SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter ended: March 31, 1999
Commission File Number: 0-13670
Teletrak Environmental Systems, Inc.
Delaware 13-3187778
State or other jurisdiction of IRS Employer
Incorporation or organization Identification No.
2 SUTTON RD WEBSTER, MA 01570
Tel: (508)-949-2430 Fax: (508) 949-2473
Indicates by check mark whether the Registrant (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 March 31, 1999, there were 7,461,927 shares of the Company's common stock,
par value $.001 per share, outstanding.
PAGE 2
TELETRAK ENVIRONMENTAL SYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Unaudited Audited
3/31/99 12/31/98
--------- ---------
ASSETS
Current Assets:
Cash 94,481 296,709
Accounts Receivable, less allowance for 390,906 206,031
doubtful accounts, $ 30,000 and $ 30,000 respectively
Inventory 446,618 365,098
Subscription Receivable 80,000
Other Current assets 50,296 50,752
--------- ---------
Total Current Assets 982,301 998,590
--------- ---------
Property and Equipment, net of accumulated depreciation 615,982 181,780
of $92,745 and $ 80,650 respectively
Other Assets 1,402 1,000
--------- ---------
TOTAL ASSETS 1,599,685 1,181,370
========= =========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Notes Payable 339,826 250,000
Current Portion of Long term debt 56,028 61,906
Accounts Payable and accrued expenses 353,656 253,907
Due to related parties 83,333 73,296
--------- ---------
Total Current Liabilities 832,843 639,109
--------- ---------
Long Term Debts
Note payable - Dunedin 58,942
--------- ---------
TOTAL LIABILITIES 891,785 639,109
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value. 5,000,000 shares
authorized none issued
Common Stock -$.001 par value. 25,000,000 shares authorized,
7,461,927 and 7,252,927 respectively, issued and outstanding 7,462 7,253
Additional paid in capital 1,381,666 1,172,875
Accumulated deficit (681,228) (637,867)
--------- ---------
Total Stockholders' Equity 707,900 542,261
--------- ---------
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,599,685 1,181,370
========= =========
See accompanying notes to condensed financial statements
PAGE 3
TELETRAK ENVIRONMENTAL SYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
MARCH 31
UNAUDITED
1999 1998
--------- ---------
Net Sales 515,326 379,117
Cost of Goods Sold 355,906 237,640
--------- ---------
Gross Profit 159,420 141,477
--------- ---------
Operating Expenses:
Selling, general and administrative expenses 183,800 99,464
Advertising expenses 11,470 9,270
--------- ---------
Total Operating Expenses 195,270 108,734
--------- ---------
(Loss) Profit from operations (35,850) 32,743
Interest Expense 7,511 9,517
--------- ---------
(Loss) Profit before provision for income taxes (43,361) 23,226
Provision for income taxes 0 250
--------- ---------
Net ( Loss ) Profit (43,361) 22,976
========= =========
--------- ---------
Net (Loss) Profit per share - basic and diluted (0.01) 0.01
========= =========
Weighted average number of common shares outstanding 7,329,560 3,022,927
========= =========
See accompanying notes to condensed financial statements
PAGE 4
TELETRAK ENVIRONMENTAL SYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
MARCH 31
UNAUDITED
1999 1998
-------- --------
Cash Flow from Operating Activities:
Net Income (Loss) (43,361) 22,976
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation & Amortization 12,096 5,475
Changes In:
Accounts receivable (184,875) (147,467)
Inventory (1,520) (6,000)
Prepaid expenses and other assets 54 118,130
Accounts payable and accrued expenses 99,749 33,286
Due to/from related party 10,037
-------- --------
Net Cash used in operating activities: (107,820) 26,400
-------- --------
Cash flows from investing activities:
Net acquisitions of property and equipment (237,297) (6,977)
-------- --------
Cash flows from from financing activities:
Proceeds from notes payable - Bank 68,766
Proceeds from notes payable - Dunedin 80,000
Principal payments on notes payable (5,877) (6,785)
-------- --------
Net Cash provided by financing activities: 142,889 (6,785)
-------- --------
Net Increase (decrease) in Cash (202,228) 12,638
Cash at the beginning of period 296,709 5,777
-------- --------
Cash at the end of period 94,481 18,415
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the quarter for:
Interest 7,511 9,517
Taxes 0 250
Supplemental disclosures of noncash operating and financing activities:
Notes Payable 80,000
Acquisition of Fixed Assets (289,000)
Issuance of Common Stock 209,000
See accompanying notes to condensed financial statements
PAGE 5
NOTES TO CONDENSED FINANCIAL STATEMENTS ( UNAUDITED )
( NOTE A ) BASIS OF PRESENTATION AND THE COMPANY:
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 month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999.
The balance sheet as at March 31, 1999 reflects the acquisition of LTC Americas,
Inc. which is being accounted as a purchase as described in note B [3], but does
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements.
THE COMPANY:
Advanced Environmental Systems, Inc. ("AES") was a privately held company prior
to the merger with Teletrak Environmental Systems, Inc. (the "Company"). It
specializes in the manufacture, distribution, and licensing of industrial
products. One of the products is the Universal Jet Pump also known as the
"Mucking Pump". This mucking pump is unique in its design and engineering in
that it has no moving parts, making our mucking pump highly effective for the
removal of granular, wet or dry, material, including sludge, scale, slurries,
sand and heavy shot blasting material. The mucking pump is versatile and has a
wide range of applications across many industries, including environmental clean
up. The mucking pump is also used as a maintenance tool in the marine, chemical,
and waste water industries.
The mucking pump technology has been applied to a variety of other vacuum and
filtering systems where governmental standards and laws demand that all surface
preparation and removal take place in a dust free environment.
Although AES originally based its business on the mucking pump, AES now
manufacutures and distributes other industrial products used in surface
preparation activities. The product line includes:
Rotary Peening tool. This is a vacuum shrouded power tool that provides dust
free, high production in the surface preparation and coating removal from
virtually any surface.
Needle Scalers. This is a vacuum shrouded surface preparation tool used to reach
difficult areas.
Sanders. This line of products, also vacuum shrouded, are effectively used in
surface treatment and rust removal.
Spindle tools. A lightweight, flexible and shrouded peening tool. HEPA Vacuums.
Tools used mainly in the recovery of lead dust and paint chips.
The HAZ-VAC.The most productive vacuum and HEPA filtration system. This tool is
self contained and is mainly used for the removal of lead paint and asbestos. It
can work by itself or it can be used to support up to six different power tools.
The Paintblitzer. This cost effective coating removal tool is effectively used
for the removal of paint from flat surfaces. It is used in the interior
restoration of structures as well as for light duty paint removal.
Vacuum blasting equipment. This line was acquired with the purchase of LTC
Americas, Inc. These products are the most versatile and productive tools
offered by our company, useful for heavy duty jobs, as well as, on projects with
light coatings.
With the addition of the LTC Americas, Inc. and power tools line, the Company is
now poised to service a variety of markets previously unavailable.
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(NOTE B) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[ 1 ] Basic loss per share of common stock:
The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS
No. 128 ). The basic loss per share of common stock is based on weighted average
number of shares outstanding. Stock options did not have an effect on the
computation of the loss per share. The adoption of SFAS No. 128, which requires
a retroactive adjustment did not have a material effect on the Company's
financial statements.
[ 2 ] Research and engineering costs
All costs incurred in the research and engineering of new and existing products
are expensed in the period incurred.
[ 3 ] Acquisition of LTC Americas, Inc.
In February 1999, the Company consummated an agreement to buy designated assets,
including inventory, fixed assets, and certain intangible assets of a company
and its subsidiary that manufactures, sells and rents vacuum blasting equipment.
The purchase cost consists of $ 211,000 in cash, $ 80,000 in promissory note
bearing interest at the rate of 10% per annum and payable in 36 equal monthly
installments and 209,000 shares of common stock valued at approximately $
52,000. The purchase price was allocated among the tangible and intangible
assets acquired based on their fair values.
[ 4 ] Note Payable
At March 31, 1999, the Company had a line of credit with a financial institution
in the amount of $ 400,000. Available borrowings are based on a formula of
eligible accounts receivable and inventory. The line expires on June 30, 2000;
however, borrowings under the line are payable on demand and bear interest at
1.50% above bank's base rate. At March 31, 1999, the Company had approximately
$50,000 available for future borrowings under the line.
PAGE 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements included in this report and in conjunction with the
description of the Company's business included in the Company's Form 10-KSB for
the year ended December 31, 1998. It is intended to assist the reader in
understanding and evaluating the financial position of the Company.
This discussion contains, in addition to historical information, forward looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from the results discussed in the forward looking
statements.
The financial statements included in this statement are condensed and
consolidated for the Company and AES. Also, the statements are unaudited.
Financial Conditions
At March 31, 1999, the Company had cash in the amount of $ 94,481 and current
assets in the amount of $ 982,301.
The Company recognized sales in the amount of $ 515,326 for the first quarter of
1999 as compared with $ 379,117 for the same period last year. This increase of
36% can be attributed to the expanded product lines as compared to last year.
For the first three months of 1999, the Company shows a loss in the amount of
$43,361 as compared to a profit of $ 22,976 for the same period last year. This
translates to a loss per common share of $ .01 as compared to a profit of $ .01
for the same period last year. This result can be attributed to the additional
expenses incurred with the absorption of the LTC Americas, Inc. staff, as well
as, the cost incurred with the expansion of the administrative and accounting
staff.
At the end of March 1999, the Company's resources were not adequate to finance
the activities for the rest of the year. As a result, management intends to
pursue ways to raise additional capital to effectively market its products.
The gross profit of $ 159,420 for the first quarter shows an increase of
$ 17,943 as compared to the same period last year. The gross profit percentage
has gone down from 37.3% to 30.9% in 1999. This decline can be attributed to
expanded mix of products which in some cases does not yield the same gross
profit as the initial product lines.
The operating expenses for the three months ended March 31, 1999 amount to
$ 195,270 as compared to $ 108,734 for the same period last year. This increase
is mainly due to the addition of the LTC Americas, Inc. staff, as well as, an
increase in the advertising expenses.
It is the intention of management to expand its presence in various other
markets. A plan is being discussed to expand the sales force in all markets of
the country and possibly abroad so as to insure that the Company product lines
are well represented and affectively sold.
PAGE 8
SIGNATURES
In accordance with 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.
Teletrak Environmental Systems, Inc.
By: /s/ Gerd Reinig
Name: Gerd Reining
Title: Chairman of the Board
By: /s/ Gerald McNamara
Name: Gerald McNamara
Title: President