SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
AMENDMENT TO
FORM 10-QSB
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
-----------------
OR
[ ] Transition report under section 13 or 15 (d) of the Exchange Act
COMMISSION FILE NUMBER 0-23402
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in Charter)
DELAWARE
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(State or other jurisdiction of incorporation)
11-2863244
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(IRS Employer Identification No.)
1335 GREG STREET, UNIT #104
SPARKS, NEVADA 89431
(702)331-5524
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(Address and Telephone Number of Principal Executive Offices)
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 requirements for the past 90 days.
Yes [ X ] No [ ].
As of February 15, 1996, 18,135,466 shares of the issuer's common stock were
outstanding.
This report contains 9 pages. There are no exhibits.
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
Amendment to FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
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<S> <C> <C>
Condensed Consolidated Balance Sheet - December 31, 1996 3
Condensed Consolidated Statements of Operations - Three Months Ended
December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows - Three
Months Ended December 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
- --------- --------------------------------------------------------
Item 6 - Exhibits and Reports on Form 8-K 9
Signatures 9
</TABLE>
2
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 25,939
Restricted investments 250,000
Accounts receivable, net 246,695
Inventories 1,708,400
Prepaid expenses and other assets 119,982
----------
Total current assets 2,351,016
INVESTMENT IN AFFILIATE 1,715,950
PROPERTY AND EQUIPMENT, NET 678,814
OTHER ASSETS 46,784
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TOTAL ASSETS $4,792,564
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 602,860
Due to related parties, net 2,329,341
Line of Credit 235,000
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Total current liabilities 3,167,201
STOCKHOLDERS' EQUITY:
5% Cumulative convertible preferred stock,
$.00001 par value; 10,000,000 shares
authorized; 0 shares issued
and outstanding -
Common stock, $.005 par value; 25,000,000
shares authorized; 18,135,466
shares issued and outstanding 90,677
Additional paid-in capital 18,012,036
Accumulated deficit (16,486,860)
Foreign currency translation adjustment 9,510
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Total stockholders' equity 1,625,363
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,792,564
===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
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SALES $ 288,588 $ 240,779
COST OF GOODS SOLD 246,678 227,180
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GROSS PROFIT (LOSS) 41,910 13,599
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COSTS AND EXPENSES:
Selling, general and administrative expense 686,690 874,150
Depreciation and amortization 34,022 10,382
Research and development 117,645 102,398
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838,357 986,930
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LOSS FROM OPERATIONS ( 796,447) ( 973,331)
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INTEREST AND OTHER INCOME (EXPENSE) ( 46,721) 56,258
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NET LOSS $ ( 843,168) $ ( 917,073)
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LOSS PER COMMON SHARE:
Net loss $ ( 843,168) $ ( 917,073)
Less: undeclared dividends on cumulative
preferred stock - ( 50,000)
Net loss from continuing operations ------------ -----------
applicable to common shares $ ( 843,168) $ ( 967,673)
============ ===========
NET LOSS PER COMMON SHARE $ (.05) $ (.08)
============= ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 18,118,711 12,444,766
============= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $( 66,985) $(1,143,561)
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CASH FLOWS FROM INVESTING ACTIVITIES ( 38,679) (277,263)
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CASH FLOWS FROM FINANCING ACTIVITIES 54,050 4,375,000
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NET DECREASE IN CASH AND CASH EQUIVALENTS ( 51,614) 2,954,176
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 77,553 459,707
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,939 $ 3,413,883
============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited;
however, in the opinion of management, such statements include all adjustments
(which are of a normal, recurring nature) necessary for a fair statement of
the results for the interim periods. The financial statements included herein
have been prepared by Vector Environmental Technologies, Inc. (the "Company")
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included
herein are adequate to make the information not misleading. The results for
the interim period are not necessarily indicative of the results that will be
realized for the fiscal year.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the Company's
consolidated financial statements filed as part of the Company's September 30,
1996 Form 10-KSB. The Form 10-KSB should be read in conjunction with this
quarterly report.
RECENTLY ISSUED ACCOUNTING STANDARDS - SFAS No. 123, Accounting for Awards of
Stock-Based Compensation, was issued by the FASB in October 1995, and
established financial accounting and reporting standards for stock-based
employee compensation plans and for transactions where equity securities are
issued for goods and services. The Company adopted the provisions of SFAS No.
123 during the first quarter of the year ending September 30, 1997. This
statement requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB No. 25, Accounting
for Stock Issued to Employees, which recognizes compensation cost based upon
the intrinsic value of the equity instrument awarded. The Company will
continue to apply APB Opinion No. 25 to its stock-based compensation awards to
employees and will disclose the required pro forma effect on net income and
earnings per share.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. RELATED PARTY TRANSACTIONS
At December 31, 1996, the Company had a net amount due to related parties of
$2,329,341 including $2,414,248 due to Casmyn Corp. ("Casmyn"). The amounts
due to Casmyn bear interest at 9% per annum and are due one year from the date
of advance.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996, COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1995
Revenues for the three months ended December 31, 1996, were $288,588 compared
to $240,779 for the three months ended December 31, 1995. The $47,809
increase was due to a higher level of sales of products in the North American
market. The gross profit margin for the three months ended December 31, 1996
was 14.5% compared to 5.7% for the three months ended December 31, 1995 which
reflects higher profit margins on the Company's North American consumer
product line.
Costs and expenses were $838,357 for the three months ended December 31, 1996,
compared to $986,930 for the three months ended December 31, 1995, a decrease
of $148,573. Compensation and benefits decreased $80,591 for the three months
ended December 31, 1996 compared to the three months ended December 31, 1995
due to decreased staff levels related to the Company outsourcing its North
American marketing and sales efforts effective August 1996. Expenses related
to professional services, primarily legal, and audit decreased by $83,224 in
the three months ended December 31, 1996 compared to the three months ended
December 31, 1995, as a result of unusually high prior period expenses due to
first year audit related costs. Marketing related costs decreased $114,353 in
the three months ended December 31, 1996 compared to the three months ended
December 31, 1995 due to outsourcing of sales and marketing effective August
1996 and the Company incurring higher advertising costs in the three months
ended December 31, 1995 related to the introduction of its new consumer water
purification product line. Travel related expenses increased $93,892 in the
three months ended December 31, 1996 compared to the three months ended
December 31, 1995 due to increased travel to Vietnam related to the Company's
community water program and its bottling operations. Other general and
administrative expenses decreased $3,184 in the three months ended December
31, 1996 compared to the three months ended December 31, 1995. Depreciation
expense increased a total of $23,640 in the three months ended December 31,
1996 compared to the three months ended December 31, 1995 due to an increase
in fixed assets in the water bottling plant in Vietnam. Research and
development related expenses of increased $15,247 in the three months ended
December 31, 1996 compared to the three months ended December 31, 1995 due to
continued research on new water purification products.
Interest and other expense was $46,721 for the three months ended December 31,
1996, compared other income of $56,258 for the three months ended December 31,
1995. This decrease in income of $102,979 was due to the Company earning
interest on short term investments in the three months ended December 31, 1995
while it was accruing interest expense on a loan payable to Casmyn Corp. for
the three months ended December 31, 1996.
7
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
At December 31, 1996, the Company's negative working capital of $816,185,
including $25,939 in cash and cash equivalents. Working capital also includes
$1,708,400 in inventory which resulted from the Company's plan to build
inventory in anticipation of sales. Realization of inventory is dependent on
the Company's ability to sell its products. The Company has active sales and
marketing programs underway in various countries, primarily Vietnam, India,
and Africa. In addition, the Company commenced selling its consumer product
line in North America.
Management anticipates that the net use of cash by operations will increase
during the foreseeable future due to expenditures related to the development
of various markets for the Company's water purification products and
technologies. The Company has borrowed approximately $2,400,000 from Casmyn.
It is management's opinion that additional short term funding will be obtained
from Casmyn sufficient to provide necessary operating funds until the Company
is able to convert its inventory to cash. Longer term projects will
necessitate the Company identifying funding sources to support those projects.
The Company is currently in discussion with a variety of debt and equity
financing sources to help fund both current operations and future projects.
The timing of future projects will depend significantly on the availability of
such funding, however, success of obtaining adequate funding is not assured.
As evidence of the Company's ability to secure debt and/or equity financing in
the fiscal year ended September 30, 1995, the Company received $3,700,000, net
of commissions and other expenses related to the transaction, from the
issuance of stock in various exempt private transactions and $2,000,000 from
the sale of preferred stock to Casmyn Corp., a related party.
Net Cash Used in Operating Activities. Net cash used in operating activities
was $66,985 for the three months ended December 31, 1996, compared to
$1,143,561 for the three months ended December 31, 1995. The decrease in the
net cash used in operating activities for the three months ended December 31,
1996 was due principally to reductions in inventory and increases in amounts
due to related parties offset by the net loss related to development of the
Company's water purification systems.
Net Cash Used in Investing Activities. Net cash used in investing activities
was $38,679 for the three months ended December 31, 1996 compared to $277,263
for the three months ended December 31, 1995. The decrease in net cash used
in investing activities was due to the purchase of equipment and improvements,
primarily related to a water bottling plant under construction in Vietnam in
the three months ended December 31, 1995 that were not made in 1996.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities was $54,050 for the three months ended December 31, 1996 compared
to $4,375,000 for the three months ended December 31, 1995. During the three
months ended December 31, 1996, the Company received $50,000 from the exercise
of stock options and $4,050 from a short term note. During the three months
ended December 31, 1995, the Company collected subscriptions receivable of
$4,375,000 from private placements of common and preferred stock of the
Company.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
None
B. Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Vector Environmental Technologies, Inc.
/s/ Dennis E. Welling
February 20, 1997 By _____________________________
Dennis E. Welling, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000918997
<NAME> VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
<PAGE>
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
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