UNITED STATES
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:
December 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from _________________ to ________________
Commission file number
0-21151
PROFILE TECHNOLOGIES, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 91-1418002
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2 Park Avenue, Suite 201
Manhasset, New York 11030
------------------- -----
(Address of Principal (Zip Code)
Executive Office)
516-365-1909
------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the part 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 [ ]
Applicable only to corporate issuers
------------------------------------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: On January 31, 2004, there were
5,461,659 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
TABLE OF CONTENTS
Description Page Number
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets (Unaudited) -
At December 31, 2003 and At June 30, 2003........................4
Condensed Statements of Operations (Unaudited) -
Three Months Ended and Six Months Ended December 31,
2003 and 2002....................................................5
Condensed Statements of Cash Flows (Unaudited) -
Six Months Ended December 31, 2003 and 2002......................6
Notes to Condensed Financial Statements (Unaudited)...................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................11
Item 3. Controls and Procedures.........................................18
PART II. OTHER INFORMATION
Item 1. Legal Proceeding................................................19
Item 2. Changes in Securities...........................................19
Item 3. Defaults Upon Senior Securities.................................22
Item 4. Submission of Matters to a Vote of Security Holders.............22
Item 5. Other Information...............................................23
Item 6. Exhibits and Reports on Form 8-K................................23
SIGNATURES....................................................................24
CERTIFICATIONS................................................................25
3
PART I-- FINANCIAL INFORMATION
Item 1. Financial Statements.
PROFILE TECHNOLOGIES, INC.
Condensed Balance Sheets
(unaudited)
December 31, June 30,
Assets 2003 2003
----------- -----------
Current assets:
Cash $ 1,843 $ --
Accounts receivable -- --
Contract work-in-progress -- 11,310
Prepaid expenses and other current assets 13,231 50,733
----------- -----------
Total current assets 15,074 62,043
Equipment, net 84,780 115,332
Patents, net 40,139 61,308
Other Assets 2,415 2,415
----------- -----------
Total assets $ 142,408 $ 241,098
=========== ===========
Liabilities and Stockholders' Deficit
Current liabilities:
Notes payable to stockholders $ 840,013 $ 641,012
Accounts payable 235,415 189,903
Deferred wages 245,832 146,658
Other accrued liabilities 192,672 201,900
----------- -----------
Total current liabilities 1,513,932 1,179,473
Long term convertible debt net of discount of $23,625 at December
31, 2003 1,375 --
Stockholders' deficit:
Common stock, $0.001 par value. Authorized 15,000,000
shares; issued and outstanding 5,461,659 shares at December
31, 2003 and June 30, 2003 5,462 5,462
Additional paid-in capital 8,391,201 8,349,701
Accumulated deficit (9,769,562) (9,293,538)
----------- -----------
Total stockholders' deficit (1,372,899) (938,375)
----------- -----------
Commitments, contingencies and subsequent events
Total liabilities and stockholders' deficit $ 142,408 $ 241,098
=========== ===========
See accompanying notes to condensed financial statements
4
PROFILE TECHNOLOGIES,INC.
Condensed Statement of Operations
(unaudited)
For the three months ended, For the six months ended
December 31, December 31
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues $ 86,429 $ 4,696 $ 222,579 $ 339,609
Cost of revenues 39,556 72,839 164,504 199,613
----------- ----------- ----------- -----------
Gross profit (loss) 46,873 (68,143) 58,075 139,996
Operating expenses:
Research and development 25,518 44,740 67,866 99,392
General and administrative 226,014 241,358 444,542 445,807
----------- ----------- ----------- -----------
Total operating expenses 251,532 286,098 512,408 545,199
Loss from operations (204,659) (354,241) (454,333) (405,203)
Other income -- -- 1,762 --
Interest income -- -- -- 6
Interest expense 12,501 4,484 23,453 13,888
----------- ----------- ----------- -----------
Net loss $ (217,160) $ (358,725) $ (476,024) $ (419,085)
=========== =========== =========== ===========
Basic and diluted net loss per share $ (0.04) $ (0.07 $ (0.09) $ (0.08)
Shares used to calculate
basic and diluted net loss per share 5,461,659 5,461,659 5,461,659 5,418,413
See accompanying notes to condensed financial statements
5
PROFILE TECHNOLOGIES, INC.
Condensed Statements of Cash Flows
(unaudited)
For the six months ended
December 31,
------------------------
2003 2002
--------- ---------
Cash flows from operating activities:
Net loss $(476,024) $(419,085)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 53,541 86,447
Accreted interest on notes payable and convertible debt 1,375 10,138
Stock compensation 16,500 4,192
Changes in certain assets and liabilities:
Accounts receivable 11,310 (11,776)
Prepaid expenses and other current assets 37,502 23,714
Other assets -- 6,643
Accounts payable 45,513 (36,686)
Deferred wages 99,174 38,125
Other accrued liabilities (9,228) 14,650
Net cash used in operating activities (220,337) (283,638)
--------- ---------
Cash flows used in investing activities - purchase of equipment (1,820) --
--------- ---------
Cash flows from financing activities
Proceeds from issuance of subordinated debt and attached warrants 25,000 105,022
Proceeds from issuance of notes payable 199,000 126,500
--------- ---------
Net cash provided by financing activities 224,000 231,522
--------- ---------
Increase (decrease) in cash 1,843 (52,116)
Cash at beginning of the period -- 73,514
Cash at end of the period $ 1,843 $ 21,398
========= =========
Supplementary disclosure of cash flow information:
Note payable converted to common stock $ -- $ 15,000
Issuance of stock and warrants previously subscribed -- 231,250
See accompanying notes to condensed financial statements
6
PROFILE TECHNOLOGIES, INC
December 31, 2003
Notes to Condensed Financial Statements
1. Description of Business
Profile Technologies, Inc. (the "Company") is in the business of developing and
commercializing potential processes for the nondestructive, noninvasive testing
of both above ground and buried pipelines for the effectiveness of pipeline
cathodic protecting systems and coating integrity. The Company's future revenues
are currently dependent upon the market's acceptance of its sole developed
process.
2. Basis of Presentation
The unaudited interim condensed financial statements and related notes of the
Company have been prepared pursuant to the instructions to Form 10-QSB.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted pursuant to such
instructions. The condensed financial statements and related notes should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's annual report on form 10-KSB for the year ended June
30, 2003 (filed October 14, 2003). The information furnished reflects, in the
opinion of management, all adjustments, consisting of only normal recurring
items, necessary for fair presentation of the results of the interim periods
presented. Interim results are not necessarily indicative of results for a full
year.
3. Net Loss Per Share
Basic loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period. Diluted loss per
share is computed by dividing the net loss by the weighted average number of
common and dilutive common equivalent shares outstanding during the period. As
the Company had a net loss attributable to common shareholders in each of the
periods presented, basic and diluted net loss per share are the same.
Excluded from the computation of diluted loss per share for the three and six
months ended December 31, 2003 are options and warrants to acquire 3,133,817
shares of common stock with a weighted-average exercise price of $2.17 because
their effect would be antidilutive. Excluded also from the computation of
diluted loss per share for the three and six months ended December 31, 2002 are
options and warrants to acquire 2,853,817 shares of common stock with a
weighted-average exercise price of $2.32 because their effect would be
antidilutive. For the three and six months ended December 31, 2003 and 2002,
additional potential dilutive securities that were excluded from the diluted
loss per share computation are the exchange rights discussed in footnote 5 that
could result in options to acquire up to 721,750 shares of common stock with an
exercise price of $1.00 at December 31, 2003 and 299,250 such shares at December
31, 2002.
7
4. Notes Payable - Stockholders
On May 9, 2002, the Company entered into a bridge loan of up to $150,000 with
Murphy Evans, President and a director and stockholder of the Company. Mr. Evans
has currently loaned the Company $126,000 pursuant to this bridge loan. Pursuant
to the terms of the loan, once Mr. Evans loaned the Company $125,000, the
Company cancelled 150,000 warrants with exercise prices ranging from $3.00 per
share to $7.50 per share (old warrants), previously held by Mr. Evans and issued
to Mr. Evans 150,000 five-year warrants with an exercise price of $1.05.
The cancellation of the old warrants is an effective re-pricing and will be
accounted for as a "variable plan" until such time as the warrants are
exercised, expire or are forfeited. Variable plan accounting will result in
intrinsic value associated with the warrants being adjusted to compensation
expense based on each reporting period's ending stock value. As of December 31,
2003, no intrinsic value had been recorded related to these warrants as the
stock price was below the exercise price.
As a result of the cancellation and re-issuance of the warrants with a reduced
exercise price, the Company recorded an additional $15,000 discount on notes
payable and an increase in additional paid in capital based on the difference
between the fair value of the old warrants and the fair value of the new
warrants. The fair value of the old and new warrants on the day of cancellation
and issuance was based on an option pricing model with the following
assumptions: warrant lives ranging from 5 to 5.5 years, risk free interest rates
of 5.25%, volatility of 120% and a zero dividend yield.
The original bridge provided for interest of 6% per annum on the unpaid balance.
Effective January 1, 2003, the Company and Mr. Evans entered into an agreement
under which this note and all other past and future advances from Mr. Evans
carry an interest rate of 5% per annum. Interest is payable on June 30 and
December 31 of each year and the notes mature on December 31, 2003. During the
three month period ended December 31, 2003, Murphy Evans loaned the Company an
additional $25,000 under the terms of this agreement. As of December 31, 2003,
accrued interest of $30,753 and the outstanding principal balance of $726,466
were due and payable. Due to insufficient funds, the Company has not repaid
these amounts. As of February 15, 2004, Mr. Evans had made no demand for
payment. All advances from Mr. Evans are convertible into any debt or equity
offering by the Company. Corresponding interest expense related to the note was
$17,994 and $13,888 for the six months ended December 31, 2003 and December 31,
2002, respectively.
In 2002, the Company issued non-interest bearing bridge notes payable to two
officers in the amounts of $15,000 and $7,500, convertible into 21,428 and
10,714 equity units, respectively. Each equity unit is comprised of one share of
common stock accompanied by a detachable five-year warrant to purchase an
additional share of common stock with an exercise price of $1.05. To the extent
that the notes are not converted before maturity, both notes are payable in full
when the Company determines it has sufficient working capital to do so. The note
in the amount of $15,000 was converted to 21,428 equity units described above in
the fiscal year 2003.
In 2003, the Company issued $50,000 in non-interest bearing bridge notes payable
to two stockholders of the Company, convertible into 71,428 equity units. Each
equity unit is comprised of one share of common stock accompanied by a
detachable five-year warrant to purchase an additional share of common stock
with an exercise price of $1.05. To the extent that the notes are not converted
before maturity, the loans are payable in full when the Company determines it
has sufficient working capital to do so.
8
In addition, in the fiscal year 2003, the Company entered into a note payable
with an officer of the Company. During the three months ended December 31, 2003,
the officer loaned the Company an additional $22,000. The note accrues interest
at 5% per annum. As of December 31, 2003, accrued interest of $1,334 and the
outstanding principal balance of $56,047 were due and payable. Due to
insufficient funds, the Company has not repaid these amounts. As of February 15,
2004, the officer had made no demand for payment. The note is convertible into
any debt or equity offering made by the Company. Corresponding interest expense
related to the note was $1,334 and $0 for the six months ended December 31, 2003
and December 31, 2002, respectively.
The following is a summary of notes payable to stockholders as of December 31,
2003.
Evans $726,466
Officer Notes 63,547
Other Stockholder Notes 50,000
--------
Total $840,013
========
As of February 15, 2004, the Company has not made the interest payments under
the notes with Murphy Evans and Henry Gemino which were due and payable on June
30, 2003 and December 31, 2003. As of February 15, 2004, neither Mr. Evans nor
Mr. Gemino has made any demand for payment, or exercised any remedies, under
these notes.
5. Liquidity
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company incurred cumulative losses of
$9,769,562 through December 31, 2003 and had negative working capital of
$1,498,858 as of December 31, 2003. Additionally, the Company has expended a
significant amount of cash in developing its technology and patented processes.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management recognizes that in order to meet the Company's
capital requirements, and continue to operate, additional financing, including
seeking industry-partner investment through joint ventures or other possible
arrangements, will be necessary. The Company is evaluating alternative sources
of financing to improve its cash position and is undertaking efforts to raise
capital. If the Company is unable to raise additional capital or secure
additional revenue contracts and generate positive cash flow, it is unlikely
that the Company will be able to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
To reduce cash outflows, certain of the Company's employees, officers and
directors have agreed to defer a portion of their salaries and consulting fees
from August 2001 until the Company has sufficient resources to pay the amounts
owed or to exchange such amounts into options as described below. At December
31, 2003, the Company has accrued approximately $377,732 related to the deferred
payment of the salaries and consulting fees of which $245,832 is included under
deferred wages and $131,900 in accrued liabilities. On March 18, 2002, the Board
of Directors approved a right whereby for each dollar of deferred salary and
fees, the employee, officer or director could exchange their deferred amount for
an option to purchase two shares of common stock with a five-year term at an
exercise price of $1.00 per share. No conversions have occurred to date. As
there was no intrinsic value associated with these exchange rights, no
additional compensation cost has been recorded.
9
On June 19, 2003, the Board of Directors approved the offering of $1,000,000 in
convertible debentures. The Debentures are convertible into that number of
shares of the Company's common stock equal to the amount of the converted
indebtedness divided by $0.50 per share. The Debentures bear interest at a rate
of 5% per annum, payable quarterly. The Company is required to redeem each
Debenture on the 5th anniversary of the date of the Debenture. The Company may,
in its discretion, redeem any Debenture at any time prior to the mandatory
redemption date of the Debenture by providing no less than 60 days' prior
written notice to the holder of the Debenture.
Upon the purchase of, and for each $0.50 of the Debenture's principal amount,
the Company will issue to an investor a warrant (the "Warrant") to purchase one
(1) share of the Company's common stock at an exercise price of $0.75 per share.
For example, if an investor executes a Debenture in the principal amount of
$100,000, the Company will issue to such investor 200,000 Warrants. The Warrants
will be exercisable at any time prior to the 5th anniversary date of the
redemption of the Debenture. As of June 30, 2003, the Company had not received
any funds from this offering.
As of December 31, 2003, the Company had raised $25,000 from this offering.
Warrants issued in connection with this offering were recorded as paid-in
capital at their fair value, estimated at $18,500, based on an option pricing
model with the following assumptions: warrant life of 10 years, risk free
interest rate of 4.45%, volatility of 120%, and a zero dividend yield. The
remaining value of the debentures results in a beneficial conversion feature
that reduces the book value of the convertible debt to zero. Accordingly, the
Company recorded a $25,000 discount on the convertible debt issued under this
offering. The Company amortizes the discount using the effective interest method
over the five year life of the debentures. For the six months ended December 31,
2003, the Company recorded $1,375 of interest expense related to the Debentures.
6. NASDAQ Delisting
In June 2001, the Company announced that it received a Nasdaq Staff
Determination, indicating that the Company failed to comply with the minimum bid
price and net tangible asset/shareholder equity requirements of the Nasdaq
Marketplace Rules for continued listing set forth in Marketplace Rule
4310(c)(4), and that its securities were, therefore, subject to delisting from
the Nasdaq SmallCap Market. On August 10, 2001, the Nasdaq Stock Market
suspended trading in the Company's common stock. Effective Monday, August 13,
2001, the Company began trading on the Over the Counter Bulletin Board under the
symbol PRTK.
10
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
Since its formation in 1988, Profile Technologies, Inc., a Delaware
corporation (the "Company"), has been engaged in the business of researching and
developing a high speed scanning process, which is nondestructive and
noninvasive, to test remotely buried, encased and insulated pipelines for
corrosion. The Company's electromagnetic wave inspection process, referred to as
the Company's "Inspection EMWSM" or "EMW," is a patented process of analyzing
the waveforms of electrical impulses in a way that extracts point-to-point
information along a segment of pipeline to illustrate the integrity of the
entire pipeline. This process involves sending electrical pulses along the pipe
being tested from two directions toward a varying intersecting point between the
two pulser locations. One or more of the modified pulses is analyzed to
determine whether an anomaly exists at the intersecting location.
The EMW process is designed to detect external corrosion of pipelines which
occurs under pipe insulation and on buried pipes, without the need for taking
the lines out of service, physically removing the insulation or digging up
pipes, and then visually inspecting the outside of the pipe for corrosion. The
Company often can inspect the pipelines by using various access points to the
pipelines that already exist for other reasons. Where such access is not already
available, the Company's technology permits the inspection of pipelines with a
minimal amount of disturbance to the coating or insulation on the pipeline. In
addition, the Company's technology permits an inspection of the entire pipeline,
as opposed to other technologies which only conduct inspections at points
selected for the testing. Such "spot inspections" are not necessarily accurate
in indicating the overall condition of a pipe segment.
The most common forms of pipeline corrosion under insulation are localized
corrosion of carbon steel and chloride stress corrosion cracking of stainless
steel. Refineries, chemical plants, utilities, natural gas transmission
companies and the petroleum industry have millions of miles of pipeline, and
much of this pipeline is exposed to harsh and severe environments. As a result,
there is an on-going effort by these industries to ensure that the quality of
the pipe meets standards established by regulatory bodies and the industry to
protect operating personnel and the environment.
In the summer of 1998, the Company completed its first commercial contract
on the North Slope of Alaska, testing approximately 100 road and carribou
crossings on British Petroleum pipelines under a contract with ASCG Inspection,
Inc.
In the summer of 1999, the Company followed up its initial Alaska work
under a contract with another large multi-national oil company to test
approximately 250 below grade pipes. During the summer of 2000, the Company
expanded its Alaska efforts by testing a total of 372 below-ground pipes. In
2001, the Company tested 441 lines in Alaska. In 2002, the Company inspected 364
lines.
Based on estimates provided by its customers, the Company originally
planned to inspect between 400 and 500 below-grade lines in Alaska in the
calendar year 2003. However, based on the Company's final work scopes and the
11
fact that more than 40 lines could not be tested for physical reasons, the
Company successfully tested 250 below-grade pipes during the calendar year 2003.
In addition to the approximately 250 below-grade lines that were successfully
tested, the Company completed the testing of approximately 3,500 feet of
above-grade, insulated pipes for one of its Alaska customers in an effort to
demonstrate that it should be included in that customer's 2004 above-grade
inspection budget. Although the Company is confident it can provide greater
value to its customer than companies offering competing inspection technologies
for above-grade work, there can be no assurance that the Company will be able to
secure any contracts to perform above-grade, insulated pipe inspections during
the calendar year 2004 or at any time in the future. If the Company is
successful in securing above-grade work for 2004, that work could begin as early
as March.
In January 2002, the Company retained Dr. Charles Frost, President of Pulse
Power Physics, Inc., to assist in the improvement of the Company's hardware,
software and its testing and data interpretation methods.
The Company's data interpretation process has also been largely automated.
The Company's business model and strategy is heavily dependent on its ability to
automate the date interpretation process and fully implement its technology. If
the Company is unable to automate completely the data interpretation process and
fully implement its technology, the Company may not be able to secure additional
fee-for-service contracts or implement a licensing and joint venture business
model. As a result, such failure may have a material adverse effect on the
business and financial condition of the Company.
Revenues
The Company derives revenue solely from the sale of the EMW inspection
technology service. The Company relies upon several employees, including the
Chief Executive Officer, the Chief Operating Officer, the Vice President - Field
Operations, for the Company's sales functions. The Company relies solely upon
the employees of the Company to conduct its sales activities.
During the six months ended December 31, 2003, all of the Company's
revenues were attributable to two customers. These customers individually
accounted for 9% and 91%, and 36% and 64%, of net revenues during the six months
ended December 31, 2003 and 2002, respectively.
Marketing
The Company's sales and marketing strategy includes positioning the
Company's EMW technology as the method of choice to detect pipeline corrosion
where the pipelines are either inaccessible to other inspection tools or much
more costly to inspect with tools other than Profile's EMW inspection. Pending
completion of designed improvements to its buried pipe inspection equipment and
procedures, the Company intends to concentrate its marketing efforts on
above-grade insulated pipe such as is common in refineries and chemical plants
and on encased road and stream crossings.
12
Upon completion of its redesigned buried pipe product, which the Company
plans to accomplish during the fiscal year 2004, the Company intends to refocus
on the natural gas utility and pipeline market, particularly in so-called "high
consequence areas" (e.g., densely populated areas). However, the design and
fabrication of an improved buried pipe product is dependent on the availability
of sufficient funding for the project.
There can be no assurance that the Company will be successful in
concentrating its marketing efforts for the EMW technology on above-grade
insulated pipe or in the "high consequence areas" of the natural gas utility and
pipeline market.
Critical Accounting Estimates and Policies
The discussion and analysis of financial condition and results of
operations is based upon the Company's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including contract revenue recognition and impairment of long-lived
assets. The Company bases its estimates on historical experience and on various
other assumptions that the Company believes to be reasonable under the
circumstances, the results of which form its basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ materially from these estimates under
different assumptions and conditions, and such variations may be adverse.
The Company recognizes revenue from service contracts using the
percentage-of-completion method of contract accounting. Contract revenues earned
are measured using either the percentage-of-contract costs incurred to date to
total estimated contract costs or, when the contract is based on measurable
units of completion, revenue is based on the completion of such units.
Historically, the majority of the Company's revenue has been recognized based on
the completion of measurable units. Anticipated losses on contracts, if any, are
charged to earnings as soon as such losses can be estimated. Changes in
estimated profits on contracts are recognized during the period in which the
change in estimate is known. The Company records claims for additional
compensation on contracts upon revision of the contract to include the amount to
be received for the additional work performed. Contract costs include all direct
material and labor costs and those indirect costs related to contract
performance, such as indirect labor, supplies, tools and repairs, and
depreciation costs. Selling, general, and administrative costs are charged to
expense as incurred. Service contracts generally extend no more than six months.
The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount which the carrying
amount of the asset exceeds the fair value of the asset.
13
Results of Operations
The Company's operating results depend exclusively on its ability to market
its EMW inspection technology. If the Company is not able to automate completely
the EMW inspection process and fully implement its new technology, the Company
may not be able to obtain future contracts to sell or to license its EMW
technology. Since the Company's revenues are derived solely from the marketing
and sale of its EMW technology, any failure to obtain future contracts will have
a material adverse effect on the business and financial condition of the
Company.
Revenues increased to $86,429 for the three months and decreased to
$222,579 for the six months ended December 31, 2003, compared to $4,696 for the
three months and $339,609 for the six months ended December 31, 2002. The
increase in revenues for the three months ended December 31, 2003 compared to
the corresponding period in the previous year is attributable to the fact that
the Company finished its Alaska work scope later in 2003 than it had in 2002.
The decrease in revenues for the six months ended December 31, 2003 compared to
the corresponding period in 2002 is attributable to the decreased overall work
scope in Alaska during the summer and fall of 2003 compared with the same period
in 2002.
Cost of revenues decreased to $39,556 for the three months and $164,504 for
the six months ended December 31, 2003, compared to $72,839 for the three months
and $199,613 for the six months ended December 31, 2002. This decrease during
both the three and six month periods is due to the decrease in the Company's
overall work scope in Alaska during the summer and fall of 2003 compared with
the corresponding period in 2002.
Gross profit was $46,873 for the three months and $58,075 for the six
months ended December 31, 2003, compared to a gross loss of $68,143 for the
three months and gross profit of $139,996 for the six months ended December 31,
2002. The increase in gross profit for the three months ended December 31, 2003
is due to operating efficiencies obtained in the latter part of the overall work
scope on the North Slope of Alaska and to the cancellation of revenue generating
contracts during the three months ended December 31, 2002. The decrease in gross
profit for the six months ended December 31, 2003, as compared to the same
period in the prior year is primarily due to a lower overall work scope in
Alaska in 2003.
Research and development expenses decreased to $25,518 for the three months
and $67,866 for the six months ended December 31, 2003, compared to $44,740 for
the three months and $99,392 for the six months ended December 31, 2002. The
decrease for both the three and six month periods ended December 31, 2003
compared to the same periods ended December 31, 2002 is attributable to the fact
that certain employees spent less time on research and development and more time
on general and administrative activities when not working on revenue generating
contracts during these periods.
General and administrative expenses decreased to $226,014 for the three
months and $444,542 for the six months ended December 31, 2003, compared to
$241,358 for the three months and $445,807 for the six months ended December 31,
2002. General and administrative costs remained relatively consistent for the
six months ended December 31, 2003, compared to the same period in the prior
year because the Company's cost structure includes a significant amount of fixed
costs.
14
Loss from operations decreased to $204,659 for the three months and
increased to $454,333 for the six months ended December 31, 2003, compared to
$354,241 for the three months and $405,203 for the six months ended December 31,
2002. The increase for the six months ended December 31, 2003 compared to the
same period in the prior year is due to operating efficiencies obtained in the
latter part of the overall work scope on the North Slope of Alaska and to the
cancellations of revenue generating contracts during the three months ended
December 31, 2002. Because the Company's cost structure includes a significant
amount of fixed costs, fluctuations in revenue significantly impact the
Company's gross margin and loss from operations.
Interest expense increased to $12,501 for the three months and $23,453 for
the six months ended December 31, 2003, compared to $4,484 for the three months
and $13,888 for the six months ended December 31, 2002. The increase during the
three and six month periods ended December 31, 2003 is a result of the interest
accrued in relation to the notes payable to stockholders described in Note 4
above.
Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company incurred cumulative losses
of $9,769,562 through December 31, 2003, and had negative working capital of
$1,498,858 as of December 31, 2003. Additionally, the Company has expended a
significant amount of cash in developing its technology and patented processes.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management recognizes that in order to meet the Company's
capital requirements, and continue to operate, additional financing, including
seeking industry-partner investment through joint ventures or other possible
arrangements, will be necessary. The Company is evaluating alternative sources
of financing to improve its cash position and is undertaking efforts to raise
capital. If the Company is unable to raise additional capital or secure
additional revenue contracts and generate positive cash flow, it is unlikely
that the Company will be able to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
To reduce cash outflows, certain of the Company's employees, officers and
directors have agreed to defer a portion of their salaries and consulting fees
from August 2001 until the Company has sufficient resources to pay the amounts
owed or to exchange such amounts into options as described below. At December
31, 2003, the Company has accrued approximately $377,732 related to the deferred
payment of the salaries and consulting fees of which $245,832 is included under
deferred wages and $131,900 in accrued liabilities. On March 18, 2002, the Board
of Directors approved a right whereby for each dollar of deferred salary and
fees, the employee, officer or director could exchange their deferred amount for
an option to purchase two shares of common stock with a five-year term at an
exercise price of $1.00 per share. No conversions have occurred to date. As
there was no intrinsic value associated with these exchange rights, no
additional compensation cost has been recorded.
15
On June 19, 2003, the Board of Directors approved the offering (the "2003
Offering") of $1,000,000 in convertible debentures (the "Debentures"). The
Debentures are convertible into that number of shares of the Company's common
stock equal to the amount of the converted indebtedness divided by $0.50 per
share. The Debentures bear interest at a rate of 5% per annum, payable
quarterly. The Company is required to redeem each Debenture on the 5th
anniversary of the date of the Debenture. The Company may, in its discretion,
redeem any Debenture at any time prior to the mandatory redemption date of the
Debenture by providing no less than 60 days' prior written notice to the holder
of the Debenture.
Upon the purchase of, and for each $0.50 of the Debenture's principal
amount, the Company will issue to an investor a warrant (the "Warrant") to
purchase one (1) share of the Company's common stock at an exercise price of
$0.75 per share. For example, if an investor executes a Debenture in the
principal amount of $100,000, the Company will issue to such investor 200,000
Warrants. The Warrants will be exercisable at any time prior to the 5th
anniversary date of the redemption of the Debenture.
As of December 31, 2003, the Company had raised $25,000 from the 2003
Offering. Warrants issued in connection with the 2003 Offering were recorded as
paid-in capital at their fair value, estimated at $18,500, based on an option
pricing model with the following assumptions: warrant life of 10 years, risk
free interest rate of 4.45%, volatility of 120%, and a zero dividend yield. The
remaining value of the Debentures results in a beneficial conversion feature
that reduces the book value of the convertible debt to zero. Accordingly, the
Company recorded a $25,000 discount on the convertible debt issued under the
2003 Offering. The Company amortized the discount using the effective interest
method over the five year life of the Debentures. For the six months ended
December 31, 2003, the Company recorded $1,375 of interest expense related to
the Debentures.
The Board of Directors approved an extension of the 2003 Offering through
February 15, 2004. Subsequent to December 31, 2003, the Company raised an
additional $80,000 from the 2003 Offering. As of February 15, 2004, the Company
has raised a total of $105,000 in the 2003 Offering.
The Company's contractual obligations consist of commitments under deferred
salaries and fees and repayment of loans payable to certain officers, directors
and stockholders. The Company does not have any contractual obligations related
to its operating leases. However, the Company expects to continue to incur costs
on leased properties, as the Company has extended such leases in the past or
will use alternate facilities. As of December 31, 2003, deferred salary and
consulting fees were equal to $377,732, and the salaries and fees will continue
to be deferred until the Company has sufficient resources to pay the amounts
owed, or the employees, officers, or directors exchange such amounts as
described above.
As of December 31, 2003, the Company had outstanding loans payable to
certain officers, directors and stockholders with principal amounts, in the
aggregate, equal to $840,013. The terms of the various notes are described below
under "Part II, Item 2, Changes in Securities."
Capital will be expended to support operations until the Company can
generate sufficient cash flows from operations. In order for the Company to
generate cash flows from operations, the Company must generate additional
revenue generating contracts. Management is currently directing the Company's
activities towards obtaining additional service contracts, which, if obtained,
will necessitate the Company attracting, hiring, training and outfitting
16
qualified technicians. If additional service contracts are obtained, it will
also necessitate additional field test equipment purchases in order to provide
the services. The Company's intention is to purchase such equipment for its
field crews for the foreseeable future, until such time as the scope of
operations may require alternate sources of financing equipment. The Company
expects that if additional contracts are secured, and revenues increase, working
capital requirements will increase. There can be no assurance that the Company's
process will gain widespread commercial acceptance within any particular time
frame, or at all. The Company will incur additional expenses as it hires and
trains field crews and support personnel related to the successful receipt of
commercial contracts. Additionally, the Company anticipates that cash will be
used to meet capital expenditure requirements necessary to develop
infrastructure to support future growth. There can be no assurance that the
Company will be able to secure additional revenue generating contracts to
provide sufficient cash.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains "forward-looking statements."
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects" or words of similar import. Similarly, statements that
describe the Company's projected future results, future plans, objectives or
goals or future conditions or events are also forward looking statements. Actual
results are inherently difficult to predict. Any such forward-looking statements
are subject to the risks and uncertainties that could cause actual results of
operations, financial condition, acquisitions, financing transactions,
operations, expenditures, expansion and other events to differ materially from
those expressed or implied in such forward-looking statements. Any such
forward-looking statements would be subject to a number of assumptions
regarding, among other things, future economic, competitive and market
conditions generally. Such assumptions would be based on facts and conditions as
they exist at the time such statements are made as well as predictions as to
future facts and conditions, the accurate prediction of which may be difficult
and involve the assessment of events beyond the Company's control.
The forward-looking statements contained in this report are based on
current expectations that involve a number of risks and uncertainties. Such
forward-looking statements are based on assumptions that the Company will obtain
or have access to adequate financing to continue its operations, that the
Company will market and provide products and services on a timely basis, that
there will be no material adverse competitive or technological change with
respect to the Company's business, demand for the Company's products and
services will significantly increase, that the Company will be able to secure
additional fee-for-services or licensing contracts, that the Company's executive
officers will remain employed as such by the Company, that the Company's
forecast accurately anticipate market demand, and that there will be no material
adverse change in the Company's operations, business or governmental regulation
affecting the Company or its customers. The foregoing assumptions are based on
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Although the Company believes the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance or achievements.
17
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in the
Company's reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported. The Company's executive officers, including
the Company's Chief Executive Officer, who also serves as Chief Financial
Officer, and the Chief Operating Officer, are responsible for establishing and
maintaining disclosure controls and procedures for the Company. These executives
have designed such controls to ensure that all material information related to
the Company is made known to them by others within the organization. As of
December 31, 2003, the Company's Chief Executive Officer and Chief Operating
Officer completed an evaluation of the Company's disclosure controls and
procedures, and such evaluation has provided them with reasonable assurance that
the Company's disclosure controls and procedures are effective in alerting them
in a timely manner to material information required to be included in the
Company's periodic filings with the SEC. They did not discover any significant
deficiencies or material weaknesses within the controls and procedures that
require modification. There were no changes in the Company's internal control
over financial reporting identified in connection with the Company's evaluation
that occurred during the fiscal quarter ended December 31, 2003 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
18
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any pending or threatened legal proceedings.
Item 2. Changes in Securities.
On March 18, 2002, the Board of Directors approved an offering of 1,000,000
shares of the Company's common stock at a price of $0.70 per share, with
attached warrants (the "2002 Offering"). Each warrant entitles the holder to
purchase one share of common stock at an exercise price of $1.05 per share until
April 4, 2007. The Company did not incur or pay any commissions with respect to
offers and sales of securities under the 2002 Offering. The 2002 Offering
terminated on December 31, 2002. As of December 31, 2002, the Company had raised
a total of $403,200 from the 2002 Offering. All of the investors were accredited
investors. The 2002 Offering is exempt from registration under Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act").
In April 2002, the Company issued a non-interest bearing bridge loan in the
principal amount of $15,000 (the "Gemino Loan") payable to Henry Gemino, the
Chief Executive Officer, Chief Financial Officer and a director and stockholder
of the Company. The terms of the Gemino Loan provided for payment at such time
as the Company determined that it had sufficient working capital to repay the
principal balance of the Gemino Loan and for the conversion into 21,428 equity
units. Each equity unit was comprised of one share of the Company's common
stock, with a detached 5-year warrant to purchase one additional share of the
Company's common stock at an exercise price of $1.05 per share. The Gemino Loan
is exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. The Gemino Loan was converted into the 21,428 equity units in 2002.
In April 2002, the Company issued a non-interest bearing bridge loan in the
principal amount of $7,500 (the "Scott Loan") payable to G.L. Scott, the former
Chairman of the Board of Directors and stockholder of the Company. The Scott
Loan is payable at such time as the Company determines that it has sufficient
working capital to repay the principal balance of the Scott Loan and is
convertible into 10,714 equity units at any time prior to payment. Each equity
unit is comprised of one share of the Company's common stock, with a detached
5-year warrant to purchase one additional share at an exercise price of $1.05
per share. The Scott Loan is exempt from registration under the Securities Act
pursuant to Section 4(2) thereof. On September 29, 2002, Mr. Scott died
unexpectedly from a stroke before converting any part of this loan. As of
February 15, 2004, Mr. Scott's estate had not converted any part of the Scott
Loan into equity units.
On May 9, 2002, the Company entered into a $150,000 bridge loan agreement
with Murphy Evans, the President and a director and stockholder of the Company
(the "Evans Loan"). The Company's Board of Directors approved the terms of the
Evans Loan. The Evans Loan was exempt from registration under Section 4(2) of
the Securities Act.
19
Mr. Evans had loaned the Company $126,000, pursuant to the Evans Loan.
Under the terms of the Evans Loan, once Mr. Evans loaned the Company $125,000,
the Company cancelled 150,000 warrants held by Mr. Evans, with exercise prices
ranging from $3.00 per share to $7.50 per share, and issued to Mr. Evans 150,000
five-year warrants with an exercise price of $1.05 per share. If the Company had
raised $400,000 pursuant to the 2002 Offering within 90 days of May 9, 2002, the
entire loan amount would have been converted into the Company's common stock in
accordance with the terms of the 2002 Offering. However, the Company raised only
$346,250, not $400,000, under the 2002 Offering within 90 days of May 9, 2002.
As a result, under the terms of the Evans Loan, the Company would have been
obligated to commence making monthly loan payments to Mr. Evans in the amount of
$25,000 per month, with interest accruing at 6% per annum on the unpaid
principal balance of the Evans Loan. On March 6, 2003, the Evans Loan was
replaced and superseded by the Amended Evans Loan as described below. As of
March 6, 2003, Mr. Evans made no demand for payment under the Evans Loan, and no
repayments of the Evans Loan had been made by the Company.
During 2002, the Company also entered into certain non-interest bearing
bridge loans in the aggregate amount of $56,500 (the "Subsequent Evans Loan")
payable to Murphy Evans, the President and a director and shareholder of the
Company. The terms of the Subsequent Evans Loan provided for payment at such
time as the Company determined it had sufficient working capital to repay the
principal balance of the Subsequent Evans Loan which was convertible into 81,428
equity units at any time prior to payment. Each equity unit was comprised of one
share of the Company's common stock, with a detached 5-year warrant to purchase
one additional share at an exercise price of $1.05 per share. The Subsequent
Evans Loan is exempt from registration under Section 4(2) of the Securities Act.
On March 6, 2003, the Subsequent Evans Loan was replaced and superseded by the
Amended Evans Loan as described below. As of March 6, 2003, no repayments of the
Subsequent Evans Loan had been made by the Company.
During the fiscal year ended June 30, 2003, Murphy Evans also loaned
$194,650 to the Company (collectively, the "Non-Convertible Evans Loan"). This
loan agreement provided for payment at such time as the Company determined it
had sufficient working capital to repay the Non-Convertible Evans Loan. Interest
was to accrue on the Non-Convertible Evans Loan at a rate of 5% per annum. The
Non-Convertible Evans Loan is exempt from registration under Section 4(2) of the
Securities Act. On March 6, 2003, the Non-Convertible Evans Loan was replaced
and superseded by the Amended Evans Loan as described below. As of March 6,
2003, no repayments of the Evans Loan had been made by the Company.
On March 6, 2003, the Company's Board of Directors approved the Loan
Amendment and Promissory Note (the "Amended Evans Loan") between the Company and
Murphy Evans. The Amended Evans Loan amends and supersedes the indebtedness
under the Evans Loan, Subsequent Evans Loan and Non-Convertible Evans Loan by
aggregating the debt under all of these loans by Mr. Evans into one promissory
note bearing interest on the aggregate principal balance at a rate of 5% per
annum, payable on June 30 and December 31 of each year. The outstanding balance
under the Amended Evans Loan was due and payable in full on December 31, 2003.
The Amended Evans Loan superseded and replaced all of the terms under the Evans
Loan, Subsequent Evans Loan and Non-Convertible Evans Loan, including the
conversion feature under the Subsequent Evans Loan.
20
In addition, the terms of the Amended Evans Loan will apply to all future
loans that may be made to the Company by Murphy Evans. Due to the necessity by
the Company to obtain additional financing in the future to sustain the
Company's operations, the Board of Directors approved the terms of the Amended
Evans Loan. From March 6, 2003 through June 30, 2003, Murphy Evans loaned the
company an additional $172,315 under the Amended Evans Loan. During the six
months ended December 31, 2003, Mr. Evans loaned the Company an additional
$177,000 under the Amended Evans Loan. The Amended Evans Loan is exempt from
registration under Section 4(2) of the Securities Act. As of December 31, 2003,
the outstanding principal balance of the Amended Evans Loan was equal to
$726,466. As of February 15, 2004, the Company has not made the interest
payments due on June 30 and December 31, 2003 and did not repay the outstanding
principal balance. Mr. Evans has not made any demand for payment, or exercised
any of his remedies, under the Amended Evans Loan.
During the twelve months ended June 30, 2003, the Company entered into two
non-interest bearing bridge loans in the respective principal amounts of $40,000
and $10,000 (the "Shareholder Loans") payable to two shareholders of the
Company. The terms of the Shareholder Loans provide for payment at such time as
the Company determines it has sufficient working capital to repay the principal
balances of the Shareholder Loans. The Shareholder Loans are convertible into
57,142 and 14,286 equity units, respectively, at any time prior to payment. Each
equity unit is comprised of one share of the Company's common stock, with a
detached 5-year warrant to purchase one additional share at an exercise price of
$1.05 per share. The Shareholder Loans are exempt from registration under
Section 4(2) of the Securities Act. As of February 15, 2004, neither shareholder
had converted either Shareholder Loan into equity units.
On June 19, 2003, the Board of Directors approved a promissory note (the
"2003 Gemino Note") in the principal amount of $34,047 payable to Henry E.
Gemino, the Chief Executive Officer, Chief Financial Officer and a director and
stockholder of the Company. The 2003 Gemino Note bears interest at the rate of
5% per annum, payable on each June 30 and December 31 of each year. The 2003
Gemino Note evidences the Company's obligation to repay Mr. Gemino certain
amounts advanced by Mr. Gemino to pay certain expenses of the Company. The
outstanding balance under the 2003 Gemino Note is due and payable in full on
December 31, 2003. The 2003 Gemino Note is exempt from registration under
Section 4(2) of the Securities Act. As of December 31, 2003, the outstanding
principal balance of the 2003 Gemino Note was equal to $56,047. As of February
15, 2004, the Company has not made the interest payments due on June 30, 2003 or
December 31, 2003 and has not repaid the outstanding balance due and payable on
December 31, 2003. Mr. Gemino has not made any demand for payment, or exercised
any of his remedies under the 2003 Gemino Note.
On June 19, 2003, the Board of Directors approved an offering (the "2003
Offering") of $1,000,000 in convertible debentures (the "Debentures"). The
Debentures are convertible into that number of shares of the Company's common
stock equal to the amount of the converted indebtedness divided by $0.50 per
share. The Debentures bear interest at a rate of 5% per annum, payable
quarterly. The Company is required to redeem each Debenture on the fifth
anniversary of the date of the Debenture. The Company may, in its discretion,
redeem any Debenture at any time prior to the mandatory redemption date of the
Debenture by providing no less than 60 days' prior written notice to the holder
of the Debenture.
21
Upon the purchase of, and for each $0.50 of the Debenture's principal
amount, the Company will issue to an investor a warrant (the "Warrant") to
purchase one (1) share of the Company's common stock at an exercise price of
$0.75 per share. For example, if an investor executes a Debenture in the
principal amount of $100,000, the Company will issue to such investor 200,000
Warrants. The Warrants will be exercisable at any time prior to the 5th
anniversary date of the redemption of the Debenture. The 2003 Offering is exempt
from registration under Section 4(2) of the Securities Act. As of June 30, 2003,
the Company had not received any funds from the 2003 Offering. As of December
31, 2003, the Company had raised $25,000 from the 2003 Offering. As of February
15, 2004, the Company has raised an aggregate amount of $105,000 in the 2003
Offering.
Item 3. Defaults Upon Senior Securities.
On March 6, 2003, the Board of Directors approved the terms of the Amended
Evans Loan between the Company and Murphy Evans. See "Part II, Item 2, Changes
in Securities." The Amended Evans Loan amends and supersedes the indebtedness
under the Evans Loan, the Subsequent Evans Loan and the Non-Convertible Evans
Loan by aggregating the debt under all of these loans by Mr. Evans into one
promissory note bearing interest on the aggregate principal balance at a rate of
5% per annum, payable on June 30 and December 31 of each year. The outstanding
balance under the Amended Evans Loan is due and payable in full on December 31,
2003. On June 19, 2003, the Board of Directors approved the 2003 Gemino Note,
the terms of which are described above in Item 2, "Changes in Securities."
As of December 31, 2003, the outstanding principal balance of the Amended
Evans Loan was equal to $726,466. As of February 15, 2004, the Company has not
made the interest payments in the amount of $13,061 and $17,692 which were due
and payable to Mr. Evans on June 30, 2003 and December 31, 2003, respectively.
As of December 31, 2003, the Company's total arrearage under the Amended Evans
Loan with respect to this interest payment was equal to $30,753. As of February
15, 2004, Mr. Evans has not made any demand for payment, or exercised any of his
remedies, under the Amended Evans Loan.
As of December 31, 2003, the outstanding principal balance of the 2003
Gemino Note was equal to $56,047. As of February 15, 2004, the Company has not
made the interest payments in the amount of $0 and $1,334 which were due and
payable to Mr. Gemino on June 30, 2003 and December 31, 2003, respectively. As
of December 31, 2003, the Company's total arrearage on the 2003 Gemino Note with
respect to this interest payment was equal to $1,334. As of February 15, 2004,
Mr. Gemino has not made any demand for payment, or exercised any of his
remedies, under the 2003 Gemino Note.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders (the "Annual Meeting") of the Company
was held on December 15, 2003.
22
At the Annual Meeting, 4,591,920 shares were present in person or by proxy.
The following is a summary and tabulation of the matters that were voted upon at
the Annual Meeting:
Proposal I.
The election of directors each for a term of one year:
Withheld
For Authority
--- ---------
Henry E. Gemino 4,432,205 159,715
Murphy Evans 4,426,205 165,715
Charles Christenson 4,438,755 153,165
William A. Krivsky 4,438,755 153,165
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 31.1 Certification of Henry E. Gemino, as Chief Executive
Officer and Chief Financial Officer of the Company,
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Exhibit 31.2 Certification of Philip L. Jones, as Chief Operating
Officer of the Company, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification under Section 906 of the
Sarbanes-Oxley Act of 2002 by Henry E. Gemino, as
Chief Executive Officer and Chief Financial Officer
of the Company.
Exhibit 32.2 Certification under Section 906 of the
Sarbanes-Oxley Act of 2002 by Philip L. Jones, as
Chief Operating Officer of the Company.
(b) Reports on Form 8-K
None.
23
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PROFILE TECHNOLOGIES, INC.
--------------------------
(Registrant)
Date: February 16, 2004 /s/ Henry E. Gemino
------------------------------------
Henry E. Gemino
Chief Executive Officer and
Chief Financial Officer
24