SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended June 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 Number 000-27592
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TECH LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1436279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
955 Belmont Avenue
North Haledon, NJ
07508
(Address of Registrant's (Zip Code)
principal executive office)
Registrant's telephone number, including area code: (973) 427-5333
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 Exchange 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 of Common Stock, par value $.01 per share,
outstanding as of June 30, 2000: 3,949,039
<PAGE>
Tech Laboratories, Inc.
FORM 10-QSB
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................... 1
Balance Sheets as of June 30, 1999
And 2000 (unaudited)............................................... 1
Statements of Operations -- For the Second Quarter
And Six Months Ended June 30, 1999 and 2000...................... 3
Statements of Cash Flows -- For the Six
Months Ended June 30, 1999 and 2000 (unaudited).................. 4
Notes to Consolidated Financial Statements......................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 7
Signature.......................................................... 8
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TECH LABORATORIES, INC.
BALANCE SHEET
JUNE 30, 1999 AND 2000
(UNAUDITED)
ASSETS
FOR THE
SIX MONTHS
ENDED JUNE 30,
1999 2000
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Current Assets:
Cash $ 204,510 $1,858,874
Marketable Securities, at the Lower of
Cost or Market 61,923 61,453
Accounts Recievable, net of Allowance
for Doubtful Accounts of $10,000 128,255 173,123
Inventories 750,085 951,362
Prepaid Expenses 3,357 4,055
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Total Current Assets $1,148,130 $3,048,867
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Property, Plant and Equipment, at Cost
Leasehold Improvements 2,247 2,247
Machinery, Equipment and Instruments 330,114 410,425
Furniture and Fixtures 67,425 76,594
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Total Property, Plant & Equipment $ 399,786 $ 489,266
Less: Accumulated Depreciation & Amortz 299,162 314,162
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Net, Property, Plant and Equipment $ 100,624 $ 175,104
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Other Assets $ 11,540 $ 11,541
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Total Assets $1,260,294 $3,235,512
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The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
BALANCE SHEET
JUNE 30, 1999 AND 2000
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' INVESTMENTS
FOR THE
SIX MONTHS
ENDED JUNE 30,
1999 2000
----------- --------------
Current Liabilities:
Current Portion of Long Term Debt $ 0 $ 27,790
Short-Term Loans Payable 74,504 79,956
Accounts Payable 9,615 26,793
Other Liabilities 37,768 25,684
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Total Current Liabilities $ 121,887 $ 160,223
=========== ===========
Stockholders; Investment:
Common Stock $.01 Par Value;
5,000,000 Shares Authorized:
3,277,242 in 1999
and 3,949,039 in 2000 $ 23,483 $ 39,492
Less: 11,316 Shares Reacquired and
Held in Treasury (113) (113)
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$ 23,370 $ 39,379
Capital Contributed in Excess of Par Value 1,840,733 4,076,972
Retained Earnings/ (Accum. Deficit) (725,696) (1,041,062)
----------- -----------
1,138,407 3,035,910
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Total Liabilities and Stockholders'
Equity $ 1,260,294 $ 3,235,512
----------- -----------
The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
STATEMENT OF OPERATIONS
JUNE 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 82,655 $ 264,410 $ 160,304 $ 583,653
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of Sales 60,188 96,505 112,213 237,127
Selling, General and Administrative
Expenses 227,750 136,982 298,311 265,504
----------- ----------- ----------- -----------
287,938 233,487 410,524 502,631
----------- ----------- ----------- -----------
Income/(loss) from Operations ($ 205,283) $ 30,923 $ (250,220) $ 81,022
----------- ----------- ----------- -----------
Other Income (Expenses):
Interest Income -0- 13,786 -0- 13,786
Interest Expense -0- (5,465) -0- (5,465)
----------- ----------- ----------- -----------
-0- 8,321 -0- 8,321
Income/(Loss) Before Income Taxes $ (205,283) $ 39,244 $ (250,220) $ 89,343
Provision for Income Taxes 0 0 0 0
----------- ----------- ----------- -----------
Net Income/(Loss) $ (205,283) $ 39,244 $ (250,220) $ 89,343
Retained Earnings/(Accum. Deficit,) Beg. Yr (520,413) (1,080,306) (475,476) (1,130,405)
----------- ----------- ----------- -----------
Retained Earnings/(Accum. Deficit), End. Yr $ (725,696) $(1,041,062) $ (725,696) $(1,041,062)
----------- ----------- ----------- -----------
Income/(Loss) Per Share $ (0.06) $ 0.01 $ (0.09) $ 0.02
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
1999 2000
----------- -----------
<S> <C> <C>
Cash Flow From (for) Operating Activities:
Net Income/ (Loss) From Operations $ (250,220) $ 89,343
ADD/(Deduct) Items Not Affecting Cash:
Depreciation/Amortization -0- -0-
Unrealized (Gain)/Loss on Valuation of
Marketable Securities -0- -0-
Changes in Operating Assets and Liabilities:
Marketable Securities (5,230) -0-
Accounts Receivable 15,207 (115,426)
Inventories (479,967) (134,659)
Accounts Payable (32,540) (233,952)
Other Assets/Liabilities 1,168 22,494
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Net Cash Flow For Operating Activities $ (751,582) $ (372,200)
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Cash Flows From (For) Investing Activities
Addition of Machinery and Equipment (99,977) (31,306)
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Net Cash Flows From Investing Activities $ (99,977) $ (31,306)
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Cash Flows From (For) Financing Activities:
Acquisition/(Repayment) of Short Term Debt (1,611) (164,186)
Issuance of Common Stock 524,900 2,263,641
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Net Cash Flows From (For) Financing Activities $ 523,289 $ 2,099,455
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Net Increase/(Decrease) in Cash $ (328,270) $ 1,695,949
Cash Balance Beginning of Year 532,780 162,925
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Cash Balance End of First Quarter $ 204,510 $ 1,858,874
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(1) Summary of Significant Accounting Policies
CASH - Includes Tech Labs' checking account at Hudson United Bank plus a money
market account at Prudential Securities.
ACCOUNTS RECEIVABLE - Tech Labs recognizes sales when orders are shipped to
customers. The allowance for bad debts is accrued based on a review of customer
accounts receivables aging.
INVENTORIES - Inventories are valued at cost or market, whichever is lower. The
FIFO cost method is generally used to determine the cost of the inventories. At
December 31, 1997, 1998 and 1999 physical inventories were taken and tested. No
physical inventory was taken on June 30, 2000.
PROPERTY AND DEPRECIATION - Additions to property and equipment are recorded at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
ASSETS ESTIMATED USEFUL LIVES
Machinery 5 to 7 years
Furniture & Fixtures 5 to 7 years
Maintenance and repairs are charged to expense as incurred. The cost of
betterments is capitalized and depreciated at appropriate rates. Upon retirement
or other disposition of property items, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in the statement of
income.
INCOME TAXES - Income tax expense is based on reported income and deferred tax
credit is provided for temporary differences between book and taxable income.
MARKETABLE SECURITIES - The marketable securities are recorded at the lower of
cost or market. The cost of securities was $61,453 at December 31, 1999 and June
30, 2000.
(2) Inventories:
Inventories at December 31, 1999, and June 30, 2000 were as follows:
1999 June 30, 2000
-------- --------------
Raw Materials & Finished Components $715,438 $ 644,759
Work in Process & Finished Goods 107,265 306,603
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$816,703 $ 951,362
-------- --------------
(3) Income/(loss) Per Share:
Income/(loss) per share was calculated on the weighted average number of shares
outstanding. As of June 30, 2000, weighted average shares outstanding were
3,949,039.
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(4) Income Taxes:
Since the company has an operating loss carry forward of $1,873,936 as of
December 31, 1999, no interperiod tax allocation was made.
(5) Current Portion of Long-Term Debt:
Loans payable to banks were as follows for the years indicated:
CURRENT NON-CURRENT
YEAR ENDED PAYEE INTEREST RATE AMOUNT AMOUNT
-------------- ----- ------------- ------ ------
1999 Hudson United Bank Prime +1.5% $28,559 --
June 30, 2000 Hudson United Bank Prime +1.5% $27,790 --
Certain marketable securities are pledged as collateral on the above loan.
(6) Short-Term Loans Payable
Demand loans payable include loans from stockholders, officers, members of the
Board of Directors and third parties. The outstanding loan balance due as of
December 31, 1999 was $243,373 and the outstanding balance as of June 30, 2000
was $79,956. The annual interest rate for these loans ranged between six (6%)
percent and ten (10%) percent. In October of 1999, three short-term loans for a
total of $200,000 at (10%) ten percent annual interest were completed. Certain
contractural revenues were pledged to secure these loans. As of June 30, 2000,
$150,000 of such loans were repaid.
(7) Common Stock
In 1999, Tech Labs filed a registration statement with respect to a
self-underwritten public offering to raise between $2,000,000 (minimum) and
$3,500,000 (maximum). This offering was completed on May 3, 2000 for total
proceeds of $2,273,723.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information contained in this section should be used in conjunction with the
consolidated Financial Statements and Notes therewith appearing in this report
Form 10QSB and the company's Annual Report for the year ended December 31, 1999.
Quarter ending June 30, 2000, Compared to Quarter Ending June 30, 1999
Sales were $264,410 for the second quarter of 2000 as compared to $82,655
for the similar period of 1999. This increase was due to sales of our IDS Sensor
Products to the Department of Energy. IDS Sensors represented 75% of Tech Labs'
second quarter sales.
Cost of sales of $96,505 for the second quarter of the year 2000 increased
by $36,317 compared to sales for the same period last year, primarily due to
volume increases.
Selling, general, and administrative expenses decreased by $90,768 compared
to the same period in 1999 due to non-recurring expenses incurred in connection
with the company's self-underwritten public offering during the second quarter
of 1999.
Income from operations increased by $244,527 compared to a loss of
($205,283) for the prior period as a direct result of increased sales plus the
elimination of non-recurring offering expenses.
Quarter Ending June 30, 2000, Compared to Year Ending December 31, 1999.
SIGNIFICANT CHANGES
In the second quarter of the year 2000, the company continued to reverse
several negative trends.
Sales trends improved substantially due to the full integration of the
DynaTraX product line into the company's sales and marketing efforts plus
increased IDS Sensor sales.
Cash Flow for the first six months of 2000 was positive at $1,695,949 as a
result of the completion of the company's self-underwritten public offering
on May 3, 2000.
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<PAGE>
TECH LABORATORIES, INC.
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 thereunto duly authorized.
TECH LABORATORIES, INC.
Date: August 14, 2000 By: /s/ Bernard M. Ciongoli
-----------------------
Bernard Ciongoli
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
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