Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended __________ May 31, 1996__________
- --------------------------------------------------------------------
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-13328
SENTEX SENSING TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2333899
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
553 Broad Avenue, Ridgefield, New Jersey 07657
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 945-3694____________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and 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
requirements for the past 90 days.
Yes X No ___
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934
after the distribution of securities under a plan confirmed by a court.
Yes No ___
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 67,360,081
<PAGE>
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 1996 [UNAUDITED]
Assets:
Current Assets:
Cash and Cash Equivalents 1,873,656
Accounts Receivable 144,299
Inventories 211,140
Prepaid Expense 11,988
Other Current Assets 20,508
Income Tax Refunds 16,000
Note Receivable 38,068
---------------
Total Current Assets 2,315,659
Equipment and Improvements - (Net of Accumulated 37,472
Depreciation and Amortization)
Covenant Not To Compete - ( Net of Amortization) 91,667
Other Assets 7,248
Total Assets $ 2,452,046
============
Liabilities and Stockholders' Equity :
Current Liabilities:
Accounts Payable $ 35,643
Accrued Expenses and Other Current Liabilities 42,568
Due to Related Party 33,333
Total Current Liabilities 111,544
Due to Related Party 33,333
Commitments and Contingencies --
Stockholders' Equity:
Common Stock, No Par Value, Authorized 200,000,000
Shares, Issued 76,206,081 Shares, Outstanding
67,360,081 Shares 1,955,489
Retained Earnings 664,898
Total 2,620,387
Less: Treasury Stock - At Cost - 8,846,000 313,218
--------------
Total Stockholders' Equity 2,307,169
-------------
Total Liabilities and Stockholders' Equity $ 2,452,046
============
See Notes to Consolidated Financial Statements.
<PAGE>
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS [UNAUDITED]
<TABLE>
Three months ended Six months ended
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
Revenues:
<S> <C> <C> <C> <C>
Net Sales $ 144,525 $ 383,882 $ 453,570 $ 709,982
Interest and Other Income 15,531 29,151 34,786 172,669
- ------------------------- ------------------- -------------- ------------ ------------
Total Revenues 160,056 413,033 488,356 882,651
- ----------------- ------------------- ----------------- -------- -------------
Costs and Expenses:
Cost of Sales 105,931 90,835 246,213 266,496
- ------------- ----------------------------------------------------------------
Selling, General & Admin. 301,338 243,438 584,476 383,791
- ------------------------- ----------------------------------------------------------------
Research & Development 48,634 104,757 103,067 191,611
- ---------------------- ----------------------------------------------------------------
Total Cost & Expenses 455,903 439,030 933,756 841,898
- ------------------------ ----------------------------------------------------------------
Income (Loss) Before (295,847) (25,997) (445,400) 40,753
- -------------------- ----------------------------------------------------------------
Income Taxes
- ------------
Provision for Income Taxes 0 (6,050) 0 2,114
- -------------------------- -----------------------------------------------------------------
Net Income (Loss) $ (295,847 $ (19,947) (445,400) $ 38,639
- ------------------ ---------------------------------------------------------------
Net Income per Share $ $ 0 $ 0 $ 0 0
- -------------------- -------------------------------------------------------------------
Weighted Average Number 67,360.081 68,623,855 67,360.081 69,126,164
- ----------------------- --------------------------------------------- ---------------
of Shares
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
SIX MONTHS ENDED
May 31, May 31,
1996 1995
---- ----
Operating Activities:
<S> <C> <C>
Net (Loss) Income $ (445,400$ 38,639
- ----------------- ------------------- --------------
Adjustments to reconcile Net (Loss) Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 19,852 6,764
- -------------------------------- ----------------------------------
Deferred Income Tax 0 (2,760)
- ---------------------- -----------------------------------
Gain on Sale of Assets (1,500) 0
- ------------------------- ------------------------------------
Gain on Sale of Investments (6,384) 0
- ------------------------------ ---------------------------------
Provision for Bad Debts 15,839 0
- --------------------------------------------------------------------------------------------
Change in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable 93,094 125,976
- ---------------------- --------------------------------
Inventories 22,834 (12,918)
- -------------- ----------------------------------
Prepaid Expenses (365) 0
- ------------------- -------------------------------------
Other Assets 3,488 0
- --------------- -------------------------------------
Other Current Assets 23,959 (15,255)
- ----------------------- ----------------------------------
Income Tax Refund (3,600) (48,068)
- -------------------- ----------------------------------
Increase (Decrease) in:
Accounts Payable (1,807) (18,128)
- ------------------- ----------------------------------
Accrued Expenses and Other Current Liabilities (38,131) (19,423)
- ------------------------------------------------- ----------------------------------
Total Adjustments 127,279 16,188
- ----------------- ---------------------------------
Net Cash Provided (Used) by Operating Activities (318,121) 54,827
- ------------------------------------------------ ---------------------------------
Investing Activities:
Proceeds on Sale of Equipment 1,500 5,311
- -------------------------------- ----------------------------------
Redemption of Short-Term Investments 337,635 1,593,758
- --------------------------------------- ------------------------------
Payment to Related Party 33,333 0
- --------------------------- ------------------------------------
Purchase of Treasury Stock 0 (87,783)
- ----------------------------- ----------------------------------
Net Cash Provided by - Investing Activities 305,802 1,511,286
- ------------------------------------------- -------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (12,319) 1,566,113
- ---------------------------------------------------- -------------------------------
Cash and Cash Equivalents - Beginning of Periods 1,885,975 576,157
- ------------------------------------------------ --------------------------------
Cash and Cash Equivalents - End of Periods $ 1,873,656 $ 2,142,270
- ------------------------------------------ --------------- --------------
<PAGE>
Supplemental Disclosure of Non-Cash Investing Activities:
On March 1, 1996, the Company entered into a Covenant Not to Compete agreement
with a related
party for a total of $100,000. As of May 31, 1996, the remaining $66,667 is
to be paid in equal
installments of $33,333 during January 1997 and 1998.
See Notes to Consolidated Financial Statements.
</TABLE>
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
[1] In the opinion of management, the unaudited financial statements contain all
adjustments [consisting of only normal recurring accruals and repayments]
necessary to present fairly the financial position at May 31, 1996 and the
results of operations and cash flows for the six months ended May 31, 1996 and
1995.
[2] The results of operations for the six months ended May 31, 1996 and 1995 are
not necessarily indicative of the results to be expected for the full year.
[3] Inventory
Inventories consist of:
May 31,
1996
Raw Materials $ 106,833
Work-in-Process 11,424
Finished Goods 92,883
------
Total $ 211,140
= =======
[4] Earnings per Share
Earnings [loss] per share are based on the weighted average number of common
shares outstanding for the periods presented, after adjustment for the shares
issued in the stock acquisition.
[5] Principles of Consolidation
The consolidated financial statements include the accounts of Sentex Sensing
Technology, Inc. and its wholly-owned subsidiaries [the "Company"]. All material
inter-company accounts and transactions have been eliminated in consolidation.
. . . . . . . . . . . . . . . .
<PAGE>
SENTEX SENSING TECHNOLOGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company formed two wholly owned subsidiaries, Sentex Systems, Inc., and
Sentex Acquisitions Corp. on May 31, 1991 to separate the present operations
of the Company into a subsidiary to continue the business of designing,
developing and marketing gas chromatographic devices, and a subsidiary to
develop and acquire new investment opportunities. On November 10, 1992 Sentex
Systems, Inc. one of the wholly owned subsidiaries was merged back into
Sentex Sensing Technology, Inc. but was reincorporated, in the State of
Delaware, on August 30, 1994. Hereinafter the "Company" shall refer to
Sentex Sensing Technology, Inc. and its two wholly owned
subsidiaries, Sentex Acquisition Corp. and Sentex Systems, Inc.
RESULTS OF OPERATIONS
The Company is engaged in the business of developing, manufacturing and selling
automated devices designed to identify and measure the concentrations of certain
chemicals in air, water and soil. The Company also sells a portable and
walk-through explosives detector, two portable air analyzers, a portable and
fixed-site water monitoring system and a sensor which measures the total organic
content of air. The Company, also, provides technical assistance and service to
its customers and on occasion, performs research and development, on a
contractual basis, to develop instrumentation designed to fulfill
customer-specific analytical requirements. Currently all of the Company's
products employ gas chromatography as the method of analysis.
The Company intends to develop, acquire or merge with other businesses which may
be unrelated to its present activities and is presently investigating such
opportunities. As of June 26, 1996 the Company and Monitek Technologies, Inc.
(OTC: (MTEK)) ("Monitek") jointly announced their respective approvals of an
Agreement and Plan of Merger (the "Merger") whereby Sentex will acquire Monitek
and operate Monitek as a wholly owned subsidiary. Both companies are designers,
developers and manufactures of instruments for analysis or monitoring of
liquids, soil and air in industrial, municipal and environmental industries. The
companies' products are sold world-wide.
The Merger Agreement provides that Monitek's Common Stock will be exchanged for
11,659,681 Sentex Common shares, which based on the number of shares of
Monitek's Common Stock outstanding as of today, equals an exchange of 6,897
Sentex Common Shares for each share of Monitek's Common Stock. The Merger
Agreement also provides that all the shares of Monitek's Class A Common Stock
will be exchanged for Convertible Notes in the aggregate principle sum of
approximately $486,000. Based on the conversion rate specific in the Class A
Convertible Note each share of Monitek's Class A Common Stock will, subject to
the restrictions on conversion discussed below, effectively be exchanged for
6.897 Sentex Common Shares.
Upon the completion of the Merger, the number of the Board of Directors of
Sentex shall be increased from five members to six members. The additional
vacancy will be filled by a nominee of Clarion Capital Corporation, the
controlling shareholder of Monitek ("Clarion"). Clarion will also receive a
convertible note in the aggregate principal amount of $136,414 in exchange for
certain indebtedness owed to it by Monitek (the "Clarion Note").
The Sentex Common Shares exchanged for shares of Monitek's Common Stock will
represent approximately 15% of the issued and outstanding Sentex Common Shares
at that time. Upon conversion, the Notes are convertible into a maximum of
15,666,080 Sentex Common Shares, which based on the anticipated total issued and
outstanding Sentex common shares at the completion of the Merger will be
approximately 29%.
The Merger is subject to the fulfillment of certain conditions and obligations
of both companies, including the approval of the Merger by the majority of the
shareholders of Monitek and Sentex of each voting class of Common Stock of
Monitek.
QUARTER ENDED MAY 31, 1996 COMPARED TO QUARTER ENDED MAY
31, 1995
<PAGE>
Total revenue decreased, at May 31, 1996 to $488,356 as compared to $882,651 at
May 31, 1995, primarily as a result of a significant decrease in sales orders
and other income, which in 1995 included non-recurring revenues of $107,593
($60,000 from a research and development contract and $47,493 from a federal
income tax return). For the six months ended May 31, 1996 net sales dropped to
$453,570 from $709,982 for the comparative period ended May 31, 1995 in the
prior fiscal year. Cost of goods sold as a percentage of sales decreased to 46%
for the six months ended May 31, 1996 as compared to 62% during the comparable
period the prior year. Gross profit dollars for the six month period ended May
31, 1996 decreased to $207,357 from $443,486 during the comparable period the
prior year. The decreased margin was due to the fixed manufacturing cost impact
on the drop in sales.
Orders for the Company's products received but not yet delivered as of May 31,
1996 amounted to $63,775 which represents a decrease from orders received but
not yet delivered as of May 31, 1995 of $78,593.
Operations resulted in a net loss of $445,400 for the six months ended May 31,
1996 as compared to income of $40,753 for the comparative period ended May 31,
1995 in the prior fiscal year. The loss, when compared to prior year, was caused
by lower sales, non-recurring revenue from the prior year of $107,593 and an
increase in Selling, General and Administrative expenses of $200,685 during the
comparable six month period ending May 31, 1996 to May 31, 1995.
Selling, general and administrative expenses increased sharply for the six
months ended May 31, 1996 to $584,476 from $383,791 for the comparable period
the prior year which ended May 31, 1995. This increase was a result of increases
in advertising, legal, consulting and bad debt expenses. Many of these expenses
were one time expenses associated with the sale of control of the Company to CPS
Capital in March 1996 and subsequent expenses associated with the Merger with
Monitek in June of this year and are not anticipated to re-occur in the future.
Inventory increased at May 31, 1996 to $211,140 as compared to $202,223 at May
31, 1995 as a result of increases in raw materials and work-in-process
inventory.
<PAGE>
FINANCIAL CONDITION
Current liabilities as of May 31, 1996 were $111,544 a decrease from $152,478 at
the end of May 31, 1995. Working capital decreased to $2,204,115 for the period
ended May 31, 1996 as compared to $2,845,899 at May 31, 1995.
The Company's financial condition has declined slightly over the past twelve
months due to a lower than expect sales performance. Total current assets
amounted to $2,315,659 at May 31, 1996 as compared to $2,998,377 as of May 31,
1995.
Cash and short-term investments amounted to approximately $1,900,000 as of May
31, 1996. The Company has no significant commitments at this time which would
require that it expend a significant portion of its' capital. Accordingly, the
amount of funds currently available are expected to be sufficient to fulfill the
Company's anticipated cash requirements and other uses throughout 1996.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
this schedule contains summary information extracted from the
consolidated balance sheet and the consolidated statement of operations
and is qualified in its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> nov-30-1996
<PERIOD-END> may-31-1996
<CASH> 1,873,656
<SECURITIES> 0
<RECEIVABLES> 144,299
<ALLOWANCES> 0
<INVENTORY> 211,140
<CURRENT-ASSETS> 2,315,659
<PP&E> 37,472
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,452,046
<CURRENT-LIABILITIES> 111,544
<BONDS> 0
0
0
<COMMON> 1,955,489
<OTHER-SE> 351,680
<TOTAL-LIABILITY-AND-EQUITY> 2,452,046
<SALES> 144,525
<TOTAL-REVENUES> 160,056
<CGS> 105,931
<TOTAL-COSTS> 349,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (295,847)
<INCOME-TAX> 0
<INCOME-CONTINUING> (295,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (295,847)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
