UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2001
Commission file number 0-21391
TURBODYNE TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) | 95-4699061 (IRS Employer Identification No.) |
6155 Carpinteria Avenue, Carpinteria, California 93013
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(805) 684-4551
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 $.001 per share, outstanding was 62,581,213 on April 9, 2001.
Report on Form 10-Q
For the Quarter Ended March 31, 2001
TABLE OF CONTENTS
| | | PAGE | ||
|---|---|---|---|---|
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Consolidated Financial Statements (Unaudited) | |||
Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 | 3 | |||
Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2000 | 4 | |||
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 | 5 | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 6 | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 7 | ||
PART II. OTHER INFORMATION | ||||
Item 1. | Legal Proceedings | 8 | ||
Item 2. | Changes in Securities and Use of Proceeds | 8 | ||
Item 3. | Defaults Upon Senior Securities | 10 | ||
Item 4. | Submission of Matters to a Vote of Security Holders | 10 | ||
Item 5. | Other Information | 10 | ||
Item 6. | Exhibits and Reports on Form 8-K | 10 | ||
Signature | 11 | |||
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TURBODYNE TECHNOLOGIES INC
CONSOLIDATED BALANCE SHEET
MARCH 31, 2001 AND DECEMBER 31, 2000
| | MARCH 31, 2001 | DECEMBER 31, 2000 | ||
|---|---|---|---|---|
| ASSETS | ||||
| CURRENT ASSETS | ||||
| CASH | — | — | ||
| TRADE ACCOUNTS RECEIVABLE, NET | 308,776 | 334,209 | ||
| EMPLOYEE ADVANCES RECEIVABLE—LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $946,847 IN 2000 AND 2001, RESPECTIVELY | 3,054 | 2,250 | ||
| INVENTORIES | 361,120 | 363,780 | ||
| PREPAID EXPENSES AND OTHER CURRENT ASSETS | 11,029 | 11,029 | ||
| TOTAL CURRENT ASSETS | 683,980 | 711,268 | ||
PROPERTY, PLANT & EQUIPMENT, AT COST, NET | 330,013 | 353,084 | ||
| OTHER ASSETS | 34,198 | 37,793 | ||
| TOTAL ASSETS | 1,048,191 | 1,102,145 | ||
| | MARCH 31, 2001 | DECEMBER 31, 2000 | |||
|---|---|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
| CURRENT LIABILITIES | |||||
| CURRENT MATURITIES OF LONG-TERM DEBT | 109,994 | 145,293 | |||
| ACCOUNTS PAYABLE AND CASH OVERDRAFT | 2,837,031 | 2,716,055 | |||
| ACCRUED LIABILITIES | 269,169 | 265,626 | |||
| CASH ADVANCED FOR UNISSUED SHARES | 684,373 | — | |||
| RESERVE FOR LAWSUIT SETTLEMENTS | 5,503,500 | 5,711,500 | |||
| TOTAL CURRENT LIABILITIES | 9,404,067 | 8,838,474 | |||
LONG-TERM DEBT, LESS CURRENT MATURITIES | 19,213 | 24,053 | |||
TOTAL LIABILITIES | 9,423,280 | 8,862,527 | |||
| STOCK HOLDERS' EQUITY (DEFICIT) | |||||
| COMMON STOCK $0.001 PAR VALUE, PREFERRED STOCK, $0.001 PAR VALUE. AUTHORIZED 1,000,000 SHARES. COMMON STOCK, $0.001 PAR VALUE. AUTHORIZED 99,000,000 SHARES; ISSUED AND OUTSTANDING: 62,581,213 AS OF MARCH 31, 2000 AND 58,151,821 AS OF DECEMBER 31, 2000 | 62,581 | 58,152 | |||
| TREASURY STOCK, AT COST | (1,755,534 | ) | (1,755,534 | ) | |
| ADDITIONAL PAID IN CAPITAL | 101,883,069 | 101,126,022 | |||
| CUMULATIVE OTHER COMPREHENSIVE INCOME | 35,119 | 35,119 | |||
| ACCUMULATED DEFICIT | (108,600,323 | ) | (107,224,141 | ) | |
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) | (8,375,089 | ) | (7,760,382 | ) | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | 1,048,191 | 1,102,145 | |||
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TURBODYNE TECHNOLOGIES INC
CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 31, 2001 AND MARCH 31, 2000
| | THREE MONTHS ENDED MARCH 31, 2001 | THREE MONTHS ENDED MARCH 31, 2000 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| NET SALES | 10,443 | 268,000 | |||||||
| COST OF GOODS SOLD | 2,660 | 254,000 | |||||||
| GROSS PROFIT | 7,783 | 14,000 | |||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSE | 628,036 | 852,000 | |||||||
| RESEARCH AND DEVELOPMENT COSTS | 731,279 | 1,246,000 | |||||||
| DEPRECIATION AND AMORTIZATION | 23,071 | 0 | |||||||
| TOTAL OPERATION EXPENSE | 1,382,386 | 2,098,000 | |||||||
| LOSS FROM OPERATIONS | (1,374,603 | ) | (2,084,000 | ) | |||||
OTHER EXPENSE (INCOME) | (16,470 | ) | — | ||||||
| INTEREST EXPENSE, NET | 2,997 | 36,000 | |||||||
| LITIGATION EXPENSE | 15,052 | — | |||||||
| LOSS BEFORE INCOME TAXES | (1,376,182 | ) | (2,120,000 | ) | |||||
| INCOME TAX EXPENSE (BENEFIT) | — | ||||||||
| NET LOSS | $ | (1,376,182 | ) | $ | (2,120,000 | ) | |||
| NET LOSS PER COMMON SHARE: | |||||||||
| BASIC LOSS PER SHARE | $ | (0.02 | ) | $ | (0.05 | ) | |||
| DILUTED LOSS PER SHARE | $ | (0.02 | ) | $ | (0.05 | ) | |||
| WEIGHTED AVERAGE SHARES USED FOR BASIC AND DILUTED LOSS PER SHARE | 58,151,213 | 46,947,000 | |||||||
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TURBODYNE TECHNOLOGIES INC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
| | 2001 | 2000 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| NET LOSS | $ | (1,376,182 | ) | $ | (2,120,000 | ) | |||||
| ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | |||||||||||
| DEPRECIATION AND AMORTIZATION | 23,071 | 92,000 | |||||||||
| (INCREASE) DECREASE IN OPERATING ASSETS: | |||||||||||
| TRADE ACCOUNTS RECEIVABLE | 25,433 | 1,583,000 | |||||||||
| EMPLOYEE ADVANCES RECEIVABLE | (804 | ) | (194,000 | ) | |||||||
| INVENTORIES | 2,660 | 425,000 | |||||||||
| PREPAID EXPENSES AND OTHER CURRENT ASSETS | (0 | ) | (15,000 | ) | |||||||
| OTHER ASSETS | 3,595 | (88,000 | ) | ||||||||
| INCREASE (DECREASE) IN OPERATING LIABILITIES: | |||||||||||
| TRADE ACCOUNTS PAYABLE | 120,976 | (168,000 | ) | ||||||||
| ACCRUED LIABILITIES | 13,543 | 143,000 | |||||||||
| RESERVE FOR LAWSUIT SETTLEMENT | (8,000 | ) | — | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES: | (1,195,709 | ) | (342,000 | ) | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| PURCHASE OF PROPERTY AND EQUIPMENT | 0 | (9,000 | ) | ||||||||
| PROCEEDS FROM SALE OF PROPERTY, PLANT AND EQUIPMENT | 0 | 0 | |||||||||
| NET CASH USED IN INVESTING ACTIVITIES: | 0 | (9,000 | ) | ||||||||
| CASH FLOW FROM FINANCING ACTIVITIES: | |||||||||||
| NET PROCEEDS FROM SHORT-TERM BORROWINGS | 20,500 | 30,000 | |||||||||
| ISSUANCE OF COMMON STOCK | 561,476 | — | |||||||||
| CASH ADVANCED FOR UNISSUED SHARES | 674,373 | — | |||||||||
| PROCEEDS FROM EXERCISE OF STOCK OPTIONS AND WARRANTS | — | 612,000 | |||||||||
| INCREASE IN CASH OVERDRAFT | (60,640 | ) | — | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES: | 1,195,709 | 642,000 | |||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | — | (19,000 | ) | ||||||||
| NET INCREASE (DECREASE) IN CASH | — | 272,000 | |||||||||
| CASH AT BEGINNING OF PERIOD | — | 29,000 | |||||||||
| CASH AT END OF PERIOD | $ | — | $ | 301,000 | |||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||
| CASH PAID DURING THE PERIOD FOR: | |||||||||||
| INTEREST | $ | — | $ | 3,000 | |||||||
| INCOME TAXES | $ | — | $ | 800 | |||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
| CONVERSION OF DEBT TO EQUITY | |||||||||||
| STOCK ISSUED FOR LEGAL SETTLEMENTS | $ | 200,000 | $ | — | |||||||
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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Except for the historical information contained below, the matters discussed in this item are forward-looking statements that involve a number of risks and uncertainties. Our actual liquidity needs, capital resources and results may differ materially form the discussion set forth in the forward-looking statements. For a discussion of important factors that could cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements, see "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
RESULTS OF OPERATIONS
SALES
Sales for the three months ended March 31, 2001 decreased to $10,443 from $268,000 a decrease of $257,557, or approximately 96.10%. This decrease reflects only ancillary sales of parts and services and no sales of Turbopacs ™ in the first quarter. An additional factor is the transfer of sales and marketing to Honeywell, pursuant to the joint development agreements, in which Honeywell recognizes sales of prototypes to the OEMs, while we do not.
COST OF GOODS SOLD
Cost of goods sold consists primarily of material, labor and applied overhead cost. Cost of goods sold for the three months ended March 31, 2001 decreased to $2,660 from $254,000 for the three months ended March 31, 2000, a decrease of $251,340 or approximately 98.95%. As a percentage of sales, cost of goods sold decreased to 25.47% from 94.78%. The decrease in cost of goods sold from March 31, 2001 to March 31, 2000 is reflective of the write down of obsolete inventory in 2000 and lower sales in the first quarter of 2001.
GROSS PROFIT
Gross profit for the three months ended March 31, 2001 decreased to $7,783 from $14,000 for the three months ended March 31, 2000. Gross profit decreased 44.40% for the three months ended March 31, 2001 from the same period ended March 31, 2000. As a percentage of sales, gross profit was 75.53% for the period ended March 31, 2001 as compared to 5.22% for the period ended March 31, 2000. The increase in gross profit as a percentage of sales reflects the loss of sales of Turbopacs in the first quarter 2001 and lower cost of goods sold.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended March 31, 2001 decreased to $628,036 from $852,000 for the three months ended March 31, 2000, a decrease of $223,964 or approximately 26.29%. The decrease in selling, general and administrative expenses is attributable to management's continuing efforts to reduce costs and staff attrition.
RESEARCH AND DEVELOPMENT
Research and development costs for the three months ended March 31, 2001 decreased to $731,279 from $1,246,000 for the three months ended March 31, 2000, a decrease of $514,721 or approximately 41.31%. The decrease was primarily attributable to Honeywell's increased participation in the development cost of the Dynacharger™ product line and the recovery in the first quarter of 2001 of those monies that we expended in 2000 that exceeded the amount required in the joint development agreement. We anticipate research and development costs will continue to be significant as we move toward our current development goal and refine development of the Dynacharger™ to meet OEM specifications and production requirements.
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OTHER INCOME AND EXPENSES
Other income and expenses consists of interest and litigation expense and other income. Interest expense for the three months ended March 31, 2001 was $3,011, legal expense was $15,052 and other income was $16,470. Other income and expense decreased 95.61% from the three months ended March 31, 2000.
NET LOSS
Net loss for the three months ended March 31, 2001 was $1,376,182 compared to $2,120,000 for the same period in 2000, a decrease of 35.09%. The decrease is the result of reduced selling, general and administrative expenses as well as research and development costs as discussed in more detail above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have been financed principally through the private sale of our equity securities.
Cash used in operating activities for the three months ended March 31, 2001 was $1,195,709 compared to $342,000 for the comparable period in 2000.
Cash used in investing activities for the three months ended March 31, 2001 was $0 compared to $9,000 for the comparable period in 2000.
Cash provided by financing activities for the three months ended March 31, 2001 was $1,227,376 compared to $642,000 for the comparable period in 2000, resulting primarily from the sale of equity.
In an effort to create operating efficiencies and preserve working capital, for the three months ended March 31, 2001 we continued our restructuring program which included settlement of lawsuits, efforts to sublet unused space at our headquarters, staff attrition, disposal of unnecessary assets and inventory and overall attempts at reducing operating costs. In addition we continued to focus our resources on research and development of our products, primarily the Dynacharger™.
Our current sources of working capital are sufficient to satisfy our anticipated working capital needs to June 1, 2001. If we are not able to obtain sufficient working capital to satisfy our working capital needs we may be required to cease operations and seek relief under the appropriate statutes. Accordingly, there is substantial doubt about our ability to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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Turbodyne Technologies, Inc. et al. v. Sheppard, Mullin, Richter & Hampton. Rainer Wollny, our former president and chief executive officer and a current board member, filed this action in Superior Court of the State of California for the County of Santa Barbara in March 2001. The suit was filed on our behalf and that of Mr. Wollny and certain other officers, directors and stockholders of ours, using counsel that we did not authorize and against the direct instructions of the board of directors. The suit alleged attorney malpractice. The board of directors determined that it was in our best interests and that of our stockholders to dismiss this action with respect to our participation as a plaintiff. On May 7, 2001, the Superior Court of the State of California granted our request to be dismissed as a plaintiff from this action.
Item 2.Changes in Securities and Use of Proceeds
On January 8, 2001, we sold 86,058 shares of our common stock and issued warrants to purchase an additional 86,058 shares of common stock for a total purchase price of $24,476.40. The shares were sold to an accredited investor in reliance on Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. The warrants are exercisable at a price per share of approximately $.71 on or before January 8, 2004.
On January 12, 2001, we sold an aggregate of 2,433,334 shares of our common stock and issued warrants to purchase an additional 2,433,334 shares of common stock for a total purchase price of $365,000. The shares were sold to three individual accredited investors in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a per share exercise price of approximately $.30 on or before January 23, 2003.
On January 17, 2001, we sold 40,000 shares of our common stock and issued warrants to purchase an additional 40,000 shares for a total purchase price of $8,000. The shares were sold to an accredited investor in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a per share exercise price of approximately $.40 on or before January 17, 2003.
On January 18, 2001, we sold an aggregate of 1,070,000 shares of our common stock and issued warrants to purchase an additional 1,070,000 shares for a total purchase price of $164,000. The shares were sold to three individual accredited investors in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.40 on or before January 20, 2003.
On February 9, 2001, we sold 714,286 shares of our common stock and issued warrants to purchase an additional 714,286 shares for a total purchase price of approximately $150,000. The shares were sold to an accredited investor who is also one of our directors in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.42 on or before February 9, 2004.
On February 14, 2001, we sold 263,158 shares of our common stock and issued warrants to purchase an additional 263,158 shares for a total purchase price of approximately $50,000. The shares were sold to an accredited investor who is also one of our directors in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.38 on or before February 12, 2004.
On February 15, 2001, we sold 800,000 shares of our common stock and issued warrants to purchase an additional 200,000 shares. The shares were issued in reliance on Regulation D and/or Section 4(2) of the Securities Act in settlement of a lawsuit. The warrants are exercisable at a price per shares of approximately $.25 on or before February 2004.
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On February 21, 2001, we sold 433,333 shares of our common stock and issued warrants to purchase an additional 433,333 shares for a total purchase price of approximately $65,000. The shares were sold to an accredited investor in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.30 on or before February 21, 2004.
On February 23, 2001, we sold 263,158 shares of our common stock and issued warrants to purchase an additional 263,158 shares for a total purchase price of approximately $50,000. The shares were sold to an individual accredited investor in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.38 on or before February 23, 2004.
On February 23, 2001, we sold 263,158 shares of our common stock and issued warrants to purchase an additional 263,158 shares for a total purchase price of approximately $50,000. The shares were sold to an individual accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.38 on or before February 23, 2004.
On February 28, 2001, we sold 358,800 shares of our common stock and issued warrants to purchase an additional 358,800 shares for a total purchase price of approximately $89,700. The shares were sold to an individual accredited investor in reliance on Regulation S and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.56 on or before March 1, 2004.
On March 12, 2001, we sold 238, 095 shares of our common stock and issued warrants to purchase an additional 238,095 shares for a total purchase price of approximately $50,000 to an individual accredited investor in reliance on Regulation S and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.56 on or before March 12, 2004.
On March 12, 2001, we sold 238,095 shares of our common stock and issued warrants to purchase an additional 238,095 shares for a total purchase price of approximately $50,000 to an individual accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.56 on or before March 12, 2004.
On March 14, 2001, we sold 100,000 shares of our common stock and issued warrants to purchase an additional 100,000 shares for a total purchase price of approximately $20,000 to an individual accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.52 on or before March 14, 2004.
On March 15, 2001, we sold 150,000 shares of our common stock and issued warrants to purchase an additional 150,000 shares for a total purchase price of approximately $30,000 to an individual accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.52 on or before March 15, 2004.
On March 19, 2001, we sold 105,263 shares of our common stock and issued warrants to purchase an additional 105,263 shares for a total purchase price of approximately $20,000 to an individual accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.52 on or before March 19, 2004.
On March 20, 2001, we sold 157,895 shares of our common stock and issued warrants to purchase ad additional 157,895 shares for a total purchase price of approximately $30,000 to an individual
9
accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.52 on or before March 22, 2004.
On March 26, 2001, we sold 52,632 shares of our common stock and issued warrants to purchase ad additional 52,632 shares for a total purchase price of approximately $10,000 to an individual accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities Act. The warrants are exercisable at a price per share of approximately $.46 on or before March 26, 2004.
On March 30, 2001, we sold 62,500 shares of our common stock and issued warrants to purchase an additional 62,500 shares for a total purchase price of approximately $10,000 to an individual accredited investor, who is also one of our directors, in reliance on Regulation D and/or Section 4(2) of the Securities. The warrants are exercisable at a price per share of approximately $.42 on or before March 30, 2004.
Item 3.Defaults Upon Senior Securities
Not applicable.
Item 4.Submission of Matters to a Vote of Security Holders
None.
None.
Item 6.Exhibits and Reports on Form 8-K
| EXHIBIT NUMBER | DESCRIPTION | |
|---|---|---|
| 99.1 | Press Release dated January 11, 2001 | |
| 99.2 | Press Release dated January 24, 2001 | |
| 99.3 | Press Release dated February 20, 2001 | |
| 99.4 | Press Release dated March 12, 2001 |
None.
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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.
| TURBODYNE TECHNOLOGIES, INC. | ||||
May 22, 2001 | By: | /s/ JOSEPH CASTANO Joseph Castano, Secretary and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) | ||
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