U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[x] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 2002
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[ ] Transition Report under Section 13 or 15(d)of the Exchange Act For the
Transition Period from ________ to ___________
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Commission File Number: 000-31663
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AMERICAN I R TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0440536
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
330 E. Warm Springs Road,Las Vegas, Nevada 89119
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(Address of principal executive offices) (zip code)
(702) 215-6455
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Issuer's Telephone Number
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months
(or 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
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
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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
Item 1. Financial Statements.............................3
Balance Sheet............................................4
Statement of Operations..................................5
Statement of Cash Flows..................................6
Notes to Financial Statements............................7
Item 2. Management's Discussion and Plan of Operation...19
PART II - OTHER INFORMATION
Item 4. Controls and Procedures.........................21
Item 6. Exhibits........................................21
SIGNATURES..............................................22
CERTIFICATIONS..........................................22
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PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial reporting and pursuant to the
rules and regulations of the Securities and Exchange Commission
("Commission"). While these statements reflect all normal
recurring adjustments which are, in the opinion of management,
necessary for fair presentation of the results of the interim
period, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. For further information, refer to the
financial statements and footnotes thereto, which are included
in the Company's annual report on Form 10-KSB previously filed with
the Commission on September 3, 2002.
The accompanying notes are an integral part of these consolidated
financial statements.
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INDEPENDENT ACCOUNTANTS REVIEW REPORT
To the Board of Directors of
American IR Technologies, Inc.:
We have reviewed the accompanying consolidated balance sheets of
American IR Technologies, Inc. as of September 30, 2002, and the
related statements of income and accumulated deficit from
January 1, 2002 to September 30, 2002, July 1, 2002 to September
30, 2002, and cash flows for the nine months ended September 30,
2002, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial
statements is the representation of the management of American IR
Technologies, Inc. The Financial Statements of American IR
Technology, Inc. as of September 30, 2001 and December 31, 2001, were
reviewed by other accountants, whose report dated August 2001,
stated that they were not aware of any material modifications that
should be made to those statements in order for them to be in
conformity with generally accepted accounting principles in the
United States of America.
A review consists principally of inquiries of Company personnel
and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards in the United States of
America, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements in order for them to be in conformity with generally
accepted accounting principles in the United States of America.
As discussed in Note 11, certain conditions indicate that
the Company may be unable to continue as a going concern.
The accompanying financial statements do not include any
adjustments to the financial statements that might be necessary
should the Company be unable to continue as a going concern.
CFO Advantage, Inc.
November 20, 2002
Las Vegas, Nevada
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AMERICAN IR TECHNOLOGIES, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 2002
(UNAUDITED)
ASSETS
9/30/2002 12/31/2001
CURRENT ASSETS
Cash $9,658 1,662
Accounts receivable, net of
reserve for bad debt 26,117 3,379
Due from officer - 20,690
Inventory 1,941 -
Total current assets 37,716 25,731
PROPERTY AND EQUIPMENT, net of
accumulated depreciation 15,745 12,973
OTHER ASSETS
Deposits 1,360 1,360
------ ------
Total other assets 1,360 1,360
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TOTAL ASSETS $54,821 $40,064
========= =========
LIABILITIES AND STOCKHOLDERs EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $105,322 176,805
Due to related parties 542,831 532,707
Notes payable 24,000 28,000
Notes payable related party 7,500 12,300
Payroll liability 73,125 -
Other current liabilities 60,751 -
Total current liabilities 813,525 749,812
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TOTAL LIABILITIES 813,525 749,812
STOCKHOLDERS EQUITY (DEFICIT)
Common stock, $.001 par value,
20,000,000 shares authorized,
19,984,107 shares issued and
outstanding as of September 30,
2002 and 13,345,787 as of
December 31, 2001 19,985 13,346
Additional paid in capital
common stock 1,314,040 818,163
Preferred stock, Class A, 6% cumulative,
convertible, $.001 par value,
5,000,000 shares authorized, 1,945,680
shares issued and outstanding as of
September 30, 2002 and no shares issued
and outstanding as of December 31, 2001 1,947 -
Additional paid in capital
preferred stock 247,101 -
Subscription receivable (29,350) (200,156)
Accumulated deficit (2,312,427) (1,341,101)
Total stockholders equity (deficit) (758,704) (709,748)
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TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY $ 54,821 $ 40,064
========== ==========
The accompanying independent accountants review
report and notes to financial statements should be
read in conjunction with this Balance Sheet.
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AMERICAN IR TECHNOLOGIES, INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
Unaudited Audited
3 months ended 6 months ended January 1, 2001
September 30 September 30 to December 31,
2002 2001 2002 2001 2001
REVENUES $22,586 $ 7,361 $60,784 $76,265 $71,303
COST OF REVENUES 12,175 30,260 13,596 51,773 91,828
GROSS PROFIT (LOSS) 10,411 (22,899) 47,188 24,492 (20,525)
EXPENSES:
General and
administrative 75,670 118,914 288,657 382,843 435,563
Depreciation 566 1,334 1,456 2,988 2,885
Professional fees 32,168 84,230 260,374 292,766 446,218
Non-cash stock
compensation 26,607 - 416,432 - -
------- ------- ------- ------- -------
Total expenses 135,011 204,478 966,919 678,597 884,666
Operating income
(loss) (124,600) (227,377) (919,731) (654,105) (905,191)
OTHER INCOME (EXPENSE)
Interest expense (1,433) (773) - (1,100) (10,536)
Interest income - - 2,304 - -
Forgiveness of debt 6,441 - 47,518 - -
Legal settlement - - (100,000) - 725
Other expenses - (4) (1,153) (1,080) (15,241)
------- ------- ------- ------- -------
Total other income
(expense) 5,008 (777) (51,331) (2,180) (25,052)
------- ------- ------- ------- -------
NET INCOME (LOSS) (119,592) (228,154) (971,062) (656,285) (930,243)
ACCUMULATED DEFICT,
beginning of period (2,192,835) (839,666) (1,341,367) (411,535) (411,124)
ACCUMULATED DEFICT,
end of period $(2,312,427) $(1,067,820) $(2,312,429) $(1,067,820) $(1,341,367)
PER SHARE INFORMATION:
Weighted average number
of shares outstanding
(basic and diluted) 19,984,107 9,414,917 18,652,016 8,238,324 9,196,001
Net income (loss)
per common share
(basic and diluted) $(0.05) $(0.02) $(0.05) $(0.08) $(0.10)
The accompanying independent accountants review report and notes to
financial statements should be read in conjunction with these
Statements of Income and Accumulated Deficit.
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AMERICAN IR TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
Nine months ended
9/30/2002 9/30/2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(Loss) from Operations $(971,062) $(656,285)
Adjustments to reconcile net income
to net cash provided:
Services Received for Stock 810,314 129,733
Depreciation Expense 1,456 -
(Increase)/Decrease in Accounts Receivable (22,738) (31,160)
(Increase)/Decrease in Inventory (1,941) -
Increase/(Decrease) in Due to
Related Party 190,124 186,285
Increase/(Decrease) in Payroll Liability 73,125 1,555
Increase/(Decrease) in Other Current
Liabilities 60,747 -
Increase/(Decrease) in Accounts Payable (119,001) 15,226
------- -------
Net cash provided by (used in)
investing activities 21,024 (354,646)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase)/Sale of Equipment (4,228) (10,554)
------- --------
Net cash provided by (used in)
investing activities (4,228) (10,554)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Stock - 353,435
Increase/(Decrease) in Short Term
Note Payable (4,000) -
Increase/(Decrease) in Short Term
Note Payable Related Party (4,800) -
------- -------
Net cash provided by (used in)
financing activities (8,800) 353,435
Balance as at beginning of period 1,662 4,243
Net increase in cash 7,996 (11,755)
------- -------
Balance at end of period $9,658 $(7,512)
SUPPLEMENTAL INFORMATION:
Interest Paid $3,737 $ (326)
Taxes Paid $ - $ -
The accompanying independent accountants review report and notes to
financial statements should be read in conjunction with these
Statements of Cash Flows.
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AMERICAN IR TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002
(UNAUDITED)
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
American IR Technologies, Inc. (the Company) was incorporated
in the State of Nevada on October 29, 1999. The principal
business objective of the Company is to design and market
consumer electronics that utilize infrared technology.
The Company was in the development stage from its inception
on October 29, 1999 through December 31, 2000. The Company
commenced operations on January 1, 2001.
The Company has previously entered into a license agreement
with an affiliate, American Infrared Technologies, Inc.
(Canada), a Canadian corporation, for exclusive rights to
their procedures, practices, and intellectual property. This
agreement is the sole source of product development for the
Company. On May 29, 2002, the company entered into a
settlement with Canada regarding the license agreement
(See Notes 4 and 9).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Companys policy is to prepare the financial statements
on the accrual basis of accounting. The fiscal year end is
December 31.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid
investments with maturities of three months or less when
purchased.
Summary of Non-Cash Transactions
There were non-cash transactions that are discussed in Note 3.
Inventory Valuation
Inventories are stated at the lower of cost or market, cost
being determined on the first in, first out (FIFO) basis.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires that
management make estimates and assumptions which affect the
reported amounts of assets and liabilities at the date of the
financial statements and revenues and expenses for the period
reported. Actual results may differ from these estimates.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Dividend Policy
The Company has not yet adopted any policy regarding payment
of dividends. The Company has authorized 1,945,680 shares of
preferred stock with a par value of $0.001.
Preferred shares carry two votes for every one preferred
share and have priority in the event of company liquidation.
Series A shares have annual dividends of 6% that are payable
quarterly. The shares are convertible to common shares on a
1 for 1.6 basis at the holders' option.
Fixed Assets
Fixed assets are stated at cost. Expenditures that materially
increase the life of the assets are capitalized. Ordinary
maintenance and repairs are charged to expense as incurred.
When assets are sold or otherwise disposed of, the cost and
the related accumulated depreciation and amortization are
removed from the accounts and any resulting gain or loss is
recognized at that time. Depreciation is computed primarily
on the straight-line method for financial statement purposes
over the following estimated useful lives:
Computer Equipment 5 Years
Furniture & Fixtures 7 Years
Office Equipment 5 Years
Depreciation expense was $1,456 and $2,988 for the nine months
ended September 30, 2002 and 2001, respectively.
Intangible Assets
Under guidance of SFAS 142, Net assets of companies acquired
in purchase transactions are recorded at fair value at the
date of acquisition, as such, the historical cost basis of
individual assets and liabilities are adjusted to reflect
their fair value. Identified intangibles are amortized on
an accelerated or straight-line basis over the period benefited.
Goodwill is not amortized, but is reviewed for potential
impairment on an annual basis at the reporting unit level.
The impairment test is performed in two phases. The first
step of the goodwill impairment test, used to identify
potential impairment, compares the fair value of the reporting
unit with its carrying amount, including goodwill. If the
fair value of the reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired;
however, if the carrying amount of the reporting unit exceeds
its fair value, an additional procedure must be performed.
That additional procedure compares the implied fair value of
the reporting units goodwill (as defined in SFAS 142) with the
carrying amount of that goodwill. An impairment loss is
recorded to the extent that the carrying amount of goodwill
exceeds its implied fair value.
-9-
Intangible Assets (Cont.)
Other intangible assets are evaluated for impairment if events
and circumstances indicate a possible impairment. Such
evaluation of other intangible assets is based on undiscounted
cash flow projections.
Earnings Per Share Calculations
Basic earnings per common share (EPS) is computed by
dividing income available to common stockholders by the
weighed-average number of common shares outstanding for the
period. The weighed-average number of common shares
outstanding for computing basic EPS was 9,414,917 and 8,238,324
for the period ended September 30, 2002, and 2001, respectively.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were
exercised or converted into common stock. The weighed-average
number of common shares outstanding for computing basic EPS was
19,701,115 and 8,238,324 for the period ended September 30, 2002,
and 2001, respectively.
Warranty
The Company sells the majority of its product with a limited
repair and replacement warranty. The accompanying financial
statements do not include a provision for estimated warranty
claims based on the Company's experience that no material
claims have been made.
Income Taxes
The Company experienced losses during the previous fiscal
tax year reported. The Company will review its need for a
provision for federal income tax after each operating quarter.
The Company has adopted FASB 109, as discussed in Note 7.
Advertising
Advertising costs are expensed when incurred. There was
no advertising expense for the three months ended September
30, 2002 and the year ended December 31, 2001, respectively.
Research and Development
The Company expenses its research and development in the
periods incurred.
-10-
Stock Based Compensation
The Company accounts for stock based compensation in accordance
with SFAS 123, "Accounting for Stock-Based Compensation."
The provisions of SFAS 123 allow companies to either expense
the estimated fair value of stock options or to continue to follow
the intrinsic value method set forth in APB Opinion 25, "Accounting
for Stock Issued to Employees" (APB 25) but disclose the pro
forma effects on net income (loss) had the fair value of the
options been expensed. The Company has elected to continue to
apply APB 25 in accounting for its stock option incentive plans.
The Company has issued its common stock as compensation to
non-employees. The Company measures the amount of stock-based
compensation based on the fair value of the equity instrument
issued or the services or goods provided as of the earlier of
(1) the date at which an agreement is reached with the
non-employee as to the number of shares to be issued for
performance, or (2) the date at which the non-employees'
performance is complete.
NOTE 3 - SUMMARY OF NON-CASH TRANSACTIONS
During the three month period ended September 30, 2002,
vendors forgave $47,518 of debt.
There were 1,945,680 shares of preferred stock issued on
February 8, 2002 for $249,047. This amount was taken as
a compensation expense.
NOTE 4 - LICENSE AGREEMENT
On December 22, 1999, the Company entered into a five-year
technology license agreement with Canada. Certain officers
and directors of Canada are also officers and directors of
the Company. The license agreement provides the Company
with the exclusive rights to all procedures, practices and
intellectual property related to Canada's technologies and
applications. According to the agreement, the Company has
agreed to pay Canada a royalty of 3% of all revenues derived
from the use of the technologies licensed from Canada. The
royalty is payable monthly. Additionally, the Company has
a 30-day right of first refusal to license additional
technologies developed by Canada.
The Company does not intend to assign a value to the
technology received from Canada because there appears to
be no discernable value. See Note 9 (Contingencies and
Commitments) regarding the companys litigation related
to the license agreement.
-11-
NOTE 5 - NOTES PAYABLE
Notes payable at September 30, 2002 consists of the following:
10% related party note payable,
principal and accrued interest
delinquent as of the date of the
review report, secured by 500,000
shares of the Company's stock
owned by the President $7,500
12.5% notes payable, unsecured,
principal and accrued interest
delinquent as of the date of the
review report 24,000
----------
$31,500
NOTE 6 - STOCKHOLDERS EQUITY
On February 8, 2002, the Company issued 1,945,680 shares
of Series A Preferred Stock to two executives. This
stock is cumulative, with an annual dividend of 6%, carrying
two (2) votes per preferred share. These shares become
convertible on July 1, 2002 into 1.6 common shares for
every 1 preferred share. They are convertible at the
option of the owner.
During 2001, the Company issued 6,210,520 shares of
common stock to various consultants
During July 2000, The Company sold 317,000 shares of its
common stock at a price of $0.20 per share. The Company
received cash in the amount of $63,400, net of expenses
of $1,900.
During 2000, the Company issued 818,267 shares of its
common stock in exchange for services valued at $163,653.
These shares were valued at their fair market value on the
date the Company agreed to issue the shares. As of December
31, 2000 the Company had recorded $44,134 as deferred
compensation for services to be received during 2001.
During 2001, the Company issued 6,210,520 shares of its
common stock in exchange for services valued at $569,456.
These shares were valued at their fair market value on the
date the Company agreed to issue the shares. As of December
31, 2001 the Company had recorded $200,156 as deferred
compensation for services to be received during 2002.
-12-
The Company has an informal arrangement with two of
its officers whereby their annual salary of $35,000 may
be paid in the Company's common stock. As of December 31,
2001 the Company has accrued officer's salary of $140,000,
which is include in due to related parties. The accrued
officer's salary would be convertible into approximately
1,085,000 shares of common stock.
NOTE 7 - STOCK WARRANTS AND OPTIONS
There are no options and warrants outstanding as of
September 30, 2002.
NOTE 8 - INCOME TAXES
American IR Technologies, Inc.s available net operating
loss carry forwards to offset future federal taxable income
of approximately $1,200,000. The carry forwards begin to
expire in 2019. The Company has deemed it less than
likely that this benefit will be utilized. Therefore,
the Company recognized no income tax benefit from the
losses generated during the years ended December 31, 2000
and 2001.
The Company has adopted the Statement of Financial
Accounting Standards No. 109 - Accounting for Income
Taxes. The tax effects of temporary differences and net
operating losses that give rise to significant portions
of deferred tax assets and liabilities consisted of the
following:
Deferred tax asset
Net operating loss carry forwards $ 408,000
Valuation allowance (408,000)
Net deferred tax asset - 0 -
NOTE 9 - CONTINGENCIES AND COMMITMENTS
Subscriptions Receivable
The Company has received common stock subscriptions in the
amount of $29,350. The Company is reporting this as part
of shareholder's equity. The Company issued stock for
services and is periodically expensing these services as
the work is performed. It is anticipated that the stock
subscriptions will be fully expensed before the end of 2002.
-13-
Litigation
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.
The Company is a defendant in several lawsuits related to
unpaid vendor invoices. The total amount of asserted claims
have been included in accounts payable as of December 31, 2001.
Leases
During November 2001, the Company entered into a two-year
non-cancelable operating lease for office space. The lease
calls for monthly payments of $1,360. The Company was evicted
from their previous office space, which called for monthly
payments of $3,264 through December 31, 2002, due to
non-payment of rent. Rent expense for the period ended
September 30, 2002 and December 31, 2001 was $13,274 and
$40,528, respectively.
Minimum annual future rent payments through the year ended
December 31, 2003 related to the operating lease are $24,480.
-14-
NOTE 10 - RELATED PARTY TRANSACTIONS
Mr. Ronald A. Ryan and Mr. Randy A. Moss owners of a
corporation called Versus SMS, Inc. that provides certain
duties and services to the Company. As of June 30, 2002,
there is $172,645 due to the corporation.
Canada provides the Company with operating advances and
inventory and pays expenses on behalf of the Company. At
June 30, 2002, the Company owed $379,555 to Canada.
An officer of the Company provides the Company with
operating advances and pays expenses on behalf of the
Company. At December 31, 2001, the Company owed $103,736 to
the officer, which is included in due to related parties.
Shareholders of the Company have provided professional
services to the Company. During 2001, the shareholders have
earned $38,416, all of which is included in due to related
parties.
During 2001, an officer of Canada entered into an agreement
to provide consulting services to the Company in exchange
for 300,000 shares of common stock. The Company recorded
expense of $16,000 related to this agreement in 2001.
These shares were valued at their fair market value on the
date the Company agreed to issue the shares.
NOTE 11 - GOING CONCERN
The Companys financial statements are prepared using the
generally accepted accounting principles applicable to
a going concern, which assumes the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company's expenses have significantly exceeded
its source of revenue. Without realization of additional
capital, it would be unlikely for the Company to continue
as a going concern. It is managements plan to seek
additional capital through the expansion of the business
operations to utilize the in-house expertise to develop
product/technologies and coordinate manufacturing processes
for outside companies as a service, which can contribute to
increased revenues while eliminating our need for capital
expenditure. Management has also taken measures to
significantly reduce expenses.
NOTE 12 - PRIOR PERIOD ADJUSTMENT
For the period ended September 30, 2002 the Company recorded
a prior period adjustment of $1,861 due to an error in
depreciating some property over 3-years rather than 5-years
and in depreciating some property over 5-years rather than
7-years.
-15-
NOTE 13 - RECENT PRONOUNCEMENTS
In April 2002, the Financial Accounting Standards Board released
SFAS 145 which is to be applied starting with fiscal years
beginning after SFAS 145 eliminate SFAS 4 Reporting Gains and
Losses from Extinguishments of Debt and thus allows for only
those gains or losses on the extinguishments of debt that meet
the criteria of extraordinary items to be treated as such in
the financial statements. SFAS No. 145 also amends SFAS 13,
"Accounting for Leases" to require sale-leaseback accounting
for certain lease modifications that have economic effects
that are similar to sale-leaseback transactions. The adoption
of SFAS No. 145 had no effect on the Companys reported financial
positions, results of operations or cash flows.
In June 2002, the Financial Accounting Standards Board released
SFAS 146 which is to be applied starting with fiscal years
beginning after December 31, 2002. SFAS 146 addresses significant
issues regarding the recognition, measurement and reporting of
costs that are associated with exit and disposal activities,
including restructuring activities that are currently accounted
for pursuant to the guidance set forth in EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity. The Company will adopt
this standard as required on January 1, 2003. Adoption of the
standard is not expected to have a material financial statement
impact on the Company.
In October 2002, the Financial Accounting Standards Board
released SFAS 147 which is to be applied starting with transactions
occurring on or after October 1, 2002. SFAS 147 addresses
Acquisitions of Certain Financial Institutions, along with
amending previous SFAS issuances. The provisions of this
Statement that relate to the application of the purchase method
of accounting applies to all acquisitions of financial
institutions, except transactions between two or more mutual
enterprises. The provisions of this Statement that relate to
the application of Statement 144 apply to certain long-term
customer-relationship intangible assets recognized in an
acquisition of a financial institution, including those acquired
in transactions between mutual enterprises. The Company has
adopted this standard as required. Adoption of this standard
is not expected to have a material financial statement impact
on the Company.
-16-
Item 2. Management's Discussion and Plan of Operation
Forward-Looking Statements
This Quarterly Report contains forward-looking statements about
American I R Technolgies, Inc.s business, financial condition
and prospects that reflect managements assumptions and beliefs
based on information currently available. We can give no
assurance that the expectations indicated by such forward-looking
statements will be realized. If any of our managements
assumptions should prove incorrect, or if any of the risks and
uncertainties underlying such expectations should materialize,
ATLIs actual results may differ materially from those indicated
by the forward-looking statements.
The key factors that are not within our control and that may
have a direct bearing on operating results include, but are not
limited to, acceptance of our services, our ability to expand
our customer base, managements ability to raise capital in the
future, the retention of key employees and changes in the
regulation of our industry.
There may be other risks and circumstances that management may be
unable to predict. When used in this Quarterly Report, words such
as, "believes," "expects," "intends," "plans," "anticipates,"
"estimates" and similar expressions are intended to identify
forward-looking statements, as defined in Section 21E of the
Securities Exchange Act of 1934, although there may be certain
forward-looking statements not accompanied by such expressions.
The safe harbors of forward-looking statements provided by Section
21E of the Exchange Act are unavailable to issuers of penny stock.
As we issued securities at a price below $5.00 per share, our
shares are considered penny stock and such safe harbors set forth
under the Reform Act are unavailable to us.
Overview
The following discussion and analysis covers material changes in
the financial condition of American IR Technologies, Inc. since
year end December 31, 2001 and a comparison of the results of
operations for the three and nine months ended September 30, 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 our Form 10-KSB for the year
ended December 31, 2001.
We are an operating Company. Our 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, we 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 September 30, 2002, we generated
revenues of $22,586. This represents an increase of $15,225,
or 207%, from the year ago period where we generated $7,361 in
sales. The increase in sales revenues was due to catalog sales
and initial sales of a new technology product...During the nine
months ended September 30, 2002, we generated $60,784 in revenues,
compared to $76,265 for the nine months ended September 30, 2001.
Cost of goods sold for the three months ended September 30, 2002
and 2001 were $12,175 and $30,260, respectively. The cost of
sales for the three months ended September 30, 2002 is
comparatively low because we sold inventory during the quarter
which was written down due to impairment as of December 31, 2001.
As of September 30, 2002, we experienced a gross profit of $10,411,
compared to a gross loss of $22,899 for the third quarter of 2001.
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We incurred $135,011 in total operating expenses for the three
months ended September 30, 2002 compared to $204,478 for the
same quarter in 2001. General and administrative expenses were
reduced to $75,670 for three months ended September 30, 2002
compared to $118,914 for the same quarter in 2001. The large
decrease in general and administrative expenses is due to our
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 September 30, 2002 were contract salaries of $59,400, rent
of $3,070, and telephone of $4,833. After deducting expenses, we
incurred an operating loss of $124,600 and $228,154 for the three
month periods ended September 30, 2002 and 2001, respectively.
During the three months ended September 30, 2002, we realized
other income in the aggregate of $5,008, consisting mainly of
forgiveness of debt in the amount of $6,441. Our net loss during
such same period was $119,592, or $0.05 per share. This compares
to a loss of $228,154 for the third quarter of 2001.
Liquidity and Capital Resources
Our capital and liquidity position at September 30, 2002
improved from the previous quarter ended June 30, 2002 and from
the year ended December 31, 2001. Our working capital deficit
at September 30, 2002 was $775,809 as compared to $724,081 at
December 31, 2001. This decrease 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.
As at September 30, 2002, we had cash on hand of $9,658 and no
current source of capital. We also continued to reported a
negative shareholders' equity, which means that our total assets
were less than our total liabilities and our shareholders would
receive nothing in the event of liquidation. Our current assets
of $37,716 are still not sufficient to meet our current
liabilities of $813,529 at this time.
Our current liabilities consist mainly of accounts payable to
our vendors, due to related parties, and notes payable and
notes payable to a 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 $7,996 of cash during the quarter ended
September 30, 2002. This cash was spent primarily on payment
of vendor invoices. We also repaid $8,800 in principal on
loans from 2001 during the quarter.
During the three months ended September 30, 2002, we relied
on cash advances to conserve our remaining cash and sustain
operations. For at least the next twelve months 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.
In addition, in order to become profitable, we may still need
to secure additional debt or equity funding. We hope to be
able to raise additional funds from an offering of our stock
in the future. However, this offering may not occur, or if
it occurs, may not raise the required funding. There are no
preliminary or definitive agreements or understandings with
any party for such financing.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
Item 4. Controls and Procedures
Within 90 days prior to the date of filing of this report,
we carried out an evaluation, under the supervision and with
the participation of our management, including the Chief
Executive Officer (who also effectively serves as the Chief
Financial Officer), of the design and operation of our
disclosure controls and procedures. Based on this evaluation,
our Chief Executive Officer concluded that our disclosure
controls and procedures are effective for gathering, analyzing
and disclosing the information we are required to disclose in
the reports we file under the Securities Exchange Act of 1934,
within the time periods specified in the SECs rules and forms.
There have been no significant changes in our internal controls
or in other factors that could significantly affect internal
controls subsequent to the date of this evaluation.
ITEM 5. Other Information
None
Item 6. Exhibits
Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes
- -Oxley Act of 2002
Incorporated by reference to the exhibits to the Companys
General Form for Registration of Securities of Small Business
Issuers on Form 10-SB, and amendments thereto, previously
filed with the Commission.
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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 hereunto duly authorized.
American I R Technologies, Inc.
(Registrant)
By: /s/ Ron Allen Ryan
Ron Allen Ryan
President
EX-99.1
Certification of Financial Statements
EXHIBIT 99.1
CERTIFICATIONS
I, Ronald A. Ryan, certify that:
1. I have reviewed this quarterly report on Form 10-QSB
of American I R Technologies, Inc.;
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; and
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 position,
results of operations, and cash flows of the issuer as of,
and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining
disclosure controls and procedures for the issuer and have:
(i) Designed such disclosure controls and procedures to ensure
that material information relating to the issuer is made known to
me, particularly during the period in which the periodic reports
are being prepared;
(ii) Evaluated the effectiveness of the issuers disclosure
controls and procedures as of September 30, 2002; and
(iii) Presented in the report our conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation
as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to
the issuers auditors and the audit committee of the board of
directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies in the design or operation of
internal controls which could adversely affect the issuers ability
to record, process, summarize and report financial data and have
identified for the issuers auditors any material weaknesses in
internal controls (none were so noted); and
(ii) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the issuers
internal controls (none were so noted); and
6. I have indicated in the 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.
Date: November 25, 2002
/s/ Ron Allen Ryan
President and CEO
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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report of American IR Technologies,
Inc. (the "Company") on Form 10-QSB for the period ending September
30, 2002, as filed with the Securities and Exchange Commission on
the date hereof (the "Report"), we, Ron Allen Ryan, acting in the
capacity as the Chief Executive Officer, and R. A. Moss, acting
in the capacity of Chief Financial Officer of the Company, certify
to the best of our knowledge, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of
operations of the Company.
/s/ Ron Allen Ryan
Ron Allen Ryan
Chief Executive Officer
November 25, 2002
/s/ R. A. Moss
R. A. Moss
Chief Financial Officer
November 25, 2002
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