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: April 30, 2000
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 - 8,343,417 shares at May 31, 2000.
1
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
Index to Form 10-Q
For the Quarter Ended April 30, 2000
Page
Part I - Financial Information
1. Report of Independent Accountants 3
2. Condensed Consolidated Financial Statements:
(a)Condensed Consolidated Balance Sheets as
of April 30, 2000 and July 31, 1999 4
(b)Condensed Consolidated Statements of
Operations for the three and nine months
ended April 30, 2000 and 1999 5
(c)Condensed Consolidated Statements of
Changes in Stockholders' Equity for the
nine months ended April 30, 2000 6
(c)Condensed Consolidated Statements of
Cash Flows for the nine months ended
April 30, 2000 and 1999 7
(d)Notes to Condensed Consolidated
Financial Statements 8-13
3. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-17
Part II - Other Information
Item 1 - Legal Proceedings 18
Item 4 - Submission of Matters to a Vote of Security Holders 18
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
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REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Electric & Gas Technology, Inc.
We have reviewed the accompanying condensed consolidated balance
sheet of Electric & Gas Technology, Inc. and Subsidiaries as of
April 30, 2000 and the related condensed consolidated statements
of operations for the three and nine months periods then ended and
changes in stockholders' equity and cash flows for nine months
periods then ended. These statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountant. A
review of interim financial information consists principally of
analytical procedures applied to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
financial statements in order for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Electric &
Gas Technology, Inc. and Subsidiaries as of July 31, 1999 and the
related statements of operations, changes in stockholders' equity
and cash flows for the year then ended (not presented separately
herein), and in our report dated October 8, 1999, we expressed an
unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of April 30, 2000 is fairly stated,
in all material respects, in relation to the balance sheet taken
as a whole.
/s/ Jackson & Rhodes P.C.
Jackson & Rhodes P. C.
Dallas, Texas
June 5, 2000
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, 2000 and July 31, 1999
ASSETS
April 30, July 31,
2000 1999
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 294,914 $ 378,340
Certificates of deposit 1,713,886 2,810,842
Investments, market 3,318 519,646
Accounts receivable, net 1,762,139 1,606,637
Inventories 2,844,842 2,669,280
Prepaid expenses 54,449 61,906
Total current assets 6,673,548 8,046,651
PROPERTY, PLANT AND EQUIPMENT, net 1,724,521 1,797,363
OTHER ASSETS 4,820,131 3,628,276
TOTAL ASSETS $13,218,200 $13,472,290
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,377,680 $ 1,731,202
Accounts payable 1,093,771 1,330,054
Accrued liabilities 323,983 276,060
Current maturities of long-term obligations 153,251 153,126
Total current liabilities 2,948,685 3,490,442
LONG-TERM OBLIGATIONS
Long-term obligations, less current
maturities 1,122,187 1,210,254
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, issued 8,343,417 83,434 83,434
Additional paid-in capital 9,258,795 9,258,795
Retained earnings 861,730 496,866
Pension liability adjustment (237,825) (237,825)
Cumulative translation adjustment (509,443) (529,676)
10,356,691 9,971,594
Treasury stock, 8,500 shares, at cost (9,363) -
Reserve for preferred stock redemption (1,200,000) (1,200,000)
Total stockholders' equity 9,147,328 8,771,594
TOTALLIABILITIES AND STOCKHOLDERS' EQUITY $13,218,200 $13,472,290
See accompanying notes.
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended April 30, 2000 and 1999
(Unaudited)
Three months ended Nine months ended
April 30, April 30,
2000 1999 2000 1999
Sales $2,509,356 $2,816,160 $8,615,844 $8,376,618
Cost of goods sold 1,992,596 2,033,148 6,614,879 6,055,396
Gross profit 516,760 783,012 2,000,965 2,321,222
Selling, general and
administrative expenses 930,052 954,263 2,580,338 2,922,186
Operating profit (loss) (413,292) (171,251) (579,373) (600,964)
Other income and (expenses)
Interest, net (9,423) 89,416 42,511 196,079
Minority interest - 1,079 - 5,654
Investment gain 342,427 182,045 690,257 182,045
Other, net (54,060) (43,634) 53,524 4,565
278,944 228,906 786,292 388,343
Income (loss) before federal
income tax credit (134,348) 57,655 206,919 (212,621)
Federal income tax credit 157,945 - 157,945 -
NET EARNINGS (LOSS) 23,597 57,655 364,864 (212,621)
Dividend on preferred stock 15,362 15,362 47,121 47,121
Net earnings (loss) applicable
to common stock $ 8,235 $ 42,293 $317,743 $(259,742)
Earnings (loss) available per Common share:
Net income (loss) $NIL $0.01 $0.04 $(0.03)
Earnings (loss) available per Common share - assuming dilution:
Net income (loss) $NIL $0.01 $0.04 $(0.03)
See accompanying notes.
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<TABLE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSEDCONSOLIDATED STATEMENTSOF CHANGESIN STOCKHOLDERS'EQUITY
Nine months ended April 30, 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Unaudited)
Accumulated Reserve
Other Redemption
Preferred Common Paid-in Retained Comprehensive Treasury Preferred
Stock Stock Capital Earnings Income Stock Stock Total
Balance at July 31, 1999 $900,000 $83,434 $9,258,795 $496,866 $(767,501) $ - $(1,200,000) $8,771,594
Net income 364,864 364,864
Currency translation adjustments 20,233 20,233
Comprehensive income 385,097
Purchase of treasury stock - - - - - (9,363) - (9,363)
Balance at April 30, 2000 $900,000 $83,434 $9,258,795 $861,730 $(747,268) $(9,363) $(1,200,000) $9,147,328
</TABLE>
See accompanying notes.
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended April 30, 2000 and 1999(Unaudited)
Nine months ended
April 30,
2000 1999
Increase (decrease) in cash:
Cash flows from operating activities:
Net earnings (loss) $ 364,864 $ (212,621)
Adjustments to reconcile net earnings ( loss)
to net cash used by operating activities:
Depreciation and amortization 155,721 144,524
Minority interest - (5,654)
Gain on investments (690,257) (182,045)
Changes in assets and liabilities:
Accounts receivable (155,502) 175,541
Inventories (175,562) (522,221)
Prepaid expenses 7,457 (64,957)
Other assets 184,032 386,210
Accounts payable (273,210) (292,722)
Accrued liabilities 47,923 175,240
Net cash provided by(used in) operating activities (534,534) (398,705)
Cash flows from investing activities:
Investments 1,613,284 1,360,918
Increase in long-term investments (608,500) -
Purchase and retirement of treasury stock (9,363) (114,456)
Reserve for redemption of preferred stock - (1,200,000)
Purchase of property, plant and equipment (82,879) (184,826)
Net cash provided by(used in) investing activities 912,542 (138,364)
Cash flows from financing activities:
Increase (decrease) in notes payable and
long-term obligations (384,304) 59,658
Due to/from affiliate (77,130) 77,170
Net cash provided by(used in) financing activities (461,434) 136,828
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (83,426) (400,241)
Cash and cash equivalents - beginning of period 378,340 542,086
Cash and cash equivalents - end of period $ 294,914 $ 141,845
Supplemental disclosures of cash flow information:
Cash paid during the period for Interest $ 384,913 $ 426,105
See accompanying notes.
7
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2000
(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
Reynolds and Hydel and owns 91.5% of AMT 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). Effective October 1, 1997, the Company
agreed to sell its defense electronics business segment and on
December 31, 1997 it sold its plastics segment. Both such
operations have been treated as discontinued operations.
Effective July 31, 1997, the Company discontinued the operations
of its metal fabrication segment which previously was engaged in
the manufacture and sale of precision metal enclosures for
telecommunication and computer equipment (Logic). 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, 1999 have been omitted, even though they are
necessary for a fair presentation of the financial position at
April 30, 2000 and 1999 and the results of operations and cash
flows for the periods then ended.
8
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 30, 2000
(Unaudited)
NOTE B - INVENTORIES
Inventories are comprised as follows:
April 30, 2000 July 31, 1999
Raw Materials $ 996,402 $1,118,659
Work in process 385,138 370,982
Finished Goods 1,463,302 1,179,639
$2,844,842 $2,669,280
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 $100,000 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 had 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 trades at approximately $1.25 per share which if
sold at that price would require 720,000 shares to be sold to
retire the obligation to Allied. The Preferred shares are
redeemable in cash plus accrued dividends at any time as the
result of an underwriting as defined therein. Accumulated and
unpaid dividends to preferred stock amounted to approximately
$275,647 at April 30, 2000.
An Illinois's court awarded a judgement on January 28, 1999 in
favor of Allied and against the Company in the amount of
approximately $1,100,000. The pending lawsuit between Allied and
the Company has now been settled and dismissed. The settlement
required the repurchase by the Company of the 90,000 shares of
preferred stock for $1.1 million which would satisfy a judgement
by the Court requiring such a purchase. An affiliate acquired
said 90,000 shares and the judgement. The transaction was
completed by the affiliate with $1.2 million of collateral
supplied by the Company. The affiliate is pursuing the sale of
the preferred stock, which if unsuccessful, the Company will
repurchase the preferred stock and retire same.
9
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 30, 2000
(Unaudited)
NOTE C - PREFERRED STOCK AND EARNINGS PER SHARE(Continued)
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Nine months ended
2000 1999 2000 1999
Numerator
Net income (loss) $23,597 $57,655 $364,864 $(212,621)
Preferred stock dividends (15,362) (15,362) (47,121) (47,121)
Numerator for basic earnings per share
Net income (loss) available to
common stockholders operations $ 8,235 $ 42,293 $317,743 $(259,742)
Effect of dilutive securities
Preferred stock dividends $ 15,362 $ 15,362 $ 47,121 $ 47,121
Numerator for diluted earnings per share
Net income (loss) available to
common stockholders after
assumed conversion $ 23,597 $ 57,655 $364,864 $(212,621)
Denominator
Denominator for basic earnings per share
Weighted-average shares 8,337,417 8,130,624 8,341,417 8,130,624
Effect of dilutive securities:
Options 44,936 200,732 44,936 -
Preferred stock 720,000 600,000 720,000 -
764,936 800,732 764,936 -
Denominator for dilutive earnings per share
assumed conversion 9,102,353 8,931,356 9,106,353 8,130,624
</TABLE>
10
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 30, 2000
(Unaudited)
NOTE C - PREFERRED STOCK AND EARNINGS PER SHARE(Continued)
Assumed conversion of preferred stock in 1999 is anti-dilutive.
Options to purchase shares ranging in price from $.50 to $.55 for
77,207 shares and shares ranging in price from $.50 to $2.75 for
352,000 shares were outstanding during 2000 and 1999,
respectively but were only included in the computation of
dilutive earnings per share for 2000 because the options'
exercise price was less than the average market price of the
common shares and were dilutive.
NOTE D - ACCUMULATED OTHER COMPREHENSIVE INCOME:
The components of other comprehensive income are as follows:
Currency Pension
Translations Liability
Adjustments Adjustments Total
Balance at July 31, 1999 $(529,676) $(237,825) $(767,501)
Currency translation adjustments 20,233 - 20,233
Balance April 30, 2000 $(509,443) $(237,825) $(747,268)
The earnings associated with the Company's investment in its
foreign subsidiary are considered to be permanently invested and
no provision for U.S. federal income taxes on these earnings or
translation adjustments has been provided.
11
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 30, 2000
(Unaudited)
NOTE E - 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.
Three Months Ended April 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C>
General
Water Gas Electric Corporate Consolidated
Sales $ 2,000 $ 489,778 $2,017,578 $ - $2,509,356
Cost of goods sold 15,555 373,550 1,603,491 - 1,992,596
Selling, gen. & adm. 7,066 289,447 359,917 273,622 930,052
Operating profit(loss) (20,621) (173,219) 54,170 (273,622) (413,292)
Interest, net - (12,966) (22,983) 26,526 (9,423)
Other income(expense) 385,832 11,148 - (108,613) 288,367
Net earnings (loss) before
income taxes $365,211 $(175,037) $ 31,187 $(355,709) $ (134,348)
Assets:
Receivables $ - $ 343,123 $1,200,199 $218,817 $ 1,762,139
Inventory $ 51,870 $ 792,467 $2,000,505 $ - $ 2,844,842
Total assets $567,496 $1,631,048 $4,347,567 $6,672,089 $13,218,200
Depreciation $1,189 $18,503 $29,196 $3,093 $51,981
Additions PP&E $ - $ 1,672 $(3,332) $ - $(1,660)
</TABLE>
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ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 30, 2000
(Unaudited)
NOTE E - INDUSTRY SEGMENT DATA(Continued):
Nine Months Ended April 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C>
General
Water Gas Electric Corporate Consolidated
Sales $ 4,241 $1,917,443 $6,694,160 $ - $8,615,844
Cost of goods sold 45,192 1,198,749 5,370,938 - 6,614,879
Selling, gen. & adm. 14,645 840,380 1,038,481 686,832 2,580,338
Operating profit(loss) (55,596) (121,686) 284,741 (686,832) (579,373)
Interest, net - (42,192) (69,759) 154,462 42,511
Other income(expense) 385,832 56,575 - 301,374 743,781
Net earnings (loss) before
income taxes $330,236 $ (107,303) $ 214,982 $(230,996) $ 206,919
Depreciation $3,567 $55,509 $87,366 $9,279 $ 155,721
Additions PP&E $ - $31,047 $46,150 $5,682 $ 82,879
</TABLE>
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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) of $364,864
and $23,597 for the nine and three months ended April 30, 2000,
respectively. This compared to $(212,621) and $57,655 for the
nine and three months ended April 30, 1999, respectively.
Operating income decreased by $(297,849) and $(261,980) for the
nine and three month periods, the result of decreases in revenue
and operating profits in the gas segment. For the current
quarter the electric segment reported slightly increased
revenues, however, operating profits decreased slightly. Gross
margins decreased from 27.71% to 23.22% for the nine months ended
April 30, 2000. Also, selling, general and administrative
expenses as a relationship to revenues at the segment level
decreased from 22.87% to 21.98% of revenues. Other income
increased significantly from the adjustment to Fair Market Value
of the Company's unrestricted stock investment in Far West Group,
Inc. which amounted to approximately $385,000. The Company filed
a carryback refund tax credit of $157,945 for prior year taxes
paid.
Increases(decreases) for the three and nine months period ended
April 30, 2000, as compared with the similar period of 1999, for
key operating data were as follows:
Three Months Ended Nine Months Ended
April 30, 2000 April 30,2000
Increase Percent Increase Percent
(Decrease) Change (Decrease) Change
Operating Revenues $(306,804) (10.89) $239,226 2.86
Operating Income (261,980) (214.93) (297,849) (73.49)
Net earnings (loss) before tax 124,966 220.88 425,194 194.80
Net Earnings Per Share (.01) (100.00) .07 233.33
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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 Nine Months Ended
April 30, 2000 April 30, 2000
Increase Increase
(Decrease) Percent (Decrease) Percent
Operating Revenues:
Water $ - - $ 2,241 .94
Gas (323,597) (105.47) (390,191) (163.11)
Electric 16,793 5.47 627,176 262.17
$(306,804) 100.00 $ 239,226 100.00
Operating Income (Loss):
Water $ (7,929) (3.03) $ 10,921 3.67
Gas (248,472) (94.84) (349,907) (117.48)
Electric (5,579) (2.13) 41,137 13.81
(261,980) 100.00 (297,849) 100.00
General Corporate 19,939 319,440
Other Income (Expense) 367,007 403,603
Net earnings (loss) before tax$ 124,966 $ 425,194
Water revenues amounted to only $4,241 for the nine months ended
April 30, 2000. Revenues for the nine months ended April 30,
1999 were $2,000 which are sales of demonstrators of this
segments "Watermaker" product. Expenses were $59,837 and $22,621
for the nine and three months ended April 30, 2000, respectively.
Expenses were $68,517 and $14,692 for the nine and three months
ended April 30, 1999, respectively. The Company continues to
test and improve its products while it searches for a partner to
commercially develop this product line. There is no forecast of
when meaningful revenues might occur.
Gas revenues decreased by $(390,191) and $(323,597) for the nine
and three months ended April 30, 2000. Operating income
decreased by $(349,907) and $(248,472) for the nine and three
months ended April 30, 2000, resulting in operating losses of
$(121,686) and $(173,219), respectively. Selling, general and
administrative expenses increased to 43.83% of revenues when
compared to 39.85% for the prior nine month period. The
significant decline in sales is attributed to increased
15
<PAGE>
competition and customers selecting less expensive units.
Expenses remained high on the lower sales due to the continuing
development of the BTU meter product. Revenues from this
products are not expected to occur until late 2000.
Electric revenues increased for the nine and three months ended
April 30, 2000 by $627,176 and $16,793. Operating profits
increased (decreased) by $41,137 and $(5,579) for the nine and
three months ended April 30, 2000, respectively. Third quarter
fiscal 2000 costs were higher due to some manufacturing equipment
breakdowns. The electric segment consists 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 (3.59)% and (9.91)%
for the nine and three months ended April 30, 2000, respectively,
the effect of poor performance in the gas segment, discussed
above.
Liquidity and Capital Resources
Liquidity. Current assets of the Company totaled $6,673,548 at
April 30, 2000, down from current assets of $8,046,651 at July
31, 1999, or a decrease of $(1,373,103). Current liabilities
decreased by $(541,757), resulting in a decrease in working
capital (current assets less current liabilities) to $3,724,863
at April 30, 2000, from $4,556,209 at July 31, 1999. 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 $201,106 and the term loan balance was $44,534 at April 30,
2000.
16
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Capital Expenditures
For Fiscal 2000, 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 $275,647 as of April 30, 2000.
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.
Information regarding and factors affecting forward looking
statements. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or
performances and underlying assumption and other statements which
are other than statements of historical facts. Certain statements
contained herein are forward-looking statements and, accordingly,
involve risks and uncertainties which could cause actual results
or outcomes to differ materially from those expressed in the
forward-looking statements. The Company's expectations, beliefs
and projections are expressed in good faith and are believed by
the Company to have a reasonable basis, including without
limitations, management's examination of historical operating
trends, data contained in the Company's records and other data
available from third parties, but there can be no assurance that
management's expectations, beliefs or projections will result, or
be achieved, or accomplished.
17
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PART II
ITEM 1. LEGAL PROCEEDINGS
Ammon & Rizos Co., Inc. Vs. Metal Products, Inc.-Cause No.; 97-
06860-C; District Court Dallas County, Texas. The former
manufacturers representative of Logic, Ammon & Rizos Co, had
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 fees
from New Logic's sales. This case was settled by all parties on
November 17, 1999 with a payment of $500,000 to the plaintiff of
which the Company contributed $200,000 to the settlement. The
balance of $300,000 was paid by New Logic. The Company had
previously sold (1997) its metal fabrication business to New
Logic.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual stockholders meeting on March 10,
2000. The following individuals were elected as directors until
the Company's next annual meeting:
S. Mort ZimmermanDaniel A. Zimmerman
Edmund W. BaileyFred M. Updegraff
James J. LingDick T. Bobbitt
Jackson & Rhodes P.C. appointment as auditors was ratified with
7,815,023 affirmative votes and 73,935 against.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)NONE
(b)Reports on Form 8-K.
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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: June 7, 2000
19
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