SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: JUNE 30, 1997 COMMISSION FILE NO. 0-4076
------------- ------
EXOTECH INCORPORATED
--------------------
(Exact name of Registrant as Specified in Charter)
STATE OR JURISDICTION OF
INCORPORATION OR ORGANIZATION: DELAWARE
IRS IDENTIFICATION NO: 54-0700888
ADDRESS OF PRINCIPAL OFFICE: 8502 DAKOTA DRIVE
GAITHERSBURG, MD. 20877
REGISTRANT'S TELEPHONE NUMBER: (301) 948-3060
SECURITIES REGISTERED PURSUANT TO
SECTION 12 (b) OF THE EXCHANGE ACT
NONE
----
SECURITIES REGISTERED PURSUANT TO
SECTION 12 (G) OF THE ACT
COMMON STOCK PAR VALUE $0.10 PER SHARE.
Indicate by checkmark 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 (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes [x] No [ ]
At June 30, 1997, 942,387 shares of Common Stock were outstanding, and the
aggregate market value of the Common Stock of Exotech Inc. held by nonaffiliates
was approximately $65,560.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I
ITEM 1. GENERAL DESCRIPTION AND BUSINESS ACTIVITIES
-------------------------------------------
A. GENERAL - There have been no changes in the organization of the
Company during the past fiscal year. The Company has been neither a party to,
nor contemplates, any actions of bankruptcy, receivership, or reorganization
during the past or current fiscal years. No material assets were acquired, no
acquisitions or dispositions are anticipated. The basic nature and conduct of
the business is expected to continue as in the past.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS - In the opinion of
Management, the Company has one industry segment: (1) electro-optics and
electronic instrument systems and related services.
1. Electro-optics products - The Company's principal products are: (1)
a laser bacteria colony counter used in food and drug processing and laboratory
testing environments, (2) a printed circuit board (PCIB) which interfaces the
laser-scanner instrument with many models of the personal computers, (3) a
crystallographic scanner that evaluates the lattice structure orientation of
semiconductor crystals on the basis of surface morphology measurements, (4) a
hand-held four channel-ground truth radiometer used for earth resource studies
in conjunction with the LANDSAT satellite and also independent studies, and (5)
an automated spiral plater that precisely and rapidly dispenses microbial
samples onto rotating agar plates used in laboratories performing bacterial
enumeration work.
These products are currently marketed world-wide. Spiral Biotech, Inc.
is the exclusive representative of products 1, 2 and 5. These products and
related service work have accounted for 86 percent of the Company's sales in the
past year and about 93 percent in the prior two fiscal years. The others are
sold directly by the Company. They are built for inventory in lots of 25 units,
with two or more lots of the well established products generally being sold in
about one year. It is intended that these products will be updated periodically
to keep them abreast of new technological developments and will remain products
of the Company. In December 1994 the Company accepted a contract from Spiral
Biotech, Inc. to design an automated spiral plater (Autoplate) to replace the
model that was being imported from Holland. In May 1995 a demonstration model of
the instrument was delivered and subsequently the Company received an order for
22 production units. This production was completed in the first six months of
fiscal year 1996. A modulation transfer function (MTF) tester, used for quality
control in the manufacture of low light level image intensifier tubes, is not in
regular production but would be manufactured to fill customers' orders. This
instrument was initially produced for the U. S. Army and delivered during fiscal
year 1979. The Company developed an adapter assembly for these test instruments
that updates them to test the latest versions of image intensifier tubes. Over
the past fifteen years the Company has provided support to the U. S. Army and
its contractors in the form of repair maintenance and calibration services. The
contracts for these services were fixed price. There were three contracts for
these services in the past fiscal year and purchase orders for calibration
services in the current fiscal year are expected from government contractors
using five of the MTF tester systems.
The Crystallographic Scanner, developed in fiscal year 1987, redesigned
into a manufacturing model in fiscal year 1988, was put into production in 1989.
The first unit was delivered to the customer in May 1989. In 1992, a system
upgrade was designed and sold for this instrument. An active marketing effort
through correspondence and personal contacts, as well as personal presentations,
is continuing to
2
<PAGE>
introduce this product to semiconductor crystal growers, processors and
manufacturers. However, there have been no sales of this instrument over the
past five years. The Company is currently engaged with the National Institute of
Standards and Technology in a cooperative R&D agreement with the objective to
calibrate the Exotech Scanner method with respect to the Bragg Angle method of
determining crystal axis orientation. Validation of our instrument's capability
vis-a-vis the X-ray methods will overcome a persistent impediment to sales of
Exotech's Scanner to producers of semiconductor wafers. There are well-known
potential customers that show continued interest in the scanner, but must be
convinced of correlation with the traditional X-ray results.
Some of the component parts for the products discussed above are
fabricated to the Company's specifications and design. Other parts are standard
electronic or optical components available off-the-shelf. The availability of
these components is dependent upon several independent manufacturers and
distributors. Delays due to strikes, material availability or scheduling
problems could adversely affect the Company's assembly and delivery schedules. A
few parts have only one source; however, the suppliers are proven, reliable
businesses. The Company does not rely on foreign sources for raw materials,
other than to the extent U. S. manufacturers acquire their supplies overseas. An
energy crisis or fuel shortage would have no more of an adverse effect on the
Company than on other firms requiring lighting, heat and modest amounts of
electric power for offices and shops.
Among its current electro-optical products the Company holds an
exclusive license and foreign patent applications on the Crystallographic
Scanner.
There are little or no seasonal variations in the business, other than
for radiometers which tend to attract greater interest during the spring and
fall seasons.
Working capital is a continuing problem for the Company. There is
currently no working capital financing available through a financial
institution, although producer loans made by Spiral Biotech, Inc. were used to
finance colony counter production in the most recent and prior fiscal years. The
limited availability of working capital results in occasional cash on delivery
orders or delays in paying suppliers. All products are guaranteed as to parts
and workmanship for a period of six months to one year. The only warranty work
incurred in the past year was repair of a Model 200 Vacuum Source at nominal
cost.
The colony counter, Autoplate, crystallographic scanner and radiometer
products are used principally in the scientific research and high technology
manufacturing communities and therefore customers tend to be concentrated in
these areas of activities.
Sales in July and August 1997 amounted to $27,000, comprising an
Autoplate, a radiometer and miscellaneous repair and calibration services.
Backlog in this segment at June 30, 1997 was $200,000.
Business performed for the Government is on a fixed-price basis and
therefore not subject to renegotiation; however, the contracts could be
terminated for non-delivery or failure to meet specifications. There are other
manufacturers of the Company's products, most of them larger and with greater
resources available to fund development and production. Competition is very keen
for the available market. The Company strives to improve its existing products
and produce highly reliable state- of-the-art instruments.
2. General Description of Business - Research and development by the
Company in the past affected four products: (1) bacteria colony counters; (2)
four channel radiometers, (3) data processors
3
<PAGE>
for bacteria colony counters and, (4) Model 500 Crystallographic Scanners. In
fiscal year 1992 , the Company, in collaboration with Spiral Biotech, Inc.,
engaged in development of computer controlled, stepper motor actuated automation
for bacteria colony plating and counting instruments. The applications comprise
coordinated precise motions on as many as four axes. The purpose of this work is
to enhance the technological excellence and competitive edge of the next
generation of the Company's products for the microbiological laboratory market.
This work, completed in March, 1992, resulted in a colony counter with automated
features, and a proof-of-concept and demonstration model of a new spiral plater
instrument. Total expenditures for the spiral plater effort amounted to $63,000
of which $20,000 was funded by Spiral Biotech, Inc. The preliminary design of
the new plating instrument was completed, and produced by Melvezi-Prolion, a
development and manufacturing firm in Holland.
Following the termination of importing of the instrument from Holland,
the Company, early in 1995, designed a replacement instrument and, concurrent
with development work, began production of 12 units on an order from Spiral
Biotech, Inc. The order was increased to 22 units in November 1995, with the
final unit of this lot shipped in February 1996. Follow-on orders for
instruments resulted in shipments of 50 more units prior to June 30, 1997.
In the biotechnology instruments business, autoplates, colony counters
and related equipment sales accounted for 78% of the year's sales, 11% from
radiometer sales, 2% from the MTF parts, calibration and maintenance; and 9%
from miscellaneous sales and repair work.
For the fiscal year ended June 30, 1997, as has been the case for prior
years, the Company's independent auditors' report has included an explanatory
paragraph, following the opinion paragraph, describing the existence of a going
concern uncertainty. Management has been advised that the principal cause of the
going concern uncertainty is cash flow shortage which has caused delays in
meeting some current obligations. It is the opinion of Management that progress
in resolving cash flow related problems, although elusive in the past several
years, will be re-established in fiscal year 1997 provided that modest increases
in instrument sales, and maintenance and repair work continue and that ongoing
demonstrations and trial applications of the Crystallographic Scanner result in
sales of this product. Strengthening of revenues and stringent controls of costs
are necessary to enable profits from operations to remedy cash flow problems.
The capital expenditures, earnings and competitive position have not
been affected by compliance with Federal, State or local regulations enacted to
control the discharge of materials into the environment or otherwise relating to
the protection of the environment.
The Company and its subsidiary employ five persons; two are classified
as professional and three as semi-professional. The Company did not conduct
operations in foreign countries.
ITEM 2. PROPERTIES
The Company, and its wholly-owned subsidiary, Exotech Research &
Analysis, Inc. have been in their present facilities at 8502 Dakota Drive,
Gaithersburg, Maryland 20877 since November, 1987. The premises consist of
approximately 4,500 square feet of office space and laboratory facilities.
In November 1995, the Company entered into a three year lease extension
with McShea Management, Inc. of Gaithersburg, Maryland for the presently
occupied facility.
4
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ITEM 3. LEGAL PROCEEDINGS
Neither the company nor its subsidiary are parties to any material
pending legal proceedings nor is any of their property the subject of any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the past fiscal year.
5
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.
a. Price range of Common Stock
---------------------------
The following table shows the Bid and Ask prices for the Common Stock
in the over-the-counter market for the fiscal years and calendar quarters
indicated, as obtained upon request from stockbrokers in the Washington area.
The quotations represent prices in the over-the counter market between dealers
in securities, do not include retail mark-up, mark-down or commission, and do
not necessarily represent actual transactions. (Transaction data was
insufficient to obtain an average for 1996 and 1997.)
-------------BID AND ASK PRICES--------------
1997 1996
---- ----
FIRST QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/4
SECOND QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/4
THIRD QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/4
FOURTH QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/4
b. Approximate number of Equity Security Holders.
----------------------------------------------
TITLE OF CLASS: Common Stock
APPROXIMATE NUMBER OF SHAREHOLDERS
(As of September 27, 1997:) 620
---
c. Dividends.
----------
No dividends were declared or paid during the most recent or any prior
fiscal year.
6
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ITEM 6. SELECTED FINANCIAL DATA
Selected Income Statement Data:
<TABLE>
<CAPTION>
---------------------------------- FISCAL YEAR ---------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C>
Net Sales $443,176 $367,259 $370,102 $437,330 $435,813
Income (Loss) before Taxes
& Extraordinary Credit (265,432) (152,584) (68,130) (35,448) (23,854)
Net Income (Loss) $(265,432) $(152,584) $(68,130) $(35,448) $(23,854)
Per Share:
Net Income (Loss) (.28) (.16) (.07) (.04) (.03)
</TABLE>
Selected Balance Sheet Data:
<TABLE>
<CAPTION>
---------------------------------- FISCAL YEAR -----------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C>
Current Assets $329,315 $563,209 $587,808 $643,836 $597,081
Current Liabilities 856,445 825,952 699,068 688,834 611,775
Working Capital (527,130) (262,743) (111,260) (44,998) (14,694)
Total Assets 335,602 570,541 596,241 654,136 612,525
Stockholders' Equity
and Accumulated
Deficit $(520,843) $(255,411) $(102,827) $(34,698) 750
</TABLE>
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULT OF OPERATIONS.
The Company's revenues of $443,176 were 21% higher than in fiscal year
1996, and 20% higher than in fiscal year 1995. The declines in earlier years
related in part to organizational and personnel disruptions in the Company's
principal customer and marketing agent for biotechnology instruments, Spiral
Biotech, Inc., and the sub-par quality of an imported automated plater
instrument, sold as a part of a system including Exotech products. The Company's
new product has replaced this instrument.
Sales of instruments, parts, repairs and calibration services in the
past three years are shown in the following table. Instrument sales have
increased 90% over the period with the large increase in 1996 related to the
introduction of the automated plater. Variations in MTF Tester services relate
to the occasional repair work ordered in addition to the usual calibration
services. The markedly higher sales of miscellaneous service in fiscal year 1995
resulted from repairs to the imported plater instrument mentioned above.
1997 1996 1995
-------- -------- ------
Biotechnology Instruments $347,445 $302,700 $189,865
Radiometer 47,015 -- 16,440
MTF Tester Service 9,590 17,350 9,050
Miscellaneous Parts and Service 39,126 47,209 154,747
The cost of operations, $670,728 including $281,117 of inventory
write-off, resulted in an operating loss of $227,552 compared to a loss of
$127,367 in fiscal year 1996 and a profit of $2,057 in 1995. The impact of
interest costs resulted in a net loss of $265,432 compared to losses of $152,584
and $68,130 in 1996 and 1995, respectively.
A net increase in demand notes of $13,000 needed to sustain operations
caused an increase in interest expense to $37,880 compared to $29,817 in the
prior year, and $26,822 in fiscal 1995. A charge of $129,000 was incurred in the
past year for research and development to search out the combination of
electronic and mechanical technology needed to design and develop a
state-of-the-art instrument with strong sales potential in a highly competitive
market. In the opinion of Management, that objective was achieved through
intense effort to deliver two preproduction prototypes and 14 units of the new
instrument in the second quarter of fiscal 1996. Production costs for the
instrument have been steadily improved following that effort. A modest profit is
projected for the current production lot.
In the past year, orders for instruments and services by Spiral
Biotech, Inc. were sustained at about the level of the prior year, bringing
backlog to $200,000 at June 30, 1997, compared to $279,000 one year earlier and
$81,000 at the end of fiscal year 1995. In the opinion of Management, recent
improvements in the marketing of the biotechnology products will rejuvenate
sales of the laser scanner instruments together with increasing sales of the new
automated plater.
Despite financial and staffing limitations that have impeded marketing
of the Crystallographic Scanner instruments, management believes that the
results of on-going collaborative studies and demonstrations of capabilities
will improve the prospects of sales to the potential customers who continue to
show interest in that instrument system. Furthermore, management is committed to
explore the prospects for collaborative arrangements with several well
established suppliers of manufacturing
8
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equipment to the semiconductor producer industry as a means to generate
increased exposure and sales potential for this product. However, substantive
results were not achieved prior to June 30, 1997. In response to the
recommendation of the independent accountant and the reviewing authorities of
the Securities and Exchange Commission, this product and the Communications
Network System products were deleted from inventory. This action resulted in a
charge against income of $281,117.
Over the past three fiscal years, as in prior years, the independent
accountants' report has included an explanatory paragraph, following the opinion
paragraph, describing the existence of a going concern uncertainty. The
accountants have advised Management that the principal cause for the going
concern uncertainty is cash flow shortages which have caused delays in meeting
current obligations. In the opinion of Management, the recent years of seriously
depressed markets for the Company's products caused substantial impediments to
overcoming the qualification stated by the accountants. Continued stringent
control of costs and cash outlays has enabled the Company to sustain high
quality and timely upgrades of its products while nurturing improved results
from marketing efforts in a very competitive environment. With a new product now
experiencing a good level of acceptance in the market, and growth in the
Company's backlog for its other biotechnology-related products, Management
believes that increasing revenue will provide sufficient cash to support
operations throughout fiscal year 1998. Additionally, the opportunity to build
on the results of our current activity will be pursued to reactivate sales of
the Crystallographic Scanner instruments and technology.
As shown in the Statements Of Cash Flows for the three years ended June
30 of 1997, 1996 and 1995, each period ended with a small positive cash balance.
The result of operating net losses in 1997 and 1996 caused negative cash flow
from operating transactions of ($9,674) and ($60,428) respectively. Offsetting
in these cases were net proceeds from notes of $13,000 in 1997 and $60,501 in
1996. In fiscal year 1995, $26,439 was provided by operating transactions. That
amount was offset by a net pay down of notes of ($26,903) and purchase of
equipment of ($587) causing a decrease in cash of ($1,051). The Company
continues to meet its cash flow obligations, although at times delayed in some
cases of trade payables and payroll, with receipts from sales and financing
activities comprised of loans from the Company's President and from Spiral
Biotech, Inc., its principal customer. The loans from Spiral Biotech are secured
by ordered instruments in progress and range from 15 to 20 percent of the
purchase order value for the total order. No loans are in default. The
fluctuations in accounts payable relate to the amount of work-in-progress for
products on order.
It is noted that the Company's property, plant and equipment are nearly
fully depreciated. However, all essential items of these assets are maintained
in good repair and no replacements nor additions are anticipated in the next
year or more.
The Company's management and employees continue to be committed to
reestablishing progress toward our goal of profitability.
9
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Linton, Shafer & Company, P.A.
Certified Public Accountants
6 West Second Street
Frederick, MD 21701
301-663-5122
Principals: Edmond B. Gregory III, CPA, CBA
Kevin R. Hessler, CPA
Donald C. Linton, CPA, CFP
Joseph M. McCathran, CPA
Ronald W. Shafer, CPA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Exotech, Incorporated and Subsidiary
We have audited the accompanying consolidated financial statements and
related schedules of Exotech, Incorporated and Subsidiary included on pages 11
through 20 of the annual report on Form 10- K of Exotech, Incorporated and
Subsidiary as of June 30, 1997 and 1996 and for the years ended June 30, 1997,
1996 and 1995. These financial statements and related schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and related schedules 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 financial statements and per share data
and ratios 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
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Exotech, Incorporated and Subsidiary as of June 30, 1997 and 1996 and the
results of their operations and their cash flows for the years ended June 30,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $265,432 during the year ended
June 30, 1997. This fact, among others discussed in Note 1 to the financial
statements, raises substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Linton, Shafer & Company, P.A.
----------------------------------
September 15, 1997
10
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EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED JUNE 30
Reference is made to Note 1 of the Notes to the Consolidated Financial
Statements for a description of operations of the Company and to Note 2 for a
description of the principal accounting policies followed by the Company.
1997 1996 1995
---- ---- ----
REVENUES
- --------
Instrument Sales $394,460 $302,325 $213,845
Parts, Repairs and Services 48,716 64,934 156,257
-------- --------- ---------
TOTAL SALES $443,176 $367,259 $370,102
COST OF OPERATIONS
- ------------------
Direct Cost and Overhead
Instrument Sales 319,705 287,536 180,600
Repairs, Parts and Service 30,548 56,162 137,366
R & D Costs -- 121,263 --
Inventory Adjustment 281,117 -- --
General and Administrative
Instrument Sales 36,191 18,345 28,444
Repairs, Parts and Service 3,167 3,583 21,635
R & D Costs -- 7,737 --
-------- -------- -------
TOTAL COST OF OPERATIONS 670,728 494,626 368,045
-------- -------- -------
OPERATING PROFIT (LOSS) (227,552) (127,367) 2,057
- -----------------------
OTHER REVENUES (EXPENSES)
- -------------------------
Miscellaneous -- 4,600 (43,365)
Interest (37,880) (29,817) (26,822)
-------- -------- --------
NET LOSS BEFORE TAXES (265,432) (152,584) (68,130)
- ---------------------
INCOME TAXES -- -- --
--------- ---------- --------
NET LOSS $(265,432) $(152,584) $(68,130)
- -------- ========== ========== =========
Loss per Common Share (.28) (.16) (.07)
Weighted average number of
common shares outstanding 942,387 942,387 942,387
The accompanying notes are an integral part of these statements.
11
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
1997 1996
---- ----
CURRENT ASSETS
Cash $3,431 $105
Accounts Receivable
(Note 2) Billed 18,225 11,073
Less: Allowance for Doubtful Account -- --
Inventories, at lower of
average cost or market
(Note 2) 307,659 551,687
Prepaid Expenses and Advances -- 344
------- ------
TOTAL CURRENT ASSETS 329,315 563,209
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 2)
Laboratory Equipment 160,980 160,980
Office Furniture & Equipment 70,550 70,550
--------- ------
231,530 231,530
Less accumulated
depreciation and
amortization (231,236) (231,119)
--------- ---------
Total Property, Plant and Equipment - Net 294 411
OTHER ASSETS
Miscellaneous 5,993 6,921
------ -----
TOTAL ASSETS $335,602 $570,541
--------- --------
The accompanying Notes are an integral part of these statements.
12
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EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
1997 1996
---- ----
CURRENT LIABILITIES
Notes Payable and Current
Maturities of Long Term
Debt (Note 5) $385,294 $372,294
Accounts Payable and Other
Accrued Liabilities 99,369 105,664
Accrued Payroll and Employee
Benefits 73,301 67,180
Accrued Officer Salary and
Benefits 186,402 201,510
Accrued Interest 112,079 79,304
------- ------
TOTAL CURRENT LIABILITIES 856,445 825,952
SHAREHOLDERS' DEFICIT
Common Stock, par value $.10
per share; 1,500,000 shares
authorized; 970,135 shares
issued and outstanding 97,014 97,014
Paid in Surplus 1,169,645 1,169,645
Accumulated Deficit (1,675,082) (1,409,650)
Treasury Stock 27,748 shares at cost (112,420) (112,420)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT (520,843) (255,411)
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $335,602 $570,541
======== ========
The accompanying Notes are an integral part of these statements.
13
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EXOTECH INCORPORATED AND SUBSIDIARY
STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1997 1996 1995
- --------------------------- ---- ---- ----
<S> <C>
CASH FLOWS FROM OPERATING TRANSACTIONS
- --------------------------------------
Net Loss: $(265,432) $(152,584) $(68,130)
Add: Non Cash Income Determinants
Depreciation & Amortization 1,045 1,101 2,454
Add (Deduct): Changes in Current Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (7,152) (141) 83,447
(Increase) Decrease in Prepaid Expenses & Advances 344 1,050 (572)
(Increase) Decrease in Inventories 244,028 23,764 (27,899)
Increase (Decrease) in Accounts Payable & Other Accrued Liabilities (6,295) 53,667 (4,484)
Increase (Decrease) in Accrued Payroll & Related (8,987) 9,560 15,176
Increase (Decrease) in Accrued Interest 32,775 3,155 26,447
------- ------ ------
Cash Provided By (or) Used In Operating Transactions $(9,674) $(60,428) $26,439
----------- ------- -------- --------- -------
CASH FLOWS FROM FINANCING TRANSACTIONS:
- ---------------------------------------
Proceeds from Notes 43,000 87,500 4,000
Payment on Notes (30,000) (26,999) (30,903)
-------- -------- --------
Cash Provided By (or) Used In Financing Transactions 13,000 60,501 (26,903)
----------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING TRANSACTIONS:
- ---------------------------------------
Purchase of Equipment -- -- (587)
-------- ------- -----
Cash Provided By (or) Used In Investing Transactions -- -- (587)
----------- ------- -------- ------- -----
INCREASE (DECREASE) IN CASH 3,326 73 (1,051)
CASH BALANCE - BEGINNING 105 32 1,083
-------- ----- -----
CASH BALANCE - ENDING $3,431 $105 $32
=========== ===== ===
SUPPLEMENTAL INFORMATION
- ------------------------
Interest Paid $37,880 $26,160 $3,740
Taxes -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
14
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EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE THREE YEARS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
($0.10) PAID-IN ACCUMULATED --------------
PAR VALUE SURPLUS (DEFICIT) SHARES COST
----------------- ------- --------- ------ ----
<S> <C>
Balance, June 30, 1994 970,135 $97,014 $1,169,645 $(1,188,936) 27,748 $(112,420)
Add (Deduct) - - - - - -
Net Profit (Loss) - - - (68,130) - -
------- ------- ---------- ------------ ------ ----------
Balance, June 30, 1995 970,135 $97,014 $1,169,645 $(1,257,066) 27,748 $(112,420)
Add (Deduct) - - - - - -
Net Profit (Loss) - - - (152,584) - -
------- ------- ---------- ------------ ------ ----------
Balance June 30, 1996 970,135 $97,014 $1,169,645 $(1,409,650) 27,748 $(112,420)
Add (Deduct) - - - - - -
Net Profit (Loss) - - - (265,432) - -
------- ------- ---------- ------------ ------ ----------
Balance June 30, 1997 970,135 $97,014 $1,169,645 $(1,675,082) 27,748 $(112,420)
======= ======= ========== ============ ====== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
EXOTECH INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DISCUSSION OF OPERATIONS AND REALIZATION OF ASSETS
For the fiscal year ended June 30, 1997, the Company had an operating loss of
$227,552, reflecting a year-end write-off of $281,117 in manufacturing
inventory. The Company had an operating loss of $127,367 in the prior fiscal
year. At June 30, 1997, approximately $66,800 of accounts payable were more than
30 days old.
The accompanying financial statements have been prepared on the "going concern"
basis of generally accepted accounting principles. The ability of the Company to
continue normal operations is dependent upon its ability to obtain the required
amounts of working capital to finance the existing contracts, to continue the
acquisition of additional contracts, and to pursue instrument sales at prices
sufficient to recover costs and some profits. Management believes that improved
revenues now being experienced with the Company's new product together with
stringent control of costs and cash outlays will provide sufficient cash to
support its operations throughout the coming fiscal year.
Inventory of Crystallographic Scanners have experienced no sales activity since
their development approximately five years ago. Efforts are ongoing to develop a
marketing agreement with an established marketer of capital equipment to the
crystal growers and processors, or alternatively to sell the products, design
package, software, patents and licenses to larger manufacturers of instruments
with a significant presence in the semiconductor processing equipment market.
However, substantive results were not achieved prior to June 30, 1997. In
response to the recommendation of the independent accountant and the reviewing
authorities of the Securities and Exchange Commission, this product and the
Communications Network System products were deleted from inventory. This action
resulted in a charge against income of $281,117 representing all completed
instrument hardware, data processing equipment and software programs and
documentation, optical and electronic calibration procedures and fixturing for a
variety of system applications.
At June 30, 1997, the remaining value (backlog) of existing sales contracts were
approximately $200,000.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
- ------------------
The Company is a manufacturer of Electro-optical instruments. It performs the
research and development required for those products.
Principle of Consolidation
- --------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiary, after elimination of all significant intercompany
transactions.
Revenue Accounting
- ------------------
The Company records revenue earned based on shipments of units of its products.
Inventory
- ---------
Finished goods inventory is stated on the basis of the lower of average costs or
market value.
16
<PAGE>
Depreciation and Amortization
- -----------------------------
The Company uses a straight-line method of depreciation and amortization for
both tax and financial reporting purposes. The following time periods are used:
DEPRECIATION:
Laboratory equipment 5 or 8 years
Office furniture and equipment 5 years
AMORTIZATION:
Leasehold improvements Life of lease
Patents 12 years
Depreciation expenses recorded in the consolidated statement of operations are
as follows: 1995 - $2,454, 1996 - $1,101, and 1997 - $1,045, including
amortization of patents at the rate of $928 in each year. The Company's limit
for capitalization of property and equipment is $500 or more.
Income Taxes
- ------------
Provisions for income taxes are based on pre-tax income reported in the
financial statements, using the guidance of Financial Accounting Standards Board
Statement No. 109 (FAS #109) "Accounting for Income Taxes." Differences between
income (loss) for financial reporting purposes and tax reporting arise from (a)
the capitalization and amortization of research and development costs for income
tax reporting purposes, but deducting these costs as expenses in the period
incurred for financial statement purposes; and (b) timing differences in
deducting net losses on contracts. There were no provisions for income taxes
required in the three year period ended June 30, 1997 due to the operating
losses for each of those years.
At June 30, 1997, the Company had net operating loss carryforwards of $659,060
which begin to expire in 1998. The Company also has incurred research and
experimental expenses of $129,000 in 1996, and $54,368 in prior years that have
been capitalized to be amortized over a sixty month period for income tax
purposes, but have been expensed in the period incurred for financial statement
reporting. While the accounting standard allows companies to recognize a
deferred tax asset on the tax effect of these timing differences, the Company
has provided a valuation allowance for the full amount since it is more likely
than not the deferred tax asset will not be realized.
The approximate tax effect of the carryforward and temporary difference for the
three years ended June 30 consist of:
1997 1996 1995
-------- -------- ------
Net operating loss carryforward $263,624 $148,543 $150,545
Deferred research and
experimental expenses 36,120 48,174 5,204
Less: Valuation allowance (299,744) (196,717) (155,749)
--------- --------- ---------
Deferred Tax Asset - net - 0 - - 0 - - 0 -
========= ========= =======
Net increase in valuation allowance $(103,027) $(40,968) $(27,153)
========== ========= =========
17
<PAGE>
Following is a table reconciling the Company's accounting net loss for each of
the last three years ended June 30.
1997 1996 1995
-------- -------- --------
Accounting Net Loss $265,432 $152,584 $68,130
Nondeductible expense (250)
Research and experimental costs:
Capitalized on tax return (129,000) -
Tax amortization 30,135 21,574 8,674
-------- -------- --------
Taxable Net Loss $295,567 $ 45,158 $ 76,554
======== ======== ========
Repairs and Betterments
- -----------------------
Repairs are expensed as incurred. Betterments are capitalized and amortized over
the remaining useful life of the assets.
Accounts Receivable
- -------------------
Accounts receivable consist of amounts billed from sales as of June 30, 1997 and
1996. There is no allowance for doubtful accounts as of June 30, 1997, as the
Company considers accounts receivable to be fully collectible.
Cash And Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Use of Estimates
- ----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
(3) INVENTORY
Inventories are summarized as follows:
1997 1996
---- ----
Raw Materials $ 32,625 $32,625
Goods in Process 261,034 505,062
Finished Goods 14,000 14,000
-------- --------
$307,659 $551,687
(4) RESEARCH AND DEVELOPMENT COSTS
The Company's accounting policy is to write off research and development costs
as incurred. In the fiscal year 1996, $129,000 of R&D costs related to the new
Autoplate 4000 product were incurred and written off. There were no R&D costs in
the fiscal year 1997 nor in 1995.
18
<PAGE>
(5) NOTES PAYABLE
Notes payable at June 30, 1997, consist of three demand notes of $100,000,
$8,000 and $47,000 with interest at 8.5% per annum to three of the Company's
former directors. In addition, Notes amounting to $230,294 are payable with
interest at 8.5% per annum to one officer/employee. Periodically, the Company
has obtained Producer Loans from Spiral Biotech,Inc. that are secured by
inventory instruments (bacteria colony counters) at a negotiated interest rate.
1997 1996
---- ----
Average* aggregate amount outstanding during year $390,877 $352,712
Maximum amount outstanding during year 402,794 372,294
Average* interest rate on loans
outstanding at end of year 8.50% 8.50%
Average* interest rate incurred
during the period 8.52% 8.50%
*Average amounts outstanding during the year and related average interest rates
were determined from the average of the month-end amounts outstanding. The
average interest rate at each year-end was determined from the weighted average
of amounts outstanding at that time.
(6) COMMITMENTS AND CONTINGENCIES
All operations of the Company and subsidiary were conducted in leased
facilities. In March 1990, the Company entered into a lease agreement for a
three-year period for the present facilities at 8502 Dakota Drive, Gaithersburg,
MD. This lease was renegotiated and extended for three years expiring November
30, 1995 and was again extended for an additional three years effective December
1, 1995. The current lease expires November 30, 1998.
Non-Financing 1999 1998
------ -----
Building $13,220 $31,344
(7) EARNINGS PER SHARE
Per share computations were based on the weighted average number of shares
outstanding during the periods, excluding options because the market price and
option price were the same.
(8) SUPPLEMENTAL PROFIT AND LOSS INFORMATION
Description 1997 1996 1995
----------- ---- ---- ----
Taxes other than income:
Payroll $ 7,796 $ 9,588 $14,487
Franchise, Personal Property and
other Miscellaneous 1,168 1,137 2,681
Rents, including equipment rental 38,653 40,097 39,823
19
<PAGE>
(9) DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No disagreements exist between management and its independent public accounting
firm.
(10) TRANSACTIONS WITH SHAREHOLDERS
Sales to a company owned by a shareholder aggregated $381,130, $340,841, and
$335,736, (about 86, 93 and 91 percent, respectively, of total sales) for the
fiscal years ended June 30, 1997, 1996 and 1995, respectively. Amounts due from
such sales at June 30, 1997 and 1996 were $12,725 and $11,073, respectively.
Sales were consummated on terms similar to those prevailing with unaffiliated
customers.
(11) VALUATION AND QUALIFYING ACCOUNTS
The following is a schedule of Valuation and Qualifying Accounts:
<TABLE>
<CAPTION>
Additions:
Balance Charged to Balance
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- --------- -------- ---------- ------
<S> <C>
Allowance deducted from asset to which it applies:
Allowance for Doubtful Accounts:
Year Ended June 30, 1995 $ -- 0 -- $43,368 $43,368(A) $ -- 0 --
Allowance for Depreciation:
Year Ended June 30, 1997 231,119 117 231,236
Year Ended June 30, 1996 230,946 174 231,119
Year Ended June 30, 1995 229,420 1,526 230,946
Allowance for Amortization
of Patents:
Year Ended June 30, 1997 7,887 928 8,815
Year Ended June 30, 1996 6,959 928 7,887
Year Ended June 30, 1995 6,031 928 6,959
</TABLE>
Note (A): Uncollected receivables written off.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a), (b), (e)
NAME: ROBERT G. LYLE (68)
President, CEO of the Company and
subsidiary; Director.
Business experience
during past 5 years Same as above, since 1977.
Other Positions: None.
Other Directorships: None.
NAME: JOHN M. TALBOT (41)
Secretary (1997) and Director and Member of
Audit Committee (1997).
Business experience - Senior Electronic Engineering Technician
during past 5 years and Data Processing Supervisor (1987-1997).
Electronic Technician and Computer
Programmer (1979-1987)
Other Positions: None.
Other Directorships: None.
NAME: ANDREW WONG (44)
Treasurer (1997). Secretary and Director
(1996-97); Member of Audit Committee
(1996).
Business experience - Vice President, Marketing, General
during past 5 years Electric-Spacenet, McLean, VA. Manager of
Marketing Function for Telecommunications
Division.
Responsible for selling customized private
networks to businesses in the United States
and international markets (1995-97).
- Director, Business Development, COMSAT
Mobile Communications, Bethesda, MD.
Responsible for identification, analysis
and implementation of mobile wireless
communications business opportunities
(1991-95).
Other Positions: None.
Other Directorships: Member, Board of Engineering Advisors,
Univ. of California, Lawrence Livermore
Laboratory (1995-97).
- ----------
Note: All terms expire in December, 1997
c. Not applicable.
d. There are no family relationships between any of the above listed
directors and any other director or executive officer of the Company.
f. None of the directors or executive officers have been subject to any
bankruptcy or insolvency proceedings, criminal proceedings, or injunctions
against dealing in investments during the past three years.
21
<PAGE>
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
A. No individual in management received remuneration of $100,000
or more. Officers as a group of three people received no payments except for
$3,500 in disbursements for the group health and life insurance premiums for the
Chief Executive Officer. The total compensation for the Chief Executive Officer
in fiscal year 1997 was $3,500. Mr. Talbot was elected to be Secretary and
Director subsequent to June 30, 1997 at no added compensation over his salary as
a full-time employee.
B. No annuity, pension or retirement benefits are proposed to be
paid to any director or officer in the event of his retirement. No remuneration
payments are proposed to be made in the future, directly or indirectly, to any
director or officer by the Company or its subsidiary pursuant to any existing
plan or arrangement.
C. There are no fees paid to directors for services in that
capacity.
D. No officer, or director of the Company: (1) received options
during the reporting period; or (2) exercised options during the reporting
period, or (3) held options as of September 1, 1997. The officers and directors
of the Company as a group did not: (1) receive options during the reporting
period, or (2) exercise options during the reporting period, or (3) hold options
as of September 1, 1997.
E. Termination of employment - the Company has no employment
termination agreements with officers or employees.
22
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of September 27, 1997, the information with
respect to common stock ownership of each person known by the Company to own
beneficially more than 5% of the shares of the Company's common stock, par value
$0.10 per share, and of all officers and directors as a group:
AMOUNT AND NATURE OF %
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS
- ---------------- -------------------- -----
Carter C. Chinnis Of Record 90,244
303 N. Vine Street Beneficially 1,200
-------
Richmond, VA 23220 Total 91,444 9.70
Robert G. Lyle Of Record 68,242 7.24
41957 Brightwood Lane
Leesburg, VA 22075
William T. Stephens Of Record 96,449 10.23
PO Box 1096
McLean, VA 22075
Denzil C. Pauli Of Record 204,547 21.70
13021 Bluhill Road
Aspen Hill, MD 20906
Samuel Schalkowsky Of Record 92,076 9.77
4003 Woodlawn Road
Chevy Chase, MD 20014
Current officers and directors as a group own a total of 68,242, representing
7.24% of Common Stock.
23
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
a. Transactions with management and others. The Company was not
a party to material transactions since the beginning of its last fiscal year in
which a holder of 5% of the securities of the Company had or has a direct or
indirect material interest, other than in the normal course of bacteria colony
counters and related equipment sales on an exclusive basis with Spiral Biotech,
Inc. owned by a shareholder holding 9.77% of the Company's stock.
b. Certain Business relationships. None of the Company's
directors, executive officers, or nominees for director have a working
relationship with any of the Company's vendors, customers or sources of working
capital that would be sizeable enough to generate a conflict of interest or
undue influence, to the best knowledge of management. William T. Stephens, is
the Company's legal counsel; however, revenue generated by services rendered to
the Company do not exceed 5% of that law firm's revenues.
c. Indebtedness of Management. No director or officer of the
Company or any associate of any director or officer were indebted to the
Company.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
A. 1. LIST OF FINANCIAL STATEMENTS IN PART II OF THIS REPORT.
PAGE NO.
--------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...................... 10
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THREE YEARS
ENDED JUNE 30, 1997.................................................... 11
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1997 AND 1996.................... 12-13
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
YEARS ENDED JUNE 30, 1997.............................................. 14
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
DEFICIT - FOR THE THREE YEARS ENDED JUNE 30, 1997...................... 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................. 16-20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT......................................................... 23
FINANCIAL DATA SCHEDULE (EX-27)......................................... 28
Schedules other than those listed above are omitted for the reason that they are
not required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
Columns omitted from schedules filed have been omitted because the information
is not applicable.
Individual financial statements of the Company are omitted because it is
primarily an operating company and the subsidiary included in the consolidated
financial statements being filed in the aggregate does not have minority equity
interests and/or indebtedness to any person other than the parent in the amounts
which together exceed 5% of the total consolidated assets at the date of the
latest balance sheet filed excepting indebtedness incurred in the ordinary
course of business which is not overdue and which matures within one year of its
creation, whether evidenced by securities or not, and indebtedness which is
collateralized by the parent by guarantee, pledge, assignment or otherwise.
A. 2. PARENT AND SUBSIDIARY
The Company has no parent. The subsidiary of the Company is:
NAME: EXOTECH RESEARCH & ANALYSIS, INC.
STATE OF INCORPORATION: DELAWARE
SECURITIES OWNED BY THE COMPANY: COMMON STOCK, 100%
The foregoing is included in the consolidated statements of the Company
and subsidiary.
25
<PAGE>
A. 3. EXHIBITS
3.1 Restated Certificate of Incorporation of the Company which is hereby
identified as a BASIC DOCUMENT. The document was originally filed pursuant to a
Registration Statement (Form S-1) filed on November 8, 1968, and is incorporated
herein by reference.
3.2 By-Laws of the Company as revised amended on April 16, 1971, which is hereby
identified as a BASIC DOCUMENT. The document has been filed pursuant to FORM
10-K for the fiscal year ended June 30, 1971, and is incorporated herein by
reference.
3.4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION - EXOTECH SYSTEMS,
INC. changing its name to EXOTECH RESEARCH AND ANALYSIS, INC. certified by the
Secretary of the State of Delaware on the 12th day of August 1975, which is
identified as a BASIC DOCUMENT. The document was originally filed with the Form
10-K for the fiscal year ended June 30, 1976, and is incorporated herein by
reference.
3.5 CERTIFICATE OF OWNERSHIP AND MERGER merging EXO-REALTY, INC. into EXOTECH
INCORPORATED, certified by the Secretary of State, State of Delaware on the 28th
day of June, 1976, which is identified as a BASIC DOCUMENT. The document was
originally filed with the Form 10-K for the fiscal year ended June 30, 1976, and
is incorporated herein by reference.
4.1 Specimen copy of a certificate for the Company's common stock, par value
$.10 per share, which is hereby identified as a BASIC DOCUMENT. The specimen was
filed pursuant to a Registration Statement (form S-1) filed on November 8, 1968,
and is incorporated herein by reference.
4.1(a) Specimen copy of a certificate for the Company's common stock, par value
$.10 per share, reprinted due to exhaustion of the initial supply. This specimen
copy was identified as a BASIC DOCUMENT. This exhibit was filed with Form 8 for
the fiscal year ended June 30, 1975, and is incorporated herein by reference.
B. No Form 8-K reports were filed in the fiscal year covered in this report.
26
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of
1934, the Company has duly caused this amended Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
September 25, 1997 BY: /s/ Robert G. Lyle
- ------------------------- -----------------------------------------
DATE ROBERT G. LYLE, CHIEF EXECUTIVE OFFICER,
PRINCIPAL ACCOUNTING OFFICER AND DIRECTOR
September 25, 1997 BY: /s/ Andrew Wong
- ------------------------- -----------------------------------------
DATE ANDREW WONG, TREASURER (PRINCIPAL
FINANCIAL OFFICER) AND DIRECTOR
September 25, 1997 BY: /s/ John M. Talbot
- ------------------------- -----------------------------------------
DATE JOHN M. TALBOT, SECRETARY AND DIRECTOR
27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,431
<SECURITIES> 0
<RECEIVABLES> 18,225
<ALLOWANCES> 0
<INVENTORY> 307,659
<CURRENT-ASSETS> 329,315
<PP&E> 231,530
<DEPRECIATION> 231,236
<TOTAL-ASSETS> 335,602
<CURRENT-LIABILITIES> 856,445
<BONDS> 0
0
0
<COMMON> 97,014
<OTHER-SE> (617,857)
<TOTAL-LIABILITY-AND-EQUITY> 335,602
<SALES> 443,176
<TOTAL-REVENUES> 443,176
<CGS> 670,728
<TOTAL-COSTS> 670,728
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,880
<INCOME-PRETAX> (265,432)
<INCOME-TAX> 0
<INCOME-CONTINUING> (265,432)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (265,432)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
