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, 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
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, 1998: 942,387
<PAGE>
EXOTECH INCORPORATED
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1998 AND JUNE 30, 1998.............................2
CONSOLIDATED CONDENSED STATEMENT OF
OPERATIONS - SIX MONTHS ENDED
DECEMBER 31, 1998 AND 1997.......................................3
STATEMENT OF CASH FLOWS FOR SIX
MONTHS ENDED DECEMBER 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
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<PAGE>
EXOTECH INCORPORATED
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31, JUNE 30,
1998 1998
(Unaudited)
CURRENT ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Accts. Receivable, Net $ 42,142 $ 33,912
Inventories
Work in Process 356,324 287,437
Raw Materials 32,625 32,625
Finished Goods 14,000 14,000
Cash and Other Current Assets 27,597 7,057
Fixed Price Contracts in Progress 598,000 --
Less: Progress Payments Received (108,000) --
--------- -----------
Total Current Assets $961,788 $375,031
PROPERTY, PLANT AND EQUIPMENT, NET 118 176
OTHER NON CURRENT ASSETS 4,602 10,156
--------- ---------
TOTAL ASSETS $966,508 $385,363
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accts. Payable & Other Accrued Expenses $ 73,166 $87,022
Other Current Liabilities 709,382 397,531
Notes Payable 404,775 411,775
------------ --------
Total Current Liabilities $1,187,323 $896,328
DEFERRED REVENUE (LONG-TERM) 295,800 --
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 (1,670,854) (1,665,204)
Treasury Stock (27,748 shares) (112,420) (112,420)
------------ ------------
Total Shareholders' Equity (516,615) (510,965)
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $966,508 $385,363
========= =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
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EXOTECH INCORPORATED
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997
----------------------- --------------------------
3 Mos. 6 Mos. 3 Mos. 6 Mos.
-----------ENDED--------- -----------ENDED-----------
12/31 12/31 12/31 12/31
----- ----- ----- -----
REVENUE
<S> <C> <C> <C> <C>
Contract Sales 224,398 324,328 143,076 195,011
EXPENSES
Direct Labor 115 317 744 5,738
Overhead 2,214 4,880 2,956 10,720
Materials -- -- 59 644
General & Administrative 29 427 690 2,448
Inventory Costs 216,676 303,615 125,070 157,145
-------- -------- -------- --------
Cost of Contract Services219,034 309,239 129,519 176,695
Operating Income (Loss) 5,364 15,089 13,557 18,316
Other Income (Expense) 107 258 -- --
Interest & Other (10,867) (20,997) (10,887) (20,144)
-------- -------- -------- --------
NET INCOME BEFORE
TAXES (5,396) (5,650) 2,670 (1,828)
State Income Tax
Provision -- -- -- --
----------- ----------- ---------- ----------
NET INCOME (LOSS) (5,396) (5,650) 2,670 (1,828)
Weighted Average Number of
Common Shares
Outstanding 942,387 942,387 942,387 942,387
EARNINGS (LOSS) PER
COMMON SHARE (.01) (.01) .003 (.002)
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>
1998 1997
---- ----
CASH FLOWS FROM OPERATING TRANSACTIONS
- --------------------------------------
<S> <C> <C>
Net Income (Loss) (5,650) (1,828)
Add: Non cash Income Determinants
Depreciation and Amortization 522 524
Add (Deduct): Changes in Current Assets & Liabilities
(Increase) Decrease in Accounts Receivable (8,230) 4,986
(Increase) Decrease in Prepaid Expenses (1,076) (229)
(Increase) Decrease in Inventory (68,887) (32,217)
Increase (Decrease) in Accts. Payable (13,856) (19,234)
Increase (Decrease) in Payroll/Emp. Benefits (6,859) (2,778)
Increase (Decrease) in Accrued Interest 16,510 16,509
Increase (Decrease) in Progress Payments 108,900 --
-------- -------
Cash Provided By or (Used For)
Operating Transactions 21,374 (34,267)
-------- --------
CASH FLOWS FROM FINANCING TRANSACTIONS:
- ---------------------------------------
Proceeds from Notes 16,000 40,500
Payments on Notes (23,000) (8,915)
-------- ----------
Cash Provided By or (Used For)
----------- ----------
Financing Transactions (7,000) 31,585
CASH FLOWS FROM INVESTING TRANSACTIONS:
- ---------------------------------------
Purchase of Equipment -- --
Deposits 5,090 --
------- -------
Cash Provided By or (Used For)
----------- ----------
Investing Transactions 5,090 --
INCREASE (DECREASE) IN CASH 19,464 (2,682)
- ---------------------------
CASH BALANCE - BEGINNING 6,442 3,431
- ------------------------ ------- -------
CASH BALANCE - ENDING 25,906 749
- --------------------- ======= =======
</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, 1998 and June 30, 1998 and the results of operations and changes in
financial position for the six months ended December 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 six months ended December 31, 1998 and 1997.
NOTE 3.
Notes Payable at December 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 $249,775 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 December 31, 1998, there was no
outstanding Producer Loan.
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
---------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Dec 31 Sept 30 Dec 31 Dec 31 Dec 31 Dec 31
1998 1998 1998 1997 1998 1997
Net Sales 224,398 99,930 224,398 143,076 324,328 195,011
Direct Cost & Overhead 2,329 2,868 2,329 3,759 5,197 17,102
G&A Expense 29 398 29 690 427 2,448
Inventory Cost 216,676 86,939 216,676 125,070 303,615 157,145
-------- ------- -------- -------- -------- --------
Cost of Sales 219,034 90,205 219,034 129,519 309,239 176,695
Interest & Other 10,760 9,979 10,760 10,887 20,739 20,144
</TABLE>
6
<PAGE>
I. CHANGE IN FINANCIAL POSITION IN THE THREE MONTHS ENDED DECEMBER 31,
1998.
In the three months period ended December 31, 1998, a reduction of the
working capital deficit of $295,756 resulted from a new contract obtained
at the beginning of the period for Autoplate instruments and related
technical support. The initial fixed price contract has a value of
$598,000 with performance and deliveries scheduled over a 15 month
period. The initial scheduling of performance under the contract
indicates that about $295,800 will be revenue in the following fiscal
year, beginning 1 July 1999. The contract was negotiated to provide
progress payments for an accelerated production schedule. In addition to
revenue from sales, this contract has provided $108,900 as progress
payment for work-in-progress. The Company's principal customer in recent
years was acquired by Advanced Instruments, Inc. of Norwood,
Massachusetts in October 1998, giving rise to the substantial improvement
in sales and backlog. The expenses of adding and training two technicians
to accommodate increased production rates resulted in a net loss of
$5,396. Non-fund charges in the quarter were $261. All loans acquired
from Spiral Biotech Inc. in prior periods were paid in full.
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, 1998, was higher by $81,322
compared to the same period in 1997. Operating income for the period was
$(5,364) compared to $13,557 in the prior year. In the opinion of
Management, the most recent quarter results show a new opportunity for
progress toward profitable operations and recovery from the large losses
incurred in prior years. Revenue was markedly higher, there is a large
backlog. Although the cost of establishing an increased production rate
resulted in a net loss, it is not expected to impact subsequent quarters.
For the six months period ended December 31, 1998, revenue of $324,328
was higher by about 66 percent compared to the same period in 1997. On
the same basis of comparison, the cost of sales was higher by about 75
percent, resulting in a net loss of $5,650 compared to an net loss of
$1,828 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 contract
for one hundred units. 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 76 percent, from
$57,300 to $13,650. 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, 1998 was $620,000, higher by
$402,900 compared to the prior year, and $110,000 lower than the backlog at
September 30, 1998. Negotiations have been completed that will increase backlog
by $42,500 in February, 1999.
ITEM 6 (B)
There were no reports filed on Form 8-K for the six months ended December 31,
1998.
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, 1999
ROBERT G. LYLE, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000034047
<NAME> EXOTECH INCORPORATED
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 25,906
<SECURITIES> 0
<RECEIVABLES> 42,142
<ALLOWANCES> 0
<INVENTORY> 402,949
<CURRENT-ASSETS> 961,788
<PP&E> 231,530
<DEPRECIATION> 231,412
<TOTAL-ASSETS> 966,508
<CURRENT-LIABILITIES> 1,187,323
<BONDS> 0
0
0
<COMMON> 97,014
<OTHER-SE> (613,629)
<TOTAL-LIABILITY-AND-EQUITY> 966,508
<SALES> 324,320
<TOTAL-REVENUES> 324,578
<CGS> 309,239
<TOTAL-COSTS> 309,239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,997
<INCOME-PRETAX> (5,650)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,650)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
