Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
RTBC > SEC Filings for RTBC > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for ROTOBLOCK CORP | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ROTOBLOCK CORP


14-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly report of Form 10Q for the third quarter, including the following management's discussion and analysis, and other reports filed by the registrant from time to time with the securities and exchange commission (collectively the "filings") contain forward-looking statements which are intended to convey our expectations or predictions regarding the occurrence of possible future events or the existence of trends and factors that may impact our future plans and operating results. these forward-looking statements are derived, in part, from various assumptions and analyses we have made in the context of our current business plan and information currently available to us and in light of our experience and perceptions of historical trends, current conditions and expected future developments and other factors we believe to be appropriate in the circumstances. you can generally identify forward-looking statements through words and phrases such as "seek", "anticipate", "believe", "estimate", "expect", "intend", "plan", "budget", "project", "may be", "may continue", "may likely result", and similar expressions. when reading any forward-looking statement you should remain mindful that all forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of our company, and are subject to risks, uncertainties, assumptions and other factors relating to our industry and results of operations, including but not limited to the following factors:

Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Each forward-looking statement should be read in context with, and with an understanding of, the various other disclosures concerning our company and our business made in our filings. You should not place undue reliance on any forward-looking statement as a prediction of actual results or developments. We are not obligated to update or revise any forward-looking statement contained in this report to reflect new events or circumstances unless and to the extent required by applicable law.

Recent Developments

We have approximately ten project installations that are in various stages from completed with operational testing underway to those currently under construction. These installations for medical waste treatment are located in the following provinces of China : Sichuan ,Guangdon and Guangxi.

Results of Operations



The following table sets forth, as a percentage of net sales, certain items
included in Rotoblock's Statements of Operations (see Financial Statements and
Notes) for the periods indicated:



                                      Three Months                 Nine Months
                                   ended September 30          ended September 30
                                   2012        2011 (1)        2012          2011
Statements of Operations Data:
Net sales                           100.0  %      100.0  %        100  %        100  %
Cost of sales

                                    (78.1)       (185.2)        (72.6)        (77.6)
Operating expenses                  (51.0)       (616.3)        (98.7)       (147.8)
Loss from operations                (29.1)       (624.8)        (71.4)       (125.4)
Net Income (loss)                   (32.5)       (609.9)        (75.1)         84.6

(1) The percentages are unusually high for the 3 months ended September 30, 2011 since only minimal revenue was able to be recognized during the period.

Quarter Ended September 30, 2012 Compared to Quarter Ended September 30, 2011

Note: Only minimal revenue was able to be recognized in the 3 month period ended September 30, 2011 while the operating expenses were comparative to other Periods.

Sales increased by $722,218 from 5,640 for the quarter ended September 30, 2011 to $727,858 for the quarter ended September 30, 2012. The increase was due to completion of a major installation project with high capacity equipment.

Cost of Goods Sold increased by $557,717 from $10,447 for the quarter ended September 30, 2011 to $568,164 for the quarter ended September 30, 2012. The increase was due to the above product costs associated with the above major installation.

Gross profit increased by $164,501 from a gross loss of $4,807 for the quarter ended September 30, 2011 to $159,694 for the quarter ended September 30, 2012. The increase was primarily due to recognition of the above mentioned major installation. As a percentage of sales, the Gross Profit for the quarter was 22% for 2012.

Selling and distribution expenses decreased by $22,574 from $117,328 for the quarter ended September 30, 2011 to $94,754 for the quarter ended September 30, 2012. The reason for the decrease was due less expenses for sales related travel.

Administrative and other operating costs increased by $43,089 from $227,202 for the quarter ended September 30, 2011 to $270,291 for the period ended September 30, 2012. The increase was primarily due to the inclusion of Rotoblock U.S. corporate for the second quarter ended September 30, 2012. Since the merger did not occur until November 2011. The Company incurred additional expenses for the following: legal and professional fees, consulting expenses. The actual Administrative and Other operating costs for the Company's China and Hong Kong operations were less due to fewer employees during the quarter ended September 30, 2012 as compared to 2011.

Depreciation increased by $3,095 from $3,048 for the quarter ended September 30, 2011 to $6,143 for the quarter ended September 30, 2012. The increase was mainly due to the acquisition with Rotoblock U.S. office for its office equipment and vehicle.

Other income increased by $6,289 from $9,235 for the quarter ended September 30, 2011 to $15,524 for the quarter ended September 30, 2012. The other income generated for the current quarter is mainly due to service income and maintenance income for medical waste equipment.

Financial expense increased by $39,239 from $1,194 for the quarter ended September 30, 2011 to $40,433 for the quarter ended September 30, 2012. The increase was mainly due to interest on loan with a related party of American Pacific Medical Group Limited for $435,641 at 7% p.a. payable of $7,665 Interest on Samyang Optics Convertible Debt for $2 millions at 6% p.a. payable of $30,247 interest on Asher Enterprises Inc. Convertible Debt for $37,500 at 8% p.a. payable of $756.

Interest Income decreased slightly from $343 for the quarter ended September 30, 2011 to $120 for the quarter ended September 30, 2012 due to less cash balances in the bank accounts subject to interest.

Net Loss for the quarter ended September 30, 2012 was $236,283 compared to $344,000 for the period ended September 30, 2011.

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

Sales increased by $498,900 from $844,054 for the nine months ended September 30, 2011 to approximately $1.3 million for the nine months ended September 30, 2012. The increase was due to three installations completed during the first nine months of 2012 as compared to two completed in 2011.

Cost of Goods Sold increased by $320,792 from $654,854 for the nine months ended September 30, 2011 to $975,583 for the nine months ended September 30, 2012. The increase was due to the additional installation completed in 2012. As a percentage of sales, the products costs were 72.6% and 77.6% for 2012 and 2011, respectively.

Gross profit increased by $178,171 from $189,200 for the nine months ended September 30, 2011 to $367,371 for the nine months ended September 30, 2012. The increase was due to improvements in cost control, where the sales margins increased from 22% to 27% for the nine months ended September 30, 2012 and for the nine months ended September 30, 2011 respectively.

Selling and distribution expenses. Decreased by $54,135 from $342,235 for the nine months ended September 30, 2011 to $288,100 for the nine months ended September 30, 2012. The reason for the decrease was less travel expenses and improved cost controls over technical and distribution expenditures.

Administrative and other operating costs increased by $123,235 from $896,147 for the nine months ended September 30, 2011 to approximately $1 million for the nine months ended September 30, 2012. The increase was primarily due to the inclusion of Rotoblock U.S.corporate for the nine months ended September 30, 2012. Since the merger did not occur until November 2011. The Company incurred additional expenses for the following: legal and professional fees, consulting expenses and stock based compensation. The actual expenses for the Company's China and Hong Kong operations were less due to the reduction of staff, with less travel expenses and professional fees incurred in China.

Depreciation increased by $9,359 from $9,018 for the nine months ended September 30, 2011 to $18,377 for the nine months ended September 30, 2012. The increase was mainly due to the acquisition with Rotoblock U.S. Corporate for its office equipment and vehicle.

Other income decreased by approximately $1.7 million from $1.7 million for the nine months ended September 30, 2011 to $67,110 for the nine months ended September 30, 2012. Other income of $1.7 million in 2011 was primarily due to the cancellation of two sales contracts by customers where the installation deposits of approximately $1.7 million were forfeited to us.

Financial expense increased by $114,774 from $2,367 for the nine months ended September 30, 2011 to $117,141 for the nine months ended September 30, 2012. The increase was mainly due to the following: interest on loan with a related party of American Pacific Medical Group Limited for $435,641 at 7% p.a. payable of $22,383, interest on Samyang Optics Convertible Debt for $2 millions at 6% p.a. payable of $90,082, interest on Asher Enterprises Inc. Convertible Debt for $37,500 at 8% p.a. payable of $1,718.

Interest Income Decreased from $1,024 for the nine months ended September 30, 2011 to $502 for the nine months ended September 30, 2012. The decrease is due to be less cash deposit into the saving account and escrow account.

Net Income (Loss ) The net loss for the nine months ended September 30, 2012 was approximately $1 million compared to a Net Income of $713,682 for the nine months ended September 30, 2011.

Liquidity and Capital Resources

In assessing our liquidity, we monitor and analyze our cash on-hand, liquidation value of our investment in securities, and our operating and capital expenditure commitments. Our principal liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. In assessing our liquidity, we monitor and analyze our cash on-hand, liquidation value of our investment in securities, and our operating and capital expenditure commitments. Our principal liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations.

Our principal sources of liquidity consist of our existing cash on hand, our investment in securities with Samyang Optics, Ltd of $755,264. As of September 30, 2012, we had a loan of $458,024 due to American Pacific Medical Group Limited, a related party of daifuWaste Group, with loan interest rate at 7% per annum, from January 1, 2012. We also have convertible debt for $39,218 with Asher Enterprises Inc with interest rate at 8% per annum. During the first nine months of 2012, we received loans of $474, 900 from Physican Medical Technology (Shenzhen) Co. Ltd and $79,150from daifu MD Internet Information Services Ltd.. Both lenders are related to daifuWaste Group and are unsecured and non-interest bearing and are repayable on request.

We will require additional capital to expand our current operations. In particular, we require additional capital to expand our customer base by the addition of qualified sales and professional staff to execute on our business plan and pursue our efforts in the research and development.

We intend to fund our long term liquidity needs related to operations through the incurrence of indebtedness, equity financing or a combination of both. Although we believe that these sources will provide sufficient liquidity for us to meet our future liquidity and capital obligations, our ability to fund these needs will depend on our future performance, which will be subject in part to general economic, financial, regulatory and other factors beyond our control, including trends in our industry and technological developments. However, we may not be able to obtain this additional financing on terms acceptable to us or at all.

We used cash in operations of $570,902 and of $334,699 during the nine months ended September 30, 2012 and 2011 respectively.

Cash used in operations during the first nine months ended September 30, 2012 was the result of the net loss incurred for the periods of approximately $1 million, offset by non-cash expenses of $331,576. In the first nine months of 2012, non-cash expenses were due to depreciation and amortization, non-cash interest, non-controlling interest, stock/warrants issued for compensation and consulting fees.

Cash used in operations for the first nine months ended June 30, 2011 was the result of the net profit of $713,682, offset by non-cash expenses of $79,876. In the first nine months of 2011, non-cash expenses were due to depreciation and amortization, non-controlling interest and stock based compensation for certain equity instruments.

For the first nine months ended September 30, 2012, the net change in operating assets and liabilities resulted in a cash increase of $290,350. The change was primarily due to the following: an decrease of $26,501 in deferred revenue, an increase of $308,733 in other payables and accrued liabilities as a result of executive pay, legal and accounting fee with offset a decrease in VAT Taxes, an increase of $417,287 in accounts receivable and an increase of $169,971 in inventory, offset by an decrease of $308,733 in prepayments and other receivables.

For the first nine months ended September 30, 2011, the net change in operating assets and liabilities resulted in a cash decrease of approximately $1.1 million The change was primarily due to the following: a decrease of $1.7 million in deferred revenue which was recognized into income, an increase of $212,776 in other payables and accrued liabilities mainly for executive pay, a decrease of $94,097 in accounts receivable and a decrease of $614,772 in payment to suppliers, offset by an increase of $346,206 in inventory.

Investing activities used cash of $0 for the first nine months ended September 30, 2012, however, cash of $293,590 was used in the first six months ended June 30, 2011, to acquire a 35% share interest in a MWT center in Qinghai Province. The center was expected to start business in the last quarter of 2012. However, due to delay of utilities supply, it is expected to start business once the government approval is granted.

Financing activities provided cash of $532,969 for the first nine months ended September 30, 2012 and provided cash of $271,373 for the first nine months ended September 30, 2011. In the first nine months ended September 30, 2012, we received cash of $17,000 through the issuance of convertible debt and used $64,022 of cash to deposit in a restricted cash account to ensure certain project performances. Also we received $579,991 in unsecured loans from two related parties of daifuWaste Group for operating use.

In the first nine months of 2011, we received total cash of $271,373 due to the following: the exercise of stock options of $100,000 and the release of previously restricted cash of $4.1 million and advances from related parties of $410,000. The cash inflows were offset by the use of $4.3 million to settle the redemption of preferred stock in our 100% subsidiary daifuWaste Management Holding Ltd.

We had cash and cash equivalents of $106,386 at September 30, 2012 as compared to $144,202 at December 31, 2011. We had working capital deficits of $3.3 million and $2.6 million at September 30, 2012 and December 31, 2011, respectively.

We will need additional funding to sustain our operations at our current levels through the next twelve months.

Critical Accounting Policies and Use of Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in conformity with U.S. generally accepted accounting principles which requires our management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reporting period. The amounts estimated could differ from actual results.

Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The more significant estimates relate to revenue recognition, contractual allowances and uncollectible accounts, intangible assets, accrued liabilities, income taxes, litigation and contingencies. Estimates are based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for judgments about results and the carrying values of assets and liabilities. Actual results and values may differ significantly from these estimates

Stock Based Compensation

The Company accounts for stock-based compensation under the provisions of FASB ASC Topic 718, Compensation-Stock Compensation ("ASC 718"), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes-Merton option pricing model (the "Black-Scholes model"). The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. We estimate forfeitures at the time of grant and revise our estimate in subsequent periods if actual forfeitures differ from those estimates.

The Company accounts for stock-based compensation awards and warrants granted to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees ("ASC 505-50"). Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts when management estimates collectability to be uncertain. Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection. In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience. The Company determined that no allowance was needed at September 30, 2012 and 2011.

Inventories

Inventories consist primarily of raw materials and are valued at the lower of cost or market value with cost determined on a specific identification basis. In assessing the ultimate realization of inventories, management makes judgments as to future demand requirements compared to current or committed inventory levels. The Company's reserve requirements generally increase/decrease due to management's projected demand requirements, market conditions and product life cycle changes. During the first nine months ended September 30, 2012, the Company did not make any allowance for slow-moving or defective inventories.

Off-Balance Sheet Arrangements

None.

  Add RTBC to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for RTBC - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.