UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended: October 31, 1996
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:# 0-14754
ELECTRIC & GAS TECHNOLOGY, INC.
(Exact Name of Registrant as specified in its Charter)
TEXAS 75-2059193
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13636 Neutron Road, Dallas, Texas 75244-4410
(Address of Principal Executive Offices) (Zip Code)
(972) 934-8797
(Registrant's telephone number, including area code)
____________________________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Act of 1934 during the preceding 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
The number of shares outstanding of each of the Issuer's Classes
of Common Stock, as of the close of the period covered by this
report:
Common - $0.01 Par Value - 8,250,416 shares at November 19, 1996.
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
Index to Form 10-Q
For the Quarter Ended October 31, 1996
Page
Part I - Financial Information
1. Condensed Consolidated Financial Statements:
(a) Condensed Consolidated Balance Sheets as
of October 31, 1996 and July 31, 1996 3
(b) Condensed Consolidated Statements of
Operations for the three months
ended October 31, 1996 and 1995 4
(c) Condensed Consolidated Statements of
Cash Flows for the three months ended
October 31, 1996 and 1995 5
(d) Notes to Condensed Consolidated
Financial Statements 6-9
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
Part II - Other Information
Item 1 - Legal Proceedings 15
Item 6 - Exhibits and Reports on Form 8-K 16
Signature (pursuant to General Instruction E) 17
All other items called for by the instructions are
omitted as they are either inapplicable, not required,
or the information is included in the Condensed
Financial Statements or Notes thereto.
2
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, 1996 and July 31, 1996
ASSETS
<TABLE>
<S> <C> <C>
October 31, July 31,
1996 1996
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 333,302 $ 879,110
Accounts receivable, net 5,021,207 4,334,153
Inventories 6,658,285 6,317,992
Prepaid expenses 167,666 165,918
Total current assets 12,180,460 11,697,173
PROPERTY, PLANT AND EQUIPMENT, net 8,580,750 8,720,454
OTHER ASSETS
Other assets 2,861,314 2,671,978
TOTAL ASSETS $23,622,524 $23,089,605
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 4,950,193 $ 4,525,668
Accounts payable 3,394,818 3,733,576
Accrued liabilities 1,611,664 1,355,441
Current maturities of long-term obligations 1,113,603 1,198,036
Total current liabilities 11,070,278 10,812,721
LONG-TERM OBLIGATIONS
Long-term obligations, less current maturities 5,274,838 5,555,954
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 5,000,000 shares
authorized, 90,000 issued and outstanding 900,000 900,000
Common stock, $.01 par value, 30,000,000 shares
authorized and issued 8,250,416 82,504 82,504
Additional paid-in capital 10,201,334 10,201,334
Retained earnings (Deficit) (2,407,746) (2,941,282)
Pension liability adjustment (214,639) (214,639)
Cumulative translation adjustment (407,928) (430,870)
8,153,525 7,597,047
Less treasury stock, 274,792 shares, at cost (876,117) (876,117)
Total stockholders' equity 7,277,408 6,720,930
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,622,524 $23,089,605
</TABLE>
See accompanying notes.
3
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended October 31, 1996 and 1995
(Unaudited)
Three months ended
October 31,
1996 1995
Sales $9,146,713 $9,614,509
Cost of goods sold 6,311,797 7,344,606
Gross profit 2,834,916 2,269,903
Selling, general and
administrative expenses 1,990,297 2,240,083
Operating profit (loss) 844,619 29,820
Other income and (expenses)
Interest, net (325,882) (273,321)
Other, net 14,796 566,320
(311,086) 292,999
Earning before income taxes 533,533 322,819
Provision (credit) for
income taxes - -
NET EARNINGS 533,533 322,819
Accrued dividend on preferred stock 15,879 -
Net earnings applicable to common stock $ 517,654 $ 322,819
Earnings per share:
Primary $ 0.07 $ 0.04
Fully diluted $ 0.06 $ 0.04
Weighted average number of
common shares outstanding 7,795,624 7,795,624
Fully diluted 8,995,624 7,795,624
See accompanying notes.
4
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended October 31, 1996 and 1995
(Unaudited)
<TABLE>
<S> <C> <C>
Three months ended
October 31,
1996 1995
Increase (decrease) in cash:
Cash flows from operating activities:
Net earnings $ 533,533 $ 322,819
Adjustments to reconcile net earnings ( loss)
to net cash provided by operating activities:
Depreciation and amortization 255,869 292,503
Gain on sale of assets - (580,576)
Issuance of common stock - 206,250
Changes in assets and liabilities:
Accounts receivable (687,054) (449,072)
Inventories (340,293) (465,402)
Prepaid expenses (1,748) 3,830
Other assets 13,171 (340,825)
Accounts payable (355,282) 580,431
Accrued liabilities 256,223 (213,886)
Net cash provided by (used in) operating activities (325,581) (643,928)
Cash flows from investing activities:
Proceeds from sale of assets - 2,068,583
Less receivables from sale of assets - (2,068,583)
Purchase of property, plant and equipment (114,494) (47,344)
Net cash provided by (used in) investing activities (114,494) (47,344)
Cash flows from financing activities:
Increase (decrease) in notes payable and
long-term obligations 98,445 82,781
Advance to affiliate (204,178) -
Proceeds from issuance of common stock - 200,000
Net cash provided by (used in) financing activities (105,733) 282,781
NET INCREASE (DECREASE) IN CASH (545,808) (408,491)
Cash - beginning of period 879,110 1,044,851
Cash - end of period $ 333,302 $ 636,360
Supplemental disclosures of cash flow information:
Cash paid during the year for Interest $ 325,882 $ 273,321
</TABLE>
See accompanying notes.
5
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
(Unaudited)
NOTE A - GENERAL
Electric & Gas Technology, Inc., (the "Company") was organized
under the laws of the State of Texas on March 18, 1985, to serve
as a holding company for operating subsidiary corporations. The
Company presently is the owner of 100% of Retech, which currently
owns 80% of ABI and the Company owns 100% of Logic, Reynolds,
Fridcorp, Hydel and SMI, and, through such subsidiaries, operates
in five distinct business segments: (1) the manufacture and sale
of electric meter enclosures and pole-line hardware for the
electric utility industry and the general public (Hydel and
Retech); (2) the design and manufacture of defense electronic
components (SMI); (3) the manufacture and sale of natural gas
measurement, metering and odorization equipment (Reynolds); (4)
the manufacture and sale of precision metal enclosures for
telecommunication and computer equipment (Logic); and (5) the
manufacture of vacuum-form and injection-mold products
(Fridcorp). Effective January 31, 1993, the Company
discontinued the operations of its 80% owned ABI which previously
was engaged in the manufacture and sale of brass and bronze
ingots. The Company sold its Canadian heating division and its
U.S. meter socket and Test Switch divisions during fiscal 1996
and 1995. These operations were part of the electric segment.
The accompanying condensed financial statements have been
prepared in accordance with the regulations of the Securities and
Exchange Commission (SEC) for inclusion in the Company's
Quarterly Report on Form 10-Q. They are subject to year-end
audit adjustments; however, they reflect all adjustments of a
normal recurring nature which are, in the opinion of Management,
necessary for a fair statement of the results of operations for
the interim periods.
The statements were prepared using generally accepted
accounting principles. As permitted by the SEC, the statements
depart from generally accepted accounting disclosure principles
in that certain data is combined, condensed or summarized that
would otherwise be reported separately and certain disclosures of
the type that were made in the Notes to Financial Statements for
the year ended July 31, 1996 have been omitted, even though they
are necessary for a fair presentation of the financial position
at October 31, 1996 and 1995 and the results of operations and
cash flows for the periods then ended.
6
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1996
(Unaudited)
NOTE B - INVENTORIES
Inventories are comprised as follows:
October 31, 1996 July 31, 1996
Raw Materials $2,599,687 $2,781,867
Work in process 1,571,763 1,274,832
Finished Goods 2,486,835 2,261,293
$6,658,285 $6,317,992
NOTE C - COMMON AND PREFERRED STOCK AND EARNINGS PER SHARE
Earnings per common share is based on the average weighted
shares outstanding during the periods reported on. Fully diluted
shares assume conversion of the 90,000 of $10 par value preferred
stock into approximately 1,200,000 shares of common stock using
an approximate market value of $.75 per share (See the following
paragraph regarding any ultimate conversion).
On December 15, 1995, the Company closed on a Note Purchase
Agreement with Allied Products Corporation ("Allied"), thereby
obtaining Allied's right, title and interest in and to a certain
Promissory Note and all security existing thereunder and
obligations of Cooper Manufacturing Corporation ("Cooper") under
this Note and the Facility Agreement formerly executed by Cooper
and its shareholders in exchange for $100,0000 in cash and newly
issued, 90,000 shares of, Series A, $10.00 par value, 7%
Convertible Preferred stock of the Company. The promissory note
was due on December 31, 1995 and demand for payment was made on
Cooper and its guarantors. The preferred stock is convertible
into common stock of the Company at the ratio of two shares of
common stock for each share of preferred stock. Each holder of
record of the shares of preferred stock is entitled to one vote
per share equal to the voting rights of the common shareholders.
The Company has agreed to make whole any deficiency upon
conversion and subsequent sale after December 31, 1997 of the
Company's common stock for less than $900,000. The Company's
common stock is trading at approximately $.75 per share which if
sold at that price would require 1,200,000 shares to be sold to
retire the obligation to Allied. The Company is of the opinion
that the consideration paid for the Allied note will require a
major adjustment due to Cooper's bankruptcy filing based on
Allied's lack of disclosure regarding their knowledge of the
threat of eminent bankruptcy by the debtor. Any final conversion
to the Company's common stock is uncertain.
7
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
October 31, 1996
(Unaudited)
NOTE C - COMMON AND PREFERRED STOCK AND EARNINGS PER
SHARE(Continued)
The individuals whose stock was pledged and who personally
guaranteed the Allied Note, petitioned the court on behalf of
Cooper to file for protection under the U.S. Bankruptcy laws in a
Houston, Texas court. A hearing was held on January 17, 1996 and
reconvened on January 19, 1996 in which the court deferred any
decision pending settlement negotiations between the parties.
The Company believes the filing was improper as those individuals
who petitioned the court as debtors in possession did not have
standing for such petition. Although the outcome of any
bankruptcy proceeding cannot be determined, the Company believes
it has the only secured creditor position and first rights to the
assets of Cooper. Further, the Company and its affiliate believe
they will recover their investment and advances to Cooper. The
Company had a Letter of Intent to acquire Cooper which has
expired and was determined by the Company not to be pursued.
Approximately, $1,200,000 is currently due from Cooper and is
included in other assets in the accompanying balance sheet.
The Company issued on August 3, 1995, 65,000 shares of its
$.01 par value common stock (restricted) valued at $1.25 per
share to certain of its key management personnel and 100,000
shares valued at $1.25 per share plus $1,500 in cash to an
affiliate of the Chairman of the Board and President as a fee for
providing continuing collateral securing the Company's $450,000
note payable to a bank. On October 26, 1995, the Company issued
200,000 shares of its $.01 par value common stock (restricted)
valued at $1.00 per share for cash to the same affiliate.
Proceeds were used to repay a portion of the Bank One Texas note
payable.
NOTE D - SALE OF ASSETS
The Company sold the Test Switch division on October 31, 1995
for cash of approximately $2,100,000. The cash was received on
November 1, 1995, accordingly the proceeds are reflected as an
account receivable as of October 31, 1995, the date the
transaction was closed. The gain on the sale was approximately
$580,000 and is included in other income.
The following are sales, cost of goods sold and selling,
general and administrative expenses for the three months ended
October 31,:
1996 1995
Sales $ - $572,000
Cost of goods sold $ - $338,000
Selling, general and administrative $ - $76,000
8
<PAGE>
NOTE F - INDUSTRY SEGMENT DATA:
The Company's business is primarily comprised of five industry
segments: i. electric component and enclosures (Hydel);ii. defense
electronics (SMI); iii. natural gas measurement and recording
devices and odorization (Reynolds);iv. customized metal fabrication
(Logic and Precision);and v. injection molding and thermoforming
plastic components (Fridcorp) as setforth below. Operating profits
represent total sales less cost of sales and general and
administrative expenses.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended October 31,1996
Defense Metal General
Electrical Electronics Gas Fabrication Plastics Corporate Consolidated
Sales $1,878,459 $1,850,561 $907,204 $4,190,427 $320,062 $ - $9,146,713
Cost of goods sold 1,498,120 1,044,049 514,139 3,022,927 232,562 - 6,311,797
Selling, gen. & adm. 386,361 646,833 330,380 408,315 64,515 153,893 1,990,297
Operating profit(loss) (6,022) 159,679 62,685 759,185 22,985 (153,893) 844,619
Interest, net (38,394) (84,574) (18,521) (116,017) (2,742) (65,634) (325,882)
Other income(expense) (3,447) 9,732 8,511 - - - 14,796
Net earnings (loss)
before income taxes $ (47,863) $ 84,837 $ 52,675 $ 643,168 $ 20,243 $(219,527) $ 533,533
Assets:
Receivables $1,163,492 $718,749 $275,927 $2,730,676 $199,606 $ (7,445) $5,081,005
Inventory $2,046,985 $1,715,831 $700,648 $2,114,936 $ 79,885 $ - $6,658,285
Total assets $4,755,906 $3,381,415 $2,154,421 $10,068,419 $674,091 $2,588,272 $23,622,524
Depreciation $36,930 $63,926 $38,670 $104,811 $5,762 $4,099 $254,198
Additions PP&E $49,613 $8,816 $23,660 $27,305 $5,100 $ - $114,494
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company, through its subsidiaries, operates within five
separate industries. These are: (i)the manufacture and sale of
electrical switching devices and metal enclosures for use in the
electric utility industry, (ii)the manufacture and sale of
defense electronics, (iii)the manufacture of natural gas
measurement and gas odorization products, (iv)the manufacture and
sale of precision, customized metal enclosures for electronic
equipment; and (v)the manufacture and sale of vacuum-form and
injection-mold plastic products.
Results of Operations
Summary. The Company reported net earnings of $533,533 and
$322,819 for the three months ended October 31, 1996 and 1995,
respectively. Operating income increased by $814,799 to $844,619
the result of improved margins and reduced expenses. During the
first quarter of fiscal 1996 a gain of approximately $580,000 was
recorded from the sale of the test switch division and is
included in other income. After giving effect to the operation
sold, revenues increased slightly by $104,575. Gross margins
improved from 23.61% to 30.99%. Selling, general and
administrative expenses as a relationship to revenues at the
segment level improved slightly to 20.08% of revenues. Interest
cost increased due mainly to increased rates over the same period
in 1995.
Increases(decreases) for the three months period ended October
31, 1996, as compared with the similar period of 1995, for key
operating data were as follows:
Three Months Ended
October 31,1996
Increase Percent
(Decrease) Change
Operating Revenues $(467,796) (4.87)
Operating Income 814,799 2,732.39
Earnings before income taxes 210,714 65.27
Net Earnings Per Share .03 75.00
10
<PAGE>
The following table represents the changes
[increase/(decrease)] in operating revenues, operating income and
net earnings before income taxes by the respective industry
segments when compared to the previous period:
Three Months Ended
October 31,1996
Increase
(Decrease) Percent
Operating Revenues:
Electric $(689,777) (147.45)
Defense electronics 118,208 25.27
Gas 264,660 56.57
Metal fabrication (140,219) (29.97)
Plastics (20,668) (4.42)
$(467,796) 100.00
Operating Income (Loss):
Electric $ (238,981) (35.49)
Defense electronics 46,730 6.94
Gas 159,555 23.69
Metal fabrication 674,925 100.22
Plastics 31,232 4.64
673,461 100.00
General Corporate 141,338
Other Income (Expense) (604,085)
Earnings before Income
Taxes $ 210,714
11
<PAGE>
Electric revenues in the aggregate were down for the three
months ended October 31, 1996 by $689,777. After giving effect
to revenue losses for the division sold of $572,371, revenues
decreased by $117,406. Gross margins for the three months
decreased by 5.22% to 20.25%. Operating profits approximated
break-even due to the carrying cost of the Paris, Texas facility
which is currently for sale. The electric segment now consist of
only the Canadian meter socket and pole line hardware product
lines selling almost entirely in the Canadian markets. This
operation continues to show profits since management changes were
made nearly a year ago. This unit reflected an operating profit
of $71,154 for the three months ended October 31, 1996 down
slightly by $9,480 in spite of the revenue decline of $117,406.
Revenues were hindered by production problems due to the
temporary loss of a Shear. The machinery has since been repaired
and is now in full service.
Defense electronics revenues for the quarter ended October
31, 1996 amounted to $1,850,561 with operating profit of
$159,679. This compares with revenues of $1,732,353 and
operating profit of $112,949 for the quarter ended October 31,
1995. Gross margins increased as a percentage of revenues by
2.06% to 43.58%. Selling, general and administrative expenses
remained relatively unchanged. Gross margin improvements have
been attributable to improved production efficiencies with less
scrap. With the declining defense market this segment is
actively seeking to expand its customer base. Texas Instruments
Incorporated (TI) continues to be our largest customer. TI
recently announced that they were taking bids on the sale of
their defense business. We are currently unable to assess what
effect, if any, this sale could have on our operations.
Gas revenues increased by $264,660 for the three months
ended October 31, 1996. Operating income increased by $159,555
for the three months ended October 31, 1996, resulting in
operating profit of $62,685. Revenues increased in both the
RECOR and Odorization product lines. These revenue increases
were also accomplished with improved margins of 43.33%, an
increase of 5.21% and roughly the same dollars spent on selling,
general and administrative expenses.
Metal fabrication revenues decreased for the first quarter
of fiscal 1997 to $4,190,427. However, gross margins increased
by 14.35% to 27.86% for the three months ended October 31, 1996.
Selling, general and administrative expenses decreased by 1.82%
to 9.74% of revenues, resulting in operating profits of 18.12% or
$759,185. These significant gains are attributable to increased
orders in the telecommunication sector and better margins on
other fabricated products. We also made dramatic improvements in
efficiencies and reduced cost in the painting operations, as well
as reducing cost overall.
Plastics revenues decreased by $20,668 for the three months
ended October 31, 1996. With revenues remaining relatively
unchanged, operating profits increased by $31,232. The increases
in operating profits were due to improved margins of 7.80% to
27.34%, and a slight decline in selling, general and
administrative expenses.
12
<PAGE>
With the exception of expense relationships discussed above
in the specific segment discussion, such other relationships
remain consistent. Operating profits increased by 7.54%, the
effect of more realistic margins, 30.99%, discussed above and
improved selling, general and administrative expense, .15%, for
the three months ended October 31, 1996.
Liquidity and Capital Resources
Liquidity. Current assets of the Company totaled
$12,180,460 at October 31, 1996, up from current assets of
$11,697,173 at July 31, 1996, or a increase of $483,287. Current
liabilities increased by $257,557, resulting in a slight increase
in working capital (current assets less current liabilities) to
$1,110,182 at October 31, 1996, from $884,452 at July 31, 1996.
The Company believes that its operations will generate cash
sufficient to meet its working capital requirements and debt
obligations.
Hydel has a working capital line-of-credit with a Canadian
bank in the amount of $2,036,720. The Canadian credit facility
is secured by receivables, inventories and equipment of Hydel.
Hydel is currently in the process of refinancing its term and
revolving debt whereby it expects to incur long-term financing
from the Canadian Development Bank and reduce its reliance on its
short-term revolving line of credit by approximately $500,000.
The Company continues to borrow under its CIT Group
Credit/Finance, Inc. revolving and term loan facility. Borrowing
under the revolving portion is based on eligible accounts
receivable and inventory. The outstanding revolving loan balance
was $2,491,981 and the term loan balance was $372,023 at October
31, 1996.
Substantially all of the Company's assets, including
certificates of deposit are pledged as collateral for the
Company's long-term and short-term indebtedness.
Capital Expenditures
For Fiscal 1997, the Company (and its subsidiaries) does not
anticipate any significant capital expenditures, other than in
the ordinary course of replacing worn-out or obsolete machinery
and equipment utilized by its subsidiaries.
Dividend Policy
No cash dividends have been declared by the Company's Board
of Directors since the Company's inception. The Company does not
contemplate paying cash dividends on its common stock in the
foreseeable future since it intends to utilize it cash flow to
invest in its businesses. Cumulative dividends on the Series A,
7% Convertible Preferred Stock, have not been paid and amounted
to $55,232 as of October 31, 1996.
13
Other Business Matters
Accounting for Post-Retirement Benefits. The Company
provides no post-retirement benefits; therefore, FASB No. 106
will have no impact on the Company's financial position or result
of operations.
Inflation. The Company does not expect the current effects
of inflation to have any effect on its operations in the
foreseeable future. The largest single impact affecting the
Company's overall operations is the general state of the economy
and principally the home construction sector.
14
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
American Brass, Inc. (ABI) discontinued its operation in
January 1993 and is involved in several lawsuits arising
principally out of secured and unsecured creditors' claims
against ABI. Under most of these cases the courts have awarded
judgements against ABI for the amounts owed such creditors plus
costs. Although ABI has not declared bankruptcy, there are
insufficient assets to satisfy any of the unsecured creditor
claims. The secured creditor currently is owed approximately
$1,450,000; however, there are remaining assets which could be
sufficient enough to satisfy its claim. Superior Technology,
Inc. (Superior) is the guarantor of this debt to the secured
creditor. Accordingly, if there were insufficient assets to
satisfy its claim, the Company could be liable for this
deficiency. Effective March 23, 1995, the United States District
Court for the Northern District of Georgia entered a summary
judgement in the amount of approximately $1,449,000 in favor of
the secured lender against Superior Technology, Inc., a wholly-
owned subsidiary of the Company and which is now being appealed.
In addition, ABI is suing the lender and others for interfering
with the Environmental Protection Agency agreement made by ABI
relating to its inventory of "Ball Mill Residue" and claiming
damages in excess of $2,000,000 which could offset said
judgement. This summary judgement is not reflected on the books
of the Company. The Company believes that a settlement can be
achieved with the secured lender for an amount less than the
judgement. Further, there are assets available which if sold
could reduce the exposure of the guarantor, Superior(now Retech,
Inc.). We are currently unable to reasonably estimate the effect
of the judgement on the Company.
Pursuant to previous disclosure, the Company has had ongoing
discussions with the Alabama Department of Environmental
Management ("ADEM") regarding the ABI plant site located near
Headland, Alabama. The Company together with an unaffiliated
agricultural company had proposed a clean-up program for the
site. Such proposal involved the processing and sale of the Ball
Mill Residue and clean-up of the other environmental problems
under a self-funding program. To accomplish such a program would
require certain parties including the secured creditor, the
Headland Industrial Development Foundation and the Bond Holders
and their Bank Trustee to reach an agreement or compromise with
regard to any program. In the event such agreements would not be
forthcoming, ADEM will turn the site over to the U.S.
Environmental Protection Agency as a potential Super Fund Site.
The Company's exposure to the cost of any clean-up, if any, is
not currently determinable.
The Company and its subsidiaries are involved in various
routine litigation incident to its business operations.
Management does not believe that any of such litigation will have
a material adverse effect on the consolidated financial position
of the Company.
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) NONE
(b) Reports on Form 8-K.
NONE
16
<PAGE>
SIGNATURE
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.
ELECTRIC & GAS TECHNOLOGY, INC.
/s/ Edmund W. Bailey
Edmund W. Bailey
Vice President and
Chief Financial Officer
Dated: November 22, 1996
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 333,302
<SECURITIES> 0
<RECEIVABLES> 5,081,005
<ALLOWANCES> 59,798
<INVENTORY> 6,658,285
<CURRENT-ASSETS> 12,180,460
<PP&E> 16,695,849
<DEPRECIATION> 8,115,099
<TOTAL-ASSETS> 23,622,524
<CURRENT-LIABILITIES> 11,070,278
<BONDS> 0
0
900,000
<COMMON> 82,504
<OTHER-SE> 6,294,904
<TOTAL-LIABILITY-AND-EQUITY> 23,622,524
<SALES> 9,146,713
<TOTAL-REVENUES> 9,146,713
<CGS> 6,311,797
<TOTAL-COSTS> 8,302,094
<OTHER-EXPENSES> (14,796)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 325,882
<INCOME-PRETAX> 533,533
<INCOME-TAX> 0
<INCOME-CONTINUING> 533,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 533,533
<EPS-PRIMARY> .07
<EPS-DILUTED> .06
</TABLE>
