U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004.
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the Transition Period from _______ to ________.
Commission File Number 000-27592
TECH LABORATORIES, INC.
(Exact name of Small Business issuer in its charter)
New Jersey 22-1436279
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
955 Belmont Avenue, North Haledon, NJ 07508
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (973) 427-5333
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 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 |_|
The number of shares of Common Stock, par value $.01 per share, outstanding as
of the latest practicable date: As of May 20, 2004, there were 50,636,215 shares
outstanding.
TECH LABORATORIES, INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets....................................................1 - 2
Statements of Operations ......................................... 3
Statements of Cash Flows.......................................... 4
Notes to Financial Statements.....................................5 - 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 7
Item 3. Controls and Procedures........................................... 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................. 9
Item 2. Changes in Securities............................................. 9
Item 3. Defaults by the Company Upon its Senior Securities................ 9
Item 4. Submission of Matters to a Vote of Security Holders............... 9
Item 5. Other Information................................................. 9
Item 6. Exhibits and Reports on Form 8-K.................................. 9
SIGNATURES................................................................. 10
TECH LABORATORIES, INC.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
March 31, December 31,
2004 2003
----------- -----------
Current Assets:
Cash $ 72,663 $ 165,308
Accounts receivable, net of allowance for
for doubtful accounts of $1,000 17,169 10,107
Inventories 1,326,171 1,249,777
Prepaid expenses 1,075 1,074
----------- -----------
Total current assets 1,417,078 1,426,266
----------- -----------
Property, plant, and equipment, at cost:
Leasehold improvements 2,247 2,247
Machinery, equipment, and instruments 607,987 607,987
Furniture and fixtures 110,140 110,893
----------- -----------
Total property, plant, and equipment 720,374 721,127
Less: Accumulated depreciation and amortization (432,796) (427,909)
----------- -----------
Net property, plant, and equipment $ 287,578 $ 293,218
----------- -----------
Other assets $ 12,063 $ 12,063
----------- -----------
Total assets $ 1,716,719 $ 1,731,547
=========== ===========
See notes to financial statements.
1
TECH LABORATORIES, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
(Unaudited) (Audited)
March 31, December 31,
2004 2003
----------- -----------
Current Liabilities:
Defaulted convertible notes $ 1,187,369 $ 1,480,785
Note payable to bank 34,096 34,444
Short-term loans payable 50,450 --
Accounts payable and accrued expenses 165,209 300,712
Other liabilities 117,340 3,271
----------- -----------
Total current liabilities 1,554,464 1,819,212
----------- -----------
Stockholders' equity (deficiency):
Common stock, $.01 par value; 250,000,000 shares
authorized: 34,082,719 shares outstanding in 2004;
18,045,376 outstanding in 2003 335,517 175,143
Less: 15,191 shares reacquired and held in treasury (113) (113)
----------- -----------
335,404 175,030
Additional paid-in capital 4,730,704 4,480,381
Accumulated deficit (4,903,853) (4,743,076)
----------- -----------
162,255 (87,665)
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,716,719 $ 1,731,547
=========== ===========
See notes to financial statements.
2
TECH LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
-----------------------------
2004 2003
------------ ------------
Sales $ 51,701 $ 94,327
Costs and expenses:
Cost of sales 29,811 58,165
Selling, general, and administrative expense 152,932 62,702
------------ ------------
182,743 120,867
------------ ------------
Income (loss) from Operations (131,042) (26,540)
Other income (expenses) (29,735) (18,306)
Income (loss) before income taxes (160,777) (44,846)
Provision for income taxes -- --
------------ ------------
Net income (loss) (160,777) (44,846)
Accumulated deficit, Beg Qtr (4,743,076) (3,817,152)
------------ ------------
Accumulated deficit, End Qtr (4,903,853) (3,861,998)
------------ ------------
Net loss per share, basic and diluted $ (0.01) $ (0.01)
============ ============
Weighted average number of common shares
and equivalent, basic and diluted 27,113,361 5,156,679
============ ============
See notes to financial statements.
3
TECH LABORATORIES, INC.
STATEMENTS OF CASH FLOW
(UNAUDITED)
Three Months Ended
March 31,
----------------------
2004 2003
--------- ---------
Cash flow from (for) operating activities:
Net income (loss) from operations $(160,777) $ (44,846)
Add (deduct) items not affecting cash:
Depreciation 4,887 7,900
Amortization -- --
Accrued expenses and other non-cash expenses 111,934 --
Changes in operating assets and liabilities
Accounts receivable (6,834) (22,743)
Inventories (76,394) 80,247
Accounts payable and accrued expenses (9,791) 3,271
Other assets/liabilities 43,577 28,943
--------- ---------
Net cash flow from (for) operating activities (93,398) 52,772
--------- ---------
Cash flows from (for) investing activities 753 3,923
--------- ---------
Net increase (decrease) in cash (92,645) 56,695
Cash balance beginning of year 165,308 68,343
--------- ---------
Cash balance - end of first quarter $ 72,663 $ 125,038
========= =========
As of March 31, 2004, an aggregate of $685,546 of convertible long-term debt and
accrued interest was converted into common stock.
See notes to financial statements.
4
TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2004
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Tech Laboratories, Inc.
("the Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Item
310(b) of Regulation SB. 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 a fair presentation have been included. Operating
results for the three months ended, March 31, 2004 are not necessarily
indicative of the results that may be expected for the year ended December
31, 2004. These unaudited financial statements should be read in
conjunction with the audited financial statements and footnotes thereto
included in the Company's Form 10-KSB/A for the year ended, December 31,
2003, as filed with the Securities and Exchange Commission.
Certain prior year balances have been reclassified to conform to the
current year presentation.
2. LONG-TERM CONVERTIBLE DEBT
On October 13, 2000, Tech Labs completed a $1.5 million financing of 6.5%
convertible promissory notes due October 15, 2002. Interest is payable
quarterly in cash or in shares of common stock at the option of the
noteholders. Tech Labs disclosed all terms of this financing on Form 8-K
filed on October 18, 2000. As of March 31, 2004, $685,546 of principal and
interest on the 6.5% convertible notes has been converted into shares of
Tech Labs' common stock.
On January 11, 2002, Tech Labs entered into a conversion and redemption
agreement concerning this long-term debt. An Event of Default, as defined
in the 6.5% convertible notes, occurred on January 25, 2002, when Tech
Labs was unable to make the first payment of $750,000 to the holders of
the notes.
On April 19, 2002, Tech Labs successfully negotiated a cure of the default
referenced above. This cure required that Tech Labs' registration
statement, filed with the Securities and Exchange Commission on April 5,
2002, covering the shares underlying the 6.5% convertible notes, to have
been declared effective on or before June 29, 2002. If the registration
statement was declared effective by such date and Tech Labs made certain
payments described in the Tech Labs' report on Form 8-K filed April 25,
2002, the maturity date of the 6.5% convertible notes would have been
extended from October 13, 2002 to December 30, 2002.
5
TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2004
(UNAUDITED)
2. LONG-TERM CONVERTIBLE DEBT (CONT'D)
On August 2, 2002, the Company announced that an Event of Default occurred
on the 6.5% convertible notes. The Company was unable to have its
registration statement declared effective by June 29, 2002, and was unable
to reach a new agreement with the holders of the 6.5% convertible notes
prior to the expiration of the waiver the Company had been granted by the
holders of the notes, which had been granted in order to permit the
parties time to negotiate a new agreement. The Company continues to seek a
cure for the default with the holders of the 6.5% convertible notes, and
in October 2003, a cure was successfully negotiated and is described in
the Company's 8-K filed in October, 2003.
6
TECH LABORATORIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Quarter ending March 31, 2004, compared to Quarter ending March 31, 2003
Sales were $51,701 for the first quarter of 2004 as compared to $94,327
for the similar period of 2003. This decrease was due to the continuing
effects of the economic downturn. The company is seeking long-term
contracts with major computer companies. The company believes these
contracts will provide future growth in its major product, Dyntrax.
Cost of sales of $29,811 for the first quarter of 2004 has been decreased
by $28,354 compared to the same period of 2003, primarily due to the sales
decline.
Selling, administrative, and general expenses increased by $90,230
compared to the same period of 2003 due to increases in expenses
associated with the company's attempts to raise long-term capital.
Loss from operations of ($131,042) increased ($104,502) compared to a loss
of ($26,540) for the prior period as a direct result of sale declines and
expenses incurred to explore long-term financing prospects.
SIGNIFICANT CHANGES
During the first quarter of 2004, the Company is still suffering from
declining sales.
Cash used in operations for the first quarter of 2004 was $93,398 as a
result of the reductions in sales caused by the downturn in the
telecommunications industry.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities utilized cash of $93,398 during the
three months ended, March 31, 2004, as compared to generated cash of
$52,772 during the three months ended, March 31, 2003.
As a result of operating losses and negative cash flow experienced during
2003, Tech Labs has a tenuous liquidity position. If sales do not improve
or alternative financing is not obtained, substantial doubt exists about
Tech Labs' ability to continue as a going concern.
7
TECH LABORATORIES, INC.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our Chief Executive Officer and Chief Financial Officer (collectively the
"Certifying Officers") maintain a system of disclosure controls and
procedures that is designed to provide reasonable assurance that
information, which is required to be disclosed, is accumulated and
communicated to management timely.
Under the supervision and with the participation of management, the
Certifying Officers evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
[13a-14(c)/15d-14(c)] under the Exchange Act) within 90 days prior to the
filing date of this report. Based upon that evaluation, the Certifying
Officers concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relative to our
company required to be disclosed in our periodic filings with the SEC.
(b) Changes in internal controls.
Our Certifying Officers have indicated that there were no significant
changes in our internal controls or other factors that could significantly
affect such controls subsequent to the date of their evaluation, and there
were no such control actions with regard to significant deficiencies and
material weaknesses.
8
TECH LABORATORIES, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On July 31, 2002, Tawfik Khalil and Amneh Khalil filed a lawsuit in the
Superior Court of Passaic County, New Jersey, against Glen Venza, a
Company part-time employee, Tech Labs, and certain other parties for
property damages and personal injuries. The case arose from a car accident
involving Mr. Venza and the plaintiffs, which occurred while Mr. Venza was
performing certain duties for Tech Labs in a vehicle Mr. Venza borrowed
from a third party. Tech Labs has only been named as a party to the
personal injuries, and not for property damages, and believes it is
covered for the accident by its insurance policy.
A lawsuit was filed against a subsidiary of the Company, Tech Labs
Community Networks, Inc. ("TLCN"), in the Superior Court of New Jersey,
Passaic County, on February 20, 2003, claiming that the plaintiff
delivered certain goods and services to TLCN and is owed $23,856, plus
interest and attorney fees. We disagree that any goods or services were
contracted to be provided to the plaintiff, and we believe we will prevail
in this litigation.
On or about November 1, 2003, we were served with a lawsuit filed by W.T.
Sports Limited, Salvatore Griscifi, a former Director, and Edward Branca,
a former employee. We have filed a response and counter-claim. The first
claim involving Salvatore Griscifi and Mr. Branca has been settled. The
second claim is in the process of being settled. The last claim with W.T.
Sports Limited is going to arbitration, which is mandatory pursuant to a
written agreement entered into between the parties in 1987. We believe
W.T. Sports Limited will owe us in excess of the plaintiff's claim.
Item 2. Changes in 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.
None.
Item 6. Exhibits and Reports of Form 8-K
None.
9
TECH LABORATORIES, INC.
SIGNATURES
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 thereunto duly authorized.
Date: February 10, 2005
TECH LABORATORIES, INC.
By: /s/ Bernard M. Ciongoli
----------------------------------------
Bernard M. Ciongoli
Chief Executive Officer, Chief Financial
Officer and Chief Accounting Officer)
10