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<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON 25, D.C. 20549
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1995 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from ______ to ______
Commission File No. 0-14266
POLLUTION RESEARCH AND CONTROL CORP.
(Exact name of Small Business Issuer as specified in its charter)
California
(State of or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer I.D. No.) 95-2746949
506 Paula Ave.
Glendale, California 91201
(Address of Principal Executive Offices)
(818) 247-7601
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address, and Former Fiscal Year,
if changed since last report)
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock outstanding at August 14, 1995 is
6,932,662.
<PAGE> 2
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
FORM 10-QSB
FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 1995
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Part I Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Part II Other Information
Item 4. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
-------------
<S> <C>
CURRENT ASSETS:
Cash $ 654,290
Accounts receivable, trade, net 706,644
Inventory (Note 3) 1,689,741
Other current assets 18,267
------------
TOTAL CURRENT ASSETS 3,068,942
PROPERTY AND LEASEHOLD
IMPROVEMENTS, NET 189,650
OTHER ASSETS 121,826
-----------
TOTAL ASSETS $3,380,418
==========
</TABLE>
See notes to the financial statements. 3
<PAGE> 4
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
-------------
<S> <C>
CURRENT LIABILITIES:
Accounts payable, trade $ 329,922
Note payble, bank 100,000
Current portion of deferred rent 14,520
Accrued liabilities 155,871
------------
TOTAL CURRENT LIABILITIES 600,313
------------
DEFERRED RENT (LESS CURRENT PORTION) 117,496
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value; 20,000,000 shares authorized, no shares issued
and outstanding
Common Stock, no par value; 30,000,000 shares authorized, 6,932,662 issued and 5,431,623
outstanding
Less notes due from sale of stock (86,857)
Accumulated deficit (2,682,157)
------------
Total shareholders' equity 2,662,609
-------------
TOTAL LIABILITIES AND $ 3,380,418
=============
SHAREHOLDERS' EQUITY
</TABLE>
See notes to the financial statements. 4
<PAGE> 5
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
ENDED JUNE 30,
--------------
1995 1994
---- ----
<S> <C> <C>
Net revenues $1,434,302 $1,444,859
Cost of goods sold 847,268 866,171
---------- ----------
Gross profit 587,034 578,688
---------- ----------
Operating expenses:
Selling, general and
administrative expenses 504,122 498,509
Research and development 63,887 68,769
---------- ----------
Total operating expenses 568,009 567,278
---------- ----------
Income from operations 19,025 11,410
Interest expense 0 (1,486)
Other income 494 826
---------- -----------
Net income $ 19,519 $ 10,750
========== ===========
Earnings per share (Note 2): $ .01 $ .01
========== ============
Net income
Weighted average number of common
and common equivalent shares 6,932,662 6,878,815
=========== ============
</TABLE>
See notes to the financial statements. 5
<PAGE> 6
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX-MONTH PERIOD
ENDED JUNE 30, 1994
-------------------
1995 1994
---- ----
<S> <C> <C>
Net revenues $2,903,344 $2,734,830
Cost of goods sold 1,719,618 1,644,001
---------- ----------
Gross profit 1,183,726 1,090,829
---------- ----------
Operating expenses:
Selling, general and
administrative expenses 911,249 898,259
Research and development 117,983 138,227
---------- ----------
Total operating expenses 1,029,232 1,036,486
---------- ----------
Income from operations 154,494 54,343
Interest expense 0 (2,419)
Other income 1,016 1,826
---------- ----------
Net income $ 155,510 $ 53,750
========== ==========
Earnings per share (Note 2): .02 $ .01
========== ==========
Net income
Weighted average number of common
and common equivalent shares 6,932,662 6,878,815
========== ==========
</TABLE>
See notes to the financial statements. 6
<PAGE> 7
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX-MONTH PERIOD
ENDED JUNE 30
-------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 155,510 $ 53,750
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 48,804 42,681
Changes in operating assets and liabilities:
Accounts receivable 196,170 56,317
Inventories 4,000 (248,978)
Other current assets (13,100) (8,262)
Accounts payable (96,941) (21,893)
Accrued liabilities (184,614) (302,900)
Deferred Rent 16,956
-------------- -------------
Net cash provided by (used for) operating activities 126,785 (429,285)
------------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and leasehold improvements (30,317) (88,453)
Other assets (6,999) (194,144)
--------- ----------
Net cash used for investing activities (37,316) (282,597)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings 100,000 100,000
--------------- ---------------
Net cash provided by financing activities 100,000 100,000
---------- ---------
NET INCREASE (DECREASE) IN CASH 189,469 (611,882)
CASH AT BEGINNING OF PERIOD 464,821 1,072,000
---------- ---------
CASH AT END OF PERIOD $ 654,290 $ 460,118
============ ===========
</TABLE>
See notes to the financial statements. 7
<PAGE> 8
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The information furnished herein reflects all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management, necessary to a fair presentation of the results of operations for
the periods presented. Interim results are not necessarily indicative of
results for a full year.
The financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's annual report
on Form 10-KSB for the year ended December 31,1994.
2. NET INCOME PER SHARE:
During the six-month period ended June 30, 1995 and 1994, the
Company used the modified treasury stock method of computing earnings per
share. Under generally accepted accounting principles, there is a
computational difference between the treasury stock method and the modified
treasury stock method which is based on the number of shares obtainable upon
the exercise of options and warrants. If the number of shares of Common Stock
obtainable upon the exercise of outstanding options and warrants exceeds 20% of
the number of shares of Common Stock outstanding at the end of the period, the
modified treasury stock method is used. For the six-month period ended June
30, 1995 and 1994, all computations under the modified treasury stock method
have been omitted as the net aggregate effect is anti-dilutive.
3. INVENTORY:
Inventory consists of:
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
-------------
<S> <C>
Raw Materials $ 733,218
Work-in-Process 342,085
Finished Goods 614,438
-----------
$ 1,689,741
===========
</TABLE>
4. BANK DEBT:
In June 1995, the Company entered into an extension of its line
of credit agreement with a bank, which provides for borrowings of up to
$100,000 through June 3, 1996. Borrowings under this agreement bear interest
at 2% above the bank's prime rate and are collateralized by substantially all
of the Company's assets.
See notes to the financial statements. 8
<PAGE> 9
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
GENERAL
The Company designs, manufactures and markets automated
continuous monitoring instruments used to detect and measure various types of
air pollution through its wholly-owned subsidiary, Dasibi Environmental Corp.
The Company currently derives essentially all of its revenue from sales of its
instruments and their replacement parts.
The Company's future operating results may be affected by a
number of factors, including: uncertainties relative to global economic
conditions; industry factors; the availability and cost of components; the
Company's ability to develop, manufacture and sell its products profitably; the
Company's ability to successfully increase its market share in its core
business while expanding its product base into other markets; the strength of
its distribution channels; and the Company's ability to effectively manage
expense growth relative to revenue growth in anticipation of continued pressure
on gross margins.
RESULTS OF OPERATIONS
SIX-MONTH PERIOD ENDED JUNE 30, 1995 VS. SIX-MONTH PERIOD ENDED JUNE 30, 1994
Net revenue increased 6% from $2,734,830 during the six-month
period ended June 30, 1994, to $2,903,344 during the six-month period ended
June 30, 1995, due to the Company's ability to adjust the prices for its core
instruments to respond to competitive price pressures which began in May 1994.
Cost of sales increased 5% from $1,644,001 during the six-month
period ended June 30, 1994, to $1,719,618 during the six- month period ended
June 30, 1995, primarily due to the increase in sales discussed above. The
Company's gross profit margin on its instruments increased slightly from 40% to
41%.
Selling, general and administrative expenses increased 2% from
$898,259 during the six month period ended June 30, 1994 to $911,249 during the
six month period ended June 30, 1995.
As a result of the foregoing factors, net income increased 189%
from $53,750 during the six-month period ended June 30, 1994 to $155,510 during
the six-month period ended June 30, 1995.
See notes to the financial statements. 9
<PAGE> 10
Form 10-QSB
June 30, 1995
POLLUTION RESEARCH AND CONTROL CORP.
THREE-MONTH PERIOD ENDED JUNE 30, 1995 VS. THREE-MONTH PERIOD ENDED JUNE 30,
1994
Net revenues decreased an insignificant 1% from $1,444,859
during the three-month period ended June 30, 1994 to $1,434,302 during the
three-month period ended June 30, 1995.
Cost of sales decreased 2% from $866,171 during the three-month
period ended June 30, 1994 to $847,268 during the three-month period ended June
30, 1995 due to favorable product mix. The Company's gross profit margin
increased slightly to 41% in the quarter ended June 30, 1995 as compared to 40%
in the quarter ended June 30, 1994.
Selling, general and administrative expenses increased slighty
from $498,509 during the three-month period ended June 30, 1994 to $504,122
during the three-month period ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES.
The Company has historically financed its growth and cash needs
primarily through borrowings and the public and private sales of its
securities.
Net cash provided by operating activities in the three months
ended June 30, 1995 amounted to $126,785.
In February 1994, the Company entered into a line of credit
agreement with a bank, which provides for borrowings up to $100,000 through
June 3, 1996. As of June 30, 1995, the Company had borrowed $100,000 under
this agreement.
Working capital increased from $2,285,000 at December 31, 1994
to $2,469,000 at June 30, 1995.
The Company has no material commitments for capital
expenditures as of June 30, 1995. The Company believes it will be able to meet
its current obligations with funds generated from its own operations.
INFLATION
The Company believes that inflation has not had a material
impact on its business.
SEASONALITY
The Company does not believe that its business is seasonal.
See notes to the financial statements. 10
<PAGE> 11
Form 10-QSB
POLLUTION RESEARCH AND CONTROL CORP.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On June 29, 1995 the Company's Annual Meeting of
Shareholders was held. The following members of the
Board of Directors were re-elected with the following
vote:
<TABLE>
<CAPTION>
Name Vote For Withheld
---- -------- --------
<S> <C> <C>
Albert E. Gosselin 5,472,226 138,339
Barbara L. Gosselin 5,469,339 141,226
Craig E. Gosselin 5,460,609 149,956
Marcia Smith 5,472,426 138,139
Gary L. Dudley 5,474,426 136,139
Non Votes: 1,322,097
</TABLE>
Additionally, the firm of Greenberg & Jackson was
elected as the Company's auditors for fiscal 1995
with the following vote:
For: 5,418,974 Against: 121,552 Abstain:
70,039 Non Votes: 1,322,097
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Not Applicable.
(b) The Company filed no reports on Form 8-K during the
period ended June 30, 1995.
See notes to the financial statements. 11
<PAGE> 12
Form 10-QSB
POLLUTION RESEARCH AND CONTROL CORP.
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.
POLLUTION RESEARCH AND CONTROL CORP.
(Registrant)
By: /s/ Albert E. Gosselin Jr.
-----------------------------------------------------------
Albert E. Gosselin, Jr., President and Chief Executive Officer
By: /s/ Cynthia L. Gosselin
-----------------------------------------------------------
Cynthia L. Gosselin, Chief Financial Officer
(Principal Accounting and Financial Officer)
Dated: August 14, 1995
See notes to the financial statements. 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 654
<SECURITIES> 0
<RECEIVABLES> 706
<ALLOWANCES> 0
<INVENTORY> 1,689
<CURRENT-ASSETS> 3,068
<PP&E> 298
<DEPRECIATION> 108
<TOTAL-ASSETS> 3,380
<CURRENT-LIABILITIES> 600
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,380
<SALES> 2,903
<TOTAL-REVENUES> 0
<CGS> 1,719
<TOTAL-COSTS> 1,719
<OTHER-EXPENSES> 1,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 155
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155
<EPS-PRIMARY> 2.0
<EPS-DILUTED> 2.0
</TABLE>
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