-----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, V4nRHN23nFHteGyblN2yq5R+CC19wDa863HDSq7z/URi2gfxCjkcAQSMkVLmGEzP DOuNQJnzAaMivk4VIf7cbA== 0000889812-99-000823.txt : 19990315 0000889812-99-000823.hdr.sgml : 19990315 ACCESSION NUMBER: 0000889812-99-000823 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASTE TECHNOLOGY CORP CENTRAL INDEX KEY: 0000781902 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 132842053 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14443 FILM NUMBER: 99563903 BUSINESS ADDRESS: STREET 1: 5400 RIO GRANDE AVE CITY: JACKSONVILLE STATE: FL ZIP: 32206 BUSINESS PHONE: 9043587013 MAIL ADDRESS: STREET 1: 5400 RIO GRANDE AVENUE CITY: JACKSONVILLE STATE: FL ZIP: 32254 10QSB 1 QUARTERLY REPORT FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) X Quarterly report pursuant to Section 13 or 15 (d) of the Securities - ----- Exchange Act of 1934 For the quarterly period ended January 31, 1999 . ----------------------- - ----- 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 0-14443 WASTE TECHNOLOGY CORP. - -------------------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) Delaware 13-2842053 - -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5400 Rio Grande Avenue Jacksonville, Florida 32254 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (904) 355-5558 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ---- At February 28, 1999 Registrant had outstanding 5,516,349 shares of its Common Stock. Transitional small business disclosure format check one: Yes No X ---- ---- 1 WASTE TECHNOLOGY CORP. TABLE OF CONTENTS PAGE ---- PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS o Consolidated Balance Sheets as of January 31, 1999 and October 31, 1998................................................3 o Consolidated Statements of Income for the three months ended January 31, 1999 and 1998.................................5 o Consolidated Statements of Changes in Stockholders' Equity for the period from October 31, 1998 to January 31, 1999........6 o Consolidated Statements of Cash Flows for the three months ended January 31, 1999 and 1998.................................7 o Notes to Financial Statements...................................8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................................10 PART II. OTHER INFORMATION o Signatures......................................................13 2 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 01/31/99 10/31/98 Unaudited ASSETS Current Assets: Cash and cash equivalents $3,877 $69,349 Accounts receivable, net of allowance for doubtful accounts of $138,000 1,026,047 1,576,722 Inventories 2,409,766 2,681,288 Prepaid expense and other current assets 1,611 822 -------------- -------------- Total current assets 3,441,301 4,328,181 Property, plant and equipment at cost 3,668,722 3,616,842 Less: accumulated depreciation 1,632,295 1,559,753 -------------- -------------- Net property, plant & equipment 2,036,427 2,057,089 Other assets: Other assets 43,255 98,611 Due from Officer 304,100 300,082 -------------- -------------- Total other assets 347,355 398,693 -------------- -------------- TOTAL ASSETS $5,825,083 $6,783,963 See accompanying notes to consolidated financial statements 3 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 01/31/99 10/31/98 Unaudited LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Revolving promissory note $913,148 $1,220,555 Current maturities of long-term debt 168,230 142,886 Capital Lease obligation 17,230 16,871 Accounts payable 1,167,752 1,276,045 Accrued liabilities 490,490 588,053 Customer deposits 455,464 555,905 Accrued Judgment 500,000 495,000 ------------- ------------- Total current liabilities 3,712,314 4,295,315 Long-term debt 413,582 449,519 Capital Lease obligation, less current maturities 666,150 669,175 ------------- ------------- Total liabilities 4,792,046 5,414,009 Stockholders' equity Common stock, par value $.01 25,000,000 shares authorized; 6,179,875 shares issued in 1999 & 1998, respectively 61,799 61,799 Preferred stock, par value $.0001, 10,000,000 shares authorized, none issued - - Additional paid-in capital 6,347,187 6,347,187 Accumulated deficit (4,603,618) (4,255,917) ------------- ------------- 1,805,368 2,153,069 Less: Treasury stock, 663,526 shares at cost 419,306 419,306 Less: Note receivable from stockholders, net 353,025 363,809 ------------- ------------- Total stockholders' equity 1,033,037 1,369,954 ------------- ------------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $5,825,083 $6,783,963 See accompanying notes to consolidated financial statements 4 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME UNAUDITED Three months ended: 01/31/99 01/31/98 Net Sales $2,171,154 $3,008,112 Cost of Sales 1,889,688 2,510,537 -------------- ------------- Gross Profit 281,466 497,575 Operating Expenses: Selling 224,146 322,416 General and Administrative 359,017 440,259 -------------- ------------- Total operating expenses 583,163 762,675 Operating Income (Loss) (301,697) (265,100) Other Income (Expense): Interest 15,109 18,061 Interest Expense (60,307) (47,325) Other Income 4,194 4,919 Provision for Judgment (5,000) - -------------- ------------- Total Other Income (Expense) (46,004) (24,345) -------------- ------------- Income (Loss) before income taxes (347,701) (289,445) Income Tax Provision Current - - Deferred - - -------------- ------------- NET INCOME (LOSS) ($347,701) ($289,445) Basic and diluted net loss per share (0.06) (0.06) Weighted average number of shares 5,516,349 5,102,481 See accompanying notes to consolidated financial statements 5 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY for three months ended January 31, 1999 unaudited
Common Stock Par Value $.01 Authorized 25,000,000 NUMBER ADDITIONAL OF SHARES PAR PAID-IN ACCUMULATED ISSUED VALUE CAPITAL DEFICIT Balance at October 31, 1998 6,179,875 $61,799 $6,347,187 ($4,255,917) Adjustment of Note Receivable from shareholder - - - - Net Income (Loss) - - - (347,701) ------------- ------------ ------------ -------------- Balance at January 31, 1999 6,179,875 $61,799 $6,347,187 ($4,603,618) Treasury Stock NUMBER TOTAL OF STOCKHOLDERS' SHARES COST OTHER EQUITY Balance at October 31, 1998 663,526 ($419,306) ($363,809) $1,369,954 Adjustment of Note Receivable from shareholder - - 10,784 10,784 Net Income (Loss) - - - (347,701) ------------ ------------- -------------- --------------- Balance at January 31, 1999 663,526 ($419,306) ($353,025) $1,033,037
See accompanying notes to consolidated financial statements 6 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW unaudited
For Three Months Ended 01/31/99 01/31/98 Cash flow from operating activities: Net (loss) income ($347,701) ($289,445) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 78,322 69,631 Increase (decrease) from changes in: Accounts receivable 550,675 52,925 Inventories 271,522 (476,831) Prepaid expenses and other current assets (789) 53,475 Other assets - 117 Accounts payable (108,293) 438,606 Accrued liabilities (77,163) (8,763) Customer deposits (100,441) 147,385 Accrued Judgment 5,000 - ------------- -------------- Net cash provided by (used in) operating activities 271,132 (12,900) Cash flows from investing activities: Increase in notes receivable from stockholders (13,634) (13,503) Purchase of property and equipment (2,304) (6,781) Purchase of Minority Interest - (15,000) ------------- -------------- Net cash used in investing activities (15,938) (35,284) Cash flows from financing activities: Increase (decrease) in Debt (320,666) 11,103 ------------- -------------- Cash flows provided by (used in) financing activities (320,666) 11,103 Net increase (decrease) in cash (65,472) (37,081) Cash at beginning of period 69,349 80,783 Cash at end of period 3,877 43,702 Supplemental schedule of disclosure of cash flow information Cash paid during period for: Interest 55,309 46,152 Income taxes - -
See accompanying notes to consolidated financial statements 7 Waste Technology Corporation and Subsidiaries Notes to Consolidated Financial Statements 1. Nature of Business: Waste Technology Corp. (the Company) is a manufacturer of baling machines which utilize mechanical, hydraulic and electrical mechanisms to compress a variety of materials into bales. The Company's customers include plastic recycling facilities, paper mills, textile mills and paper recycling facilities throughout the United States, the Far East, Europe and South America. The Company has two manufacturing subsidiaries, International Baler Corp. (IBC), located in Jacksonville, Florida, and International Press and Shear, Corp. (IPS), located in Baxley, Georgia. The IPS subsidiary was formed in the second quarter of fiscal 1995 and greatly expanded the manufacturing capacity of the Company. Operating losses at IPS are a significant cause of the consolidated losses in the first quarter of fiscal 1999 and 1998. These losses occurred primarily as a result of the continuing depressed recycled products markets, as well as higher than anticipated costs of sales and selling and administrative expenses. In the fourth quarter of 1998 the Company effectuated significant cost reductions which will exceed $500,000 on an annual basis. These cost cutting measures include personnel eliminations, salary reductions and advertising reductions. The Company is unable to predict how soon prices will recover, but, based on previous cyclical dips in corrugated and paper prices, the Company believes that prices could rise in the relatively near future with a resulting increase in sales and profits. The Company has introduced new textile balers, new corrugated balers and has been marketing the new patented hinge side baler. The Company anticipates that these products will have a significant impact on sales in fiscal 1999. 2. Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period January 31, 1999 are not necessarily indicative of the results that may be expected for the year ending October 31, 1999. For further information, refer to the Company's Annual Report on form 10KSB for the year ended October 31, 1998 and the Management Discussion included in this form 10QSB. Certain prior year amounts have been reclassified to conform with the current year's presentation. 8 3. Summary of Significant Account Policies: (a) Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Waste Technology Corp. and all of its wholly owned and majority owned subsidiaries. Intercompany balances and material intercompany transactions have been eliminated in consolidation. (b) Basic and Diluted Earnings (Loss) Per Share: Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share includes the net additional number of shares that would be issued upon the exercise of stock options using the treasury stock method. Options are not considered in loss periods as they would be antidilutive. 4. Related Party Loan and Notes Receivable: The Company was indebted in the amount of $414,775 to the General Counsel and his law firm at January 31, 1999. During 1997, the General Counsel and his law firm authorized the Company to set off accrued legal fees against the note receivable from the General Counsel at such time as the Board of Directors shall determine. Accordingly, accrued legal fees are presented as a reduction of notes receivable from General Counsel at January 31, 1999. On December 29, 1995, the Company transferred a life insurance policy, covering the life of its president, to the president in exchange for a note receivable. The amount of the note receivable from president is equal to the amount of the cash surrender value of the policy at the time of the transfer. Interest accrues at the rate of 6% per annum. No principal or interest is due until proceeds from the policy are realized. 5. Revolving Promissory Note: The Company has a $2,000,000 line of credit with $913,148 outstanding at January 31, 1999 and $1,220,555 outstanding at October 31, 1998. The line of credit is secured by substantially all assets. Advances under the revolving line are limited to the aggregate of up to 85% of eligible accounts receivable less than 90 days old and 30% of eligible raw materials and finished goods inventory. As of January 31, 1999, the balance of the revolving line approximated the maximum borrowing capacity available to the Company. The revolving line bears interest at the prime rate plus 1.5% (9.25% at January 31, 1999) with the principal amount payable on demand. 9 6. Long-Term Debt: Long-term debt consists of the following:
01-31-99 10-31-98 -------- -------- Term note payable to bank at prime rate, due in equal monthly installments of $9,028, plus interest through August 2002, secured by substantially all assets. $388,194 $415,278 Term note payable to Appling County, Georgia at 4.0% due in equal monthly installments of $3,417, including interest through July 2003. 168,618 177,127 Note payable to director, payable on demand, non-interest bearing. 25,000 - --------- ------ 581,812 592,405 Amounts classified as current 168,230 142,886 --------- ------- $ 413,582 $ 449,519 =========== =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: Three Month Comparisons For the first quarter of fiscal 1999 the Company had net sales of $2,171,154 as compared to $3,008,112 for the first quarter of 1998. The lower sales were the result of lower shipments to the recycled products markets at both the International Baler and International Press and Shear operations. The Company had a net loss of $347,701 in the first quarter of 1999 as compared to a loss of $289,445 in the first quarter of 1998. The increase in the loss is the result of the lower level of shipments partially offset by lower operating expenses. Selling expenses were reduced by $98,270 and general and administrative expenses were reduced by $81,242 in the first quarter 1999 versus the same quarter in fiscal 1998. These cost reductions are the result of personnel eliminations, salary reductions, and lower advertising and travel expenses. The Company is reviewing all aspects of its operations in order to determine what additional actions may be taken in order to allow the Company to return to profitability even if the recycled products markets remain depressed. The Company has moved production of certain baler models to Jacksonville and has also eliminated a number of support staff in Baxley maintaining only critical personnel. As order activity increases full production can resume. The Company has introduced new textile balers, new corrugated balers and has been marketing a new patented hinge side baler. The Company anticipates that these products will have a significant impact on sales in fiscal 1999. The order backlog as of February 28, 1999 was $2,146,000 as compared with $3,010,000 at February 28, 1998. 10 Financial Condition: Working capital decreased from $32,866 at October 31, 1998 to $(271,013) at January 31, 1999. This decrease is due to the overall operating results of the first quarter of 1999. The entire balance of the line of credit is included as a current liability even through it is not due to be renewed or replaced until July 31, 2000 because of the nature of this type of loan. This line of credit is for a period of two years, accrues interest at 1 1/2% above the prime rate and is secured primarily by accounts receivable and inventories. Also included in current liabilities is the accrued legal judgement of $500,000 which relates to the Company's former subsidiary, Ram Coating Technology. The term note with SouthTrust Bank had a balance of $338,194 at January 31, 1999 and is due in equal monthly installments of $9,028, plus interest at the prime rate to August 2002. The term note payable to Appling County, Georgia is due in equal monthly installments of $3,417 including interest at 4.0% through July 2003. Our auditors, KPMG LLP, have stated in the "Report of Independent Accountants" for October 31, 1998 to the shareholders of Waste Technology Corporation that there is "substantial doubt" about the Company's ability to continue as a going concern. The Company's Management and Board of Directors has substantial concern over recent operating performances, however, it believes that it has several viable options to continue as a going concern for the following reasons: 1. In July 1998 the Company has replaced the $1,000,000 revolving promissory note with SouthTrust Bank with a $2,000,000 (maximum) revolving promissory note with a term of two years. Therefore, the Company is no longer in violation of the SouthTrust revolving promissory note loan covenants. 2. The Company has taken certain actions to reduce operating costs including the elimination of personnel, implementing salary reductions for management, and cutting expenditures wherever possible. These cost cutting actions should result in annual savings in excess of $500,000 and were implemented in the fourth quarter of fiscal 1998. The Company is also developing additional contingency plans to further reduce costs in order that the Company can operate profitably in the future and have positive cash flow from operations at a minimum. The Company has no commitments for any material capital expenditures. Other than as set forth above, there are no unusual or infrequent events or transactions or significant economic charges which materially affect the amount of reported income from continuing operations. The above contains forward looking statements and is subject to many variables over which the Company has no control such as inflation, competition, and the general market conditions for its products. Therefore the Company may have to consider additional financing and/or operating alternatives to insure the Company will continue as a going concern. 11 Year 2000 Compliance: The Company believes it has fully achieved Year 2000 compliance for all internal systems. Costs associated with compliance were immaterial and have been fully incurred. The Company is in the process of examining key vendor and customer relationships to determine, to the extent practical, the degree of such parties' Year 2000 compliance. Should a key vendor or customer have a systems failure due to the century change, the Company believes that the most significant impact would likely be the inability to receive inventory on a timely basis. While the Company does not expect any such impact to be material, it is developing contingency plans to address this possibility. Inflation: The costs of the Company and its subsidiaries are subject to the general inflationary trends existing in the general economy. The Company believes that expected pricing by its subsidiaries for balers will be able to include sufficient increases to offset any increase in costs due to inflation. 12 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 undersigned hereto duly authorized. Dated: March 14, 1999 WASTE TECHNOLOGY CORPORATION BY: /s/Ted C. Flood ----------------------------------- Ted C. Flood, President (Chief Executive Officer) BY: /s/William E. Nielsen ----------------------------------- William E. Nielsen Chief Financial Officer (Principal Financial and Accounting Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from the financial statements and is qualified in its entirety by reference to such financial statements. 3-MOS OCT-31-1999 JAN-31-1999 3,877 0 1,164,047 138,000 2,409,766 3,441,301 3,668,722 1,632,295 5,825,083 3,712,314 0 0 0 61,799 971,238 5,825,083 2,171,154 2,171,154 1,889,688 2,472,851 (14,303) 0 60,307 (347,701) 0 (347,701) 0 0 0 (347,701) (.06) (.06)
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