UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF
1934
For the quarterly period ended September 30, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
------------------------------------------------
Commission File Number 0-21832
TurboSonic Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-1949528
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
550 Parkside Drive, Suite A-14,
Waterloo, Ontario, Canada N2L 5V4
(Address of principal executive offices) (Zip Code)
519-885-5513
(Registrant's telephone number, including area code)
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 proceeding 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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN A BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by the Section 12, 13 or 15 (d) of the Securities
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
As of September 30, 2000, 10,000,000 shares of Common Stock were outstanding.
TURBOSONIC TECHNOLOGIES, INC. AND SUBSIDIARIES
Form 10-QSB/A
INDEX
PART 1 - FINANCIAL INFORMATION PAGE
ITEM 1
Consolidated statement of Operations
(Unaudited) for the Three Months
Ended September 30, 2000 and September 30, 1999 3
Consolidated Balance Sheets
At September 30, 2000 (Unaudited) and June 30, 2000 (Audited) 4
Consolidated Statements of Cash Flow
(Unaudited) for the Three Months Ended
September 30, 2000 and September 30, 1999 5
Notes to Consolidated Financial Statements
(Unaudited) 6 - 7
Item 2.
Management's Discussion and Analysis of
Financial Conditions and Results of Operations 7 - 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a 9
Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signature 9
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TURBOSONIC TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Operations
US dollars (Unaudited)
For the Three For the Three
Months Ended Months Ended
September 30, September 30,
2000 1999
[restated-note 4]
----------------- -------------
Nozzle Systems revenue $ 496,898 $ 681,576
Scrubber Systems revenue 1,283,304 345,388
------------ ------------
Total Revenue 1,780,202 1,026,964
------------ ------------
Cost of Nozzle Systems 261,405 478,125
Cost of Scrubber Systems 1,129,942 227,415
------------ ------------
Total Cost of goods sold 1,391,347 705,540
------------ ------------
Gross Profit 388,855 321,424
Selling, general and administrative
expenses 329,093 337,513
Stock-based compensation expense [Note 4] 60,111 0
Depreciation and amortization 49,428 48,259
------------ ------------
Total Expenses 438,632 385,772
------------ ------------
(Loss) from Operations (49,777) (64,348)
Interest (Expense) (10,011) (5,419)
------------ ------------
Net (Loss) before taxes (59,788) (69,767)
------------ ------------
Tax Provision 0 0
------------ ------------
Net (Loss) $ (59,788) $ (69,767)
Other comprehensive (loss):
foreign currency translation adjustment (5,599) (16,374)
------------ ------------
Comprehensive (Loss) (65,387) (86,141)
============ ============
Weighted average number of shares
outstanding 10,000,000 10,000,000
Incremental shares using treasury method 10,870,000 10,500,000
Basic EPS (0.006) (0.007)
Diluted EPS (0.006) (0.007)
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TURBOSONIC TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheet
(US dollars)
September 30, June 30,
2000 2000
(Unaudited) (Audited)
[restated-note 4] (note 5)
----------------- ---------
Assets
Current Assets:
Cash $ 248,461 $ 407,784
Contracts and accounts receivable, net of allowance
for doubtful accounts of $61,904 and $61,904 1,313,937 972,911
Deferred contract costs and unbilled revenue 762,752 647,214
Inventories 102,300 105,729
Income Tax Receivable 25,512 25,239
Other current assets 44,393 52,947
----------- -----------
Total current assets 2,497,355 2,211,824
Equipment and leasehold improvements,
at cost, net of accumulated depreciation 129,696 142,595
Patents, less accumulated amortization 1 1
Goodwill, net of accumulated amortization 986,633 1,024,577
Other assets 20,779 20,779
----------- -----------
Total Assets $ 3,634,464 $ 3,399,776
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable & accrued expenses $ 752,427 $ 760,938
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,065,886 797,549
Obligations under capital leases, current portion 21,446 21,778
----------- -----------
Total Current Liabilities 1,839,759 1,580,265
Accrued Expenses 65,623 75,140
Loans from Shareholders [Note 3] 265,081 268,103
Obligations under capital leases, long-term portion 53,341 60,332
----------- -----------
2,223,804 1,983,840
----------- -----------
Stockholders' Equity:
Authorized Share Capital
21,800,000 common shares par value $0.10 per share
8,200,000 exchangeable common shares par value
$0.10 per share
Issued Share Capital
1,800,000 common shares -- --
8,200,000 exchangeable shares 2,299,096 2,299,096
Additional paid - in capital [Notes 3 and 4] 1,552,210 1,492,099
----------- -----------
3,851,306 3,791,195
Accumulated other comprehensive income (55,892) (50,293)
Accumulated deficit (2,384,754) (2,324,966)
----------- -----------
Total stockholders' equity 1,410,660 1,415,936
----------- -----------
Total Liabilities and Stockholders' Equity $ 3,634,464 $ 3,399,776
=========== ===========
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TURBOSONIC TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the three months ended September 30, 2000 and September 30, 1999
(US dollars) (Unaudited)
September 30, September 30,
2000 1999
[restated-note 4]
----------------- -------------
Cash flows from operating activities
Net (Loss) $ (59,788) $ (69,767)
Add (deduct) changes to operations not requiring
a current cash payment:
Stock-based compensation expense [note 4] 60,111
--------- ---------
Depreciation and amortization 49,428 48,259
--------- ---------
49,751 (21,508)
--------- ---------
Changes in non-cash working capital balances
Related to operations:
(Increase) decrease in accounts receivable (358,254) 24,803
(Increase) in income tax recoverable (600) (6,678)
Decrease (increase) in inventories (3,057 (3,062)
(Increase) in deferred contract costs
and unbilled revenue (126,002) (142,063)
Decrease in other current assets 7,947 5,159
(Decrease) in accounts payable and
Accrued charges (8,318) (103,732)
Increase in unearned revenue and
Contract advances 282,773 260,939
--------- ---------
(199,397) 35,366
--------- ---------
Net cash (applied to) provided by operating (149,646) 13,858
--------- ---------
Cash flows from investing activities:
Repayment of capital leases (6,139) 0
Purchase of fixed assets 0 (13,361)
--------- ---------
Net cash (applied to)investing activities (6,139) (13,361)
--------- ---------
Cash flows from financing activities:
Shareholders loans 0 288
--------- ---------
Net cash provided by financing activities 0 288
--------- ---------
Effect of exchange rate change on cash (3,538) 923
--------- ---------
Net cash (applied) provided during the period (159,323) 1,708
Cash - beginning of period 407,784 310,944
--------- ---------
Cash - end of period 248,461 312,652
========= =========
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TURBOSONIC TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
Note 1.
TurboSonic Technologies, Inc., formerly known as Sonic Environmental Systems,
Inc. and its subsidiaries (collectively the "Company"), directly and through
subsidiaries, designs and markets integrated pollution control and industrial
gas cooling/conditioning systems including liquid atomization technology and
dust suppression systems to ameliorate or abate industrial environmental
problems.
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. Accordingly, these financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles. 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 September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2001. These consolidated financial statements should be read in
conjunction with the financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB/A for the year ended June 30, 2000.
Note 2. Costs and Estimated Earnings on Uncompleted Contracts
September 30, June 30,
2000 2000
------------- -----------
Costs incurred on uncompleted contracts $ 3,767,602 $ 3,087,601
Estimated earnings 1,203,408 1,070,693
----------- -----------
4,971,010 4,158,294
Less: billings to date 5,274,144 4,308,629
----------- -----------
$ (303,134) $ (150,335)
=========== ===========
Included in accompanying balance sheets
under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 762,752 $ 647,214
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,065,886) (797,549)
----------- -----------
$ (303,134) $ (150,335)
=========== ===========
Note 3. Loans from Shareholders
An officer and director of the Company, together with another shareholder of the
Company, lent an aggregate of $CDN200,000 (representing $129,400 at the exchange
rate of $0.647 at such date) to the Company on October 21, 1998. Another officer
and director and another shareholder each lent $CDN100,000 (representing $65,490
and $66,620 at the exchange rate of $0.6549 and $0.6662 at the date of their
respective loans) to the Company on January 4, 1999 and April 9, 1999,
respectively. All of these loans are repayable two years from the date of the
loan, bear interest at 10% per annum and are collateralized by a lien upon and
security interest in substantially all of the Company's assets. As an inducement
to advance these sums to the Company, the lenders were granted detachable
warrants to purchase an aggregate of 400,000 common shares of the Company at an
initial exercise price of $0.50 through October 31, 2000, increasing to $0.75
thereafter through October 31, 2002 and to $1.00 thereafter through October 31,
2003, respectively. The warrants, whose initial exercise price was greater than
the market price of the Company's common shares on the date such warrants were
granted, expire on the earlier of October 31, 2003 or 30 days after the
Company's shares have closed at a price per share above $1.50 for 10 consecutive
trading days on the NASDAQ over-the-counter Bulletin Board. In accordance with
APB 14, a portion of the proceeds of the debt securities issued with detachable
stock purchase warrants, which is allocated as the fair-value of the warrants,
has been accounted for as paid-in capital. The related discount on the debt
securities will be amortized over the remaining period to maturity.
On July 10, 2000, officers, directors and shareholders agreed to extend the
maturity dates of their respective loans by an additional year. Accordingly, the
due dates are October 21, 2001,
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January 4, 2002 and April 9, 2002. As a result of the extended maturity dates,
the loans are classified as non-current liabilities in the accompanying
financial statements. As an inducement to extend the maturity dates of the
loans, the Company has modified the exercise price of the above warrants as
follows: for three years after the initial date of the respective loan at an
exercise price of $0.50 per share, for a period of two years following the
initial three year period at an exercise price of $0.75 per share and for an
additional period of one year at an exercise price of $1.00. Additionally, a
further 400,000 warrants were granted in the aggregate to the lenders, at an
exercise price of $0.5625 per share, commencing on the first day of the
extension of their loan for a period of two years. The expiry terms and periods
of the warrants modified to state the warrants expire 90 days after the Company
has notified the warrant holders in writing that the Company's shares have
closed at a trading price above $1.50 for 30 consecutive trading days on the
NASDAQ over-the-counter Bulletin Board In accordance with EITF 96-19, the
modification of the term of the shareholder loan is not considered to result in
a substantially different debt instrument. The new warrants and the modification
of existing warrants will be recorded at fair value as debt modification costs
when the warrants are issued in October 2000 and will be amortized using the
interest method over the new term of the debt.
Note 4. Stock-based Compensation
The vesting of options under the 2000 Stock Option Plan is subject to the
performance of the Company. As a result, compensation expense related to these
options is measured when performance conditions are met or waived by the Board
of Directors. The Company's 10-QSB for the period ended September 30, 2000 has
been amended to reflect this accounting method. The effect of this change is to
increase net loss and other paid-in capital by $60,111 as compared to amounts
originally reported.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Three Months ended September 30, 2000
Compared with Three Months ended September 30, 1999
Nozzle systems revenue decreased by $184,678 (27.1%) to $496,898 for the three
month period ended September 30, 2000 from $681,576 for the same period in 1999.
The supply of fewer cooling towers in evaporative gas cooling systems is
primarily responsible for the decrease in nozzle system revenues.
Scrubber system revenue increased by $937,916 (271.6%) to $1,283,304 for the
three month period ended September 30, 2000 from $345,388 for the same period
one year earlier. An increase in the number of scrubber/WESP projects being
processed has led to the increased revenue recorded for the period. The increase
in scrubber system revenues is primarily due to the recognition during this
period of a portion of the revenue from the $6.5 million sales of a Wet
Electrostatic Precipitator, the Company's largest sale to date.
Cost of nozzle systems decreased by $216,720 (45.3%) to $261,405 for the three
months ended September 30, 2000 from $478,125 for the same period in 1999. As a
percentage of nozzle systems revenue, the cost of nozzle systems was 52.6% for
the three month period ended September 30, 2000 and 70.2% for the same period in
1999. The decreased nozzle system costs is the result of the decreased sales
volume discussed above. The improved ratio to sales variance in the current
quarter over that of last year is the result of the sale of fewer cooling towers
in this period, which typically produce lower margins than other components of
the evaporative gas cooling system.
Cost of scrubber systems increased by $902,527 (396.9%) to $1,129,942 for the
three month period ended September 30, 2000 from $227,415 for the same period
one year earlier. As a percentage of scrubber systems revenue, the cost of
scrubber systems was 88.1% versus 65.8% for the same period in 1999. The
increased scrubber system costs is the result of the increased sales volume
discussed above. The increased percent to sales is the result of favourable
variances in 1999 on a number of completed scrubber projects, not duplicated in
- 7 -
2000, together with lower margins on the larger projects in progress in the
current fiscal period.
Selling, general and administrative expenses decreased $8,420 (2.5%) to $329,093
for the three month period ended September 30, 2000 from $337,513 for the same
period in 1999. As a percentage of total revenue, selling, general and
administrative expenses were 18.5% for the quarter ended September 30, 2000 and
32.9% for the same period in 1999. This decrease in percent to revenue is the
direct result of the increased volume of revenue for the current period.
Stock-based compensation expense of $60,111 [note 4] was recorded in this
quarter, with no comparable expense recorded in the first quarter of the
previous year.
Liquidity and Capital Resources
The Company had a negative cash flow from operating activities of $149,646 for
the three month period ended September 30, 2000 as compared to positive cash
flow of $13,858 for the same period in 1999, an decrease in cash flow of
$163,504.
At September 30, 2000, the Company had working capital of $657,596, as compared
to working capital as at June 30, 2000 of $631,559, an increase of $26,037. The
Company's current ratio (current assets divided by current liabilities) was 1.36
and 1.40 as at September 30, 2000 and June 30, 2000, respectively.
The Company's contracts typically provide for progress payments based upon the
achievement of performance milestones or the passage of time. The Company's
contracts often provide for the Company's customers to retain a portion of the
contract price until the achievement of performance guarantees has been
demonstrated. The Company attempts to have its progress billings exceed its
costs and estimated earnings on uncompleted contracts; however, it is possible,
at any point in time, that costs and estimated earnings can exceed progress
billings on uncompleted contracts, which would negatively impact cash flow and
working capital. At September 30, 2000 and June 30, 2000, "Billings in excess of
costs and estimated earnings on uncompleted contracts" exceeded "Deferred
contract costs and unbilled revenue" by $303,134 and $150,335 respectively.
The Company's backlog as at September 30, 2000 was approximately $6,500,000, of
which the Company believes all will be shipped prior to the end of the current
fiscal year. The Company believes that the projected cash generated from
operations, together with the loans from shareholders (see Note 3) will be
sufficient to meet its cash needs through the end of the fiscal year ended June
30, 2001.
Quantitative and Qualitative Information About Market Risk
- ----------------------------------------------------------
The Company does not engage in trading market risk sensitive instruments and
does not purchase hedging instruments or "other than trading" instruments that
are likely to expose the Company to market risk, whether interest rate, foreign
currency exchange, commodity price or equity prices risk. The Company has
purchased no options and entered into no swaps. The Company has no bank
borrowing facility which could subject it to the risk of interest rate
fluctuations.
- 8 -
Part II - Other Information
- ---------------------------
Item 1. None
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. (a) Exhibits;
27 Financial Data Schedule
(b) Reports on Form 8-K;
None
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report or amendment thereto to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: February 28, 2001
TURBOSONIC TECHNOLOGIES, INC.
By: /s/ PATRICK J. FORDE
-----------------------------------------
Patrick J. Forde, President,
Secretary and Treasurer
- 9 -