<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
Nine Months Ended March 31, 1996 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 March 31, 1996, there were 4,020,415 shares of the Registrant's common stock
outstanding.
Page 1
<PAGE>
Item 1. Financial Information
MOYCO TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1996 June 30,
ASSETS (Substantially Pledged) (Note 3) (Unaudited) 1995
------------ --------
<S> <C> <C>
Current Assets
Cash (including cash equivalents of $0 at
March 31, 1996 and June 30, 1995) $ 1,278,938 $ 1,097,323
Accounts receivable, net of doubtful account
allowances of $78,990 at March 31, 1996
and $78,990 at June 30, 1995) 1,728,353 1,932,913
Note Receivable-Trade 15,850 41,051
Other Receivable -- 198,000
Inventories, estimated (Note 1 and 2) 3,626,151 3,218,077
Prepaid expenses 91,116 25,147
----------- -----------
Total Current Assets 6,740,408 6,512,511
----------- -----------
Property, Plant and Equipment
Land 452,433 452,433
Buildings and improvements 4,362,674 4,172,201
Automotive equipment 48,511 48,511
Machinery and equipment 4,780,292 4,586,844
Furniture and fixtures 533,200 503,450
----------- -----------
10,177,110 9,763,439
Less: Accumulated Depreciation 4,189,878 3,771,798
----------- -----------
Net Property, Plant and Equipment 5,987,232 5,991,641
----------- -----------
Other Assets
Unamortized patents and trademarks, net of
accumulated amortization of $53,749 at March
31, 1996 and $48,309 at June 30, 1995 (Note 1 & 4) 1,813 7,253
Unamortized mortgage costs, net of accumulated
amortization of $38,348 at March 31, 1996
and $35,243 at June 30, 1995 (Note 1) 26,597 29,702
Surrender Value Officers Life 22,660 22,660
Deposits and Other Assets 40,532 419,898
----------- -----------
Total Other Assets 91,602 479,513
----------- -----------
TOTAL ASSETS $12,819,242 $12,983,665
=========== ===========
</TABLE>
See accompanying notes.
Page 2
<PAGE>
<TABLE>
<CAPTION>
March 31,
1996 June 30,
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 1995
----------- -----------
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt (Note 3 & 4) $ 889,783 $ 526,954
Accounts payable 588,687 963,231
Accrued expenses:
Payroll 52,152 194,556
Interest 66,563 33,750
Other 208,210 138,900
Profit Sharing -- 15,000
Income Tax -- 50,375
----------- -----------
Total Current Liabilities 1,805,395 1,922,766
Long-term debt, net of current maturities 5,946,348 6,735,460
Deferred income taxes 174,864 174,864
----------- -----------
Total Liabilities 7,926,607 8,833,090
----------- -----------
Shareholders' Equity
Preferred stock, $.005 par value -- --
Authorized 2,500,000 shares,
None issued
Common stock, $.005 par value 23,773 22,654
Authorized 15,000,000 shares
Issued 4,612,290 shares
Additional paid-in capital 3,104,798 3,038,892
Retained Earnings 1,885,017 1,209,982
Less: Treasury stock 591,875 shares at March 31,
1996 and at June 30, 1995, at cost 120,953 120,953
----------- -----------
Total Shareholders' Equity 4,892,635 4,150,575
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,819,242 $12,983,665
=========== ===========
</TABLE>
<PAGE>
MOYCO TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net Sales $8,770,917 $8,582,079
Cost of Sales 5,194,699 5,078,565
---------- ----------
Gross Profit 3,576,218 3,503,514
Operating Expenses 2,576,904 2,485,261
---------- ----------
Income from Operations 999,314 1,018,253
---------- ----------
Other Income (Expenses)
Interest Expense ( 505,665) ( 284,448)
Other Income 77,514 105,574
Contribution - ( 96,322)
---------- ----------
Total Other Income (Expense) ( 428,151) ( 275,196)
---------- ----------
Income Before Provision for Income Taxes and
Extraordinary Item 571,163 743,057
---------- ----------
Provision for Income Taxes 102,516 356,695
---------- ----------
Income Before Extraordinary Item 468,647 386,362
Extraordinary Item - Settlement of
Lawsuit (less applicable income taxes
of $151,271) 206,388 -
---------- ----------
Net Income 675,035 386,362
Retained Earnings, beginning of period 1,209,982 673,668
---------- ----------
Retained Earnings, end of period $1,885,017 $1,060,030
========== ==========
Earnings per Share $ 0.17 $ 0.10
========== ==========
Weighted Average Number of Common Shares 4,020,415 3,932,885
========== ==========
</TABLE>
See accompanying notes.
Page 3
<PAGE>
MOYCO TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net Sales $2,879,413 $2,875,029
Cost of Sales 1,754,900 1,641,438
---------- ----------
Gross Profit 1,124,513 1,233,591
Operating Expenses 857,974 861,413
---------- ----------
Income from Operations 266,539 372,178
---------- ----------
Other Income (Expenses)
Interest Expense ( 129,628) ( 121,519)
Other Income (Expenses) 9,098 47,998
Contribution - ( 96,322)
---------- ----------
Total Other Income (Expense) ( 120,530) ( 169,843)
---------- ----------
Income Before Provision for Income Taxes
and Extraordinary Item 146,009 202,335
---------- ----------
Provision (Benefit) for Income Taxes ( 76,410) 131,082
---------- ----------
Income Before Extraordinary Item 222,419 71,253
Extraordinary Item - Settlement of
Lawsuit (less applicable income
taxes of $151,271) 206,388 -
---------- ----------
Net Income 428,807 71,253
Retained Earnings, beginning of period 1,456,210 988,777
---------- ----------
Retained Earnings, end of period $1,885,017 $1,060,030
========== ==========
Earnings per Share $ 0.11 $ 0.02
========== ==========
Weighted Average Number of Common Shares 4,020,415 3,932,885
========== ==========
</TABLE>
See accompanying notes.
Page 4
<PAGE>
MOYCO TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
Increase (Decrease) in cash and cash equivalents
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities $1,021,569 ($ 418,610)
Cash flows from investing activities
(Expenditures) Retirements for property, plant and
equipment ( 413,671) ( 1,581,747)
Expenditures for other assets - ( 40,250)
---------- ----------
Net Cash (used in) investing activities ( 413,671) ( 1,621,997)
---------- ----------
Cash flows from financing activities
Reduction of long-term debt obligations ( 791,283) ( 2,140,016)
New borrowings of long-term debt 365,000 4,017,999
---------- ----------
Net cash provided by (used in) financing activities ( 426,283) 1,877,983
---------- ----------
Net Increase (Decrease) in cash 181,615 ( 162,624)
Cash and cash equivalents, beginning of period 1,097,323 1,447,565
---------- ----------
Cash and cash equivalents, end of period $1,278,938 $1,284,941
========== ==========
</TABLE>
See accompanying notes.
Page 5
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
Note 1: Summary of Significant Accounting Policies
Nature of Business
------------------
The Company is engaged in the business of manufacturing precision
abrasives, commercial abrasives, finishing products and manufacturing of
dental waxes, dental supplies, mirrors, endodontic and dental products
as well as a repacker of other disposable products for commercial and
industrial use.
Principles of Accounting
------------------------
The balance sheet as of March 31, 1996, and the related statements of
operations and retained earnings, and cash flows for the nine months
ended March 31, 1996 and 1995 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.
Mortgage Costs
--------------
Mortgage costs are being amortized over the terms of the related
mortgages.
Page 6
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(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 nine months ended March 31, 1996 and year ended
June 30, 1995 were $4,402 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:
March 31, June 30,
1996 1995
---------- ----------
Raw materials $ 916,302 $ 813,185
Work-in-process 853,767 755,992
Finished goods 1,664,329 1,477,032
Cartons 191,753 171,868
---------- ----------
$3,626,151 $3,218,077
========== ==========
Page 7
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
Note 3: Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
March 31,
1996 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. $ 314,540 $ 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. 482,538 496,805
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. 1,411,288 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. 281,303 295,200
Mortgage payable in 180 monthly installments of $6,371,
including interest at 2%, which matures July 1, 2010. 942,436 990,126
Other
Note payable due December 31, 1997 with monthly interest
only payments at prime beginning July 1995 until maturity.
This note was satisfied from the proceeds of the patent
lawsuit settlement during the quarter ended March
31, 1996 (Note 4). - 350,000
Auto loan payable in forty eight monthly installments of
$838 plus interest at 7.75% 20,691 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
MARCH 31, 1996
(UNAUDITED)
Note 3: Long-Term Debt (Continued)
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
March 31,
1996 June 30,
(Unaudited) 1995
----------- ----------
<S> <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. 1,530,000 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. 128,335 -
Credit line payable dated December 31,
1991. Amended November 28, 1994. Interest
rate of prime plus .5%. 225,000 -
---------- ---------
6,836,131 7,262,414
Less: Current Maturities ( 889,783) ( 526,954)
---------- ----------
Substantially all of the Company's Assets
are pledged as collateral for the long-
term debt $5,946,348 $6,735,460
========== ==========
</TABLE>
As of March 31, 1996 long-term debt matures as follows:
1997 $ 889,783
1998 900,755
1999 902,757
2000 914,211
2001 645,206
Thereafter 2,583,419
----------
$6,836,131
==========
Note 4: Settlement of Lawsuit
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.
Net gain on settlement of lawsuit is included in the statement of
operations as an extraordinary item. All costs previously capitalized to
defend the patent were offset.
Additionally proceeds were used to extinguish a note of $350,000.
Note 5: Provision for Income Taxes
During the quarter ended March 31, 1996, the company realized a
permanent tax difference resulting from a triggering event in the
non-compensatory stock option plan. The benefit of this tax difference
was $137,108, which is reflected in the computation for provision for
income taxes.
Page 9
<PAGE>
MOYCO TECHNOLOGIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
NINE MONTHS ENDED MARCH 31, 1996
----------------------------------------------
Results of Operations
Comparison of recent quarter (3/31/96) and immediate preceding Quarter
(12/31/95):
-----------------------------------------------------------------------
Net sales decreased by $302,007 and is attributable to increased sales
in the prior quarter due to backorders being filled subsequent to the
move to new facility.
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 quarterly accounting.
Operating expenses decreased by $26,067 as compared to preceding
quarter which is attributable to the consolidation of operations which
began at the beginning of calendar year 1996.
During this quarter we recognized a gain from settlement of a lawsuit
which is included in the statement of operations as an extraordinary
item.
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
NINE MONTHS ENDED MARCH 31, 1996
----------------------------------------------
Comparison of recent Quarter (3/31/96) and Equivalent Quarter (3/31/95):
------------------------------------------------------------------------
Net sales increased marginally by $4,384.
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.
Operating expenses decreased by $3,439 in the current quarter as a
result of the consolidation of operations which began at the beginning
of calendar year 1996. Interest expense has increased by $8,109 as a
result of additional borrowings.
The increase in net profit is directly related to the decrease in
operating expense. Additionally during this quarter we recognized a
gain from settlement of a lawsuit which is included in the statement of
operations as an extraordinary item.
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
NINE MONTHS ENDED MARCH 31, 1996
----------------------------------------------
Comparison of Recent Year-to-Date (3/31/96) and Equivalent Period in
Prior Year (3/31/95):
-----------------------------------------------------------------------
Net sales increased by $188,838 due to increased product demand. The
increase was in both our abrasive and dental segments. 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 $91,643 and is related to costs associated
with the opening of new facilities.
Interest expense increased by $221,217 as a result of additional
borrowings.
Additionally, during this quarter we recognized a gain from settlement
of a lawsuit which is included in the statement of operations as an
extraordinary item.
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
NINE MONTHS ENDED MARCH 31, 1996
----------------------------------------------
Liquidity and Capital Resources
-------------------------------
It is anticipated that pressures on earnings will continue. The current
economic climate, 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-two 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.
Additionally, should a vendor who supplies raw materials to the
corporation be unable or unwilling to supply a product used within our
manufacturing process, a requalification and approval of product would
negatively impact sales and profits.
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 gain on settlement of
lawsuit is reflected in the statement of operations as an extraordinary
item.
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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,278,938
<SECURITIES> 0
<RECEIVABLES> 1,807,343
<ALLOWANCES> 78,990
<INVENTORY> 3,626,151
<CURRENT-ASSETS> 6,740,408
<PP&E> 10,177,110
<DEPRECIATION> 4,189,878
<TOTAL-ASSETS> 12,819,242
<CURRENT-LIABILITIES> 1,805,395
<BONDS> 0
0
0
<COMMON> 23,773
<OTHER-SE> 3,104,798
<TOTAL-LIABILITY-AND-EQUITY> 12,819,242
<SALES> 8,770,917
<TOTAL-REVENUES> 8,848,431
<CGS> 5,194,699
<TOTAL-COSTS> 7,771,603
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 505,665
<INCOME-PRETAX> 571,163
<INCOME-TAX> 102,516
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 206,388
<CHANGES> 0
<NET-INCOME> 675,035
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
