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: June 30, 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
Indicate 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, 1999, there were 7,681,927 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
6/30/99 12/31/98
---------- ----------
ASSETS
Current Assets:
Cash 130,590 296,709
Accounts Receivable, less allowance for doubtful accounts 392,992 206,031
$ 30,000 and $ 30,000 respectively
Inventory 474,911 365,098
Subscription Receivable 80,000
Other Current assets 40,588 50,752
---------- ----------
Total Current Assets 1,039,081 998,590
---------- ----------
Property and Equipment, net of accumulated depreciation 601,693 181,780
of $ 105,600 and $ 80,650 respectively
Other Assets 1,402 1,000
---------- ----------
TOTAL ASSETS 1,642,176 1,181,370
========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Notes Payable 383,092 250,000
Current Portion of Long term debts 50,152 61,906
Accounts Payable and accrued expenses 347,770 253,907
Due to related parties 86,106 73,296
---------- ----------
Total Current Liabilities 867,120 639,109
---------- ----------
Long Term Debts
Note Payable - Dunedin 47,374
---------- ----------
TOTAL LIABILITIES 914,494 639,109
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value. 5,000,000 shares
authorized, none issued
Common Stock - $.001 par value. 25,000,000 shares authorized, 7,681 7,253
7,681,927 and 7,252,927 respectively, issued and outstanding
Additional paid in capital 1,491,447 1,172,875
Accumulated deficit (771,446) (637,867)
---------- ----------
Total Stockholders' Equity 727,682 542,261
---------- ----------
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,642,176 1,181,370
========== ==========
See accompanying notes to condensed financial statements
PAGE 3
TELETRAK ENVIRONMENTAL SYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
June 30, 1999
Unaudited Unaudited
Three months Six months
1999 1998 1999 1998
--------------------------------------------------------
Net Sales 522,296 457,568 1,037,622 836,686
Cost of Goods Sold 342,408 222,280 698,314 459,921
------------------------- -------------------------
Gross Profit 179,888 235,288 339,308 376,765
------------------------- -------------------------
Operating Expenses:
Selling, general and administrative expenses 248,485 186,118 432,285 285,581
Advertising expenses 16,838 1,180 28,308 10,450
------------------------- -------------------------
Total Operating Expenses 265,323 187,298 460,593 296,031
------------------------- -------------------------
Profit (Loss) from operations (85,435) 47,990 (121,285) 80,734
Interest Expense 11,051 11,125 18,562 20,643
Other Income 6,268 0 6,268 0
------------------------- -------------------------
(Loss) Profit before provision for income taxes (90,218) 36,865 (133,579) 60,091
------------------------- -------------------------
Provision for income taxes 0 250
------------------------- -------------------------
Net (loss) Profit (90,218) 36,865 (133,579) 59,841
========================= =========================
------------------------- -------------------------
Net (Loss) Profit per share - basic and diluted (0.01) 0.01 (0.02) 0.02
========================= =========================
Weighted average number of common shares outstanding 7,594,015 3,022,927 7,462,518 3,022,927
========================= =========================
See accompanying notes to condensed financial statements
PAGE 4
TELETRAK ENVIRONMENTAL SYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
June 30, 1999
Unaudited Unaudited
Three months Six months
1999 1998 1999 1998
--------------------- ---------------------
Cash Flow from Operating Activities:
Net (Loss) Income (90,218) 36,865 (133,579) 59,841
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation & Amortization 12,854 13,702 24,950 19,151
Changes In:
Accounts receivable (2,086) 90,338 (186,961) (57,128)
Inventory (28,293) (78,466) (29,813) 39,664
Prepaid expenses and other assets 9,708 23,758 9,762 13,785
Accounts payable and accrued expenses (5,885) (93,390) 93,862 (60,104)
Due to/from related party 2,772 12,810
--------------------- ---------------------
Net Cash used in operating activities: (101,148) (7,193) (208,969) 15,209
--------------------- ---------------------
Cash flows from investing activities:
Net acquisitions of property and equipment 1,434 3,746 (235,862) 767
--------------------- ---------------------
Cash flows from financing activities:
Proceeds from sale of common stock 110,000 110,000
Proceeds from notes payable - Bank 37,491 106,258
Proceeds from note payable - Dunedin 80,000
Principal payments on notes payable (11,668) (6,482) (17,546) (13,267)
--------------------- ---------------------
Net Cash provided by financing activities: 135,823 (6,482) 278,712 (13,267)
--------------------- ---------------------
Net Increase (decrease) in Cash 36,109 (9,929) (166,119) 2,709
Cash at the beginning of period 94,481 18,415 296,709 5,777
--------------------- ---------------------
Cash at the end of period 130,590 8,486 130,590 8,486
===================== =====================
Supplemental disclosure of cash flow information:
Cash paid during the quarter for:
Interest 11,051 11,125 18,562 20,643
Taxes 250
Supplemental disclosures of non cash 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 June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
THE COMPANY:
Advanced Environmental Systems, Inc. (the "AES") was a privately held company
prior to the merger with Teletrak Environmental Systems, Inc. (the "Company").
AES 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
manufactures and distributes other industrial products used in surface
preparation activities. The product line includes the following:
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.
With the addition of new power tools lines as well the LTC Americas, Inc.
products, the Company is now beginning to sell spare parts, as well as,
accessories for the products it sells. Furthermore, a servicing and maintaining
special systems may spur the Company to establish a service department and
operate it as a separate profit center.
PAGE 6
( 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 related to the research and engineering of new and existing products
are expensed in the period incurred.
[ 3 ] Note Payable
At June 30, 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 the banks base rate. At June 30, 1999, the Company had approximately
$ 50,000 available for future borrowings.
[ 4 ] Capital
In the second quarter of 1999, the Company issued 220,000 new shares of common
stock at $.50 per share.
PAGE 7
ITEM 2. MANAGEMENT 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 reports 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 statements are condensed and
consolidated for the Company and AES. Also, the statements are unaudited.
Financial Conditions
As of June 30, 1999, the Company had $ 130,590 in cash and current assets in the
amount of $ 1,039,081.
The Company recognized sales in the amount of $ 522,296 for the second quarter
of 1999 as compared with $ 457,468 for the same period last year. This increase
of 14% can be attributed to the expanded product lines as compared to last year.
For the six months combined, the Company recognized sales in the amount of
$1,037,622 as compared to $ 836,686 for the same period last year. The increase
can be attibuted to expanded product lines as compared to the same period last
year.
For the quarter ended June 30, 1999, the Company shows a loss in the amount of
$90,218 as compared to a profit of $ 36,865 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.
For the first six months of 1999, the Company shows a loss of 133,579 or $ .02
loss per common share. For the same period last year, the Company showed a
profit of $ 59,841 or $ .02 per common share.
At the end of June 1999, the Company's resources were not adequate to finance
the activities for the rest of the year. As a result, management has began
negotiations with a European company who is interested in manufacturing certain
products in Europe under license. These negotiations are in the preliminary
stages and may not come to fruition.
The gross profit of $ 179,888 for the second quarter shows a decrease of
$ 55,400 as compared with the same period last year. The gross profit percentage
has gone down from 51.4% to 34.4% in 1999. This decline can be attributed to
expanded mix of products which, in some cases, do not yield the same gross
profit as the initial product lines.
The gross profit for the first six months of 1999 amount to $ 339,308 compared
to $ 376,765 as compared to the same period last year. The percentage of gross
profit went from 45.0% in 1988 to 32.7% in 1999. This is largely due to the
product mix.
The operating expenses for the three months ended June 30, 1999 amount to
$265,323 as compared to $ 187,298 for the same period last year. This increase
is mostly due to the addition of the LTC Americas, Inc. staff to the payroll
while the acquisition of the LTC Americas, Inc. purchases was being absorbed by
the Company. The six months ended June 30, 1999 show a total of $ 460,593 for
operating expenses while the same period of last year show $ 296,031. Also, in
this case the increase as result of the addition of the LTC Americas, Inc.
staff.
At this time, management is actively trying to expand its sales force so as to
assure effective penetration in the various markets. It is estimated that it
will take several months before the sales department is brought to the ideal
structure.
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 Reinig
Title: Chairman of Board
By: /s/ Gerald McNamara
Name: Gerald McNamara
President: President
Dated:
PAGE 9