SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(b)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 2002
Commission File Number: O-13670
Teletrak Environmental Systems, Inc. 13-3187778
Delaware IRS Employer
State or other jurisdiction of Ident. No.
Incorporation or organization
2 SUTTON RD
WEBSTER, MA 01570
Tel: (508) 949-2430
Fax: (508) 949-2473
Indicates by check mark whether the registrants(1) has filed all
reports required to be filed by section 13 of 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 __
At June 30, 2002, there were 9,593,582 shares of the Company's common
stock outstanding.
TELETRAK ENVIRONMENTAL SYSTEMS, INC.
FORM 10QSB TABLE OF CONTENTS
Part I Financial Information
Item 1 Financial Statements
June 30, 2002 and December 31, 2001
Consolidated Balance Sheets
Consolidated Statements of Operations
for the three and six months ended June 30, 2002
and 2001
Consolidated Statements of Cash Flows
for the six months ended June 30, 2002 and 2001.
Item 2 Management Discussion and Analysis of
Financial Condition and Results of Operations
Part II Other Information
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signature(s)
Part 1
Item 1 - Financial Statements
TELETRAK ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited Audited
June 30, December 31,
2002 2001
Current assets
Cash $ 13,260 $ 7,994
Accounts receivable, net of allowance for
doubtful accounts of $8,064 in 2002
and $14,084 in 2001 226,169 153,225
Inventory, net of reserves of $148,708 111,328 173,860
Prepaid expenses and other current assets 12,822 10,242
------- -------
363,579 345,321
------- -------
Property and equipment, net 63,114 90,043
------- -------
Other assets
Goodwill, net of accumulated amortization
of $35,473 346,302 346,302
Cash surrender value of life insurance,
net of loans 14,109 16,059
------- -------
360,411 362,361
Total assets $ 787,104 $ 797,725
Liabilities and Stockholders' Deficit
Current liabilities
Bank line of credit $ 365,500 $ 400,000
Current portion of long term debt - 7,617
Note payable, stockholder 130,000 130,000
Accounts payable 237,576 273,438
Due to related parties 126,452 389,423
Customer deposits 9,300 -
Accrued expenses and other
current liabilities 76,798 80,459
------- -------
945,626 1,280,937
Commitments and contingencies
Stockholders' deficit (158,522) (483,212)
Total liabilities and stockholders' deficit $ 787,104 $ 797,725
See accompanying "Notes to Financial Statements (Unaudited)"
Item 1 - Financial Statements
TELETRAK ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three months For the six months
ended June 30 ended June 30
Unaudited Unaudited Unaudited Unaudited
2002 2001 2002 2001
Net sales $ 430,154 $ 361,018 $ 637,792 $ 749,143
Cost of goods sold 295,608 261,346 442,758 500,556
-------- -------- -------- --------
Gross profit 134,546 99,672 195,034 248,587
-------- -------- -------- --------
Operating expenses
Selling, general, and
administrative 202,784 210,493 370,682 402,946
-------- -------- -------- --------
Loss from operations (68,238) (110,821) (175,648) (154,359)
-------- -------- -------- --------
Other income (expense)
Gain on sale of fixed asset - - 1,000 -
Interest expense (14,635) (14,198) (24,871) (32,682)
------- ------- ------- -------
(14,635) (14,198) (23,871) (32,682)
------- ------- ------- -------
Net loss $ (82,873) $(125,019) $(199,519)$(187,041)
------- ------- ------- -------
Loss per common share $ (0.01) $ (0.02) $ (0.03)$ (0.02)
------- ------- ------- -------
Weighted average number
of shares outstanding 7,754,969 7,731,932 7,733,960 7,731,932
See accompanying "Notes to Financial Statements (Unaudited)"
Item 1 - Financial Statements
TELETRAK ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30
Unaudited Unaudited
2002 2001
Cash flows from operating activities
Net loss $(199,519) $(187,041)
Adjustments to reconcile net loss
to net cash provided by
(used for) operating activities:
Depreciation and amortization 25,929 30,096
Gain on sale of fixed asset 1,000 -
(Increase) decrease in:
Accounts receivable (72,944) (27,983)
Inventory 62,532 66,300
Prepaid expenses and other
current assets (2,580) (11,654)
Increase (decrease) in:
Accounts payable and accrued
liabilities 136,246 91,855
Due to related parties 85,469 31,305
Customer deposits 9,300 -
------- -------
Net cash provided by
(used for) operating activities 45,433 (7,122)
------- -------
Cash flows from investing activities
Change in cash surrender value of
life insurance 1,950 20,159
------ -------
Net cash provided by investing activities 1,950 20,159
Cash flows from financing activities
Net repayments of bank line of credit (34,500) -
Repayments of long-term debt (7,617) (17,637)
------- -------
Net cash used for financing activities (42,117) (17,637)
------- -------
Increase (decrease) in cash 5,266 (4,600)
Cash-beginning 7,994 4,600
------- -------
Cash-ending $ 13,260 $ -
------- -------
Supplemental disclosure of cash flows information
Cash paid for interest $ 24,871 $ 32,682
Issuance of common stock in settlement of ------- -------
vendor and related party debt $ 524,209 $ -
------- -------
See accompanying "Notes to Financial Statements (Unaudited)"
Item 1 - Financial Statements
NOTES TO CONDENSED FINANCIAL STATEMENTS
(NOTE A) BASIS OF PRESENTATION:
The accompanying unaudited condensed 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 regulations S-B. Accordingly, they do not include all of
the information and 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 fair presentation have
been included. Operating results of the three and six month periods
ended June 30, 2002 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2002.
(NOTE B) NATURE OF OPERATIONS
Teletrak Advanced Environmental Systems, Inc. and its subsidiaries
are engaged principally in the manufacturing, marketing, and
distribution of vacuum blasting equipment, industrial pumps and
related equipment used primarily in environmental remediation
throughout North America.
Management plans to improve its cash position by focusing its sales
on profitable product lines of environmental remediation equipment,
as well as, vacuum blasting equipment. The ultimate success of the
Companies is dependent upon their ability to increase sales and to
secure financing adequate to meet their working capital and product
development needs.Management is seeking to enhance the Companies'
financial position by obtaining permanent additional financing.
Management believes that the revenues being generated from operations,
short-term lines of credit and proceeds from the sales of common stock
in anticipated private placements will provide sufficient liquidity to
meet the Company's working capital needs for the remainder of the
fiscal year ending December 31, 2002. There can be no assurance,
however, that the Companies' operations will be sustained or be
profitable in the future, that adequate sources of financing will be
available at all, when needed or on commercially acceptable terms, or
that the Companies' product development and marketing efforts will be
successful.
(NOTE C) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[1] Earnings (loss) per common share:
In 2002 and 2001, earnings(loss) per common share is computed using
the weighted average number of shares of common stock outstanding
during the period. Currently, there are no outstanding options or
warrants.
[2] Research and Development Costs:
The Companies charge costs of research and development activities
to operations as incurred.
[3] Stockholders' Equity
June 30 December 31
Preferred Stock 2002 2001
There are 5,000,000 authorized shares
of cumulative preferred stock with a par
value of $.001. There are no shares
issued or outstanding at June 30, 2002
or December 31, 2001. The preferred
stock has a liquidation value at par plus
accrued dividends, if any,
and is non-voting stock.
Common Stock
Common stock consists of voting stock with
a par value of $.001.There are 25,000,000
shares authorized with 9,593,582 shares
issued and outstanding at June 30, 2002
and 7,713,182 shares December 31, 2001 $ 9,574 $ 7,694
Additional Paid-In Capital 2,038,763 1,516,434
Accumulated Deficit (2,206,859) (2,007,340)
----------- -----------
Total Stockholders' Equity $(158,522) $ (483,212)
=========== ===========
[4] Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Accounting for Business Combinations," and SFAS No.142,
"Goodwill and Other Intangible Assets." These statements modify
accounting for business combinations after June 30, 2001 and will
affect the Company's treatment of goodwill and other intangible assets
during 2002.The statements require that goodwill be reviewed for
possible impairment. The Company does not expect the adoption of this
statement to result in significant impairment changes or to have a
material impact on its results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The
Company does not expect the adoption of this statement to have a
material impact on its results of operations.
In August 2001, the FASB issued SFAS No. 144,"Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets. The Company does not expect the adoption of this
statement to have a material impact on its results of operations.
Item 2
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Overview
TAES was formed in 1998 after the merger of Advanced Environmental
Systems, a privately held company, with Teletrak Advanced Systems,Inc.
The Company specializes in the manufacture, distribution and licensing
of industrial jet pumps and related equipment. The design of these
pumps based on jet pump technology,
with no movable parts, makes this equipment a highly effective
portable tool for the removal of granular wet or dry material
(including sludge, scale, slurries, sands and heavy shot blasting
materials), for a wide range of applications across many industries
including environmental clean-up of hazardous matter such as lead and
other heavy metals and nuclear contaminants and as general maintenance
tools in the marine, transportation, chemical and waste water
industries. The motive power, compressed gases such as air or steam
or pressurized liquids such as water, oils, or pulps, provides
operating flexibility for hopper loading, cleaning and submersible
application, as well as the ability to collect and transport materials
over long distances.
The jet pump technology is also included in the Company's vacuums
marketed under the trade names HAZVAC and ENVIROVAC and Company's line
of abrasive blasting and recycling equipment marketed under the trade
name "SURFACE DECON".
In addition, the Company manufactures and distributes a full line of
shrouded, hand operated tools that attach to the Company's vacuum
filtering equipment and can be used with the Company's abrasive
blasting and recycling equipment. These tools have been designed to
work on all surfaces and all types of construction material, both
hazardous and non-hazardous.
AES offers the most complete line of equipment for remediation and
surface preparation where dust and waste generation give problems.
All AES equipment is designed to provide" POINT OF GENERATION DUST
CONTROL AND WASTE CONTAINMENT." Dust control is achieved by providing
negative air pressure and shrouds around tools or blast nozzles.
The operator is not exposed in any way to unhealthy lead levels
or dust.
Three months ended June 30, 2002 vs. three months ended June 30, 2001.
- ----------------------------------------------------------------------
For the quarter ended June 30, 2002, the company shows a loss in the
amount of ($82,873) as compared to a loss in the amount of ($125,019)
for the same period last year. This translates to a loss per common
share of $(.01) as compared to a loss per common share of $(.02) for
the same period last year.
The Company recognized sales in the amount of $430,154 for the three
months ended June 30, 2002 as compared to $361,018 for the same period
last year.
Six months ended June 30, 2002 vs. six months ended June 30, 2001.
- ------------------------------------------------------------------
For the six months ended June 30, 2002, the company shows a loss in
the amount of $(199,519) as compared to a loss in the amount of
$(187,041) for the same period last year. This translates to a loss
per common share of $(.03) as compared to a loss of $(.02) for the
same period last year.
The company recognized sales in the amount of $637,792 for six months
ended June 30, 2002 as compared to $749,143 for the same period
last year.
Liquidity & Capital Resources
- -----------------------------
The Company has a working capital deficit of $(582,047) at June 30,
2002 compared to $(935,616) at December 31, 2001.
The Company has a $365,500 revolving line of credit with a major bank,
secured by substantially all of the assets of the Company.
At December 31, 2001, the line of credit expired and was not renewed.
The bank has granted the Company a forbearance on this line until
September 30, 2002.
On June 28, 2002, the Company issued common stock to creditors and
related parties in settlement of debt in the amount of $524,209.
The Company does not have any material commitments for capital
expenditures as of the filing of this report.
Management believes that the revenues being generated from operations
and the proceeds from the sale of common stock in anticipated Private
Placements will provide sufficient liquidity to meet the Company's
working capital needs for the remainder of this fiscal year ending
December 31, 2002.
Seasonality
- -----------
The Company's products are a primarily used for outdoors projects and
such demand for these products is significantly reduced during the
winter season for those parts of the country that experience bad
weather.
Revenue Recognition
- -------------------
Revenue from equipment sales is recognized when equipment is shipped.
Shipments on a consignment or demonstration basis are carried in
inventory until such items are sold. Revenue from equipment rental is
recognized as the services are rendered.
Inflation
- ---------
Inflation has not had a significant impact on the Company's operations
to date.
Forward Looking Statements
This Form 10-QSB contains statements, which are not historical facts.
These statements may constitute "forward-looking statements" within
the meaning of the Securities Act of 1933 and the Securities and
Exchange Act of 1934 as amended. Certain, but not necessarily all,
of such forward looking statements can be identified by the use of
such words as "believes", "expects", "may", "will", "should", or
"anticipates" or the negative thereof or other variations thereon
of similar terminology, and/or which include, without limitation,
statements regarding the following: adequacy of the funding to
operate the Company; plans for raising capital; market expectation
for the Company's products and the related anticipated sales growth;
changes in the marketplace including mergers, acquisitions and
partnerships; implementation of the sales and marketing plan; economic
and competitive factors affecting market growth; and discussions of
strategies involving risk and uncertainties that reflect management's
current views .These statements are based on many assumptions and
factors and may involve risks and uncertainties. The actual results
of the Company or industry results may be materially different from
any future results expressed or implied by such forward looking
statements because of factors such as insufficient capital resources
to operate the Company; inability to successfully market and sell the
Company's products; changes in the marketplace including variations
in the demand for the Company's products and consolidation via
partnership; mergers, and acquisitions,' and changes in the economic
and competitive environment. These factors and other information
contained in this Form 10 QSB could cause such views, assumptions and
factors and the Company's results of operations to be materially
different.
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
C. Sales of Securities
None
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a vote of Security Holders
None
Item 5 - Other Information
Not applicable
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Teletrak Environmental Systems, Inc.
GERD REINIG
BY: Gerd Reinig, Chairman of the Board
GERALD MCNAMARA
BY: Gerald McNamara, President
Dated: