UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 001-09370
PWRCOR, INC.
(Exact Name of Registrant as Specified in the Charter)
Delaware | | 13-3186327 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| | |
60 E. 42nd Street, Suite 4600 | | |
New York, NY | | 10165 |
(Address of Principal Executive Offices) | | (Zip Code) |
(212) 796-4097
(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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer | [ ] | Smaller reporting company | [X] |
| | Emerging growth company | [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes [ ] No [X]
As of May 13, 2020 there were 210,342,722 shares of the registrant’s common stock outstanding.
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PwrCor, Inc.
Financial Statements
For the Three Months Ended
March 31, 2020
3
PwrCor, Inc.
Balance Sheets
| March 31, 2020 | | December 31, 2019 |
| (unaudited) | | |
ASSETS | | | | | |
Cash | $ | 70,264 | | $ | 126,632 |
Accounts receivable, net of allowance for doubtful accounts | | 91,869 | | | 151,882 |
Prepaid expenses and deposits | | 30,873 | | | 32,039 |
Total Current Assets | | 193,006 | | | 310,553 |
| | | | | |
Intangible asset - license agreement | | 104,625 | | | 108,000 |
| | | | | |
Fixed assets, net of accumulated depreciation | | 9,114 | | | 11,061 |
| | | | | |
Total Assets | $ | 306,745 | | $ | 429,614 |
| | | | | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | |
Accounts payable and accrued expenses | | 697,405 | | | 794,368 |
Total Current Liabilities | $ | 697,405 | | $ | 794,368 |
| | | | | |
Common stock, $0.001 par value: 325,000,000 shares authorized; 210,342,722 shares issued and outstanding at both March 31, 2020 and December 31, 2019 | | 210,342 | | | 210,342 |
Additional paid-in capital | | 1,310,910 | | | 1,310,910 |
Retained earnings (deficit) | | (1,911,912) | | | (1,886,006) |
Total Stockholders’ Equity (Deficit) | | (390,660) | | | (364,754) |
| | | | | |
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 306,745 | | $ | 429,614 |
See notes to financial statements
4
PwrCor, Inc.
Statement of Operations
(Unaudited)
| Three Months Ended September 30 |
| 2020 | | 2019 |
| | | | | |
REVENUE | | | | | |
Project Management | $ | 113,770 | | $ | 177,445 |
Engine Business | | - | | | 8,800 |
| | | | | |
Total Revenue | | 113,770 | | | 186,245 |
| | | | | |
| | | | | |
EXPENSES | | | | | |
Consulting fees | | 80,288 | | | 156,315 |
Engine Production | | - | | | 26,217 |
General and Administrative | | 18,444 | | | 32,232 |
Legal and other professional fees | | 40,944 | | | 43,015 |
| | | | | |
Total Expenses | | 139,676 | | | 257,779 |
| | | | | |
Net (Loss) | $ | (25,906) | | $ | (71,534) |
| | | | | |
Net Income (Loss) per Common Share - Basic and Diluted | $ | (0.00) | | $ | (0.00) |
| | | | | |
Weighted Average Common Shares Outstanding - Basic and Diluted | | 210,342,722 | | | 210,342,722 |
See notes to financial statements
5
PwrCor, Inc.
Statement of Stockholders’ Equity (Deficit)
For the Three Months Ended
March 31, 2020 and 2019
(Unaudited)
Three Months Ended March 31, 2020
| Common Stock | | | | | | |
| Number of Shares | Amount | | Additional Paid-in Capital | | Retained Earnings (Deficit) | | Total Stockholders’ Equity (Deficit) |
| | | | | | | | |
Balance, December 31, 2019 | 210,342,722 | $ | 210,342 | | $ | 1,310,910 | | $ | (1,886,006) | | $ | (364,754) |
| | | | | | | | | | | | |
Net (Loss) | - | | - | | | - | | | (25,906) | | | (25,906) |
Balance, March 31, 2020 | 210,342,722 | $ | 210,342 | | $ | 1,310,910 | | $ | (1,911,912) | | $ | (390,660) |
Three Months Ended March 31, 2019
| Common Stock | | | | | | |
| Number of Shares | Amount | | Additional Paid-in Capital | | Retained Earnings (Deficit) | | Total Stockholders’ Equity (Deficit) |
| | | | | | | | |
Balance, December 31, 2018 | 210,342,722 | $ | 210,342 | | $ | 1,310,910 | | $ | (1,436,585) | | $ | 84,667 |
| | | | | | | | | | | | |
Net (Loss) | - | | - | | | - | | | (71,534) | | | (71,534) |
Balance, March 31, 2019 | 210,342,722 | $ | 210,342 | | $ | 1,310,910 | | $ | (1,508,119) | | $ | 13,133 |
See notes to financial statements
6
PwrCor, Inc.
Statement of Cash Flows
(Unaudited)
| Three Months Ended September 30, |
| 2020 | | 2019 |
| | | | | |
NET (LOSS) | $ | (25,906) | | $ | (71,534) |
Adjustments to reconcile net (loss) to net cash (used) by operating activities | | | | | |
Depreciation and amortization | | 5,322 | | | 5,322 |
Changes in Assets and Liabilities | | | | | |
Decrease in accounts receivable | | 60,013 | | | 21,030 |
Decrease (increase) in prepaid expenses and deposits | | 1,167 | | | (3,105) |
(Decrease) in accounts payable and accrued expenses | | (96,964) | | | (94,675) |
Total Adjustments | | (30,462) | | | (71,428) |
| | | | | |
Net Cash (Used) by Operating Activities | | (56,368) | | | (142,962) |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Payment to Licensor | | - | | | (40,500) |
Net Cash (Used) in Investing Activities | | - | | | (40,500) |
| | | | | |
Net (decrease) increase in cash | | (56,368) | | | (183,462) |
| | | | | |
Cash, beginning of period | | 126,632 | | | 345,405 |
| | | | | |
Cash, end of period | $ | 70,264 | | $ | 161,943 |
See notes to financial statements
7
PwrCor, Inc.
Notes to Financial Statements
March 31, 2020
(Unaudited)
1. Organization and Nature of Business
PwrCor, Inc. (the “Company” or “PwrCor”) was until the first quarter of 2017 named Receivable Acquisition & Management Corporation (“RAMCO”) and doing business as Cornerstone Sustainable Energy. RAMCO, a public reporting entity, was in the business to purchase, manage and collect defaulted consumer receivables.
Cornerstone Program Advisors LLC (“Cornerstone”), a Delaware limited liability company, is an energy infrastructure project management company focused on healthcare and higher learning institutions. Sustainable Energy Industries, Inc. (“Sustainable”) is a New York corporation involved in developing and improving the efficiency of energy infrastructure using advanced proprietary technologies. As a result of a reverse merger acquisition (the “Merger”) between RAMCO, Cornerstone, and Sustainable during 2013, the Company adopted a business plan to build on the business of Cornerstone and Sustainable in energy infrastructure and alternative energy.
In January 2017, the Company’s shareholders approved a name change to PwrCor, Inc., which became effective on March 3, 2017.
Note 2. Significant Accounting Policies
Basis of Presentation and Use of Estimates
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates required to be made by management include, recognition of revenue for work completed and unbilled to customers, the allowance for doubtful accounts, and the valuation of License Agreements. Actual results could differ from those estimates.
In view of the disruptions to the economy resulting from the recently emerged worldwide coronavirus pandemic, the Company’s ongoing business activities may be curtailed for a period. In consequence, there can be no assurance that funds generated from operations, together with existing cash and cash infusions by stockholders, will be sufficient to finance the Company’s operations for the next twelve months. The Company is actively seeking additional capital to cover its working capital needs and to fund growth initiatives in its identified markets, and has engaged the services of an investment bank to assist in this and in actively introducing the Company’s engine technology to businesses in a set of identified key markets to accelerate the commercialization of the Company’s latest generation product. However, there can be no assurance these efforts will succeed, or that any new debt or equity financing arrangement will be available to the Company when needed on acceptable terms, if at all. The continued operations of the Company are dependent on its ability to raise funds, collect accounts receivable, and generate revenue.
Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. The unaudited financial statements should be read in conjunction with those financial statements included in the Company’s Form 10-K for the year ended December 31, 2019. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
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PwrCor, Inc.
Notes to Financial Statements
March 31, 2020
(Unaudited)
2. Significant Accounting Policies (continued)
Cash
The Company continually monitors its positions with, and the credit quality of, the financial institutions it invests with. From time to time, however briefly, the Company maintains balances in operating accounts in excess of federally insured limits.
Accounts Receivable
Receivables are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. At both March 31, 2020, and December 31, 2019, an allowance for doubtful accounts was made totaling $52,105, to provide for the possibility of a revenue shortfall from the project in Modoc County, and is reflected in the accounts receivable balance on the balance sheet in the accompanying financial statements.
Revenue Recognition
Revenues are recognized when the Company satisfies a performance obligation by transferring goods or services promised in a contract to a customer, in an amount that reflects the consideration to be received in exchange for those goods or services.
Revenue from contract customers is recognized by: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to separate performance obligations; and (5) recognizing revenues when (or as) each performance obligation is satisfied.
The majority of the Company’s revenue is currently from products and services transferred to customers at a point in time. It was 100.0% of revenue for the quarters ended March 31, 2020 and March 31, 2019. These revenues are generated by providing consulting services to customers under a contractual arrangement. They are (a) time and expense arrangements, under which the customer pays the Company, typically as billed in a monthly invoice, based on hours incurred and contracted rates; (b) performed activities arrangements, under which the customer pays the Company for particular tasks performed (typically tasks which can be valued, but for which time spent is highly variable or unpredictable), based on contracted rates; or (c) reimbursements by the customer for certain identified expenses, such as travel, out-of-pocket, or advances on behalf of the customer.
The Company recognizes revenue for (a) and (b) at the point in time in which the customer is provided the service and is invoiced for that period. Amounts under (c) are generally included in revenues in the period invoiced, and an equivalent amount of reimbursable expenses is included in costs of services in the period in which the expense is incurred.
The Company’s performance obligations under its engine business are generally satisfied as “over time”. There was no revenue from products or services transferred to a customer over time for the three months ended March 31, 2020 and 2019, respectively. Revenue under this type of contract is generally recognized over time using an input measure based upon the proportion of actual costs incurred to estimated total project costs, which is a method used to best depict the Company’s performance to date under the terms of the contract.
9
PwrCor, Inc.
Notes to Financial Statements
March 31, 2020
(Unaudited)
2. Significant Accounting Policies (continued)
Revenue Recognition, continued
Progress payments, which when involved are invoiced, are typically characteristic of such contracts, but do not affect revenue recognition. In this regard and in other instances, the timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in contract assets or contract liabilities (deferred revenue) on the Company’s balance sheet. The Company records a contract asset when revenue is recognized prior to invoicing, or contract liabilities when revenue is recognized subsequent to invoicing.
The Company had unbilled receivables (contract assets) of $54,439 and $63,410 at March 31, 2020 and December 31, 2019, respectively. There were no costs in excess of billings and billings in excess of costs associated with “over time” contracts at December 31, 2019 or 2018. There was no revenue recognized during the year ended December 31, 2019 and 2018 that was included in contract liabilities at the beginning of the period.
In much of the Company’s business, customers request changes in contract specifications or in the scope or amount of services to be delivered. These are typically covered under the contract with the customer.
On March 31, 2020, the Company had no remaining performance obligations.
Fixed Assets
Fixed assets are being depreciated on the straight line basis over a period of five years.
License Agreement
The cost of the license agreement (see Note 4) is being amortized on a straight-line basis over ten years. The license agreement is tested annually for impairment or earlier if an indication of impairment exists. The Company believes that the license agreement has not been impaired.
Income Taxes
The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by the tax authorities. Management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2016 - 2018). The Company’s tax year ends September 30.
Basic and Diluted Net Income (Loss) per Share
The Company computes income (loss) per share in accordance with “ASC-260”, “Earnings per Share” which requires presentation of both basic and diluted income (loss) per share on the face of the statement of operations. Basic income (loss) per share is computed by dividing net income available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive income (loss) per share excludes all potential common shares if their effect is anti-dilutive.
For the three month period ended March 31, 2020 and 2019, basic (loss) and diluted (loss) per share were the same. The 4,575,000 warrants outstanding at March 31, 2020 are anti-dilutive as the trading price of the Company’s common stock was below the exercise price of the warrants.
10
PwrCor, Inc.
Notes to Financial Statements
March 31, 2020
(Unaudited)
2. Significant Accounting Policies (continued)
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02: “Leases” (“ASU 2016-02”). ASU 2016-02 creates new accounting and reporting guidelines for leasing arrangements. The new standard will require organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The standard will also require new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard has been adopted by the Company. The Company has evaluated the impact of ASU 2016-02 on its consolidated financial statements, and it did not have a material impact as the Company’s lease obligation is less than one year.
On June 20, 2018, FASB issued Accounting Standards Update No. 2018-07, “Compensation - Stock Compensation” (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees. This ASU expands the scope of ASC Topic 718, “Compensation - Stock Compensation”, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. ASU 2018-07 supersedes ASC Subtopic 505-50, “Equity - Equity-Based Payments to Non-Employees”. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company has evaluated the impact of ASU 2018-07 on its consolidated financial statements and it did not have a material impact.
All other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
Subsequent Events
Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued.
3. Related Party Transactions
Consulting Fees
Certain stockholders of the Company and entities affiliated with management perform services for customers and were compensated at various rates. Total consulting expenses incurred by these stockholders and entities for the three months ended March 31, 2020 and 2019, amounted to $63,804 and $115,453, respectively. Amounts payable to these stockholders and entities at March 31, 2020 and December 31, 2019 totaled $87,281 and $102,700, respectively.
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PwrCor, Inc.
Notes to Financial Statements
March 31, 2020
(Unaudited)
3. Related Party Transactions (continued)
Technology Development Fees
Under a technology development agreement the Company has with Thermal Tech Holdings, LLC, a Delaware limited liability company (“TTH”), the Company reimburses TTH for managing the work by a contracted third party on various technology developments as agreed to on a case-by-case basis. The amounts payable under this arrangement amounted to $243,112 at both March 30, 2020 and December 31, 2019. The Company obtains full rights to any intellectual property it develops or acquires through such payments.
Intangible Asset Valuation
The Company performs a qualitative assessment of its intangible assets to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of its one such asset is less than its carrying amount. As a result of management’s qualitative assessment, the Company determined that the carrying value of its license agreement warranted no loss or impairment as of March 31, 2020.
License Agreements
In December, 2017, the Company entered into an intellectual property license agreement with TTH. TTH is an entity owned equally by two entities affiliated, respectively, with two officers and directors of the Company, who also serve in management positions with TTH.
TTH is the owner of certain patent applications as well as the inventions relating to the Company’s proprietary engine technology (the “Licensed Patents and Technical Information”). The Licensed Patents and Technical Information were developed by an independent non-profit research institute (the “Contractor”). All work done by the Contractor was paid for by TTH in order that TTH, rather than the Company, would be at risk if the research, development, engineering and design work were of little or no value. Furthermore, the work performed by the Contractor for TTH was confidential for competitive business reasons.
The Patent License grants the Company a worldwide non-exclusive license to use the Licensed Patents and Technical Information to make, use or sell any products and/or services which would be covered by these specific Licensed Patents. However, TTH may not license any Licensed Patents and Technical Information to any competitive entity, or to any other entity without the prior written consent of the Company.
The agreement calls for the Company to pay TTH a royalty equal to five percent (5%) of the Net Revenue (as defined) of all Licensed Products covered by a Licensed Patent sold by the Company and its affiliates, as well as an initial license fee of $135,000. The Patent License will terminate upon the expiration of all Licensed Patents. The Company may terminate the agreement on ninety (90) days’ prior written notice. TTH may terminate the agreement on ninety (90) days’ prior written notice for uncured defaults (as defined).
The accompanying March 31, 2020 balance sheet presents the carrying value of the license fee at $104,625, which is net of $30,375 in accumulated amortization. The cost of the license agreement is being amortized over ten years.
The Company periodically performs an analysis of its contractual rights and arrangements and establishes asset value based on that analysis.
12
PwrCor, Inc.
Notes to Financial Statements
March 31, 2020
(Unaudited)
4. Concentrations
The Company grants credit in the normal course of business to its customers. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk.
One customer accounted for 100% of total project management revenue during the three months ended March 31, 2020, and two customers accounted for 89.9% and 10.1%, respectively, during the three months ended March 31, 2019.
Two customers accounted for approximately 80.5% and 19.5% of total net accounts receivable at March 31, 2020, and two customers accounted for 73.9% and 14.4%, respectively, at December 31, 2019.
5. Stock Issuance
In August, September and October, 2018, the Company issued an aggregate of 2,500,000 shares of common stock at a per share price of $0.14 to three investors in return for a capital infusion of $350,000. Each share issued was accompanied by a warrant for one-half share of common stock; the warrants are exercisable at a price of $0.40 per share. A total of 1,250,000 warrants accompanied these shares.
In September and October 2017, the Company issued an aggregate of 6,650,000 shares of common stock at a per share price of $0.10 to thirteen individual investors in return for a capital infusion of $665,000. Each share issued was accompanied by a warrant for one-half share of common stock; the warrants are exercisable at a price of $0.30 per share. A total of 3,325,000 warrants accompanied these shares.
At March 31, 2020, the Company had 4,575,000 warrants outstanding. Of these, 3,325,000 warrants were exercisable at $0.30 per share but may be redeemed by the Company if not exercised, in whole or in part, on at least twenty days’ prior written notice, at a price of $.001 per share; provided the average closing bid price of the Common Stock is at or above $1.00 per share for at least twenty consecutive trading days ending with three business days prior to the redemption notice. An additional 1,250,000 warrants are exercisable at $0.40 per share but may be redeemed by the Company if not exercised, in whole or in part, on at least twenty days’ prior written notice, at a price of $.001 per share; provided the average closing bid price of the Common Stock is at or above $1.50 per share for at least twenty consecutive trading days ending with three business days prior to the redemption notice.
The Company claims exemptions from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D promulgated thereunder. No commissions were paid and no underwriter or placement agent was involved in these transactions. The proceeds of these transactions were used for the Company’s working capital and general corporate purposes.
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Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operations.
The following management’s discussion and analysis should be read in conjunction with the Company’s historical consolidated financial statements and the related notes thereto included in our audited financial statements for the year ended December 31, 2019, and the notes thereto. The management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this quarterly report. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this quarterly report.
Overview
On May 15, 2013, Receivable Acquisition & Management Corporation, a Delaware corporation completed the acquisition of Cornerstone Program Advisors LLC, a Delaware limited liability company (“Cornerstone”) and Sustainable Energy Industries, Inc., a Delaware corporation (“Sustainable”), and the Company assumed the operations of each of these entities (the “Merger”). Receivable Acquisition & Management Corporation had operated as a business purchasing and collecting upon defaulted consumer receivables; those operations were ceased and collections on any remaining receivables are being run off. Cornerstone has been in the business of managing energy infrastructure projects, specializing in the non-profit marketplace. Sustainable is in the business of developing, marketing, and implementing clean tech technologies. The Company has refocused on managing energy infrastructure projects and developing applications for an environmentally benign heat conversion technology with particular focus on the geothermal and waste-heat-to-energy production markets.
Shareholders approved a name change to PwrCor, Inc. at the shareholders meeting in January 2017, by a large majority of shareholder votes. The corporate name change in Delaware to “PwrCor, Inc.” was effective on March 3, 2017.
Results of Operations
During the three month period ended March 31, 2020, the Company had a net loss of ($25,906), on revenues of $113,770, versus a net loss of ($71,534), on revenues of $186,245, respectively, in the three month period ended March 31, 2019. The decline in the most recent three month period in 2020 as compared to the corresponding period in 2019 was due to a reduction in project management revenues.
Revenue
Revenues for the three months ended March 31, 2020 as compared to the same period in 2019 from the Company’s major customer showed a 29% decrease due to the winding down of certain customer projects. The margin of project management revenue over the corresponding cost of subcontracted consultants for such projects has increased from 2019 to 2020. This gross profit for the three month period ended March 31, 2020, was 29% of revenues, versus 18% for the corresponding period in 2019.
Revenue decreased 39% for the three month period ended March 31, 2020, as compared to the corresponding period from 2019. The decrease in the three month period is largely attributable to the abovementioned winding down of certain projects at one customer which was not fully offset by new business.
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Operating Expenses
Total operating expenses for the three month period ended March 31, 2020 were $139,676, versus $257,779, during the three month period ended March 31, 2019. The 46% decrease in operating expenses in the three month period in 2020, against the corresponding period in 2019, was primarily due to lower costs of subcontracted consultants naturally resulting from the decreased project management activity noted above.
Consulting Expenses
The Company outsources a significant portion of its project management, oversight and advisory activities to a carefully selected group of small firms, individuals and subcontractors with expertise specific to the projects underway. As of the quarter ended March 31, 2020, the Company was using five such consulting resources. Consulting expenses consistently constitute the bulk of operating costs for the project advisory and management business activities of the Company, and accordingly generally track revenue.
Liquidity and Capital Resources
As of March 31, 2020, the Company had a working capital deficit (that is, total current assets minus total current liabilities) of ($504,399) versus a working capital deficit of ($483,815) as of December 31, 2019. The change was principally due to a decline in cash.
For the period ended March 31, 2020, the Company had cash of $70,264 versus $126,632 at December 31, 2019. For the three months ended March 31, 2020, net cash (used) by operating activities was ($56,368) versus net cash (used) by operating activities of ($142,962) for the three months ended March 31, 2019. The major factor in the change in net cash from operating activities was the use of cash for reducing payables, accrued expenses and outstanding obligations.
For the three month periods ended March 31, 2020 and March 31, 2019, $0 in cash was provided by financing activities. In the period ended March 31, 2020, no cash was used in investing activities, while $40,500 in cash was used in investing activities to complete the license acquisition from the licensor of the Company’s engine technology in the comparable 2019 period.
The recent worldwide emergence of a new and in some cases fatal coronavirus has caused major disruptions to daily life domestically and around the world. Most important to the Company, these developments are causing significant changes in a wide array of business activities and disruption in capital markets. Regarding the first, the Company is currently engaged in projects at hospitals primarily in the New York City, which have been dealing with unprecedented losses to their normal business and less than forecast demand for virus-related treatments. There can be no assurance that these hospitals will continue the Company’s activity uninterrupted while dealing with these financial losses, and if so at what level of activity, or even whether the hospital environments will be sufficiently safe for the Company’s consultants to continue to work on-site. Regarding the second, the dramatic swings in financial markets and the related uncertainties are likely to challenge efforts to obtain additional capital during this pandemic and, possibly, in its near term aftermath.
Given these major uncertainties, the Company cannot reliably project its results from its project management operations for at least the next six months, so it is uncertain whether any such revenue, together with existing cash and cash infusions by major stockholders, will be sufficient to finance its operations for the next twelve months. However, the Company has engaged the services of an investment bank and is actively seeking additional capital to cover any working capital needs and to fund growth initiatives in its identified markets, some of which, like those in the energy sector, have been dramatically disrupted by both supply and demand shocks to the oil market. There can be no assurance that any new debt or equity financing arrangement will be available to the Company when needed on acceptable terms, if at all. The initiative is also in the process of actively introducing the Company’s engine technology to business in a set of identified key markets to accelerate the commercialization of the Company’s latest generation product. These efforts also have no assurance, particularly in an environment where businesses are being disrupted, of achieving their objectives at sufficient scale to achieve desirable levels of cash flow. The continued operations of the Company are dependent on its ability to collect its receivables and increase revenues.
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Income Taxes
The Company did not record any income tax provision for the three month period ended March 31, 2020, and does not expect any material income tax liability for the period. There was less than $1,000 in income and related taxes for 2018 paid in the three months ended March 31, 2020.
Critical Accounting Policy & Estimates
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.
On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions and conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the condensed consolidated financial statements included in this quarterly report.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Issuer is not required to provide the information called for in this item due to its status as a Smaller Reporting Company.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
The term “disclosure controls and procedures” is defined in Rules 13(a)-15e and 15(d) - 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2020. He has concluded that, as of March 31, 2020, our disclosures, controls and procedures were effective to ensure that:
(1)Information required to be disclosed by the Company in reports that it files or submits under the act is recorded, processed, summarized and reported, within the time periods specified in the Commissions’ rules and forms; and
(2)Controls and procedures are designed by the Company to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management including the principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding financial disclosure.
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This term refers to the controls and procedures of a Company that are designed to ensure that information required to be disclosed by a Company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the required time periods. Management continues to take steps to improve its controls and procedures, and expects, further, that the growing scale of the business will enable the Company to obtain additional resources to assist in that effort.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting or in any other factors that could significantly affect these controls during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any material pending legal proceedings or a proceeding being contemplated by a governmental authority nor is any of the Company’s property the subject of any pending legal proceedings or a proceeding being contemplated by a governmental authority except as set forth in our Annual Report on Form 10-K for December 31, 2019 from which there have been no material changes.
Item 1A. Risk Factors.
None.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Number | | Exhibit Title |
31.1 | | Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | | Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS * | | XBRL Instance Document |
101.SCH * | | XBRL Taxonomy Schema |
101.CAL * | | XBRL Taxonomy Calculation Linkbase |
101.DEF * | | XBRL Taxonomy Definition Linkbase |
101.LAB * | | XBRL Taxonomy Label Linkbase |
101.PRE * | | XBRL Taxonomy Presentation Linkbase |
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed by the undersigned, thereunto duly authorized.
| PWRCOR, INC. |
| | |
Date: May 13, 2020 | By: | /s/ Thomas Telegades |
| Name: | Thomas Telegades |
| Title: | Chief Executive Officer Interim Chief Financial Officer (Principal Executive Officer Interim Principal Financial Officer and Principal Accounting Officer) |
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