<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995 Commission File Number 33-14201
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MONITEK TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 94-1689129
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1495 Zephyr Avenue, Hayward, CA 94544
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 471-8300
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NONE
- --------------------------------------------------------------------------------
(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 and 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
requirements for the last 90 days.
YES X NO___
---
<TABLE>
<CAPTION>
Outstanding at
CLASS June 30, 1995
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<S> <C>
COMMON STOCK - $.01 PAR VALUE 1,690,424
CLASS A COMMON STOCK - $.01 PAR VALUE 1,252,676
</TABLE>
1
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MONITEK TECHNOLOGIES, INC.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
- ---- ----------- ----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
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1. Financial Statements
Consolidated Balance Sheets as of March 31,1995
(audited) and June 30, 1995 (unaudited)................3
Consolidated Statements of Operations (unaudited)
for the Three Months Ended June 30, 1994 and
June 30, 1995..........................................5
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended June 30, 1994
and June 30, 1995......................................6
Notes to Consolidated Financial Statements.............7
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................9
PART II - OTHER INFORMATION
---------------------------
6. Exhibits and Reports on Form 8-K......................12
SIGNATURE............................................ 12
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</TABLE>
2
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND JUNE 30, 1995
<TABLE>
<CAPTION>
March 31, June 30,
1995 1995
(Audited) (Unaudited)
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<S> <C> <C>
ASSETS
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Current Assets:
Cash and equivalents..................................... $ 59,908 $ 59,627
Accounts receivable, less allowance for
doubtful accounts of $35,465 and $43,541................ 896,704 1,063,282
Inventories.............................................. 1,488,502 1,483,330
Prepaid expenses......................................... - 20,068
Other current assets..................................... 113,213 129,267
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Total Current Assets................................ 2,558,327 2,755,574
Property and equipment, less accumulated
depreciation and amortization of
$910,964 and $924,952.................................... 158,708 149,548
Product line acquisition costs, less
accumulated amortization of
$75,715 and $78,326...................................... 52,912 50,301
Other assets.............................................. 1,808 2,136
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Total Assets........................................ $2,771,755 $2,957,559
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND JUNE 30, 1995
<TABLE>
<CAPTION>
March 31, June 30,
1995 1995
(Audited) (Unaudited)
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable to related party........................... $ 200,000 $ 250,000
Current capital lease obligations........................ 5,005 3,830
Accounts payable:
Trade.................................................. 345,573 589,166
Accrued liabilities...................................... 626,675 668,503
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Total Current Liabilities............................ 1,177,253 1,511,499
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Stockholders' Equity:
Common stock - $.01 par value, authorized
10,000,000 shares and 1,690,424 shares
issued and outstanding................................. 16,904 16,904
Class A common stock - $.01 par value,
authorized 2,000,000 shares and
1,252,676 shares issued and outstanding,
convertible into common stock.......................... 12,527 12,527
Paid-in capital.......................................... 6,117,176 6,117,176
Accumulated deficit...................................... (4,602,382) (4,749,636)
Cumulative translation adjustment........................ 50,277 49,089
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Total Stockholders' Equity........................... 1,594,502 1,446,060
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Total Liabilities and
Stockholders' Equity............................... $ 2,771,755 $ 2,957,559
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
4
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
JUNE 30, 1994 AND JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
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June 30, 1994 June 30, 1995
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<S> <C> <C>
Net sales $1,684,140 $1,763,795
Cost of sales 732,994 805,251
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Gross profit 951,146 958,544
Selling, general and
administrative expenses 838,214 955,660
Research, development and
product engineering 67,292 141,296
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Operating income (loss) 45,640 (138,412)
Other income (expense):
Interest expense (4,178) (7,016)
Foreign currency trans-
action gain (loss) 23,440 (3,499)
Other income 5,229 1,673
Interest income 1,027 -
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Income (loss) before income tax 71,158 (147,254)
Income tax expense - -
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Net income (loss) $ 71,158 $ (147,254)
=========== ===========
Net income (loss) per share $ .02 $ (.05)
========= =========
Weighted average number of
common shares outstanding 2,949,100 2,943,100
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
5
<PAGE>
MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED JUNE 30, 1994 AND JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
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June 30, 1994 June 30, 1995
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<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 1,295,681 $ 1,598,740
Cash paid to suppliers and employees (1,515,176) (1,614,732)
Interest received 1,027 -
Interest paid (4,178) (7,016)
Other misc. receipts (payments) 43,224 (20,920)
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Net cash used in operations (179,422) (43,928)
Cash flows from investing activities:
Capital expenditures (1,088) (5,178)
Cash flows from financing activities:
Net borrowings on line of credit - 50,000
Principal payments:
Capital lease obligations (2,546) (1,175)
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Net cash received from (used for)
financing activities (2,546) 48,825
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Net decrease in cash (183,056) (281)
Cash at beginning of period 254,473 59,908
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Cash at end of period $ 71,417 $ 59,627
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
6
<PAGE>
MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements include the accounts of
Monitek Technologies, Inc. and its wholly owned subsidiary (collectively
the "Company"). All significant intercompany balances and transactions have
been eliminated in consolidation.
The consolidated financial statements reflect all adjustments (which
include only normal, recurring adjustments) which, in the opinion of
management, are necessary for the fair presentation of the results of the
Company for the periods covered.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.
These interim statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995 (Commission
File No. 0-16544).
Results of operations for the three months ended June 30, 1995 are not
necessarily indicative of the results to be achieved for the full fiscal
year.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value).
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1995 1995
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<S> <C> <C>
Raw Materials $ 393,586 $ 367,535
Component parts and
work in progress 236,964 283,844
Finished goods 857,952 831,951
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$1,488,502 $1,483,330
========== ==========
</TABLE>
7
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONT'D)
3. Net Income (Loss) Per Share
The computation of net income (loss) per share is based on the weighted
average number of shares outstanding. No effect is given to outstanding
stock options or warrants in the computation of net income (loss) per share
since they are deemed to be anti-dilutive.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total net sales increased by 5%, from $1,684,000 for the three months ended June
30, 1994 ("Fiscal 1995 Three Months") to $1,764,000 for the three months ended
June 30, 1995 ("Fiscal 1996 Three Months"). Domestic sales increased by 16%,
export sales from the United States decreased by 6% and sales to continental
Europe by the Company's wholly owned subsidiary, Monitek GmbH, which accounted
for more that half of the total net sales for both the Fiscal 1995 and Fiscal
1996 Three Months, increased by 2%. The impact of price increases from Fiscal
1995 to Fiscal 1996 was negligible, inasmuch as prices were only increased
slightly on selective models.
Cost of sales, as a percentage of net sales, increased from 44% for the Fiscal
1994 Three Months to 46% for the Fiscal 1995 Three Months. Material costs
increased from 34% to 36% of net sales, primarily as a result of a change in
product mix. Direct labor and factory overhead remained constant, at 10% of net
sales, for both the Fiscal 1995 Three Months and the Fiscal 1996 Three Months.
Selling, general and administrative expenses increased from $838,000, or 50% of
net sales, for the Fiscal 1995 Three Months to $956,000, or 54% of net sales,
for the Fiscal 1996 Three Months, primarily as a result of increases in
expenditures by Monitek GmbH. The majority of the increase occurred in payroll
and related expenses, advertising, travel, sales commissions and certain
administrative expenses.
Research, development and product engineering expenses increased from $67,000,
or 4% of net sales, for the Fiscal 1995 Three Months to $141,000, or 8% of net
sales, for the Fiscal 1996 Three Months. Spending during the Fiscal 1995 Three
Months had been severely curtailed to conserve working capital and reduce
operating losses. Management recently made the decision to fund certain
projects that had been placed on hold, resulting in the increased expenditures
for the Fiscal 1996 Three Months.
Operating income (loss) went from a profit of $46,000 for the Fiscal 1995 Three
Months to a loss of $138,000 for the Fiscal 1996 Three Months as a result of the
increase in cost of sales,
9
<PAGE>
selling, general and administrative expenses and engineering expenses, as a
percentage of sales, partially offset by the increase in sales.
Foreign currency transactions resulted in a gain of $23,000 for the Fiscal 1995
Three Months compared with a loss of $3,000 for the Fiscal 1996 Three Months as
a result of fluctuations in the value of the U.S. Dollar relative to the German
Deutsche Mark.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net working capital decreased from $1,381,000 on March 31, 1995 to $1,244,000 on
June 30, 1995. This decrease was the result of the loss for the period,
partially offset by various minor changes in non-current assets and liabilities.
The Company's unused sources of liquidity, consisting of unrestricted cash and
short-term interest bearing securities, remained constant, at $60,000, on March
31, 1995 and June 30, 1995. As set forth in the notes to audited financial
statements (Note 16) included in the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995, the Company's recurring losses from
operations and the resulting effect on cash flow raise substantial doubt about
its ability to continue as a going concern without additional sources of
external financing. The Company's management is currently seeking other sources
of financing including, but not limited to, loans collateralized by assets of
the Company and a sale of equity securities, to fund its operating and working
capital requirements. There is no assurance that such financing, if available,
can be obtained on terms satisfactory to the Company. In December 1993, the
Company entered into a temporary loan and security agreement with its major
shareholder, Clarion Capital Corporation, to borrow up to a maximum of $250,000
at an interest rate of 10% per annum. At June 30, 1995, borrowings under this
agreement totaled $250,000.
At June 30, 1995, the Company had available net operating loss carryforwards of
approximately $4,938,000 and $1,889,000 to offset future Federal and California
taxable income, respectively. The Tax Reform Act of 1986 imposes certain
restrictions on the amount of net operating loss carryforwards which can be used
in any one year by the Company for losses prior to July 31, 1987, the date of
the Company's initial public offering, which is deemed to be a change in
ownership for Federal tax purposes. The Company's utilization of Federal net
operating loss carryforwards from years prior to Fiscal 1988, totaling
10
<PAGE>
$1,640,000, is limited to approximately $620,000 per year. Deductions available
for net operating losses generated in years subsequent to the change in
ownership are unlimited. If the Company's income were to exceed the permissible
net operating loss carryforward deduction, as to which there can be no
assurance, the Company would incur liability for Federal income taxes on the
excess earnings, even though net operating loss carryforwards would be available
for future years.
11
<PAGE>
OTHER INFORMATION
-----------------
Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Registrant during the quarter
ended June 30, 1995.
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MONITEK TECHNOLOGIES, INC.
--------------------------
(Registrant)
DATED: August 10, 1995 s/ Frank J. Vetrovec
- ------------------ ---------------------------
Frank J. Vetrovec
President and Chief
Operating Officer
s/ James S. O'Leary
---------------------------
James S. O'Leary
Executive Vice President
and Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 59,627
<SECURITIES> 0
<RECEIVABLES> 1,106,273
<ALLOWANCES> 45,541
<INVENTORY> 1,483,330
<CURRENT-ASSETS> 2,755,574
<PP&E> 1,074,500
<DEPRECIATION> 924,952
<TOTAL-ASSETS> 2,957,559
<CURRENT-LIABILITIES> 1,511,499
<BONDS> 0
<COMMON> 29,431
0
0
<OTHER-SE> 1,416,629
<TOTAL-LIABILITY-AND-EQUITY> 2,957,559
<SALES> 1,763,795
<TOTAL-REVENUES> 1,763,795
<CGS> 805,251
<TOTAL-COSTS> 805,251
<OTHER-EXPENSES> 1,100,455
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,016
<INCOME-PRETAX> (147,254)
<INCOME-TAX> 0
<INCOME-CONTINUING> (147,254)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (147,254)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
