Floorless Debenture for AIRG?
RESULTS OF OPERATIONS FOR THE QUARTER ENDED AUGUST 31, 2001 COMPARED TO THE
QUARTER ENDED AUGUST 31, 2000
REVENUES
Our consolidated total revenues decreased $105,012 or 20.2% from $518,637 for the three months ended August 31, 2000 compared to the three months ended August 31, 2001 of $413,,625. This decrease in sales is due to the cessation of sales from the consumer direct sale franchise group. In the first quarter, August 31, 2000 the Company opened four retail outlets for sale of the portable unit. These stores were closed in March 2001.
COSTS AND EXPENSES
Our consolidated total costs and expenses decreased $524,352 or 45% from $1,152,668 in 2000 to $628,316 in 2001. The major components of this $524,352 decrease were:
Salaries and wages decreased $236,468 or 69% from $340,650 in 2000 to $104,182 for 2001. This decrease is the result of many factors including decreased commissions on sales of our products through the retail direct sale stores. Also, we have decreased the total number of employees (outside of the retail store group) by seven individuals. In addition, management has reduced and/or eliminated their personal salaries.
Cost of sales decreased $55,706 or 19% to $228,766 for 2001 as compared to $284,766 for 2000. This decrease is due to the 20% decrease in product sales. The percentage cost of goods sold remained constant at 55% of sales in 2000 and 2001. The higher gross margins of the retail direct sale stores sales were replaced by higher margin sales of the Company's newest product, the Model S-30.
Research and development costs decreased $44,249 from $75,250 in August 31, 2000 to $31,001 in costs for August 31, 2001. This decrease of 59% is due to the reduction of costs associated with the completion of the Model S-30 for sale.
Advertising costs decreased $92,749 to $30,855 for 2001 from $123,604 for 2000. This is a 75% decrease in costs. The decrease is due to the introduction of new products and the implementation of our new residential franchise sales approach, which increased promotional costs, including brochures and travel expenses for the August 31, 2000 quarter and no similar costs in 2001.
Depreciation and amortization increased $28,467 to $106,654 for the three months ended August 31, 2001 compared to $78,187 for 2000. This increase is primarily due to increased amortization of prepaid royalties.
General and administrative expenses decreased $123,647 to $126,858 for the three months ended August 31, 2001 from $250,505 in 2000. This 49% decrease is due to decreases in litigation expenses of legal fees and settlement costs. The decrease in facilities costs after combining the office and warehouse functions in one location. In addition, outside consultant fees and investment bankers fees decreased during 2001.
Interest expense of $171,615 for 2001 is $109,005 higher or 174% than the $62,610 interest expense in 2000, due to the interest accrual on the outstanding 6% debentures issued in February 2000 and the 12% debentures issued in March and July 2001. In addition, the 12% convertible debentures sold in March and July 2001 contained an imbedded beneficial conversion feature, wherein an additional $92,115 in interest was charged as interest expense and as a discount to the debentures.
The result of these revenues and costs and expenses is a net loss of $(386,306) or ($0.01) per share of common stock (basic and diluted)for the three months ended August 31, 2001 compared to a net loss of $(696,641) or ($0.03) per share of common stock for the three months ended August 31, 2000. This represents a 45% decrease in our net loss and a $0.02 decrease in loss per share of our common stock compared to 2000. The average number of shares of our common stock increased from 2000 to 2001 so the loss per share on our common stock is not comparable. |
