UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2002
--------------
Commission file Number: 0-24989
-------
AMERICAS POWER PARTNERS, INC.
-----------------------------
(Exact Name of Registrant as Specified in its Charter)
Colorado 05-0499526
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
710 North York Road, Hinsdale, IL 60521
(Address of Principal Executive Offices) (Zip code)
(630) 325-9101
(Registrant's Telephone Number, Including Area Code)
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 [_] NO [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date: Common Stock, no par value -
7,138,100 shares as of March 31, 2002.
Transitional Small Business Disclosure Format: YES [_] NO [X]
PART I - FINANCIAL INFORMATION
Disclosure Regarding Forward-Looking Statements
This Quarterly Report on Form 10-QSB includes historical information as well as
statements regarding the Company's future expectations which may constitute
"forwarding-looking statements" within the meaning of the Securities Act of 1933
and the Securities Act of 1934, as amended. Important factors that could cause
actual results to differ materially from those discussed in forward-looking
statements include: supply/demand for products, competitive pricing pressures,
availability of capital on acceptable terms, continuing relationships with
strategic partners, dependence on key personnel, changes in industry laws and
regulations, competitive technology, and failure to achieve cost reduction
targets or complete construction projects on schedule. The Company believes in
good faith that the forward-looking statements in this Quarterly Report have a
reasonable basis, including without limitation, management's examination of
historical operating trends, data contained in records and other data available
from third parties, but such forward-looking statements are not guarantees of
future performance and actual results may differ materially from any results
expressed or implied by such forward-looking statements.
ITEM 1 - FINANCIAL STATEMENTS
AMERICAS POWER PARTNERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 476,777
Trade accounts receivable 716,889
Current portion of net investment in leases 164,228
Inventory - fuel oil 95,273
Prepaid expenses and deferred contract costs 135,976
----------
TOTAL CURRENT ASSETS 1,589,143
EQUIPMENT AND FIXTURES
Computer equipment 120,092
Office equipment 33,498
Equipment leased to clients 2,152,332
Client construction projects in process 1,532,794
----------
3,838,716
Less accumulated depreciation (215,420)
----------
TOTAL EQUIPMENT AND FIXTURES 3,623,296
OTHER ASSETS
Net investment in leases, less current portion 1,826,202
Deposits and fees 64,167
Deferred rent 144,386
Deferred contract costs, net of accumulated
amortization of $256,865 105,404
----------
TOTAL OTHER ASSETS 2,140,160
----------
TOTAL ASSETS $7,352,599
==========
See accompanying Notes to Condensed Consolidated Financial Statements.
AMERICAS POWER PARTNERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 2002
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 859,715
Due to related party in connection with client contracts 1,927,440
Accrued expenses:
To related party 71,302
Other 197,401
Notes payable - Note B:
To bank in connection with client construction 3,387,940
To related party 810,500
Current maturities of long-term debt 140,704
-----------
TOTAL CURRENT LIABILITIES 7,395,002
LONG-TERM DEBT - net of current maturities
10.5 % note payable to bank, due May 2005 - Note B 314,237
Capital leases 8,428
-----------
TOTAL LIABILITIES 7,717,666
MINORITY INTEREST 287,239
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock, no par value,
10,000,000 shares authorized;
Series A: authorized - 2,725,000 shares;
Issued and outstanding - 2,709,519 shares 3,952,250
Series B: authorized - 3,000,000 shares;
Issued and outstanding - 3,000,000 shares 704,763
Common Stock, no par value,
Authorized - 40,000,000 shares;
Shares issued and outstanding - 7,138,100 shares 1,983,249
Retained earnings deficit (7,292,569)
-----------
TOTAL STOCKHOLDERS' DEFICIT (652,307)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 7,352,599
===========
See accompanying Notes to Condensed Consolidated Financial Statements.
AMERICAS POWER PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended March 31 Three Months Ended March 31
----------------------------- -----------------------------
2002 2001-Note E 2002 2001-Note E
---------- ------------ ---------- -----------
Contract revenues $ 669,932 $ 606,808 $ 236,488 $ 271,853
Cost of client services 167,831 445,825 45,553 252,494
---------- ----------- ---------- ----------
Gross profit 502,101 160,983 190,935 19,359
Costs and expenses:
Payroll and employee benefits 497,712 1,157,941 172,807 303,290
Management and consulting fees - 209,426 - 75,000
Write-off project contract costs - 89,880 - 4,015
Financing expense 45,000 - - -
Other professional fees 11,919 146,262 2,041 1,888
General and administrative 415,199 630,144 115,423 166,721
---------- ----------- ---------- ----------
Total expenses 969,830 2,233,653 290,271 550,914
---------- ----------- ---------- ----------
LOSS FROM OPERATIONS (467,729) (2,072,670) (99,336) (531,555)
Interest income (33,898) (59,344) (8,459) (10,297)
Interest expense 144,132 45,909 52,352 17,659
---------- ----------- ---------- ----------
Total other expense (income), net 110,234 (13,435) 43,893 7,362
---------- ----------- ---------- ----------
LOSS BEFORE MINORITY INTEREST (577,963) (2,059,235) (143,229) (538,917)
Minority interest in earnings of
limited liability corporation (104,670) (29,364) (42,401) 17,195
---------- ----------- ---------- ----------
NET LOSS $ (682,633) $(2,088,599) $ (185,630) $ (521,722)
========== =========== ========== ==========
Net loss per share - basic and diluted - Note E $ (0.10) $ (0.24) $ (0.03) $ (0.07)
Weighted average number of common
shares outstanding - basic and diluted 7,138,100 8,653,545 7,138,100 7,861,833
See accompanying Notes to Condensed Consolidated Financial Statements.
AMERICAS POWER PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31
--------------------------
2002 2001 - Note E
---- -------------
Cash Flows from Operating Activities:
Net loss $ (682,633) $ (2,088,599)
Adjustments to reconcile net loss to
net cash used in operating activities:
Provision for depreciation and amortization 156,664 276,291
Minority interest 104,670 29,364
Loss on sale of equipment and fixtures - 47,662
Redemption of Common Stock in exchange for assets - 103,286
Common Stock issued for services - 37,500
Change in accounts receivable (159,400) (128,114)
Change in inventory - (187,390)
Change in prepaid expenses and deferred contract costs 17,665 (2,043)
Change in accounts payable 34,489 (43,899)
Change in accrued expenses (95,903) (3,432)
----------- ------------
Total adjustments 58,185 129,225
----------- ------------
Net cash used in operating activities (624,448) (1,959,374)
Cash Flow from Investing Activities:
Purchase of client construction projects in progress (1,229,225) (844,784)
Purchase of equipment underlying lease agreements (735,225) (488,600)
Payments from lessees regarding finance lease receivables 58,387 116,075
Increase in deposits - (16,938)
Payment of deferred contract costs and fees (62,687) (179,053)
Repayments from related parties - 308,000
----------- ------------
Net cash used in investing activities (1,968,750) (1,105,300)
Cash Flow from Financing Activities:
Proceeds from notes payable to banks, net of fees 2,408,190 600,000
Proceeds from notes payable to related party 699,129 17,500
Payments on note payable to bank (83,784) (59,202)
Payment on note payable to related party (126,129) -
Payments on capital leases (15,237) (11,138)
Payments on insurance financing (13,881) -
Minority interest investment in limited liability company - 387,745
Distribution from limited liability company (75,000) -
Payments for redemption of Common Stock - (342,000)
Payment on note relating to assets exchanged - (250,000)
Proceeds from issuance of Common Stock - 2,000,000
----------- ------------
Net cash provided by financing activities 2,793,288 2,342,905
----------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents 200,090 (721,769)
Cash and Cash Equivalents at Beginning of Period 276,687 951,509
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 476,777 $ 229,740
=========== ============
SUPPLEMENTAL DISCLOSURES
Interest paid (net of amount capitalized) $ 106,182 $ 21,127
Accrual for client construction projects in process 136,531 -
Net investment in capitalized finance leases 1,328,547 488,600
See accompanying Notes to Condensed Consolidated Financial Statements.
AMERICAS POWER PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business and Development Stage Activities
The Company was in the development stage since its inception on January 27,
1998. During the third quarter of the fiscal year ended June 30, 2000, the
Company emerged from its development stage with the signing of two client
contracts, billings under these contracts and the raising of additional capital
through a private placement Preferred Stock offering.
The Company was formed to develop, optimize, own and operate power plant systems
(steam, electric, compressed air, water, waste water and condensate return) for
industrial, commercial and institutional clients. The Company has formed
strategic alliances with several recognized energy companies in the areas of
power plant optimization, operations and maintenance, fuel supply and electric
power marketing. The Company's strategic partners bring key skill sets to the
development process and have provided the Company with project opportunities
from their established customer bases. The Company generates revenue primarily
from fees produced from structuring and financing these energy projects. All of
the Company's customers are in the United States.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, APP
Optimization I, LLC (a single member limited liability corporation), and its
50%-owned limited liability corporation, Armstrong-Americas I, LLC ("AA I,
LLC"), which were both incorporated early in fiscal 2001. AA I, LLC was formed
for the purpose of holding the Company's interests in certain of the projects
relating to its largest client. The other 50% member of this LLC is the investor
in the Company's Preferred Stock. The AA I, LLC limited liability corporation
agreement provides that the Company has management control over the operations
of the LLC. All material intercompany accounts and transactions are eliminated.
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to SEC rules and regulations;
nevertheless, the Company believes that the disclosures are adequate to make the
information presented not misleading.
AMERICAS POWER PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The interim financial information presented in the accompanying consolidated
financial statements reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary to
present the consolidated financial position of the Company as of March 31, 2002
and the results of its operations for the periods of nine and three months then
ended and its cash flows for the period of nine months then ended. Results shown
for interim periods are not necessarily indicative of the results for a full
fiscal year. The interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2001.
Revenue Recognition
The Company evaluates the terms of the energy services agreements (ESA) and
operation and maintenance agreements which it executes with clients to determine
the applicable accounting treatment on an individual basis. To the extent that
ESA's provide for fixed minimum payments and terms that qualify as a capital
lease as defined in Statement of Financial Accounting Standards No. 13,
"Accounting for Leases", the net investment in the contract is recorded on the
balance sheet and unearned income is amortized over the term of the agreement
using the interest method. Revenue from ESA's that qualify as operating leases
under SFAS No. 13 is recorded on a straight-line basis over the term of the
contract. Revenue from sale of commodities that the Company maintains as
inventories is recognized as the products are delivered. Administrative fees
earned in connection with securing project financing are recognized as the
funding is received. The Company grants credit to all of its customers.
Per Share of Common Stock
Income (loss) per common share is computed by dividing net income (loss) by the
weighted-average number of common shares outstanding during the period. When
dilutive, stock options, warrants and convertible Preferred Stock are included
as share equivalents using the treasury stock method in the calculation of
diluted earnings per share. For the periods ended March 31, 2002 and 2001, the
diluted loss per share computation was antidilutive; therefore, the amount
reported for basic and diluted loss per share is the same.
AMERICAS POWER PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2002
NOTE B - NOTES PAYABLE
On August 9, 2000, the Company obtained a loan in the amount of $606,000 from a
bank to finance an optimization project. The note is payable in 57 monthly
installments of $13,593, including interest at a rate of 10.5% per annum.
AA I, LLC, the Company's 50%-owned limited liability corporation, has signed
twelve interim promissory notes with a bank, totaling $3,387,940, which provide
for the eventual sale to the bank of the equipment previously purchased from a
client, along with certain improvements being made to the facilities. The notes
provide for monthly interest payments computed at the bank's prime rate and
mature on September 30, 2002. AA I, LLC will continue to finance with similar
obligations a total of approximately $3.8 million in planned improvements as
they are installed at the client facility. Upon completion of the project, AA I,
LLC will lease the energy generation facility from the bank under a master lease
arrangement. The investor in the Company's Preferred Stock has guaranteed the
interim financing, AAI, LLC's subsequent lease payments after the sale-leaseback
transaction is closed, and other performance criteria.
The Company has borrowed $810,500 for working capital purposes from a company
that is the investor in the Company's Preferred Stock. The loan is evidenced by
a note that matures on April 15, 2002 (subsequently extended to June 15, 2002)
and bears interest at prime plus 2%. The same company also loaned $126,129 to AA
I, LLC in connection with the latter's purchase of a client's steam generation
and air compression assets, and the related note was repaid during the quarter
ended March 31, 2002 with interest at prime plus 2%.
NOTE C - CUSTOMER CONCENTRATION
On September 4, 2001, the Company signed a second contract with a food
processing corporation to purchase the energy generation assets of another of
the client's divisions and, in turn, provide the division's full requirement
energy services for the next twenty-five years. AA I, LLC began recognizing
revenue from this contract in the second quarter of fiscal 2002. Another
contract relating to a third division of the same client was signed April 9,
2002, and revenue from this contract will be recognized starting in the fourth
quarter of fiscal 2002.
AMERICAS POWER PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2002
NOTE D - LIQUIDITY
Since its inception, the Company has incurred a net loss of $7,292,569 and, at
March 31, 2002, it had a working capital deficiency of $5,805,859. In light of
current results of operations and cash flow, the Company recently has relied on
advances from and Preferred Stock issued to a related party firm to finance its
operations and sales development activities. In addition, client projects are
anticipated to require substantial capital investment and additional third-party
financing. Based upon current market conditions, the Company has reduced from
$12 million to $3 million the amount it seeks to raise in private equity from
one or more institutional investors. Management believes proceeds from the
equity offering would provide the Company's capital requirements to develop
specific client projects and meet working capital requirements, which have been
reduced over the last nine months.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. While the Company is
expending its best efforts to consummate the above equity offering, there can be
no assurance that it will be successful in this regard. The aforementioned
losses and deficit raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
NOTE E - RESTATEMENT OF PRIOR PERIOD INTERIM FINANCIAL STATEMENTS
The net loss for the periods of nine and three months ended March 31, 2001 has
been adjusted to retroactively correct an accounting error, which inadvertently
occurred in the preparation of the prior year interim financial statements for
the aforementioned periods, with respect to a transaction on January 24, 2001 in
which the Company redeemed 1,699,000 shares of Common Stock in exchange for the
transfer of certain of the Company's assets, plus cash and a note totaling
$592,000. In addition, the Company's chief executive officer's employment and
deferred compensation agreements were terminated, and the Company accepted and
returned to the treasury 1,200,000 shares of Common Stock in full satisfaction
of the chief executive officer's $1,000,000 promissory note payable to the
Company. The Company had recorded a gain of $394,766 on this transaction.
AMERICAS POWER PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2002
NOTE E - RESTATEMENT OF PRIOR PERIOD INTERIM FINANCIAL STATEMENTS (CONTINUED)
In addition, the basic and diluted net loss per share for the periods of nine
and three months ended March 31, 2001 has been restated to exclude the
antidilutive common stock equivalents previously included in the calculation.
Following is a summary of the effects of the above-described items on the prior
period interim financials statements:
Nine Months Three Months
Ended Ended
March 31, 2001 March 31, 2001
-------------- --------------
Net loss, as previously reported $(1,693,833) $(126,956)
Adjustment for net proceeds in excess
of carrying value of assets sold and
value of shares acquired (394,766) (394,766)
----------- ---------
NET LOSS, as adjusted $(2,088,599) $(521,722)
=========== =========
Net loss per share, as previously reported $ (.14) $ (.01)
Adjustment for:
Net proceeds in excess of carrying value
of assets sold and value of shares
acquired (.04) (.05)
Antidilutive common stock equivalents (.06) (.01)
----------- ---------
NET LOSS PER SHARE, as adjusted $ (.24) $ (.07)
=========== =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the historical
financial information and the notes thereto included in Item 1 of this Quarterly
Report.
The Company signed its first two contracts for the monetization and optimization
of steam generation facilities during the third quarter of fiscal 2000. Three
additional contracts were signed in the quarter ended September 30, 2000, with
two of these resulting in revenues and costs recorded in that quarter. The third
contract, signed between the Company's 50%-owned limited liability corporation
and a food processing company, was effective starting in the second quarter of
fiscal 2001, and accounted for approximately 54% and 58% of revenues for the
periods of nine and three months ended March 31, 2002, respectively. Another
contract with this food processing client, signed in September 2001, accounted
for approximately 14% and 21% of revenues for the periods of nine and three
months ended March 31, 2002, respectively.
The Company's gross margin in the current fiscal nine-month period increased to
74.9% from 26.5% in the corresponding prior year period as a result of an
amendment to a client contract, which eliminated the requirement that the
Company provide utility commodities as part of its service in the current fiscal
year, and the sale of low margin fuel oil to another client in fiscal 2001.
During the period of nine months ended March 31, 2002, the Company incurred a
net loss of $682,633, compared to a net loss of $2,088,599 for the corresponding
prior year period (see Note E of Notes to Condensed Consolidated Financial
Statements). For the current three-month period, the Company recorded a net loss
of $185,630, compared to a net loss of $521,722 for the third quarter of fiscal
2001. In the nine and three-month fiscal 2002 periods, the Company was able to
achieve the following reduction of expenses compared to amounts recorded during
the corresponding periods of fiscal 2001.
Payroll and employee benefits: Payroll and benefits expense for the periods of
nine and three months ended March 31, 2002 decreased approximately $660,200 and
$130,500, respectively, compared to the corresponding periods of the prior
fiscal year, principally as a result of the decrease in the number of employees
(three versus ten, respectively, for most of the nine month periods) and the
elimination in January 2001 of a provision for a former officer's deferred
compensation.
Management and consulting fees: Management and consulting fees decreased
approximately $209,400 and $75,000, respectively, for the nine and three month
periods ended March 31, 2002, compared to the prior year, as a result of the
cancellation, effective June 30, 2001, of a contract with a venture
capital/management consulting firm and the voluntary termination, effective
November 2000, of related party independent contractor agreements.
Write-off project contract costs: During the period of three months ended
September 30, 2000, management concluded that several client projects were no
longer economically feasible or did not justify further investment of resources.
Accordingly, approximately $104,200 of previously deferred development costs
relating to these projects was written-off. A similar review of the deferred
development costs recorded as of March 31, 2002 determined that the stated
amounts had continuing value to the Company.
Financing expense: In April 2001, the Company entered into an agreement with an
investment banking firm to raise $12 million of additional equity through the
sale of stock or other securities, the proceeds of which were to be used as
working capital for ongoing operations and to fund future client projects. The
firm was paid a retainer of $15,000 per month through September 2001.
Other professional fees: Professional fees decreased approximately $134,300
during the current nine-month period compared to the corresponding prior year
period as a result of a significant decrease in legal expense relating to client
contract development and the elimination of public relation activities in the
first half of fiscal 2002.
General and administrative: General and administrative expenses for the nine and
three month periods ended March 31, 2002 decreased approximately $215,000 and
$51,300, respectively, from the corresponding prior year periods with the
reduction and/or elimination of expenditures relating to personnel travel and
office expense for fewer employees, rental of office facilities, and
depreciation of Company-owned equipment sold at the end of the prior fiscal
year.
Interest Income: Interest income decreased approximately $25,400 and $1,800,
respectively, in the nine and three-month periods ended March 31, 2002 compared
to the corresponding prior year periods as a result of the lower cash balances
available during the first half of fiscal 2002 and the decline in money market
interest rates. In September 2000, the Company received the proceeds from both
the sale of $2 million in Common Stock and the outside investment made in the
Company's 50%-owned limited liability company.
Interest Expense: Interest expense for the nine month fiscal 2002 period
increased approximately $98,200 as a result of the interim bank loans, totaling
$3,387,940 at March 31, 2002 (which debt did not exist in the prior fiscal year
period), used to finance construction of improvements to client facilities, the
increase in working capital loans received from a related party, plus nine
months of current year interest on a bank note signed in September 2000 (see
Note B of Notes to Condensed Consolidated Financial Statements). Except for the
latter, the same factors impacted the $34,700 increase in interest expense for
the three-month period ended March 31, 2002, compared to the corresponding
period ended March 31, 2001.
Liquidity and Capital Resources
Cash balances at March 31, 2002 increased $200,090 from the prior fiscal
year-end as a result of the timing of receipts in connection with the utility
invoice processing service performed for clients, including a new division of a
client that was added in October, 2001. The Company's working capital deficiency
increased to $5,805,859 at March 31, 2002, compared to a deficiency of
$1,944,751 at June 30, 2001, principally as a result of $3,400,000 of additional
payables and short-term bank notes associated with the construction of client
projects and $573,000 of additional advances on notes from a related party to
finance current operations. No additional related party notes were executed
during the quarter ended March 31, 2002.
The Company has signed a bank note, in the amount of $606,000, relating to the
financing of a client project. In addition, the Company's 50%-owned limited
liability company has a commitment from a bank to sell and leaseback steam
generation and air compression facilities previously purchased from a customer
and improvements being installed thereto, with a total project cost of $3.8
million. During the period of construction, the improvements are being financed
under an interim financing agreement with the bank, which provides for
interest-bearing notes to be executed in support of each construction
installment disbursement. The notes mature on September 30, 2002. Upon
completion of the project (anticipated to be in mid-May , 2002), the LLC will
lease the energy generation facility from the bank under a master lease
arrangement. Armstrong International, Inc. ("Armstrong"), the investor in the
Company's Preferred Stock and strategic business partner, has guaranteed the
interim financing, the LLC's subsequent lease payments after the sale-leaseback
transaction is closed, and other performance criteria.
During the period of three months ended March 31, 2002, the LLC repaid to
Armstrong a note in the amount of $126,129 (plus interest at prime plus 2%).
signed in connection with the LLC's purchase of a client's steam generation and
air compression assets. The LLC has a commitment from a bank that it will
finance $1.5 million of improvements for this client project under an
arrangement similar to that described above. Subsequent to March 31, 2002, the
LLC self-financed approximately 85% of the purchase of the steam generation and
air compression assets of a third division of this client; Armstrong loaned the
LLC the balance of the funds. The same bank referred to above has committed to
finance approximately $2.9 million of improvements for this third project.
The 50%-owned limited liability company's $500,000 line of credit with a bank
expired during the period of three months ended March 31, 2002. Management
believes the LLC can at the present time self-finance its day-to-day operations.
The Company experienced severe liquidity difficulties during the latter part of
the year ended June 30, 2001, through the period of nine months ended March 31,
2002, and subsequently. As described above, expenses have been reduced where
possible. Based upon current market conditions, the Company has reduced from $12
million to $3 million the amount it seeks to raise in private equity through the
sale of stock or other securities
to one or more institutional investors, the proceeds of which are to be used as
working capital for ongoing operations and to fund future client projects. In
the interim, Armstrong has agreed to support the Company's efforts to obtain
short-term working capital to meet its essential business requirements on a
short-term basis, and has advanced the Company $810,500 as of March 31, 2002
under an interest-bearing note arrangement. These notes mature on April 15,
2002, and the maturity date subsequently has been extended to June 15, 2002.
Although management believes that Armstrong will continue to provide financing
to permit the Company to satisfy its current financial obligations, Armstrong
has no contractual or other legal obligation to provide financing to the
Company. If Armstrong were to discontinue providing financing to the Company, it
would have a material adverse effect on the Company's financial condition and
could result in the inability of the Company to continue its business.
Management believes that, in order to attract and finance additional projects,
which may include the acquisition of client energy facilities, significant
amounts of new debt facilities and/or capital will be needed. In addition,
working capital financing will be needed to facilitate the Company's utility
invoice processing service for future clients. The Company cannot be certain
that it will be successful in efforts to raise such new funds.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to recognize all
derivatives as assets and liabilities measured at their fair value. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and whether it qualifies for hedge accounting. The
Company's adoption of this statement, as amended by SFAS No. 138, did not have
an effect on the financial statements.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which is effective for years beginning after December 15, 2001. Under
the new pronouncement, other intangibles will continue to be amortized over
their respective useful lives. The Company has adopted early SFAS No. 142, which
did not have an effect on the financial statements.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," effective for years beginning after June 15, 2002. Under this
standard asset retirement obligations will be recognized at a discounted fair
value basis and capitalized and allocated to expense over the asset's useful
life. The Company is not required to adopt this new standard until its fiscal
year ended June 30, 2003, and is currently evaluating the standard's impact.
In August 2001, the FASB issued SFAS No. 144, " Accounting for the Impairment or
Disposal of Long-Lived Assets", effective for years beginning after December 15,
2001. The new rules for long-lived assets to be disposed by sale excludes the
allocation of
goodwill to be tested for impairment of such assets, establishes a primary asset
approach to be used for the estimation of future cash flows and allows for
probability-weighted future cash flow estimation for impairment testing. The
Company is not required to adopt this new standard until its fiscal year ended
June 30, 2003, and currently is evaluating the standard's impact.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
Neither the Registrant nor any of its affiliates are a party, nor is any of
their property subject, to material pending legal proceedings or material
proceedings known to be contemplated by governmental authorities.
ITEM 2. Changes in Securities
During the period of three months ended March 31, 2002, there were no changes in
the Company's outstanding securities.
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits:
None
b. Reports on Form 8-K:
There were no Form 8-K filings during the period of three months ended
March 31, 2002.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAS POWER PARTNERS, INC.
/s/ Mark A. Margason
-----------------------------------------
May 15, 2002 Mark A. Margason
Chief Executive Officer
/s/ Tom F. Perles
-----------------------------------------
May 15, 2002 Tom F. Perles
Chief Financial Officer