SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the Quarter Ended Commission File Number
September 30, 2001 333-41092
MIRENCO, INC.
(Exact name of registrant as specified in charter)
Iowa 39-1878581
---------------------------- --------------------------
(State of (IRS Employer
Incorporation) Identification No.
206 May St. PO Box 343
Radcliffe, IA 50230
(Address of Principle Executive Offices)
800-423-9903
(Registrants telephone number including area code)
Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ]
----- -----
* Not applicable since Registrant became subject to Section 15(d) on and after
January 26, 2001.
The Registrant has 13,274,687 shares of common stock, no par value per share
issued and outstanding as of September 30, 2001.
Traditional Small Business Disclosure Format
YES [ X ] NO [ ]
----- -----
PART I - Financial Information
Item I. Financial Statements
MIRENCO, Inc.
(a development stage company)
BALANCE SHEETS
(unaudited)
September 30, September 30,
2001 2000
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,623,337 $ 6,357,934
Accounts receivable 22,685 5,484
Inventories 111,580 102,927
Other 65,181 61,966
----------- -----------
Total current assets 3,822,783 6,628,311
PROPERTY AND EQUIPMENT, net 1,360,731 213,840
PATENTS AND TRADEMARKS, net of accumulated amortization
of $2,368 and $1,407 in 2001 and 2000, respectively 7,432 9,388
OTHER ASSETS 11,542 -
----------- -----------
$ 5,202,488 $ 6,851,539
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 67,750 $ 7,209
Accrued liabilities 16,625 39,912
----------- -----------
Total current liabilities 84,375 47,121
COMMITMENTS AND CONTINGENCIES - -
STOCK SUBJECT TO RESCISSION OFFER
Common stock, no par value; 1,508,908 and 1,561,248
shares issued and outstanding at September 30,
2001 and 2000, respectively 7,544,540 7,806,240
STOCKHOLDERS' DEFICIT
Common stock, no par value; 30,000,000 shares
authorized, 11,765,779 and 11,697,779 shares
issued and outstanding at September
30, 2001 and 2000, resepectively 751,010 731,290
Additional paid-in capital 1,714,954 1,714,954
Deficit accumulated during development stage (4,892,391) (3,448,066)
----------- -----------
(2,426,427) (1,001,822)
----------- -----------
$ 5,202,488 $ 6,851,539
=========== ===========
The accompanying notes are an integral part of these statements.
2
MIRENCO, Inc.
(a development stage company)
STATEMENTS OF OPERATIONS
(unaudited)
Period from
February 21,
Nine months Nine months 1997
ended ended (inception) to
September 30, September 30, September 30,
2001 2000 2001
------------- --------------- --------------
Sales $ 62,526 $ 53,593 $ 420,099
Cost of sales 25,993 116,046 413,151
----------- ----------- -----------
Gross profit (loss) 36,533 (62,453) 6,948
Salaries and wages 541,551 379,621 1,254,278
Stock-based compensation - - 1,933,054
Royalty expenses 1,876 1,608 23,709
Marketing and advertising 319,173 37,167 449,051
Other general and administrative expenses 594,401 289,245 1,663,086
----------- ----------- -----------
1,457,001 707,641 5,323,178
----------- ----------- -----------
Loss from operations (1,420,468) (770,094) (5,316,230)
Other income (expense)
Interest income 186,023 133,831 438,829
Interest expense - - (14,990)
----------- ----------- -----------
186,023 133,831 423,839
----------- ----------- -----------
NET LOSS $(1,234,445) $ (636,263) $(4,892,391)
=========== ============ ===========
Net loss per share available for common
shareholders - basic and diluted $ (0.09) $ (0.05)
=========== ============
Weighted-average shares outstanding -
basic and diluted 13,266,410 12,459,209
=========== ============
The accompanying notes are an integral part of these statements.
3
MIRENCO, Inc.
(a development stage company)
STATEMENTS OF OPERATIONS
(unaudited)
Three months Three months
ended ended
September 30, September 30,
2001 2000
------------------------- -------------------------
Sales $ 19,454 $ 6,913
Cost of sales 2,191 24,770
------------------------- -------------------------
Gross profit (loss) 17,263 (17,857)
Salaries and wages 191,728 112,418
Stock-based compensation - -
Royalty expenses 584 207
Marketing and advertising 80,644 28,140
Other general and administrative expenses 181,396 162,130
------------------------- -------------------------
454,352 302,895
------------------------- -------------------------
Loss from operations (437,089) (320,752)
Other income (expense)
Interest income 43,587 81,167
Interest expense - -
------------------------- -------------------------
43,587 81,167
------------------------- -------------------------
NET LOSS $ (393,502) $ (239,585)
========================= =========================
Net loss per share available for common
shareholders - basic and diluted $ (0.03) $ (0.02)
========================= =========================
Weighted-average shares outstanding -
basic and diluted 13,266,410 12,459,209
========================= =========================
The accompanying notes are an integral part of these statements.
4
MIRENCO, Inc.
(a development stage company)
STATEMENTS OF CASH FLOWS
(unaudited)
February 21,
Nine months Nine months 1997
ended ended (inception) to
September 30, September 30, September 30
2001 2000 2001
-------------- ------------- ------------
Cash flows from operating activities
Net loss $(1,234,445) $ (636,263) $(4,892,391)
Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities:
Stock-based compensation - - 1,933,054
Depreciation and amortization 42,095 10,610 62,107
(Increase) decrease in assets:
Accounts receivable 17,682 103,225 (22,685)
Inventories (19,079) (65,877) (111,580)
Other 102,579 (84,932) (1,694)
Increase (decrease) in liabilities:
Accounts payable 48,391 (75,849) 67,750
Accrued liabilities (33,926) (3,879) 16,625
-------------------- --------------- ----------------
Net cash used in operating activities (1,076,703) (752,965) (2,948,814)
Cash flows from investing activities
Purchase of property and equipment (750,043) (204,370) (1,419,654)
Purchase of patents and trademarks - (995) (10,795)
-------------------- --------------- ----------------
Net cash used in investing activities (750,043) (205,365) (1,430,449)
Cash flows from financing activities
Proceeds from sale of stock, net of offering costs 19,720 6,829,652 8,504,500
Refund of common stock in rescission offer (261,700) - (261,700)
Distribution to stockholders - (225,000) (240,200)
-------------------- --------------- ----------------
Net cash provided (used) by financing activities (241,980) 6,604,652 8,002,600
-------------------- --------------- ----------------
Change in cash and cash equivalents (2,068,726) 5,646,322 3,623,337
Cash and cash equivalents, beginning of period 5,692,063 711,612 -
-------------------- --------------- ----------------
Cash and cash equivalents, end of period $ 3,623,337 $6,357,934 $ 3,623,337
==================== =============== ================
The accompanying notes are an integral part of these statements.
5
MIRENCO, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows.
1. Nature of Business
MIRENCO, Inc. (the Company) was incorporated as an Iowa corporation in 1997.
The Company is a marketing company that distributes a variety of automotive and
aftermarket products for which they have exclusive licensing rights. The
products primarily reduce emissions and increase vehicle performance. The
Company's products are sold primarily in the domestic market.
2. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Interest income is
generated from cash invested in these short-term financial instruments.
3. Revenue Recognition
Revenue is recognized from sales when a product is shipped and from services
when they are performed.
4. Inventories
Inventories, consisting of purchased finished goods ready for sale, are stated
at the lower of cost (as determined by the first-in, first-out method) or
market.
5. Income Taxes
The Company accounts for income taxes under the asset and liability method
where deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates applied to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. Deferred tax assets are
recognized to the extent management believes that it is more likely than not
that they will be realized.
6. Patents and Trademarks
Patents and trademarks will be amortized on the straight-line method over their
remaining legal lives of approximately 9 years.
6
MIRENCO, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
7. Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation on the straight-line method over the estimated useful lives of
three years for computer equipment, five years for manufacturing and test
equipment and other equipment, and 39 years for building.
8. Impairment of Long-Lived Assets
Impairment losses are recognized for long-lived assets when indicators of
impairment are present and the undiscounted cash flows are not sufficient to
recover their carrying amounts. The impairment loss is measured by comparing
the fair value of the asset to its carrying amount.
9. Stock-Based Compensation
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation," and elected to continue the accounting set forth in Accounting
Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued
to Employees." This opinion requires that for options granted at less than
fair market value, a compensation charge must be recognized for the difference
between the exercise price and fair market value.
10. Net Loss Per Share
Basic net loss per share is calculated on the basis of the weighted-average
number of common shares outstanding during the periods, which includes the
effects of all stock splits. Net loss per share, assuming dilution, is
calculated on the basis of the weighted-average number of common shares
outstanding and the dilutive effect of all potential common stock equivalents.
Net loss per share assumes dilution for the nine months ended September 30,
2001 and 2000 is equal to basic net loss per share, since the effect of common
stock equivalents outstanding during the periods is antidilutive.
11. Fair Value of Financial Instruments
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, and accrued expenses. The carrying amounts of financial
instruments approximate fair value due to their short maturities.
12. Royalty Expense
Royalty expense is recorded and paid based upon the sale of products,
services, and rights related to patents according to a contractual agreement.
13. Advertising
Advertising costs are charged to expense as incurred.
7
MIRENCO, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
14. Offering Costs
Specific incremental costs directly attributable to the Company's equity
offerings, including advertisements in newspaper, radio and direct mail,
letters, printing costs and certain identifiable legal fees, are charged
against the gross proceeds of the offerings.
15. Software Development Costs
The Company capitalizes software development costs when project technological
feasibility is established and concludes when the product is ready for release.
To date, no amounts have been capitalized. Research and development costs
related to software development are expensed as incurred.
16. Research and Development
The Company expenses research and development costs as incurred. Such costs
include certain prototype products, test parts, consulting fees, and costs
incurred with third parties to determine feasibility of products.
17. Accounts Receivable
The Company considers accounts receivable to be fully collectible; accordingly
no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made.
18. Use of Estimates
In preparing financial statements in conformity with accounting standards
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
19. Basis of Presentation
The accompanying financial statements of Mirenco, Inc., included herein are
unaudited, but include all adjustments consisting of normal recurring accruals
which the Company deems necessary for a fair presentation of its financial
position, results of operations and cash flows for the interim period. Such
results are not necessarily indicative of results to be expected for the full
year. These financial statements do not include all disclosures provided in the
annual financial statements and should be read in conjunction with the annual
financial statements and notes thereto included in the Company's Form SB-2
filed on May 11, 2001.
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8
MIRENCO, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2001
NOTE B - STOCK SUBJECT TO RESCISSION OFFER
On August 12, 2000, the Company determined that resales of Iowa-Only shares by
Iowa residents to non-Iowa residents violated certain provisions of the
Securities Act of 1933. In response, the Company undertook an offering to
rescind the earlier Iowa-Only Offering in an offering effective January 26,
2001. The Rescission Offer terminated on February 26, 2001 with the result
that the Company refunded 52,340 shares or $261,700, incurring interest
expense of $14,990. As a result, at June 30, 2001, the 1,508,908 Iowa-Only
Offering Shares, in the amount of $7,544,540, are classified as temporary
equity. These shares will remain in temporary equity until such time as the
violations under the securities laws have been cured. Subsequent to the close
of the Rescission Offer, the Company believes that Iowa-Only Offering
Shareholders are estopped from alleging injury. However, the Company will
continue to be contingently liable to such shareholders during the statute of
limitations, a period of one year from the date of the Rescission Offer (or
three years from the date of the original offer). The Company is unable to
quantify the amount of any such contingent liability, among other reasons,
because the claim must be brought through individual lawsuit, the Company
intends to vigorously defend any such lawsuit believing it has valid defenses,
and, finally, management considers the probability that it will incur any
obligation under such contingent liability as remote. The Company will
continue to assess the effect of this contingent liability on its financial
statements during the period of the contingent liability.
[Balance of page left intentionally blank]
9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General and Background
We develop and market technologically advanced products for throttle
control of internal combustion vehicles to improve fuel efficiency, reduce
environmental emissions and reduce vehicle maintenance. Our primary products
are derived from technology patented in the U.S., Mexico and Canada and are:
DriverMax(R), DriverMax(R) Software, HydroFire(R) Injection, HydroFire(R) Fluid,
HydroFire(R) Lubricant and EconoCruise(R). Our newest product offering,
EconoCruise(R), is a new and improved version of our product line utilizing
other input sensors including Global Positioning System technology and ambient
sensor features. We believe we are the first to provide a product incorporating
Global Positioning System technology into a throttle-control application using
"Satellite-to-Throttle(TM)" technology. We intend to market our products both
domestically and internationally and intend to license our patented technology
to automakers for use on their new model vehicles. We expect our revenues to
increase as a result of the broader market penetration, license revenues,
service agreements and new products scheduled for introduction over the next 24
to 36 months.
As noted in Company news releases, three of our existing customers were
recently honored for clean air achievements by regulatory agencies:
Grand Canyon National Park Lodges proactive efforts to be environmentally
friendly helped its parent company, Amfac, win both a 2001 U.S. Department of
Interior Environmental Achievement Award and Travel Industry Association's
Odyssey Award. The company was one of the first to use DriverMax(R), our
computerized throttle modulating system that cuts pollution and saves fuel.
Recent tests show the company has cut pollution from their buses by an average
of 65% over the past eleven months. Exhaust data continues to minimize emissions
and maximize fuel.
As a long-time user of Mirenco's technologies, Five Seasons Transportation
operates the transit system for Cedar Rapids, Iowa and has earned both energy
efficiency and clean environment honors. Through the intelligent application of
effective technologies, Five Seasons has extended the life of their fleet while
maintaining operational and environmental efficiencies. Ranging in age from
1978 to 1982, Five Seasons' buses are virtually smoke-free, producing an average
emissions measurement of 6.33%. In comparison to new buses, this emissions
level is extraordinary, as even today's newest engine technology will often
produce emissions in the 5-10% range.
The Louisville, KY region has been reclassified as being in compliance with
the United States Environmental Protection Agency's (EPA) one-hour ozone
standard. For over three years, Mirenco has been involved in the Transit
Authority of River City (TARC) efforts to curb emissions and improve mileage.
According to TARC's records and Mirenco's emissions calculations, since
installation in 1999, Mirenco's technologies and services have continued to save
TARC tens of thousands of pounds of polluting emissions and tens of thousands of
gallons of fuel. In light of the ongoing success of the products, in August
2001, TARC signed up for an annual contract of continuing emissions testing and
evaluation services provided through Mirenco.
We believe the results achieved by these customers can be similarly
achieved by other fleet managers throughout the country. Our sales efforts in
2001 and 2002 will continue to address the emissions control and fuel savings
needs of transit authorities.
We have incurred losses during our fiscal years ended December 31, 2000 and
1999 while developing and introducing our original products and focusing
management and other resources on capitalizing the Company to support future
growth. DriverMax accounts for more than 90% of our product sales during our
development stage, being the most readily marketable of our fully developed
products. HydroFire units account for the remainder. No sales have been
conditioned on other performance or approval. The losses incurred to date are
considered normal for a development stage company. Other costs were incurred
during the past three years to prepare us for commercialization of our products,
including additional management, personnel, consultants and marketing
expenditures. We expect, as sales increase, there will also be increases in the
total amounts of distribution and selling, general and administrative expenses.
However, as a percentage of sales, these expenses should decline.
From July 30, 1999 through July 30, 2000, we raised $7,806,240 from our
Iowa-Only Offering. On August 12, 2000, we determined that resales of Iowa-Only
shares by Iowa residents to non-Iowa residents violated certain provisions of
the Securities Act of 1933. In response, we undertook an offering to rescind the
earlier Iowa-Only Offering in an offering effective January 26, 2001. The
Rescission Offer terminated on February 26, 2001 with the result that we
refunded 52,340 shares or $261,700, incurring interest expense of $14,990. As a
result, at June 30, 2001, the 1,508,908 Iowa-Only Offering Shares, in the amount
of $7,544,540, are classified as temporary equity. These shares will remain in
temporary equity until such time as the violations under the securities laws
have been cured. Subsequent to the close of the Rescission Offer, we believe
that Iowa-Only Offering Shareholders are estopped from alleging injury. However,
we will continue to be contingently liable to such shareholders during the
statute of limitations, a period of one year from the date of the Rescission
Offer (or three years from the date of the original offer). We are unable to
quantify the amount of any such contingent liability, among other reasons,
because the claim must be brought through individual lawsuit, we intend to
vigorously defend any such lawsuit believing we have valid defenses, and,
finally, we consider the probability that we will incur any obligation under
such contingent liability as remote. We will continue to assess the effect of
this contingent liability on our financial statements during the period of the
contingent liability.
10
Results of Operations
Sales increased $8,933 or 17% for the nine months ended September 30, 2001
compared to the same period at 2000. During our development stage, we have
continued to focus management and other resources on raising equity capital and
developing our products. This was again true during the first quarter of 2001
as we worked toward the effective date of the Resission Offer of January 26,
2001 and the termination of the offer on February 26, 2001. In 2001, we began
developing a new sales strategy founded upon collecting emissions data before
and after the use of our products and providing continuing emission testing
services of our installed products. In August 2001, we sold our first emissions
testing and evaluation service annual agreement. Approximately 66% of sales
during the quarter ending September 2001 were for services. Service sales are
expected to grow; however, future service sales will generally follow or
coincide with product sales. During the second and third quarters of 2001, we
focused our attention on our public announcement of our patents and testing
installations and other pre-sales efforts for new clients in the mining industry
and other public transits. Sales have occurred sporadically during the
development stage creating differences between comparative periods. No trends
or seasonality have yet to be identified.
Cost of sales decreased $90,053 or 78% from 2000 to 2001, costs
representing 214% and 41% of sales, respectively. The decrease in cost of sales
is related to the change in management focus during the first quarter to use
production personnel to gather data from existing customers to meet our ongoing
research and development and customer service needs and thus not be charged to
production overhead. Production overhead was further reduced because 2001 sales
were made to existing customers who required no installation assistance from us
or were service related. Management believes cost of sales will range between
40% and 60% of sales as increased unit sales levels cover production overhead
and unit costs.
Operating expenses increased $749,437 or 106% from 2000 to 2001. The
increase is primarily attributable to our second quarter marketing plan to
launch awareness of our patents and products. Cost of the launch in two major
national print publications was approximately $210,000. We also incurred
$20,000 more advertising expenses in 2001 than the comparable period in 2000
based on recording shareholder newsletter mailings as advertising expense
instead of a cost of fund raising. Throughout our self-underwritten, Iowa-Only
Offering, we updated shareholders and potential shareholders regarding Company
developments as a means to raise awareness and increase sales of the offer.
Such costs were recorded as offering costs, a decrement to shareholders equity.
Upon completion of the Iowa-Only Offering, we continued to incur similar costs;
however, these costs were expensed as incurred. Another $52,000 of the increase
in advertising expenses were incurred related to radio and other media to begin
marketing DriverMax(R) products. Approximately $162,000 of the increase from
2000 to 2001 resulted from the change in recording payroll as production
overhead to sales and R&D related expenses, adding medical benefits, and newly
hired employees. Legal costs increased approximately $88,000 as we incurred the
expense of a prepaid expense paid to our securities counsel in stock. The stock
was granted for work to complete registration of our Iowa-Only Offering shares
which was completed on May 14, 2001 on Form SB-2. Accounting services required
to complete the Recission Offer prospectus and registration resulted in an
additional $25,000 in 2001 compared to 2000. Another $93,000 increase in
operating expenses occurred as a result of new research and development efforts
including payments to U.S. DOE Kansas City Plant operated by Honeywell and
purchasing engine components for testing with our products. We incurred an
additional $58,000 in postage expense in 2001, partly related to mailing the
Rescission Offer to Iowa-Only Shareholders and in charges to deliver our patent
announcement directly to many individuals we determined could be interested in
our products and patents. Approximately $31,000 of the increase was incurred
from depreciation on the headquarters facility and new equipment. The remaining
approximately $10,000 was from other G&A changes.
Royalty expense for the nine months ended September 30, 2001 and 2000 was
3% of sales calculated per the patent purchase agreement with American
Technologies.
Our net loss increased from $636,185 in 2000 to $1,234,445 in 2001
primarily as a result of increased costs to complete the rescission offer, low
sales, and increased research and development and marketing efforts in 2001 to
collect emissions data from existing customers.
Changes in sales, cost of sales and operating expenses for the three months
ended September 30, 2001 compared to the three months ended September 30, 2000
mirror those for the nine months ended September 30, 2001, primarily product
advertising and increases in new hires in the third quarter of 2001. We also
completed construction of the new headquarters facility late in the second
quarter of 2001.
11
Liquidity and Capital Resources
We have not yet commenced generating substantial revenue. We expect to
fund development expenditures and incur losses until we are able to generate
sufficient income and cash flows to meet these expenditures and other
requirements. Having closed our Rescission Offer refunding $261,700 or 3.4% of
the original $7,806,240, we believe we currently have adequate cash reserves to
continue to cover anticipated expenditures and cash requirements.
Since our inception in 1997, we have primarily relied on the sources of
funds discussed in "Cash Flows" below to finance our testing and operations. We
believe that the proceeds raised from the Iowa-Only Offering, net of the
Rescission Offer, will be adequate to continue our operations, including the
contemplated expansion of sales efforts, inventories, and accounts receivable
through the next twelve months.
Since acceptance or the affirmative rejection or failure to respond to the
Rescission Offer does not act as a release of claims, eligible Iowa-Only
Offering Shareholders who have accepted, rejected or failed to respond to the
Rescission Offer would retain any rights of claim they may have under federal
securities laws. Any subsequent claims by an Iowa-Only Offering Shareholder
would be subject to any defenses we may have, including the running of the
statute of limitations and/or estoppel. In general, to sustain a claim based on
violations of the registration provisions of federal securities laws, the claim
must be brought within one year after discovery of the violation upon which the
claim is based in this case, based on the date of the prospectus (or three years
from the date of the original offer). Under the principle of estoppel, the
person bringing a claim must carry the burden of proof of why he or she took no
action under the rescission offer and/or how he or she may have been injured.
We have been evaluating financing and capitalization alternatives as part
of our long-term business plans. These alternatives include the sale of
preferred stock and warrants. To preserve operating funds, we have also
developed a strategic plan that provides for reductions of expenditures and a
prioritization of development options.
According to the terms of our purchase agreement with American Technologies
to acquire the patents and trademarks, we will pay a 3% royalty of annual gross
sales for a period of 20 years, which began November 1, 1999.
Cash Flows for the Nine Months Ended September 30, 2001 and 2000
Since our inception, February 21, 1997, through September 30, 2001, our
activities have been organizational, devoted to developing a business plan and
raising capital. Where these costs are indirect and administrative in nature,
they have been expensed in the accompanying statements of operations. Where
these costs relate to capital raising and are both directly attributable to our
offerings and incremental, they have been treated as offering costs in the
accompanying balance sheets. Therefore, all indirect costs, such as management
salaries, have been expensed in the period in which they were incurred.
Net cash used in operating activities for the nine months ended September
30, 2001 and 2000 was $1,076,703 and $752,965, respectively. The use of cash in
operating activities was primarily related to our net losses and significant
changes in working capital components, including payables and receivables.
Net cash used in investing activities for the nine months ended September
30, 2001 and 2000 was $750,043 and $205,365, respectively. The use of cash in
investing activities in 2001 was primarily attributed to approximately $726,000
construction and furnishing costs for our new headquarters facility.
Net cash used by financing activities during the nine months ended
September 30, 2001 was $241,980 compared to net cash provided by financing
activities of $6,604,652 during the nine months ended September 30, 2000. The
source of the financing in 2000 was proceeds from the issuance of shares of
common stock in our Iowa-Only Offering, while in 2001, we refunded $261,700 as a
result of the Rescission Offer. Some option holders excercised options during
May and early June 2001 accounting for $19,720 of new common stock issued,
representing 68,000 shares.
Recent Accounting Pronouncements
We do not believe any recently issued accounting standards will have an
impact on our financial statements.
12
Forward-looking Statements
Statements contained in this document which are not historical fact are
forward-looking statements based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
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13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Reference is made to Mirenco's Schedule 14C filed with the Securities &
Exchange Commission on July 13, 2001 for a description of the annual shareholder
meeting of August 18, 2001.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MIRENCO, INC.
Date: November 13, 2001 By: /s/ Dwayne Fosseen
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Dwayne Fosseen
Chairman and Chief
Executive Officer
Date: November 13, 2001 By: /s/ Darrell R. Jolley
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Darrell R. Jolley
Chief Financial Officer
14