<PAGE>
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 November 30, 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
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(Address of Principal Executive Offices)
(201) 507-8300
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(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: 3,499,180 as of January
17, 1996
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WATER-JEL TECHNOLOGIES, INC.
INDEX
PART I
ITEM 1. Financial Information Page No.
Balance Sheet
November 30, 1995 and August 31, 1995 . . . . . . . . . . 3
Statement of Operations
Three Months Ended November 30, 1995 and 1994 . . . . . . 4
Statement of Cash Flows
Three Months Ended November 30, 1995 and 1994 . . . . . . 5
Notes to 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
2
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WATER-JEL TECHNOLOGIES, INC.
BALANCE SHEET
NOVEMBER 30, AUGUST 31,
1995 1995
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,343,315 $ 2,924,322
Accounts receivable, net of allowance for
doubtful accounts of $25,000 for November 30,
1995 and August 31, 1995, respectively 494,752 631,829
Inventories (Note 2) 1,116,842 1,113,369
Notes receivable (Note 4) 175,000 325,000
Deferred income taxes 136,000 136,000
Prepaid expenses and other current assets 134,400 136,603
----------- -----------
TOTAL CURRENT ASSETS 5,400,310 5,267,123
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of
$1,250,399 at November 30, 1995
$1,222,807 at August 31, 1995 1,002,256 1,062,224
OTHER ASSETS:
Patents and trademarks, net of accumulated
amortization of $84,058 at November 30, 1995
and $78,888 at August 31, 1995 130,875 136,044
Marketable securities available for sale at
fair value (Note 3) 1,233,900 1,255,931
Deferred income taxes (Note 7) 224,250 218,728
Other assets 347,612 367,129
----------- -----------
TOTAL ASSETS $ 8,339,202 $ 8,307,179
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 448,916 $ 479,822
Current portion of long-term debt 29,400 39,200
----------- -----------
TOTAL CURRENT LIABILITIES 478,316 519,022
----------- -----------
LONG-TERM DEBT 129,900 129,900
----------- -----------
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 279,934 279,934
Preferred stock, $.08 par value;
authorized 125,000 shares; -0-
issued and outstanding - -
Unrealized gain on investments reported
at fair value 441,750 450,759
Additional paid-in capital 9,633,335 9,633,335
Deficit (2,624,033) (2,705,771)
----------- -----------
7,730,986 7,658,257
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,339,202 $ 8,307,179
=========== ===========
See notes to financial statements.
3
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WATER-JEL TECHNOLOGIES, INC.
STATEMENT OF EARNINGS
(Unaudited)
THREE MONTHS ENDED
NOVEMBER 30,
1995 1994
REVENUES:
Sales, net $1,024,701 $1,257,698
Interest income 20,423 35,262
Other income 29,245 -
---------- ----------
1,074,369 1,292,960
COST AND EXPENSES:
Cost of goods sold 422,143 433,371
Selling, administrative
and general 566,563 725,212
Interest expense 3,925 2,625
---------- ----------
992,631 1,161,208
NET INCOME $ 81,738 $ 131,752
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NET INCOME PER COMMON SHARE
PRIMARY $ 0.02 $ 0.04
========== ==========
ASSUMING FULL DILUTION $ 0.02 $ 0.04
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
PRIMARY 3,547,716 3,499,199
========== ==========
ASSUMING FULL DILUTION 3,623,005 3,499,199
========== ==========
See notes to financial statements.
4
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WATER-JEL TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
November 30,
1995 1994
Cash flows from operating activities:
Net income $ 81,738 $ 131,752
---------- ----------
Adjustment to reconcile net income to net
cash provided by operating activities:
Gain on sale of marketable securities (29,250) -
Depreciation and amortization 55,763 52,932
Gain on sale of property and equipment (3,500)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 137,077 198,626
Inventories (3,473) (74,620)
Prepaid expenses and other current assets 2,203 (56,667)
Other assets 19,517 52,328
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (30,906) 161,346
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Total adjustments 147,431 333,945
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Net cash provided by operating
activities 229,169 465,697
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Cash flows from investing activities:
Investment in marketable securities - (393,900)
Proceeds from sale of marketable securities 36,750 937,500
Acquisition of property and equipment (2,126) (87,957)
Proceeds from sale of property and equipment 15,000 -
Notes receivable 150,000 (340,000)
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Net cash provided by investing activities 199,624 115,643
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Cash flows from financing activities:
Proceeds from issuance of debt - 167,923
Principal payment of long-term debt (9,800) (2,575)
---------- ----------
Net cash provided by (used in)
financing activities (9,800) 165,348
---------- ----------
Net increase in cash and cash equivalents 418,993 746,688
Cash and cash equivalents -
beginning of period 2,924,322 2,077,893
---------- ----------
Cash and cash equivalents -
end of period $3,343,315 $2,824,581
========== ==========
See notes to financial statements.
5
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WATER-JEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
November 30, 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 November 30, 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, 1995.
2. INVENTORIES CONSISTED OF:
November 30, 1995 August 31, 1995
----------------- ---------------
(unaudited)
Raw Materials $ 707,996 $ 733,481
Finished goods 408,846 379,888
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$1,116,842 $1,113,369
========== ==========
6
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WATER-JEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
3. INVESTMENT IN MARKETABLE SECURITIES
In September 1995, the Company sold 5,000 shares of common stock of a
corporation which is affiliated with one of the Company's
directors/shareholders. The Company received net proceeds from the sale
of this security of approximately $36,750. As of January 15, 1996, the
Company still owns 285,000 shares of common stock of this corporation
with a market price of $6.00 per share.
4. NOTES RECEIVABLE
In March 1995, the Company loaned $150,000 to a corporation with which
one of the Company's directors/shareholders has a consulting
agreement. This note was fully repaid with interest in November 1995.
In consideration for the loan the Company received 140,000 warrants.
In November 1995, the corporation completed an initial public offering
of securities. Concurrently with that offering it registered the
Company's warrants for public resale. In January 1996, the Company
sold its 140,000 warrants and received net proceeds from the sale of
approximately $98,000.
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.
It expects to provide additional such financings in the immediate
future.
5. SUPPLEMENTARY INFORMATION - STATEMENTS OF CASH FLOWS:
The Company paid interest of $3,925 and $2,625 for the three months
ended November 30, 1995 and 1994, respectively.
6. EARNINGS PER SHARE:
Earnings per common share has been computed using the weighted average
number of common shares outstanding during each period presented.
7. 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
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Net sales for the three months ended November 30, 1995 and 1994,
respectively, were approximately $1,025,000 and $1,258,000, representing a 19%
decrease in sales. Sales for the quarter ended November 30, 1994 were higher
than usual because they included opening orders related to the Company's
domestic consumer rollout in the south east and sales to a foreign government.
Additionally, effective September 1, 1995, the Company reduced its pricing on
certain items from its First Aid Product Line for Burns. The price reductions
are designed to increase market share and consequently increase sales. The
decrease in sales in the current quarter are principally attributable to these
factors.
Cost of goods for the three months ended November 30, 1995 and 1994
were approximately $422,000 as compared to $433,000, representing 41% and 34% of
net sales, respectively. The increase in cost of goods sold is a direct result
of the Company's price reduction. Selling, general and administrative expenses
for the three months ended November 30, 1995 and 1994 were approximately
$570,000 as compared to $728,000, representing a $158,000 decrease in expenses
for the current period. During the quarter ended November 30, 1994, the Company
incurred approximately $160,000 in consumer related advertising cost which were
not incurred in the current period.
LIQUIDITY AND CAPITAL RESOURCES:
At November 30, 1995 the Company had working capital of approximately
$4,922,000 as compared to $4,748,000 at August 31, 1995. In September 1995, the
Company sold 5,000 shares of common stock of a corporation which is affiliated
with one of the Company's directors/shareholders. The Company received net
proceeds from the sale of this security of approximately $36,750. As of January
15, 1996, the Company still owns 285,000 shares of common stock of this
corporation with a market price of $6.00 per share. In March 1995, the Company
loaned $150,000 to a corporation with which one of the Company's
directors/shareholders has a consulting agreement. This note was fully repaid
with interest in November 1995. In consideration for the loan the Company
received 140,000 warrants which were registered in November 1995 with that
corporations initial public offering. In January 1996, the Company sold its
140,000 warrants and received net proceeds of from the sale of these warrants of
approximately $98,000.
The consolidated statement of cash flows for the period ended November
30, 1995 reflects net cash provided by operating activities of $229,169. Cash
provided by investing activities was
8
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$199,624, consisting of proceeds from the sale of a marketable security of
$36,750, payment of a notes receivable of $150,000, proceeds from the sale of
property and equipment of $15,000 less acquisitions of property and equipment of
$2,126.
The Company believes that it has adequate working capital for at least
the next twelve months of operations at current levels. As of January 19, 1996
the Company had approximately $3,100,000 in cash.
9
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PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
In fiscal 1995, a lawsuit was commenced against the Company by Nortrade
International, Inc. in the United States District Court of Utah. See
Item 3. - Legal Proceedings in the Company's form 10-KSB for fiscal
year end August 31, 1995 for further information.
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
10
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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: January 19, 1996
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> NOV-30-1995
<CASH> 3,343,315
<SECURITIES> 0
<RECEIVABLES> 519,752
<ALLOWANCES> 25,000
<INVENTORY> 1,116,842
<CURRENT-ASSETS> 5,400,310
<PP&E> 2,252,655
<DEPRECIATION> 1,250,399
<TOTAL-ASSETS> 7,730,986
<CURRENT-LIABILITIES> 478,316
<BONDS> 129,900
0
0
<COMMON> 279,934
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,009,302
<SALES> 1,024,701
<TOTAL-REVENUES> 1,074,369
<CGS> 422,143
<TOTAL-COSTS> 422,143
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,925
<INCOME-PRETAX> 81,738
<INCOME-TAX> 0
<INCOME-CONTINUING> 81,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,738
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
