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 March 31, 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 May 12, 2000: 3,944,039
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Tech Laboratories, Inc.
FORM 10-Q
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................... 1
Balance Sheets as of March 31, 1999
And 2000 (unaudited)............................................... 1
Statements of Operations --For the Three Months
Ended March 31,1999 and 2000 (unaudited)......................... 3
Statements of Cash Flows -- For the Three
Months Ended March 31,1999 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
Signatures......................................................... 8
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TECH LABORATORIES, INC.
BALANCE SHEET
MARCH 31, 1999 AND 2000
(UN-AUDITED)
ASSETS
1999 2000
---------- ----------
Current Assets:
Cash $ 666,850 $ 88,602
Marketable Securities, at the Lower of
Cost or Market 56,693 61,453
Accounts Recievable, net of Allowance
for Doubtful Accounts of $10,000 91,245 251,539
Investment 500,000 0
Inventories 373,817 851,126
Prepaid Expenses 3,357 4,055
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Total Current Assets $1,691,962 $1,256,775
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Property, Plant and Equipment, at Cost
Leasehold Improvements 2,247 2,247
Machinery, Equipment and Instruments 230,137 379,815
Furniture and Fixtures 67,425 75,899
---------- ----------
Total Property, Plant & Equipment $ 299,809 457,961
Less: Accumulated Depreciation & Amortz 299,162 314,162
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Net, Property, Plant and Equipment $ 647 143,799
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Other Assets - Including SB-2 Escrow Deposits $ 11,540 $ 935,301
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Total Assets $1,704,149 $2,335,875
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The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
BALANCE SHEET
MARCH 31, 1999 AND 2000
(UN-AUDITED)
LIABILITIES AND STOCKHOLDERS' INVESTMENTS
1999 2000
----------- -----------
Current Liabilities:
Current Portion of L.T. Debt $ 32,742 $ 27,727
Short-Term Loans Payable 43,373 243,373
Accounts Payable 87,092 260,277
Other Liabilities 36,600 32,933
SB-2 Subscribers' Liability -0- 923,761
----------- -----------
Total Current Liabilities $ 199,807 $ 1,488,471
=========== ===========
Stockholders; Investment:
Common Stock $.01 Par Value;
5,000,000 Shares Authorized; 3,650,660
Issued $ 29,604 36,507
Less: 11,316 Shares Reacquired and
Held in Treasury (113) (113)
----------- -----------
$ 29,491 $ 36,394
Common Stock Subscribed 0 75,000
Capital Contributed in Excess of Par Value 1,995,264 1,816,316
Retained Earnings/ (Accum. Deficit) (520,413) (1,080,306)
----------- -----------
$ 1,504,342 $ 847,704
----------- -----------
Total Liabilities and Stockholders'
Equity $ 1,704,149 $ 2,335,875
----------- -----------
The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
STATEMENT OF OPERATIONS
MARCH 31, 1999 AND 2000
(UN-AUDITED)
1999 2000
----------- -----------
Sales $ 77,649 $ 319,243
----------- -----------
Costs and Expenses:
Cost of Sales 52,025 140,622
Selling, General and Administrative
Expenses 70,561 128,522
----------- -----------
122,586 269,144
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Income/(loss) from Operations ($ 44,937) $ 50,099
----------- -----------
Other Income (Expenses): -0- -0-
Income/ (Loss) Before Income Taxes ($ 44,937) 50,099
Provision for Income Taxes 0 0
----------- -----------
Net Income/ (Loss) ($ 44,937) 50,099
Retained Earnings/(Accum. Deficit,) Beg. Yr (475,576) (1,130,405)
----------- -----------
Retained Earnings/(Accum. Deficit), End. Yr ($ 520,413) (1,080,306)
Income/ (Loss) Per Share ($ 0.03) $ 0.01
The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
STATEMENTS OF CASH FLOW
MARCH 31, 1999 AND 2000
(UN-AUDITED)
Cash Flow From (for) 1999 2000
--------- ---------
Operating Activities:
Net Income/ (Loss) From Operations $ (44,937) $ 50,099
ADD/(Deduct) Items
Not Affecting Cash:
Depreciation -0- -0-
Amortization -0- -0-
Changes in Operating
Assets and Liabilities:
Accounts Receivable 52,217 (193,842)
Inventories (103,699) (34,423)
Prepaid Expenses -0- -0-
Accounts Payable and
Accrued Expenses 44,937 (68)
Other Assets/Liabilities -0- 28,911
Net Cash Flow from (for) -------- --------
Operating Activities (51,482) (149,323)
-------- --------
Cash Flows From (For)
Investing Activities (500,000) -0-
Cash Flows From (For)
Financing Activities:
Issuance of Common Stock 685,552 -0-
Common Stock Subscriptions -0- 75,000
--------- ---------
Net Cash Flow From (For)
Finnancing Activities 685,552 75,000
--------- ---------
Net Increase/(Decrease) in Cash 134,070 (74,323)
Cash Balance Beginning of Year 532,780 162,925
--------- ---------
Cash Balance End of First Quarter 666,850 88,602
--------- ---------
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 QUARTER ENDED MARCH 31, 2000
(UNAUDITED)
(1) Summary of Significant Accounting Policies
CASH - Includes Tech Labs's checking account at Hudson United Bank. There are no
Cash Equivalents.
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 3/31/00.
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
March 31, 2000.
(2) Inventories:
Inventories at December 31, 1999, and March 31, 2000 were as follows:
1999 March 31, 2000
-------- --------------
Raw Materials & Finished Components $715,438 $ 718,386
Work in Process & Finished Goods 107,265 132,740
-------- --------------
$816,703 $ 851,126
-------- --------------
(3) Income/(loss) Per Share:
Income/(loss) per share was calculated on the weighted average number of shares
outstanding. As of March 31, 2000, weighted average shares outstanding were
3,650,660.
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(4) Income Taxes:
Since the company has a 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 --
March 31, 2000 Hudson United Bank Prime +1.5% $27,727 --
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 balances due as of
December 31, 1999 and March 31, 2000 was $243,373. The annual interest rate for
these loans ranged between six (6%) percent and ten (10%) percent. One loan in
the principal amount of $11,500 together with accrued interest of $4,294 at
December 31, 1999 is secured by the assets of Tech Labs. 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
this loan.
(7) Common Stock
In 1999, Tech Labs began an SB-2 public offering to raise between $2,000,000
(minimum) and $3,500,000 (maximum). This offering was completed on May 3, 2000
and a total of $2,273,723 was raised.
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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 March 31,2000, Compared to Quarter Ending March 31, 1999
Sales were $319,243 for the first quarter of 2000 as compared to $77,649
for the similar period of 1999. This increase was due to sales of our DynaTraX
(TM) products, acquired from Nordex/CDT in April, 1999. DynaTraX sales represent
fifty percent (50%) of the first quarter sales in the year 2000.
Cost of sales of $140,622 for the first quarter of the year 2000 has been
increased by $88,597 compared to the same period of 1999, primarily due to
volume increases.
Selling, general, and administrative expenses increased by $57,961 compared
to the same period in 1999 due to expenses incurred to support our higher sales
levels plus stock related expenses incurred to support the Company's SB-2 public
offering.
Income from operations of $50,099 increased by $95,036 compared to a loss
of ($44,937) for the prior period as a direct result of increased sales.
Quarter Ending March 31, 2000, Compared to Year Ending December 31, 1999.
SIGNIFICANT CHANGES
In the first quarter of the year 2000, the Company reversed 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.
Cash Flow for the first quarter of 2000 was negative ($74,323) as a result
of Working Capital increases caused by higher sales.
SUBSEQUENT EVENTS:
On May 3, 2000, the Company successfully completed its SB-2 public offering
and raised $2,273,723. The effect of this offering on the Company's financial
position will be included in the second quarter of the year 2000.
As of March 31, 2000, $913,761 was escrowed awaiting the completion of the
offering.
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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: May 15, 2000 By: /s/ Bernard M. Ciongoli
-----------------------
Bernard Ciongoli
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 88,602
<SECURITIES> 61,453
<RECEIVABLES> 251,539
<ALLOWANCES> 10,000
<INVENTORY> 851,126
<CURRENT-ASSETS> 1,256,775
<PP&E> 457,961
<DEPRECIATION> 314,162
<TOTAL-ASSETS> 2,335,875
<CURRENT-LIABILITIES> 1,488,471
<BONDS> 0
0
0
<COMMON> 36,394
<OTHER-SE> 847,404
<TOTAL-LIABILITY-AND-EQUITY> 2,335,875
<SALES> 319,243
<TOTAL-REVENUES> 319,243
<CGS> 140,622
<TOTAL-COSTS> 269,144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 50,099
<INCOME-TAX> 0
<INCOME-CONTINUING> 50,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,099
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
