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U.S. 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 May 31, 1995
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission file number 0-13049
_______
WATER-JEL TECHNOLOGIES, INC.
_______________________________________________________________________
(Exact Name of Small Business Issuer as Specified in its charter)
NEW YORK 13-3006788
___________________________________ ______________________
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
243 VETERANS BOULEVARD, CARLSTADT, NEW JERSEY 07072
______________________________________________________________________
(Address of Principal Executive Offices)
(201) 507-8300
______________________________________________________________________
(Issuer's Telephone Number, Including Area Code)
______________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
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 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 ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes _____ 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: 3,499,199
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WATER-JEL TECHNOLOGIES, INC. AND SUBSIDIARY
INDEX
PART I
ITEM 1. Financial Information Page No.
Consolidated Balance Sheets
May 31, 1995 and August 31, 1994 . . . . . . . . . . . . 3
Consolidated Statements of Earnings
Nine and Three Months Ended
May 31, 1995 and 1994 . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
Nine Months Ended May 31, 1995 and 1994 . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . 6-7
ITEM 2. Management's Discussion and Analysis of
the Financial Condition and
Results of Operations . . . . . . . . . . . . . . 8-9
PART II
Other Information . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . 11
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WATER-JEL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MAY 31, AUGUST 31,
1995 1994
ASSETS (Unaudited) ---------
---------
CURRENT ASSETS:
Cash and cash equivalents $ 2,580,715 $ 2,077,893
Accounts receivable, net of allowance for
doubtful accounts of $25,000 for May 31,
1995 and August 31, 1994, respectively 782,438 823,098
Inventories (Note 2) 1,215,278 854,437
Notes receivable (Note 3) 450,000 300,000
Due from the sale of marketable securities - 937,500
Deferred income taxes 133,000 133,000
Prepaid expenses and other current assets 227,855 166,005
----------- -----------
TOTAL CURRENT ASSETS 5,389,286 5,291,933
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of
$1,170,957 at May 31, 1995
$1,044,007 at August 31, 1994 1,026,239 989,312
OTHER ASSETS:
Patents and trademarks, net of accumulated
amortization of $72,777 at May 31, 1995
and $54,445 at August 31, 1994 142,155 160,487
Investment in securities 543,900 150,000
Other assets 373,305 386,606
----------- -----------
TOTAL ASSETS $ 7,474,885 $ 6,978,338
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 654,444 $ 530,172
Current portion of long-term debt 43,500 10,300
----------- -----------
TOTAL CURRENT LIABILITIES 697,944 540,472
----------- -----------
LONG-TERM DEBT 115,220 17,744
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.08 par value, authorized
12,500,000 shares; 3,499,199 issued and
outstanding at May 31, 1995 and
August 31, 1994, respectively 279,936 279,936
Preferred stock, $.08 par value;
authorized 125,000 shares; -0-
issued and outstanding - -
Additional paid-in capital 9,633,333 9,633,333
Deficit (3,251,547) (3,493,147)
----------- -----------
6,661,722 6,420,122
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 7,474,885 $ 6,978,338
=========== ===========
See notes to consolidated financial statements.
3
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WATER-JEL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
MAY 31, MAY 31,
----------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
REVENUES:
Sales, net $ 3,690,540 $ 3,207,687 $ 1,313,095 $ 1,218,921
Interest income 98,713 41,409 26,765 11,782
---------- ---------- ---------- ----------
3,789,253 3,249,096 1,339,860 1,230,703
COST AND EXPENSES:
Cost of goods sold 1,411,265 1,257,049 484,815 455,873
Selling, administrative
and general 2,124,168 1,818,395 807,837 654,802
Interest expense 12,220 2,355 6,150 757
---------- ---------- ---------- ----------
3,547,653 3,077,799 1,298,802 1,111,432
NET INCOME $ 241,600 $ 171,297 $ 41,059 $ 119,271
========== ========== ========== ==========
NET INCOME PER COMMON
SHARE $ 0.07 $ 0.05 $ 0.01 $ 0.03
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 3,499,199 3,498,741 3,499,199 3,499,199
========== ========== ========== ==========
See notes to consolidated financial statements.
4
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WATER-JEL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
May 31,
-----------------
1995 1994
---- ----
Cash flows from operating activities:
Net income $ 241,600 $ 171,297
----------- ----------
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 145,281 166,637
Loss on sale of property and equipment - 11,326
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 40,660 287,019
Inventories (360,841) (114,322)
Prepaid expenses and other current assets (61,850) (3,776)
Other assests 13,301 (44,965)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 124,272 (14,425)
----------- ----------
Total adjustments (99,177) 287,494
----------- ----------
Net cash provided by operating
activities 142,423 458,791
----------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (163,877) (9,838)
Acquisition of patent and trademark - (22,891)
Investment in marketable securities (393,900) -
Proceeds from sale of marketable securities 937,500 -
Notes receivable (150,000) (300,000)
----------- ----------
Net cash provided by (used in)
investing activities 229,723 (332,729)
----------- ----------
Cash flows from financing activities:
Principal payment of long-term debt (37,247) (7,725)
Proceeds from issuance of debt 167,923 2,250
----------- ----------
Net cash provided by (used in)
financing activities 130,676 (5,475)
----------- ----------
Net increase (decrease) in cash and cash equivalents 502,822 120,587
Cash and cash equivalents -
beginning of period 2,077,893 1,629,539
----------- ----------
Cash and cash equivalents -
end of period $ 2,580,715 $ 1,750,126
=========== ==========
See notes to consolidated financial statements.
5
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WATER-JEL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
May 31, 1995
1. BASIS OF QUARTERLY PRESENTATION:
The accompanying quarterly financial statements have been prepared in
conformity with generally accepted accounting principles.
The financial statements of the Registrant included herein have been prepared
by the Registrant pursuant to the rules and regulations of the Securities and
Exchange Commission and, in the opinion of management, reflect all adjustments
which are necessary to present fairly the results for the period ended May 31,
1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations; however,
management believes that the disclosures are adequate to make the information
presented not misleading. This report should be read in conjunction with the
financial statements and footnotes therein included in the audited annual report
on Form 10-KSB as of August 31, 1994.
2. INVENTORIES CONSISTED OF:
May 31, 1995 August 31, 1994
------------ ---------------
(unaudited)
Raw Materials $ 731,134 $ 529,526
Finished goods 484,144 324,911
--------- ---------
1,215,278 $ 854,437
--------- ---------
--------- ---------
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WATER-JEL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. NOTES RECEIVABLE
In March 1995, the Company received three units related to a bridge loan for
approximately $150,000 in a corporation which has signed a letter of intent to
complete an initial public offering. This corporation has also entered into a
consulting agreement with one of the Company's shareholders/directors. This loan
is evidenced by a note bearing interest at 8% per annum, payable by March 27,
1996 or if earlier the completion of an initial public offering. It is expected
that the three units received through the bridge loan will be registered with
that company's pending offering.
The Company has from time to time provided financing to emerging companies. The
Company believes that such investments may be an area of significant opportunity
notwithstanding the significant risks involved.
4. SUPPLEMENTARY INFORMATION - STATEMENTS OF CASH FLOWS:
The Company paid interest of $12,220 and $2,355 for the nine months ended May
31, 1995 and 1994, respectively.
5. EARNINGS PER SHARE:
Earnings per common share has been computed using the weighted average number of
common shares outstanding during each period presented.
6. INCOME TAXES:
The Company has adopted the Financial Accounting Standards new standard on
accounting for income taxes, Statement No. 109. Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities, and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
7. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, The Tea Tree Company, Inc., whose operations were
immaterial. All intercompany balances and transactions have been eliminated.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
For the nine months ended May 31, 1995 and 1994, the Company generated net
sales of approximately $3,691,000 and $3,208,000, representing a 15% increase in
sales. For the three months ended May 31, 1995 and 1994, the Company generated
net sales of approximately $1,313,000 and $1,219,000, representing an 8%
increase in sales in the current quarter.
Cost of goods sold approximated $1,411,000 and $1,257,000 for the nine months
ended May 31, 1995 and 1994, representing 38% and 39% of net sales. Cost of
goods sold for the three months ended May 31, 1995 and 1994 approximated
$485,000 and $456,000, representing 36% and 37% of net sales, respectively.
Selling, administrative and general expenses increased approximately $316,000
and $158,000 for the nine and three months ended May 31, 1995, respectively.
The increase in these costs are attributed to the Company's consumer advertising
program.
LIQUIDITY AND CAPITAL RESOURCES:
At May 31, 1995, the Company had working capital of approximately $4,691,000
as compared to $4,751,000 at August 31, 1994. In November 1993, the Company
loaned $50,000 to a corporation which is affiliated with one of the Company's
directors/stockholders. This loan was evidenced by a note bearing interest at
6% per annum, payable by January 31, 1995 or the completion of that Company's
pending offering of securities. In January 1994, the Company also loaned
$250,000 to a non-affiliated company. This loan was evidenced by a note bearing
interest at 8% per annum, and was payable by August 31, 1994. As of July 1995
both of these loans were unpaid and the Company is pursuing collection of them.
In March 1995, the Company received three units related to a bridge loan for
approximately $150,000 in a corporation which has signed a letter of intent to
complete an initial public offering. This corporation has also entered into a
consulting agreement with one of the Company's shareholder/director. This loan
is evidenced by a note bearing interest at 8% per annum, payable by March 27,
1996 or if earlier the completion of an initial public offering. It is expected
that warrants included in the three units received through the bridge loan will
be registered with that company's pending offering.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some methods of consumer marketing, such as national media advertising would
require significant expenditures in excess of the Company's current capital
resources. In the event that additional funding may be required the Company
might seek to encourage the exercise of its redeemable publicly traded Warrants
or make a private placement of its securities. The Company has at present no
plans or arrangement to raise additional capital by either method.
The Company believes that it has adequate working capital for at least the
next twelve months of operations at current levels.
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PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
In June 1995, a lawsuit was commenced against the Company by Nortrade
International, Inc. ("Nortrade") in the United States District Court of Utah
(Case No. 2:95CV-565s). Nortrade also manufactures burn care products. The
lawsuit alleges that the Company engaged in various fraudulent and unfair
activities injurious to Nortrade's business, and seeks monetary damages and
injunctions prohibiting the Company from engaging in these activities, including
communicating with Nortrade's customers and the Federal Food and Drug
Administration regarding Nortrade's products. The lawsuit also seeks a
declaratory judgement that Nortrade's trademark does not infringe on the
Company's trademarks. The Company intends to vigorously defend against the
lawsuit. The Company believes Nortrade is infringing upon the Company's
trademarks, and intends to file counterclaims against Nortrade regarding
trademark infringement and possibly other matters.
ITEM 2 - Changes In Securities
None
ITEM 3 - Defaults on Senior Securities
None
ITEM 4 - Submission to a Vote of Security Holders
None
ITEM 5 - Other Information
None
ITEM 6 - Exhibits and Reports on Form 8-K
(a) None
(b) None
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WATER-JEL TECHNOLOGIES, INC.
243 VETERANS BOULEVARD
CARLSTADT, N.J. 07072
________________________
FILE # 0-13049
________________________
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BY: /s/ Peter D. Cohen
------------------
PETER D. COHEN,
PRESIDENT
BY: /s/ Alex M. Alaminos
--------------------
ALEX M. ALAMINOS,
CONTROLLER
DATE: July 18, 1995
