SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: DECEMBER 31, 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
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 DECEMBER 31, 1997: 942,387
<PAGE>
EXOTECH INCORPORATED
INDEX
PAGE
PART I FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1997 AND JUNE 30, 1997......................2
CONSOLIDATED CONDENSED STATEMENT OF
OPERATIONS - SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1996................................3
STATEMENT OF CASH FLOWS FOR SIX
MONTHS ENDED DECEMBER 31, 1997 AND 1996...................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
<PAGE>
EXOTECH INCORPORATED
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
----------- --------
(Unaudited)
<S> <C>
CURRENT ASSETS
Accts. Receivable, Net $ 13,239 $ 18,225
Inventories
Work in Process 293,251 261,034
Raw Materials 32,625 32,625
Finished Goods 14,000 14,000
Other Current Assets 229 -0-
Cash 749 3,431
-------- -------
Total Current Assets 354,093 563,209
PROPERTY, PLANT AND EQUIPMENT
NET 224 294
OTHER NON-CURRENT ASSETS 5,529 5,993
-------- -------
TOTAL ASSETS 359,856 335,602
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accts. Payable & Other Accrued Expenses 80,135 99,369
Other Current Liabilities 385,514 371,782
Notes Payable 416,879 385,294
-------- -------
Total Current Liabilities 882,528 856,445
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 (1,676,911) (1,675,082)
Treasury Stock (27,748 shares) (112,420) (112,420)
----------- -----------
Total Shareholders' Equity (522,672) (520,843)
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY 359,856 335,602
========= ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
EXOTECH INCORPORATED
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996
----------------------- ----------------------------
3 Mos. 6 Mos. 3 Mos. 6 Mos.
----------- ENDED ----------- ----------- ENDED -----------
12/31 12/31 12/31 12/31
----- ----- ----- -----
<S> <C>
REVENUE
Contract Sales 143,076 195,011 87,208 198,004
EXPENSES
Direct Labor 744 5,738 4,682 5,336
Overhead 2,956 10,720 9,282 10,068
Materials 59 644 384 384
General & Administrative 690 2,448 852 996
Inventory Costs 125,070 157,145 52,488 151,200
-------- -------- ------- -------
Cost of Contract Services 129,519 176,695 67,688 167,984
Operating Income (Loss) 13,557 18,316 19,520 30,020
Other Income (Expense) -- -- -- --
Interest & Other (10,887) (20,144) (7,799) (14,929)
-------- -------- ------- --------
NET INCOME BEFORE
TAXES 2,670 (1,828) 11,721 15,091
State Income Tax
Provision -- -- -- --
----------- ----------- ---------- ---------
NET INCOME (LOSS) 2,670 (1,828) 11,721 15,091
Weighted Average Number of
Common Shares
Outstanding 942,387 942,387 942,387 942,387
EARNINGS (LOSS) PER
COMMON SHARE .003 (.002) .01 .02
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
SIX MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C>
CASH FLOWS FROM OPERATING TRANSACTIONS
Net Income (Loss) (1,828) 15,091
Add: Non cash Income Determinants
Depreciation and Amortization 524 551
Add (Deduct): Changes in Current Assets & Liabilities
(Increase) Decrease in Accounts Receivable 4,986 (7,760)
(Increase) Decrease in Prepaid Expenses (229) 86
(Increase) Decrease in Inventory (32,217) (65,447)
Increase (Decrease) in Accts. Payable (19,234) 14,149
Increase (Decrease) in Payroll/Emp. Benefits (2,778) (2,551)
Increase (Decrease) in Accrued Interest 16,509 13,799
------- ------
Cash Provided By or (Used For) Operating Transactions (34,267) (32,082)
CASH FLOWS FROM FINANCING TRANSACTIONS:
Proceeds from Notes 40,500 33,800
Payments on Notes 8,915 --
---------- ------
Cash Provided By or (Used For) Financing Transactions 31,585 33,800
CASH FLOWS FROM INVESTING TRANSACTIONS:
Purchase of Equipment -- --
Deposits -- --
------- ------
Cash Provided By or (Used For) Investing Transactions -- --
INCREASE (DECREASE) IN CASH (2,682) 1,718
- ---------------------------
CASH BALANCE - BEGINNING 3,431 105
- ------------------------ ------- -----
CASH BALANCE - ENDING 749 1,823
- --------------------- ======= =====
</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
December 31, 1997 and June 30, 1997 and the results of operations and changes in
financial position for the six months ended December 31, 1997 and 1996 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 six months ended December 31, 1997 and 1996.
NOTE 3.
Notes Payable at December 31, 1997 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 $236,530 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 December 31, 1997, there was an
outstanding Producer Loan of $9,049 with interest at 9.0% per annum. This loan
may be prepaid, in whole or in part, at any time, without penalty.
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 SIX MONTHS
---------------- ---------------- ---------------
Dec 31 Sept 30 Dec 31 Dec 31 Dec 31 Dec 31
1997 1997 1997 1996 1997 1996
<S> <C>
Net Sales 143,076 51,935 143,076 87,208 195,011 198,004
Direct Cost & Overhead 3,759 13,343 3,759 14,348 17,102 15,788
G&A Expense 690 1,758 690 852 2,448 996
Inventory Cost 125,070 32,075 125,070 52,488 157,145 151,200
-------- ------- -------- ------- -------- -------
Cost of Sales 129,519 47,176 129,519 67,688 176,695 167,984
Interest & Other 10,887 9,257 10,887 7,799 20,144 14,929
<PAGE>
I. CHANGE IN FINANCIAL POSITION IN THE THREE MONTHS ENDED
DECEMBER 31, 1997.
In the three months period ended December 31, 1997, a reduction of the
working capital deficit of $2,933 resulted from a net profit from
operations of $2,670 and non-fund charges of $263. A loan of $20,000
obtained from Spiral Biotech, Inc. in September, 1997 was repaid in
full in the most recent quarter. In December, another loan of $9,049
was obtained from Spiral Biotech, Inc. that is secured by
work-in-progress inventory of Autoplate instruments being produced
under a purchase order from the lender in the amount of $150,000. The
pay down of the loan is scheduled out of receipts for instruments as
they are delivered in January and February 1998. Additional financing
in the amount of $2,036 was obtained by a loan from an
officer/employee.
II. INCOME AND EXPENSE IN THE MOST RECENT QUARTER AND SIX MONTH PERIOD AND
THE SAME QUARTER AND SIX MONTHS PERIOD LAST YEAR.
Revenue for the quarter ended December 31, 1997, was higher by $55,868
compared to the same period in 1996. Operating income for the period
was $13,557 compared to $19,520 in the prior year. In the opinion of
Management, the most recent quarter results show a continuation of
modest progress toward profitable operations and recovery from the
large losses incurred in prior years.
For the six months period ended December 31, 1997, revenue of $195,011
was lower by about 1.5 percent compared to the same period in 1996. On
the same basis of comparison, the cost of sales was higher by about
5.2 percent, resulting in a net loss of $1,828 as opposed to an net
profit of $15,091 in the prior year. These changes reflect the
fluctuations between quarterly periods that are cyclical according to
the phase of the manufacturing process occurring in a particular
quarter. The cycle is dependent on the time of receipt of an order for
a lot of instruments. In the most recent period, production of a new
lot of thirty Autoplate instruments was begun, requiring substantial
effort and expenditures prior to the delivery and invoicing for the
products which began at the start of the last quarter. In the last
month of this latest period, a new production run on these instruments
was started in response to a purchase order for twenty-five units. The
expense incurred for the new production was about $38,000. In the
prior year, deliveries of the instruments were ongoing throughout the
period, without a startup of a new production lot.
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 six months period,
the accounts payable more than 30 days old was reduced by about 55 percent, from
$66,800 to $30,000. 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 December 31, 1997 was $217,100, higher by
$46,700 compared to the prior year, and $132,900 lower than the backlog at
September 30, 1997. Negotiations have been completed that will increase backlog
by $32,000 in February, 1998.
ITEM 6 (B)
There were no reports filed on Form 8-K for the six months ended December 31,
1997.
8
<PAGE>
SIGNATURES
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: February 12, 1998
____________________________
_____________________________________
ROBERT G. LYLE, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
9
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 749
<SECURITIES> 0
<RECEIVABLES> 13,239
<ALLOWANCES> 0
<INVENTORY> 339,876
<CURRENT-ASSETS> 354,093
<PP&E> 231,530
<DEPRECIATION> 231,306
<TOTAL-ASSETS> 359,856
<CURRENT-LIABILITIES> 882,528
<BONDS> 0
0
0
<COMMON> 97,014
<OTHER-SE> (619,686)
<TOTAL-LIABILITY-AND-EQUITY> 359,856
<SALES> 195,011
<TOTAL-REVENUES> 195,011
<CGS> 176,695
<TOTAL-COSTS> 176,695
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,144
<INCOME-PRETAX> (1,828)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,828)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,828)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
