<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996 Commission File No.
------------- ---------
MOYCO TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-1697233
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
200 Commerce Drive
Montgomeryville, PA 18936
- ---------------------------------------- ---------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including
area code: (215) 855-4300
---------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.005 per share
- --------------------------------------------------------------------------------
(Title of Class)
"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 ninety 90 days."
YES X NO
----- -----
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 28, 1996 was $36,673,116, the number of shares
outstanding of the Registrant's Common Stock was 4,140,140.
Page 1 of 41
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PART I
ITEM 1. BUSINESS
General
There were no material changes in the nature of the business conducted
by Moyco Technologies, Inc. during the fiscal year ended June 30, 1996. The
Company manufacturers and sells commercial abrasive materials, dental materials
and supplies and repacks and sells other disposable materials.
The Company's net sales, operating profit, and identifiable assets for
each of the two aforementioned business segments is detailed in Note 5 and Item
6 to the consolidated financial statements.
Page 2 of 41
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Business Segments
Commercial Abrasive Materials
The Registrant is engaged through its Ultralap Division in the
manufacture and sale of commercial abrasive materials under the name
"Flex-I-Grit." "Flex-I-Grit" is sold by a master distributor and other repackers
to approximately 45 accounts, six of these accounted for 76% of total sales for
this division.
The Registrant further is engaged through its Ultralap Division in the
manufacture and sale of fine polishing agents and abrasives sold under the trade
name "Ultralap." The "Ultralap" products are sold by in-house salesmen to
approximately 470 customers, nine of these customers accounted for over 40% of
the total sales of these products. During the last fiscal year, the sale of
"Ultralap" products accounted for approximately 77% of the total sales of this
division.
Dental Supplies
The Registrant through its dental division is engaged in the
manufacture and sale of dental supplies such as waxes, abrasives, medicaments,
dental mirrors, endodontic materials and equipment, sundry dental items as well
as a repacker of other disposable materials. During the last fiscal year the
sale of endodontic (root canal) instruments manufactured by the Registrant
accounted for 36% of the total sales of the dental division.
All sales are made from existing inventory by six salaried salespersons
to approximately 400 dental supply wholesalers and distributors in the United
States and Overseas. During the last fiscal year foreign sales represented
approximately 12% of the total sales of the dental division. Ten customers
accounted for more than 60% of the total sales of this division.
Approximately 1% of the dental supply and repacking business of the
Registrant was done with the United States Government for the fiscal year ended
June 30, 1996.
Backlog
There is a backlog of orders in the aggregate of $1,992,092 as of June
30, 1996. There had been a backlog of $1,416,388 as of June 30, 1995.
Approximately 27% of the backlog at June 30, 1996 was for dental supplies and
materials.
Page 3 of 41
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Sources and Availability of Supplies
The Company procures its raw materials and supplies from various
sources and does not expect to have any difficulty in procurement during the
coming year or during the foreseeable future.
It is intended that the Company will continue in its existing lines of
dental supplies and commercial abrasive materials during the current fiscal
year.
Research and Development
The Company engages in research activities and has two employees
devoting part of their time to this activity. Such research as is conducted is
directed toward the development of new products related to current product lines
and the improvement and enhancement of existing products.
Competition
All of the lines of business in which the Registrant is presently
engaged are highly competitive. There are numerous other manufacturers of dental
supplies, polymer backed abrasives, other abrasives and repackers, many of which
are larger and have greater financial reserves and more sales representatives.
Employees
The Registrant employs approximately 115 persons, of whom 82 are
involved in manufacturing abrasives and other products of the Ultralap and
Dental divisions, and 33 engaged in administration, sales, engineering,
supervision and clerical work. The Registrant has had no work stoppages and
considers its employee relations to be good.
Other
Moyco did not experience any curtailment of supplies of electricity,
gas, oil or water during the fiscal year ended June 30, 1996 and does not expect
any curtailment in the current fiscal year.
In as much as the Company believes it produces no significant
discharges of waste or pollutants into the air, there are no significant effects
on the Company in complying with current Federal, State and local environmental
laws and regulations.
Moyco Technologies, Inc. as of June 30, 1996 was in compliance with the
enactment of the Clean Air Act, effective August 1992.
Page 4 of 41
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ITEM 2. PROPERTIES
The Registrant is the owner of two buildings. The
Montgomeryville, Pennsylvania facility was a one-story cinder block building
containing approximately 26,000 square feet of which approximately 13,000 square
feet were used for manufacturing; 11,750 square feet for warehousing and
distribution; and 1,250 square feet for offices. This facility is primarily used
for the manufacture of precision coated abrasives for commercial and industrial
use. During the prior year, the registrant expanded its Montgomeryville,
Pennsylvania facility to 40,125 square feet of which 14,250 square feet are used
for manufacturing; 19,875 square feet for warehousing and distribution; and
6,000 square feet for offices. The York, Pennsylvania facility is 68,995 square
feet of which approximately 45,807 square feet are used for manufacturing;
16,542 for warehousing and 6,646 for offices. There are mortgages on both
properties. Moyco's facilities are suitable for their respective uses and are in
general, adequate for Moyco's present needs.
During the prior year the registrant donated the five story
brick building in Philadelphia, Pennsylvania containing approximately 88,000
square feet of which approximately 59,928 square feet was used for
manufacturing, 22,968 square feet for warehousing and distribution, and 5,104
square feet for offices to a qualified charity.
The Registrant leased 27,671 square feet of space in a
building in Emigsville, Pennsylvania. Initial lease term began September 30,
1991 and ended March 31, 1992 at $5,283 per month. Renewal rate at the then
prevailing market rate $6,646, per month. This facility was utilized in
connection with the dental supply segment. The lease was terminated in December
of 1994 when the registrant moved to its newly constructed building in York,
Pennsylvania.
The registrant has completed two capital projects. 30% of the
total $1,000,000 expansion of the Montgomeryville facility was financed over 15
years with the Pennsylvania Industrial Development Authority at an interest rate
of 2%, 50% of the project cost was financed by the bank over 15 years at 8 3/4%
for 5 years and a variable rate for 10 years thereafter and the remaining 20% by
the registrant. The Montgomeryville project was completed in March of 1995.
Construction of a new building in York, Pennsylvania to replace the leased
facility was completed during December 1994. 37% of the total project cost of
$2,700,000 was financed by the Pennsylvania Industrial Development Authority at
2%, 53% of the cost was financed by the bank at 9.25% for 5 years and at prime
plus 1% thereafter, and the remaining 10% by the registrant.
ITEM 3. LEGAL PROCEEDINGS
None, however there can be no certainty that the Company may
not ultimately incur charges, whether for governmental proceedings and claims,
products liability claims, environmental proceedings or other actions, in excess
of presently established accruals. While such future charges could have a
material adverse impact on the Company's net income in the quarterly period in
which they are recorded, the Company believes that such additional charges, if
any, will not have a material adverse effect on the consolidated financial
position or annual results of operations of the Company. Also, refer to Recent
Developments in Item 7, page 9 of 41.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N O N E
Page 5 of 41
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Price Range of Common Stock:
The following table shows the range of low and high prices for the
common stock in the over-the-counter market for the quarterly periods indicated
according to the Company's records. The quotations represent prices in the
over-the-counter market between dealers in securities and do not include retail
markup, markdown or commission and do not necessarily represent actual
transactions. The common stock of the Company began trading in the Nasdaq
National Market on January 26, 1996.
Low High
First quarter ended September 30, 1995 4.75 15.50
Second quarter ended December 31, 1995 7.50 13.50
Third quarter ended March 31, 1996 6.50 10.75
Fourth quarter ended June 30, 1996 5.50 12.00
First quarter ended September 30, 1994 1.00 1.00
Second quarter ended December 31, 1994 .94 .94
Third quarter ended March 31, 1995 .85 .85
Fourth quarter ended June 30, 1995 2.06 2.13
There were no dividends paid during the fiscal year ended June 30,
1996. The number of shareholders of record on June 30, 1996 was 859.
Page 6 of 41
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ITEM 6. SELECTED STATEMENT OF CONSOLIDATED OPERATIONS AND BALANCE
SHEET DATA
Selected statement of consolidated operations data:
<TABLE>
<CAPTION>
Year Ended June 30
------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Sales
Dental and consumable
supplies $ 7,496,812 $ 7,399,768 $ 6,459,088 $ 6,872,698 $5,921,273
Commercial abrasive
materials, Ultralap
and Flex-I-Grit 4,417,491 4,480,418 3,572,255 4,364,516 3,073,832
----------- ----------- ----------- ----------- ----------
$11,914,303 $11,880,186 $10,031,343 $11,237,214 $8,995,105
=========== =========== =========== =========== ==========
Income from operations $ 996,578 $ 1,419,531 $ 1,092,447 $ 1,036,374 $ 840,801
=========== =========== =========== =========== ==========
Net Income $ 745,139 $ 536,314 $ 391,848 $ 509,792 $ 350,785
=========== =========== =========== =========== ==========
Primary Earnings per
Common Share:
Weighted average
common shares
outstanding 4,024,665 3,938,915 3,931,385 3,927,235 3,926,335
=========== =========== =========== =========== ==========
Earnings per share $ .19 $ .14 $ .10 $ .13 $ .09
=========== =========== =========== =========== ==========
Fully-Diluted Earnings
Per Common Share:
Weighted average
common shares
outstanding 4,045,408 3,938,915 3,931,385 3,927,235 3,926,335
=========== =========== =========== =========== ==========
Earnings per share $ .18 $ .14 $ .10 $ .13 $ .09
=========== =========== =========== =========== ==========
Dividends per share $0 $0 $0 $0 $0
== == == == ==
</TABLE>
Page 7 of 41
<PAGE>
ITEM 6. SELECTED STATEMENT OF CONSOLIDATED OPERATIONS AND BALANCE
SHEET DATA (Continued)
Selected statement of consolidated operations data:
<TABLE>
<CAPTION>
June 30
------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Current Assets $ 6,517,083 $ 6,512,511 $5,971,107 $5,491,009 $5,829,603
Current Liabilities 1,799,708 1,922,766 2,967,267 2,000,727 2,809,673
----------- ----------- ---------- ---------- ----------
Working Capital $ 4,717,375 $ 4,589,745 $3,003,840 $3,490,282 $3,019,930
=========== =========== ========== ========== ==========
Total Assets $12,544,014 $12,983,665 $9,765,891 $8,013,251 $8,535,421
=========== =========== ========== ========== ==========
Long-Term Debt $ 5,616,112 $ 6,735,460 $3,046,168 $2,734,393 $2,959,504
=========== =========== ========== ========== ==========
Deferred Income Taxes $ 152,704 $ 174,864 $ 139,445 $ 58,798 $ 58,798
=========== =========== ========== ========== ==========
Shareholders' Equity $ 4,975,490 $ 4,150,575 $3,613,011 $3,219,333 $2,707,446
=========== =========== ========== ========== ==========
</TABLE>
Page 8 of 41
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Recent Developments:
The Company changed its corporate name from Moyco Industries, Inc. to
Moyco Technologies, Inc. effective September 20, 1995. The amendment was filed
with the Pennsylvania Department of State on December 21, 1995. The common stock
of the Company began trading in the Nasdaq National Market on January 26, 1996.
On February 1, 1996, the Company entered into a confidential agreement to
resolve litigation involving three Moyco patents.
The Company purchased Thompson Dental Mfg. Co. ("Thompson Dental")
effective August 8, 1996. Thompson Dental of Missoula, Montana is a leading
manufacturer of dental hand instruments and related products. Thompson will
operate as a wholly-owned subsidiary of Moyco. Proprietary products such as
Thompson exclusive tactile tone scalers are synergistic with the Moyco Union
Broach Dental Division products which include proprietary endodontic (root
canal) instruments, waxes, dental abrasives along with general supplies and
dental mirrors.
The Thompson Dental subsidiary will increase the annual revenues of
Moyco Technologies, Inc. by approximately 25%. Tom Thompson, Jr. will remain
President of Thompson Dental Company, Inc. a wholly-owned subsidiary of Moyco.
Mr. Thompson will also have a seat on the Board of Directors of Thompson. The
Company expects that this subsidiary, after all merger and integrating costs
are absorbed, will produce profits for Moyco.
The merger Agreement provides that shareholders of Thompson Dental will
exchange all shares of Thompson Dental for 115,000 shares of Moyco common stock.
There are additional earn out provisions with fixed criteria.
Effective May 3, 1996, the Company incorporated a new corporation under
the laws of the State of Delaware. This new corporation will operate as a
wholly-owned subsidiary, which will maintain and manage Moyco's intellectual
property, which includes the Moyco trade name and certain trademarks, service
marks and patents.
It is expected that the consolidation of the patents and trademarks
into a separate legal entity will produce both specific and general benefits to
Moyco. The patents and trademarks are valuable assets of the Moyco group. By
consolidating the patents and trademarks into a separate subsidiary, Moyco will
be able to monitor more closely and efficiently the profits associated with the
patents and trademarks.
The Company has retained legal counsel to represent it in a government
investigation in which the government has asserted it has evidence of
violations of law and/or regulations that may have been committed by certain
officers and/or employees of the Company. Legal counsel has not yet completed
its investigation of these matters and therefore cannot evaluate the likelihood
of an unfavorable outcome to the Company.
Page 9 of 41
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Summary
The following table sets forth for the periods indicated (i)
percentages which certain items reflected in the financial data bear to net
sales of the Company and (ii) the percentage increase (decrease) of such items
as compared to the indicated prior period:
Percentage
Relationship Increase
to Net Sales (Decrease)
/-------------------/ /-----------------/
1996 1995 1994 1996-95 1995-94
Sales
Dental and consumable supplies 62.92 62.29 64.39 1.31 14.6
Commercial abrasive materials 37.08 37.71 35.61 (1.40) 25.4
------ ------ ------
100.00 100.00 100.00 .29 18.4
Cost of Sales 61.3 59.1 56.7 3.95 23.4
------ ------ ------
Gross Profit 38.7 40.9 43.3 (5.01) 12.0
Operating Expenses 30.4 28.9 32.4 5.23 (5.9)
------ ------ ------
Income from operations 8.3 12.0 10.9 (29.80) 29.9
Net other (Expenses) ( 3.5 ) (3.4) (2.3) 3.89 74.8
------ ------ ------
Income before provision for
income taxes extraordinary items
and cumulative effect of change
in accounting principle 4.8 8.6 8.6
Provision for Income Taxes .3 4.0 4.1
------ ------ -----
Income before extraordinary
items and cumulative effect
of change in accounting
principle 4.5 4.6 4.5
Extraordinary Item 1.7
Cumulative effect of change
in accounting principle - - .5
------ ------ -----
Net Income 6.2 4.6 4.0
====== ====== =====
Page 10 of 41
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Net sales increased $34,117. The increases in net sales is related to
increased sales by the dental division. Gross profit decreased
$243,289. The decline is due to the costs to move out of the
Philadelphia facility and severance payments for the former
Philadelphia facility employees.
Operating expenses increased $179,664 as a result of increased legal
and professional fees related to investigations of potential company
acquisitions.
Interest expense increased $124,066 as a result of having a full year
of interest related to two capital projects completed in the prior
fiscal year.
Extraordinary items contributed $204,289 of net income. This is the
result of the settlement of a patent infringement suit.
Operating profit growth will be driven by new products, increased
market demand (domestic and global) and economies of scale the Company
is able to achieve based upon reaching a critical mass in sales volume.
Sales and profit can be accelerated further by a synergistic
acquisition and/or a strategic alliance which the Company is actively
pursuing.
All of our lines of business are in highly competitive markets with
others, domestically and internationally, having greater resources. The
dental domestic market remains relatively flat as the economic
pressures continues. Our abrasive division continues to enter new
markets, however, our high tech products are subject to sale swings as
a result of technological changes as well as purchasing practices by
our customers. We are not aware of any conditions in the purchasing of
raw material and/or labor markets that can effect the profitability of
the Company. There is continued need for sales growth as a result of
putting in line new facilities and equipment, inflationary costs, and
general operating expense increases.
Page 11 of 41
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994
Net sales increased $1,848,843. The increase in net sales is related to
increased pricing, and more directly to increased unit sales in both
our abrasive and dental divisions.
Gross profit increased $518,935 and is directly related to the
increased sales.
Operating expenses increased $191,851 as a result of the increase in
operating activity, increase in costs, as well as increases caused by
the closing of the Philadelphia facility and opening of the new
facilities.
Interest expense increased $207,402 as a result of the increased
long-term borrowings related to the two capital projects in fiscal year
end June 30, 1995.
Operating profit growth will be driven by new products, increased
market demand (domestic and global) and economies of scale the Company
is able to achieve based upon reaching a critical mass in sales volume.
Sales and profit can be accelerated further by a synergistic
acquisition and/or a strategic alliance which the Company is actively
pursuing.
All of our lines of business are in highly competitive markets with
others, domestically and internationally, having greater resources. The
dental domestic market remains relatively flat as the economic
recession continues. Our abrasive division continues to enter new
markets, however, our high tech products are subject to sale swings as
a result of technological changes as well as purchasing practices by
our customers. We are not aware of any conditions in the purchasing of
raw material and/or labor markets that can effect the profitability of
the Company. There is continued need for sales growth as a result of
putting in line new facilities and equipment, inflationary costs, and
general operating expense increases.
Page 12 of 41
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
The Company uses a number of measures of liquidity for internal management
purposes. These measures include working capital and activity ratios, all of
which are set forth below:
Year Ended June 30
------------------------------------------
1996 1995 1994
---------- ---------- ---------
Working capital, the ability to meet short-term obligations:
Working Capital $4,717,375 $4,589,745 $3,003,840
Working Capital Ratio 3.62:1 3.39:1 2.01:1
Activity ratios, which should be helpful in evaluating liquidity:
Calendar days to convert sales
to cash 49 60 58
Inventory turnover 2.25 2.33 2.07
Inventory as a percent of
working capital 69.6 70.1 93.8
Sales to working capital 2.53 2.59 3.34
The Company's working capital at June 30, 1996 was $4,717,375 compared to
$4,589,745, in 1995 representing an increase in the amount of $127,630. The
component differences are reflected in the statement of cash flows.
Current assets increased $4,572 and current liabilities decreased $123,058.
During the fiscal years 1993 and 1994 the primary use of funds was the
acquisition of additional equipment and lease of additional facilities located
in Emigsville, Pennsylvania. This facility produced dental supplies under the
name Moyco/Union Broach. During 1994, capital projects were commenced in
Montgomeryville and York, Pennsylvania requiring additional funds. These
projects were completed in the fiscal year ended June 30, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Responsibility for Preparation of Financial Statements:
The management of Moyco Technologies, Inc. is responsible for the integrity and
objectivity of the financial statements. The financial statements and related
notes were prepared by the Company using generally accepted accounting
principles which were considered appropriate for the circumstances and
necessarily include amounts based upon our best estimates and judgment.
Financial data found elsewhere in this Annual Report is consistent with these
financial statements.
Page 13 of 41
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Moyco Technologies, Inc.:
We have audited the consolidated balance sheets of Moyco Technologies,
Inc. as of June 30, 1996 and 1995 and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years ended June 30, 1996. Our audits also included the consolidated financial
statement schedule on page 40. These consolidated financial statements and
consolidated financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and consolidated financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Moyco Technologies, Inc. as of June 30, 1996 and 1995, and the results of its
operations, and its cash flows for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting principles. Also,
in our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.
Philadelphia, Pennsylvania
August 28, 1996
Page 14 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30
-------------------------
1996 1995
----------- -----------
Current Assets
Cash and Cash Equivalents $ 1,402,088 $ 1,097,323
Accounts receivable, net of allowance for doubtful
accounts of $78,990 in 1996 and $78,990 in 1995 1,600,764 1,932,913
Note Receivable-trade 11,519 41,051
Other Receivable 8,215 198,000
Inventories 3,283,779 3,218,077
Deferred Tax 68,856 -
Prepaid Taxes 117,644 -
Prepaid expenses 24,218 25,147
----------- -----------
Total Current Assets 6,517,083 6,512,511
----------- -----------
Property, Plant and Equipment
Land 452,433 452,433
Buildings and improvements 4,386,877 4,172,201
Automotive equipment 48,511 48,511
Machinery and equipment 4,822,188 4,586,844
Furniture and fixtures 534,068 503,450
----------- -----------
10,244,077 9,763,439
Less: Accumulated Depreciation 4,350,226 3,771,798
----------- -----------
Net Property, Plant and Equipment 5,893,851 5,991,641
----------- -----------
Other Assets 133,080 479,513
----------- -----------
TOTAL ASSETS $12,544,014 $12,983,665
=========== ===========
See accompanying notes to consolidated financial statements.
Page 15 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30
-------------------------
1996 1995
----------- -----------
Current Liabilities
Current maturities of long-term debt $ 895,408 $ 526,954
Accounts payable 381,372 963,231
Accrued expenses:
Payroll 205,092 194,556
Interest 33,750 33,750
Other 284,086 138,900
Profit Sharing -- 15,000
Income Tax -- 50,375
----------- -----------
Total Current Liabilities 1,799,708 1,922,766
----------- -----------
Long-term debt, net of current maturities 5,616,112 6,735,460
Net Deferred income taxes 152,704 174,864
----------- -----------
Total Liabilities 7,568,524 8,833,090
----------- -----------
Shareholders' Equity
Preferred stock, $.005 par value
Authorized 2,500,000 shares,
None issued
Common stock, $.005 par value 23,083 22,654
Authorized 15,000,000 shares
Issued and outstanding shares -
4,616,640 in 1996 and
4,530,790 in 1995
Additional paid-in capital 3,118,239 3,038,892
Retained Earnings 1,955,121 1,209,982
Less: Treasury stock 591,875 shares in 1996 and
591,875 shares in 1995 at cost 120,953 120,953
----------- -----------
Total Shareholders' Equity 4,975,490 4,150,575
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,544,014 $12,983,665
=========== ===========
See accompanying notes to consolidated financial statements.
Page 16 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30
---------------------------------------
1996 1995 1994
----------- ----------- -----------
Net Sales $11,914,303 $11,880,186 $10,031,343
Cost of Sales 7,299,860 7,022,454 5,692,546
----------- ----------- -----------
Gross Profit 4,614,443 4,857,732 4,338,797
Operating Expenses 3,617,865 3,438,201 3,246,350
----------- ----------- -----------
Income from operations 996,578 1,419,531 1,092,447
----------- ----------- -----------
Other income (Expense)
Interest Expense ( 559,240) ( 435,174) ( 227,772)
Other Income (Expense) 138,635 126,623 42,750
Donation of Building - ( 96,322) -
Casualty Loss - - ( 46,571)
----------- ----------- -----------
Net Other (Expenses) ( 420,605) ( 404,873) ( 231,593)
----------- ----------- -----------
Income before provision for
income taxes, extraordinary item
and cumulative effect of change
in accounting principle 575,973 1,014,658 860,854
----------- ----------- -----------
Provision for income taxes
Current 126,139 442,925 388,359
Deferred ( 91,016) 35,419 20,479
----------- ----------- -----------
35,123 478,344 408,838
----------- ----------- -----------
Income before effect of extraordinary
item, and change in accounting
principle 540,850 536,314 452,016
Extraordinary Item - Settlement
of Lawsuit (less applicable income
taxes of $151,271) 204,289 - -
Cumulative effect of change
in accounting principle - - 60,168
----------- ----------- -----------
Net Income $ 745,139 $ 536,314 $ 391,848
=========== =========== ===========
See accompanying notes to consolidated financial statements.
Page 17 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
Year Ended June 30
----------------------------------------
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Primary Earnings Per Common Share:
Earnings per common share
before extraordinary item, and
cumulative effect of change
in accounting principle $.14 $.14 $.12
Extraordinary Item .05 - -
Cumulative effect of change
in accounting principle - - ( .02)
---- ---- ----
Earnings Per Common Share $.19 $.14 $.10
==== ==== ====
Weighted average common shares
outstanding 4,024,665 3,938,915 3,931,385
========= ========= =========
Fully-Diluted Earnings per Common Share:
Earnings per common share before
extraordinary item and cumulative
effect of change in accounting
principle $.13 $.14 $.12
Extraordinary Item .05 - -
Cumulative effect of change in
accounting principle - - .02
---- ---- ----
Earnings Per Common Share $.18 $.14 $.10
==== ==== ====
Weighted average common shares
outstanding 4,045,408 3,938,915 3,931,385
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 18 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Number of Shares Amounts
------------------- ---------------------------------------------
Additional
Common Treasury Common Paid-In Retained Treasury
Stock Stock Stock Capital Earnings Stock
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1993 4,519,340 591,205 22,597 3,035,502 281,820 ( 120,586)
- -------------
Net income 391,848
Employee
Common stock
Options exercised 2,100 11 1,814
Reclassifications 2,950 1,800 14 358 ( 367)
--------- ------- ------- ---------- ---------- --------
June 30, 1994 4,524,390 593,005 22,622 3,037,674 673,668 ( 120,953)
- -------------
Net income 536,314
Employee
Common stock
Options exercised 1,500 8 1,242
Reclassifications 4,900 ( 1,130) 24 ( 24)
--------- ------- ------- ---------- ---------- --------
June 30, 1995 4,530,790 591,875 22,654 3,038,892 1,209,982 ( 120,953)
- ------------- --------- ------- ------- ---------- ---------- --------
Net income 745,139
Employee
Common stock
Options exercised 85,850 429 79,347
Reclassifications
--------- ------- ------- ---------- ---------- --------
June 30, 1996 4,616,640 591,875 23,083 3,118,239 1,955,121 ( 120,953)
- ------------- ========= ======= ======= ========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 19 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 745,139 $ 536,314 $ 391,848
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for bad debt allowance - 20,000 -
Depreciation and amortization 648,517 542,062 428,916
(Gain) Loss on sale of Equipment ( 57,000) ( 15,489) -
Donation of Building - 96,322 -
Change in assets and liabilities:
Cash Value-Officers Life Insurance - ( 4,498) ( 18,162)
(Increase) Decrease in deferred tax asset ( 68,856) 8,484 ( 24,007)
Increase (Decrease) in deferred tax liability ( 22,160) 26,935 104,654
(Increase) Decrease in accounts receivable 332,149 ( 280,567) ( 33,667)
(Increase) Decrease in note receivable-trade 29,532 ( 41,051) -
(Increase) Decrease in other receivable 189,785 ( 198,000) -
(Increase) Decrease in inventory ( 65,702) ( 399,303) ( 138,106)
(Increase) Decrease in prepaid expenses
& taxes ( 116,715) 7,275 ( 1,550)
(Increase) Decrease in deposits and
other assets 333,344 46,599 ( 318,451)
Increase (Decrease) in accounts payable ( 581,859) 677,944 ( 148,222)
Increase (Decrease) in accrued expenses 90,347 ( 158,728) 254,501
---------- ---------- ----------
Net Cash Provided by Operating Activities 1,456,521 864,299 497,754
---------- ---------- ----------
Cash flows from investing activities
Expenditures for property, plant & equipment ( 537,638) ( 3,342,633) ( 1,364,845)
Mortgage Costs - ( 21,233) -
Proceeds from Sale of Equipment 57,000 22,500 -
---------- ---------- ----------
Net Cash (Used) in Financing Activities ( 480,638) ( 3,341,366) ( 1,364,845)
---------- ---------- ----------
Cash flows from financing activities
Proceeds from exercise of Stock Options 79,776 1,250 1,830
Proceeds from long-term debt 140,000 5,380,978 1,443,845
Payments of long-term debt ( 890,894) ( 3,255,403) ( 271,809)
---------- ---------- ----------
Net Cash provided by (Used) in financing
activities ( 671,118) 2,126,825 1,173,866
Net Increase (Decrease) in cash and
cash equivalents 304,765 ( 350,242) 306,775
Cash and Cash Equivalents, Beginning of Period 1,097,323 1,447,565 1,140,790
---------- ---------- ----------
Cash and Cash Equivalents, End of Period $1,402,088 $1,097,323 $1,447,565
========== ========== ==========
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 559,240 $ 501,649 $ 227,772
---------- ---------- ----------
Income Taxes Paid $ 436,034 $ 521,976 $ 331,920
---------- ---------- ----------
</TABLE>
Interest paid in 1995 included capitalized interest of $70,225.
See accompanying notes to consolidated financial statements.
Page 20 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 1: Summary of Significant Accounting Policies
Nature of Business
The Company (formerly Moyco Industries, Inc.) manufactures
dental waxes, dental supplies, endodontic material and
equipment, pharmaceuticals, precision abrasives, commercial
abrasives, and is a repacker of other disposable products for
commercial and industrial use and sells to both domestic and
international customers.
Principles of Accounting
Principles of Consolidation
The consolidated financial statements include the accounts of
Moyco Technologies, Inc. and its wholly owned subsidiary. All
intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Actual results may differ from those
estimates.
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.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is
computed by the straight-line method over the assets expected
useful lives as follows:
Buildings and Improvements 10-25 Years
Machinery, Equipment, Furniture
and Fixtures 5-10 Years
Automotive Equipment 3 Years
Depreciation charged to expense for the years ended June 30,
1996, 1995, and 1994 was $635,428, $531,376, and $418,891,
respectively.
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.
Page 21 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 1: Summary of Significant Accounting Policies (Continued)
Mortgage Costs
Mortgage costs are being amortized over the terms of the
related mortgages.
Income Taxes
The Company currently accounts for income taxes in accordance
with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Prior to
fiscal 1994, the Company accounted for income taxes in
accordance with Accounting Principles Board Opinion No. 11.
The cumulative effect of this change in accounting principle
decreased net earnings for fiscal 1994 by $60,168 as discussed
in Note 7.
Reclassifications
Certain accounts in the prior-year financial statements have
been reclassified for comparative purposes to conform with the
presentation in the current-year consolidated financial
statements.
Research and Development
Research and development costs are charged to expense as
incurred. The amounts charged for the years ended June 30,
1996, 1995, and 1994 were $6,661, $35,718, and $19,583,
respectively.
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.
Advertising Costs
Advertising costs are charged to expense as incurred. The
amounts charged for the years ended June 30, 1996, 1995, and
1994 were $228,049, $251,984, and $243,748, respectively.
Fair Value of Financial Instruments
The following notes summarize the major methods and
assumptions used in estimating the fair values of financial
instruments:
Cash and Cash Equivalents
The carrying amount approximates fair value due to the
relatively short period to maturity of these instruments.
Page 22 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 1: Summary of Significant Accounting Policies (Continued)
Long-Term Debt
The fair value of the Company's long-term debt is estimated
based on the quoted market prices for the same or similar
issues or on the current prices for the same or similar issues
or on the current rates offered to the Company for debt of the
same remaining maturities.
The following table presents the carrying amounts and
estimated fair values of the Company's financial instruments
as of June 30, 1996 and 1995:
1996 1995
--------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------------------------------------------------
Cash and Cash
Equivalents $1,402,088 1,402,088 $1,097,323 $1,097,323
Accounts
Receivable 1,600,764 1,600,764 1,932,913 1,932,913
Accounts Payable
and Accrued
Expenses 904,300 904,300 1,395,812 1,392,812
Long-Term Debts
including current
portion 6,511,520 6,080,263 7,262,414 6,749,369
--------------------------------------------------------------
Note 2: Inventories
The components of inventories are as follows:
June 30
------------------------
1996 1995
---------- ----------
Raw materials $ 761,072 $ 813,185
Work-in-process 873,884 755,992
Finished goods 1,450,411 1,477,032
Cartons 198,413 171,868
---------- ----------
$3,283,780 $3,218,077
========== ==========
Page 23 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 3: Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30
-------------------------
Mortgages Payable 1996 1995
----------- ----------
<S> <C> <C>
Banks
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. Rate at June 30, 1996
was 8.5%. $ 306,827 $ 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. 479,696 496,805
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. 1,403,848 1,448,847
Mortgages Payable
Municipal Authorities
Mortgage payable in 180 monthly installments
of $1,952, including interest at 2% which
matures April 1, 2010. 278,314 295,200
Mortgage payable in 180 monthly installments
of $6,371, including interest at 2% which
matures July 1, 2010. 932,735 990,126
Other
Note payable due December 31, 1997 with
monthly interest only payments at prime
beginning July 1995 until maturity. - 350,000
Auto loan payable in forty-eight monthly
installments of $838 plus interest at 7.75%. 18,764 30,176
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. 1,470,000 1,800,000
Note payable in monthly installments of $2,333 plus interest
at 8.65% beginning November 1, 1995 which matures
November 1, 2000. 121,336 -
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%). Rate at
June 30, 1996 was 8.25%. Subordinated to
prime lender. 1,500,000 1,500,000
---------- ----------
6,511,520 7,262,414
Less: Current Maturities ( 895,408) ( 526,954)
---------- ----------
$5,616,112 $6,735,460
========== ==========
</TABLE>
Page 24 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 3: Long-Term Debt (Continued)
Substantially all of the Company's assets are pledged as
collateral for the long-term debt.
As of June 30, 1996 long-term debt matures as follows:
Twelve Months Ending June 30,
1997 $ 895,408
1998 906,765
1999 911,835
2000 926,771
2001 594,330
Thereafter 2,276,411
---------
$6,511,520
==========
Note 4: Employee Benefit Plans
Profit Sharing Plan
The Company has a non-contributory profit sharing plan for its
employees who have completed one full year of service and have
attained the age of 21. The Company, at the discretion of the
Board of Directors may make contributions to the plan. The
contributions cannot exceed the maximum amount which will
constitute an allowable deduction for federal income tax
purposes and is based on the Company's profitability and shall
be paid from the Company's net earnings and/or retained
earnings.
A participating employee's full account becomes payable upon
normal retirement, or upon retirement at any age due to
disability, or upon death to the employee's designated
beneficiary. In the event employment is terminated before
normal retirement, a portion of the Company's contribution is
forfeited unless the employee has at least seven full years of
service.
The contribution expense for the years ended June 30, 1996,
1995 and 1994 was $0, $15,000 and $25,000, respectively.
Page 25 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 4: Employee Benefit Plans (Continued)
Employee Savings Plan
The tax deferred employee savings and protection plan under
Section 401(K) of the Internal Revenue Code for all eligible
employees. This plan allows an employee to contribute between
3% and 10% of his salary, including overtime pay, bonus and
commissions, to the plan and these contributions are not
subject to current federal income taxes. The Company will
contribute 50% of the employee's contributions, to a maximum
of 3% of the employee's salary subject to the deferral limit
(IRC Sec. 401 (a)(30)). Participants are at all times fully
vested in their contributions and the Company contributions
become vested to the participant at various percentages based
on the employee's years of service with 20% vested after three
years of service and 20% for each year thereafter.
The contribution expense for the years ended June 30, 1996,
1995 and 1994 was $64,509, $62,220 and $58,608, respectively.
Note 5: Business Segments
The Company operates within two business segments: dental
supplies and precision abrasives. Through its dental supplies
division the Company manufactures and sells dental supplies
such as waxes, abrasives, medicaments, sundry dental items and
endodontic materials and equipment. Through its precision
abrasive division the Company manufactures and sells
commercial abrasive materials and fine polishing agents.
Financial information concerning the operations in each of the
Company's business segments for the years ended June 30, 1996,
1995 and 1994 is as follows:
Year Ended June 30
---------------------------------------
1996 1995 1994
----------- ----------- -----------
Sales
Domestic and U.S. Government
Customers
Dental Supplies $ 6,662,894 $ 6,624,273 $ 5,817,816
Precision Abrasives 3,981,706 4,074,581 3,250,837
International customers
Dental Supplies 833,918 775,495 641,272
Precision Abrasives 435,785 405,837 321,418
----------- ----------- -----------
$11,914,303 $11,880,186 $10,031,343
=========== =========== ===========
Page 26 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 5: Business Segments (Continued)
<TABLE>
<CAPTION>
Year Ended June 30
----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Gross Profit
Dental Supplies $ 3,196,272 $ 3,487,510 $ 3,344,223
Commercial abrasive materials 1,418,171 1,370,222 994,574
----------- ----------- -----------
4,614,443 4,857,732 4,338,797
Operating expenses 3,617,865 3,438,201 3,246,350
----------- ----------- -----------
Income from operations $ 996,578 $ 1,419,531 $ 1,092,447
=========== =========== ===========
Identifiable Assets
Corporate $ 1,745,886 $ 1,799,983 $ 1,991,053
Dental Supplies 3,776,974 7,570,516 5,262,739
Commercial Montgomeryville
abrasive materials 7,021,154 3,613,166 2,512,099
----------- ----------- -----------
$12,544,014 $12,983,665 $ 9,765,891
=========== =========== ===========
Depreciation expense
Dental Supplies $ 404,269 $ 367,747 $ 316,528
Commercial abrasive materials 231,159 163,629 102,363
----------- ----------- -----------
$ 635,428 $ 531,376 $ 418,891
=========== =========== ===========
Capital expenditures
Dental Supplies $ 255,740 $ 2,254,105 $ 735,346
Commercial abrasive materials 281,898 1,088,528 629,499
----------- ----------- -----------
$ 537,638 $ 3,342,633 $ 1,364,845
=========== =========== ===========
</TABLE>
For the years ended June 30, 1996, 1995 and 1994 net sales to
various agencies of the U.S. Government represented 1.6%, 1%
and 1% respectively, of the Company's total net sales.
Page 27 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 6: Quarterly Results (Unaudited)
The following tables summarize quarterly financial data for
the fiscal year's ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1996
Net Sales $2,710,084 $3,181,420 $2,879,413 $3,143,386 $11,914,303
Cost of Sales (*) 1,662,983 1,776,816 1,754,900 2,105,161 7,299,860
---------- ---------- ---------- ---------- -----------
Gross Profit 1,047,101 1,404,604 1,124,513 1,038,225 4,614,443
Operating Expenses 834,889 884,041 857,974 1,040,961 3,617,865
---------- ---------- ---------- ---------- -----------
Income from operations 212,212 520,563 266,539 ( 2,736) 996,578
Other (expense) income
Interest (expense) ( 163,249)( 212,788)( 129,628)( 53,575)( 559,240)
Other income 69,273 ( 857) 9,098 61,121 138,635
Less provision (benefit)
for income taxes 49,758 129,168 ( 76,410)( 67,393) 35,123
---------- ---------- ---------- ---------- -----------
Net Income before
extraordinary item $ 68,478 $ 177,750 $ 222,419 $ 72,203 $ 540,850
Extraordinary Item -
Settlement of Lawsuit
(Less applicable income
taxes of 151,271) - - 206,388 ( 2,099) 204,289
---------- ---------- ---------- ---------- ----------
Net Income $ 68,478 $ 177,750 $ 428,807 $ 70,104 $ 745,139
========== ========== ========== ========== ==========
Primary Earnings Per Share $.02 $.04 $.11 $.02 $.19
==== ==== ==== ==== ====
Fully-Diluted Earnings
Per Share $.02 $.04 $.11 $.01 $.18
==== ==== ==== ==== ====
</TABLE>
* During the current year, the first three quarters' inventory
computation was based on the prior year's gross profit percentages,
which overall was 40.9%. The year end actual inventory valuation
resulted in a 38.7% gross profit percentage. Therefore, fourth quarter
results reflect the entire years percentage decrease. The gross profit
percentage decrease was a result of increased costs due to expansion
and construction of two facilities in the year ended June 30, 1996.
Page 28 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 6: Quarterly Results (Unaudited) (Continued)
<TABLE>
<CAPTION>
1995
----------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995
Net Sales $2,839,429 $2,867,621 $2,875,029 $3,298,107 $11,880,186
Cost of Sales 1,647,107 1,790,020 1,641,438 1,943,889 7,022,454
---------- ---------- ---------- ---------- -----------
Gross Profit 1,192,322 1,077,601 1,233,591 1,354,218 4,857,732
Operating Expenses 835,186 788,662 861,413 952,940 3,438,201
---------- ---------- ---------- ---------- -----------
Income from operations 357,136 288,939 372,178 401,278 1,419,531
Other (expense) income
Interest (expense) ( 103,919)( 59,010)( 121,519)( 150,726)( 435,174)
Other income 49,178 8,398 47,998 21,049 126,623
Donation of Building - - ( 96,322) - ( 96,322)
Less provision for income
taxes 127,263 98,350 131,082 121,649 478,344
---------- ---------- ---------- ---------- -----------
Net Income $ 175,132 $ 139,977 $ 71,253 $ 149,952 $ 536,314
========== ========== ========== ========== ===========
Primary Earnings Per Share $ .04 $ .04 $ .02 $ .04 $ .14
===== ===== ===== ===== =====
Fully-Diluted Earnings
Per Share $ .04 $ .04 $ .02 $ .04 $ .14
===== ===== ===== ===== =====
</TABLE>
Page 29 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 7: Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Currently payable:
Federal (net of tax credits) $ 87,345 $314,442 $275,215
State 38,794 128,483 113,144
-------- -------- --------
126,139 442,925 388,359
-------- -------- --------
Deferred: ( 91,016) 35,419 20,479
-------- -------- --------
Income taxes before
extraordinary item and
cumulative effect of
accounting change $ 35,123 $478,344 $408,838
======== ======== ========
</TABLE>
Deferred income taxes result from the tax effect of
transactions which are recognized in different periods for
financial and tax reporting purposes. Significant components
of deferred income taxes and their related impact on deferred
income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Cumulative effect of
accounting change $ - $ - $ 60,168
Accelerated depreciation ( 152,704) 26,935 44,486
Contributions carry over - ( 333) -
Vacation and bonus accrual 41,999 - -
Other 19,689 8,817 ( 24,007)
-------- -------- --------
($ 91,016) $ 35,419 $ 80,647
======== ======== ========
</TABLE>
A reconciliation of the U.S. Federal Income Tax rate to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Federal taxes at graduated
rates from 15% to 39% 12.2% 31.0% 32.0%
===== ===== =====
State taxes 7.8% 12.7% 13.1%
===== ===== =====
Effective income tax rate 20.0% 43.7% 45.1%
===== ===== =====
</TABLE>
Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standard No. 109, Accounting for Income
Taxes. The cumulative effect of the change in accounting
principle amounted to $60,168 and is included in determining
net income for year ended June 30, 1994. Financial statements
for prior years have not been restated.
Page 30 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 8: Commitments and Contingencies
There are no material pending or contemplated legal
proceedings against the Company or of which any of its
property is subject.
Note 9: Shareholders' Equity
On December 17, 1986, the shareholders approved an increase in
the authorized capital to 15,000,000 shares of common stock
and 2,500,000 shares of preferred stock, each with a par value
of $.005 per share, and authorized the shares of preferred
stock to be issued in one or more classes, and in one or more
series within a class, with such voting rights, designations,
powers, preferences, qualifications, privileges, limitations,
options, conversion rights, restrictions and other special
rights as may be established from time to time by resolution
of the board of directors of the Company at or prior to the
time of issuance of shares of such class or series.
Note 10: Notes Payable, Bank
The Company had an unsecured line of credit with a Bank in the
amount of $2,000,000 with interest of 1% above the bank's
prevailing prime interest rate. There was $0 drawn upon the
line of credit at June 30, 1996 and 1995.
Note 11: Letters of Credit - Bank
The Company had a letter of credit with a bank. $50,000 issued
December 6, 1994 expiring December 6, 1997, whose beneficiary
is the Montgomery County Industrial Authority. The Company had
another letter of credit with a bank for $100,000 issued May
1, 1995 expiring May 2, 1996 whose beneficiary was the
Pennsylvania Industrial Development Authority. The
beneficiaries were both holders of mortgages on part of the
Company's buildings. At June 30, 1995 and 1996 there were no
funds drawn on these letters of credit.
Page 31 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 12: Legal Proceedings
The Company had filed suit against two defendants in one
action for patent infringement. This suit was settled in 1996
and has been treated as an extraordinary item.
Note 13: Subsequent Event
In August 1996, the Company purchased Thompson Dental Mfg. Co.
of Missoula, Montana, a leading manufacturer of dental hand
instruments and related products. Thompson Dental will operate
as a wholly-operated subsidiary of Moyco.
Note 14: Stock Option
The Company adopted an incentive stock option plan on October
30, 1992. The plan provides that key employees and directors
may be awarded options not to exceed 200,000 shares of the
Company's stock. Under the plans, options are granted at a
price not less than the fair market value at the grant date
and generally become exercisable upon date of grant. In all
cases, options expire ten years after grant. Of the total
options authorized for issuance, 111,800 shares had been
granted and 92,250 shares have been exercised.
The following summarizes the stock option transactions during
the year ended June 30, 1996.
Outstanding Outstanding
July 1, 1995 Granted Exercised Cancelled June 30, 1996
- --------------------------------------------------------------------------------
Shares under
Option I 71,100 1,000 67,100 - 5,000
Option price $.75 $.75 $.75 - $.75
Shares under
Option II 14,400 - 13,400 1,000 -
Option Price $1.00 - $1.00 $1.00 -
Shares under
Option III - 17,300 5,350 - 11,950
Option Price - $3.00 $3.00 - $3.00
Shares available for future grant were 88,200 shares at June
30, 1996.
Page 32 of 41
<PAGE>
MOYCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 15: Concentration of Credit Risk
The Company had funds in three banks in excess of federally
insured limits by $539,845 at June 30, 1996.
Note 16: Building Donation
In March 1995 the Company donated its Philadelphia building to
a qualified charity. At the time of the donation the book
value of the building was $96,323 which is reflected in these
financial statements as donation expense as part of other
expense. The fair market value of the building was appraised
at $125,000 at the time of the donation.
Note 17: Capitalized Interest
The Company capitalized $70,225 of interest costs paid as part
of their two construction projects completed during the year
ended June 30, 1995.
Page 33 of 41
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND CONSOLIDATED FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(1) Executive Officers of the Registrant:
(a) The names, ages and positions with the Registrant of all
of the executive officers of the Registrant, none of whom are
related by blood, marriage or adoption to each other, are as
follows:
<TABLE>
<CAPTION>
Name Age Position with the Registrant
---- --- ----------------------------
<S> <C> <C>
Marvin E. Sternberg 62 Chairman of the Board and President
Jerome Lipkin 62 Vice-President
William Woodhead 59 Secretary/Treasurer
</TABLE>
(b) The executive officers hold their respective offices until
the first meeting of newly elected directors following the
next annual meeting of the Company and the election of
successor officer unless otherwise terminated by the Board of
Directors.
Page 34 of 41
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(c) The following is a brief account of the business
experience of the executive officers of the Registrant:
Mr. Marvin E. Sternberg joined the Registrant in
March of 1974, as a Management Consultant and was elected
President of the Registrant on August 9, 1974. From 1965 to
1973, Mr. Sternberg was Trustee and Operating Officer for the
Robinson Trust, Philadelphia, Pennsylvania. From 1965 to
present, Mr. Sternberg has been a partner and/or director in a
number of other companies in the Philadelphia, Pennsylvania
and Fort Lauderdale, Florida areas.
Mr. Jerome Lipkin joined the Registrant on June 12,
1974 as assistant to the Vice-President. He was elected to
Vice-President in charge of operations on March 20, 1978.
Mr. William Woodhead joined the Registrant on January
7, 1985 as Controller. He was elected Secretary/Treasurer on
December 18, 1985.
(2) Directors of the Registrant:
(a) The following table sets forth the name of each director
of the Registrant and all offices presently held by him. The
term of each director will expire on such date as the Annual
Meeting of Shareholders is held and his successor is duly
elected and qualified.
<TABLE>
<CAPTION>
Name Age Other Positions with Registrant
---- --- -------------------------------
<S> <C> <C>
Marvin E. Sternberg 62 Chairman of the Board and President
Irvin Paul 66 None
Marvin Cravetz 59 None
Jerome Lipkin 62 Vice-President
William Woodhead 59 Secretary/Treasurer
</TABLE>
Page 35 of 41
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(2) Directors of the Registrant: (Continued)
(b) There are no family relationships between any director or
executive officer of the Registrant.
Irvin Paul, D.D.S., has engaged in the practice of
Dentistry, with offices in Upper Darby, Pennsylvania, for more
than thirty years.
Marvin Cravetz, D.D.S., was engaged in the practice
of Dentistry, with offices in Hatboro, Pennsylvania for more
than twenty years.
The business experience of the other directors during
the past six years is reported under Item 10(1) EXECUTIVE
OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION
The following table shows for fiscal years ending June 30,
1996, 1995 and 1994, the cash compensation as well as certain
other compensation paid to the named executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
| Long Term Compensation |
--------------------------------------
Annual Compensation | Awards | Payouts |
--------------------------------------------------------------------------------
| | |
| Securities | Long |
Other | Under- | Term |
Name Annual | Restricted lying |Incentive| All Other
and Compen- | Stock Options/ | Plan | Compen-
Principal sation | Award(s) SARs | Payouts | sation
Position Year Salary ($) Bonus ($) ($) | ($) (#) | ($) | ($)
--------- ---- ---------- --------- ------- ---------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin E. Sternberg | | |
Chairman of the | | |
Board & President 1996 $270,000 0 0 | 0 0 | 0 | $3,450
1995 270,000 0 0 | 0 0 | 1,450 | 4,620
1994 275,000 0 0 | 0 0 | 2,416 | 4,620
Jerome Lipkin | | |
Vice-President 1996 112,470 10,000 0 | 0 0 | 0 | 3,587
1995 103,200 10,000 0 | 0 0 | 630 | 4,448
1994 96,400 10,000 0 | 0 0 | 1,050 | 4,244
| | |
William Woodhead 1996 78,200 10,000 4,800 | 0 0 | 0 | 2,550
Treasurer 1995 70,900 10,000 4,800 | 0 0 | 464 | 2,427
1994 69,150 10,000 4,800 | 0 0 | 744 | 2,374
</TABLE>
Page 36 of 41
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (Continued)
STOCK OPTIONS
The following table shows stock options exercised and fiscal
year end values for the named exective officers under the
Moyco Industries, Inc. stock option plan. The plan does not
permit the grant of stock appreciation rights ("SARs"). There
have been no stock options granted in the current fiscal year.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Shares Options/SARs at FY-End ($)
Acquired on Value Realized at FY-End (#) Exercisable(2)/
Name Exercise (#) (1) ($) (2) Exercisable Unexercisable
---- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Marvin E. Sternberg 10,000 $74,028 0 0/0
Jerome Lipkin 10,000 $64,500 0 0/0
William Woodhead 10,000 $46,250 0 0/0
</TABLE>
(1) Upon exercise of an option, the optionee must pay the exercise
price in cash.
(2) Represents the difference between the fair market value of the
common stock underlying the option and the exercise price at
exercise, or fiscal year-end, respectively.
EMPLOYEE BENEFIT PLANS
The information under Note 4 "Employee Benefit Plans" of the
consolidated financial statements appearing on page 25 of 41
the Form 10K is incorporated herein by reference. All officers
and and employee directors participate in the programs on the
same terms as other salaried employees.
DIRECTORS COMPENSATION
Directors do not receive any compensation for serving as
directors.
Page 37 of 41
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following table sets forth information as of June 30,
1996 with respect to any person who is known to the Registrant
to be the beneficial owner of more than 5% of any class of
Registrant's voting securities:
Shares Percentage
Beneficially of
Title of Class Name and Address Owned Class
-------------- ---------------- ------------ ----------
Common Stock Marvin E. Sternberg 2,897,815 (1) (2) 72.00%
937 Mt. Pleasant Rd.
Bryn Mawr, PA 19010
(1) Of these shares 2,408,365 shares are held by
Marvin E. Sternberg, legally and
beneficially in his own name; 16,900 shares
by Susan Sternberg, wife of said Marvin E.
Sternberg, legally and beneficially in her
own name; and 497,310 shares are held by
said Susan Sternberg together with T. Allen
Lipsky in trusts consisting of 165,770
shares each for the respective beneficial
interests of Joseph S. Sternberg, Mark E.
Sternberg and Janet L. Sternberg, children
of said Marvin E. Sternberg and Susan
Sternberg.
(2) None of Marvin E. Sternberg, Susan Sternberg
or T. Allen Lipsky claim any beneficial
interests in the shares herein described
which are not reported here for his or her
respective legal and beneficial interest.
(b) The following table sets forth information, as of June 30,
1995, as to each class of equity securities of the Registrant
beneficially owned, directly or indirectly, by all directors
and officers of the Registrant, as a group:
<TABLE>
<CAPTION>
Shares Beneficially Percentage
Title of Class Beneficial Owner Owned (1) of Class
-------------- ---------------- ------------------- ---------
<S> <C> <C> <C>
Common Stock Marvin E. Sternberg 2,897,815 72.00%
Common Stock Irvin Paul -
Common Stock Marvin Cravetz -
Common Stock Jerome Lipkin 128,650 3.20%
Common Stock William Woodhead 10,025 .25%
Common Stock All Officers and
Directors (5 in number) 3,036,490 75.45%
</TABLE>
(1) Refer to Footnotes (1) and (2) of previous table.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director or officer had any material interest,
direct or indirect, in any business transaction of the Company
during the period July 1, 1995 through June 30, 1996, or in
any such proposed transaction.
Page 38 of 41
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
Page No.
--------
(a) 1. Financial statements
Included in Part II of this report
Report of independent certified public accountants 14
Consolidated Balance sheets at June 30, 1996
and 1995 15-16
Consolidated Statements of operations for the
three years ended June 30, 1996 17-18
Consolidated Statements of changes in
shareholders' equity for the three years
ended June 30, 1996 19
Consolidated Statements of cash flows for the three
years ended June 30, 1996 20
Notes to consolidated financial statements 21-33
2. Financial statement schedules
Included in Part IV of this report
For the three years ended June 30, 1996
Schedule II Valuation and qualifying accounts
All other schedules and notes specified under Regulation S-X are
omitted because they are either not applicable, not required or the
information called for therein appears in the financial statements or
notes thereto.
3. Exhibits required to be filed by Item 601 Regulation S-K:
23 Consent of Heffler, Radetich & Saitta L.L.P.
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only, and not filed.
(b) Reports on Form 8-K - NONE.
Page 39 of 41
<PAGE>
SCHEDULE II
MOYCO TECHNOLOGIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 1996
================================================================================
Column A Column B Column C Column D Column E
-------- ---------- ----------- ----------- ---------
Additions
Balance Balance
at Accounts at
Beginning Charged to Written End of
of Period Expense Off (1) Period
--------- ---------- ------- ------
Allowance for
doubtful
receivables:
June 30, 1996 $78,990 $ - $ - $78,990
======= ======== ======== =======
June 30, 1995 $58,990 $ 20,084 $ 84 $78,990
======= ======== ======== =======
June 30, 1994 $70,351 $ - $ 11,361 $58,990
======= ======== ======== =======
(1) Represents accounts written off against the reserve.
Page 40 of 41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MOYCO INDUSTRIES, INC.
BY: /s/ Marvin E. Sternberg
--------------------------------------
Marvin E. Sternberg
President and Chief Executive Officer
Chairman of the Board
Dated: September 20, 1996
----------------------------
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.
/s/ Marvin E. Sternberg President and Chief Executive Officer
- ---------------------------
Marvin E. Sternberg
Dated: September 20, 1996
--------------------------
/s/ Jerome Lipkin Vice President and Director
- --------------------------- Executive Officer
Jerome Lipkin
Dated: September 20, 1996
--------------------------
/s/ William Woodhead Secretary/Treasurer and
- --------------------------- Director
William Woodhead
Dated: September 20, 1996
--------------------------
Page 41 of 41
<PAGE>
SCHEDULE 23
CONSENT
We consent to the incorporation by reference in the Annual Report (Form 10-K) of
Moyco Technologies, Inc. of our report dated August 28, 1886, included in the
1996 Annual Report to Shareholders of Moyco Technologies, Inc.
Our audits also included the financial statement schedules of Moyco
Technologies, Inc. listed in Item 14(a). These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
/s/ Heffler, Radetich & Saitta L.L.P.
-------------------------------------
Heffler, Radetich & Saitta L.L.P.
Philadelphia, PA
September 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,402,088
<SECURITIES> 0
<RECEIVABLES> 1,699,488
<ALLOWANCES> (78,990)
<INVENTORY> 3,283,779
<CURRENT-ASSETS> 6,517,083
<PP&E> 10,244,077
<DEPRECIATION> 4,350,226
<TOTAL-ASSETS> 12,544,014
<CURRENT-LIABILITIES> 1,799,708
<BONDS> 6,511,520
0
0
<COMMON> 23,083
<OTHER-SE> 4,952,407
<TOTAL-LIABILITY-AND-EQUITY> 12,544,014
<SALES> 11,914,303
<TOTAL-REVENUES> 11,914,303
<CGS> 7,299,860
<TOTAL-COSTS> 7,299,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559,240
<INCOME-PRETAX> 575,973
<INCOME-TAX> 35,123
<INCOME-CONTINUING> 540,850
<DISCONTINUED> 0
<EXTRAORDINARY> 204,289
<CHANGES> 0
<NET-INCOME> 745,139
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
