<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-QSB
Mark One
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarterly Period Ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from to
------------- ----------------
Commission File Number 000-08193
SENSYTECH, INC.
(FORMERLY KNOWN AS SENSYS TECHNOLOGIES INC.)
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-1873250
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8419 Terminal Road, Newington, Virginia 22122-1430
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 550-7000
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 [ ]
As of May 10, 2000, there were 4,021,547 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE> 2
SENSYTECH, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
- ------ ----
<S> <C>
Condensed Consolidated Balance Sheets at
March 31, 2000 and September 30, 1999 ...................... 3-4
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and March 31, 1999,
And Six Months Ended March 31, 2000 and March 31, 1999....... 5-6
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended March 31, 2000 and March 31, 1999 .......... 7
Notes to Condensed Consolidated Financial Statements ................ 8
Item 2. Management's Discussion and Analysis of Results of
- ------ Operations and Financial Condition .......................... 9-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................... 11
- ------
Item 4. Submission of Matters to a Vote of Security Holders ......... 11-12
- ------
Item 6. Exhibits and Reports on Form 8-K ............................ 12
- ------
Signatures............................................................ 13
</TABLE>
2
<PAGE> 3
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
--------- ------------
(Unaudited) (*)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents ........................ $ 2,501,000 $ 3,076,000
Accounts receivable, net of allowance for doubtful
accounts of $372,000 at March 31, 2000 and
$311,000 at September 30, 1999 ................... 3,103,000 3,215,000
Unbilled contract costs, net ..................... 5,265,000 4,924,000
Inventories (Note 2) ............................. 24,000 25,000
Deferred income taxes ............................ 596,000 717,000
Prepaid income taxes ............................. 551,000 -
Other current assets ............................. 70,000 151,000
---------- ----------
TOTAL CURRENT ASSETS ........................... 12,110,000 12,108,000
PROPERTY AND EQUIPMENT ............................. 1,434,000 1,403,000
OTHER ASSETS
Deferred income taxes ............................ 54,000 54,000
Goodwill, net of accumulated amortization of
$33,000 at March 31, 2000 and $25,000 at
September 30, 1999 ............................... 133,000 141,000
Other assets ..................................... 75,000 81,000
---------- ----------
TOTAL ASSETS ................................... $13,806,000 $13,787,000
=========== ===========
</TABLE>
*The year-end balance sheet data was summarized from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
------------ ------------
(Unaudited) (*)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,744,000 $ 1,486,000
Accrued salaries, benefits, and related expenses 1,008,000 1,267,000
Deferred compensation - 356,000
Other accrued expenses 623,000 634,000
Income taxes payable - 355,000
Billings in excess of costs 234,000 466,000
Capital leases 44,000 42,000
------------ ------------
TOTAL CURRENT LIABILITIES 3,653,000 4,606,000
LONG-TERM LIABILITIES
Capital leases 46,000 69,000
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, at March 31, 2000, $.01 par value,
authorized 5,000,000 shares; issued and outstanding 4,019,147
shares; at September 30, 1999, $.01 par value, authorized
5,000,000 shares; issued and outstanding 3,987,940 shares 40,000 40,000
Additional paid-in capital 7,235,000 7,099,000
Unearned stock-based compensation (104,000) (125,000)
Retained earnings 2,936,000 2,098,000
------------ ------------
10,107,000 9,112,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,806,000 $ 13,787,000
============ ============
</TABLE>
*The year-end balance sheet data was summarized from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUE
Contract revenue $ 6,002,000 $ 7,515,000
----------- ------------
COSTS AND EXPENSES
Cost of revenues 4,197,000 5,591,000
General and administrative expenses 1,023,000 1,225,000
----------- ------------
Total costs and expenses 5,220,000 6,816,000
----------- ------------
INCOME FROM OPERATIONS 782,000 699,000
OTHER INCOME (EXPENSES)
Interest income (expense), net 13,000 (24,000)
----------- ------------
INCOME BEFORE INCOME TAXES 795,000 675,000
INCOME TAX PROVISION (297,000) (260,000)
----------- ------------
NET INCOME $ 498,000 $ 415,000
=========== ============
PER SHARE AMOUNTS (Note 3)
Basic earnings per share $ 0.12 $ 0.10
=========== ============
Diluted earnings per share $ 0.12 $ 0.10
=========== ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended
March 31,
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUE
Contract revenue $ 11,495,000 $ 13,538,000
------------ ------------
COSTS AND EXPENSES
Cost of revenues 8,375,000 10,221,000
General and administrative expenses 1,820,000 2,116,000
------------ ------------
Total costs and expenses 10,195,000 12,337,000
------------ ------------
INCOME FROM OPERATIONS 1,300,000 1,201,000
OTHER INCOME (EXPENSES)
Interest income (expense), net 43,000 (70,000)
------------ ------------
INCOME BEFORE INCOME TAXES 1,343,000 1,131,000
INCOME TAX PROVISION (505,000) (440,000)
------------ ------------
NET INCOME $ 838,000 $ 691,000
============ ============
PER SHARE AMOUNTS (Note 3)
Basic earnings per share $ 0.21 $ 0.17
============ ============
Diluted earnings per share $ 0.20 $ 0.17
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
March 31,
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net cash (used in) provided by operating activities $ (374,000) $ 1,797,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net acquisitions of property and equipment (274,000) (237,000)
Proceeds from disposal of property held for sale - 1,446,000
------------ ------------
Net cash (used in) provided by investing activities $ (274,000) $ 1,209,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under line of credit $ - $(2,049,000)
Principal payments on mortgage debt - (220,000)
Principal payments on capital lease obligations (21,000) (21,000)
Proceeds of stock option exercises 94,000 21,000
------------ ------------
Net cash provided by (used in) financing activities 73,000 (2,269,000)
Net (decrease) increase in cash and cash equivalents (575,000) 737,000
Cash and cash equivalents, beginning of period 3,076,000 112,000
------------ ------------
Cash and cash equivalents, end of period $ 2,501,000 $ 849,000
============ ============
Supplemental disclosure of cash flow information:
Cash received for income taxes $ 4,000 $ 24,000
============ ============
Cash paid for interest $ 5,000 $ 65,000
============ ============
Cash paid for income taxes $ 1,290,000 $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE> 8
SENSYTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information for commercial and industrial companies and with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. Operating results
for the three and six month periods ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 2000. Intercompany accounts and transactions have been eliminated
in consolidation. For further information, refer to Sensytech, Inc.'s Annual
Report on Form 10-KSB for the year ended September 30, 1999.
2. INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method and consisted of component parts.
3. EARNINGS PER SHARE
The computation of net earnings per share is based on the weighted average
number of shares of common stock outstanding during the periods presented. The
weighted average number of shares used in the basic earnings per share
calculation was 4,012,513 and 3,968,554 for the three month periods ended March
31, 2000 and 1999, respectively, and 4,005,509 and 3,967,576 for the six month
periods ended March 31, 2000 and 1999, respectively. The weighted average number
of shares used in the diluted earnings per share calculation was 4,185,065 and
4,177,764 for the three-month periods ended March 31, 2000 and 1999,
respectively. The weighted average number of shares used in the diluted earnings
per share calculation was 4,201,022 and 4,159,775 for the six-month periods
ended March 31, 2000 and 1999, respectively.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion provides information which management believes is
relevant to an assessment and an understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
condensed consolidated financial statements and accompanying notes.
Forward-looking Statements
Statements in this filing which are not historical facts are forward-
looking statements under the provisions of the Private Securities Litigation
Reform Act of 1995. All forward-looking statements involve risks and
uncertainties. These statements are based upon numerous assumptions about future
conditions that could prove not to be accurate. Actual events, transactions or
results may materially differ from the anticipated events, transactions or
results described in such statements. The Company's ability to consummate such
transactions and achieve such events or results is subject to certain risks and
uncertainties. In addition to those specifically mentioned above, such risks and
uncertainties include, but are not limited to, the existence of demand for and
acceptance of the Company's products and services, regulatory approvals and
developments, economic conditions, the impact of competition and pricing,
results of financing efforts and other factors affecting the Company's business
that are beyond the Company's control. The Company undertakes no obligation and
does not intend to update or revise these forward-looking statements to reflect
future events or circumstances.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999:
Revenue for the three months ended March 31, 2000 was $6,002,000 compared to
$7,515,000 for the three months ended March 31, 1999, resulting in a $1,513,000
or a 20.1% decrease. The decrease was primarily the result of reduced revenues
on the ESM Receiver contract with the U.S. Navy. This contract generated 28.6%
of the revenue for the three months ended March 31, 1999 compared to 5.7% of the
revenue for the three months ended March 31, 2000.
The total amount of negotiated backlog, including both unfilled firm orders for
the Company's products for which funding had been authorized and appropriated by
the customer, and firm orders for which funding had not been appropriated as of
March 31, 2000 and 1999 was $15,000,000 and $17,000,000 respectively. This
decrease is principally the result of reduced unappropriated backlog. The
Company is in negotiation for an additional authorization of approximately
$5,000,000 on a major subcontract with the U.S. Navy. However, there can be no
assurance that the negotiations will be successful.
Cost of revenue, as a percentage of revenue, decreased from 74.4% for the three
months ended March 31, 1999 to 69.9% for the three months ended March 31, 2000.
The decrease primarily resulted from continuing productivity improvements in the
operations and in the profit margins under current contracts.
For the three months ended March 31, 2000, general and administrative expenses
decreased from $1,225,000 to $1,023,000 resulting in a $202,000 or a 16.5%
decrease compared to the three month period ended March 31, 1999. The decrease
was due principally to shedding of inefficiencies in the current year.
9
<PAGE> 10
Net interest income was $13,000 for the three months ended March 31, 2000,
compared to net interest expense of $24,000 for the three months ended March 31,
1999. The Company was able to utilize its improved operating performance and the
net proceeds from the sale of real estate on December 1, 1998, to reduce to zero
its outstanding balance on its line of credit throughout the three-month period
ended March 31, 2000, and earned interest on temporary cash investments.
Income tax expense consists of federal and state income tax. The Company's
effective tax rate was 37.3% for the three months ended March 31, 2000, compared
to an effective tax rate of 38.5% for the three months ended March 31, 1999. The
rate varied from the statutory rate primarily due to state taxes.
Net income for the three months ended March 31, 2000 increased to $498,000,
compared to a net income of $415,000 for the three months ended March 31, 1999.
The increase of $83,000 was the result of the items discussed above.
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999:
Revenue for the six months ended March 31, 2000 was $11,495,000 compared to
$13,538,000 for the six months ended March 31, 1999, resulting in a $2,043,000
or 15.1% decrease. The decrease was primarily the result of reduced revenues on
the ESM Receiver contract with the U.S. Navy. This contract generated 33.0% of
the revenue for the six months ended March 31, 1999 compared to 10.8% of the
revenue for the six months ended March 31, 2000.
Cost of revenue, as a percentage of revenue, decreased from 75.5% for the six
months ended March 31, 1999 to 72.9% for the six months ended March 31, 2000.
The decrease primarily resulted from an improved mix of business and
productivity improvements in the operations.
For the six months ended March 31, 2000, general and administrative expenses
decreased from $2,116,000 to $1,820,000 or a 14.0% decrease compared to the
six-month period ended March 31, 1999. The decrease was due principally to a
decrease in salaries and related benefit expense.
Net interest income was $43,000 for the six months ended March 31, 2000,
compared to net interest expense of $70,000 for the six months ended March
31,1999. The Company was able to utilize its improved operating performance and
the net proceeds from the sale of real estate on December 1, 1998, to pay down
its outstanding balance on its line of credit throughout the three-month period
ended March 31, 2000, and earned interest on temporary cash investments.
Income tax expense consists of federal and state income tax. The Company's
effective tax rate was 37.6% for the six months ended March 31, 2000, compared
to an effective tax rate of 38.9% for the six months ended March 31, 1999. The
rate varied from the statutory rate primarily due to state taxes.
Net income for the six months ended March 31, 2000 increased to $838,000,
compared to a net income of $691,000 for the six months ended March 31, 1999.
The increase of $147,000 was the result of the items discussed above.
10
<PAGE> 11
LIQUIDITY AND SOURCES OF CAPITAL
Cash flows used in operating activities were $374,000 for the six months ended
March 31, 2000, compared to cash flows provided by operating activities of
$1,797,000 during the comparable six month period of fiscal year 1999. This
decrease was principally due to the prepayment of income taxes, an increase in
unbilled receivables, and terminating a deferred compensation plan, which
resulted in a payout to participants.
The net cash used for investing activities during the six-month period ended
March 31, 2000 was $274,000, compared to net cash provided to the Company by its
investing activities of $1,209,000 during the first six months of fiscal year
1999. In the six months ended March 31, 1999, the Company disposed of property
held for sale for $1,446,000. The current period expenditures were related to
the acquisition of property and equipment. The Company anticipates that it will
continue to incur capital expenditures at this approximate rate through the end
of the fourth quarter of fiscal year 2000.
The net cash provided by the Company in financing activities during the
six-month period ended March 31, 2000 was $73,000, compared to net cash used by
the Company in financing activities of $2,269,000 during the comparable
six-month period of fiscal year 1999. The 2000 activity was principally the
result of the proceeds of stock option exercises offset by the payment of
capital lease obligations. For the six month period ended March 31, 1999, the
net cash used was primarily devoted to reducing to zero the Company's line of
credit and satisfying the mortgage on the real estate which was sold. At March
31, 2000, the Company was in compliance with the covenants contained in the line
of credit agreement, and there were no amounts outstanding.
The Company believes that its existing funds, amounts generated by operations,
and amounts available for borrowings under its line of credit will be sufficient
to meet its working capital needs through the next 12 months.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of, any
pending legal proceedings other than that which is incidental to the ordinary
course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the period covered by this report, the Company filed with the Securities
and Exchange Commission and delivered to its shareholders the Company's Proxy
Statement for its Annual Meeting of Stockholders held February 9, 2000.
(a) The Company's Annual Meeting of Stockholders was held on February 9,
2000.
(b) The nominees for the Board of Directors are identified below.
(c) The inspector of election tabulated the following votes for the election
of directors:
11
<PAGE> 12
Election of Directors
<TABLE>
<CAPTION>
Number of Votes Abstentions and Broker
Nominee for Office Number of Votes "For" "Against" Non-Votes
- ------------------ --------------------- ------- ---------
<S> <C> <C> <C>
Charles W. Bernard 2,504,067 7,559 - 0 -
John Irving 2,504,067 7,559 - 0 -
Thomas R. Ory 2,503,638 7,989 - 0 -
S. R. Perrino 2,499,867 11,760 - 0 -
Philip H. Power 2,504,067 7,559 - 0 -
S. Kent Rockwell 2,504,067 7,559 - 0 -
John D. Sanders 2,507,067 7,559 - 0 -
</TABLE>
The inspector of election tabulated the following votes for the ratification of
the selection of PricewaterhouseCoopers LLP as the Company's independent
accountants for the 2000 fiscal year:
<TABLE>
<CAPTION>
Abstentions and Broker
Number of Votes "For" Number of Votes "Against" Non-Votes
<S> <C> <C>
2,503,989 -0- 7,638
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule
(b) The Company did not file any Reports on Form 8-K during this period.
12
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SENSYTECH, INC.
May 15, 2000 By: /s/S. Kent Rockwell
-----------------------------------
S. Kent Rockwell
Chief Executive Officer
By: /s/Lloyd B. Johnston
------------------------------------
Lloyd B. Johnston
Principal Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,501
<SECURITIES> 0
<RECEIVABLES> 3,475
<ALLOWANCES> 372
<INVENTORY> 24
<CURRENT-ASSETS> 12,110
<PP&E> 4,108
<DEPRECIATION> 2,674
<TOTAL-ASSETS> 13,806
<CURRENT-LIABILITIES> 3,653
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 10,067
<TOTAL-LIABILITY-AND-EQUITY> 13,806
<SALES> 0
<TOTAL-REVENUES> 11,495
<CGS> 0
<TOTAL-COSTS> 10,195
<OTHER-EXPENSES> 43
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,343
<INCOME-TAX> 505
<INCOME-CONTINUING> 838
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 838
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.20
</TABLE>
