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: January 31, 1998
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 - 7,808,224 shares at March 6, 1998.
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
Index to Form 10-Q
For the Quarter Ended January 31, 1998
Page
Part I - Financial Information
1. Condensed Consolidated Financial Statements:
(a)Condensed Consolidated Balance Sheets as
of January 31, 1998 and July 31, 1997 3
(b)Condensed Consolidated Statements of
Operations for the three and six months
ended January 31, 1998 and 1997 4-5
(c)Condensed Consolidated Statements of
Cash Flows for the six months ended
January 31, 1998 and 1997 6
(d)Notes to Condensed Consolidated
Financial Statements 7-13
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-17
Part II - Other Information
Item 1 - Legal Proceedings 17
Item 6 - Exhibits and Reports on Form 8-K 18
Signature (pursuant to General Instruction E) 19
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
January 31, 1998 and July 31, 1997
ASSETS
<TABLE>
<S> <C> <C>
January 31, July 31,
1998 1997
CURRENT ASSETS(Unaudited)
Cash and cash equivalents $ 1,126,065 $14,503,417
Investments 9,624,258 -
Accounts receivable, net 1,523,809 1,648,286
Inventories 3,032,395 3,067,865
Prepaid expenses 79,920 93,398
Total current assets 15,386,447 19,312,966
PROPERTY, PLANT AND EQUIPMENT, net 1,933,096 2,086,744
OTHER ASSETS 3,213,500 1,619,419
TOTAL ASSETS $20,533,043 $23,019,129
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,271,061 $ 1,463,554
Accounts payable 1,590,750 1,780,352
Accrued liabilities 102,732 1,110,075
Current maturities of long-term obligations 147,513 183,231
Total current liabilities 3,112,056 4,537,212
LONG-TERM OBLIGATIONS
Long-term obligations, less current
maturities 1,787,306 2,357,794
MINORITY INTEREST IN SUBSIDIARY 62,744 83,004
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 10,099,338 10,099,338
Retained earnings 6,465,913 6,421,117
Pension liability adjustment (329,805) (329,805)
Cumulative translation adjustment (490,647) (432,274)
16,727,303 16,740,880
Less treasury stock, 442,192 in 1998 and
219,792 in 1997 shares, at cost (1,156,366) (699,761)
Total stockholders' equity 15,570,937 16,041,119
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,533,043 $23,019,129
</TABLE>
See accompanying notes.
3
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended January 31, 1998 and 1997
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Six months ended
January 31, January 31,
1998 1997 1998 1997
Sales $2,703,094 $2,625,417 $5,479,876 $5,411,080
Cost of goods sold 2,147,511 1,768,248 4,266,631 3,780,507
Gross profit 555,583 857,169 1,213,245 1,630,573
Selling, general and
administrative expenses 1,158,336 1,003,223 2,274,342 1,873,857
Operating profit (loss) (602,753) (146,054) (1,061,097) (243,284)
Other income and (expenses)
Interest, net 99,070 (109,736) 57,873 (232,285)
Minority interest 10,317 - 20,260 -
Investment gain 435,440 - 1,341,898 -
Other, net 20,868 (6,167) 41,951 (1,103)
565,695 (115,903) 1,461,982 (233,388)
Earnings (loss) from continuing
operations (37,058) (261,957) 400,885 (476,672)
Earnings (Loss) from discontinued
operations of:
Plastics segment (40,905) (13,943) (32,472) 6,300
Defense segment - (261,218) (323,617) (176,381)
Metal fabrication segment - 409,877 - 1,053,045
(40,905) 134,716 (356,089) 882,964
NET EARNINGS (LOSS) (77,963) (127,241) 44,796 406,292
Dividend on preferred stock 15,879 15,879 31,759 31,759
Net earnings (loss) applicable
to common stock $ (93,842) $ (143,120) $ 13,037 $ (374,533)
</TABLE>
See accompanying notes.
4
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
Three and Six Months Ended January 31, 1998 and 1997
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Six months ended
January 31, January 31,
1998 1997 1998 1997
Earnings (loss) available per Common share:
Continuing operations $(0.01) $(0.04) $ 0.05 $(0.06)
Discontinued operations 0.00 0.02 (0.05) 0.11
Net income $(0.01) $(0.02) $ 0.00 $ 0.05
Earnings (loss) available per Common share - assuming dilution:
Continuing operations $0.00 $(0.03) $ 0.05 $(0.05)
Discontinued operations (0.01) 0.02 (0.04) 0.09
Net income $(0.01) $(0.01) $ 0.01 $ 0.04
</TABLE>
See accompanying notes.
5
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended January 31, 1998 and 1997
(Unaudited)Six months ended
<TABLE>
<S> <C> <C>
January 31,
1998 1997
Increase (decrease) in cash:
Cash flows from operating activities:
Net earnings (loss) $ 44,796 $ 406,292
Adjustments to reconcile net earnings ( loss)
to net cash provided by operating activities:
Discontinued operations (356,089) 882,964
Depreciation and amortization 159,845 166,839
Minority interest (20,260) -
Gain on investments (1,341,898) -
Changes in assets and liabilities:
Accounts receivable 124,477 278,855
Inventories 35,470 (373,876)
Prepaid expenses 13,478 16,648
Other assets 851,855 (1,383,208)
Accounts payable (171,503) 295,847
Accrued liabilities (1,007,343) (59,479)
Net cash provided by (used in) operating activities (1,667,172) 230,882
Cash flows from investing activities:
Investments (10,037,591) -
Purchase of treasury stock (456,605) -
Purchase of property, plant and equipment (2,855) (92,204)
Net cash provided by (used in) investing activities (10,497,051) (92,204)
Cash flows from financing activities:
Increase (decrease) in notes payable and
long-term obligations (875,171) (165,335)
Due to/from affiliate (337,958) (205,610)
Net cash provided by (used in) financing activities (1,213,129) (370,945)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (13,377,352) (232,267)
Cash and cash equivalents - beginning of period 14,503,417 458,359
Cash and cash equivalents - end of period $ 1,126,065 $ 226,092
Supplemental disclosures of cash flow information:
Cash paid during the year for Interest $ 188,454 $ 232,285
</TABLE>
See accompanying notes.
6
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1998
(Unaudited)
NOTE A - GENERAL
Electric & Gas Technology, Inc.("the Company"or "ELGT") 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
91.5% of AMT and 100% of Reynolds and Hydel, and, through such
subsidiaries, operates in three distinct business segments: (1)
production of atmospheric water, filtration and enhanced water
products (AMT); (2) the manufacture and sale of natural gas
measurement, metering and odorization equipment (Reynolds); and
(3) the manufacture and sale of electric meter enclosures and
pole-line hardware for the electric utility industry and the
general public (Hydel). The entrance into the Water Industry
will be the major focus for the future development and growth on
the Company. Effective December 31, 1997, October 1, 1997 and
July 31, 1997, the Company discontinued the operations of its
plastics, defense and metal fabrication segments, respectively
which previously were engaged in the manufacture of vacuum-form
and injection-mold products (Fridcorp), design and manufacture of
defense electronic components (SMI) and the manufacture and sale
of precision metal enclosures for telecommunication and computer
equipment (Logic), respectively. 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, 1997 have been omitted, even though they are
necessary for a fair presentation of the financial position at
January 31, 1998 and 1997 and the results of operations and cash
flows for the periods then ended.
7
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
January 31, 1998
(Unaudited)
NOTE B - INVENTORIES
Inventories are comprised as follows:
January 31, 1998 July 31, 1997
Raw Materials $1,129,909 $1,209,548
Work in process 274,212 312,226
Finished Goods 1,628,274 1,546,091
$3,032,395 $3,067,865
NOTE C - PREFERRED STOCK AND EARNINGS PER SHARE
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.
Under the agreement the Company is 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 $1.75 per share which if
sold at that price would require approximately 514,000 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
regarding the Promissory Note purchased from Allied. Allied has
sued the Company under the Preferred Stock issued by the Company
in connection with its investment in Cooper and the rights
pertaining thereto. The suit was filed in the Eastern District
of Illinois (Chicago) and currently, all activity is directed at
discovery. The Company has filed a counter suit alleging
security violations (10b5) demanding return of its Preferred
Stock. In addition, the Company has been advised by the Cooper
debtor-in-possession that it has litigation pending claiming
preference and other violations by Allied. The ultimate
resolution of the Company's case will depend in part upon the
outcome of the Cooper bankruptcy case. Any final conversion to
the Company's common stock is uncertain. Accumulated and unpaid
dividends on the preferred stock amounted to approximately
$134,112 at January 31, 1998.
8
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
January 31, 1998
(Unaudited)
NOTE C - 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. Effective July 31, 1997, the Company
reduced its investment in Cooper to $350,000, the amount
anticipated to be recovered under the bankruptcy. On November
21, 1997, the bankruptcy court confirmed the debtor's Plan (Cabec
Energy Corp.) which provides the Company with $700,000 in cash,
notes totaling $220,000, a royalty of 3% of new rigs sold and
1,000,000 shares of Cabec Energy Corp. common stock. Based on
the consideration received under the confirmed Plan, the Company
adjusted its investment in Cooper to approximately $1,200,000.
In 1997, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings
per Share". Statement 128 replaced the previously reported
primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Dilute earnings
per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for
all periods have been presented, and when necessary, restated to
conform to the Statement 128 requirements.
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Six months ended
1998 1997 1998 1997
Numerator
Net income (loss)from continuing
operations $(37,058) $(261,957) $400,885 $(476,672)
Preferred stock dividends (15,879) (15,879) (31,759) (31,759)
Numerator for basic earnings per share
Net income (loss) available to
common stockholders continuing
operations (52,937) (277,836) 369,126 (508,431)
Discontinued operations (40,905) 134,716 (356,089) 882,964
Net income (loss) available to
common stockholders $(93,842) $(143,120) $ 13,037 $ 374,533
</TABLE>
9
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
January 31, 1998
(Unaudited)
NOTE C - PREFERRED STOCK AND EARNINGS PER SHARE(Continued)
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Six months ended
1998 1997 1998 1997
Effect of dilutive securities
Preferred stock dividends $ 15,879 $ 15,879 $ 31,759 $ 31,759
Numerator for diluted earnings per share
Net income (loss) available to
common stockholders after
assumed conversion continuing
operations $(37,058) $(261,957) $400,885 $(476,672)
Discontinued operations (40,905) 134,716 (356,089) 882,964
Net income (loss) available to
common stockholders $(77,963) $(127,241)$ 44,796 $406,292
Demoninator
Demoninator for basic earnings per share
weighted-average shares 7,808,224 7,975,624 7,808,224 7,975,624
Effect of dilutive securities:
Options 290,000 - 290,000 -
Preferred stock 514,000 1,371,000 514,000 1,371,000
804,000 1,371,000 804,000 1,371,000
Demoninator for dilutive earnings per share
assumed conversion 8,612,224 9,346,624 8,612,224 9,346,624
</TABLE>
Options to purchase shares ranging in price from $2.00 to $4.25
for 127,000 shares and shares ranging in price from $2.50 to
$4.68 for 333,000 shares were outstanding during 1998 and 1997,
respectively but were not included in the computation of dilutive
earnings per share because the options' exercise price was
greater that the average market price of the common shares and,
therefore, the effect would be antidilutive.
10
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
January 31, 1998
(Unaudited)
NOTE D - DISPOSITIONS
The Company sold its Plastics (Fridcorp), defense (SMI) and metal
fabrication (Logic and Precision) segments effective December 31,
1997, October 1, 1997 and July 31, 1997, respectively and
accordingly, the financial statements have been reclassified to
reflect these segments as discontinued operations. The Company
sold the operating assets of Fridcorp Plastics, Inc. for cash of
$760,000 which resulted in a gain of $211,903. The Company has
an agreement to sale SMI to its current management and will
receive cash of $100,000, a note for $900,000 and a contingent
payment based on a future royalty. Such note and deferred gain
are grouped in other assets at January 31, 1998 and any gain will
be recognized as cash is received. Proceeds from the sale of the
metal fabrication segment amounted to approximately $20,850,000
with a corresponding gain of approximately $12,650,000 and was
recorded effective July 31, 1997. Sales, cost of goods sold,
selling, general and administrative expense and other for three
and six months ended January 31, 1998 and 1997 were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Three months Six months
1998 1997 1998 1997
Sales $185,517 $6,153,898 $1,104,411 $12,514,948
Cost of goods sold 187,983 4,535,009 946,193 8,834,547
Selling, general and administrative 31,986 1,307,167 440,418 2,426,830
Other 6,453 177,006 73,889 370,607
Discontinued operations $(40,905) $ 134,716 $ (356,089) $ 882,964
</TABLE>
11
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
January 31, 1998
(Unaudited)
NOTE F - INDUSTRY SEGMENT DATA:
The Company's business is primarily comprised of three industry
segments: i. water (AMT); ii. natural gas measurement and
recording devices and odorization (Reynolds); and iii. electrical
components and enclosures (Hydel) as set forth below. Operating
profits represent total sales less cost of sales and general and
administrative expenses.
<TABLE>
<S> <C> <C> <C> <C> <C>
Three Months Ended January 31, 1998
General
Water Gas Electric Corporate Consolidated
Sales $ - $ 601,208 $2,101,886 $ - $2,703,094
Cost of goods sold 25,939 464,847 1,656,725 - 2,147,511
Selling, gen. & adm. 111,221 316,951 335,702 394,462 1,158,336
Operating profit(loss) (137,160) (180,590) 109,459 (394,462) (602,753)
Interest, net - (7,000) (29,091) 135,161 99,070
Other income(expense) - 22,126 - 444,499 466,625
Net earnings (loss) from
continuing operations $(137,160) $(165,464) $ 80,368 $185,198 $ (37,058)
Assets:
Receivables $ 47 $ 295,470 $ 1,228,292 $ - $1,523,809
Inventory $423,091 $723,291 $1,886,013 $ - $3,032,395
Total assets $734,724 $1,849,619 $4,582,847 $13,365,853 $20,533,043
Depreciation $2,064 $43,932 $32,187 $3,647 $81,830
Additions PP&E $ - $3,905 $(8,766) $ - $(4,861)
</TABLE>
12
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
January 31, 1998
(Unaudited)
NOTE F - INDUSTRY SEGMENT DATA(Continued):
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Ended January 31, 1998
General
Water Gas Electric Corporate Consolidated
Sales $ 52,105 $1,208,859 $4,218,912 $ - $5,479,876
Cost of goods sold 106,530 812,031 3,348,070 - 4,266,631
Selling, gen. & adm. 183,936 660,983 698,749 730,674 2,274,342
Operating profit(loss) (238,361) (264,155 172,093 (730,674)( 1,061,097)
Interest, net - (27,835) (52,063) 137,771 57,873
Other income(expense) - 43,239 - 1,360,870 1,404,109
Net earnings (loss) from
continuing operations $(238,361) $(248,751) $ 120,030 $767,967 $400,885
Depreciation $2,064 $84,523 $65,965 $7,293 $159,845
Additions PP&E $9,587 $7,224 $(15,334) $1,378 $2,855
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company, through its subsidiaries, operates within three
separate industries. These are (i) production of atmospheric
water, filtration and enhanced water products; (ii) the
manufacture of natural gas measurement equipment and gas
odorization products; and (iii) the manufacture and sale of metal
enclosures and other electrical equipment for use in the electric
utility industry.
Results of Operations
Summary. The Company reported net earnings (loss) from
continuing operations and net earnings (loss) of $400,885 and
$44,796 and $(37,058) and $(77,963) for the six and three months
ended January 31, 1998, respectively. This compared to
$(476,672) and $406,292 and $(261,957) and $(127,241) for the six
and three months ended January 31, 1997, respectively. Operating
income decreased by $(484,732) and $(305,937) for the six and
three month periods, the result of operating expenses of $137,160
with no corresponding revenue in the water segment during the
second quarter and higher cost of goods sold and general and
administrative expenses with reduced revenues and operating
profits in the gas segment. The electric segment reported
improved revenues and operating profits for both periods. The
first quarter of fiscal 1998 was benefited by the favorable
treatment under the debtor's confirmed Plan for Cooper
Manufacturing Corporation in bankruptcy. Gross margins declined
from 30.13% to 22.14%. Selling, general and administrative
expenses as a relationship to revenues at the segment level
increased from 27.28% to 28.17% of revenues. Net interest income
was reported both for the six and three months ended January 31,
1998 due to earnings on short-term investments and decreased
borrowing.
Increases(decreases) for the three and six months period ended
January 31, 1998, as compared with the similar period of 1997,
for key operating data were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
January 31, 1998 January 31,1998
Increase Percent Increase Percent
(Decrease) Change (Decrease) Change
Operating Revenues $77,677 2.87 $68,796 1.26
Operating Income (305,937) (313.31) (484,732) (314.13)
Earnings (loss) from continuing
operations 214,582 81.91 857,297 179.85
Net Earnings Per Share (.01) (50.00) (.05) (100.00)
</TABLE>
14
<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:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
January 31, 1998 January 31,1998
Increase Increase
(Decrease) Percent (Decrease) Percent
Operating Revenues:
Water $ - - $ 52,105 75.74
Gas (337,103) (433.98) (636,656) (925.43)
Electric 414,780 533.98 653,347 949.69
$ 77,677 100.00 $ 68,796 100.00
Operating Income (Loss):
Water $(137,160) (44.83) $ (238,361) (49.17)
Gas (255,779) (83.61) (402,029) (82.94)
Electric 87,002 28.44 155,658 32.11
(305,937) 100.00 (484,732) 100.00
General Corporate (150,762) (333,081)
Other Income (Expense) 671,281 1,675,110
Earnings from continuing
operations $ 214,582 $ 857,297
</TABLE>
Water revenues amounted to $52,105 for the six months ended
January 31, 1998 which were essentially sales of a few
demonstrators of this segments "Watermaker" product occurring
during the first quarter. No revenues were recorded during the
second quarter. Expenses were $290,466 and $137,160 for the six
and three months ended January 31, 1998, respectively. With the
exception of cost associated with the first quarter revenues,
expenses mainly consisted of further development costs, including
a business plan and marketing expenses. While the Company has
been working on this project for sometime, only recently has any
meaningful activity taken place. Revenues are not projected
until sometime in the fourth quarter of fiscal 1998.
15
<PAGE>
Gas revenues decreased by $(636,656) and $(337,103) for the six
and three months ended January 31, 1998. Operating income
decreased by $(402,029) and $(255,779) for the six and three
months ended January 31, 1998, resulting in operating loss of
$(264,155) and $(180,590), respectively. Selling, general and
administrative expenses increased slightly in-spite of the
declining revenues, resulting in the operating losses. Staffing
levels remained high due to a development contract for a new BTU
meter.
Electric revenues increased for the six and three months ended
January 31, 1998 by $653,347 and $414,780. Operating profits
increased by $155,658 and $87,002 for the six and three months
ended January 31, 1998, respectively, due to the lower carrying
cost of the Paris, Texas facility and improved performance in the
Canadian operation. Second quarter revenues were helped by
winter storms affecting eastern Canada, requiring major
replacement of damaged transmission lines. The electric segment
now consist of only the Canadian meter socket and pole line
hardware product lines selling almost entirely in the Canadian
markets.
With the exception of expense relationships discussed above in
the specific segment discussion, such other relationships remain
consistent. Operating profits decreased by 8.88% and 11.42% for
the six and three months ended January 31, 1998, respectively,
the effect of reduced margins, discussed above.
Liquidity and Capital Resources
Liquidity. Current assets of the Company totaled $15,386,447 at
January 31, 1998, down from current assets of $19,312,966 at July
31, 1997, or a decrease of $(3,926,519). Current liabilities
decreased by $(1,425,156), resulting in a decrease in working
capital (current assets less current liabilities) to $12,274,391
at January 31, 1998, from $14,775,754 at July 31, 1997. The
Company believes that it has and will generate sufficient cash 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 approximately $1,500,000. The Canadian credit
facility is secured by receivables, inventories and equipment of
Hydel.
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 $333,559 and the term loan balance was $78,842 at January 31,
1998.
Capital Expenditures
For Fiscal 1998, 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.
16
<PAGE>
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 $134,112 as of January 31, 1998.
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 new home construction.
PART II
ITEM 1. LEGAL PROCEEDINGS
The former manufacturers representative of Logic, Ammon & Rizos
Co, has filed a suit against the Company, the Company's chairman
of the board, Logic, and New Logic Design Metals, Inc. ("New
Logic")(the purchaser of the assets) for unpaid fees, assumed by
New Logic and a previous adjustment in prior fees plus
prospective fee from New Logic's sales. The case is in early
stages of discovery; management believes there will be no
material effect on the Company.
Allied Products Co has sued the Company under the Preferred Stock
issued by the Company in connection with its investment in Cooper
Manufacturing Corporation ("Cooper") and the rights pertaining
thereto. The suit was filed in the Eastern District of Illinois
(Chicago) and currently, all activity is directed at discovery.
The Company has filed a counter suit alleging security violations
(10b5) demanding return of its Preferred Stock. In addition, the
Company has been advised by the Cooper debtor-in-possession that
it has litigation pending claiming preference and other
violations by Allied. The ultimate resolution of this case will
depend in part upon the outcome of the Cooper bankruptcy case.
The bankruptcy court confirmed the debtor's Plan of
Reorganization on November 21, 1997.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)NONE
(b)Reports on Form 8-K.
NONE
18
<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: March 16, 1998
19
<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 10,750,323
<SECURITIES> 0
<RECEIVABLES> 1,523,809
<ALLOWANCES> 3,541
<INVENTORY> 3,032,395
<CURRENT-ASSETS> 15,386,447
<PP&E> 4,391,234
<DEPRECIATION> 2,458,138
<TOTAL-ASSETS> 20,553,043
<CURRENT-LIABILITIES> 3,112,056
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900,000
<COMMON> 82,504
<OTHER-SE> 14,488,433
<TOTAL-LIABILITY-AND-EQUITY> 20,553,043
<SALES> 5,479,876
<TOTAL-REVENUES> 5,479,876
<CGS> 4,266,631
<TOTAL-COSTS> 6,540,973
<OTHER-EXPENSES> (1,461,982)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,454
<INCOME-PRETAX> 400,885
<INCOME-TAX> 0
<INCOME-CONTINUING> 400,885
<DISCONTINUED> (356,089)
<EXTRAORDINARY> 0
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<NET-INCOME> 44,796
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