U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006.
[ ] 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)
18851 N.E. 29th Avenue, Suite 306
Aventura, Florida 33180
________________________________________ _________
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (732) 409-1212
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 November 9, 2006, there were 303,000,000
shares outstanding.
TECH LABORATORIES, INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets.................................................... 3
Statements of Operations ......................................... 4
Statements of Cash Flows.......................................... 5
Notes to Financial Statements..................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 8
Item 3. Controls and Procedures........................................... 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................. 12
Item 2. Unregistered Sales of Securities and Use of Proceeds.............. 13
Item 3. Defaults Upon Senior Securities................................... 13
Item 4. Submission of Matters to a Vote of Security Holders............... 13
Item 5. Other Information................................................. 15
Item 6. Exhibits and Reports on Form 8-K.................................. 15
SIGNATURES................................................................ 16
2
PART I.
ITEM 1. FINANCIAL STATEMENTS
TECH LABORATORIES, INC.
BALANCE SHEETS
September 30, December 31,
2006 2005
_____________ ____________
(Unaudited)
Current Assets:
Cash $ 848 $ 212,390
Prepaid expense 27,500 81,876
Loan receivable 70,000 -
Accrued interest receivable 710 -
___________ ___________
Total Assets $ 99,058 $ 294,266
=========== ===========
Convertible notes $ 1,313,295 $ 1,345,662
Accounts payable and accrued expenses 348,311 311,445
___________ ___________
Total current liabilities 1,661,606 1,657,107
Shareholders' Deficit
Common stock, $.01 Par Value;
195,000,000 Shares Authorized
195,000,000 and 141,446,880 Shares Issued 1,950,000 1,414,469
Less: 15,191 Shares Reacquired and held in Treasury (113) (113)
___________ ___________
1,949,887 1,414,356
Capital contributed in excess of par value 4,625,639 4,967,975
Accumulated deficit (8,138,074) (7,745,172)
___________ ___________
(1,562,548) (1,362,841)
___________ ___________
Total Liabilities and Shareholders' Deficit $ 99,058 $ 294,266
=========== ===========
See notes to financial statements.
3
TECH LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
_______________________________ _______________________________
2006 2005 2006 2005
____________ ____________ ____________ ____________
Sales $ - $ - $ - $ 91,280
____________ ____________ ____________ ____________
Costs and expenses:
Cost of sales - - - 30,557
Selling, general, and
administrative expense 39,103 23,447 229,103 273,514
____________ ____________ ____________ ____________
39,103 23,447 229,103 304,071
____________ ____________ ____________ ____________
Loss from Operations (39,103) (23,447) (229,103) (212,791)
____________ ____________ ____________ ____________
Other income (expenses):
Interest income 710 - 710 187
Interest expense (54,519) (17,614) (164,009) (82,668)
Loss on settlement agreement (Note 2) - (884,574) - (884,574)
____________ ____________ ____________ ____________
(53,809) (902,188) (163,299) (967,055)
____________ ____________ ____________ ____________
Loss before income taxes (92,912) (925,635) (392,402) (1,179,846)
Provision for income taxes - - 500 -
____________ ____________ ____________ ____________
Net loss (92,912) (925,635) (392,902) (1,179,846)
(Accumulated deficit), Beg Qtr. (8,045,162) (6,356,597) (7,745,172) (6,102,386)
____________ ____________ ____________ ____________
(Accumulated deficit), End Qtr. (8,138,074) (7,282,232) (8,138,074) (7,282,232)
____________ ____________ ____________ ____________
Net loss per share, basic and diluted $ - $ (0.01) $ - $ (0.01)
============ ============ ============ ============
Weighted average number of common
shares and equivalents, basic and diluted 195,000,000 139,926,344 176,991,761 119,817,514
============ ============ ============ ============
See notes to financial statements.
4
TECH LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
______________________________
2006 2005
__________ ___________
Cash flow from (for) operating activities:
Loss from operations $ (392,902) $(1,179,846)
Add (deduct) items not affecting cash:
Amortization 54,376 9,774
Loss on settlement agreement - 884,574
Capitalized interest 109,632 30,742
Expenses paid with the issuance of stock 51,196 -
Changes in operating assets and liabilities
Accounts receivable - (862)
Inventories - (165,312)
Accounts payable and accrued expenses 36,866 115,348
Other assets/liabilities (710) 18,751
__________ ___________
Net cash flow for operating activities (141,542) (286,831)
__________ ___________
Cash flows from (for) investing activities
Loan receivable (70,000) -
Decrease in restricted certificate of deposit - 1,364
__________ ___________
Net cash flow from (for) investing activities (70,000) 1,364
__________ ___________
Cash flows from (for) financing activities:
Proceeds of convertible note - 160,000
Proceeds from notes payable - 20,620
__________ ___________
Net cash flow from (for) financing activities - 180,620
__________ ___________
Net increase (decrease) in cash (211,542) (104,847)
Cash balance beginning of year 212,390 106,283
__________ ___________
Cash balance - end of third quarter $ 848 $ 1,436
========== ===========
Supplemental schedule of noncash investing and
financing activities:
Conversion of debt to common stock $ 142,000 $ 60,000
See notes to financial statements.
5
TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2006
(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 and nine months ended,
September 30, 2006 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2006. 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 for the year ended, December 31, 2005, as filed with the
Securities and Exchange Commission.
2. LONG-TERM CONVERTIBLE DEBT
On May 18, 2004, the Company issued an additional $250,000 convertible
debenture at a rate of 5.0% due on May 18, 2007.
On December 27, 2005, the convertible debt of $250,000 was renegotiated
with an additional $300,000 plus accrued interest for a total amount of
$537,220. The interest rate is 15% per annum and is due upon demand.
Simultaneously with the financing agreement, we issued an Amended and
Restated Convertible Debenture to the Investor in the amount of
$537,220 to cure the default under the Debenture issued to the Investor
on April 5, 2005 in the original amount of $420,514 for not filing a
registration statement by the initial filing deadline (the "Amended
Debenture"). The Amended Debenture bears a 15% interest rate and a
maturity date of December 27, 2006. The debenture is convertible into
shares of our common stock at a conversion price equal to the lesser of
(a) $0.00525 per share or (b) ninety percent of the lowest Closing Bid
Price of the common stock during the ten trading days immediately
preceding the conversion date, as quoted by Bloomberg, LP. We are
committed to filing an SB-2 Registration Statement with the SEC within
90 days of funding. There are penalty provisions should the filing not
become effective within 150 days of filing.
In accordance with EITF 98-5, the Company recognized an imbedded
beneficial conversion feature present in the Notes. The Company
recognized and measured an aggregate of $149,902 of the proceeds, which
is equal to the intrinsic value of the imbedded beneficial conversion
feature, to additional paid-in capital and a discount against the
Notes.
6
TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2006
(UNAUDITED)
3. SETTLEMENT AGREEMENT AND RELEASE
On July 11, 2005 (the "Effective Date"), the Company finalized a
Settlement Agreement and Release (the "Agreement") with Bernard
Ciongoli and Earl Bjorndal (the "Settlement Parties"). In connection
with the Agreement, Mr. Ciongoli resigned from his positions as
President, Chief Executive Officer, Chief Financial Officer and member
of the Board of Directors of the Company, and agreed to the
cancellation of 17,754,806 of his shares of our common stock. Earl
Bjorndal resigned from his positions as Vice President and member of
the Board of Directors of the Company, and agreed to the cancellation
of 8,044,445 of his shares of our common stock. The parties agreed to
the transfer of all of the Company's assets, including all technologies
and product lines, to the Settlement Parties in exchange for the
cancellation of all outstanding obligations owed to the Settlement
Parties, including past due salaries and loans due to them, the
cancellation of the above mentioned shares, and the assumption of
certain liabilities of the Company and the lease by the Settlement
Parties. The Agreement grants the Company a seven-year license in the
transferred technology, pursuant to which the Company shall have the
right to sell the products developed for the DynaTrax technology as a
dealer to its customers at a dealer price of 25% off list price. The
Company will also receive a royalty of 5% of the profits per year for
the sale of DynaTrax products. The Company recorded a loss from this
transaction in the amount of $884,574.
7
Statements made in this Form 10-QSB that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section
21E of the Securities Exchange Act of 1934. These statements often can be
identified by the use of terms such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "approximate" or "continue," or the negative thereof.
We intend that such forward-looking statements be subject to the safe harbors
for such statements. We wish to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual
results and events to differ materially from historical results of operations
and events and those presently anticipated or projected. We disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events. Please note that throughout
this Quarterly Report, and unless otherwise noted, the words "we", "our" or the
"Company" refer to Tech Laboratories, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
GENERAL
Tech Laboratories, Inc. is a corporation organized under the laws of the
State of New Jersey. We trade on the Over-the-Counter Bulletin Board under the
symbol "TCHL:OB".
Please note that throughout this Quarterly Report, and unless otherwise
noted, the words "we," "our," "us," the "Company," or "Tech Laboratories" refers
to Tech Laboratories, Inc.
RECENT DEVELOPMENTS
On September 22, 2006, we effected an amendment to our Articles of
Incorporation to increase the authorized number of shares of common stock from
195,000,000 to 3,000,000,000 (the "Amendment"). Our Board of Director adopted
resolutions effective July 21, 2006 approving and authorizing the Amendment and
directing that the Amendment be submitted to a vote of our shareholders at the
annual meeting of Shareholders to be held on September 22, 2006 (the
"Shareholder Meeting"). On September 22, 2006, our shareholders approved the
Amendment. See "Part II. Other Information. Item 4. Submission of Matters to a
Vote of Security Holders."
RESULTS OF OPERATION
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 COMPARED TO NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 2005
Our net loss for the nine-month period ended September 30, 2006 was
approximately ($392,902) compared to a net loss of ($1,179,846) during the
nine-month period ended September 30, 2005 (a decrease of $786,944). During the
nine-month period ended September 30, 2006, we generated $-0- in sales revenue
compared to $91,280 generated in sales revenue during the nine-month period
ended September 30, 2005.
8
During the nine-month period ended September 30, 2006, we incurred expenses
of approximately $229,103 compared to $212,791 incurred during the nine-month
period ended September 30, 2005 (an increase of $16,312). These expenses
incurred during the nine-month period ended September 30, 2006 consisted of: (i)
$229,103 (2005: $273,514) in selling, general and administrative expense; (ii)
$-0- (2005: $30,557) in cost of sales; (iii) $164,009 (2005: $82,668) in
interest expense; and (iv) $-0- (2005: $884,574) relating to loss on settlement
agreement. See " - Plan of Operation".
Expenses incurred during the nine-month period ended September 30, 2006
increased primarily due to increased business activity and related
re-structuring. General and administrative expense generally includes corporate
overhead, financial and administrative contracted services, marketing and
consulting costs.
Expenses incurred during the nine-month period ended September 30, 2006
were offset by interest income consisting of $710 (2005: 187) resulting in a net
loss of ($392,402) compared to a net loss of ($1,179,846). The decrease in net
loss incurred during the nine-month period ended September 30, 2006 compared to
the nine-month period ended September 30, 2005 resulted primarily from the
recording of the loss on settlement agreement of $884,574 during the nine-month
period ended September 30, 2005.
Our net loss during the nine-month period ended September 30, 2006 was
($392,402) or ($0.00) per share compared to a net loss of ($1,179,846) or
($0.01) per share during the nine-month period ended September 30, 2005. The
weighted average number of shares outstanding was 176,991,761 for the nine-month
period ended September 30, 2006 compared to 119,817,514 for the nine-month
period ended September 30, 2005.
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 COMPARED TO THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 2005.
Our net loss for the three-month period ended September 30, 2006 was
approximately ($92,912) compared to a net loss of ($925,635) during the
three-month period ended September 30, 2005 (a decrease of $832,723). During the
three-month periods ended September 30, 2006, we generated $-0- in sales
revenue, respectively.
During the three-month period ended September 30, 2006, we incurred
expenses of approximately $39,103 compared to $23,447 incurred during the
three-month period ended September 30, 2005 (an increase of $15,656). These
expenses incurred during the three-month period ended September 30, 2006
consisted of: (i)$39,103 (2005: $23,447) in selling, general and administrative
expenses; (ii) $54,519 (2005: $17,614) in interest expense; and (iv) $-0- (2005:
$884,574) relating to loss on settlement agreement. Expenses incurred during the
three-month period ended September 30, 2006 increased primarily due to increased
business activity and related re-structuring. General and administrative expense
generally includes corporate overhead, financial and administrative contracted
services, marketing and consulting costs.
Expenses incurred during the three-month period ended September 30, 2006
were offset by interest income consisting of $710 (2005: $-0-) resulting in a
net loss of ($92,912) compared to a net loss of ($925,635). The decrease in net
loss incurred during the three-month period ended September 30, 2006 compared to
the three-month period ended September 30, 2005 resulted primarily from the
recording of the loss on settlement agreement of $884,574 during the three-month
period ended September 30, 2005.
9
Our net loss during the three-month period ended September 30, 2006 was
($92,912) or ($0.00) per share compared to a net loss of ($925,635) or ($0.01)
per share during the three-month period ended September 30, 2005. The weighted
average number of shares outstanding was 195,000,000 for the three-month period
ended September 30, 2006 compared to 139,926,344 for the three-month period
ended September 30, 2005.
LIQUIDITY AND CAPITAL RESOURCES
Our financial statements have been prepared assuming that we will continue
as a going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006
As at the nine-month period ended September 30, 2006, our current assets
were $99,058 and our current liabilities were $1,661,606, which resulted in a
working capital deficit of $1,562,548. As at the nine-month period ended
September 30, 2006, current assets were comprised of: (i) $848 in cash; (ii)
$27,500 in prepaid expenses; (iii) $70,000 in loan receivable; and (iv) $710 in
accrued interest receivable. As at the nine-month period ended September 30,
2006, current liabilities were comprised of: (i) $1,313,295 in convertible
notes; and (ii) $348,311 in accounts payable and accrued expenses.
As at the nine-month period ended September 30, 2006, our total assets were
$99,058 comprised of $99,058 in current assets. The decrease in total assets
during the nine-month period ended September 30, 2006 from fiscal year ended
December 31, 2005 was primarily due to the decrease in cash.
As at the nine-month period ended September 30, 2006, our total liabilities
were $1,661,606 comprised of current liabilities. The slight increase in
liabilities during the nine-month period ended September 30, 2006 from fiscal
year ended December 31, 2005 was primarily due to the increase in accounts
payable and accrued expenses.
Stockholders' equity decreased from ($1,362,841) for fiscal year ended
December 31, 2005 to ($1,562,548) for the nine-month period ended September 30,
2006.
We have not generated positive cash flows from operating activities. For
the nine-month period ended September 30, 2006, net cash flows used in operating
activities was ($141,542), consisting primarily of a net loss of ($392,902). Net
cash flows used in operating activities was adjusted by $215,204 to reconcile
the non-cash expenses of $109,632 for capitalized interest, $51,196 for expenses
paid with issuance of stock, and $54,376 for amortization.
For the nine-month period ended September 30, 2006, net cash flows used in
investing activities was ($70,000) consisting of loan receivable.
For the nine-month period ended September 30, 2006, net cash flows from
financing activities was $-0-.
We expect that working capital requirements will continue to be funded
through a combination of our existing funds and possible further issuances of
securities. We have a tenuous liquidity position. If alternative financing is
not obtain or a suitable merger candidate is not found, substantial doubt exists
about our ability to continue as a growing concern.
10
PLAN OF OPERATION
On July 11, 2005 (the "Effective Date"), we finalized a Settlement
Agreement and Release (the "Agreement") with Bernard Ciongoli and Earl Bjorndal
(the "Settlement Parties"). In connection with the Agreement, Mr. Ciongoli
resigned from his positions as President, Chief Executive Officer, Chief
Financial Officer, and member of the Board of Directors of the Company, and
agreed to the cancellation of 17,931,806 of his shares of our Common Stock. Earl
Bjorndal resigned from his positions as our Vice President and a member of our
Board of Directors, and agreed to the cancellation of 8,044,445 of his shares of
our common stock. The parties agreed to the transfer of all of our assets,
including all technologies and product lines, to the Settlement Parties in
exchange for the cancellation of all outstanding obligations owed to the
Settlement Parties, including past due salaries and loans due to them, the
cancellation of the above mentioned shares, and the assumption of certain of our
liabilities and the lease by the Settlement Parties. As part of the Agreement,
we agreed to transfer all of the issued and outstanding shares of common stock
of Tech Logistics, Inc., our subsidiary, to Bernard Ciongoli.
Pursuant to the Agreement, the Settlement Parties granted us a seven-year
license in the transferred technology, pursuant to which we shall have the right
to sell the products developed from the DynaTrax technology as a dealer to its
customers at a dealer price of 25% off list price. We will also receive a
royalty of 5% of the profits per year for the sale of DynaTrax products. In
exchange for all of our assets, the Settlement Parties agreed to the
cancellation of all outstanding obligations owed to the Settlement Parties,
including past due salaries and loans due to them; the cancellation of the above
mentioned shares; and the assumption of certain of our liabilities and the lease
by the Settlement Parties.
We are continuing our efforts to locate a merger candidate for the purpose
of a merger. It is possible that the registrant will be successful in locating
such a merger candidate and closing such merger. However, if we cannot effect a
non-cash acquisition, we may have to raise funds from a private offering of its
securities under Rule 506 of Regulation D. There is no assurance we would obtain
any such equity funding.
We will attempt to locate and negotiate with a business entity for the
combination of that target company with us. The combination will normally take
the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In
most instances the target company will wish to structure the business
combination to be within the definition of a tax-free reorganization under
Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No
assurances can be given that we will be successful in locating or negotiating
with any target company.
A business combination with a target company will normally involve the
transfer to the target company of the majority of our issued and outstanding
common stock, and the substitution by the target company of its own management
and board of directors.
No assurances can be given that we will be able to enter into a business
combination, as to the terms of a business combination, or as to the nature of
the target company.
11
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2006.
Based on this evaluation, our principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms and that our disclosure and controls are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
There were no changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls over
financial reporting that occurred during the third quarter of fiscal 2006 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
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, one of
part-time employees, us, 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
us in a vehicle Mr. Venza borrowed from a third party. We were named as a party
to the personal injuries, and not for property damages. As of the date of this
Quarterly Report, the litigation has been settled by payment of $5,000.
On July 30, 2003, a former director and a former employee filed a joint
lawsuit in Superior Court of New Jersey, Passaic County, against us for
consulting fees and expenses, respectively. In the same lawsuit, W.T. Sports
filed a claim for a commission owed on sales due from a licensing agreement with
us. The claims by the former director and former employee are for about $10,000
and we deny any liability under these claims and are defending the lawsuit. With
regard to W.T. Sports, our agreement has an arbitration in case of dispute and
therefore we are attempting to move this case to arbitration. We believe that we
have a counterclaim, which is far in excess of the amount they claim we owe for
the licensing fees. On November 11, 2004, an arbitration hearing took place. On
December 31, 2004, the arbitrator awarded $35,148 to WT Sports. We can continue
to manufacture the system in the United States.
On June 30, 2004, the law firm of Stursberg & Veith, our former counsel,
filed a lawsuit in the United States District Court for the Southern District of
New York claiming that they delivered certain good and valuable services to us
and is owed $161,179.26 plus interest, costs, and disbursements for each cause
of action, and other and further relief as the Court may deem necessary. The
complaint alleges four causes of action including an unpaid account, stated
12
breach of contract, quantim meruit, and unjust enrichment. We disagree with the
amount of the unpaid balance owed to the plaintiff. We have filed a counterclaim
for overcharging by the plaintiff. On December 5, 2005, a judgment was rendered
by the court to make payment of $204,834.10, including interest.
ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS.
During the nine-month period ended September 30, 2006 and as of the date of
this Quarterly Report, we issued an aggregate of 110,000,000 shares of
restricted Common Stock as follows:
(i) On approximately October 30, 2006, we issued an aggregate of 12,000,000
shares of our restricted Common Stock to Craig Press at approximately $0.00096
(which per share price reflects a 20% discount from the trading price of $0.0012
as of October 30, 2006) per share for services rendered in connection with his
appointment as one of our directors. The shares of Common Stock were issued
under the exemption from registration in Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"). Mr. Press acknowledged that the
securities to be issued have not been registered under the Securities Act, that
he understood the economic risk of an investment in the securities, and that he
had the opportunity to ask questions of and receive answers from our management
concerning any and all matters related to acquisition of the securities.
(ii) We entered into an agreement with Knightsbridge Capital Inc.
("Knightsbridge") pursuant to which we agreed to issue an aggregate of
98,000,000 shares of our restricted Common Stock to Knightsbridge at
approximately $0.00096 (which per share price reflects a 20% discount from the
trading price of $0.0012 as of October 30, 2006) for services rendered valued at
approximately $94,080. The shares of Common Stock were issued under the
exemption from registration in Section 4(2) of the Securities Act. Knightsbridge
acknowledged that the securities to be issued have not been registered under the
Securities Act, that it understood the economic risk of an investment in the
securities, and that it had the opportunity to ask questions of and receive
answers from our management concerning any and all matters related to
acquisition of the securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PROXY STATEMENT
On September 22, 2006, an annual meeting of our shareholders (the
"Meeting") was held to authorize an amendment to our Articles of Incorporation
to increase the authorized number of shares of Common Stock from 195,000,000 to
3,000,000,000 (the "Amendment"). We distributed a Proxy Statement dated August
29, 2006 and supporting documentation to our shareholders.
Only shareholders of record at the close of business on August 29, 2006
(the "Record Date") were entitled to notice or and to vote the shares of common
stock held by them on such date at the Meeting or any and all adjournments
thereof. As of the Record Date, an aggregate 195,000,000 shares of Common Stock
were outstanding. There was no other class of voting securities outstanding at
that date. Each share of Common Stock held by a shareholder entitled such
shareholder to one vote on each matter that was voted at the Meeting. The
presence, in person or by proxy, of the holders of a majority of the outstanding
share of Common Stock was necessary to constitute a quorum at the Meeting.
Assuming that a quorum was present, the affirmative vote of the holders of a
majority of the shares of Common Stock outstanding was required to approve the
matters presented for approval at the Meeting.
13
On September 22, 2006, the Meeting of shareholders was held with the
resulting votes cast either in person or proxy as below:
1. Authorization and approval to file the Amendment.
For 112,614,289
Against 18,645,716
Abstain 2,557,978
Broker non-vote 0
INFORMATION STATEMENT
On October 31, 2006, our Board of Directors authorized an Information
Statement to be filed under Section 14(c) of the Securities Exchange Act (the
"Information Statement"). The Information Statement is being circulated to our
shareholders in connection with the taking of corporate action without a meeting
upon the written consent (the "Written Consent") of the holders of a majority of
the outstanding shares of our Common Stock. The names of the shareholders who
will be signing the Written Consent and their respective equity ownership are as
follows: (i) Donna Silverman holding of record 48,516,404 shares of Common Stock
(16.01%); (ii) Knightsbridge Holdings LLC holding of record 12,060,737 shares of
Common Stock (3.98%); (iii) W. Sylvester Corp. holding of record 12,000,000
shares of Common Stock (3.96%); (iv) Jeff Sternberg holding of record 12,000,000
shares of Common Stock (3.96%); (v) Craig Press holding of record 12,000,000
shares of Common Stock (3.96%); (vi) Lil' Cobble holding of record 12,000,000
shares of Common Stock (3.96%); (vii) Ashley Jourdan Trust holding of record
12,000,000 shares of Common Stock (3.96%); (viii) Stephen Dwyer holding of
record 12,000,000 shares of Common Stock (3.96%); (ix) Alexa Caroline Trust
holding of record 12,000,000 shares of Common Stock (3.96%); and (x) Alexy
Resources LLC holding of record 12,000,000 shares of Common Stock (3.96%).
The matters upon which action is proposed to be taken are: (i) to approve
and to authorize our Board of Directors to effect a reverse stock split of
one-for-thirty (the "Reverse Stock Split") of our outstanding Common Stock,
depending upon a determination by our Board of Directors that a Reverse Stock
Split is in our best interests and our shareholders; and (ii) to approve the
adoption an amendment to our Articles of Incorporation to authorize a class of
"blank check" preferred stock consisting of 20,000,000 authorized shares (the
"Amendment").
The date, time and place at which action is to be taken by Written Consent
on the matters to be acted upon, and at which consents are to be submitted, is
December 11, 2006 at 10:00 Eastern time at 18851 NE 29th Avenue, Suite 306,
Aventura, Florida 32180 .
The Information Statement is being first sent or given to security holders
on approximately November 16, 2006.
14
ITEM 5. OTHER INFORMATION.
RESIGNATION OF DIRECTOR/APPOINTMENT OF DIRECTOR
On October 31, 2006, our Board of Directors accepted the resignation of
Michael Abri as a member of the board of directors effective October 31, 2006.
On October 31, 2006, our Board of Directors, pursuant to written unanimous
consent, appointed Craig Press as a member to our Bard of Directors effective as
of October 31, 2006.
From 1996 to the present, Mr. Press has been the vice president and head of
operations for Georal International, Corp. and AJR International, Ltd., both
located in Whitestone, New York. His responsibilities include the oversight and
management of day to day operations of both company's employees, its sales,
marketing, public relations and construction, of all of the company's products
and services. Additionally, he is responsible for the day to day operations of
the company's California facility and its personnel as well. Mr. Press also
maintains control of the company's contacts with federal, state and municipal
organizations as well as major real estate, banking and industrial corporations.
Mr. Press is also a security consultant for anti-terrorism perimeter security,
employee entrance and egress, fire, building and safety codes and negotiates all
labor contracts with the New York City unions with which his company interacts.
As of the date of this Quarterly Report, we do not have any contractual
arrangements with Mr. Press.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K:
Report on Form 8-K Item 1.01 and 5.02 filed with the Securities and
Exchange Commission on January 10, 2006.
Report on Form 8-K Item 5.02 filed with the Securities and Exchange
Commission on November 3, 2006.
Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Securities
Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
31.2 Certification of Chief Financial Officer pursuant to Securities
Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule
13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15
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: November 14, 2006 TECH LABORATORIES, INC.
By: /s/ DONNA SILVERMAN
___________________________
Donna Silverman
Chief Executive Officer
By: /s/ DONNA SILVERMAN
___________________________
Donna Silverman
Chief Financial Officer
16
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.
On July 30, 2003, a former director and a former employee filed a joint lawsuit
in Superior Court of New Jersey, Passaic County, against us for consulting fees
and expenses, respectively. In the same lawsuit, W.T. Sports filed a claim for a
commission owed on sales due from a licensing agreement with us. The claims by
the former director and former employee are for about $10,000 and we deny any
liability under these claims and are defending the lawsuit. With regard to W.T.
Sports, our agreement has an arbitration in case of dispute and therefore we are
attempting to move this case to arbitration. We believe that we have a
counterclaim, which is far in excess of the amount they claim we owe for the
licensing fees. On November 11, 2004, an arbitration hearing took place. On
December 31, 2004, the arbitrator awarded $35,148 to WT Sports. Tech Labs can
continue to manufacture the system in the United States.
On June 30, 2004, the law firm of Stursberg & Veith, former counsel to Tech
Laboratories, Inc., filed a lawsuit
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2006. Based on
this evaluation, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in the reports we file or
submit under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms and that our disclosure and controls are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
There were no changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls over financial
reporting that occurred during the third quarter of fiscal 2006 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
17
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.
On July 30, 2003, a former director and a former employee filed a joint lawsuit
in Superior Court of New Jersey, Passaic County, against us for consulting fees
and expenses, respectively. In the same lawsuit, W.T. Sports filed a claim for a
commission owed on sales due from a licensing agreement with us. The claims by
the former director and former employee are for about $10,000 and we deny any
liability under these claims and are defending the lawsuit. With regard to W.T.
Sports, our agreement has an arbitration in case of dispute and therefore we are
attempting to move this case to arbitration. We believe that we have a
counterclaim, which is far in excess of the amount they claim we owe for the
licensing fees. On November 11, 2004, an arbitration hearing took place. On
December 31, 2004, the arbitrator awarded $35,148 to WT Sports. Tech Labs can
continue to manufacture the system in the United States.
On June 30, 2004, the law firm of Stursberg & Veith, former counsel to Tech
Laboratories, Inc., filed a lawsuit in the United States District Court for the
Southern District of New York claiming that the plaintiff delivered certain good
and valuable services to Tech laboratories and is owed $161,179.26 plus
interest, costs, and disbursements for each cause of action, and other and
further relief as the Court may deem necessary. The complaint alleges four
causes of action including an unpaid account, stated breach of contract, quantim
meruit, and unjust enrichment. We disagree with the amount of the unpaid balance
owed to the plaintiff. We have filed a counterclaim for overcharging by the
plaintiff. On December 5, 2005, a judgment was rendered by the court to make
payment of $204,834.10, including interest.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES.
None.
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
On January 10, 2006, the Company filed an 8K based on a change in the
Board of Directors of the Company.
18
TECH LABORATORIES, INC.
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: ______________________________ TECH LABORATORIES, INC.
By: /s/ DONNA SILVERMAN
________________________
Donna Silverman
Chief Executive Officer,
Chief Financial Officer
and President
19