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 __________ August 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 ___
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
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<TABLE>
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
<S> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,661,441
Short-Term Investments 100,000
Accounts 389,737
Inventories 181,655
Prepaid Expenses 15,874
Income Tax Refunds 14,647
Note Receivable 50,083
Other Current Assets 5,139
-----------
Total Current Assets 2,418,576
Equipment and Improvements - [Net of Accumulated
Depreciation and Amortization] 33,091
Covenant Not To Compete - [Net of Amortization] 83,333
Deferred Charges 62,500
Other Assets 5,745
Total Assets $ 2,603,245
===========
Liabilities and Stockholders' Equity :
Current Liabilities:
Accounts Payable $ 36,633
Accrued Expenses and Other Current Liabilities 105,875
Due to Related Party 33,333
Note Payable - Bank 190,000
-----------
Total Current Liabilities 365,841
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 561,800
Total 2,517,289
Less: Treasury Stock - At Cost - 8,846,000 313,218
-----------
Total Stockholders' Equity 2,204,071
Total Liabilities and Stockholders' Equity $ 2,603,245
===========
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS [UNAUDITED]
- ------------------------------------------------------------------------------
Three months ended Nine months ended
August 31, August 31,
---------- ----------
1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Net Sales $ 353,504 $ 349,742 $ 807,074 $ 1,059,724
Interest and Other Income 32,506 71,946 67,292 197,022
----------- ---------- ----------- -----------
Total Revenues 386,010 421,688 874,366 1,256,746
----------- ---------- ----------- -----------
Costs and Expenses:
Cost of Sales 102,371 118,308 348,584 384,804
Selling, General and Administrative 319,475 256,063 903,951 639,854
Research and Development 63,645 70,323 166,712 261,934
----------- ---------- ----------- -----------
Total Cost and Expenses 485,491 444,694 1,419,247 1,286,592
----------- ---------- ----------- -----------
[Loss] Income Before Income Taxes (99,481) (23,006) (544,881) (29,846)
Provision for Income Taxes 3,618 5,095 3,618 (40,384)
----------- ---------- ----------- -----------
Net [Loss] Income $ (103,099)$ (28,101)$ (548,499)$ 10,538
=========== ========== =========== ===========
Net Income Per Share $ -- $ -- $ -- $ --
=========== ========== =========== ===========
Weighted Average Number of Shares 67,360,081 67,873,339 67,360,081 68,287,327
=========== ========== =========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
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Nine months ended
August 31,
1 9 9 6 1 9 9 5
------- -------
Operating Activities:
<S> <C> <C>
Net [Loss] Income $ (548,499)$ 10,538
----------- -----------
Adjustments to Reconcile Net [Loss] Income to
Net Cash [Used for] Operating Activities:
Depreciation and Amortization 33,945 10,722
Deferred Income Tax -- (2,760)
Gain on Sale of Assets (1,500) --
Gain on Sale of Investments (6,384) --
Provision for Bad Debts 18,877 --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (141,622) 50,414
Inventories 52,320 (12,563)
Prepaid Expenses (4,251) --
Other Current Assets 28,523 (20,533)
Income Tax Refund (2,247) (48,068)
Other Assets 4,990 --
Increase [Decrease] in:
Accounts Payable (817) 8,196
Accrued Expenses and Other Current Liabilities 25,176 (18,671)
----------- -----------
Total Adjustments 7,010 33,263
----------- -----------
Net Cash - Operating Activities (541,489) (22,725)
----------- -----------
Investing Activities:
Proceeds on Sale of Equipment 1,500 5,311
Redemption of Short-Term Investments 372,667 1,797,589
Purchase of Investments (100,000) --
Payment to Related Party (33,333) --
Issuance of Note Receivable (50,000) --
Purchase of Treasury Stock -- (97,442)
Purchase of Equipment and Improvements (1,379) --
----------- -----------
Net Cash - Investing Activities 189,455 1,705,458
----------- -----------
Financing Activities:
Proceeds from Bank Loan 190,000 --
Organizational Costs (62,500) --
----------- -----------
Net Cash - Financing Activities 127,500 --
----------- -----------
Net [Decrease] Increase in Cash and Cash Equivalents (224,534) 1,682,733
Cash and Cash Equivalents - Beginning of Periods 1,885,975 576,157
----------- -----------
Cash and Cash Equivalents - End of Periods $ 1,661,441 $ 2,258,890
=========== ===========
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 August 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>
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SENTEX SENSING TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
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[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 August 31, 1996 and the
results of operations and cash flows for the nine months ended August 31, 1996
and 1995.
[2] The results of operations for the nine months ended August 31, 1996 and 1995
are not necessarily indicative of the results to be expected for the full year.
[3] Inventory
Inventories consist of:
August 31,
1 9 9 6
Raw Materials $ 83,760
Work-in-Process 4,690
Finished Goods 93,205
-----------
Total $ 181,655
----- ===========
[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
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The Company currently has three wholly owned subsidiaries, Sentex Systems, Inc.,
the operating subsidiary, and Sentex Acquisitions Corp., a dormant acquisition
subsidiary, and Sentex Merger Corp., the subsidiary being used to effect the
Merger described herein. Hereinafter the "Company" shall refer to Sentex Sensing
Technology, Inc. and its three wholly owned subsidiaries, Sentex Acquisition
Corp.
and Sentex Systems, Inc., and Sentex Merger Corp.
The Company, which primarily conducts its business through Sentex Systems, Inc.,
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.
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"], which was amended and restated on July 30, 1996
[the "Merger Agreement"] whereby the Company 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 6.8974890
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
6.8974890 Sentex Common Shares, or an aggregate amount of $8,640,320 Sentex
Common Shares.
Upon the completion of the Merger, the number of the Board of Directors of
Sentex may be increased from five members to six members. The additional vacancy
will be available for a nominee of Clarion Capital Corporation, the controlling
shareholder of Monitek ["Clarion"], at their option. 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 assuming such shares were issued and
outstanding 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. A Joint Proxy Statement/Prospectus was mailed to the shareholders of
the Company and the stockholders of Monitek on or about October 11, 1996. A
special meeting for the Company and Monitek will each be held on November 14,
1996.
<PAGE>
SENTEX SENSING TECHNOLOGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Results of Operations
Nine Months Ended August 31, 1996 Compared to August 31, 1995
Total revenue decreased, at August 31, 1996 to $874,366 as compared to
$1,256,746 at August 31, 1995, primarily as a result of a significant decrease
in sales orders and other income, which in 1995 included non-recurring revenues
of approximately $154,000 [$107,000 from a research and development contract and
$47,000 from a federal income tax refund]. For the nine months ended August 31,
1996 net sales dropped to $807,074 from $1,059,724 for the comparative period
ended August 31, 1995 in the prior fiscal year. Cost of goods sold as a
percentage of sales increased to 43% for the nine months ended August 31, 1996
as compared to 36% during the comparable period the prior year. Gross profit
dollars for the nine month period ended August 31, 1996 decreased to $458,490
from $674,920 during the comparable period the prior year. The decreased margin
was primarily 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 August
31, 1996 amounted to $106,820 which represents a increase of $8,255 from orders
received but not yet delivered as of August 31, 1995 of $98,565.
Operations resulted in a net loss of $548,499 for the nine months ended August
31, 1996 as compared to income of $10,538 for the comparative period ended
August 31, 1995 in the prior fiscal year. The loss, when compared to prior year,
was caused primarily by lower sales and non-recurring revenues that resulted in
a reduction of gross profit by $346,160. In addition, Selling, General and
Administrative expenses increased $264,097 offset by a reduction in Research and
Development expenses of $95,222 during the comparable nine month period ending
August 31, 1996 to August 31, 1995.
The sharp increase in Selling, general and administrative expenses for the nine
months ended August 31, 1996 to $903,951 from $639,854 the comparable period the
prior year 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 pending merger with Monitek and are not anticipated
to re-occur in the future.
Inventory decreased at August 31, 1996 to $181,655 as compared to $201,868 at
August 31, 1995 as a result of decreases in raw materials and work-in-process
inventory.
Financial Condition
Current liabilities as of August 31, 1996 were $365,841 a large increase from
$174,041 at the end of August 31, 1995, due to a note payable entered into
during the third quarter. Working capital decreased to $2,052,735 for the period
ended August 31, 1996 as compared to $2,817,610 at August 31, 1995.
The Company's financial condition has declined slightly over the past twelve
months due to a lower than expected sales performance. Total current assets
amounted to $2,418,576 at August 31, 1996 as compared to $2,991,651 as of August
31, 1995.
Cash and short-term investments amounted to approximately $1,760,000 as of
August 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 the next
year.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> nov-30-1996
<PERIOD-END> aug-31-1996
<CASH> 1,661,441
<SECURITIES> 0
<RECEIVABLES> 389,737
<ALLOWANCES> 0
<INVENTORY> 181,655
<CURRENT-ASSETS> 2,418,576
<PP&E> 33,091
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,603,245
<CURRENT-LIABILITIES> 365,841
<BONDS> 0
0
0
<COMMON> 1,955,489
<OTHER-SE> 248,582
<TOTAL-LIABILITY-AND-EQUITY> 2,603,245
<SALES> 353,504
<TOTAL-REVENUES> 386,010
<CGS> 102,371
<TOTAL-COSTS> 485,491
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,618
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (99,481)
<INCOME-TAX> 0
<INCOME-CONTINUING> (103,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (103,099)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
