-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GO22ZvcNE74s7svKg6mbr4yMv54LupMdR0VwyqiuUY+3ecT16bWmNKH1OdvmsEgy sMkQN6CixwMFeDpYu1GE4A== 0000950150-97-000759.txt : 19970515 0000950150-97-000759.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950150-97-000759 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLLUTION RESEARCH & CONTROL CORP /CA/ CENTRAL INDEX KEY: 0000763950 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 952746949 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-09327 FILM NUMBER: 97603418 BUSINESS ADDRESS: STREET 1: 506 PAULA AVE CITY: GLENDALE STATE: CA ZIP: 91201 BUSINESS PHONE: 8182477601 MAIL ADDRESS: STREET 1: 506 PAULA AVE CITY: GLENDALE STATE: CA ZIP: 91201 FORMER COMPANY: FORMER CONFORMED NAME: DASIBI ENVIRONMENTAL CORP DATE OF NAME CHANGE: 19900529 10QSB 1 FORM 10-QSB FOR THE PERIOD ENDED MARCH 31, 1997 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarterly Period ended March 31, 1997 [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act For the Transition Period from _________ to _________ Commission file Number 0-14266 POLLUTION RESEARCH AND CONTROL CORP. ---------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) California 95-2746949 ---------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 506 Paula Avenue, Glendale, California, 91201 --------------------------------------------- (Address of Principal Executive Offices) (818) 247-7601 (Issuer's telephone number, including area code) Check whether the Small Business Issuer (1) has filed all reports required to be filed by Section 13or15(d) of the Exchange Act of 1934 during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements of the past 90 days. Yes X No --- --- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
Class Date No. of Shares Outstanding ------ ---- ------------------------- Common May 14, 1997 8,673,732
Traditional Small Business Disclosure Format (check one): Yes X No --- --- 1 2 POLLUTION RESEARCH AND CONTROL CORP. FORM 10-QSB FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1997 TABLE OF CONTENTS
Page ---- Part I Financial Information Item 1. Financial Statements: Consolidated Balance Sheet 3 Consolidated Statements of Operations 5 Consolidated Statements of Cash Flows 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II Other Information 10 Item 6(b). Reports on Form 8-K 11
2 3 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET ASSETS (UNAUDITED)
CURRENT ASSETS 03/31/97 ---------- Cash $ 679,848 Marketable securities 99,000 Accounts receivable, trade, less allowance for doubtful accounts of $41,382 1,821,695 Inventories (Note 2) 2,492,899 Other current assets 14,825 ---------- TOTAL CURRENT ASSETS 5,108,267 PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, less accumulated depreciation of 253,461 1,605,568 OTHER ASSETS Goodwill, less accumulated amortization of $5,974 293,914 Loan costs, less accumulated amortization of $22,706 68,118 Other intangibles, less accumulated amortization of $5,950 34,559 Other 13,630 ---------- TOTAL OTHER ASSETS 410,221 ---------- TOTAL ASSETS $7,124,056 ==========
See notes to the financial statements 3 4 CONSOLIDATED BALANCE SHEET LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)
AS OF CURRENT LIABILITIES 3/31/97 ---------- Notes payable (Note 3) $ 744,762 Accounts payable 785,260 Accrued liabilities 201,734 Current portion of long-term debt - related party 8,202 Current portion of long-term debt 178,539 ----------- TOTAL CURRENT LIABILITIES 1,918,497 ----------- LONG-TERM DEBT, less current portion (Note 3) 714,619 LONG-TERM DEBT, related party, less current portion 364,992 DEFERRED RENT, less current portion 101,570 DEFFERED INCOME TAXES 45,000 COMMITMENTS AND CONTINGENCIES (Note 4) -- SHAREHOLDERS' EQUITY (Note 5) Preferred Stock, no par value; 20,000,000 shares authorized, no shares issued and outstanding -- Common Stock, no par value; 30,000,000 shares authorized, 8,549,565 issued and outstanding 6,588,980 Less notes receivable (86,857) Other paid in capital 145,764 Accumulated deficit (2,792,910) Unrealized gain on marketable securities 99,000 Unrealized foreign currency translation gain 25,401 ----------- TOTAL SHAREHOLDERS' EQUITY 3,979,378 ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,124,056 ===========
See notes to the financial statements 4 5 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------------------- 1997 1996 ------------ ------------ Net revenues $ 2,552,366 $ 1,629,046 Costs of good sold 1,828,482 929,056 ----------- ----------- Gross profit 723,884 699,990 Operating expenses: Selling, general and administrative expenses 655,107 403,614 Research and development 6,730 38,022 ----------- ----------- Total operating expenses 661,837 441,636 Income from operations 62,047 258,354 Interest expense (71,461) (3,837) Interest and other income 1,077 4,638 Other income -- -- ----------- ----------- Income (loss) before income taxes (8,337) 259,155 Provision for income taxes: Current -- -- Deferred (Note 6) (10,000) -- ----------- ----------- Total provision for income taxes (10,000) -- ----------- ----------- Net income 1,663 259,155 ----------- ----------- Earnings per Share (Note 10) Net Income (loss) $ .0002 $ .04 ----------- ----------- Weighted Average Number of Common and Common Equivalent Shares Outstanding 8,739,815 6,941,557 =========== ===========
See notes to financial statements 5 6 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, --------------------------- 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,663 $ 259,155 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization 58,150 8,004 Deferred income taxes (10,000) -- Deferred rent 25,379 (3,634) Changes in operating assets and liabilities: Accounts receivable, trade, net (101,990) (723,118) Inventories 54,570 -- Other current assets 6,022 (3,112) Other assets 4,004 -- Accounts payable (200,933) (26,664) Accrued liabilities (54,482) (31,416) Unearned revenue (50,820) -- --------- --------- Net cash used for operating activities (268,437) (520,785) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property, equipment and leasehold improvements (3,689) (3,759) --------- --------- Net cash used for investing activities (3,689) (3,759) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank line of credit - advances (repayments) (100,000) 50,000 Net increase in Nutek line of credit 291,104 160,140 Repayments of long-term debt (61,176) -- Additional borrowing under long-term debt 100,000 -- --------- --------- Net cash provided by financing activities 229,928 210,140 --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,124) -- --------- --------- NET INCREASE (DECREASE) IN CASH (43,322) (314,404) CASH AT BEGINNING OF PERIOD 723,170 641,695 --------- --------- CASH AT END OF PERIOD $ 679,848 $ 327,291 ========= =========
See notes to the financial statements 6 7 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to a fair presentation of the financial statements for the period presented. Interim results are not necessarily indicative of results for a full year. The financial statements at March 31, 1997, include the activity of two subsidiaries, NUTEK, Inc. and LOGAN MEDICAL DEVICES, Inc., which were acquired by the company in June, 1996. As a result, the statement of operations for March 31, 1996, is not comparable to March 31, 1997, and it is impractical to provide proforma results in the notes. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 1996. 2. INVENTORIES: Inventories at March 31, 1997 consisted of the following: Raw Materials $ 1,914,569 Work-in-Progress 456,720 Finished Goods 121,610 ----------- $ 2,492,899 ===========
3. NOTES PAYABLE AND LONG TERM DEBT: Since the filing of the Company's Annual Report on Form 10-K, the Company has increased its borrowings under the Nutek working capital facility by $291,104 and increased the term loan by an additional $100,000. 4. COMMITMENTS AND CONTINGENCIES: In October 1996, the Company terminated its agreement with a public relations firm and cancelled 1,300,000 options held by the public relations firm. The matter is presently in dispute. The probability or amount of any loss to the Company cannot be determined at this time. 5. SHAREHOLDERS' EQUITY: Options and Warrants As of March 31, 1997, the Company had 3,205,500 options and 1,275,836 warrants outstanding at exercise prices ranging from $0.55 to $2.00 which, if exercised, would generate proceeds to the Company of $4,821,386. 7 8 6. EARNINGS PER SHARE: Earnings per share is computed by dividing net income or loss by the weighted average number of common and common equivalent shares (options and warrants) outstanding during the period. Options and warrants which are dilutive are included as common equivalents under the treasury stock method, unless the dilutive options and warrants would, if exercised, generate proceeds sufficient to repurchase more than 20% of the Company's outstanding common stock at market prices, in which case the modified treasury stock method applies. During the quarter ended March 31, 1997, there were not sufficient number of dilutive options and warrants to cause application of the modified treasury stock method. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS GENERAL The Company designs, manufactures and markets automated continuous monitoring instruments used to detect and measure various types of air pollution through its wholly-owned subsidiary, Dasibi Environmental Corp. The Company currently derives approximately 50% of its revenue from sales of its instruments and their replacement parts. The Company designs, manufactures and markets electrical control panels for automation use in utility, pulp and paper mill and various other industrial process applications through its wholly owned subsidiary, NUTEK, Inc., ("Nutek"), and currently derives approximately 45% of its revenues from Nutek sales. The Company designs, manufactures and markets medical instrumentation through its wholly owned subsidiary, LOGAN MEDICAL DEVICES, Inc. ("LMD"), a start-up company applying the Company's technology to non-invasive asthma diagnostics. The Company currently derives approximately 5% of its revenues from medical sales. The Company's future operating results may be affected by a number of factors, including: uncertainties relative to global economic conditions; industry factors, the availability and cost of components; the Company's ability to develop, manufacture and sell its products profitably; the Company's ability to successfully increase its market share in its core business while expanding its product base into other markets; the strength of its distribution channels; and the Company's ability to effectively manage expense growth relative to revenue growth in anticipation of continued pressure on gross margins. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997, VERSUS THREE MONTHS ENDED MARCH 31, 1996 Net revenues increased 57% from $1,629,046 during the first quarter of 1996 to $2,552,366 during the first quarter of 1997. The increase was primarily due to the acquisitions of Nutek and LMD, completed in June 1996. Revenues for the core air pollution decreased $462,000, or 28%, due to on-going competitive price pressures which directly effect the Company's ability to obtain contracts. 8 9 Gross margin was 28% for the first quarter of 1997 versus 43% for the first quarter of 1996. Nutek operates at lower margins than the Company's core air pollution instrument business due to its nonproprietary business. Selling, general and administrative expenses increased $251,493, or 62% , during the first quarter of 1997, over the same period in 1996, principally due to the addition of the expenses of Nutek and LMD. Research and development declined 31,292, or 82%, during the first quarter of 1997, compared to the first quarter of 1996, due to cost reduction measures. Interest expense was $71,461 during the first quarter of 1997, compared to $3,837 during the first quarter of 1996. The increase was due to the debt incurred in connection with the acquisitions of Nutek and LMD. As a result of the foregoing factors, net income decreased from a net income of $259,155 during the three months ended March 31,1996 to net income of $1,663 during the three months ended March 31, 1997. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its growth and cash needs primarily through borrowings, and the public and private sales of its securities. Net cash used in operating activities in the three months ended March 31, 1997, amounted to $268,437, due to a reduction in accounts payable. Working capital was $3,189,770 at March 31, 1997. As of March 31, 1997, Nutek had borrowings of $654,762 under its line of credit which has a maximum of the lesser of $1,000,000 or the borrowing base (as defined in the loan agreement). The Company has no material commitments for capital expenditures as of March 31, 1997. The Company believes it will be able to meet its current obligations with funds generated from operations and the existing credit facilities during the next twelve months. INFLATION The Company believes that inflation has not had a material impact on its business. SEASONALITY The Company does not believe that its business is seasonal. 9 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a.) Not applicable (b.) The Company did not file any reports on Form 8-K during the three months ended March 31, 1997. 10 11 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POLLUTION RESEARCH AND CONTROL CORP. ------------------------------------ (Registrant) Date May 14, 1997 By: /s/ Albert E. Gosselin, Jr. ------------------------ ---------------------------------- Albert E. Gosselin, Jr., President and Chief Executive Officer Date May 14, 1997 By: /s/ Cynthia L. Gosselin ----------------------- ------------------------------- Cynthia L. Gosselin, Chief Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 US-DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 679 0 1,821 0 2,492 5,108 1,859 253 7,124 1,918 0 0 0 0 0 7,124 2,552 0 1,828 1,828 661 0 0 62 0 0 0 0 0 62 .01 .01
-----END PRIVACY-ENHANCED MESSAGE-----