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, 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
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, 1999, 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 $73,280.
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 90 percent of the Company's sales in the
past year and about 91 and 86 percent in the prior two fiscal years. The other
products are sold directly by the Company. They are built for inventory in lots
of 25 or more 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 a 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 160 units of this
instrument have been manufactured and delivered in fiscal years 1997 through
1999. 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
<PAGE>
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 seven 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 for materials. 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 1999 amounted to $142,444, comprising 8
Autoplates, 10 Vacuum Sources, a Radiometer and miscellaneous repair and
calibration services. Backlog in this segment at June 30, 1999 was $300,000.
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
<PAGE>
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 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 Autoplates on an order from Spiral
Biotech, Inc. Follow-on orders for these instruments resulted in shipments of
182 units prior to June 30, 1999.
In the electro-optical instruments business, Autoplates, Colony
Counters and related equipment sales accounted for 90% of the year's sales, 5%
from radiometer sales, 0.5% from the MTF, calibration and maintenance, and 4.5%
from miscellaneous sales and repair work.
For the fiscal year ended June 30, 1999, 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 was cash flow shortage which in prior years caused
delays in meeting some current obligations. It is the opinion of Management that
progress in resolving cash flow related problems, although elusive in past
years, was markedly improved in fiscal year 1999. Provided that the current
level in instrument sales, and maintenance and repair work continue, Management
expects to sustain adequate cash flow and improve working capital.
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 the end of October 1999.
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.
4
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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 May 1999, 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 1998 and 1999.)
-------------BID AND ASK PRICES--------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C> <C>
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
</TABLE>
b. Approximate number of Equity Security Holders.
TITLE OF CLASS: Common Stock
APPROXIMATE NUMBER OF SHAREHOLDERS
(As of September 21, 1999) 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------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $821,158 $499,476 $443,176 $367,259 $370,102
Income (Loss) before Taxes
& Extraordinary Credit 31,494 9,878 (265,432) (152,584) (68,130)
Net Income (Loss) $31,494 $9,878 $(265,432) $(152,584) $(68,130)
Per Share:
Net Income (Loss) .03 .01 (.28) (.16) (.07)
<CAPTION>
Selected Balance Sheet Data:
-----------------------------------FISCAL YEAR------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current Assets $428,348 $375,031 $329,315 $563,209 $587,808
Current Liabilities 913,889 896,328 856,445 825,952 699,068
Working Capital (485,541) (521,297) (527,130) (262,743) (111,260)
Total Assets 434,418 385,363 335,602 570,541 596,241
Stockholders' Equity
and Accumulated
Deficit $(479,471) $(510,965) $(520,843) $(255,411) $(102,827)
</TABLE>
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS.
The Company's revenues of $821,158 were 64% higher than in fiscal year
1998, and 85% higher than in fiscal year 1997. 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. The increase of the past year is largely attributable to new
ownership of Spiral Biotech, Inc., that has purchased a substantially larger
quantity of instruments.
Sales of instruments, parts, repairs and calibration services in the
past three years are shown in the following table. Instrument sales have
increased 97% over the period with the increase related to the introduction of
the automated plater. The reduced sales of miscellaneous service, parts and
repairs in fiscal year 1999 resulted from a shift in prioritites by the new
management of the Company's principal customer in this period.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Biotechnology Instruments $736,467 $411,273 $347,445
Radiometer 40,504 22,555 47,015
MTF Tester Service 6,100 10,550 9,590
Miscellaneous Parts and Service 38,087 55,098 39,126
</TABLE>
The cost of operations, $754,126, includes a $34,188 write-off of aging
inventory and resulted in an operating income of $67,032, compared to fiscal
year 1998 income of $50,819 and operating loss of $227,552 in fiscal year 1997.
The impact of interest costs resulted in a net profit of $31,494 compared to a
net profit of $9,878 and a loss of $265,432 in 1998 and 1997, respectively.
A net decrease in demand notes of $12,703 allowed a decrease in
interest expense to $36,279, compared to $41,529 in the prior year, and $37,880
in fiscal 1997. 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 the past three fiscal years. Production costs for the instrument have been
steadily improved during that period.
In the past year, orders for instruments and services related to
biotechnology products increased by 79% above the level of the prior year. In
the opinion of Management, recent improvements in the marketing of the
biotechnology products may rejuvenate sales of the laser scanner instruments
together with increasing sales of services products related to the automated
plater.
Sales of the Model 100BX radiometer rebounded by 80% over the results
in the prior fiscal year, without the benefit of any marketing effort.
Management recognizes a continuing demand for this instrument which deserves
attention. A Web site is being implemented to market this product on the
Internet. The radiometer enjoys a long-standing reputation for value in the
remote sensing field and efforts will be renewed to increase sales.
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
9
<PAGE>
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 for this product. Substantive results from this effort were not
achieved prior to June 30, 1999.
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 2000.
As shown in the Statements Of Cash Flows for the three years ended June
30 of 1999, 1998 and 1997, each period ended with a small positive cash balance.
Negative cash flow from operations have been experienced in two of the past
three years. In fiscal year 1999, a net profit of $31,494 was offset by
substantial increases in accounts receivable, accounts payable and other accrued
expenses, and a decrease in inventories. The result of an operating net loss in
1997 and a small profit in 1998 caused negative cash flow from operating
transactions of ($9,674) and ($18,387) respectively. Offsetting in these cases
were net proceeds from notes of $26,479 in 1998 and $13,000 in 1997. The Company
managed to meet its cash flow obligations in the past year with receipts from
sales and financing activities comprised of deposits received with purchase
orders and waiver of compensation by the Company's Chief Executive Officer.
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 significant 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
<PAGE>
Linton, Shafer & Company, P.A.
Certified Public Accountants
6 West Second Street
Frederick, MD 21701
301-663-5122
Principals: Edmond B. Gregory III, CPA, CBA
Kevin R. Hessler, CPA
Donald C. Linton, CPA, CFP
Joseph M. McCathran, 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, 1999 and 1998 and for the years ended June 30, 1999,
1998 and 1997. 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, 1999 and 1998 and the
results of their operations and their cash flows for the years ended June 30,
1999, 1998 and 1997, 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.
August 30, 1999
/s/ LINTON, SHAFER & COMPANY, P.A.
11
<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.
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
REVENUES
<S> <C> <C> <C>
Instrument Sales $776,971 $433,828 $394,460
Parts, Repairs and Services 44,187 65,648 48,716
--------- --------- --------
TOTAL SALES $821,158 $499,476 $443,176
COST OF OPERATIONS
Direct Cost and Overhead
Instrument Sales 646,114 362,084 319,705
Repairs, Parts and Service 24,549 37,596 30,548
R & D Costs -- -- --
Inventory Adjustment 34,188 -- 281,117
General and Administrative
Instrument Sales 47,243 44,615 36,191
Repairs, Parts and Service 2,032 4,362 3,167
R & D Costs -- -- --
-------- -------- --------
TOTAL COST OF OPERATIONS 754,126 448,657 670,728
-------- -------- --------
OPERATING PROFIT (LOSS) 67,032 50,819 (227,552)
- -----------------------
OTHER REVENUES (EXPENSES)
Miscellaneous 741 588 --
Interest (36,279) (41,529) (37,880)
-------- -------- --------
NET PROFIT (LOSS) BEFORE TAXES 31,494 9,878 (265,432)
- ------------------------------
INCOME TAXES -- -- --
---------- ---------- ---------
NET PROFIT (LOSS) $31,494 $9,878 $(265,432)
- ----------------- ======== ======= ==========
Gain or (Loss) per Common Share .03 .01 (.28)
Weighted average number of
common shares outstanding 942,387 942,387 942,387
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
<TABLE>
<CAPTION>
1999 1998
------ ------
CURRENT ASSETS
<S> <C> <C>
Cash $8,868 $6,442
Accounts Receivable
(Note 2) Billed 85,270 33,912
Less: Allowance for Doubtful Account -- --
Inventories, at lower of
average cost or market 331,135 334,062
Prepaid Expenses and Advances 3,075 615
--------- ---------
TOTAL CURRENT ASSETS 428,348 375,031
PROPERTY, PLANT AND EQUIPMENT,
at cost
Laboratory Equipment 160,980 160,980
Office Furniture & Equipment 72,245 70,550
--------- ---------
233,225 231,530
Less accumulated
depreciation and
amortization (231,498) (231,354)
--------- ---------
Total Property, Plant and Equipment - Net 1,727 176
OTHER ASSETS
Miscellaneous 4,343 10,156
-------- --------
TOTAL ASSETS $434,418 $385,363
--------- ---------
</TABLE>
The accompanying Notes are an integral part of these statements.
13
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
<TABLE>
<CAPTION>
1999 1998
---- ----
CURRENT LIABILITIES
<S> <C> <C>
Notes Payable and Current
Maturities of Long Term
Debt (Note 5) $399,072 $411,775
Accounts Payable and Other
Accrued Liabilities 20,099 87,022
Accrued Payroll and Employee
Benefits 67,501 71,250
Accrued Officer Salary and
Benefits 169,730 181,169
Accrued Interest 176,587 145,112
Deferred Revenue 80,900 --
--------- ----------
TOTAL CURRENT LIABILITIES 913,889 896,328
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 (1,633,710) (1,665,204)
Treasury Stock 27,748 shares at cost (112,420) (112,420)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT (479,471) (510,965)
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $434,418 $385,363
======== =========
</TABLE>
The accompanying Notes are an integral part of these statements.
14
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1999 1998 1997
- --------------------------- ------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING TRANSACTIONS
Net Profit (Loss): $31,494 $9,878 $(265,432)
Add: Non Cash Income Determinants
Depreciation & Amortization 1,073 1,045 1,045
Add (Deduct): Changes in Current Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (51,358) (15,687) (7,152)
(Increase) Decrease in Prepaid Expenses & Advances (2,460) (615) 344
(Increase) Decrease in Inventories 2,927 (26,403) 244,028
Increase (Decrease) in Accounts Payable & Other Accrued Liabilities (66,924) (12,345) (6,295)
Increase (Decrease) in Accrued Payroll & Related Expenses (15,188) (7,284) (8,987)
Increase (Decrease) in Accrued Interest 31,475 33,033 32,775
Deferred Revenue 80,900 -- --
-------- --------- --------
Cash Provided By (or) Used In Operating Transactions $11,939 $(18,378) $(9,674)
----------- ------- -------- --------- --------
CASH FLOWS FROM FINANCING TRANSACTIONS:
Proceeds from Notes 22,195 75,306 43,000
Payment on Notes (34,898) (48,827) (30,000)
-------- -------- --------
Cash Provided By (or) Used In Financing Transactions (12,703) 26,479 13,000
----------- ------- -------- ------- -------
CASH FLOWS FROM INVESTING TRANSACTIONS:
Purchase of Equipment (1,695) (5,090) --
Deposits 4,885 -- --
------- -------- --------
Cash Provided By (or) Used In Investing Transactions 3,190 (5,090) --
----------- ------- ------- ------- --------
INCREASE (DECREASE) IN CASH 2,426 3,011 3,326
CASH BALANCE - BEGINNING 6,442 3,431 105
------ ------ --------
CASH BALANCE - ENDING $8,868 $6,442 $3,431
======= ======= =======
SUPPLEMENTAL INFORMATION
Interest Paid $4,804 $8,496 $5,105
Taxes -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE THREE YEARS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
($0.10) PAID-IN ACCUMULATED TREASURY STOCK
--------------------
SHARES PAR VALUE SURPLUS (DEFICIT) SHARES COST
-------- --------- ------------ ------------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
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)
Add (Deduct) -- -- -- -- -- --
Net Profit (Loss) -- -- -- 31,494 -- --
-------- --------- ------------ ------------- ------- ---------
Balance, June 30, 1999 970,135 $97,014 $1,169,645 $(1,663,710) 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, 1999, the Company had an operating profit of
$67,032, after a year-end write-off of $34,188 in manufacturing inventory. The
Company had an operating profit of $50,819 in the fiscal year ended June 30,
1998. At June 30, 1997, there was an operating loss of $227,552 which included
an inventory write-off of $281,117. At June 30, 1999, all accounts payable were
less 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, 1999. In the
fiscal year ended June 30, 1997 this product line was deleted from inventory.
At June 30, 1999, the remaining value (backlog) of existing sales contracts was
approximately $300,000.
(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 cost 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 expense recorded in the consolidated statement of operations is as
follows: 1997 - $1,045, 1998 - $1,045, and 1999 - $1,073, 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, 1999 due to the operating
losses and loss carryforwards for each of those years.
At June 30, 1999, the Company had net operating loss carryforwards of $661,376
which begin to expire in 2000. The Company also has incurred research and
experimental expenses of $183,368 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:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net operating loss carryforward $264,550 $269,993 $263,624
Deferred research and
experimental expenses 15,480 25,800 36,120
Less: Valuation allowance (280,030) (295,793) (299,744)
--------- --------- ---------
Deferred Tax Asset - net - 0 - - 0 - - 0 -
========= ========= =========
Net (increase) decrease in
valuation allowance $15,763 $3,951 $(103,027)
========= ======= ==========
</TABLE>
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.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Accounting Net (Income) Loss $(31,494) $(9,878) $265,432
Nondeductible expense -- -- --
Research and experimental costs:
Capitalized on tax return -- -- --
Tax amortization 25,800 25,800 30,135
--------- -------- --------
Taxable Net (Income) Loss $(5,694) $ 15,922 $295,567
========= ======== ========
</TABLE>
Repairs and Betterments
- -----------------------
Repairs are expensed as incurred. Betterments are capitalized and depreciated
over the remaining useful life of the assets.
Accounts Receivable
- -------------------
Accounts receivable consist of amounts billed from sales as of June 30, 1999 and
1998. There is no allowance for doubtful accounts as of June 30, 1999, 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:
1999 1998
------ ------
Raw Materials $32,625 $32,625
Goods in Process 284,510 287,437
Finished Goods 14,000 14,000
--------- ---------
$331,135 $334,062
(4) RESEARCH AND DEVELOPMENT COSTS
The Company's accounting policy is to write off research and development costs
as incurred. There were no R&D costs in the fiscal year 1997, 1998 nor in 1999.
19
<PAGE>
(5) NOTES PAYABLE
Notes payable at June 30, 1999, 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 $244,072 are payable with
interest at 8.5% per annum to one officer/employee.
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
---- ----
Average* aggregate amount outstanding during year $410,093 $416,624
Maximum amount outstanding during year 429,273 434,719
Average* interest rate on loans
outstanding at end of year 8.50% 8.26%
Average* interest rate incurred
during the period 7.80% 7.93%
</TABLE>
*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
The Company received cash deposits from its principal customer of $158,900 on
orders for instruments and technical services amounting to $598,000. The balance
of this liability at June 30, 1999 was $80,900 which will be reduced
incrementally upon discounted billing for delivered instruments and services. At
the end of August 1999, the balance of the liability was further reduced in this
manner to $59,900.
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 in three year increments through
May 31, 2002.
Non-Financing 2002 2001 2000
------ ------ ------
Building $30,873 $32,781 $31,826
(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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Description 1999 1998 1997
- ----------- ---- ---- ----
Taxes other than income:
Payroll $11,299 $8,938 $7,796
Franchise, Personal Property and
other Miscellaneous 873 1,587 1,168
Rents, including equipment rental 42,318 41,573 38,653
</TABLE>
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 $87,361, $457,018 and
$381,130 (about 11, 91 and 86 percent, respectively, of total sales) for the
fiscal years ended June 30, 1999, 1998 and 1997, respectively. Amounts due from
such sales at June 30, 1998 and 1997 were $23,042 and $12,725, respectively.
There was nothing due from such sales after October 1998. 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:
<TABLE>
<CAPTION>
Additions:
Balance Charged to Balance
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- --------- -------- ---------- ------
Allowance for Depreciation:
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1999 231,354 144 231,498
Year Ended June 30, 1998 231,236 118 231,354
Year Ended June 30, 1997 231,119 117 231,236
Allowance for Amortization
of Patents:
Year Ended June 30, 1999 9,743 928 10,671
Year Ended June 30, 1998 8,815 928 9,743
Year Ended June 30, 1997 7,887 928 8,815
</TABLE>
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a), (b), (e)
NAME: ROBERT G. LYLE (70)
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: THEODORE J. PARRECO (42)
Secretary (1999) and Director and Member of
Audit Committee (1999).
Business experience
during past 5 years: - President and Treasurer, James Parreco &
Son Inc. Construction Equipment Leasing
(1990-present)
- Vice President, Indcom Land Inc.
(1994-present)
Other Positions: None.
Other Directorships: None.
- ---------------------
NAME: JOHN M. TALBOT (43)
Treasurer (1999), Secretary (1997-1999) and
Director and Member of Audit Committee
(1997-1999).
Business experience
during past 5 years: - Senior Electronic Engineering Technician
and Data Processing
Supervisor (1987-1999). Electronic
Technician and Computer Programmer
(1979-1987)
Other Positions: None.
Other Directorships: None.
- ----------------------
Note: All terms expire in December, 1999
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 $8,925 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 1999 was $8,925.
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, 1999. 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,
1999.
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 21, 1999, 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:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF %
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS
- ---------------- -------------------- -----
<S> <C>
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 160,318 17.01
41957 Brightwood Lane
Leesburg, VA 22075
Theodore Parreco Of Record 44,100
PO Box 1357 Benefically 5,126
-------
Upper Marlboro, MD 20773 Total 49,226 6.27
Denzil C. Pauli Of Record 204,547 21.70
13021 Bluhill Road
Aspen Hill, MD 20906
William T. Stephens Of Record 96,449 10.23
PO Box 1096
McLean, VA 22075
Current officers and directors as a group own a total of 209,544, representing
22.24% of Common Stock.
</TABLE>
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 prior to September 1999 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.
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...................................................... 11
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THREE YEARS
ENDED JUNE 30, 1999.................................................................................... 12
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1999 AND 1998.................................................... 13-14
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
YEARS ENDED JUNE 30, 1999.............................................................................. 15
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
DEFICIT - FOR THE THREE YEARS ENDED JUNE 30, 1999...................................................... 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.
</TABLE>
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 21, 1999 BY: /s/ Robert G. Lyle
----------------------- ----------------------------
DATE ROBERT G. LYLE, CHIEF
EXECUTIVE OFFICER, PRINCIPAL
ACCOUNTING OFFICER AND
DIRECTOR
September 21, 1999 BY: /s/ John M. Talbot
----------------------- ----------------------------
DATE JOHN M. TALBOT, TREASURER
(PRINCIPAL FINANCIAL OFFICER)
AND DIRECTOR
September 21, 1999 BY: /s/ Theodore J. Parreco
----------------------- -----------------------------
DATE THEODORE J. PARRECO, SECRETARY
AND DIRECTOR
28
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,868
<SECURITIES> 0
<RECEIVABLES> 85,270
<ALLOWANCES> 0
<INVENTORY> 331,135
<CURRENT-ASSETS> 428,348
<PP&E> 233,225
<DEPRECIATION> 231,498
<TOTAL-ASSETS> 434,418
<CURRENT-LIABILITIES> 913,889
<BONDS> 0
0
0
<COMMON> 97,014
<OTHER-SE> (576,485)
<TOTAL-LIABILITY-AND-EQUITY> 434,418
<SALES> 821,158
<TOTAL-REVENUES> 821,899
<CGS> 754,126
<TOTAL-COSTS> 754,126
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,279
<INCOME-PRETAX> 31,494
<INCOME-TAX> 0
<INCOME-CONTINUING> 31,494
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,494
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
