<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended July 31, 1995
Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-14443
WASTE TECHNOLOGY CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 13-2842053
(State or Other Jurisdiction of (I.R.S. Employer Incorporation or
Organization) Identification No.)
5400 Rio Grande Avenue
Jacksonville, Florida 32254
(Address of Principal Executive Offices) (Zip Code)
(904) 355-5558
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether 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, and
(2) has been subject to such filing requirements for the past 90
days. Yes X No
At July 31, 1995, Registrant had outstanding 2,431,551 shares of its Common
Stock.
Transitional small business disclosure format check one:
Yes No X
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WASTE TECHNOLOGY CORP.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
o Balance Sheets as of July 31, 1995 3
and October 31, 1994
o Statements of Income for the three months 5
and nine months ended July 31, 1995 and 1994
o Statements of Changes in Stockholders' Equity 7
for the period from October 31, 1994 to
July 31, 1995
o Statements of Cash Flows for the three 8
and nine months ended July 31, 1995 and 1994
o Notes to Financial Statements 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
o Signatures 21
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WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
07/31/95 10/31/94
Unaudited
ASSETS
Current Assets:
Cash and cash equivalents $ 951,241 $ 499,199
Marketable securities 607 607
Accounts receivable, net of allowance
for doubtful accounts of $36,447 1,542,786 1,221,163
Inventories 1,610,999 1,319,126
Prepaid expense and sundry current
assets 50,612 82,590
Notes receivable, other -- --
Total current assets 4,156,245 3,122,685
Investment -- 25,000
Property, plant and equipment at cost 1,509,835 1,362,515
Less: accumulated depreciation 850,041 783,324
Net property, plant & equipment 659,794 579,191
Real estate held for sale 204,114 214,889
Other assets:
Loan to joint venture, including
accrued interest 99,840 99,840
Goodwill, net of accumulated
amortization of $21,098 and $17,933
at 07/31/95 and 10/31/94 63,291 66,456
Non-competition covenants, net of
accumulated amortization of $31,253
and $25,005 at 07/31/95 and 10/31/94
respectively 7,614 13,862
Other intangible & sundry assets, net 174,776 146,017
Notes receivable -- director & legal
counsel 195,021 425,052
Total other assets 540,542 751,227
TOTAL ASSETS $5,560,695 $4,692,992
3
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WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
07/31/95 10/31/94
Unaudited
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 358,622 $ 248,147
Accounts payable 392,913 263,555
Accrued liabilities 436,472 452,063
Customer deposits 328,651 57,633
Notes payable -- 50,000
Total current liabilities 1,516,658 1,071,398
Accrued legal fees -- non-current 195,021 425,052
Long-term debt 275,833 609,621
Capital lease obligation -- --
Minority interest in equity of subsidiary 505,574 429,684
Total liabilities 2,493,086 2,535,755
Stockholders' equity
Common stock, par value $.01
25,000,000 shares authorized;
2,763,314 shares issued and outstanding 27,634 22,634
Preferred stock, par value $.0001,
10,000 shares authorized, none issued
Additional paid-in capital 6,069,995 5,574,995
Accumulated deficit (2,152,812) (2,823,482)
3,944,817 2,774,147
Less: Treasury stock, 331,763 shares at cost 419,306 419,306
Less: Note receivable from shareholder 457,902 197,604
Total stockholders' equity 3,067,609 2,157,237
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 5,560,695 $ 4,692,992
4
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WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
Three months ended: 07/31/95 07/31/94
Net Sales $ 2,744,780 $ 2,488,856
Cost of Sales 1,836,706 1,772,166
Gross Profit 908,074 716,690
Operating Expenses:
Selling 217,503 215,334
General and Administrative 358,779 277,872
Total operating expenses 576,282 493,206
Operating Income 331,792 223,484
Other Income (Expenses):
Interest and Dividends 12,718 (16,758)
Net gain on Disposal of Fixed Assets -- --
Other Income 34,210 5,698
Interest Expense (49,559) (22,403)
Other Expense -- (35,000)
Total Other Income (Expenses) (2,631) (68,463)
Less minority interest in income of
consolidated subsidiary 32,820 18,676
Income before income taxes 296,341 136,345
Income taxes 10,000 8,771
NET INCOME 286,341 127,574
Earnings per share 0.10 0.06
Average number of shares and equivalent 2,456,395 2,106,551
5
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WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
Nine months ended: 07/31/95 07/31/94
Net Sales $7,419,255 $6,473,989
Cost of Sales 4,939,338 4,253,552
Gross Profit 2,479,917 2,220,437
Operating Expenses:
Selling 653,230 612,944
General and Administrative 998,568 893,741
Total operating expenses 1,651,798 1,506,685
Operating Income 828,119 713,752
Other Income (Expenses):
Interest and Dividends 39,089 2,714
Net gain on Disposal of Fixed Assets 618 --
Other Income 60,051 19,618
Interest Expense (131,142) (71,064)
Other Expense (25,175) (35,000)
Total Other Income (Expenses) (56,559) (83,732)
Less minority interest in income of
consolidated subsidiary 75,890 75,863
Income before income taxes 695,670 554,157
Income taxes 25,000 37,838
NET INCOME 670,670 516,319
Earnings per share 0.29 0.25
Average number of shares and
equivalent 2,316,846 2,106,551
6
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WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the nine months ended July 31, 1995
<TABLE>
<CAPTION>
Common Stock
Par Value $.01 Authorized
25,000,000 Shares Treasury Stock
------------------------- ------------------
NUMBER ADDITIONAL NUMBER TOTAL
OF SHARES PAR PAID-IN ACCUMULATED OF STOCKHOLDERS'
ISSUED VALUE CAPITAL DEFICIT SHARES COST OTHER EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1993 2,248,314 22,484 5,551,145 (3,536,394) 331,763 (419,306) (158,231) 1,459,698
Issuance of 15,000 shares of common
stock 15,000 150 23,850 -- -- -- -- 24,000
Adjustment of Note Receivable from
shareholder as a reduction of
stockholder's Equity -- -- -- -- -- -- (39,373) (39,373)
Net income -- -- -- 712,912 -- -- -- 712,912
--------- -------- ----------- ------------ -------- ---------- ---------- -----------
Balance at October 31, 1994 2,263,314 $ 22,634 $ 5,574,995 $ (2,823,482) 331,763 $ (419,306) $ (197,604) $ 2,157,237
Issuance of 500,000 shares of
common stock due to exercise of
stock options 500,000 5,000 495,000 -- -- -- -- 500,000
Adjustment of Note Receivable from
shareholder as a reduction of
stockholder's equity (260,298) (260,298)
Net income -- -- -- 670,670 -- -- -- 670,670
--------- -------- ----------- ------------ -------- ---------- ---------- -----------
Balance at July 31, 1995 2,763,314 $ 27,634 $ 6,069,995 $ (2,152,812) 331,763 $ (419,306) $ (457,902) $ 3,067,609
========= ======== =========== ============ ======== ========== ========== ===========
</TABLE>
7
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WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For The Three Months Ended
07/31/95 07/31/94
<S> <C> <C>
Cash flow from operating activities:
Net income 286,341 127,574
Adjustments to reconcile net income to
net cash provided by operating activities:
Items not requiring (providing) cash included
in income:
Depreciation and amortization 28,635 34,936
Minority interest in income of subsidiary 32,820 18,676
Changes in operating asssets and liabilities:
(Increase)/decrease in accounts receivable 113,683 (219,431)
(Increase)/decrease in inventories (142,549) 175,583
(Increase)/decrease in prepaid expenses (34,145) (26,916)
(Increase)/decrease in other assets 222,700 33,072
Increase/(decrease) in accounts payable 59,896 (55,526)
Increase/(decrease) in accrued liabilities (271,835) 7,057
Increase/(decrease) in customer deposits 115,921 (41,879)
Total adjustments 125,126 (74,428)
Net cash provided by (used in) operating activities 411,467 53,146
Cash flows from investing activities:
(Additions) decreases in fixed assets (133,630) (1,033)
Increase/(Decrease) in marketable securities -- --
Increase in note receivable reserve (249,967) --
Net cash provided by investing activities (383,597) (1,033)
Cash flows from financing activities:
Increase/(decrease) in officer loans -- (10,336)
Increase/(decrease) in long-term liabilities (92,937) (62,051)
Proceeds from excercise of stock options 500,000 --
Cash flows provided by (used in) financing
activities 407,063 (72,386)
Net increase (decrease) in cash 434,933 (20,273)
Cash and cash equivalents at beginning of period 516,308 173,525
Cash and cash equivalents at end of period 951,241 153,252
Supplemental schedule of disclosure of cash flow information
Cash paid during period for:
Interest 18,402 14,403
Income taxes 0 0
</TABLE>
8
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WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For The Nine Months Ended
07/31/95 07/31/94
<S> <C> <C>
Cash flow from operating activities:
Net income 670,670 516,319
Adjustments to reconcile net income to
net cash provided by operating activities:
Items not requiring (providing) cash included
in income:
Depreciation and amortization 85,913 80,944
Minority interest in income of subsidiary 75,890 75,863
Changes in operating asssets and liabilities:
(Increase)/decrease in accounts receivable (321,623) (544,778)
(Increase)/decrease in inventories (291,873) (133,594)
(Increase)/decrease in prepaid expenses 31,978 (89,163)
(Increase)/decrease in other assets 237,047 21,238
Increase/(decrease) in accounts payable 129,358 571,834
Increase/(decrease) in accrued liabilities (245,622) (79,823)
Increase/(decrease) in customer deposits 271,018 (265,880)
Total adjustments (27,914) (363,359)
Net cash provided by(used in) operating activities 642,756 152,960
Cash flows from investing activities:
(Additions) decreases in fixed assets (157,104) (48,305)
Increase/(Decrease) in marketable securities -- --
Increase in note receivable reserve (260,297) --
Net cash provided by investing activities (417,401) (48,305)
Cash flows from financing activities:
Increase/(decrease) in officer loans (50,000) (20,063)
Increase/(decrease) in long-term liabilities (223,313) (129,342)
Proceeds from exercise of stock options 500,000 --
Cash flows provided by (used in) financing
activities 226,687 (149,405)
Net increase (decrease) in cash 452,042 (44,750)
Cash and cash equivalents at beginning of period 499,199 198,002
Cash and cash equivalents at end of period 951,241 153,252
Supplemental schedule of disclosure of cash flow information
Cash paid during period for:
Interest 58,730 62,975
Income taxes -- 12,572
</TABLE>
9
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WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES:
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly owned and majority
owned subsidiaries. Intercompany balances and material
intercompany transactions have been eliminated in consolidation.
Description of the Business
The Company is a manufacturer of baling machines which utilize
mechanical, hydraulic and electrical mechanisms to compress a
variety of waste materials into bales. The Company's customers
include plastic recycling facilities, paper mills, textile mills,
tire manufacturers and paper recycling facilities throughout the
United States, the Far East and South America.
Minority Interest
The Company owns 85.8% of the outstanding shares of the
subsidiary International Baler Corp. as of July 31, 1995. The
parent company theory has been applied in the presentation of the
minority interest. Under the parent company theory, minority
interest is separately stated as a liability on the consolidated
balance sheet at an amount equal to the minority ownership
percentage of the book value of the subsidiary's net assets. The
minority interest in the consolidated income statement is equal to
the minority ownership percentage of the subsidiary's realized net
income or loss.
Inventories
Inventories of the subsidiaries are stated at the lower of
cost or market. Cost is determined by the first-in, first-out
method.
Depreciation
The cost of property, plant and equipment is depreciated over
the estimated useful lives of the related assets. Depreciation is
computed on the straight line method for financial reporting and
accelerated ACRS and MACRS method for income tax purposes. There
is no material timing difference affecting the income statement or
balance sheet and therefore no deferred tax credits or charges have
been accrued.
10
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Cash and Equivalents
The Company considers all highly liquid investments owned with
an original maturity of three months or less when purchased to be
a cash equivalent.
Goodwill
Goodwill represents the excess of the cost of acquiring the
net assets of Solid Waste and Recovery Systems, Inc. (Solid Waste)
over the fair value of the net assets acquired (using the purchase
method) at date of acquisition in 1990, and is being amortized on
the straight-line method over a period of 20 years.
Patents
Patents and patent rights are being amortized over a 17-year
period using the straight-line method, and are carried at cost,
less accumulated amortization. Amortization charged to operations
for the three months ended July 31, 1995 and 1994 was $512 in each
period.
Unamortized Noncompetition Covenant
In 1990, The Company paid $50,000 to the previous owner of
Solid Waste (Ted C. Flood, the President of the Company). The
covenant is being amortized over six years.
NOTE 2 -- LOAN AND NOTES RECEIVABLE -- OFFICER AND DIRECTOR:
The Company had advanced $698,527 of which $487,039 was
reserved by the Company, to Leslie N. Erber, its former Chairman
and President. During 1993, Mr. Erber returned his 171,341 shares
of Waste Technology stock and 163,450 shares of IBC stock in return
for forgiveness of his outstanding balance. The shares received
have been recorded as treasury shares.
On April 12, 1990, four individuals, including Leslie N.
Erber, Chairman of the Board and President of the Company and
Morton S. Robson, Secretary and Director of the Company entered
into an agreement with a group of dissident shareholders to
purchase an aggregate of 294,182 shares at a purchase price of
$1.00 per share. Leslie N. Erber and Morton S. Robson each
purchased 134,591 shares of common stock and the other two
individuals purchased an aggregate of 25,000 shares.
On July 15, 1991 the purchase of shares was finalized by the
payment to the selling shareholders of the balance of the purchase
price plus accrued interest. The financing of the transaction was
paid with funds borrowed from the Company with the unanimous
approval of the Company's Board of Directors. The four individuals
executed promissory notes in favor of the Company payable in three
11
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annual installments due July 15, 1992-1994 plus accrued interest
from July 15, 1991 at the rate of 9% per annum. Mr. Erber's
promissory note was satisfied as described above. The Company has
extended the initial installment date to July 15, 1996. The debt
is collateralized by a lien on the 104,591 shares of the Company's
common stock and a guarantee by Robson & Miller. In June 1992,
100,000 collateralized shares were sold for $2 per share and the
officers applied the proceeds to their respective principal
balances.
On June 13, 1995 Robson & Miller exercised its option to
purchase 250,000 shares of Waste Technology Corporation common
stock at $1.00 per share. These shares are also being held as
collateral for the note receivable from Morton S. Robson.
The following represents an analysis of the notes receivable
and accrued interest at July 31, 1995:
Accrued Total Net
Principal Interest Note Reserve Total
--------- -------- ----- ------- -----
Morton S. Robson $448,364 $204,558 $652,922 $ -- $652,922
Howard Bodner 25,000 12,594 37,594 37,594 --
Jordon Erber 25,000 12,594 37,594 37,594 --
-------- -------- -------- ------- --------
$498,364 $229,746 $728,110 $75,188 $652,922
The Company expects that a primary source for repayment of the
above notes will be from the sale of the collateralized shares of
the Company stock.
The notes receivable from Mr. Robson are presented as long-term assets to
the extent of $195,021 which is the amount the Company owes accrued legal fees
to Robson & Miller. The excess of notes receivable from Mr. Robson over
amounts owed his law firm are presented as a reduction of equity.
NOTE 3 -- INVENTORIES:
Inventories consisted of:
July 31, 1995
Raw materials $ 914,588
Work in process 482,079
Finished goods 241,332
----------
$1,610,999
12
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NOTE 4 -- OTHER INVESTMENTS:
Real Estate Venture
In December 1990, the Company formed a wholly-owned
subsidiary, Waste Tech Real Estate Corp. ("WT Real Estate"), for
the purpose of having that corporation enter into a joint venture
with a non-affiliated company, Rock-Tech Realty Corp. ("RT"), to
purchase a parcel of land in Far Rockaway, Queens, New York and to
build residential single family homes on the property. RT had
previously entered into a contract to purchase the property for
$625,000, with $50,000 being paid on the execution of the contract
and the balance to be paid $200,000 on closing and $375,000 by a
purchase money mortgage to the seller. RT has assigned the
contract to the joint venture.
WT Real Estate has a twenty-one (21%) percent interest in the
profits and losses of the joint venture. As of October 31, 1994,
the Company had committed to fund up to $175,000 for its share of
loans and loaned the sum of $166,980 to the joint venture on behalf
of WT Real Estate. Management states that it does not believe that
it will be required to advance funds in excess of such commitment.
WT Real Estate has a mortgage lien on the property as collateral
for all sums it advances to the joint venture except that mortgage
shall be subordinated to any purchase money mortgage or
construction loan mortgage. The Company is to receive interest at
10% per annum. As of July 31, 1995 accrued interest in the amount
of $51,032 is included in the total of $218,012. The Company has
established a reserve of $118,172 as an estimate for potential
uncollectible amounts.
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT:
The following is a summary of property, plant and equipment --
at cost, less accumulated depreciation:
Land $ 75,000
Buildings and improvements 544,967
Machinery and equipment 599,266
Vehicles 188,628
----------
$1,407,861
Less: accumulated depreciation 850,041
----------
$ 557,820
Depreciation expense charged to operations in the Third
Quarter was $25,500 and $31,801 in 1995 and 1994, respectively.
13
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NOTE 6 -- NOTES PAYABLE-OFFICER AND OTHER:
A note was issued by Waste Technology to the father of the
former owner of Ram and Eagle on August 10, 1991 in consideration
of a loan in the amount of $150,000 carrying interest at 10-1/2% per
annum, due November 10, 1991. In addition, 750 shares of stock
were issued to the father of the former owner as additional
consideration, which was treated as interest expense by the
Company. On January 10, 1992, this Note was reduced to $100,000
due on March 10, 1992. On June 10, 1992, accrued interest was
added to principal increasing the note to $103,500. The balance of
the note at October 31, 1994 was $50,000 and was paid in full
during the First Quarter 1995.
NOTE -- 7 LONG-TERM DEBT:
Long-term debt consists of the following at July 31, 1995:
Term note payable to bank, at prime rate
plus 1%, due in equal monthly installments
of $15,833, plus interest, through
November 1, 1997 $465,833
Note payable to bank, at prime rate plus 2.5%,
due in equal monthly installments of $4,000,
including interest, due in January 1996,
collateralized by real estate with a net
book value of $204,114 168,622
--------
634,455
Current maturities 358,622
--------
$275,833
========
The Term Note contains certain covenants for which the Company
must, among other things, maintain specified levels of tangible net
worth and working capital, and maintain a specified ratio of debt
to tangible net worth and current ratio. The Company met the
required covenants during 1994 and 1995 to date.
The Company has pledged substantially all of its assets as
collateral under the term loan agreement.
14
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Maturities of debt are as follows:
Period Ending Aggregate
July 31, Obligation
------------- ----------
1995 $358,622
1996 190,000
1997 133,333
--------
Total $634,455
========
NOTE 8 -- CONTINGENT LIABILITIES AND COMMITMENTS:
Litigation
The Company is a defendant in a wrongful death action, whereby
the complaint alleges that the plaintiff's decedent was injured
while operating a baling machine during his employment and he died
as a result of those injuries. Although the Company believes that
it has no liabilities since the baler was sold many years ago, was
modified by third parties without the knowledge of the Company and
was improperly operated, it is not possible, at this time to
preclude, absolutely, the possibility of a large award against the
Company.
There are various other litigation proceedings in which the
Company is involved. Any liability which the Company may have
under many of these proceedings is covered by insurance. The
results of other litigation proceedings cannot be predicted with
certainty, however, the Company believes that the results of any
litigation will not have a material adverse effect on the Company's
financial condition.
Other
The Company has an employment agreement with its President and
Treasurer for a term of five years commencing on August 1, 1993 and
ending August 1, 1998. Annual Compensation pursuant to the
contract is $100,627, increased 5% per year for the years 1995 to
1998.
NOTE -- 9 RELATED PARTY TRANSACTIONS:
The income statement includes interest income on officer and
director notes receivable of $10,089 and $10,216 for the Third
Quarter 1995 and 1994, respectively.
An officer and director is a partner in the law firm providing
legal services to the Company and as of July 31, 1995 the Company
is indebted in the amount of $195,021 to this firm, including
interest.
15
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NOTE 10 -- NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES:
Net earnings per common and common equivalent share are
calculated using the weighted average number of common shares
outstanding during each year and on the net additional number of
shares which would be issuable upon the exercise of stock options,
assuming that the Company used the proceeds received to purchase
additional shares at market value.
NOTE 11 -- STOCK OPTIONS:
On June 13, 1995 the Board of Directors of the Company
adopted, subject to the approval of the Company's shareholders, the
1995 Stock Option Plan. Under the 1995 Plan, incentive stock
options within the meaning of Section 442A of the Internal Revenue
Code of 1986, as amended (the 'Code'), may be granted to key
employees, including officers and directors who are employees, and
nonqualified stock options and/or stock appreciation rights
('SARs') may be granted to key employees, officers, directors and
consultants, of the Company and its present and future subsidiaries
to purchase an aggregate of 1,000,000 shares of the Company's
Common Stock (the 'Common Stock').
The purpose of the 1995 Plan is to aid the Company in
attracting and retaining key employees, officers, directors and
consultants and to secure for the Company the benefits of the
incentive inherent in equity ownership by such persons who are
responsible for causing the Company's growth and success.
Accordingly, the Board of Directors unanimously recommends that
shareholders approve the 1995 Plan. The approval of the 1995 Plan
by the shareholders will require the affirmative vote of the
holders of majority of the shares of Common Stock entitled to vote
at the Annual Meeting.
The maximum number of shares as to which options may be
granted under the 1995 Plan (subject to adjustment as described
below) is 1,000,000 shares of Common Stock. Upon expiration,
cancellation or termination of unexercised options, the shares with
respect to which such options shall have been granted will again be
available for grant under the 1995 Plan.
The 1995 Plan is administered by the Board of Directors, or if
appointed, by a stock Option Committee consisting of a least two
(2) members of the Board of Directors, none of whom is eligible to
participate under the 1995 Plan. (The group administering the 1995
Plan is referred to as the "Committee").
The Committee has the authority under the 1995 Plan to determine
the terms of options and/or SARs granted under the 1995 Plan, including,
among other things, whether an option shall be an incentive or a
nonqualified stock option, the individuals who shall receive them,
whether an SAR shall be granted separately, in tandem with or in
addition to options, the number of shares to be subject to each option
and/or SAR, the date or dates each option or SAR shall become
exercisable and the exercise price or base price of each option and SAR;
provided, however, that the exercise price of an incentive stock option
may not be less than 100% of the fair market value of the Common stock
on the date of grant and not less than 110% of the fair market value in
the case of an optionee who at the time of grant owns more than ten
percent (10%) of the total combined voting power of the Company, or of
any subsidiary or parent of the Company.
In March 1994 and February 1993, the Board of Directors issued
275,000 and 350,000 non-qualified stock options, respectively, to
purchase 275,000 and 350,000 shares, respectively, of the Company's
common stock at $1 per share. The stock options granted are not to
be subject to the Company's stock option plan. The options issued
in March 1994 were for key employees. Of the 350,000 options,
100,000 shares were issued to directors and the remaining 250,000
options were granted to the Company's general counsel and director
for consideration for his firm's forbearing payment of outstanding
legal fees. The options granted the right to purchase shares of
the Company's common stock at a price of $1 per share, the market
value of the Company's common stock at the date of the grant. The
options have antidilutive rights in the event of a split, reversal
split, or recapitalization and are exercisable in whole or in part
through March 2004 and September 1, 2002, respectively. The
options or shares purchased thereunder may be registered pursuant
to the Securities Act of 1933. On June 13, 1995, Ted C. Flood and
Morton S. Robson exercised their options to purchase 250,000 shares
at $1.00 per share.
On December 10, 1993, the Board of Directors issued 15,000
shares of common stock and granted 65,000 options to a creditor in
satisfaction of a liability. The options are exercisable at $1
5/8, the market value of the Company's stock at the date of the
grant, and vested upon issuance. The options have antidilutive
rights in the event of a split, reverse split, or recapitalization
and are exercisable in whole or in part through December 1998. The
Company recognized expense of $24,375 associated with this
transaction.
NOTE 12 -- EMPLOYEES' BENEFIT PLAN:
The Company instituted a profit sharing plan for its employees
in 1989 by contributing 375,000 shares of its stock to the trust,
having a fair market value of $165,000 on the transfer date. No
contributions by the Company were made in fiscal 1995 or 1994.
NOTE 13 -- UNAUDITED FINANCIAL STATEMENTS:
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
17
<PAGE>
necessary for a fair presentation have been included. Operating
results for the three-month periods ended July 31, 1995 are not
necessarily indicative of the results that may be expected for the
year ending October 31, 1995. For further information, refer to
the consolidated financial statements and footnotes thereto
contained herein.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Three Month Comparisons
For the Third Quarter of fiscal 1995, the Company had
consolidated Net Sales of $2,744,780 as compared to $2,488,856 for
the corresponding quarter of the prior year, an increase of 10.3%.
For the Third Quarter of fiscal 1995, the Company had
consolidated Net Income of $286,341 as compared to $127,574 for the
corresponding quarter of the prior year, an increase of 124%. Net
Income per share was $.10 for the Third Quarter of fiscal 1995 and $.06
for the Third Quarter 1994.
Gross profit as a percentage of Net Sales increased to 33.1%
from 28.8% for the corresponding Third Quarter 1994. The Gross
Profit Margin variance is due primarily to an inventory adjustment
in the prior year.
Nine Month Comparisons
Net Sales increased by 14.6% from $6,473,989 in 1994 to
$7,419,255 for the same period in 1995.
Gross profit margins decreased slightly from 34.3% in fiscal
1994 to 33.4% in fiscal 1995.
For the first nine months of fiscal 1995 Net Income was
$670,670, which was 29.9% above Net Income of $516,319 in the same
period 1994. Net Income per share was $.29 for the first nine
months of 1995 versus $.25 for the same period in 1994.
Financial Condition
Working capital increased from $2,240,000 at the end of the
Second Quarter and from $2,051,000 at the end of the prior Fiscal
year to $2,639,000.
The Company continues to generate sufficient cash from its
operations to meet its operating capital needs and service its
debt. During fiscal 1994 the Company refinanced its loan
obligation to First Performance Bank in Jacksonville, Florida with
an agreement with SouthTrust Bank. This loan is payable in equal
installments of $15,883 plus interest through November 1, 1997.
All assets of the Company are pledged as security for the repayment
of this note. The balance of this loan has decreased from $760,000
to $465,833 at the end of the Third Quarter 1995.
19
<PAGE>
The Company formed a new subsidiary, International Press and
Shear Corporation and is in the process of building a manufacturing
facility in Baxley, Georgia. This facility will be located on
eight acres of land and be approximately 60,000 square feet.
Management for this operation has been hired and production has
started at a temporary site in Baxley. Financing for this project
will be from current cash reserves, an additional line of credit of
$1,000,000, and a mortgage loan on the building.
Other than as set forth above, there are no unusual or
infrequent events or transactions or significant economic changes
which materially affect the amount of reported income from
continuing operations.
Inflation
The costs of the Company and its subsidiaries are subject to
the general inflationary trends existing in the general economy.
The Company believes that expected pricing by its subsidiaries for
balers will be able to include sufficient increases to offset any
increase in costs due to inflation.
20
<PAGE>
PART II-OTHER INFORMATION
None.
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 undersigned hereto duly authorized.
Dated: September 12, 1995 WASTE TECHNOLOGY CORPORATION
BY: /s/ Ted C. Flood
-------------------------
Ted C. Flood, President
(Chief Executive Officer)
BY: /s/ William E. Nielsen
-------------------------
William E. Nielsen
Chief Financial Officer
(Principal Financial and
Accounting Officer)
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JUL-31-1995
<CASH> 951,241
<SECURITIES> 607
<RECEIVABLES> 1,579,233
<ALLOWANCES> 36,447
<INVENTORY> 1,610,999
<CURRENT-ASSETS> 4,156,245
<PP&E> 1,509,835
<DEPRECIATION> 850,041
<TOTAL-ASSETS> 5,560,695
<CURRENT-LIABILITIES> 1,516,658
<BONDS> 0
<COMMON> 27,634
0
0
<OTHER-SE> 3,039,975
<TOTAL-LIABILITY-AND-EQUITY> 5,560,695
<SALES> 7,419,255
<TOTAL-REVENUES> 7,419,255
<CGS> 4,939,338
<TOTAL-COSTS> 6,591,136
<OTHER-EXPENSES> 1,307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,142
<INCOME-PRETAX> 695,670
<INCOME-TAX> 25,000
<INCOME-CONTINUING> 670,670
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 670,670
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
