Through Dec. 31, 1998 241,000 241 86,471 86,712
Prior period adjustment ...................... 1,356 1,356
Net income ................................... -- -- -- -- (53,599) (53,599)
BALANCE ON DECEMBER 31, 1998 ...................... 5,408,161 $ 5,408 $ 128,781 $ 535,000 $ (54,399) $ 614,790
========= ========== ========== ========== ========== ==========
AS OF JUNE 30, 1999
- -------------------
Balance January 1, 1999 ...................... 5,408,161 $ 5,408 128,781 535,000 $(54,399) $ 614,790
Changes in paid in capital.................... 72,600 72 61,065 61,065
Net loss .............................. -- -- -- -- (59,365) (59,365)
BALANCE ON DECEMBER 31, 1998 ...................... 5,480,761 $ 5,480 $ 189,846 $ 535,000 $(113,764) $ 616,490
========= ========== ========== ========== ========== ==========
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Reporting Entity
----------------
PowerSource Corporation (a Nevada Corporation), formerly known as American Gas
Corporation, was originally formed in March of 1990. PowerSource Corporation is
registered electric service provider and through the assistance of certain other
companies, has procured permits to provide electric service to residential,
commercial and industrial customers located in the state of California.
Use of Estimates
----------------
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities, and reported
revenues and expenses. Actual results could differ from those estimates.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is provided principally
on the straight- line method over cost recovery periods prescribed by Internal
Revenue Service, which approximated the useful lives of the assets. The
estimated useful lives are as follows:
Machinery and equipment ..................... 5 - 15 years
Furniture and fixtures ...................... 7 years
Computer equipment and software.............. 5 years
Vehicles and automotive equipment............ 7 years
Leasehold improvements are amortized by the straight-line method over a period
of 31.5 years for book and tax purposes. Expenditures for maintenance and
repairs are charged to operations as incurred, while renewals and betterment are
capitalized.
Organization Expenses
---------------------
Organization expenses include legal fees, licensing fees, and certain other
organization costs, which will be amortized using the straight-line method over
a period of five years.
Powersource Corporation
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
(Continued)
INCOME TAXES
------------
The Company recognizes the tax effect of transactions in the year in which such
transactions enter into determination of net income regardless of when they are
reported for tax purposes. The Company has adopted the Statement of Financial
Accounting Standards No. 109 (Accounting for Income Taxes) in computing deferred
income taxes. Deferred income taxes, when shown, result primarily from different
depreciation methods for book and tax purposes.
2 LETTER OF CREDIT
As a requirement to provide electricity, Senator Associates Ltd, (a Hungarian
corporation) on behalf of the Company executed, and delivered a Letter of Credit
in the sum of $26,000 to be placed with Bankers Trust, (a U.S. bank), as trustee
for the benefit of Automated Power Exchange Inc. This amount is used to recover
for any unpaid balance in the event that the Company defaults in its payment.
This amount cannot be drawn as long as the Company is in business with Automated
Power Exchange Inc.
3 PROPERTY AND EQUIPMENT
Property and equipment consist of the following
6/30/99 12/31/98
- -- -- -- -- --
Furniture and Fixtures ....... $ 8,758 $ 1,906
Office Equipment ............. 58,885 8,758
------ ------
TOTAL 67,643 10,664
Less: Accumulated depreciation (9,100) (2,024)
------ ------
TOTAL $ 58,543 $ 8,640
======== ========
4 INVESTMENT IN OIL AND GAS PROPERTIES
In February 1998, PowerSource Ltd. (a Nevada Corporation) entered into a plan of
reorganization with American Gas Corporation (a Nevada Corporation), then a
wholly owned subsidiary of Kensington International Holding Corporation AKA The
Kensington Company, Inc. (a Minnesota Corporation and referred to hereinafter as
"Kensington" ), a fully reporting public company. Kensington retained fifteen
(15%) percent (200,000 shares of the then issued common stocks) and was granted
5,350 shares of American Gas Corporation's series A, $100 par value, preferred
stock. The series A preferred stock is convertible to common stock, in five
years, at $10 per share. On May 12, 1998, American Gas Corporation's name was
changed to PowerSource
Powersource Corporation
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
(Continued)
4 INVESTMENT IN OIL AND GAS PROPERTIES (Continued)
corporation and became the Company. The acquisition was accounted for under the
purchase method of accounting. As of the date of acquisition, the Company has
recorded an investment in oil and gas properties as follows:
6/30/99 12/31/98
- -- -- -- -- --
Equipment ................................... $300,000 $300,000
Pipelines ................................... 200,000 200,000
Rights of Way................................ 35,000 35,000
Total $535,000 $535,000
This value has been estimated by an appraisal and management of the Company and
its realization is contingent upon the Company's investment of about $100,000 as
stated below in note (7) commitments. To date the Company has not invested any
funds and has not entered into any contract for the proposed improvement.
5 COMMON STOCK WARRANTS
PowerSource Corporation has a total of four class of common stock warrants. The
warrants range in exercise prices from $.10 per share to $6.50 per share and
expire anywhere from 60 days from the date of issue through July 1, 1999.
6 NOTES PAYABLE
Notes payable as of March 31, 1999 consisted of the following:
6/30/99 12/31/98
- -- -- -- -- --
Note payable to Senator Associates, Ltd.
is unsecured with interest as 7%, all interest
and principal due on Septemeber 10, 1999 ..... $ 67,700.00 $ 80,000.00
Letter of credit from Bankers Trust .......... 26,000.00 26,000.00
Note payable to German Teitelbaum ........... - 10,000.00
Total $ 93,700.00 116,000.00
====== =====
Powersource Corporation
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
(Continued)
7 LONG TERM NOTES PAYABLE
Note payable to Comprehensive Leasing $1774.08
per month plus interest accrued at 29.07% collaterized
by computer system with a net book value of
$60,713.47
6/30/99 12/31/98
- -- -- -- -- --
$ 74,511 -
Less amount due within one year 21,289 -
-------- -------
$ 53,222 -
======= =======
8 COMMITMENTS
The management has committed to invest an estimated amount of $100,000 on the
Rosewood gas field to bring the lease and easement current, clean and repair the
wells and pipelines, install a new compressor and reconnect to the Texas Gas
Pipeline.
The company currently pays $2,104 per month. The lease, including options,
extends through March 31, 2000.
Future minimum payments under the lease as of March 31, 1999, are as follows:
6/30/99 12/31/98
- -- -- -- -- --
Period ending December 31, 1999 $ 12,624 $25,248
March 31, 2000 6,312 6,312
----- -----
Total $ 18,936 $ 31,560
======= =======
Powersource Corporation
SUPPLEMENTARY INFORMATION
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
Powersource Corporation
SCHEDULE 1 - SELLING EXPENSES
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
6/30/99 12/31/98
- -- -- -- -- --
Percent of
Amount Net Sales
------ ------
Automated Power Exchange .............
Advertising ........................... $ 4,988 2.61%
Entertainment & travel ................ 7,552 5.91%
-----
TOTAL ............................... $17,889 10.89%
======= =======
POWERSOURCE CORPORATION
SCHEDULE 2 - GENERAL AND ADMINISTRATIVE EXPENSES
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
6/30/99 12/31/98
- -- -- -- -- --
Percent of Percent of
Amount Net sales Amount Net sales
------------------------- ---------------------
Alamr & Security $ 100 0.05% $ - -
Amortization expense 500 0.24% 1,000 0.48%
Auto expenses 4,112 1.96% 1,332 0.63%
Bank charges 760 0.36% 959 0.46%
Computer expense 1,635 0.78% 1,346 0.64%
Consulting fee 38,678 18.42% 29,955 14.26%
Depreciation 7,076 3.37% 2,024 0.96%
Dues & subscriptions 4,891 2.33% 383 0.18%
Gifts 446 0.21% - -
Insurance 1,836 0.87% 846 0.40%
Lease-equipment 150 0.07% - -
Legal & professional services 5,478 2.61% 90,130 42.92%
License & permits 972 0.46% 3,080 1.47%
Marketing 964 0.46% - -
Office expenses 2,596 1.24% 1,005 0.48%
Office supplies 3,696 1.76% 3,141 1,50%
Outside service 68,842 32.78% 26,900 12.81%
Parking 2,218 1.06% 2,410 1.15%
Postage and delivery 4,607 2.19% 5,827 2.77%
Printing and reproductions 10,602 5.05% 21,789 10.38%
Professional service 27,353 13.03% - -
Penalty 182 0.09% - -
Repair & maintenance 2,473 1.18% 250 0.12%
Rent 15,030 7.16% 19,275 9.18%
Salaries-Office 11,337 5.40% 9,023 4.30%
Salaries-Officers 15,125 7.20% - -
Taxes-Business 311 0.15% - -
Taxes-Payroll 3,902 1.86% 668 0.32%
Telephone 9,153 4.36% 9,745 4.64%
Wire fee 305 0.15% - -
TOTAL $ 245,330 116.82% $ 231,088 110.04%
======== ======== ======== ========