UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MarkOne)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF
1934
For the quarterly period ended December 31, 2001
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 December 31, 2001,10,507,250 shares of Common Stock were outstanding.
-1-
TURBOSONIC TECHNOLOGIES, INC. AND SUBSIDIARIES
Form 10-QSB
INDEX
PAGE
----
PART 1 - FINANCIAL INFORMATION
ITEM 1
Consolidated Statement of Operations
(Unaudited) for the Three Months and Six Months
Ended December 31, 2001 and December 31, 2000 3
Consolidated Balance Sheet
At December 31, 2001 (Unaudited) and June 30, 2001 (Audited) 4
Consolidated Statement of Cash Flows
(Unaudited) for the Six Months Ended
December 31, 2001 and December 31, 2000 5
Notes to Consolidated Financial Statements
(Unaudited) 6 - 7
Item 2.
Management's Discussion and Analysis of
Financial Conditions and Results of Operations 8 - 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a 10
Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 10
-2-
TURBOSONIC TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Operations
US dollars (Unaudited)
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
December 31, December 31, December 31, December 31,
2001 2000 2001 2000
------------ ------------- ------------ ------------
Nozzle systems revenue $ 418,945 $ 702,941 $ 1,167,053 $ 1,199,839
Scrubber systems revenue 144,190 852,739 1,500,155 2,136,043
----------- ----------- ----------- -----------
Total revenue 563,135 1,555,680 2,667,208 3,335,882
----------- ----------- ----------- -----------
Cost of nozzles systems 221,179 376,806 726,232 630,991
Cost of scrubber systems 222,193 758,604 1,376,624 1,870,887
----------- ----------- ----------- -----------
Total cost of goods sold 443,372 1,135,410 2,102,856 2,501,878
----------- ----------- ----------- -----------
Gross profit 119,763 420,270 564,352 834,004
----------- ----------- ----------- -----------
Selling, general and administrative
expenses 350,232 353,789 682,370 707,761
Stock-based compensation expense 888 (71,812) 1,734 (11,701)
Debt modification expense 10,531 8,250 29,181 8,250
Depreciation and amortization [note 5] 9,001 49,164 18,200 98,592
----------- ----------- ----------- -----------
Total expenses 370,652 339,391 731,485 802,902
----------- ----------- ----------- -----------
(Loss) income from operations (250,889) 80,879 (167,133) 31,102
Interest (expense) income (3,251) (9,864) 1,126 (19,875)
----------- ----------- ----------- -----------
Net (loss) income before taxes (254,140) 71,015 (166,007) 11,227
Tax (recovery) provision (50,829) 0 (6,769) 0
----------- ----------- ----------- -----------
Net (loss) income $ (203,311) $ 71,015 (159,238) 11,227
Other comprehensive (loss) income: foreign
currency translation (16,572) 8,125 (105,412) 2,526
----------- ----------- ----------- -----------
Comprehensive (loss) income $ (219,883) $ 79,140 $ (264,650) $ 13,753
=========== =========== =========== ===========
Weighted average number of shares
outstanding 10,507,250 10,000,000 10,507,250 10,000,000
Incremental shares using treasury method 10,614,045 10,192,916 10,598,364 10,187,811
Basic EPS (0.019) 0.007 (0.015) 0.001
Diluted EPS (0.019) 0.007 (0.015) 0.001
-3-
TURBOSONIC TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheet
(US dollars)
December 31, 2001 June 30, 2001
(Unaudited) (Audited)
----------------- -------------
Assets
Current Assets:
Cash and cash equivalents $ 787,993 $ 1,778,604
Contracts and accounts receivable, net of allowance
for doubtful accounts of $51,592 and $61,904 1,060,070 1,698,139
Deferred contract costs and unbilled revenue [note 2] 179,153 1,257,351
Income taxes receivable 4,482 --
Inventories 71,070 78,790
Other current assets 66,199 32,574
----------- -----------
Total current assets 2,168,967 4,845,458
Equipment and leasehold improvements,
at cost, net of accumulated depreciation 116,241 115,427
Patents, less accumulated amortization 1 1
Goodwill, net of accumulated amortization [note 5] 797,774 797,794
Other assets 20,778 20,779
----------- -----------
Total Assets $ 3,103,761 $ 5,779,459
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Loans from shareholders - current [note 3] $ 58,909 $ 230,100
Accounts payable & accrued expenses 441,543 2,092,673
Billings in excess of costs and estimated
earnings on uncompleted contracts [note 2] 211,386 1,208,188
Income taxes payable -- 76,768
Obligations under capital leases, current portion 28,114 21,297
----------- -----------
Total Current Liabilities 739,952 3,629,026
Accrued expenses 19,035 38,066
Obligations under capital leases, long-term portion 26,336 33,902
----------- -----------
785,323 3,700,994
----------- -----------
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
5,792,608 common shares [note 6] 50,725 --
4,714,642 exchangeable shares 2,299,096 2,299,096
Additional paid - in capital [notes 3, 4 and 6] 2,003,522 1,549,624
----------- -----------
4,353,343 3,848,720
Accumulated other comprehensive (loss) (143,738) (38,326)
Accumulated deficit (1,891,167) (1,731,929)
----------- -----------
Total stockholders' equity 2,318,438 2,078,465
----------- -----------
Total Liabilities and Stockholders' Equity $ 3,103,761 $ 5,779,459
=========== ===========
-4-
TURBOSONIC TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the six months ended December 31,
2001 and December 31, 2000
(US dollars) (Unaudited)
December 31,2001 December 31,2000
---------------- ----------------
Cash flows from operating activities
Net income (loss) $ (159,238) $ 11,227
Add changes to operations not requiring
a current cash payment:
Stock-based compensation expense 1,734 (11,701)
Debt modification expense 29,181 8,250
Depreciation and amortization 18,200 98,592
----------- ---------
(110,123) 106,368
----------- ---------
Changes in non-cash working capital balances Related to operations:
Decrease (increase) in accounts receivable 575,667 (559,699)
Decrease in inventories 7,163 12,479
(Increase) decrease in income tax recoverable (4,480) 22,437
Decrease in deferred contract costs
and unbilled revenue 1,032,310 215,797
(Increase) in other current assets (35,626) (31,584)
(Decrease) increase in accounts payable and
accrued charges (1,616,803) 141,717
(Decrease) increase in unearned revenue and
contract advances (952,673) 582,236
(Decrease) in income taxes payable (73,897) --
----------- ---------
(1,068,339) 383,383
----------- ---------
Net cash (applied to) provided by operating activities (1,178,462) 489,751
----------- ---------
Cash flows from investing activities:
Purchase of capital assets (25,168) (5,180)
----------- ---------
Net cash (applied to)investing activities (25,168) (5,180)
----------- ---------
Cash flows from financing activities
Proceeds (repayment) of capital leases 2,010 (12,437)
(Repayment) of shareholder loans (189,470) --
Proceeds from issuance of common shares [note 6] 502,904 --
----------- ---------
Net cash provided by (applied to) financing activities 315,444 (12,437)
----------- ---------
Effect of exchange rate change on cash (102,425) (7,113)
----------- ---------
Net cash (applied) provided during the period (990,611) 465,021
Cash - beginning of period 1,778,604 407,784
----------- ---------
Cash - end of period $ 787,993 $ 872,805
=========== =========
-5-
TURBOSONIC TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2001
(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 December 31, 2001,
and the six month period ended December 31, 2001 are not necessarily indicative
of the results that may be expected for the year ending June 30, 2002. 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 for the year ended June 30, 2001.
Note. 2. Costs and Estimated Earnings on Uncompleted Contracts
December 31,2001 June 30, 2001
---------------- -------------
Costs incurred on uncompleted contracts $13,432,655 $11,394,645
Estimated earnings 1,519,405 1,489,467
----------- -----------
14,952,060 12,884,112
Less: billings to date 14,984,293 12,834,949
----------- -----------
$ (32,233) $ 49,163
=========== ===========
Included in accompanying balance sheets
under the following captions:
Costs and estimated earnings in excess of
Billings on uncompleted contracts $ 179,153 $ 1,257,351
Billings in excess of costs and estimated
Earnings on uncompleted contracts (211,386) (1,208,188)
----------- -----------
$ (32,233) $ 49,163
=========== ===========
As the result of the financial difficulties experienced by one of the Company's
subcontractors that became known during the first quarter of fiscal 2002 and its
subsequent assignment of assets for the benefit of creditors, the estimated
completion costs for a project were revised upward by $177,000 in the financial
statements for the year ended June 30, 2001. The estimated completion costs have
been increased for the six-month period ended December 31, 2001 by $140,000 to
$317,000. Management has based this estimate on information available about the
subcontractor's status and an assessment of its own obligations under the
contract with its customer. Due to uncertainties related to obligations of the
subcontractor that the Company will assume, the estimate of additional costs
that the Company could ultimately incur could differ materially in the near term
from the estimated costs. Recovery, in whole or part, of these increased costs
may be possible through the liquidation of the assets of the subcontractor. The
liquidation process may not be completed in the fiscal period ended June 30,
2002.
-6-
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 on
terms that were subsequently modified as disclosed below. 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 discounts on the debt
securities were 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, January 4, 2002 and April 9, 2002. 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 have been 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
was not considered to result in a substantially different debt instrument. The
new warrants and the modification of existing warrants were recorded at fair
value as debt modification costs ($75,240) when the warrants were issued in
October 2000 and are being amortized using the interest method over the new term
of the debt.
In October 2001 and in December 2001, the loans by the two directors and
officers and the first shareholder mentioned above were repaid in full.
Note 4. 2000 Stock Option Plan
The Company had concluded, subsequent to the end of fiscal 2000, that its 2000
Stock Option Plan should be accounted for as a variable plan in accordance with
FIN 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option
or Award Plans. The Company's amended financial statements for fiscal 2000 and
the first quarter of fiscal 2001, together with the financial statements for the
second quarter of fiscal 2001 reflect the accounting for the variable stock
options plan. The financial statements for the first six months of fiscal 2002
include a stock-based compensation expense of $1,734.
During the third quarter of fiscal 2001, the 2000 Stock Option Plan was amended.
As a result of the amendment, the plan will be accounted for as a non-variable
plan from the date of amendment in accordance with FIN 28, Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans.
Note 5. Goodwill
Effective July 1, 2001, the Company early adopted SFAS No. 142, Goodwill and
Intangible Assets. Under SFAS No.142, goodwill is no longer amortized but is
subject to an annual impairment review (or more frequently if deemed
appropriate). Since the adoption of SFAS No. 142 at July 1, 2001, the Company
has completed the transitional impairment test to identify if there is any
impairment to the goodwill as at July 1, 2001 using a fair value methodology.
The Company has concluded that there is no impairment as at July 1, 2001. An
annual impairment test will be completed as of April 1, 2002. As required by
SFAS No.142, the results for the prior year's quarter have not been restated. A
reconciliation of net income as if SFAS No.142 has been adopted is presented
below for the three month and six-month periods ended December 31, 2001 and
2000:
-7-
Three Months ended December 31, Six Months ended December 31
2001 2000 2001 2000
--------- --------- --------- -------
Reported net income (loss) $(210,914) $ 71,015 $(166,938) $11,227
Add-back goodwill amortization -- $ 37,953 -- $75,906
--------- --------- --------- -------
Adjusted net income (loss) $(210,914) $ 108,968 $(166,938) $87,133
========= ========= ========= =======
Basic earnings per share
Reported earnings (loss) per share (0.020) 0.007 (0.016) 0.001
Goodwill amortization -- 0.004 -- 0.008
--------- --------- --------- -------
Adjusted earnings (loss) per share (0.020) 0.011 (0.016) 0.009
========= ========= ========= =======
Diluted earnings per share
Reported earnings (loss) per share (0.020) 0.007 (0.016) 0.001
Goodwill amortization -- 0.004 0.008
--------- --------- --------- -------
Adjusted earnings (loss) per share (0.020) 0.011 (0.016) 0.009
========= ========= ========= =======
Note 6. Investment Agreement
On August 7, 2001, the Company announced that it had entered into an agreement
to form a strategic alliance with Hamon Research-Cottrell, Inc. As part of the
agreement, Hamon Research-Cottrell acquired directly from the Company 500,000
shares of TurboSonic common stock, representing an approximately 4.7% equity
interest at $1.00 U.S. per share. Amounts of $50,000 and $450,000 were added to
Common Shares and Additional Paid-in Capital as the result of this transaction.
Certain of TurboSonic's shareholders, including officers and directors, granted
options to Hamon Research-Cottrell to acquire control of TurboSonic from these
shareholders at prices ranging from $1.80 to $2.50 per share. These options are
exercisable only in the event that Hamon Research-Cottrell initiates a tender
offer for TurboSonic's common stock. The agreement also provides for the joint
marketing of certain products.
-8-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Three Months ended December 31, 2001
Compared with Three Months ended December 31, 2000
Nozzle systems revenue decreased by $283,996 (40.4%) to $418,945 for the
three-month period ended December 31, 2001 from $702,941 for the same period in
fiscal 2001. The delay in placement of orders, as the result of the current
recessional climate, for the supply of cooling towers and systems for
evaporative gas cooling systems is primarily responsible for the decrease in
nozzle system revenues.
Scrubber system revenue decreased by $708,549 (83.1%) to $144,190 for the three
month period ended December 31, 2001 from $852,739 for the same period one year
earlier. Non-replacement in the current quarter of the large scrubber system
orders in progress during the previous three-month period contributed to the
sales decrease noted above. The reduction of scrubber system revenue is also the
result of postponed order placements due to the current recession in the US.
Cost of nozzle systems decreased by $155,627 (41.3%) to $221,179 for the three
months ended December 31, 2001 from $376,806 for the same period in fiscal 2001.
As a percentage of nozzle systems revenue, the cost of nozzle systems was 52.8%
for the three month period ended December 31, 2001 and 53.6% for the same period
in fiscal 2001. The decreased nozzle system costs is the result of the decreased
sales volume discussed above.
Cost of scrubber systems decreased by $536,411 (70.7%) to $222,193 for the three
month period ended December 31, 2001 from $758,604 for the same period one year
earlier. As a percentage of scrubber systems revenue, the cost of scrubber
systems was 154.1% versus 89.0% for the same period in fiscal 2001. The
decreased scrubber system costs is the result of the decreased sales volume
discussed above. The increased percent to revenue is the result of the
recognition in the current quarter of increased project costs on a specific
scrubber project as discussed in Note 2 to these financial statements, that did
not occur in the previous three month period ended December 31,2000.
Selling, general and administrative expenses decreased $3,557 (1.0%) to $350,232
for the three month period ended December 31, 2001 from $353,789 for the same
period in fiscal 2001. As a percentage of total revenue, selling, general and
administrative expenses were 62.2% for the quarter ended December 31, 2001 and
22.7% for the same period a year earlier. This increase in percent to revenue is
the direct result of the decreased volume of revenue for the current period.
Also included in total expenses were the stock-based compensation expense
($888)[note 4] and debt modification ($10,531) expense [note 3].
Net income before tax decreased $325,155 to a net loss of $254,140 from the net
income before taxes of $71,015 for the same period in fiscal 2001. Income tax
recovery of $50,829 was recorded in the three month period ended December 31,
2001 compared to no tax expense in the same period one year ago. An "other
comprehensive loss" of $16,572 was recorded for the three months ended December
31, 2001, as compared to "other comprehensive income" of $8,125 for the same
period in fiscal 2001. The "other comprehensive loss" in the current quarter was
the result of the decrease in the value of the Canadian dollar opposite the US
dollar from September 30, 2001 to December 31, 2001, and the resulting changes
in our balance sheet relative to Canadian dollar-denominated accounts.
Six Months ended December 31, 2001
Compared with Six Months ended December 31,2000
Nozzle systems revenue decreased marginally by $32,786 (2.7%) to $1,167,053 for
the six-month period ended December 31, 2001 from $1,199,839 for the same period
in fiscal 2001.
Scrubber system revenue decreased by $635,888 (29.8%) to $1,500,155 for the six
month period ended December 31, 2001 from $2,136,043 for the same period one
year earlier. Non-replacement in the current period of the large scrubber system
orders in progress during the previous six-month period in fiscal 2001
contributed to the sales decrease noted above. The reduction of scrubber system
revenue is also the result of postponed order placements due to the current
recession in the US.
Cost of nozzle systems increased by $95,241 (15.1%) to $726,232 for the six
months ended December 31, 2001 from $630,991 for the same period in fiscal 2001.
As a percentage of nozzle systems revenue, the cost of nozzle systems was 62.2%
for the six month period ended
-9-
December 31, 2001 and 52.6% for the same period in fiscal 2001. The increased
ratio to sales variance in the current period over that of last year is the
result of the sale of more cooling towers in this period, which typically
produce lower margins than other components of the evaporative gas cooling
system.
Cost of scrubber systems decreased by $494,263 (26.4%) to $1,376,624 for the six
month period ended December 31, 2001 from $1,870,887 for the same period one
year earlier. As a percentage of scrubber systems revenue, the cost of scrubber
systems was 91.8% versus 87.6% for the same period in fiscal 2001. The decreased
scrubber system costs is the result of the decreased sales volume discussed
above. The increased percent to revenue is the result of the recognition in the
current quarter of increased project costs on a specific scrubber project as
discussed in Note 2, that did not occur in the previous six month period ended
December 31,2000.
Selling, general and administrative expenses decreased $25,391 (3.6%) to
$682,370 for the six month period ended December 31, 2001 from $707,761 for the
same period in fiscal 2001. As a percentage of total revenue, selling, general
and administrative expenses were 25.6% for the fiscal period ended December 31,
2001 and 21.2% for the same period a year earlier. This increase in percent to
revenue is the direct result of the decreased volume of revenue for the current
period. Also included in total expenses were the stock-based compensation
expense ($1,734)[note 4] and debt modification ($29,181) expense [note 3].
Net income before tax decreased $177,234 to a net loss of $166,007 from the net
income before taxes of $11,227 for the same period in fiscal 2001. An "other
comprehensive loss" of $105,412 was recorded for the six months ended December
31, 2001, as compared to "other comprehensive income" of $2,526 for the same
period in fiscal 2001. The "other comprehensive loss" in the current period was
the result of the decrease in the value of the Canadian dollar opposite the US
dollar from June 30, 2001 to December 31, 2001, and the resulting changes in our
balance sheet relative to Canadian-denominated accounts.
Liquidity and Capital Resources
The Company had a negative cash flow from operating activities of $1,178,462 for
the six month period ended December 31, 2001 as compared to positive cash flow
of $489,751 for the same period in fiscal 2001, a decrease in cash flow of
$1,668,213. The negative cash flow for the period ended December 31, 2001 is
primarily the result of the completion of the large Norske Skog WESP during the
current period and the subsequent payment of related accounts payable. Norske
Skog currently is maintaining a holdback of $375,000, which will be released
upon successful completion of the WESP performance tests.
Cash flows from financing activities included proceeds from the sale of common
shares [note 5] to Hamon Research-Cottrell for $500,000.
At December 31, 2001, the Company had working capital of $1,429,015, as compared
to working capital as at June 30, 2001 of $1,216,432, an increase of $212,583.
The Company's current ratio (current assets divided by current liabilities) was
2.93 and 1.34 as at December 31, 2001 and June 30, 2001, 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 December 31, 2001, "Billings in excess of costs and
estimated earnings on uncompleted contracts" exceeded "Deferred contract costs
and unbilled revenue" by $32,233, thereby negatively impacting cash flow. At
June 30, 2001, "Deferred contract costs and unbilled revenue" exceeded "Billings
in excess of costs and estimated earnings on uncompleted contracts" by $49,163.
The large decrease in both categories from June 30, 2001 to December 31, 2001
[note 2] is the direct result of the completion of the Norske Skog Canada WESP
in the current period.
The Company's backlog as at December 31, 2001 was approximately $300,000, 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 current cash reserves will be sufficient to meet its
cash needs through the end of the fiscal year ended June 30, 2002.
-10-
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.
-11-
Part II - Other Information
Item 1. None
Item 2. None
Item 3. None
Item 4. Submission of Matters to a Vote of Security Holders
(a) December 13, 2001 - Annual Meeting
(b) Election of Officers:
Name For Against
Edward F. Spink 7,807,501 9,510
Patrick J. Forde 7,807,501 9,510
Richard H. Hurd 7,807,501 9,510
Dr. Donald R. Spink 7,807,494 9,510
Jonathan R. Lagarenne 7,807,501 9,510
(c) Ratification of Selection of Ernst & Young LLP as Independent
Auditors
For Against Abstention
7,502,129 9,639 305,243
Item 5. None
Item 6. (a) None
(b) None
Signature
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 hereunto duly authorized.
Dated: February 14, 2002
TURBOSONIC TECHNOLOGIES, INC.
By: /s/ PATRICK J. FORDE
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Patrick J. Forde, President,
Secretary and Treasurer
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