UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO ______
COMMISSION FILE NUMBER 1-6496
LUNDELL TECHNOLOGIES, INC.
================================================================================
(Exact name of small business issuer as specified in its charter)
WASHINGTON 91-0413022
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(State or other jurisdiction of (I.R.S Employer
incorporation or organization) identification No)
45 Orchard St., Manhasset, New York 11003
- ------------------------------------------ ------------------
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (516) 869-7960
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (x) No ( )
1
<PAGE>
The number of shares outstanding of the issuers common stock, par value
$.001 per share, at January 31, 1997 was 5,165,500 shares.
2
<PAGE>
LUNDELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, 1997 October 31, 1996
---------------- ----------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 588,265 $ 360,802
Accounts receivable, trade 491,732 47,173
Inventories 1,458,882 1,290,908
Deferred income taxes 326,000 326,000
Prepaid expenses and other current assets 122,779 109,449
----------- -----------
Total current assets 2,987,658 2,134,332
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PROPERTY, PLANT AND EQUIPMENT, NET 6,209,623 6,002,213
----------- -----------
OTHER ASSETS:
Intangible asset, net 1,952,880 1,986,592
Deposit on building -- 46,150
Other Assets 4,200
----------- -----------
1,957,080 2,032,742
----------- -----------
$11,154,361 $10,169,287
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES:
Accounts payable--trade $ 409,895 $ 173,121
Accrued expenses--related parties 30,185 250,985
Advances on contract--related parties 1,671,298 519,435
Advances on contracts -- 225,149
Current maturities of long-term debt 61,000 61,000
Accrued expenses and other current liabilities 388,328 409,948
----------- -----------
Total current liabilities 2,560,706 1,639,638
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LONG TERM LIABILITES:
Long-term debt 405,682 414,682
Notes payable--related parties 895,288 871,529
Deferred income taxes 2,007,000 2,007,000
---------- ---------
3,307,970 3,293,211
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STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; 20,000,000
shares authorized; 5,165,500 shares issued 5,165 5,165
Additional paid-in capital 5,644,100 5,644,100
Accumulated deficit (363,580) (412,827)
----------- -----------
Total stockholders' equity 5,285,685 5,236,438
----------- -----------
$11,154,361 $10,169,287
=========== ===========
</TABLE>
3
<PAGE>
LUNDELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
----------------------------------
January 31, 1997 January 31, 1996
---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 1,351,545 $ 41,199
COST OF SALES 464,639 44,553
----------- -----------
GROSS PROFIT 886,906 (3,354)
----------- -----------
OPERATING EXPENSES (INCOME)
Selling 187,363 62,368
General and administrative 357,654 127,570
Depreciation and amortization 275,603 93,552
Interest expense 22,751 35,948
Interest income (5,711) (4,102)
----------- -----------
837,660 (315,336)
----------- -----------
NET INCOME BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES
AND EXTRAORDINARY ITEM 49,246 (318,690)
PROVISION (BENEFIT) FOR INCOME TAXES 10,000 (126,000)
----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 39,246 (192,690)
EXTRAORDINARY ITEM, TAX
BENEFIT FROM NET OPERATING
LOSS CARRYFORWARD 10,000
----------- -----------
NET INCOME (LOSS) $ 49,246 $ (318,690)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ .01 $ (0.04)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,165,500 5,000,000
=========== ===========
</TABLE>
4
<PAGE>
LUNDELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended
January 31, 1997
------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 49,246
Adjustments to reconcile net income
to net cash provided by operating activities: --
Depreciation and amortization 275,603
Changes in assets and liabilities:
Accounts receivable (444,559)
Inventories (167,974)
Prepaid expenses and other current assets (13,330)
Accounts payable and accrued expenses 15,975
Accrued compensation and withholdings (21,620)
Advances on contracts 926,714
--------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 620,055
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (403,151)
Other (4,200)
--------
NET CASH USED IN INVESTING ACTIVITIES (407,351)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from related parties 23,759
Payment of long term debt (9,000)
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,759
--------
NET CHANGE IN CASH 227,463
CASH-BEGINNING 360,802
--------
CASH-ENDING $588,265
========
5
<PAGE>
LUNDELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
(UNAUDITED)
NOTE A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principals for interim
financial information and the instructions to Form 10-QSB and article 10 of
Regulation S-X. Accordingly, they do not include all information and footnotes
required by generally accepted accounting principals for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. Operating results for the three
month period ended January 31, 1997 are not necessarily indicative of results
that may be expected for the year ending October 31, 1997. For further
information, refer to the consolidated financial statements and footnotes,
thereto included in the Company's annual report on Form 10-KSB for the year
ended October 31, 1996.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains trend information and other forward
looking statements that involve a number of risks and uncertainties. The
Company's actual results could differ materially from the Company's historical
results of operations and those discussed in the forward-looking statements.
Factors that could cause actual results to differ materially include, but are
not limited to, those identified.
IN REVIEWING MANAGEMENT'S DISCUSSION AND ANALYSIS, REFERENCE SHOULD BE MADE TO
THE FINANCIAL STATEMENT AND NOTES THERETO INCLUDED IN THE ANNUAL REPORT ON FORM
10-KSB AND THE FINANCIAL STATEMENTS AND NOTES THERETO ON THIS FORM 10-QSB.
OVERVIEW
The Company operates principally to facilitate the sale of domestic product
to foreign markets.
Lundell Manufacturing is engaged principally in the manufacturing and
worldwide distribution of solid waste recycling equipment. Lundell Manufacturing
holds nine patents and over 169 patents pending in waste processing systems.
Lundell Manufacturing also manufactures and sells replacement parts for a line
of agricultural equipment it previously manufactured and sold throughout the
United States.
Lundell Aquametrics, Inc. designs, markets and installs water recycling
systems and components for a variety of industrial applications.
In January 1996, the Company entered into an agreement to sell four of its
recycling systems for approximately $7 million to Tung Bua Ltd., a Thailand
corporation. The sale price is to be paid through the issuance of irrevocable
letters of credit to the Company through a Thailand bank. In September 1996, the
Company received an initial deposit of $519,435. As of April 1, 1997, the
Company has received additional progress payments of approximately $1,900,000.
On August 23, 1996 the Company agreed to issue a credit to Tung Bua Ltd. in the
amount of $1,600,000 and the Company will acquire a one-third interest in Tung
Bua Ltd. when certain conditions are met. The Company has guaranteed $1,920,000,
representing one-third of certain bank borrowings of Tung Bua Ltd.
7
<PAGE>
ANALYSIS OF FINANCIAL RESULTS FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AS
COMPARED TO THE THREE MONTHS ENDED JANUARY 31, 1996
Net sales increased approximately $1,300,000 which is an increase in excess of
three thousand percent. This increase is attributable to an increase in the sale
of recycling and related equipment, initial revenues on certain substantial
contracts being recognized pursuant to the percentage of completion during the
three months being reported, and revenues from the sales of the water recycling
systems and components which did not exist in the comparable quarter.
Cost of sales have increased as a result of the expenses required to fulfill the
increase in sales as discussed previously.
Operating expenses have increased due to the costs incurred by the water
recycling systems and components subsidiary, marketing and certain other one
time charges relating to seeking additional sales of the Company's products and
additional costs required by the dramatic increase in the current and
anticipated future sales growth of the Company.
FINANCIAL CONDITION AND LIQUIDITY
As of January 31, 1997, the Company had cash of $588,265, working capital
of $426,952, and $5,285,685 of stockholders' equity. Operating activities
provided cash of $620,055 for the quarter ended January 31, 1997.
On December 16, 1996, the Company purchased a building in Manhasset, New
York for $417,500 in cash. The seller is permitted to rent approximately half
the building through August 31, 1997. The Company has no additional significant
commitments for capital expenditures for Fiscal 1997.
The company plans that all current and future foreign sales will be made
pursuant to irrevocable letters of credit with structured payments. The rapid
growth of the Company may require additional capital resources. Should the
Company's cash flow from operations not be sufficient to meet all of its
requirements, the company would seek additional capital through the issuance of
stock in the public market, private financing and/or joint ventures.
8
<PAGE>
LUNDELL TECHNOLOGIES AND SUBSIDIARY
OTHER INFORMATION
Item 1 Legal Proceedings
No new legal proceedings or material development has occurred
in this quarter. For further information regarding pending
legal proceedings, refer to the Company's annual report on
Form 10-KSB for the year ended October 31, 1996
Items 2-5 Inapplicable
Item 6 Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
9
<PAGE>
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.
Lundell Technologies, Inc.
- --------------------------
(Registrant)
/s/ BERNARD ARTZ
-----------------------------------
Bernard Artz, Authorized
Officer and Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED BALANCE SHEET AS OF JANUARY 31, 1997 AND UNAUDITED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 588,265
<SECURITIES> 0
<RECEIVABLES> 497,732
<ALLOWANCES> 6,000
<INVENTORY> 1,458,882
<CURRENT-ASSETS> 2,987,658
<PP&E> 8,754,584
<DEPRECIATION> 544,961
<TOTAL-ASSETS> 11,154,361
<CURRENT-LIABILITIES> 2,560,706
<BONDS> 0
<COMMON> 5,165
0
0
<OTHER-SE> 5,280,520
<TOTAL-LIABILITY-AND-EQUITY> 11,154,361
<SALES> 1,351,545
<TOTAL-REVENUES> 1,351,545
<CGS> 464,639
<TOTAL-COSTS> 464,639
<OTHER-EXPENSES> 837,660
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,751
<INCOME-PRETAX> 49,246
<INCOME-TAX> 10,000
<INCOME-CONTINUING> 39,246
<DISCONTINUED> 0
<EXTRAORDINARY> 10,000
<CHANGES> 0
<NET-INCOME> 49,246
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
