<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Six Months Ended December 31, 1995 Commission File No. 0-4123
MOYCO TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-1697233
- ----------------------------- ---------------------------------
(State or other Jurisdiction) (IRS Employer Identification No.)
200 Commerce Drive Montgomeryville, PA 18936
- ----------------------------------------- ----------
*(Address of Principal Executive Offices) (Zip Code)
200 Commerce Drive, Montgomeryville, PA 18936
- --------------------------------------------------------------------------------
*(As of June 1995 Principal Executive Offices)
Registrant's telephone number, including area code: (215) 855-4300
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ NO _____
On December 31, 1995, there were 4,019,215 shares of the Registrant's common
stock outstanding.
Page 1
<PAGE>
Item 1. Financial Information
MOYCO TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1995 June 30,
ASSETS (Substantially Pledged) (Note 3) (Unaudited) 1995
------------ --------
<S> <C> <C>
Current Assets
Cash (including cash equivalents of $0 at
December 31, 1995 and June 30, 1995) ............. $ 975,425 $ 1,097,323
Accounts receivable, net of doubtful account
allowances of $78,990 at December 31, 1995
and $78,990 at June 30, 1995) .................... 1,912,276 1,932,913
Note Receivable-Trade .............................. 16,351 41,051
Other Receivable ................................... -- 198,000
Inventories, estimated (Note 1 and 2) .............. 3,489,907 3,218,077
Prepaid expenses ................................... 59,364 25,147
----------- -----------
Total Current Assets ........................ 6,453,323 6,512,511
----------- -----------
Property, Plant and Equipment
Land ............................................... 452,433 452,433
Buildings and improvements ......................... 4,371,102 4,172,201
Automotive equipment ............................... 48,511 48,511
Machinery and equipment ............................ 4,767,359 4,586,844
Furniture and fixtures ............................. 575,857 503,450
----------- -----------
10,215,262 9,763,439
Less: Accumulated Depreciation .................... 4,050,519 3,771,798
----------- -----------
Net Property, Plant and Equipment ........... 6,164,743 5,991,641
----------- -----------
Other Assets
Unamortized patents and trademarks, net of
accumulated amortization of $51,936 at December
31, 1995 and $48,309 at June 30, 1995
(Note 1 & 4) ..................................... 790,370 7,253
Unamortized mortgage costs, net of accumulated
amortization of $37,313 at December 31, 1995
and $35,243 at June 30, 1995 (Note 1)............. 27,632 29,702
Surrender Value Officers Life ...................... 22,660 22,660
Deposits and Other Assets .......................... 65,282 419,898
----------- -----------
Total Other Assets ........................ 905,944 479,513
----------- -----------
TOTAL ASSETS ................... $13,524,010 $12,983,665
=========== ===========
</TABLE>
See accompanying notes.
Page 2
<PAGE>
<TABLE>
<CAPTION>
December 31,
1995 June 30,
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 1995
----------- ------------
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt (Note 3 & 4) ............. $ 1,237,828 $ 526,954
Accounts payable .............................................. 917,574 963,231
Accrued expenses:
Payroll ..................................................... 63,667 194,556
Interest .................................................... 66,563 33,750
Other ....................................................... 39,707 138,900
Profit Sharing .............................................. -- 15,000
Income Tax .................................................. 45,891 50,375
----------- -----------
Total Current Liabilities ............................. 2,371,230 1,922,766
Long-term debt, net of current maturities ......................... 6,517,388 6,735,460
Deferred income taxes ............................................. 174,864 174,864
----------- -----------
Total Liabilities ..................................... 9,063,482 8,833,090
----------- -----------
Shareholders' Equity
Preferred stock, $.005 par value .............................. -- --
Authorized 2,500,000 shares,
None issued
Common stock, $.005 par value ................................. 23,768 22,654
Authorized 15,000,000 shares
Issued 4,611,090 shares
Additional paid-in capital .................................... 3,101,503 3,038,892
Retained Earnings ............................................. 1,456,210 1,209,982
Less: Treasury stock 591,875 shares at December 31,
1995 and at June 30, 1995, at cost ........................ 120,953 120,953
----------- -----------
Total Shareholders' Equity ............................ 4,460,528 4,150,575
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................ $13,524,010 $12,983,665
=========== ===========
</TABLE>
<PAGE>
MOYCO TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
DECEMBER 31
-----------------
1995 1994
---- ----
Net Sales .............................. $5,891,504 $5,707,050
Cost of Sales .......................... 3,439,799 3,437,127
---------- ----------
Gross Profit ........................... 2,451,705 2,269,923
Operating Expenses ..................... 1,718,930 1,623,848
---------- ----------
Income from Operations ................. 732,775 646,075
---------- ----------
Other Income (Expenses)
Interest Expense ..................... (376,037) (162,929)
Other Income ......................... 68,416 57,576
---------- ----------
Total Other Income (Expense) ........... (307,621) (105,353)
---------- ----------
Income Before Provision for Income Taxes 425,154 540,722
---------- ----------
Provision for Income Taxes ............. 178,926 225,613
---------- ----------
Net Income ............................. 246,228 315,109
Retained Earnings, beginning of period . 1,209,982 673,668
---------- ----------
Retained Earnings, end of period ....... $1,456,210 $ 988,777
========== ==========
Earnings per Share ..................... $ 0.06 $ 0.08
========== ==========
Weighted Average Number of Common Shares 4,019,215 3,931,385
========== ==========
See accompanying notes.
Page 3
<PAGE>
MOYCO TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
DECEMBER 31
----------------------
1995 1994
--------- --------
Net Sales ..................................... $3,181,420 $2,867,621
Cost of Sales ................................. 1,776,816 1,790,020
---------- ----------
Gross Profit .................................. 1,404,604 1,077,601
Operating Expenses ............................ 884,041 788,662
---------- ----------
Income from Operations ........................ 520,563 288,939
---------- ----------
Other Income (Expenses)
Interest Expense ............................ (212,788) (59,010)
Other Income (Expenses) ..................... (857) 8,398
---------- ----------
Total Other Income (Expense) .................. (213,645) (50,612)
---------- ----------
Income Before Provision for Income Taxes ...... 306,918 238,327
---------- ----------
Provision for Income Taxes .................... 129,168 98,350
---------- ----------
Net Income .................................... 177,750 139,977
Retained Earnings, beginning of period ........ 1,278,460 848,800
---------- ----------
Retained Earnings, end of period .............. $1,456,210 $ 988,777
========== ==========
Earnings per Share ............................ $ 0.04 $ 0.04
========== ==========
Weighted Average Number of Common Shares ...... 4,019,215 3,931,385
========== ==========
See accompanying notes.
Page 4
<PAGE>
MOYCO TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
Increase (Decrease) in cash and cash equivalents
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1994
------ ------
<S> <C> <C>
Net cash provided by operating activities ............. $ 325,953 $ 309,199
Cash flows from investing activities
(Expenditures) Retirements for property,
plant and equipment ................................. ( 508,252) ( 2,281,025)
Expenditures for other assets ....................... ( 432,401) ( 22,123)
---------- ----------
Net Cash (used in) investing activities ............. ( 940,653) ( 2,303,148)
---------- ----------
Cash flows from financing activities
Reduction of long-term debt obligations ............. ( 347,198) ( 1,167,368)
New borrowings of long-term debt .................... 840,000 2,943,203
---------- ----------
Net cash Provided by financing activities ........... 492,802 1,775,835
---------- ----------
Net (Decrease) in cash ................................ ( 121,898) ( 218,114)
Cash and cash equivalents, beginning of period ........ 1,097,323 1,447,565
---------- ----------
Cash and cash equivalents, end of period .............. $ 975,425 $1,229,451
========== ==========
</TABLE>
See accompanying notes.
Page 5
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
Note 1: Summary of Significant Accounting Policies
Nature of Business
------------------
The Company is engaged in the business of manufacturing dental
waxes, dental supplies, endodontic and dental products,
pharmaceuticals, precision coated abrasives, commercial
abrasives, and is a repacker of other disposable products for
commercial and industrial use.
Principles of Accounting
------------------------
The balance sheet as of December 31, 1995, and the related
statements of operations and retained earnings, and cash flows
for the six months ended December 31, 1995 and 1994 are
unaudited: in the opinion of management, all adjustments
necessary for a fair presentation of such financial statements
have been included. Such adjustments consisted only of normal
recurring items. Interim results are not necessarily
indicative of results for a full year.
Valuation of Inventories
------------------------
Inventories are stated at the lower of cost or market. Costs
of raw materials and cartons are determined by the first-in,
first-out method. Labor and overhead included in
work-in-process and finished goods are determined at average
cost. Ending inventories at interims are estimated by the
gross profit method.
Depreciation
------------
Depreciation is computed by the straight-line method at rates
adequate to allocate the cost of applicable assets over their
expected useful lives.
Patents and Trademarks
----------------------
The costs of patents and trademarks are capitalized and
amortized to operations over their estimated useful lives or
statutory lives, whichever is shorter. Amortization is
computed by the straight-line method. Cost of defending
patents are added to the unamortized balance at date of
incurred expenditure. At such time as litigation is resolved
the remaining balance will be amortized over the remaining
useful lives.
Mortgage Costs
--------------
Mortgage costs are being amortized over the terms of the
related mortgages.
Page 6
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
Note 1: Summary of Significant Accounting Policies (Continued)
Income Taxes
------------
The Company provides for deferred income taxes resulting from
timing differences resulting from using different depreciation
methods and different methods of recording and amortizing
interest costs related to the acquisition and rehabilitation
of the Montgomeryville building. They also result from the use
of the uniform capitalization rules and bad debt reserve
policy required by the Tax Reform Act of 1986. Job credits for
increasing research activities are accounted for the
flow-through method which recognizes the credits as reductions
of federal income tax expenses in the year utilized.
Research and Development
------------------------
Research and development costs are charged to expense as
incurred. The amounts charged for the six months ended
December 31, 1995 and year ended June 30, 1995 were $810 and
$35,718 respectively, and are included in costs of sales
category.
Earnings Per Common Share
. -------------------------
Earnings per common share have been computed by dividing
earnings for each year by the weighted average number of
common shares outstanding during each period.
Note 2: Inventories (Estimated)
The components of inventory are as follows:
December 31, June 30,
1995 1995
------------ ----------
Raw materials ........ $ 881,874 $ 813,185
Work-in-process ...... 819,850 755,992
Finished goods ....... 1,601,796 1,477,032
Cartons .............. 186,387 171,868
---------- ----------
$3,489,907 $3,218,077
========== ==========
Page 7
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
Note 3: Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1995 June 30,
(Unaudited) 1995
----------- ----------
<S> <C> <C>
Mortgages Payable
Mortgage payable in monthly installments of $6,569, including
interest at .85% of prime (not to exceed 15% or be below
8.5%), which matures in August 2001 ........................ $ 326,103 $ 351,260
Mortgage payable in monthly installments of $5,053, including
interest at 8.75% for five years and at prime plus 1% for the
remaining term through maturity December 1, 2009 ............ 487,073 496,805
Mortgage payable in monthly installments of $14,950 including
interest at 9.25% for five years and at prime plus 1% for the
remaining term through maturity May 1, 2010 ................ 1,423,307 1,448,847
Mortgage Payable
Municipal Authorities
Mortgage payable in 180 monthly installments of $1,952,
including interest at 2%, which matures April 1, 2010........ 285,738 295,200
Mortgage payable in 180 monthly installments of $6,371,
including interest at 2%, which matures July 1, 2010......... 956,789 990,126
Other
Note payable due December 31, 1997 with monthly interest only
payments at prime beginning July 1995 until maturity......... 350,000 350,000
Auto loan payable in forty eight monthly installments
of $838 plus interest at 7.75%............................... 23,205 30,176
Note payable in quarterly interest-only payments through
1996. Thereafter, twenty equal quarterly payments
including principal and interest at prime. (interest rate
not to exceed 10% or be below 8%)............................ 1,500,000 1,500,000
</TABLE>
Page 8
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
Note 3: Long-Term Debt (Continued)
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31
1995 June 30,
(Unaudited) 1995
----------- --------
<C> <C> <C>
Commercial term note payable in monthly installments of
$30,000 plus interest at prime rate plus 1/2% beginning August
1, 1995 which matures August 1, 2000 ........................... 1,620,000 1,800,000
Commercial term note payable in sixty monthly installments of
$2,333 plus interest at 8.65%, beginning October, 1995 which
matures September 2000 .......................................... 133,001 --
Credit line payable dated December 31, 1991. Amended
November 28, 1994. Interest rate of prime plus .5%............... 650,000 --
----------- -----------
7,755,216 7,262,414
Less: Current Maturities ....................................... (1,237,828) ( 526,954)
----------- -----------
Substantially all of the Company's Assets are pledged as
collateral for the long-term debt................................ $ 6,517,388 $ 6,735,460
=========== ===========
</TABLE>
As of December 31, 1995 long-term debt matures as follows:
1996 $1,237,828
1997 1,248,642
1998 902,986
1999 911,738
2000 737,193
Thereafter 2,716,829
---------
$7,755,216
Note 4: Subsequent Events
On January 24, 1996 the company entered into a confidential
Settlement Agreement with Tulsa Dental Products L.L.C. to
resolve litigation involving three Moyco patents. As a result,
Moyco has licensed these patents for use by Tulsa Dental
Products L.L.C. The Settlement Agreement dismisses all
claims made by either party.
Net proceeds have not been determined as all costs are not
ascertainable as of this date. The costs to defend this claim
have been included on the balance sheet in other unamortized
patents and trademarks awaiting final determination.
Additionally proceeds were used to extinguish a note of
$350,000.
On January 26, 1996 the company was accepted on NASDAQ and
listed on the national market with a trading symbol of MOYC.
Page 9
<PAGE>
MOYCO TECHNOLOGIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
SIX MONTHS ENDED DECEMBER 31, 1995
Results of Operations
Comparison of recent quarter (12/31/95) and immediate preceding Quarter
(9/30/95):
Net sales increased by $471,336 and is attributable to the increased
product demand.
The increase in gross profit is correlated to the increase in volume.
The procedure for computing inventories by department is the gross
profit method using the previous fiscal years actual gross profit
percentage, unless management is aware of a significant adjustment
required in the quarter, continues as the standard procedure in
computing interim in quarterly accounting.
Operating expenses increased marginally as compared to preceding
quarter.
The increase in net profit is related to the increase in sales.
Working capital is sufficient for current operating needs however,
should the current state of the economy continue, both nationally and
internationally, the need for additional sales levels will put further
stress on working capital needs. Inflationary pressures have
significantly less bearing on current profitability than the continued
need for additional sales.
Page 10
<PAGE>
MOYCO TECHNOLOGIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
(Continued)
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
SIX MONTHS ENDED DECEMBER 31, 1995
Comparison of recent Quarter (12/31/95) and Equivalent Quarter (12/31/94):
--------------------------------------------------------------------------
Net sales increased by $313,799 and is attributable to increased
product demand.
The procedure for computing inventories by department by the gross
profit method, using the previous fiscal years actual gross profit
percentage unless management is aware of a significant adjustment
required in the quarter continues as the standard procedure in
computing interim quarterly accounting.
Manufacturing and operating overhead costs should realize some
reduction as a result of consolidating operations which began at the
start of the 1996 calendar year.
Operating expenses increased by $95,379 in the current quarter which is
attributable to costs related to the opening of new facilities.
Interest expense has increased by $153,778 as a result of additional
borrowings.
The increase in net profit is directly related to the increase in
sales.
Working capital is sufficient for current operating needs, however
should the state of the economy continue the need for additional sales
levels will put further stress on working capital. Inflationary
pressures have significantly less bearing on current profitability than
the continued need for additional sales.
Page 11
<PAGE>
MOYCO TECHNOLOGIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
(Continued)
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
SIX MONTHS ENDED DECEMBER 31, 1995
Comparison of Recent Year-to-Date (12/31/95) and Equivalent Period in
---------------------------------------------------------------------
Prior Year (12/31/94):
----------------------
Net sales increased by $184,454. The increase was in both our abrasive
and dental segments. Cost of sales remained stable. The procedure for
computing interim inventories by department by the gross profit method,
using the previous fiscal years actual gross profit percentage, unless
management is aware of a significant adjustment required in the
quarter, continues as the standard procedure in computing interim
accounting.
Operating expenses increased $95,082 and is related to costs associated
with the opening of new facilities.
The decrease in net profit of $68,881 is directly related to the
increase in interest expense as a result of additional debt borrowings.
Increase sales are a constant requirement for growth. We continue to
seek acquisitions as well as continue to pursue new products to expand
our critical mass. In our high tech development as well as the dental
industry, there are many companies with substantially greater
resources. In addition, emerging as well as existing technologies are
subject to rapid change which can create large savings in sales in any
given period. Some of our new products are being tested and we are
optimistic about favorable results. Rapid growth will require the need
for additional funds and alternative means of financing the potential
growth are being investigated.
Page 12
<PAGE>
MOYCO TECHNOLOGIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
(Continued)
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
SIX MONTHS ENDED DECEMBER 31, 1995
Liquidity and Capital Resources
-------------------------------
It is anticipated that pressures on earnings will continue. The current
economic recession, and the continuing need to increase sales to offset
costs are a reality. The addition of capital improvement projects of
plant facilities and equipment, along with the financial commitments,
will require sales growth and earnings to repay the additional debt
service. Moyco currently has enjoyed twenty-one straight quarters of
profitability. Also, changes in the high tech products sold by our
abrasive division are subject to swings which directly effect net sales
and profits.
Moyco Industries, Inc. as of June 30, 1994 was in compliance with the
enactment of the Clean Air Act, effective August 1992.
Uncertainties
-------------
There is a constant need for increased sales in both units and dollars.
There is no stronger factor in determining our companies current and
future abilities to meet debt service and generate future profits. The
economy and the degree of recovery will be a major factor in
forecasting the future.
Litigation
----------
The litigation against Tulsa Dental Products and Quality Dental
Products for their infringement of our patented R tip endodontic
instrument was settled on January 24, 1996. Net proceeds have not been
determined as all final costs are not ascertainable as of this date.
Page 13
<PAGE>
MOYCO TECHNOLOGIES, INC.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - None
(b) Exhibits - None
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
MOYCO TECHNOLOGIES, INC.
(Registrant)
Date _______________________ By ________________________________________
Marvin E. Sternberg
President and Chief Executive Officer
Chairman of the Board
Date _______________________ By ________________________________________
Jerome Lipkin
Vice President and Director
Executive Officer
Date _______________________ By ________________________________________
William G. Woodhead
Secretary/Treasurer and Director
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 975,425
<SECURITIES> 0
<RECEIVABLES> 1,991,266
<ALLOWANCES> 78,990
<INVENTORY> 3,489,907
<CURRENT-ASSETS> 6,453,323
<PP&E> 10,215,262
<DEPRECIATION> 4,050,519
<TOTAL-ASSETS> 13,524,010
<CURRENT-LIABILITIES> 2,371,230
<BONDS> 0
0
0
<COMMON> 23,768
<OTHER-SE> 3,101,503
<TOTAL-LIABILITY-AND-EQUITY> 13,524,010
<SALES> 5,891,504
<TOTAL-REVENUES> 5,959,920
<CGS> 3,439,799
<TOTAL-COSTS> 5,158,729
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 376,037
<INCOME-PRETAX> 425,154
<INCOME-TAX> 178,926
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246,228
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
