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: MARCH 31, 1999 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
MARCH 31, 1999 942,387
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<PAGE>
EXOTECH INCORPORATED
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
CONSOLIDATED CONDENSED BALANCE SHEET
March 31, 1999 AND JUNE 30, 1998.............................. 2
CONSOLIDATED CONDENSED STATEMENT OF
OPERATIONS - NINE MONTHS ENDED
MARCH 31, 1999 AND 1998........................................ 3
STATEMENT OF CASH FLOWS FOR NINE
MONTHS ENDED MARCH 31, 1999 AND 1998........................... 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,
1999 1998
---------- --------
(Unaudited)
<S><C>
CURRENT ASSETS
Accts. Receivable, Net $ 44,744 $ 33,912
Inventories
Work in Process 372,371 287,437
Raw Materials 32,625 32,625
Finished Goods 14,000 14,000
Cash and Other Current Assets 17,734 7,057
Fixed Price Contracts in Progress 598,000 --
Less: Progress Payments Received (217,700) --
-------- --------
Total Current Assets $861,775 $375,031
PROPERTY, PLANT AND EQUIPMENT, NET 90 176
OTHER NON CURRENT ASSETS 11,017 10,156
-------- --------
TOTAL ASSETS $872,882 $385,363
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accts. Payable & Other Accrued Expenses $ 67,349 $87,022
Other Current Liabilities 619,153 397,531
Notes Payable 400,275 411,775
---------- --------
Total Current Liabilities $1,086,777 $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 (1,663,934) (1,665,204)
Treasury Stock (27,748 shares) (112,420) (112,420)
---------- ----------
Total Shareholders' Equity (509,695) (510,965)
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $872,882 $385,363
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
EXOTECH INCORPORATED
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
1999 1998
----------------------------- ---------------------------
3 Mos. 9 Mos. 3 Mos. 9 Mos.
----------- ENDED ----------- ----------- ENDED ---------
3/31 3/31 3/31 3/31
<S><C>
REVENUE
Contract Sales $243,350 $567,678 $132,178 $327,189
EXPENSES
Direct Labor 754 1,071 3,216 8,954
Overhead 3,123 8,003 4,895 15,615
Materials -- -- 2,230 2,874
Other Direct Costs -- -- -- --
Travel -- -- -- 650
General & Administrative 177 604 722 3,170
Inventory Costs 224,114 527,729 100,889 258,034
-------- -------- -------- --------
Cost of Contract Services 228,168 537,407 112,602 289,297
Operating Income (Loss) 15,182 30,271 19,576 37,892
Miscellaneous Income 132 390 -- --
Research and Development -- -- -- --
Interest & Other (8,393) (29,390) (9,487) (29,631)
-------- -------- -------- --------
NET INCOME BEFORE
TAXES 6,921 1,271 10,089 8,261
State Income Tax
Provision -- -- -- --
-------- -------- -------- --------
NET INCOME (LOSS) 6,921 1,271 10,089 8,261
Weighted Average Number of
Common Shares
Outstanding 942,387 942,387 942,387 942,387
EARNINGS (LOSS) PER
COMMON SHARE 0.01 0.00 0.01 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>
1999 1998
------ ------
<S><C>
CASH FLOWS FROM OPERATING TRANSACTIONS
Net Income (Loss) 1,271 8,261
Add: Non cash Income Determinants
Depreciation and Amortization 782 784
Add (Deduct): Changes in Current Assets & Liabilities
(Increase) Decrease in Accounts Receivable (10,832) (33)
(Increase) Decrease in Prepaid Expenses (1,514) (343)
(Increase) Decrease in Inventory (84,934) (62,035)
Increase (Decrease) in Accts. Payable (19,675) (11,660)
Increase (Decrease) in Payroll/Emp. Benefits (14,864) (4,818)
Increase (Decrease) in Accrued Interest 24,586 24,586
Increase (decrease) in Progress Payments 127,400 --
------- ------
Cash Provided By or (Used For) Operating Transactions 22,220 (45,258)
----------- --------
CASH FLOWS FROM FINANCING TRANSACTIONS:
Proceeds from Notes 16,000 66,789
Payments on Notes (27,500) (23,864)
------- ------
Cash Provided By or (Used For) Financing Transactions (11,500) 42,925
----------- --------
CASH FLOWS FROM INVESTING TRANSACTIONS:
Purchase of Equipment -- --
Deposits (1,557) --
------- ------
Cash Provided By or (Used For) Investing Transactions (1,557) --
----------- --------
INCREASE (DECREASE) IN CASH 9,163 (2,333)
- ---------------------------
CASH BALANCE - BEGINNING 6,442 3,431
------- ------
CASH BALANCE - ENDING $15,605 $1,098
======= ======
</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, 1999 and June 30, 1998 and the results of operations and changes in
financial position for the nine months ended March 31, 1999 and 1998 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, 1999 and 1998.
NOTE 3.
Notes Payable at March 31, 1999 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 $245,275 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, 1999, there was no outstanding
Producer Loan.
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
1999 1998 1999 1998 1999 1998
<S><C>
Net Sales 243,350 224,398 243,350 132,178 567,678 327,189
Cost of Labor & Overhead 3,877 2,329 3,877 8,111 9,074 24,589
G&A Expense 177 29 177 722 604 3,170
Inventory Cost 224,114 216,676 224,114 100,889 527,729 258,034
--------- --------- --------- --------- --------- ---------
Cost of Sales 228,168 219,034 228,168 112,602 537,407 289,297
Interest & Other 8,393 10,760 8,393 9,487 29,390 29,631
</TABLE>
6
<PAGE>
I. CHANGE IN FINANCIAL POSITION IN THE NINE MONTHS ENDED MARCH 31,
1999.
In the nine months period ended March 31, 1999, a reduction of the
working capital deficit of $296,297 resulted from a contract obtained in
October 1998 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 $127,400 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 at the end of the
second quarter and a net profit of $1,271 at the end of nine months.
Non-fund charges in the period were $782. All loans acquired from Spiral
Biotech Inc. in this and prior periods were paid in full.
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, 1999, was higher by $111,172
compared to the same period in 1998. Operating income for the period was
$30,271 compared to $19,576 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 lower net profit, it is not expected to impact subsequent
quarters.
For the nine months period ended March 31, 1999, revenue of $567,678 was
higher by about 74 percent compared to the same period in 1998. On the
same basis of comparison, the cost of sales was higher by about 86
percent, resulting in a net profit of $1,271 compared to an net profit
of $8,261 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 first quarter of the current fiscal year, 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 second quarter. In the
last month of that quarter, 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, with a startup of only new lot of twenty-six units.
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 87 percent, from
$57,300 to $7,500. 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, 1999 was $495,400, higher by
$326,500 compared to that of the prior year, and $124,600 lower than the backlog
at December 31, 1998. Management has continued its study of potential risks
associated with the anticipated problems for some data processing systems
(hardware and software) at the turn of the century. To date, no risks of this
kind have been identified that could adversely impact the Company's operations
or administration.
ITEM 6 (B)
There were no reports filed on Form 8-K for the nine months ended March 31,
1999.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the Company has duly
caused this Report to be signed on its behalf by the undersigned thereunto duly
authorized.
EXOTECH INCORPORATED
REGISTRANT
DATE: May 13, 1999
________________
____________________________________
ROBERT G. LYLE, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
9
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 15,605
<SECURITIES> 0
<RECEIVABLES> 44,744
<ALLOWANCES> 0
<INVENTORY> 418,996
<CURRENT-ASSETS> 861,775
<PP&E> 231,530
<DEPRECIATION> 231,440
<TOTAL-ASSETS> 872,882
<CURRENT-LIABILITIES> 1,086,777
<BONDS> 0
0
0
<COMMON> 97,014
<OTHER-SE> (606,709)
<TOTAL-LIABILITY-AND-EQUITY> 872,882
<SALES> 567,678
<TOTAL-REVENUES> 568,068
<CGS> 537,407
<TOTAL-COSTS> 537,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,390
<INCOME-PRETAX> 1,271
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,271
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,271
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
