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 September 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 November 10, 2000: 4,019,039
<PAGE>
Tech Laboratories, Inc.
FORM 10-QSB
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................... 1
Balance Sheets as of September 30, 1999
and 2000 (unaudited)............................................... 1
Statements of Operations -- For the Third Quarter
And Nine Months Ended September 30, 1999 and 2000................ 3
Statements of Cash Flows -- For the Nine
Months Ended September 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
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................ 7
Signature.......................................................... 9
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TECH LABORATORIES, INC.
BALANCE SHEET
SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
ASSETS
1999 2000
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Current Assets:
Cash $ 212,348 $1,462,319
Marketable Securities, at the Lower of
Cost or Market 61,923 61,453
Accounts Recievable, Net of Allowance
for Doubtful Accounts of $10,000 150,359 169,251
Inventories 788,586 1,251,010
Prepaid Expenses 5,668 4,055
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Total Current Assets $1,218,884 $2,948,088
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Property, Plant and Equipment, at Cost
Leasehold Improvements 2,247 2,247
Machinery, Equipment and Instruments 340,337 410,425
Furniture and Fixtures 67,574 79,161
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Total Property, Plant & Equipment $ 410,158 $ 491,833
Less: Accumulated Depreciation & Amortization 299,162 314,162
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Net, Property, Plant and Equipment $ 110,996 $ 177,671
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Other Assets $ 11,540 $ 11,541
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Total Assets $1,341,420 $3,137,300
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The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
BALANCE SHEET
SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' INVESTMENTS
1999 2000
----------- --------------
Current Liabilities:
Current Portion of Long Term Debt $ 30,293 $ 25,821
Short-Term Loans Payable 43,373 79,956
Accounts Payable 189,025 34,765
Other Liabilities 77,938 29,057
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Total Current Liabilities $ 340,629 $ 169,599
=========== ===========
Stockholders; Investment:
Common Stock $.01 Par Value;
10,000,000 Shares Authorized:
3,277,242 in 1999
and 4,019,039 in 2000 $ 35,870 $ 39,492
Less: 11,316 Shares Reacquired and
Held in Treasury (113) (113)
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$ 35,757 $ 39,379
Capital Contributed in Excess of Par Value 1,828,346 4,060,287
Retained Earnings/ (Accumulated Deficit) (863,312) (1,131,965)
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1,000,791 2,967,701
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Total Liabilities and Stockholders'
Equity $ 1,341,420 $ 3,137,300
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The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 315,142 $ 265,453 $ 535,160 $ 849,106
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of Sales 221,391 135,840 374,612 372,967
Selling, General and Administrative
Expenses 185,430 241,526 548,384 507,030
----------- ----------- ----------- -----------
407,821 377,366 922,991 879,997
----------- ----------- ----------- -----------
Income/(Loss) from Operations ($ 92,679) $ (111,913) $ (387,836) $ (30,891)
----------- ----------- ----------- -----------
Other Income (Expenses):
Interest Income -0- 21,010 -0- 34,796
Interest Expense -0- -0- -0- (5,465)
----------- ----------- ----------- -----------
-0- 21,010 -0- 29,331
Income/(Loss) Before Income Taxes $ (92,679) $ (90,903) $ (387,836) $ (1,560)
Provision for Income Taxes 0 0 0 0
----------- ----------- ----------- -----------
Net Income/(Loss) $ (92,679) $ (90,903) $ (387,836) $ (1,560)
Retained Earnings/(Accum. Deficit), Beg. (770,633) (1,041,662) (475,476) (1,130,405)
----------- ----------- ----------- -----------
Retained Earnings/(Accum. Deficit), End. $ (863,312) $(1,131,965) $ (863,312) $(1,131,965)
----------- ----------- ----------- -----------
Income/(Loss) Per Share $ (0.03) $ (0.02) $ (0.12) $ -0-
=========== =========== =========== ===========
</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 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
1999 2000
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<S> <C> <C>
Cash Flow From (for) Operating Activities:
Net Income/ (Loss) From Operations $ (387,836) $ (1,560)
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 (6,897) (111,554)
Inventories (518,468) (434,307)
Accounts Payable 146,870 (225,980)
Other Assets/Liabilities 39,027 23,129
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Net Cash Flow For Operating Activities $ (732,534) $ (750,272)
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Cash Flows From (For) Investing Activities
Addition of Machinery and Equipment (110,349) (33,872)
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Net Cash Flows From Investing Activities $ (110,349) $ (33,872)
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Cash Flows From (For) Financing Activities:
Acquisition/(Repayment) of Short Term Debt (2,449) (163,417)
Issuance of Common Stock 524,900 2,246,956
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Net Cash Flows From (For) Financing Activities $ 522,451 $ 2,083,539
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Net Increase/(Decrease) in Cash $ (320,432) $ 1,299,395
Cash Balance Beginning of Year 532,780 162,924
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Cash Balance $ 212,348 $ 1,462,319
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 September 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
September 30, 2000.
(2) Inventories:
Inventories at December 31, 1999, and September 30, 2000 were as follows:
1999 Sept. 30, 2000
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Raw Materials & Finished Components $715,438 $ 1,057,725
Work in Process & Finished Goods 107,265 193,285
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$816,703 $ 1,251,010
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(3) Income/(loss) Per Share:
Income/(loss) per share was calculated on the weighted average number of shares
outstanding. As of September 30, 2000, weighted average shares outstanding were
4,019,039.
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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 periods indicated:
CURRENT NON-CURRENT
PERIOD ENDED PAYEE INTEREST RATE AMOUNT AMOUNT
-------------- ----- ------------- ------ ------
December 31, 1999 Hudson United Bank Prime +1.5% $28,559 --
Sept. 30, 2000 Hudson United Bank Prime +1.5% $25,821 --
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 September 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
September 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.
(8) Subsequent Event
On October 13, 2000 Tech Labs completed a $1.5 million dollar financing of 6.5%
convertible promissory notes due October 15, 2002. Interest is payable quarterly
in cash or in shares of common stock at the option of the noteholders. Under the
terms of the financing the investors have agreed to invest an additional
$500,000 upon the effectiveness of a registration statement registering the
shares underlying the convertible notes and warrants and the satisfaction of
certain other conditions. The Company has disclosed all terms of this financing
in Form 8-K filed on October 18, 2000.
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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 September 30, 2000, Compared to Quarter Ending September 30,
1999.
Sales were $265,453 for the third quarter of 2000 as compared to $315,142
for the similar period of 1999. This decrease was due to a reduction in sales of
our less profitable mechanical electrical switching devices.
Cost of sales of $135,840 for the third quarter of the year 2000 decreased
by $86,551 compared to the same period last year, primarily due to volume
declines in our more costly products.
Selling, general, and administrative expenses increased by $56,096 compared
to the same period in 1999 due to expenses associated with issuing convertible
debentures required to fund our new product development. These debentures were
issued in the fourth quarter of 2000.
Income from operations increased by $1,776.
Quarter Ending September 30, 2000, Compared to Year Ending December 31,
1999.
SIGNIFICANT CHANGES
In the third quarter of the year 2000, the company continued to reverse
several negative trends.
Sales of our more profitable IDS sensors continued to increase.
Cash Flow for the first nine months of 2000 was positive at $1,299,395 as a
result of the completion of the company's self-underwritten public offering on
May 3, 2000.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on August 10, 2000 (the
"Annual Meeting").
The Company's shareholders were asked to take the following actions at the
meeting:
1. To elect four (4) directors to serve until the next Annual Meeting and
until their successors are chosen and qualified.
2. To approve an amendment to the certificate of incorporation of the Company
to increase from 5,000,000 to 10,000,000 the authorized number of shares of
the common stock of the Company.
3. To ratify and approve the selection by the Board of Directors of Charles J.
Birnberg as the Company's independent public accountant for the fiscal year
ended December 31, 2000.
4. To adopt an incentive stock option plan for employees of the Company.
5. To adopt a stock option plan for non-employee directors of the Company.
6. To consider and act upon such other matters as may properly come before the
meeting or any adjournment thereof.
The amendment to the certificate of incorporation, the auditor and the four
nominees for election to the Company's board of directors were all approved by a
majority of the shares outstanding at the Annual Meeting. The incentive stock
option plan and the non-employee director plan were not approved by a majority
of the shares outstanding at the Annual Meeting. Each of the proposals received
the following votes:
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Votes Cast For Against Abstensions
-------------- ------- -----------
Amendment of Certificate
of Incorporation 3,315,845 21,963 6,450
Auditors Proposal 3,300,063 37,145 7,050
Incentive Stock
Option Plan 1,248,487 58,573 5,950
Non-Employee Director
Plan 1,207,957 99,193 5,860
With respect to the director proposal, the four (4) individuals nominated
to the board of directors received the following votes:
Vote For Against Abstensions
-------- ------- -----------
Bernard Ciongoli 3,305,913 28,546 9,799
Earl J. Bjorndal 3,334,459 0 9,799
Carmine O. Pellosie 3,305,113 29,346 9,799
Salvatore Grisafi 3,305,913 28,546 9,799
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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: November 14, 2000 By: /s/ Bernard M. Ciongoli
-----------------------
Bernard Ciongoli
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
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