SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-QSB
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
-----------------
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 May 15, 1997, 18,135,466 shares of the issuer's common stock were
outstanding.
This report contains 10 pages. There are no exhibits.
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- --------- -------------------------------------------------------- --------
<S> <C> <C>
Condensed Consolidated Balance Sheet - March 31, 1997 3
Condensed Consolidated Statements of Operations - Three
Months and Six Months ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis or Plan of
Operations 8
PART II. OTHER INFORMATION
- --------- --------------------------------------------------------
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 10
</TABLE>
2
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
ASSETS
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CURRENT ASSETS:
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 116,984
Accounts receivable, net 304,260
Inventories 1,989,724
Prepaid expenses and other assets 49,003
----------
Total Current Assets 2,459,971
----------
INVESTMENT IN AFFILIATE 1,594,113
EQUIPMENT AND IMPROVEMENTS NET 943,044
OTHER ASSETS 2,001
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TOTAL ASSETS $4,999,129
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $1,085,175
----------
Due to related parties, net 2,957,996
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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 (17,156,265)
Foreign currency translation adjustment 9,510
-----------
Total stockholders' equity 995,958
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,999,129
===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
For the Six Months For the Three Months
Ended March 31, Ended March 31
<S> <C> <C> <C> <C>
1997 1996 1997 1996
----------- --------- ---------- ------------
SALES $ 471,234 $ 554,279 $ 182,646 $ 313,500
SALES RETURNS & ALLOWANCE ( 83,848) - ( 83,848) -
------------- ------------ ----------- -----------
387,386 554,279 98,798 313,500
COST OF GOODS SOLD 313,027 409,278 66,349 182,098
------------- ------------ ----------- -----------
GROSS PROFIT 74,359 145,001 32,449 131,402
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COSTS AND EXPENSES:
Selling, general and
administrative expense 1,244,854 1,590,367 558,164 716,217
Depreciation and
amortization 68,044 25,154 34,022 14,772
Research and development 223,134 135,703 105,489 33,305
------------- ----------- ------------- -----------
1,536,032 1,751,224 697,675 764,294
------------- ----------- ------------- -----------
LOSS FROM OPERATIONS (1,461,673) (1,606,223) (665,226) ( 632,892)
------------- ----------- ------------- -----------
INTEREST AND OTHER
INCOME (EXPENSE) (50,900) 77,335 (4,179) 21,077
------------- ----------- ------------- -----------
NET LOSS $ (1,512,573)$ (1,528,888) $(669,405) $( 611,815)
============= =========== ============= ===========
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LOSS PER COMMON SHARE:
Net loss $ (1,512,573)$ (1,528,888) (669,405) $ ( 611,815)
Less: undeclared dividends on
cumulative preferred stock - ( 100,000) - ( 50,000)
Net loss from operations ---------- ----------- ---------- ----------
Net loss applicable to common
shares $ (1,512,573)$ (1,628,888) $ (669,405) $ ( 661,815)
============ =========== =========== ==========
NET LOSS PER COMMON SHARE $ (.08) $ (.13) $ (.04) $ (.05)
============= ========== ========= ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 18,127,089 12,444,766 18,135,466 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 SIX MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $( 1,077,149) $(2,312,176)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES ( 147,010) (523,735)
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CASH FLOWS FROM FINANCING ACTIVITIES 1,263,590 4,375,000
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NET INCREASE IN CASH AND CASH EQUIVALENTS 39,431 1,539,089
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 77,553 459,707
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 116,984 $ 1,998,796
============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. The
statement is effective for financial statements of the Company for periods
ending after December 15, 1997, including interim periods. SFAS No. 128
establishes standards for computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, Earnings per Share, and makes
them comparable to international EPS standards. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement
for entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. The Company will adopt the new
statement for its fiscal year ending September 30, 1998, and does not
anticipate earnings per share calculations will be significantly different from
those previously calculated.
6
<PAGE>
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
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
2. RELATED PARTY TRANSACTIONS
At March 31, 1997, the Company had a net amount of $2,957,996 due to Casmyn
Corp. ("Casmyn"). The amount bears interest at 9% per annum and is due one
year from the date of the advance.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997, COMPARED TO THE SIX MONTHS ENDED
MARCH 31, 1996
Gross revenues for the six months ended March 31, 1997, were $471,234 compared
to $554,279 for the six months ended March 31, 1996 a decrease of $83,045.
This decrease is primarily due to a reduction of sales in the United Arab
Emirates ("UAE"). Operations in the UAE were curtailed in order to focus the
Company's efforts on the North American and Asian markets. There was an
adjustmment of $83,848 to revenue caused by the return of products by a
distributor in Vietnam as part of a new territorial distribution plan. As a
result of the negative adjustment to revenue, gross margin for the six month
period ended March 31, 1997 was $74,359 (19%) compared to $145,001 (26%) for
the same period ended March 31, 1996.
Costs and expenses were $1,536,032 for the six month period ended March 31,
1997, compared to $1,751,224 for the same period ended March 31, 1996,
a decrease of $215,192. Compensation and benefits decreased $180,037
for the six month period ended March 31, 1997 over the same period last
year due to reduction of staff levels by outsourcing its North American
marketing and sales activities. Expenses related to professional services,
primarily legal, audit and marketing decreased by $211,046 in the six month
period ended March 31, 1997 compared to the six month period ended March 31,
1996. This decrease is primarily due to a reduction of auditing costs from
last year, which was higher than usual as a result of the initial audit work
carried out by the current auditors. Marketing costs decreased as a result of
outsourcing of the North Americaan marketing program. These decreases were
partially offset by a provision for bad debts of $50,000 recorded in the six
months ended March 31, 1997. Depreciation expense increased $42,890 in the
six month period ended March 31, 1997 compared to the period ended March 31,
1996, reflecting additions to the Company's capital assets. Research and
development for first six months increased by $87,431 over the same period
last year due to the evaluation of new technologies.
There were no interest income earned on short-term investments due
to full redemption of these instruments during the first quarter.
As a result, other expenses amount to $50,900 for the period ended
March 31, 1997 compared to an income of $77,335 for the same peiod
in the prior year.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1996
Gross revenues for the three month period ended March 31, 1997 amounted to
$182,646, which was offset by the adjustment for the return of products in
Vietnam totaling $83,848, bringing the total net revenues for the
quarter to $98,798. Sales, before returns and allowances, for the three month
period ended March 31, 1997 were $130,854 lower than the sales for the same
period ended March 31, 1996 due primarily to a curtailment of operations in
the UAE as discussed above. As a result of the negative adjustment to revenue,
gross margin for the three month period ended March 31, 1997 was $32,449 (32%)
compared to gross profit of $131,402 (42%) for the same period ended March 31,
1996.
Costs and expenses were $697,675 for the three month period ended March 31,
1997 compared to $764,294 for the period ended March 31, 1996, a
8
<PAGE>
decrease of $66,619. Compensation and benefits decreased $70,869 for
the three month period ended March 31, 1997 compared to the same period
ended March 31, 1996 due to reduction in staff levels. Expenses related
to professional services, primarily legal, audit and marketing decreased by
$70,325 in the three month period ended March 31, 1997 compared to the three
month period ended March 31, 1996. Travel related expenses decreased by
$60,700 for the three month period ended March 31, 1997 compared to the same
period ended March 31, 1996 due to higher travel costs in the three months
ended March 31, 1996 relating to the community water programs and bottling
plants in Vietnam. Expenses related to research and development increased by
$72,184 for the three month period to March 31, 1997 compared to the same
period of 1996 due to increased research activities. In addition, a provision
for bad debts was recorded in the amount of $50,000 in the three month period
ended March 31, 1997. Depreciation expense increased $19,250 in the three
month period ended March 31, 1997 compared to the same period of 1996 due to
increases in the Company's capital assets.
Other expenses amounted to $4,179 for the three month period ended March 31,
1997 compared to an income of $21,077 for the same period ended March 31,
1996, a change of $25,256. The income of last year reflects the Company's
investment of its surplus funds in short term investments during the period.
CAPITAL RESOURCES AND LIQUIDITY
At March 31, 1997, the Company's working capital was $1,374,796, including
$116,984 in cash and cash equivalents. Working capital also includes
$1,989,724 in inventory, realization of which is dependent on the Company's
ability to sell its products. The Company has active sales and marketing
programs underway in various Asian and North America countries.
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 $2,957,996
from Casmyn Corp., a related party. It is management's opinion that its short
term funds requirements will be met by additional financing from Casmyn until
such time as its inventory is realized in the normal course of business.
Longer term projects will necessitate the Company identifying additional
funding sources. The Company is currently in discussion with a variety of
debt and equity financing sources for its current operations and future
projects needs. The timing of future projects will depend significantly on
the availability of such funding, however, success of obtaining adequate
funding is not assured.
Net Cash Used in Operating Activities. Net cash used in operating
activities was $1,077,149 for the six months ended March 31, 1997
compared to $2,312,176 for the six months ended March 31, 1996. The
reduction in cash use is primarily attributable to the reduction in inventory
and accounts receivable outstanding. Furthermore, inventory increased
significantly during the period in 1996 in anticipation of higher sales
level.
Net Cash Used in Investing Activities. Net cash used in investing
activities was $147,010 for the six months ended March 31, 1997 compared
to $523,735 for the six months ended March 31, 1996. The decrease in cash
use is due to fewer additions to the capital assets. The higher cash use
during the period in 1996 was due to the purchase of equipment and
improvements, primarily related to a water bottling plant under construction
in Vietnam.
Net Cash Provided by Financing Activities. Net cash provided by
financing activities was $1,263,590 for the six months ended March
31, 1997 compared to $4,375,000 for the six months ended March 31, 1996.
There were no significant new financings during the six months ended
March 31, 1997 other than the additional advances from related parties.
During the same period in 1996, the Company had collected the proceeds of
$4,375,000 from private placements of its common and preferred shares.
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
May 16, 1997 By _____________________________
Dennis E. Welling, Controller
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000918997
<NAME> VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
<PAGE>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 117
<SECURITIES> 0
<RECEIVABLES> 387
<ALLOWANCES> ( 83)
<INVENTORY> 1,990
<CURRENT-ASSETS> 2,460
<PP&E> 1,094
<DEPRECIATION> (151)
<TOTAL-ASSETS> 4,999
<CURRENT-LIABILITIES> 1,085
<BONDS> 0
0
0
<COMMON> 91
<OTHER-SE> 865
<TOTAL-LIABILITY-AND-EQUITY> 4,999
<SALES> 471
<TOTAL-REVENUES> 387
<CGS> 313
<TOTAL-COSTS> 1,536
<OTHER-EXPENSES> 51
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> (1,513)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,513)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,513)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> 0
</TABLE>
