<PAGE>
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, 2000 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, 2000, 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 94 percent of the Company's sales in the past
year and about 90 and 91 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. These products will be updated
periodically to keep them abreast of new technological developments to remain
viable 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 260 units of this instrument
have been manufactured and delivered in fiscal years 1997 through 2000. 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 twenty 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 two 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 in May 1989. In 1992, a system
upgrade was designed and sold for this instrument. Marketing effort
2
<PAGE>
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 eight 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 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 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 2000 amounted to $48,835, comprising 6 Vacuum
Sources, Autoplate parts inventory and miscellaneous repair and calibration
services. Backlog in this segment at June 30, 2000 was $30,400.
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-of-the-art instruments.
3
<PAGE>
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 was 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
282 units prior to June 30, 2000. Spiral Biotech, Inc. advised the Company that
future production of Autoplates will be performed by Advanced Instruments, Inc.,
the parent company of Spiral Biotech.
In the electro-optical instruments business, Autoplates, Colony Counters
and related equipment sales accounted for 94% of the year's sales, 2% from
radiometer sales, 0.8% from the MTF, calibration and maintenance, and 3.2% from
miscellaneous sales and repair work.
For the fiscal year ended June 30, 2000, 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 years 1999 and 2000. 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 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 had no
susceptibility to problems relating to year 2000 and beyond. The Company's
principle providers of banking, payroll processing, and materials and parts
provided suitable uninterrupted service throughout the turn of the century
period.
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 any 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 1999 and 2000.)
-------------BID AND ASK PRICES--------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <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, 2000) 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
<TABLE>
<CAPTION>
Selected Income Statement Data:
------------------------ FISCAL YEAR -------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $428,696 $821,158 $499,476 $ 443,176 $ 367,259
Income (Loss) before Taxes
& Extraordinary Credit 3,609 31,494 9,878 (265,432) (152,584)
Net Income (Loss) $ 3,609 $ 31,494 $ 9,878 $(265,432) $(152,584)
Per Share:
Net Income (Loss) .00 .03 .01 (.28) (.16)
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data:
------------------------ FISCAL YEAR -------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current Assets $ 330,336 $ 428,348 $ 375,031 $ 329,315 $ 563,209
Current Liabilities 812,543 913,889 896,328 856,445 825,952
Working Capital (482,207) (485,541) (521,297) (527,130) (262,743)
Total Assets 336,681 434,418 385,363 335,602 570,541
Stockholders' Equity
and Accumulated
Deficit $(475,862) $(479,471) $(510,965) $(520,843) $(255,411)
</TABLE>
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS.
The Company's revenues of $428,696 were 48% lower than in fiscal year 1999,
and 14% lower than in fiscal year 1998. The decline in the past year 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 in 1999 was largely attributable to new ownership of Spiral
Biotech, Inc., resulting in an order for 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 peaked in the
prior year with the increase related to a large order for the automated plater.
The sales of miscellaneous service, parts and repairs doubled over fiscal year
1999 results reflecting a shift in priorities by the management of the Company's
principal customer in this period.
2000 1999 1998
-------- -------- --------
Biotechnology Instruments $338,170 $736,467 $411,273
Radiometer 10,060 40,504 22,555
MTF Tester Service 3,500 6,100 10,550
Miscellaneous Parts and Service 76,966 38,087 55,098
The cost of operations, $392,782, resulted in an operating income of
$35,914, compared to fiscal year 1999 income of $67,032 and operating income of
$50,819 in fiscal year 1998. The impact of interest costs resulted in a net
profit of $3,609 compared to a net profit of $31,494 and $9,878 in 1999 and
1998, respectively.
Sales of the Model 100BX radiometer was limited to one instrument pending
the recent completion of a new lot of 25 units. Management recognizes a
continuing demand for this instrument which deserves attention. A Web site was
implemented to market this product on the Internet. The radiometer enjoys a
long-standing reputation for value in the remote sensing field and efforts have
been renewed to increase sales.
In the past year, orders for instruments decreased by 54% and services
related to biotechnology products increased by 100% relative to the level of the
prior year. The inventory of finished goods of Autoplates and Vacuum Sources
was at the level targeted by Spiral Biotech Inc. (SBI) early in the third
quarter of the past fiscal year. This condition had been anticipated and the
Company was advised by SBI that further manufacturing of Autoplates would be
done by SBI's parent company, Advanced Instruments Inc.. Planning was
undertaken collaboratively in November 1999 by Exotech and Spiral Biotech for
the Company to be the provider of all parts and services for biotechnology
products and also to provide specifically assigned design and development
services for next-generation products. Planning progressed toward full
implementation of these objectives, including the co-location of SBI's Maryland
office with Exotech, through early April 2000 when the Company's Chief Executive
Officer and designated principal designer of instrumentation suffered a heart
attack. This event stalled further implementation for a period of five weeks,
and resulted in a revision of SBI plans, whereby the Company was requested to
provide further technology transfer instructions and services until such time as
all Spiral Biotech activities and related services could be relocated to the
facilities of the parent company in Norwood, Massachusetts. Explorations and
negotiations continue with Spiral Biotech to find mutually beneficial
relationships and
9
<PAGE>
activities that will go on through the next fiscal year.
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 for this product.
Substantive results from this effort were not achieved prior to June 30, 2000.
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 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 three years of improved
markets for the Company's products allowed substantial progress toward
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 seeking improved results from
marketing efforts in a very competitive environment. The challenge now being
addressed in contract negotiations, marketing efforts and explorations of other
business opportunities, is to provide ample resources to support operations and
growth throughout the coming fiscal year.
As shown in the Statements Of Cash Flows for the three years ended June 30
of 2000, 1999 and 1998, 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 small operating profits
in 2000 and 1998 caused negative cash flow from operating transactions of
($9,750) and ($18,378) respectively. Offsetting in these cases were net
proceeds from notes of $26,479 in 1998 and $4,151 in 2000. 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, resulted
in safeguards that kept the company's data processing and record-keeping systems
from suffering 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
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Linton, Shafer & Company, P.A.
Certified Public Accountants
932 Hungerford Drive, Suite 13
Rockville, MD 20850
301-340-0084
Principals: Corrine M.Bradac, CPA
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 balance sheet of Exotech,
Incorporated and Subsidiary as of June 30, 2000 and 1999 and the consolidated
income statement and cash flows for the years ended June 30, 2000, 1999 and
1998. These reports and related schedules are included on pages 12 through 21 of
the annual report on Form 10-K of Exotech, Incorporated and Subsidiary. 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, 2000 and 1999 and the results of
their operations and their cash flows for the years ended June 30, 2000, 1999
and 1998, 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 20, 2000
/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.
2000 1999 1998
---- ---- ----
REVENUES
--------
Instrument Sales $348,230 $776,971 $433,828
Parts, Repairs and Services 80,466 44,187 65,648
-------- -------- --------
TOTAL SALES $428,696 $821,158 $499,476
COST OF OPERATIONS
------------------
Direct Cost and Overhead
Instrument Sales 288,044 646,114 362,084
Repairs, Parts and Service 68,921 24,549 37,596
Inventory Adjustment -- 34,188 --
General and Administrative
Instrument Sales 25,538 47,243 44,615
Repairs, Parts and Service 10,279 2,032 4,362
-------- -------- --------
TOTAL COST OF OPERATIONS 392,782 754,126 448,657
-------- -------- --------
OPERATING PROFIT (LOSS) 35,914 67,032 50,819
-----------------------
OTHER REVENUES (EXPENSES)
-------------------------
Miscellaneous 776 741 588
Interest (33,081) (36,279) (41,529)
-------- -------- --------
NET PROFIT (LOSS) BEFORE TAXES 3,609 31,494 9,878
------------------------------
INCOME TAXES -- -- --
-------- -------- --------
NET PROFIT (LOSS) $ 3,609 $ 31,494 $ 9,878
----------------- ======== ======== ========
Gain or (Loss) per Common Share .00 .03 .01
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
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,921 $ 8,868
Accounts Receivable
(Note 2) Billed 12,633 85,270
Less: Allowance for Doubtful Account -- --
Inventories, at lower of
average cost or market 313,842 331,135
Prepaid Expenses and Advances 1,940 3,075
--------- ---------
TOTAL CURRENT ASSETS 330,336 428,348
PROPERTY, PLANT AND EQUIPMENT,
at cost
Laboratory Equipment 160,980 160,980
Office Furniture & Equipment 73,393 72,245
--------- ---------
234,373 233,225
Less accumulated
depreciation and
amortization (232,108) (231,498)
--------- ---------
Total Property, Plant and Equipment - Net 2,265 1,727
OTHER ASSETS
Miscellaneous 4,080 4,343
--------- ---------
TOTAL ASSETS $ 336,681 $ 434,418
--------- ---------
</TABLE>
The accompanying Notes are an integral part of these statements.
<PAGE>
EXOTECH INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
2000 1999
---- ----
CURRENT LIABILITIES
Notes Payable and Current
Maturities of Long Term
Debt (Note 5) $ 403,223 $ 399,072
Accounts Payable and Other
Accrued Liabilities 13,053 20,099
Accrued Payroll and Employee
Benefits 45,016 67,501
Accrued Officer Salary and
Benefits 140,072 169,730
Accrued Interest 209,779 176,587
Deferred Revenue 1,400 80,900
----------- -----------
TOTAL CURRENT LIABILITIES 812,543 913,889
SHAREHOLDERS' DEFICIT
Common Stock, par value $.10 per share;
1,500,000 shares authorized;
970,135 shares issued;
942,387 shares outstanding 97,014 97,014
Paid in Surplus 1,169,645 1,169,645
Accumulated Deficit (1,630,101) (1,633,710)
Treasury Stock 27,748 shares at cost (112,420) (112,420)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT (475,862) (479,471)
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $ 336,681 $ 434,418
=========== ===========
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 2000 1999 1998
--------------------------- ---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING TRANSACTIONS
--------------------------------------
Net Profit (Loss): $ 3,609 $ 31,494 $ 9,878
Add: Non Cash Income Determinants
Depreciation & Amortization 1,073 1,073 1,045
Add (Deduct): Changes in Current Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 72,637 (51,358) (15,687)
(Increase) Decrease in Prepaid Expenses & Advances 1,135 (2,460) (615)
(Increase) Decrease in Inventories 17,293 2,927 (26,403)
Increase (Decrease) in Accounts Payable & Other Accrued Liabilities (7,046) (66,924) (12,345)
Increase (Decrease) in Accrued Payroll & Related Expenses (52,143) (15,188) (7,284)
Increase (Decrease) in Accrued Interest 33,192 31,475 33,033
Deferred Revenue (79,500) 80,900 --
-------- -------- --------
Cash Provided By (Used In) Operating Transactions $ (9,750) $ 11,939 $(18,378)
----------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING TRANSACTIONS:
---------------------------------------
Proceeds from Notes 18,000 22,195 75,306
Payment on Notes (13,849) (34,898) (48,827)
-------- -------- --------
Cash Provided By (Used In) Financing Transactions 4,151 (12,703) 26,479
----------- ------- -------- -------- --------
CASH FLOWS FROM INVESTING TRANSACTIONS:
---------------------------------------
Purchase of Equipment (1,148) (1,695) (5,090)
Deposits (200) 4,885 --
-------- -------- --------
Cash Provided By (Used In) Investing Transactions (1,348) 3,190 (5,090)
----------- ------- -------- -------- --------
INCREASE (DECREASE) IN CASH (6,947) 2,426 3,011
CASH BALANCE - BEGINNING 8,868 6,442 3,431
-------- -------- --------
CASH BALANCE - ENDING $ 1,921 $ 8,868 $ 6,442
======== ======== ========
SUPPLEMENTAL INFORMATION
------------------------
Interest Paid $ 12 $ 4,804 $ 8,496
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, 2000
<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, 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 $(1,633,710) 27,748 $(112,420)
------- ------- ---------- ----------- ------ ---------
Add (Deduct) -- -- -- -- -- --
Net Profit (Loss) -- -- -- 3,609 -- --
------- ------- ---------- ----------- ------ ---------
Balance, June 30, 2000 970,135 $97,014 $1,169,645 $(1,630,101) 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, 2000, the Company had an operating profit of
$35,914. Operating profit was $67,032 in the prior year 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, 2000, 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 revenues
now being experienced, together with stringent control of costs and cash outlays
will provide sufficient cash to support its operations throughout the on-going
negotiations for new business arrangments for the current fiscal year.
Crystallographic Scanners have experienced no sales activity since approximately
seven 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, 2000. In the fiscal year ended June 30, 1997 this
product line was deleted from inventory.
At June 30, 2000, the remaining value (backlog) of existing sales contracts was
approximately $30,400.
(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 reporting purposes. The following time periods are used:
17
<PAGE>
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: 1998 - $1,045, 1999 - $1,073, including amortization of patents at the
rate of $928 in 1998 and 1999, and $1,073 in fiscal year 2000 of which $610
represents depreciation and $463 represents amortization. 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, 2000 due to the operating
losses and loss carryforwards for each of those years.
At June 30, 2000, the Company had net operating loss carryforwards of $664,734
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:
2000 1999 1998
--------- --------- ---------
Net operating loss carryforward 265,894 $ 264,550 $ 269,993
Deferred research and
experimental expenses 5,160 15,480 25,800
Less: Valuation allowance (271,054) (280,030) (295,793)
--------- --------- ---------
Deferred Tax Asset - net - 0 - - 0 - - 0 -
========= ========= =========
Net (increase) decrease in
valuation allowance $ (8,976) $ 15,763 $ 3,951
========= ========= =========
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.
2000 1999 1998
-------- -------- -------
Accounting Net (Income) Loss $ (3,609) $(31,494) $(9,878)
Nondeductible expense -- -- --
Research and experimental costs:
Capitalized on tax return -- -- --
Tax amortization 25,800 25,800 25,800
-------- -------- -------
Taxable Net (Income) Loss $22,191 $ (5,694) $15,922
======== ======== =======
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, 2000 and
1999. There is no allowance for doubtful accounts as of June 30, 2000, 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:
2000 1999
-------- --------
Raw Materials $ 32,625 $ 32,625
Goods in Process 267,217 284,510
Finished Goods 14,000 14,000
-------- --------
$313,842 $331,135
(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 1998, 1999 nor in 2000.
19
<PAGE>
(5) NOTES PAYABLE
Notes payable at June 30, 2000, 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 $248,223 are payable with
interest at 8.5% per annum to one officer/employee.
2000 1999
---- ----
Average* aggregate amount outstanding during year $387,141 $410,093
Maximum amount outstanding during year 403,223 429,273
Average* interest rate on loans
outstanding at end of year 8.50% 8.50%
Average* interest rate incurred
during the period 8.50% 7.80%
*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, 2000 was $1,400 which will be reduced
incrementally upon discounted billing for delivered parts and services. At the
end of August 2000, the balance of the liability remained at $1,400.
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
------ ------
Building $30,873 $32,781
(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 2000 1999 1998
----------- ---- ---- ----
Taxes other than income:
Payroll $ 9,125 $11,299 $ 8,938
Franchise, Personal Property and
other Miscellaneous 880 873 1,587
Rents, including equipment rental 42,634 42,318 41,573
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 $-0-, $87,361, and $457,018
(about 0, 11 and 91 percent, respectively, of total sales) for the fiscal years
ended June 30, 2000, 1999 and 1998, respectively. Amount due from such sales at
June 30, 1998 was $23,042. 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:
Additions:
Balance Charged to Balance
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- --------- -------- ---------- ------
Allowance for Depreciation:
Year Ended June 30, 2000 231,498 610 -- 232,108
Year Ended June 30, 1999 231,354 144 -- 231,498
Year Ended June 30, 1998 231,236 118 -- 231,354
Allowance for Amortization
of Patents:
Year Ended June 30, 2000 10,671 463 -- 11,134
Year Ended June 30, 1999 9,743 928 -- 10,671
Year Ended June 30, 1998 8,815 928 -- 9,743
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a), (b), (e)
NAME: ROBERT G. LYLE (71)
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 (43)
Secretary (1999-2000) and Director and Member of Audit
Committee (1999-2000).
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 (44)
Treasurer (1999), Secretary (1997-1999) and Director
and Member of Audit Committee (1997-2000).
Business experience
during past 5 years: - Senior Electronic Engineering Technician and Data
Processing Supervisor (1987-2000). Electronic
Technician and Computer Programmer (1979-1987)
Other Positions: None.
Other Directorships: None.
______________________
Note: All terms expire in December, 2000
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 $10,166 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 2000
was $10,166. 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, 2000. 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, 2000.
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, 2000, 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 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.
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.
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, 2000.................................................. 12
CONSOLIDATED BALANCE SHEETS - JUNE 30, 2000 AND 1999.................. 13-14
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
YEARS ENDED JUNE 30, 2000............................................ 15
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
DEFICIT - FOR THE THREE YEARS ENDED JUNE 30, 2000.................... 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 25, 2000 BY: /s/ Robert G. Lyle
---------------------- ---------------------------------------
DATE ROBERT G. LYLE, CHIEF EXECUTIVE OFFICER,
PRINCIPAL ACCOUNTING OFFICER AND DIRECTOR
September 25, 2000 BY: /s/ John M. Talbot
---------------------- ---------------------------------------
DATE JOHN M. TALBOT, TREASURER (PRINCIPAL
FINANCIAL OFFICER) AND DIRECTOR
September 25, 2000 BY: /s/ Theodore J. Parreco
---------------------- ---------------------------------------
DATE THEODORE J. PARRECO, SECRETARY AND
DIRECTOR
28
