Research and Development: Our research and development costs increased $46,612 from $42,956 for the quarter ended March 31, 2001 to $89,568 for the quarter ended March 31, 2002. This reflects our commitment to the continual development and testing of new products and technology.
Consulting Fees: Our consulting fees for the quarter ended March 31, 2002 was $157,141 as compared to $87,310 for the quarter ended March 31, 2001 for an increase of $69,831. The increase is related to fees paid for business and financial consulting, in addition to services relating to the development and testing of products.
Interest Expense: Our interest expense decreased $66,890 from $72,579 for the quarter ended March 31, 2001 to $5,689 for the quarter ended March 31, 2002. The decrease is due to the reduction in loans from a related party that was outstanding during the first quarter of 2001.
Discontinued Operations: The loss from discontinued operations at March 31, 2001 reflects a $342,290 loss from our roofing contracting operations offset by $153,679 of income from a litigation settlement. The $18,331of income from discontinued operations at March 31, 2002 reflects income generated from the completion of certain roofing projects under contract at the end of 2001 and completed in the first quarter of 2002.
Liquidity and Capital Resources
We had $610,883 of cash on hand at March 31, 2002 reflecting an increase of $91,658 when compared to the $519,225 of cash on hand at December 31, 2001.
The cash required by operations for the first quarter of 2002 was $3,017,000, which is mainly attributable to our net loss for the quarter offset by a decrease in prepaid expenses and elimination of non-cash expenses for consulting, and board of director fees. In comparison, the cash required by operations for the first quarter of 2001 was $873,503 and was a result of our net loss offset by an increase in the accounts payable, accrued expense and elimination of
non-cash expenses primarily for consultants, legal fees, settlements, interest, board of director fees and employee compensation.
The cash used in investing activities was $73,386 for the quarter ended March 31, 2002 as compared to $399,600 for the quarter ended March 31, 2001 reflecting a decrease of $326,214. The net cash required for capital expenditures in the first quarter of 2001 was $380,375 for the purchase of vehicles, machinery and equipment for the production of our product and the establishment of the contracting services subsidiary, and $19,225 for cost relating to patent protection. The capital expenditure of $141,591 and costs related to patent protection of $23,133 were offset by the disposition of property and equipment of $91,338 in the first quarter of 2002. The cash provided from financing activities was $3,182,044 for the quarter ended March 31, 2002 as compared to $1,294,883 for the quarter ended March 31, 2001. The primary source of cash in the first quarter of 2002 is attributed to the issuance of Series C Preferred Stock, while in the same period in 2001 it is attributed to proceeds of loans from the Chairman of the Board.
As of March 31, 2002, we had $3,075,000 in subscriptions receivable and up to $5,000,000 pursuant to a Series C Preferred Stock Option available to fund our operations. Notwithstanding these commitments, we anticipate further financing through short-term loans and/or the sale of our preferred stock to accredited sophisticated investors. See Item 5. Other Information for further details.
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk. |
We do not issue or invest in financial instruments or their derivatives for trading or speculative purposes. Our operations are conducted presently in the United States, and, as such, we are not subject to material foreign currency exchange risks. Although we have outstanding debt and related interest expense, market risk in interest rate exposure in the United States is currently not material to our operations.
Forward Looking Statements
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain disclosures made by the Company in this report and in other reports and statements released by the Company are and will be forward-looking in nature, such as comments that express the Company’s opinions about trends and factors that may impact future operating results. Disclosures that use words such as the Company “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from expectations. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in context with the Company’s disclosures about its businesses made in reports filed with the Securities and Exchange Commission.
16
