SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000, or
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
COMMISSION FILE NUMBER 0-19622
WTC INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 38-2308668
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(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification No.)
150 MARIE AVENUE EAST, WEST ST. PAUL, MINNESOTA 55118-4002
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(Address of Principal Executive Offices) (Zip Code)
(651) 554-3140
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(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing required for the past 90 days. Yes _x_ No ___.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
1,472,698 shares of Common Stock as of April 28, 1999
Transitional Small Business Disclosure Format (check one):
Yes ___; No _x_
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WTC INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Unaudited Balance Sheets
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Unaudited Statements of Operations
Three Months Ended March 31, 2000 and 1999 4
Condensed Consolidated Unaudited Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WTC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
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<S> <C> <C>
CURRENT ASSETS
Cash $ 10,674 $ 11,043
Accounts receivable, net of allowance for doubtful accounts
of $9,000 606,821 533,174
Inventories (Note 3) 270,277 356,096
Prepaid expenses and other 22,862 43,950
------------ ------------
TOTAL CURRENT ASSETS 910,634 944,263
PROPERTY AND EQUIPMENT 1,324,624 1,025,352
Less accumulated depreciation 725,494 700,012
------------ ------------
599,130 325,340
OTHER ASSETS 4,556 5,191
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$ 1,514,320 $ 1,274,794
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
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CURRENT LIABILITIES
Current maturities of long-term debt $ 130,790 $ 139,132
Accounts payable 542,319 486,737
Customer deposits 10,499 5,438
Accrued interest payable 186,825 157,552
Accrued expenses - other 343,599 371,321
------------ ------------
TOTAL CURRENT LIABILITIES 1,214,032 1,160,180
LONG-TERM LIABILITIES
Accrued minimum purchase commitments 292,400 292,400
Long-term debt, net of current maturities 5,172,713 5,405,287
------------ ------------
5,465,113 5,697,687
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STOCKHOLDERS' DEFICIT (Note 4)
Common stock 147,270 116,936
Additional paid-in capital 12,504,896 11,800,230
Receivable from officer on issuance of common stock (30,000) (30,000)
Accumulated deficit (17,786,991) (17,470,239)
------------ ------------
(5,164,825) (5,583,073)
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$ 1,514,320 $ 1,274,794
============ ============
</TABLE>
See notes to consolidated condensed unaudited financial statements.
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WTC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended March 31,
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2000 1999
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NET SALES $ 1,186,153 $ 1,181,751
COST OF GOODS SOLD 848,833 826,796
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GROSS PROFIT 337,320 354,955
EXPENSES
Selling, general and administrative 403,743 304,959
Research and development 188,769 47,324
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592,512 352,283
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INCOME (LOSS) FROM OPERATIONS (255,192) 2,672
NONOPERATING (INCOME) EXPENSE
Interest expense 61,560 82,329
Other (income) expense, net -- 4,270
Gain on disposal of fixed assets -- (1,091)
------------ ------------
61,560 85,508
------------ ------------
NET LOSS $ (316,752) $ (82,836)
============ ============
PER COMMON SHARE DATA - BASIC & DILUTED
NET LOSS $ (0.25) $ (0.07)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 1,287,000 1,146,000
============ ============
See notes to consolidated condensed unaudited financial statements.
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WTC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
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2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (316,752) $ (82,836)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 25,482 28,100
(Gain) on disposal of fixed assets -- (1,091)
Accretion of long-term debt discount 5,493 --
Changes in operating assets and liabilities:
Accounts receivable (73,647) (251,852)
Inventories 85,819 36,838
Current and other assets 56,723 (21,259)
Accounts payable 55,582 (75,687)
Accrued expenses 6,612 59,762
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Net cash used in operating activities (154,688) (308,025)
------------ ------------
INVESTING ACTIVITIES
Proceeds from sales of equipment -- 1,127
Purchases of property and equipment (299,272) (66,751)
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Net cash provided by (used in) investing activities (299,272) (65,624)
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FINANCING ACTIVITIES
Proceeds of loans from chairman -- 350,000
Proceeds from bank 250,000 --
Proceeds from issuance of common stock 250,000 --
Payments on long-term obligations (46,409) (1,612)
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Net cash provided by financing activities 453,591 348,388
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (369) (25,261)
CASH AND CASH EQUIVALENTS:
Beginning of period 11,043 25,261
------------ ------------
End of period $ 10,674 $ 0
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for interest $ 26,794 $ 51,102
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES -
Common stock issued on conversion of debt $ 450,000
Bank financing converted to promissory note to chairman $ 750,000
Common stock issued for payment of rent $ 35,000
</TABLE>
See notes to consolidated condensed unaudited financial statements.
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WTC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED UNAUDITED
FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND MANAGEMENT'S PLANS REGARDING OPERATING
LOSSES AND LIQUIDITY
BUSINESS - WTC Industries, Inc., (the "Company") designs, manufactures, and
markets water filtration and purification products for the potable water market.
The potable water market includes residential, commercial, and food service. The
Company's filtration products remove or reduce many undesirable contaminants
found in water including lead, chlorine, cryptosporidium, giardia, bad taste and
odor. In addition, the Company has a family of purification products that have
the added benefit of devitalizing or removing bacteria, viruses, and parasites
with the use of the Company's patented PentaPure(R) iodinated resin technology.
Consumer demand is driven both by the consumers desire to improve the taste and
quality of their drinking water and by heightened concerns of regulatory
agencies. Recent outbreaks of cryptosporidium and giardia cyst and, in some
cases, bacteria and virus contamination, have raised the health concerns of
consumers in the U.S. and other major developed countries. Third world
countries' drinking water quality has been found to be severely inadequate. In
the food service industry, restaurants have become increasingly aware of the
need for water filtration to control the quality and taste of the water used in
their businesses.
The Company anticipates accelerated growth in coming years based on the
following growth strategies:
NEW PRODUCT DEVELOPMENT AND TECHNOLOGY INTEGRATION FOR THE OEM MARKET. Recently,
the Company has developed specialized high value-added products for three major
OEM customers. The Company anticipates that it will continue to grow this market
by providing products that it believes are superior in design, function and
quality. The Company is in the process of designing and testing a long-term use
purification device that utilizes the PentaPure(R) technology for the U.S.
market. In addition, the Company intends to continue to develop its ability to
integrate other filtration and purification technologies into its products.
CONTINUED IMPROVEMENT IN OPERATING EFFICIENCIES. The Company believes it can
improve gross profit margins by increasing revenues and improving production
capabilities and efficiencies. The Company has implemented new cost controls in
the areas of purchasing and inventory control. In addition, new production
methods and automation have increased both output and quality while reducing
labor costs.
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GOING CONCERN - The accompanying financial statements have been prepared on a
going-concern basis which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
For the three month period ended March 31, 2000, the Company incurred a net loss
of $316,752, and cash used in operating activities was $154,688. In addition, as
of March 31, 2000, the Company has a deficiency in working capital of $303,398
and an accumulated deficit of $17,786,991.
These factors, among others, indicate that the Company may not be able to
continue as a going concern for a reasonable period of time. The Company's
working capital requirements during the first quarter of 2000 were met
principally through borrowings from a bank for $250,000 and the issuance of
Company common stock to the chairman of the board for $250,000. Management
believes that the Company's existing cash position, collection of accounts
receivable and other available sources of liquidity are sufficient to meet
current and anticipated requirements for the foreseeable future.
Management's plans for the Company to continue as a going concern include (a)
increasing sales to the domestic OEM refrigerator water filtration market, (b)
continuing research and development efforts for new disinfection technology
markets, and (c) continued improvement in the Company's production processes and
quality controls to increase gross profit margins. There is no assurance
whatsoever that these plans will be successful.
The condensed consolidated unaudited financial statements do not include any
adjustments related to the recoverability and classification of recorded asset
amounts or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern.
2. BASIS OF PRESENTATION
The accompanying condensed consolidated unaudited financial statements of WTC
Industries, Inc. and Subsidiary have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments, consisting of normal recurring
accruals, which are, in the opinion of management, necessary for a fair
presentation of financial position, results of operations, and cash flows for
the periods shown. These statements are condensed and do not include all
information required by generally accepted accounting principles. It is
recommended that these financial statements be read in conjunction with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1999, which are included in the Company's Annual Report on Form
10-KSB.
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3. INVENTORIES
INVENTORIES CONSIST OF THE FOLLOWING: March 31, 2000 December 31, 1999
- ------------------------------------- -------------- -----------------
Raw Materials $ 225,582 $ 233,291
Work-in-process 2,829 5,849
Finished Goods 44,866 116,956
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$ 270,277 $ 356,096
============= ===========
The total inventory reserve as of March 31, 2000 and December 31, 1999 is
$734,000 and $739,000, respectively.
4. COMMON AND PREFERRED STOCK
COMMON STOCK - At March 31, 2000 and December 31, 1999, the Company had
15,000,000 shares of $.10 par value common stock authorized, with 1,472,698 and
1,169,364, respectively, shares issued and outstanding.
PREFERRED STOCK - At March 31, 2000 and December 31, 1999, there were 2,000,000
shares of the Company's 9% convertible, cumulative, nonvoting, $1 par value
preferred stock authorized and zero (0) shares issued and outstanding.
5. COMMITMENTS AND CONTINGENCIES
MINIMUM PURCHASE COMMITMENT - The Company has an agreement with a supplier that
expires in June 2002 under which the Company is obligated to purchase a minimum
of $172,500 annually of its cyst filter requirements for certain of its
products. The Chairman personally guarantees the Company's performance under the
contract, subject to a $100,000 limitation on the guaranty. The Company has
accrued the remaining estimated commitment not likely to be fulfilled under this
contract. At March 31, 2000 and December 31, 1999, $517,500 is accrued, of which
$225,100 is included in current liabilities.
LICENSE AGREEMENT - The Company manufactures and markets certain of its products
pursuant to a license agreement with KSURF, as amended July 1, 1998. The Company
pays a royalty on annual sales of certain products equal to 3% of the first
$1,000,000 of net sales and 2% of the excess, due quarterly, subject to a
minimum annual royalty of $25,000 per year. The license agreement will expire on
or before the final expiration date of the last patent or patent application
contained in the patent rights. The Company is also obligated to pay KSURF 40%
of any royalties or payments received for sublicensing the patent rights
contained in the license agreement. Royalty expenses were $6,250 for the three
month periods ended March 31, 2000 and 1999.
ARRANGEMENTS WITH SUPPLIERS - The Company utilizes the services of an
independent contractor to manufacture iodinated resin that is incorporated into
some of the Company's
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products. Certain techniques used to manufacture the iodinated resins were
developed by and are the property of the supplier. Under the terms of an
agreement, the Company has agreed that if it elects to buy iodinated resin from
an outside vendor, it will buy iodinated resin only from this supplier. The
supplier has agreed to sell the iodinated resin only to the Company and one
other party. The other party does not compete with the Company in any of its
product applications.
6. RELATED-PARTY TRANSACTIONS
Tapemark Company ("Tapemark"), of West St. Paul, Minnesota, provides labels for
the Company's products. Mr. Klas, the Company's CEO, Chairman and largest
stockholder, is also the CEO and Chairman of the Board for Tapemark. During the
three month period ended March 31, 2000 and 1999, the Company paid Tapemark a
total of $13,000 and $28,000, respectively, for these services.
The Company also leases manufacturing and office space from Tapemark under a
two-year noncancelable lease expiring February 28, 2001. The Company will make
no payments to Tapemark for general utilities, pro rata taxes and special
assessments. In lieu of cash payments for rent, the Company issued a total of
46,667 shares of common stock at its fair market value for the term of the
lease.
7. NOTES PAYABLE AND LONG TERM OBLIGATIONS
The Company has borrowed certain sums from Mr. Klas and Tapemark for working
capital purposes. During 1999, Mr. Klas advanced the Company $400,000 in demand
promissory notes and also purchased a $50,000 promissory note owed by the
Company to another private noteholder. On February 29, 2000, the Company and Mr.
Klas agreed to convert this debt totaling $450,000 to 180,000 shares of the
Company's common stock. In conjunction with the debt conversion, Mr. Klas
purchased 100,000 shares of the Company's common stock for $250,000.
On March 20, 2000, Mr. Klas assumed the Company's indebtedness of $750,000 to
its bank and the Company issued Mr. Klas a convertible promissory note in the
amount of the indebtedness. The new promissory note matures in one year and
provides a right to convert the indebtedness to shares of Company common stock,
at the discretion of the holder of the Note, at a conversion price of $3.00 per
share. In addition, Mr. Klas agreed to co-sign a new credit agreement with the
bank under which the bank extends the Company a new term loan of $750,000 and a
new revolving credit facility of $700,000. Also, Mr. Klas agreed to sign a
subordination agreement for all of his outstanding debt. In consideration
thereof, the Company issued to Mr. Klas a new stock warrant to purchase 80,000
shares of the Company's common stock for an exercise price of $3.125 per share
on or before March 1, 2004.
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The Company extended the expiration date to May 22, 2006 of an existing warrant
held by Mr. Klas (issued in 1996) to purchase 240,000 shares of Company common
stock at an exercise price of $20.00 per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
OVERVIEW
GOING CONCERN. The accompanying financial statements have been prepared on a
going-concern basis which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
For the three month period ended March 31, 2000, the Company incurred a net loss
of $316,752, and cash used in operating activities was $154,688. In addition, as
of March 31, 2000, the Company has a deficiency in working capital of $303,398
and an accumulated deficit of $17,786,991.
These factors, among others, indicate that the Company may not be able to
continue as a going concern for a reasonable period of time. The Company's
working capital requirements during the first quarter of 2000 were met
principally through borrowings from a bank for $250,000 and the issuance of
Company common stock to the chairman of the board for $250,000. Management
believes that the Company's existing cash position, collection of accounts
receivable and other available sources of liquidity are sufficient to meet
current and anticipated requirements for the foreseeable future.
Management's plans for the Company to continue as a going concern include (a)
increasing sales to the domestic OEM refrigerator water filtration market, (b)
continuing research and development efforts for new disinfection technology
markets, and (c) continued improvement in the Company's production processes and
quality controls to increase gross profit margins. There is no assurance
whatsoever that these plans will be successful.
The Company is also evaluating its available options to raise capital. These
options include, but are not limited to, private placements of debt or equity
securities to accredited investors, registered offerings of the Company's common
stock and strategic partnership or joint venture arrangements. In addition, the
Company will evaluate the possibility of converting to equity some or all of its
outstanding short term and long term debt. There is no assurance that the
Company will be able to obtain additional financing, or that the terms of any
such financing will be acceptable to the Company. If the Company's efforts to
raise additional capital are not successful, the Company's operations may be
negatively impacted.
The condensed consolidated unaudited financial statements do not include any
adjustments related to the recoverability and classification of recorded asset
amounts or
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the amounts and classifications of liabilities that might be necessary should
the Company be unable to continue as a going concern.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
NET SALES. The Company had net sales of $1,186,153 in the first quarter of 2000
compared to 1999's first quarter sales of $1,181,751. The Company is
anticipating that domestic sales will increase during the year due to higher
sales to the OEM appliance market. The Company's largest customer had net sales
of $795,000 or 67% of total net sales in 2000 compared to $789,000 or 67% of
total net sales for the same period in 1999.
International sales continue to remain flat because of the continuing poor
economic conditions in Eastern Europe and the impact of a strong U.S dollar in
Asia. However, the Company anticipates that international sales will gradually
improve during the year. International sales represented approximately 20% of
total net sales in 2000 as compared to 16% in 1999.
GROSS PROFIT. The Company's gross profit decreased slightly to $337,320 or 28.4%
of total net sales in the first quarter of 2000, compared to $354,955 or 30.0%
of net sales in 1999. The decrease in gross profit is primarily due to higher
production overhead costs incurred for purposes of expanding existing
manufacturing capabilities.
OPERATING EXPENSES. Selling, general, and administrative expenses were $403,743,
an increase of $98,784 or 32.4% compared to 1999 expenses of $304,959. The
increase is primarily due to higher professional fees, sales expenses such as
advertising and brochures, and building related expenses. Research and
development costs were significantly higher in 2000 than in 1999 because of new
product development for both the OEM and disinfection markets. The Company
anticipates that research and development spending will remain at current levels
for the remainder of 2000 as the Company pursues EPA registration for a
long-term point-of-use water purification system for the U.S. market.
NONOPERATING ACTIVITY. Interest expense decreased to $61,560 in the first
quarter of 2000 from $82,329 in the first quarter 1999. The decrease is
attributed to the debt restructuring efforts in April 1999 that resulted in
lower effective interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital requirements during the first quarter of 2000 were
met principally through borrowings from a bank for $250,000 and the issuance of
Company common stock to the chairman of the board for $250,000. As of March 31,
2000, the Company had a working capital deficit (total current liabilities in
excess of total current assets) of $303,398 compared with a working capital
deficit of $215,917 as of December
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31, 1999. Management believes that the Company's existing cash position,
collection of accounts receivable and other available sources of liquidity are
sufficient to meet current and anticipated requirements for the foreseeable
future.
For the three month period ended March 31, 2000, cash decreased $369, primarily
due to cash used in operating activities of $154,688 and cash used in investing
activities of $299,272, which was essentially offset by cash provided by
financing activities of $453,591. Significant cash uses by operations included
the net loss of $316,752 along with an increase in accounts receivable of
$73,647, partially offset by an increase in accounts payable of $55,582 and
accrued expenses of $6,612 and a decrease in inventory of $85,819. Net cash used
by investing activities consisted of purchases of property and equipment of
$299,272. Net cash provided by financing activities was from proceeds from bank
financing and the issuance of common stock for a total of $500,000, offset by
payments on long-term debt of $46,409.
For the three month period ended March, 1999, cash decreased $25,261, primarily
due to cash used in operations of $308,025 and cash used in investing activities
of $65,624, which was essentially offset by cash provided by financing
activities of $348,388. Significant cash uses by operations included the net
loss of $82,836 and increases in accounts receivable of $251,852 and current and
other assets of $21,259 and a decrease in accounts payable of $75,687, partially
offset by an increase in accrued expenses of $59,762 and an decrease in
inventory of $36,838. Net cash used by investing activities consisted of
purchases of property and equipment of $66,751, offset from proceeds from sales
of equipment of $1,127. Net cash provided by financing activities was from
advances from the chairman of the board for $350,000, offset by payments on
long-term debt of $1,612.
The Company has borrowed certain sums from Mr. Klas and Tapemark for working
capital purposes. During 1999, Mr. Klas advanced the Company $400,000 in demand
promissory notes and also purchased a $50,000 promissory note owed by the
Company to another private noteholder. On February 29, 2000, the Company and Mr.
Klas agreed to convert this debt totaling $450,000 to 180,000 shares of the
Company's common stock. In conjunction with the debt conversion, Mr. Klas
purchased 100,000 shares of the Company's common stock for $250,000.
On March 20, 2000, Mr. Klas assumed the Company's indebtedness of $750,000 to
its bank and the Company issued Mr. Klas a convertible promissory note in the
amount of the indebtedness. The new promissory note matures in one year,
interest accrues at the 30 day London Interbank Offered Rates (LIBOR) rate plus
2%, and provides a right to convert the indebtedness to shares of Company common
stock, at the discretion of the holder of the Note, at a conversion price of
$3.00 per share. In addition, Mr. Klas agreed to co-sign a new credit agreement
with the bank under which the bank extends the Company a new term loan of
$750,000 and a new revolving credit facility of $700,000. Also, Mr. Klas agreed
to sign a subordination agreement for all of his outstanding debt. In
consideration thereof, the Company issued to Mr. Klas a new stock warrant to
purchase 80,000 shares of the
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Company's common stock for an exercise price of $3.125 per share on or before
March 1, 2004.
On March 20, 2000, the Company entered into a new loan agreement with a bank for
a term loan of $750,000 and a $700,000 revolving credit facility, both of which
are co-signed by the chairman. The term loan matures on May 31, 2002, accrues
interest at a floating 30-day LIBOR plus 2.5%, and is secured by all the
Company's business assets. The revolving loan has a term for one year, accrues
interest at a floating 30-day LIBOR plus 2.0%, and is secured by all the
Company's business assets. In addition, the Company issued the bank a new stock
warrant to purchase 15,000 shares of the Company's common stock for an exercise
price of $5.00 per share on or before March 29, 2004.
The Company extended the expiration date to May 22, 2006 of an existing warrant
held by Mr. Klas (issued in 1996) to purchase 240,000 shares of Company common
stock at an exercise price of $20.00 per share.
The Company has an agreement with a supplier that expires in June 2002 under
which the Company is obligated to purchase a minimum of $172,500 annually of its
cyst filter requirements for certain of its products. Through December 31, 1999,
the Company has paid a total of $199,000 of its total estimated contract
obligation of $862,500. During 2000, the Company anticipates it will pay
approximately $225,100, which represents the remaining obligation for 1999 and
the obligation for 2000. Failure of the Company to perform under this agreement
could have a significant negative impact on the Company's financial resources.
The Company estimates that, for the remainder of 2000, it will have working
capital needs of approximately $750,000 to fund its operations and approximately
$750,000 to fund capital expenditures needs for equipment and tooling.
FOREIGN CURRENCY EFFECTS
Beginning in the third quarter 1997, foreign currency exchange rate fluctuations
and deteriorating economic conditions had a material impact on the demand for
the Company's products in Asian markets. In addition, beginning in the third
quarter of 1998, foreign currency exchange rate fluctuations and deteriorating
economic conditions in Eastern Europe had a material impact on sales to the
Company's largest distributor. The Company anticipates these trends to continue
into 2000.
EFFECTS OF INFLATION
The Company believes that during 1999 and 2000 inflation has not had a material
impact on the Company's business.
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NOTIFICATION REGARDING FORWARD LOOKING INFORMATION
Except for historical information contained herein, certain statements are
forward looking statements that involve risks and uncertainties, including, but
not limited to, the results of financing efforts and sufficiency of working
capital requirements, product demand and market acceptance risks, customer mix,
the effect of economic conditions, the impact of competitive products and
pricing, product development, commercialization and technological difficulties,
supply constraints or difficulties, and actual purchases under agreements. The
actual results that the Company achieves may differ materially from these
forward looking statements due to such risks and uncertainties. Readers are
urged to carefully review and consider the various disclosures made by the
Company's other filings with the Securities and Exchange Commission that advise
interested parties of the risks and uncertainties that may effect the Company's
financial condition and results of operations.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are filed as part of the report:
(a) EXHIBITS. The following exhibits are being filed as part of this
Form 10-QSB.
Exhibit
No. Title Method of Filing
- ------- ----------------------------------------- ----------------
27 Financial Data Schedule Filed Herewith
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the first quarter of 2000.
SIGNATURES
In accordance with the Exchange Act, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 12, 2000 WTC Industries, Inc.
By: /s/ Robert C. Klas, Sr.
----------------------------------
Robert C. Klas, Sr.
Chief Executive Officer
By: /s/ Gregory P. Jensen
----------------------------------
Gregory P. Jensen
Chief Financial Officer
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WTC
INDUSTRIES, INC. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF
MARCH 31, 2000 AND 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,674
<SECURITIES> 0
<RECEIVABLES> 606,821
<ALLOWANCES> 9,000
<INVENTORY> 270,277
<CURRENT-ASSETS> 910,634
<PP&E> 1,324,624
<DEPRECIATION> 725,494
<TOTAL-ASSETS> 1,514,320
<CURRENT-LIABILITIES> 1,214,032
<BONDS> 5,465,113
0
0
<COMMON> 147,270
<OTHER-SE> (5,312,095)
<TOTAL-LIABILITY-AND-EQUITY> 1,514,320
<SALES> 1,186,153
<TOTAL-REVENUES> 1,186,153
<CGS> 848,833
<TOTAL-COSTS> 592,512
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,560
<INCOME-PRETAX> (316,752)
<INCOME-TAX> 0
<INCOME-CONTINUING> (316,752)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (316,752)
<EPS-BASIC> (.25)
<EPS-DILUTED> (.25)
</TABLE>
