-----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, QDopJfcoClMf+35mBHH/zXCyAo3seLH5k45f1eQi3z2lPtzkkLVa4vwxAbB3PImV 9Umt2W8r4g+mvS4mSropPg== 0000930413-01-000625.txt : 20010319 0000930413-01-000625.hdr.sgml : 20010319 ACCESSION NUMBER: 0000930413-01-000625 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010316 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: 1570074 BUSINESS ADDRESS: STREET 1: 5400 RIO GRANDE AVE CITY: JACKSONVILLE STATE: FL ZIP: 32205 BUSINESS PHONE: 8002319286 MAIL ADDRESS: STREET 1: 5400 RIO GRANDE AVENUE CITY: JACKSONVILLE STATE: FL ZIP: 32205 10QSB 1 0001.txt FORM 10-QSB 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, 2001 . ___ 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 CORPORATION - ------------------------------------------------------------------------------- (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, 2001, Registrant had outstanding 5,516,349 shares of its Common Stock. Transitional small business disclosure format check one: Yes____ No _X_ WASTE TECHNOLOGY CORPORATION TABLE OF CONTENTS PAGE ---- PART I. FINANCIAL INFORMATION..............................................3 ITEM I. FINANCIAL STATEMENTS o Consolidated Balance Sheets as of January 31, 2001, and October 31, 2000.............................................3 o Consolidated Statements of Operations for the three months ended January 31, 2001, and January 31, 2000 . . . . . ......................................5 o Consolidated Statements of Changes in Stockholders' Equity for the period from October 31, 1999, to January 31, 2001.................................................6 o Consolidated Statements of Cash Flows for the three months ended January 31, 2001, and January 31, 2000.................................................7 o Notes to Financial Statements....................................8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........11 PART II. OTHER INFORMATION o Signatures......................................................14 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 01/31/01 10/31/00 Unaudited ASSETS Current Assets: Cash and cash equivalents $49,760 $176,046 Accounts receivable, net of allowance for doubtful accounts of $86,000 716,251 787,224 Inventories 1,567,724 1,579,724 Prepaid expense and other current assets 1,296 9,593 ----------- ----------- Total current assets 2,335,031 2,552,587 Property, plant and equipment at cost 1,842,985 1,841,742 Less: accumulated depreciation 1,243,817 1,230,638 ----------- ----------- Net property, plant & equipment 599,168 611,104 Other assets: Other assets 8,983 11,419 Due from Officer 379,746 375,122 ----------- ----------- Total other assets 388,729 386,541 ----------- ----------- TOTAL ASSETS $3,322,928 $3,550,232 See accompanying note to consolidated financial statements. 3 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 01/31/01 10/31/00 Unaudited LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Revolving promissory note $111,741 $35,783 Current maturities of long-term debt 108,333 108,333 Accounts payable 365,475 579,029 Accrued liabilities 545,945 590,191 Customer deposits 208,633 200,583 Accrued Judgment 582,000 576,000 ----------- ----------- Total current liabilities 1,922,127 2,089,919 Long-term debt 63,194 90,277 ----------- ----------- Total liabilities 1,985,321 2,180,196 Stockholders' equity Common stock, par value $.01 25,000,000 shares authorized; 6,179,875 shares issued in 2001 & 2000, respectively 61,799 61,799 Preferred stock, par value $.0001, 10,000,000 shares authorized, none issued 0 0 Additional paid-in capital 6,347,187 6,347,187 Accumulated deficit (4,273,755) (4,237,203) ----------- ----------- 2,135,231 2,171,783 Less: Treasury stock, 663,526 shares at cost 419,306 419,306 Less: Note receivable from shareholders 378,318 382,441 ----------- ---------- Total stockholders' equity 1,337,607 1,370,036 ----------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $3,322,928 $3,550,232 See accompanying notes to consolidated financial statements. 4 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED Three months ended: 01/31/01 1/31/00 Net Sales 1,807,568 2,457,308 Cost of Sales 1,473,055 1,901,892 ---------- ---------- Gross Profit 334,513 555,416 Operating Expenses: Selling 144,477 173,491 General and Administrative 215,113 299,120 ---------- ---------- Total operating expenses 359,590 472,611 Operating Income (Loss) (25,077) 82,805 Other Income (Expense): Interest & Dividends 16,562 18,934 Interest Expense (19,515) (55,167) Other Income 478 2,613 Net gain on Disposal of Fixed Assets 0 626,929 Provision for Judgment (6,000) (7,000) ---------- ---------- Total Other Income (Expenses) (8,475) 586,309 ---------- ---------- Income (Loss) before income taxes (33,552) 669,114 Income Tax Provision Current 3,000 0 Deferred 0 0 ---------- ---------- NET INCOME (LOSS) (36,552) 669,114 Basic and diluted Income (Loss) per share (0.01) 0.12 Weighted average number of shares 5,516,349 5,516,349 See accompanying notes to consolidated statements. 5 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY As of January 31, 2001 Unaudited
COMMON STOCK PAR VALUE $.01 AUTHORIZED 25,000,000 SHARES TREASURY STOCK ----------------------- ----------------------- NUMBER ADDITIONAL NUMBER OF SHARES PAR PAID-IN ACCUMULATED OF ISSUED VALUE CAPITAL DEFICIT SHARES COST ----------- ----------- ------------ ------------- ----------- --------- Balance at October 31, 1999 6,179,875 $61,799 $6,347,187 $(5,085,769) 663,526 $(419,306) Net Adjustment of Note Receivable from shareholder -0- -0- -0- -0- -0- -0- Net Income (Loss) -0- -0- -0- 848,566 -0- -0- ---------- ----------- ----------- ------------ -------- --------- Balance at October 31, 2000 6,179,875 $61,799 $6,347,187 $(4,237,203) 663,526 $(419,306) Net Adjustment of Note Receivable from shareholder -0- -0- -0- -0- -0- -0- Net Income (Loss) -0- -0- -0- (36,552) -0- -0- ---------- ----------- ------------ ------------ -------- --------- Balance at January 31, 2001 6,179,875 $61,799 $6,347,187 $(4,273,755) 663,526 $(419,306) TOTAL STOCKHOLDERS' OTHER EQUITY - ---------- ------------ $ (377,711) $ 526,200 (4,730) (4,730) -0- 848,566 - ----------- ------------- (382,441) $ 1,370,036 4,123 4,123 -0- (36,552) - ----------- ------------- $(378,318) $ 1,337,607
See accompanying notes to consolidated financial statements 6 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW Unaudited
For The Three Months Ended 01/31/01 01/31/00 Cash flow from operating activities: Net (loss) income $ (36,552) $ 669,114 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 15,615 32,437 Gain from sale of equipment 0 (626,929) Increase (decrease) from changes in: Accounts receivable 70,973 39,705 Inventories 12,000 116,608 Prepaid expenses and other current assets 8,297 (101,762) Other assets 0 14,611 Accounts payable (213,553) (728,242) Accrued liabilities (44,246) 3,420 Customer deposits 8,050 480,721 Accrued Judgment 6,000 7,000 ---------- ---------- Net cash provided by (used in) operating activities (173,416) (93,317) Cash flows from investing activities: Increase in notes receivable from shareholders (502) 10,616 Purchase of property and equipment (1,243) 0 Proceeds from sale of assets and liabilities 0 661,220 ---------- ---------- Net cash provided by (used in) investing activities (1,745) 671,836 Cash flows from financing activities: Net (Payments) Drawings from revolving promissory note 75,958 (553,852) (Payments) on Long Term Debt, Capital Leases (27,083) (32,921) ---------- ---------- Cash flows provided by (used in) financing activities 48,875 (586,773) Net increase (decrease) in cash (126,286) (8,254) Cash at beginning of period 176,046 18,432 Cash at end of period 49,760 10,178 Supplemental schedule of disclosure of cash flow information Cash paid during period for: Interest 17,590 44,214 Income taxes 0 0
See accompanying notes to consolidated financial statements 7 WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. NATURE OF BUSINESS: Waste Technology Corporation (the Company) is a manufacturer of baling machines which utilize technical, 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. During a portion of the first quarter of fiscal 2000, the Company had two manufacturing subsidiaries, International Baler Corp. (IBC), located in Jacksonville, Florida, and International Press and Shear, Corporation (IPS), located in Baxley, Georgia. In December 1999, the Company sold the assets of its IPS subsidiary of $1,897,643 to two IPS officers for $661,220 and the assumption of $1,863,352 liabilities. 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 were a significant cause of the consolidated losses in both 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. The Company's management and Board of Directors have substantial concern over recent operating performances, however, it believes that its operating performance over the past year and current negotiations relating to the Company's agreement to indemnify a bonding company for payment it made with respect to a judgment entered in 1998 against a former wholly owned subsidiary of the Company which will hopefully result in payment by the Company to the bonding company of an amount less than the judgment or allow it to pay the amount of the judgment over a period of time will provide liquidity to allow the Company to continue as a going concern. See, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations." 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 ended January 31, 2001, are not necessarily indicative of the results that may be expected for the year ending October 31, 2001. For further information, refer to the Company's Annual Report on form 10-KSB for the year ended October 31, 2000, and the Management Discussion included in this form 10-QSB. Certain prior year amounts have been reclassified to conform with the current year's presentation. 8 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (a) PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Waste Technology Corporation 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 $466,407 to the General Counsel and his law firm at January 31, 2001. 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, 2001. 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 the 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: In August 2000, the Company entered into a line of credit agreement which allows the Company to borrow up to the lesser of 80% of eligible receivables or $500,000. The line of credit bears interest at prime rate plus 1% plus certain service charges. The line of credit had an outstanding balance of $111,741 at January 31, 2001 and the unused line of credit at this date was approximately $205,000. 9 6. TERM NOTES AND CAPITAL LEASES: Long-term debt consists of the following:
01-31-01 10-31-00 -------- -------- 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. $171,527 $198,110 -------- -------- Amounts classified as current 108,333 108,333 -------- -------- $ 63,194 $ 90,277 ======== ========
7. INCOME TAXES As of January 31, 2001, the Company's anticipated annual effective tax rate is zero as a result of the reduction in a portion of the valuation allowance equal to the utilization of net operating loss carry-forwards. However, the company is anticipating a small liability due to the alternative minimum tax regulations. As of January 31, 2001, the Company has approximately $3,500,000 of net operating loss carry-forwards for tax purposes, which expire in years 2007 through 2013. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: THREE MONTH COMPARISON In the first quarter ending January 31, 2001, the Company had net sales of $1,807,568 as compared to $2,457,308 in the first quarter of fiscal 2000, a decrease of 26.4%. The lower shipments were primarily the result of the sale of the assets of the IPS subsidiary in December 1999 which had sales of $416,000 in the first quarter of fiscal 2000 along with lower sales at both the International Baler Corporation ("IBC") and Consolidated Baling Machine Company, Inc. ("CBMC") subsidiaries. These lower sales were partially offset by higher sales at the Solid Waste and Recovery Systems ("SWRS") subsidiary. The Company had a net loss of $36,552 in the first quarter of fiscal 2001, as compared to a profit of $669,114 in the first quarter of 2000. The first quarter 2000 profit was primarily due to a gain of $626,929 on the sale of the IPS assets. Operating income in the first quarter of 2001 was a loss of $25,077 as opposed to operating income of $82,805 in the prior year's first quarter. This was due to the lower sales previously mentioned. Gross profit margins declined from 22.6% in the first quarter of fiscal 2000 to 18.5% in the current year due to the lower sales figure and related lower absorption of fixed overhead. Beginning in the fourth quarter of 1998 and continuing through 1999, 2000 and fiscal 2001, the Company has effectuated significant cost reductions which included personnel eliminations and the reduction of salaries and advertising costs. Selling and administrative expenses were significantly lower in the first quarter of fiscal 2001 as compared to the first quarter of fiscal 2000. These expenses were reduced by $57,549 due to the sale and discontinuance of the IPS operation and expenses at IBM and CBMC were reduced by $55,472 compared to the first quater of fiscal 2000. Interest expense was also significantly lowered in the first quarter of fiscal 2001 versus the first quarter of fiscal 2000 due to the sale of IPS' encumbered assets and the substantial reduction in borrowing from the Company's line of credit. The sold order backlog as of February 28, 2001 was $1,067,000 as compared to $1,670,000 at February 29, 2000. This decrease was due to the downturn in general economic conditions. FINANCIAL CONDITION Net working capital decreased from $462,668 as of October 31, 2000 to $412,904 at January 31, 2001. On August 7, 2000, the Company entered into a line of credit agreement with Presidential Financial Corporation which allows the Company to borrow up to $500,000. The line of credit bears interest at the prime rate plus one percent (1%) plus certain service charges. This agreement has a one year term with an automatic renewal unless either of the parties to the agreement gives written notice to terminate the agreement at least sixty (60) days prior to the annual renewal date. 11 The Company's auditors, KPMG LLP, has stated in its "Report of Independent Accountants" for October 31, 2000 to the Company's shareholders that there is "substantial doubt" about the Company's ability to continue as a going concern. The Company's Management and Board of Directors have substantial concern over the Company's ability to reach an acceptable and affordable settlement of its obligation arising out of its agreement to indemnify Transamerica Premier Insurance Corporation ("Transamerica") for its payment of a judgment entered on June 5, 1998 against the Company's former wholly owned subsidiary, Ram Coating Technology Corporation ("Ram"), and Transamerica in the amount of $360,194, together with interest, in favor of L & A Contracting Company in the 19th Judicial District Court of the State of Louisiana, Case No. 382924 Division F (the "Judgment"). Transamerica had issued a performance and payment bond (the "Bond") for Ram in connection with the contract which was the subject of the action and which was the basis of the Judgment against Ram. The Company had agreed to indemnify Transamerica for any payments it was required to make pursuant to the Bond. As a result of the indemnification agreement, the Company is liable to Transamerica for the amount of the Judgment. In July 2000, the Judgment was affirmed by the First Circuit Court of Appeals of the State of Louisiana. The Company has reduced net income by the full amount of the Judgment and interest in the aggregate amount of $582,000 through January 31, 2001. The Judgment has been paid by Transamerica and the Company is attempting to negotiate a settlement for an amount less than the Judgment or a term payment arrangement. Management, however, believes that it will be able to improve the Company's financial condition based on its cost-cutting measures, its recent operating performances and the settlement of the amount and terms of the payment to be made to Transamerica to satisfy the Judgment and therefore, the Company will continue as a viable going concern. However, no assurances can be given that it will be able to do so. The Company has no commitments for any significant capital expenditures. Other than as set forth above, there are no unusual or infrequent events or transactions or significant economic changes which materially affect the amount of reported income from continuing operations. This "Management's Discussion and Analysis" contains forward-looking statements within the meaning of Section 21B of the Securities and Exchange Act of 1934, as amended. These forward-looking statements represent the Company's present expectations or beliefs concerning future events. The Company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties including, but not limited to, changes in general economic conditions and changing competition which would cause actual result to differ materially from those indicated. Therefore, the Company may have to consider additional financing and/or operating alternatives to insure the Company will continue as a going concern. INFLATION: The cost 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 PART II. OTHER INFORMATION None. 13 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 9, 2001 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) 14 -----END PRIVACY-ENHANCED MESSAGE-----