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, 1998 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, 1998, 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 91 percent of the Company's sales in the past
year and about 86 and 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. An additional 100 units of this instrument have been
manufactured and delivered in fiscal years 1997 and 1998. 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 eighteen 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
are fixed price. There were two 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 four 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
2
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in May 1989. In 1992, a system upgrade was designed and sold for this
instrument. Marketing effort continues through correspondence and personal
contacts, as well as personal presentations to introduce this product to
semiconductor crystal growers, processors and manufacturers. However, there have
been no sales of this instrument over the past six 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 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 microbiological laboratory instruments' 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
4000 Autoplate 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 1998 amounted to $49,415, comprising 7
Autoplates, 4 Vacuum Sources and miscellaneous repair and calibration services.
Backlog in this segment at June 30, 1998 was $186,000.
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-
3
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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 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. Follow-on orders for
these instruments resulted in shipments of 100 more units prior to June 30,
1998.
In the biotechnology instruments business, Autoplates, Colony Counters and
related equipment sales accounted for 82% of the year's sales, 5% from
radiometer sales, 2% from the MTF parts, calibration and maintenance; and 11%
from miscellaneous sales and repair work.
For the fiscal year ended June 30, 1998, 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 improved in fiscal year 1999 provided that modest increases in
instrument sales, and maintenance and repair work continue. Ongoing
demonstrations and trial applications of the Crystallographic Scanner may 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.
Prompted by the many published statements of warning about data management
problems at the turn of the century, the Company has carefully examined its
internal data systems for susceptibility to such problems. The current internal
data processing systems service engineering design and quality assurance,
shareholder records and word processing for document preparation. These systems
have no susceptibility to problems relating to year 2000 and beyond. Inquiries
have been posed to the Company's principle providers of banking, payroll
processing, and materials and parts to obtain assurance of suitable
uninterrupted service throughout the turn of the century period. Where any doubt
of such assurance is found, alternative providers will be engaged prior to June
30, 1999.
4
<PAGE>
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.
5
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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.
6
<PAGE>
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 1997 and 1998.)
-------------BID AND ASK PRICES--------------
1998 1997
---- ----
FIRST QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8
SECOND QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8
THIRD QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8
FOURTH QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8
b. Approximate number of Equity Security Holders.
TITLE OF CLASS: Common Stock
APPROXIMATE NUMBER OF SHAREHOLDERS
(As of September 23, 1998) 596
c. Dividends.
No dividends were declared or paid during the most recent or any prior
fiscal year.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Selected Income Statement Data:
<TABLE>
<CAPTION>
--------------------- FISCAL YEAR ----------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S><C>
Net Sales $499,476 $443,176 $367,259 $370,102 $437,330
Income (Loss) before Taxes
& Extraordinary Credit 9,878 (265,432) (152,584) (68,130) (35,448)
Net Income (Loss) $9,878 $(265,432) $(152,584) $(68,130) $(35,448)
Per Share:
Net Income (Loss) .01 (.28) (.16) (.07) (.04)
</TABLE>
Selected Balance Sheet Data:
<TABLE>
<CAPTION>
--------------------- FISCAL YEAR ----------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S><C>
Current Assets $375,031 $329,315 $563,209 $587,808 $643,836
Current Liabilities 896,328 856,445 825,952 699,068 688,834
Working Capital (521,297) (527,130) (262,743) (111,260) (44,998)
Total Assets 385,363 335,602 570,541 596,241 654,136
Stockholders' Equity
and Accumulated
Deficit $(510,965) $(520,843) $(255,411) $(102,827) $(34,698)
</TABLE>
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS.
The Company's revenues of $499,476 were 12.7% higher than in fiscal year
1997, and 36% higher than in fiscal year 1996. 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
35.9% over the period with the increase 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 higher
sales of miscellaneous service in fiscal year 1998 resulted from an improved
marketing effort by Spiral Biotech Inc. to sell these services.
1998 1997 1996
-------- -------- ------
Biotechnology Instruments $411,273 $347,445 $302,700
Radiometer 22,555 47,015 --
MTF Tester Service 10,550 9,590 17,350
Miscellaneous Parts and Service 55,098 39,126 47,209
The cost of operations, $448,657 resulted in an operating income of
$50,819, compared to an operating loss of $227,552 in fiscal year 1997 and a
loss of $127,367 in fiscal year 1996. The impact of interest costs resulted in a
net profit of $9,878 compared to losses of $265,432 and $152,584 in 1997 and
1996, respectively.
A net increase in demand notes of $26,481 needed to sustain operations
caused an increase in interest expense to $41,529, compared to $37,880 in the
prior year, and $29,817 in fiscal 1996. The objective of Management following
successful, but costly, development of a state-of-the-art automated plater
instrument in fiscal year 1996 was to demonstrate its sales potential in a
highly competitive market. In the opinion of Management, that objective was
achieved through intense effort to improve the production efficiency, and prove
the reliability of the instrument in fiscal 1997. Production costs for the
instrument have been steadily improved following that effort. A modest profit is
projected for the continued production of the Autoplate with an annual output in
excess of 85 units.
In the past year, orders for instruments and services by Spiral Biotech,
Inc. increased by $63,800, or 18% above the level of the prior year. 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 and related products.
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 equipment to the semiconductor industry
as a means to generate increased exposure and sales potential
9
<PAGE>
for this product. Substantive results from this effort were not achieved prior
to June 30, 1998.
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 1999.
As shown in the Statements Of Cash Flows for the three years ended June 30
of 1998, 1997 and 1996, each period ended with a small positive cash balance.
Negative cash flow from operations have been experienced over the past three
years. In fiscal year 1998, a net profit of $9,878 was offset by substantial
increases in accounts receivable and inventories, and a decrease in accounts
payable. 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 $26,479 in 1998,
$13,000 in 1997 and $60,501 in 1996. 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.
A careful examination by Management, prompted by well-publicized risks of
year 2000 anomalies with some computer operating systems and programs, has
resulted in assurance that the company's current data processing and
record-keeping will not be in jeopardy of such difficulties.
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.
10
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[LINTON, SHAFER & COMPANY LOGOS HERE]
Linton, Shafer & Company, P.A.
Certified Public Accountants
Principals & Associates:
Corinne M. Bradac, CPA
Edmond B. Gregory III, CPA, CBA
Kevin R. Hessler, CPA
Donald C. Linton, CPA, CFP
Joseph M. McCathran, CPA
Michele R. Mills, 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 12
through 21 of the annual report on Form 10- K of Exotech, Incorporated and
Subsidiary as of June 30, 1998 and 1997 and for the years ended June 30, 1998,
1997 and 1996. 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 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, 1998 and 1997 and the results of
their operations and their cash flows for the years ended June 30, 1998, 1997
and 1996, 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 discussed in Note 1 to
the financial statements, there is 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.
September 17, 1998
/s/ LINTON, SHAFER & COMPANY, P.A.
______________________________________
6 West Second Street (bullet) Frederick, Maryland 21701 (bullet) 301-663-5122
(bullet) 1-800-466-5122 (bullet) FAX 301-663-3876
ANNAPOLIS (bullet) SILVER SPRING (bullet) FREDERICK
Website: www.lscpa.com (bullet) E-mail: [email protected]
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<PAGE>
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.
1998 1997 1996
------ ------ ------
REVENUES
Instrument Sales $433,828 $394,460 $302,325
Parts, Repairs and Services 65,648 48,716 64,934
-------- -------- --------
TOTAL SALES $499,476 $443,176 $367,259
COST OF OPERATIONS
Direct Cost and Overhead
Instrument Sales 362,084 319,705 287,536
Repairs, Parts and Service 37,596 30,548 56,162
R & D Costs -- -- 121,263
Inventory Adjustment -- 281,117 --
General and Administrative
Instrument Sales 44,615 36,191 18,345
Repairs, Parts and Service 4,362 3,167 3,583
R & D Costs -- -- 7,737
-------- -------- --------
TOTAL COST OF OPERATIONS 448,657 670,728 494,626
-------- -------- --------
OPERATING PROFIT (LOSS) 50,819 (227,552) (127,367)
- -----------------------
OTHER REVENUES (EXPENSES)
- -------------------------
Miscellaneous 588 -- 4,600
Interest (41,529) (37,880) (29,817)
-------- -------- --------
NET PROFIT (LOSS) BEFORE TAXES 9,878 (265,432) (152,584)
- ------------------------------
INCOME TAXES -- -- --
-------- -------- --------
NET PROFIT (LOSS) $9,878 $(265,432) $(152,584)
- ----------------- ====== ========== ==========
Gain or (Loss) per Common Share .01 (.28) (.16)
Weighted average number of
common shares outstanding 942,387 942,387 942,387
The accompanying notes are an integral part of these statements.
12
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
1998 1997
------- --------
CURRENT ASSETS
Cash $6,442 $3,431
Accounts Receivable
(Note 2) Billed 33,912 18,225
Less: Allowance for Doubtful Account -- --
Inventories, at lower of
average cost or market
(Note 2) 334,062 307,659
Prepaid Expenses and Advances 615 --
--------- --------
TOTAL CURRENT ASSETS 375,031 329,315
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 (231,354) (231,236)
--------- --------
Total Property, Plant and Equipment - Net 176 294
OTHER ASSETS
Miscellaneous 10,156 5,993
--------- --------
TOTAL ASSETS $385,363 $335,602
--------- --------
The accompanying Notes are an integral part of these statements.
13
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
1998 1997
---- ----
CURRENT LIABILITIES
Notes Payable and Current
Maturities of Long Term
Debt (Note 5) $411,775 $385,294
Accounts Payable and Other
Accrued Liabilities 87,022 99,369
Accrued Payroll and Employee
Benefits 71,250 73,301
Accrued Officer Salary and
Benefits 181,169 186,402
Accrued Interest 145,112 112,079
-------- --------
TOTAL CURRENT LIABILITIES 896,328 856,445
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 (1,665,204) (1,675,082)
Treasury Stock 27,748 shares at cost (112,420) (112,420)
-------- --------
TOTAL SHAREHOLDERS' DEFICIT (510,965) (520,843)
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $385,363 $335,602
======== ========
The accompanying Notes are an integral part of these statements.
14
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1998 1997 1996
- --------------------------- ------ ------ ------
<S><C>
CASH FLOWS FROM OPERATING TRANSACTIONS
Net Profit (Loss): $9,878 $(265,432) $(152,584)
Add: Non Cash Income Determinants
Depreciation & Amortization 1,045 1,045 1,101
Add (Deduct): Changes in Current Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (15,687) (7,152) (141)
(Increase) Decrease in Prepaid Expenses & Advances (615) 344 1,050
(Increase) Decrease in Inventories (26,403) 244,028 23,764
Increase (Decrease) in Accounts Payable & Other Accrued Liabilities (12,345) (6,295) 53,667
Increase (Decrease) in Accrued Payroll & Related (7,284) (8,987) 9,560
Increase (Decrease) in Accrued Interest 33,033 32,775 3,155
-------- --------- --------
Cash Provided By (or) Used In Operating Transactions $(18,387) $(9,674) $(60,428)
-------- --------- --------
CASH FLOWS FROM FINANCING TRANSACTIONS:
Proceeds from Notes 75,306 43,000 87,500
Payment on Notes (48,827) (30,000) (26,999)
-------- --------- --------
Cash Provided By (or) Used In Financing Transactions 26,479 13,000 60,501
-------- --------- --------
CASH FLOWS FROM INVESTING TRANSACTIONS:
Purchase of Equipment (5,090) -- --
-------- --------- --------
Cash Provided By (or) Used In Investing Transactions (5,090) -- --
-------- --------- --------
INCREASE (DECREASE) IN CASH 3,011 3,326 73
CASH BALANCE - BEGINNING 3,431 105 32
-------- --------- --------
CASH BALANCE - ENDING $6,442 $3,431 $105
======== ========= ========
SUPPLEMENTAL INFORMATION
Interest Paid $8,496 $5,105 $26,663
Taxes -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
15
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EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE THREE YEARS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
COMMON STOCK
----------------- TREASURY STOCK
($0.10) PAID-IN ACCUMULATED ----------------
SHARES PAR VALUE SURPLUS (DEFICIT) SHARES COST
------ --------- ------- ----------- ------ ----
<S><C>
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)
Add (Deduct) -- -- -- -- -- --
Net Profit (Loss) -- -- -- 9,878 -- --
------- ------- ---------- ----------- ------ ---------
Balance, June 30, 1998 970,135 $97,014 $1,169,645 $(1,665,204) 27,748 $(112,420)
======= ======= ========== =========== ====== =========
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE>
EXOTECH INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DISCUSSION OF OPERATIONS AND REALIZATION OF ASSETS
For the fiscal year ended June 30, 1998, the Company had an operating profit of
$50,819, while in the prior year it 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 fiscal year ended June 30,
1996. At June 30, 1998, approximately $57,300 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, the automatic
plater for microbiological laboratories, together with stringent control of
costs and cash outlays will provide sufficient cash to support its operations
throughout the coming fiscal year.
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, 1998. In the
fiscal year ended June 30, 1997 this product line was deleted from inventory,
resulting in a charge against income of $281,117.
At June 30, 1998, the remaining value (backlog) of existing sales contracts were
approximately $186,000.
(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.
Depreciation and Amortization
The Company uses a straight-line method of depreciation and amortization for
both tax and financial
17
<PAGE>
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: 1996 - $1,101, 1997 - $1,045, and 1998 - $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, 1998 due to the operating
losses and loss carryforwards for each of those years.
At June 30, 1998, the Company had net operating loss carryforwards of $674,982
which begin to expire in 1999. 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:
1998 1997 1996
------ ------ ------
Net operating loss carryforward $269,993 $263,624 $148,543
Deferred research and
experimental expenses 25,800 36,120 48,174
Less: Valuation allowance (295,793) (299,744) (196,717)
-------- -------- --------
Deferred Tax Asset - net - 0 - - 0 - - 0 -
======== ======== ========
Net (increase) decrease in
valuation allowance $3,951 $(103,027) $(40,968)
======== ======== ========
18
<PAGE>
Following is a table reconciling the Company's accounting net loss or (income)
for each of the last three years ended June 30.
1998 1997 1996
------ ------ ------
Accounting Net (Income) Loss $(9,878) $265,432 $152,584
Nondeductible expense -- -- --
Research and experimental costs:
Capitalized on tax return -- -- (129,000)
Tax amortization 25,800 30,135 21,574
-------- -------- --------
Taxable Net Loss $ 15,922 $295,567 $ 45,158
======== ======== ========
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, 1998 and
1997. There is no allowance for doubtful accounts as of June 30, 1998, 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:
1998 1997
------ ------
Raw Materials $ 32,625 $32,625
Goods in Process 287,437 261,034
Finished Goods 14,000 14,000
-------- --------
$334,062 $307,659
(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 1998 nor in 1997.
19
<PAGE>
(5) NOTES PAYABLE
Notes payable at June 30, 1998, 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 $245,175 are payable with
interest at 8.5% per annum to one officer/employee, and an $11,600 Producer Loan
from Spiral Biotech, Inc. that is secured by inventory instruments (Autoplaters)
with an interest rate of 9% which is waived unless delivery requirements are not
met.
1998 1997
---- ----
Average* aggregate amount outstanding during year $416,624 $390,877
Maximum amount outstanding during year 434,719 402,794
Average* interest rate on loans
outstanding at end of year 8.26% 8.50%
Average* interest rate incurred
during the period 7.93% 8.52%
*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 1998 1997 1996
- ----------- ------ ------ ------
Taxes other than income:
Payroll $8,938 $7,796 $9,588
Franchise, Personal Property and
other Miscellaneous 1,587 1,168 1,137
Rents, including equipment rental 41,573 38,653 40,097
20
<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 $457,018, $381,130 and
$340,841 (about 91, 86 and 93 percent, respectively, of total sales) for the
fiscal years ended June 30, 1998, 1997 and 1996, respectively. Amounts due from
such sales at June 30, 1998 and 1997 were $23,042 and $12,725, 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:
Additions:
Balance Charged to Balance
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- --------- --------- ---------- -------
Allowance for Depreciation:
Year Ended June 30, 1998 231,236 118 231,354
Year Ended June 30, 1997 231,119 117 231,236
Year Ended June 30, 1996 230,946 174 231,119
Allowance for Amortization
of Patents:
Year Ended June 30, 1998 8,815 928 9,743
Year Ended June 30, 1997 7,887 928 8,815
Year Ended June 30, 1996 6,959 928 7,887
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a), (b), (e)
<TABLE>
<S><C>
NAME: ROBERT G. LYLE (69)
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 (42)
Secretary (1997) and Director and Member of Audit
Committee (1997).
Business experience - Senior Electronic Engineering Technician and Data Processing
during past 5 years Supervisor (1987-1997). Electronic Technician and Computer
Programmer (1979-1987)
Other Positions: None.
Other Directorships: None.
NAME: ANDREW WONG (45)
Treasurer (1997). Secretary and Director (1996-97); Member of Audit
Committee (1996).
Business experience - Vice President, Marketing, General Electric-Spacenet, McLean,
during past 5 years 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).
</TABLE>
_________
Note: All terms expire in December, 1998
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.
22
<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 $3,783 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 $3,783. 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, 1998.
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, 1998.
E. Termination of employment - the Company has no employment
termination agreements with officers or employees.
23
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of September 23, 1998, 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.
24
<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 microbiology laboratory instruments
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 1% 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.
25
<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..................... 11
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THREE YEARS
ENDED JUNE 30, 1998................................................... 12
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1998 AND 1997................... 13-14
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
YEARS ENDED JUNE 30, 1998............................................. 15
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
DEFICIT - FOR THE THREE YEARS ENDED JUNE 30, 1998..................... 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................. 17-21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT........................................................ 24
FINANCIAL DATA SCHEDULE (EX-27)........................................ 29
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.
26
<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.
27
<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 23, 1998 BY: /s/
________________________ __________________________________________
DATE ROBERT G. LYLE, CHIEF EXECUTIVE OFFICER,
PRINCIPAL ACCOUNTING OFFICER AND DIRECTOR
September 23, 1998 BY: /s/
________________________ __________________________________________
DATE ANDREW WONG, TREASURER (PRINCIPAL
FINANCIAL OFFICER) AND DIRECTOR
September 23, 1998 BY: /s/
________________________ __________________________________________
DATE JOHN M. TALBOT, SECRETARY AND DIRECTOR
28
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,442
<SECURITIES> 0
<RECEIVABLES> 33,912
<ALLOWANCES> 0
<INVENTORY> 334,062
<CURRENT-ASSETS> 375,031
<PP&E> 231,530
<DEPRECIATION> 231,354
<TOTAL-ASSETS> 385,363
<CURRENT-LIABILITIES> 896,328
<BONDS> 0
0
0
<COMMON> 97,014
<OTHER-SE> (607,979)
<TOTAL-LIABILITY-AND-EQUITY> 385,363
<SALES> 499,476
<TOTAL-REVENUES> 499,476
<CGS> 448,657
<TOTAL-COSTS> 448,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,529
<INCOME-PRETAX> 9,878
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,878
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
