SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES E6XCHANGE ACT OF 1934
FOR QUARTER ENDED: MARCH 31, 1998 COMMISSION FILE NO. 0-4076
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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
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 [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.
CLASS: COMMON STOCK, PAR VALUE $0.10
-----------------------------
OUTSTANDING AT
MARCH 31, 1998 942,387
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<PAGE>
EXOTECH INCORPORATED
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
CONSOLIDATED CONDENSED BALANCE SHEET
March 31, 1998 AND JUNE 30, 1997......................... 2
CONSOLIDATED CONDENSED STATEMENT OF
OPERATIONS - NINE MONTHS ENDED
MARCH 31, 1998 AND 1997................................... 3
STATEMENT OF CASH FLOWS FOR NINE
MONTHS ENDED MARCH 31, 1998 AND 1997...................... 4
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS...................................... 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONSOLIDATED CONDENSED STATEMENT
OF OPERATIONS............................................. 6
PART II OTHER INFORMATION
OTHER FINANCIAL INFORMATION............................... 8
SIGNATURES................................................ 9
FINANCIAL DATA SCHEDULES (EX-27)..........................10
<PAGE>
EXOTECH INCORPORATED
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
March 31, June 30,
1998 1997
-------------- -------------
(Unaudited)
<S><C>
CURRENT ASSETS
Accts. Receivable, Net $ 18,258 $ 18,225
Inventories
Work in Process 323,069 261,034
Raw Materials 32,625 32,625
Finished Goods 14,000 14,000
Other Current Assets 343 -0-
Cash 1,098 3,431
---------- ----------
Total Current Assets 389,393 329,315
PROPERTY, PLANT AND EQUIPMENT
NET 206 294
OTHER NON-CURRENT ASSETS 5,297 5,993
---------- ----------
TOTAL ASSETS 394,896 335,602
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accts. Payable & Other Accrued Expenses 87,709 99,369
Other Current Liabilities 391,550 371,782
Notes Payable 428,219 385,294
---------- ----------
Total Current Liabilities 907,478 856,445
SHAREHOLDERS EQUITY
Common Stock, Par Value $.10 per share;
1,500,000 shares authorized; 970,135
issued; 942,387 outstanding 97,014 97,014
Paid-in-Surplus 1,169,645 1,169,645
Deficit (1,666,821) (1,675,082)
Treasury Stock (27,748 shares) (112,420) (112,420)
---------- ----------
Total Shareholders' Equity (512,582) (520,843)
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY 394,896 335,602
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
EXOTECH INCORPORATED
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997
----------------------------- ------------------------------
3 Mos. 9 Mos. 3 Mos. 9 Mos.
----------- ENDED ----------- ------------ ENDED -----------
3/31 3/31 3/31 3/31
<S><C>
REVENUE
Contract Sales $132,178 $327,189 $137,171 $335,175
EXPENSES
Direct Labor 3,216 8,954 2,573 7,909
Overhead 4,895 15,615 6,054 16,122
Materials 2,230 2,874 149 533
Other Direct Costs - - 5,000 5,000
Travel - 650 2,316 2,316
General & Administrative 722 3,170 2,114 3,110
Inventory Costs 100,889 258,034 111,669 262,869
-------- -------- -------- --------
Cost of Contract Services 112,602 289,297 129,875 297,859
Operating Income (Loss) 19,576 37,892 7,296 37,316
Miscellaneous Income -- -- -- --
Research and Development -- -- -- --
Interest & Other (9,487) (29,631) (8,771) (23,700)
-------- -------- -------- --------
NET INCOME BEFORE
TAXES 10,089 8,261 (1,475) 13,616
State Income Tax
Provision -- -- -- --
-------- -------- -------- --------
NET INCOME (LOSS) 10,089 8,261 (1,475) 13,616
Weighted Average Number of
Common Shares
Outstanding 942,387 942,387 942,387 942,387
EARNINGS (LOSS) PER
COMMON SHARE 0.01 0.01 (0.00) 0.01
DIVIDENDS PER
COMMON SHARE None None None None
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements. These
statements have been prepared from the books of account without audit.
3
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
STATEMENT OF CASH FLOWS FOR
NINE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S><C>
CASH FLOWS FROM OPERATING TRANSACTIONS
Net Income (Loss) 8,261 13,616
Add: Non cash Income Determinants
Depreciation and Amortization 784 826
Add (Deduct): Changes in Current Assets & Liabilities
(Increase) Decrease in Accounts Receivable (33) (3,362)
(Increase) Decrease in Prepaid Expenses (343) 280
(Increase) Decrease in Inventory (62,035) (21,963)
Increase (Decrease) in Accts. Payable (11,660) (10,300)
Increase (Decrease) in Payroll/Emp. Benefits (4,818) (9,177)
Increase (Decrease) in Accrued Interest 24,586 20,550
------- -------
Cash Provided By or (Used) For Operating Transactions (45,258) (9,530)
CASH FLOWS FROM FINANCING TRANSACTIONS:
Proceeds from Notes 66,789 39,800
Payments on Notes (23,864) (30,000)
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Cash Provided By or (Used For) Financing Transactions 42,925 9,800
CASH FLOWS FROM INVESTING TRANSACTIONS:
Purchase of Equipment -- --
Deposits -- --
------- -------
Cash Provided By or (Used For) Investing Transactions -- --
INCREASE (DECREASE) IN CASH (2,333) 270
CASH BALANCE - BEGINNING 3,431 105
------- -------
CASH BALANCE - ENDING $1,098 $375
======= =======
</TABLE>
4
<PAGE>
EXOTECH INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1.
In the opinion of Management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
March 31, 1998 and June 30, 1997 and the results of operations and changes in
financial position for the nine months ended March 31, 1998 and 1997 of Exotech
Incorporated and its inactive wholly-owned consolidated subsidiary, Exotech
Research & Analysis, Inc. There are no significant intercompany transactions.
NOTE 2.
Per share computations have been based on the weighted average shares
outstanding of 942,387 for the nine months ended March 31, 1998 and 1997.
NOTE 3.
Notes Payable at March 31, 1998 consist of four demand notes of $100,000, $8,000
and $47,000, payable with interest at 8.5% per annum to three of the Company's
former directors. In addition, one demand note of $252,775 is 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 (Autoplaters). At March 31, 1998, there was an outstanding
Producer Loan of $20,444 without interest charge.
NOTE 4.
Inventory cost shown in the cost of sales, represents the cost of production of
goods sold that were incurred in the prior fiscal year.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods included
in the accompanying consolidated condensed statement of operations.
A summary of the period to period changes in the principal items included in the
consolidated statement of operations is shown below:
<TABLE>
<CAPTION>
------------------------------------------ COMPARISON OF ----------------------------------------
THREE MONTHS THREE MONTHS NINE MONTHS
---------------------- -------------------- --------------------
Mar 31 Dec 31 Mar 31 Mar 31 Mar 31 Mar 31
1998 1997 1998 1997 1998 1997
<S><C>
Net Sales 132,178 143,076 132,178 137,171 327,189 335,175
Cost of Labor & Overhead 8,111 3,759 8,111 8,627 24,589 24,031
G&A Expense 722 690 722 2,114 3,170 3,110
Inventory Cost 100,889 125,070 100,889 111,669 258,034 262,869
-------- -------- -------- -------- -------- --------
Cost of Sales 112,602 129,519 112,602 129,875 289,297 297,859
Interest & Other 9,487 10,887 9,487 8,771 29,631 23,700
</TABLE>
6
<PAGE>
I. CHANGE IN FINANCIAL POSITION IN THE NINE MONTHS ENDED
MARCH 31, 1998.
In the nine months period ended March 31, 1998, a reduction of the
working capital deficit of $9,045 resulted from a net profit from
operations of $8,261 and non-fund charges of $784. Producer loans
totalling $40,500 - obtained from Spiral Biotech, Inc. in this period
were paid-down prior to $20,444 to the end of the period. Additional
loans amounting to $22,481 obtained from an officer of the Company in
this period are outstanding.
An order received in March 1998 from Spiral Biotech, Inc. increased
backlog at the end of the period by $32,000 for instruments scheduled
for deliveries in May 1998. Negotiations completed at the end of the
most recent quarter will further increase backlog early in the next
quarter by $150,000.
II. INCOME AND EXPENSE IN THE MOST RECENT QUARTER AND NINE MONTH PERIOD
AND THE SAME QUARTER AND NINE MONTHS PERIOD LAST YEAR.
Revenue for the quarter ended March 31, 1998, at $132,178, was $4,993
lower compared to the same period one year earlier. Operating income
was $19,576 compared to $7,296 in the quarter ended March 31, 1997.
The earlier period had higher indirect costs related to the hiring and
training of an employee following the retirement of a key staff
member. In the opinion of Management, results in the most recent
quarter show a continuation of modest progress over the past three
quarters toward profitable operations and recovery from the large
losses incurred in the prior year.
For the nine months period ended March 31, 1998, revenue of $327,189
was two percent lower than that achieved one year earlier. On the same
basis of comparison, the cost of sales was lower by about three
percent. Interest expense in the recent period was higher by 25
percent, reflecting the necessity of increased borrowing to provide
for purchases of material at the outset of new production runs
resulting in a net profit of $8,261, compared to $13,616 in the prior
year. In the opinion of management, the increasing frequency of large
increases in backlog for existing product lines will materially reduce
the cash flow interruptions that have been experienced between the end
of one production run and the first billable products of the
subsequent production run. Furthermore, economies of scale will become
available to reduce costs. These changes reflect progress toward
improved operating conditions for the Company after an intense and
very costly effort to develop a new product in prior fiscal years.
7
<PAGE>
PART II. OTHER FINANCIAL INFORMATION
ITEM 5.
As in the past, a shortage of working capital continues to be a significant
problem, limiting efforts to develop new business to the fullest extent
possible, as well as causing occasional delays of 30 to 45 days in payments to
suppliers of materials for manufacturing. In the most recent nine months period,
the accounts payable more than 30 days old was reduced by about 65 percent, from
$66,800 to $24,000. Management also is continuing to pursue opportunities to
affiliate with other companies to increase marketing and sales of its products
and develop new products from Exotech's proprietary technology. In the opinion
of Management, the Company should be in a position to sustain operations at
least until such time as the results of current contracts and negotiations for
new business is determinable. Ultimate realization of the carrying value of
prepaid expenses and advances, property and equipment, and miscellaneous other
assets shown in the accompanying balance sheet depend on the effect of the
matters discussed herein.
The dollar amount of the backlog as of March 31, 1998 was $168,900, lower by
$97,000 compared to that of the prior year, and $48,200 lower than the backlog
at December 31, 1997. An order received in March, 1998 increased backlog by
$32,000 for products that will be purchased in May. Further orders have been
negotiated that will add a minimum of $150,000 to the backlog in the quarter
beginning April 1, 1998.
ITEM 6 (B)
There were no reports filed on Form 8-K for the nine months ended March 31,
1998.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the Company has duly
caused this Report to be signed on its behalf by the undersigned thereunto duly
authorized.
EXOTECH INCORPORATED
REGISTRANT
DATE: May 13, 1998
_____________________
____________________________________
ROBERT G. LYLE, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,098
<SECURITIES> 0
<RECEIVABLES> 18,258
<ALLOWANCES> 0
<INVENTORY> 369,694
<CURRENT-ASSETS> 389,393
<PP&E> 231,530
<DEPRECIATION> 231,324
<TOTAL-ASSETS> 394,896
<CURRENT-LIABILITIES> 907,478
<BONDS> 0
0
0
<COMMON> 97,014
<OTHER-SE> (512,582)
<TOTAL-LIABILITY-AND-EQUITY> 394,896
<SALES> 327,189
<TOTAL-REVENUES> 327,189
<CGS> 289,297
<TOTAL-COSTS> 289,297
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,631
<INCOME-PRETAX> 8,261
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,261
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
