<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 September 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
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(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____
---
Outstanding at
CLASS September 30, 1995
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COMMON STOCK - $.01 PAR VALUE 1,690,424
CLASS A COMMON STOCK - $.01 PAR VALUE 1,252,676
1
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MONITEK TECHNOLOGIES, INC.
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TABLE OF CONTENTS
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ITEM DESCRIPTION PAGE
- ---- ----------- ----
PART I - FINANCIAL INFORMATION
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1. Financial Statements
Consolidated Balance Sheets as of March 31,1995
(audited) and September 30, 1995 (unaudited)...........3
Consolidated Statements of Operations (unaudited)
for the Three Months and Six Months Ended September
30, 1994 and September 30, 1995........................5
Consolidated Statements of Cash Flows (unaudited)
for the Six Months Ended September 30, 1994
and September 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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2
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
March 31, September 30,
1995 1995
(Audited) (Unaudited)
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<S> <C> <C>
ASSETS
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Current Assets:
Cash and equivalents..................................... $ 59,908 $ 70,988
Accounts receivable, less allowance for
doubtful accounts of $35,465 and $44,578 896,704 1,038,120
Inventories.............................................. 1,488,502 1,253,420
Prepaid expenses......................................... - 21,778
Other current assets..................................... 113,213 111,639
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Total Current Assets............................... 2,558,327 2,495,945
Property and equipment, less accumulated
depreciation and amortization of
$910,964 and $937,312.................................... 158,708 138,863
Product line acquisition costs, less
accumulated amortization of
$75,715 and $80,937...................................... 52,912 47,690
Other assets.............................................. 1,808 2,136
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Total Assets........................................ $2,771,755 $2,684,634
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</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONT,D)
MARCH 31, 1995 AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
March 31, September 30,
1995 1995
(Audited) (Unaudited)
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Notes payable to related parties......................... $ 200,000 $300,000
Current capital lease obligations........................ 5,005 2,606
Trade accounts payable................................... 345,573 499,475
Accrued liabilities...................................... 626,675 640,133
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Total Current Liabilities............................ 1,177,253 1,442,214
Stockholders' Equity:
Common stock - $.01 par value, authorized
10,000,000 shares with 1,690,424 shares
issued and outstanding................................. 16,904 16,904
Class A common stock - $.01 par value,
authorized 2,000,000 shares, 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) (4,950 200)
Cumulative translation adjustment........................ 50,277 46,013
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Total Stockholders' Equity........................... 1,594,502 1,242,420
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Total Liabilities and
Stockholders' Equity............................... $2,771,755 $2,684,634
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</TABLE>
See accompanying notes to unaudited consolidated financial statements
4
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ------------------------
September 30, September 30,
1994 1995 1994 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $1,531,145 $1,897,662 $3,215,285 $3,661,457
Cost of sales 714,496 886,071 1,447,490 1,691,322
---------- ---------- ---------- ----------
Gross profit 816,649 1,011,591 1,767,795 1,970,135
Selling, general and
administrative expenses 750,281 1,001,412 1,588,495 1,957,072
Research, development and
product engineering 72,935 168,497 140,227 309,793
---------- ---------- ---------- ----------
Operating profit (loss) (6,567) (158,318) 39,073 (296,730)
Other income (expense):
Interest expense (2,547) (24,394) (6,725) (31,410)
Foreign currency trans-
action gain 20,863 (19,963) 44,303 (23,462)
Other income 6,503 2,111 11,732 3,784
Interest income 312 - 1,389 -
---------- ---------- ---------- ----------
Profit (loss) before
income tax expense 18,564 (200,564) 89,772 (347,818)
Income tax expense - - - -
--------- ---------- ---------- ----------
Net profit (loss) $ 18,564 $ (200,564) $ 89,772 $ (347,818)
=========== =========== =========== ===========
Net profit (loss) per share $ .01 $ (.07) $ .02 $ (.12)
======== ======== ======== ========
Weighted average number of
common shares outstanding 2,943,100 2,943,100 2,943,100 2,943,100
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
5
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
----------------
September 30,
1994 1995
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Cash flows from operating activities:
Cash received from customers $ 3,088,693 $ 3,523,505
Cash paid to suppliers and employees (3,243,154) (3,545,603)
Interest received 1,389 -
Interest paid (6,725) (31,410)
Income taxes paid - -
Other miscellaneous cash
receipts (disbursements) 53,686 (26,160)
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Net cash used in operations (106,111) (79,668)
Cash flows from investing activities:
Capital expenditures (6,710) (6,853)
Cash flows from financing activities:
Net borrowings on line of credit - 100,000
Capital lease obligation payments (5,180) (2,399)
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Net cash used in
financing activities (5,180) 97,601
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Net decrease in cash
and equivalents (118,001) 11,080
Cash and equivalents at beginning of period 254,473 59,908
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Cash and equivalents at end of period $ 136,472 $ 70,988
=========== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
6
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARY
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 at the dates of the balance sheets.
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 six months ended September 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, September 30,
1995 1995
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<S> <C> <C>
Raw Materials $393,586 $344,463
Component parts and
work in progress 236,964 228,277
Finished goods 857,952 680,680
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$1,488,502 $1,253,420
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</TABLE>
7
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONT'D)
3. Income (Loss) Per Share
The computation of net income (loss) per share is based on the weighted
average number of common shares outstanding. No effect is given to
outstanding stock options or warrants in the computation of income (loss)
per share since they are deemed to be anti-dilutive.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
Net sales increased by 14% for the three months and 24% for the six months ended
September 30, 1995 ("Fiscal 1996 Three Months") and ("Fiscal 1996 Six Months")
compared with the three months and six months ended September 30, 1994 ("Fiscal
1995 Three Months") and ("Fiscal 1995 Six Months"). Domestic sales increased by
12% and 14% for the Fiscal 1996 Three Months and Fiscal 1996 Six Months,
respectively, while export sales from the United States decreased by 19% for the
Fiscal 1996 Three Months and 13% for the Fiscal 1996 Six Months, compared with
the comparable prior year periods. Sales to Continental Europe by Monitek GmbH
increased by 45% for the Fiscal 1996 Three Months and 23% for the Fiscal 1996
Six Months compared with the Fiscal 1995 periods. Management attributes the
decline in export sales to the fact that several of the Company's foreign
distributors lack the proper training in products and applications. Recent
trips by Company employees to South America and the Far East are expected to
improve sales in those areas, and future trips are scheduled to other parts of
the world. The increase in sales by Monitek GmbH was impacted by a $162,000
shipment of goods which has a final destination in the Far East. Such large
orders are quite rare and, when they occur, they have a significant impact on
the comparative analysis of year-to-year sales.
Cost of sales, as a percentage of net sales, varied from 47% and 45% for the
Fiscal 1995 Three Months and Fiscal 1995 Six Months to 47% and 46%,
respectively, for the Fiscal 1996 Three Months and Six Months. Material costs,
as a percentage of net sales, varied from 36% and 35% for the Fiscal 1995 Three
Months and Six Months to 37% and 36%, respectively, for the comparable Fiscal
1996 periods, primarily as a result of a change in product mix. Direct labor
and factory overhead varied from 11% and 10% of net sales for the Fiscal 1995
Three Months and Six Months to 10% and 10% for the comparable Fiscal 1996
periods.
Selling, general and administrative expenses, as a percentage of net sales,
increased from 49% and 49% for the Fiscal 1995 Three Months and Fiscal 1995 Six
Months, respectively, to 53% for both of the comparable Fiscal 1996 periods,
primarily as a result of
9
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an accounting adjustment that was made during the Fiscal 1995 Three Months. At
that time, the accrued bonus, payable to the Managing Director of Monitek GmbH,
was finalized as a deferred compensation agreement, resulting in a reduction of
expense in the amount of $107,000.
Research, development and engineering expenses, as a percentage of net sales,
increased from 4.8% and 4.4% for the Fiscal 1995 Three Months and Six Months
compared to 8.9% and 8.5% for the comparable Fiscal 1995 periods. Spending
during the Fiscal 1995 periods had been severely curtailed to conserve working
capital and reduce operating losses. Subsequently, management made the decision
to fund certain projects that had been placed on hold, resulting in the
increased expenditures for the Fiscal 1996 Three Months and six months.
Operating income (loss) went from a loss of $7,000 for the Fiscal 1995 Three
Months and a profit of $39,000 for the Fiscal 1995 Six Months to losses of
$158,000 and $297,000 for the Fiscal 1996 Three Months and Six Months,
respectively, primarily as a result of the increase in selling, general and
administrative expenses, and research, development and engineering expenses, as
a percentage of sales, during the Fiscal 1996 periods.
Foreign currency transactions resulted in gains of $21,000 and $44,000 for the
Fiscal 1995 Three Months and Six Months compared with losses of $20,000 and
$23,000 for the Fiscal 1996 Three Months and Six 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 $1,054,000 on
September 30, 1995 as a result of the net loss for the period coupled with
various minor changes in non-current assets and liabilities.
The Company's unused sources of liquidity, consisting of unrestricted cash,
increased from $60,000 on March 31, 1995 to $71,000 on September 30, 1995. As
set forth in the notes to audited financial statements (Note 19) included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994,
the Company's recurring losses from operations and the resulting effect on cash
flow raise substantial doubt about its
10
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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. As an interim measure, the
Company has entered into a temporary loan and security agreement with its major
shareholder, Clarion Capital Corporation, to borrow funds at an interest rate of
10% per annum. At September 30, 1995, borrowings under this agreement totaled
$300,000.
At September 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, respective-ly. 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 $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
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OTHER INFORMATION
-----------------
Exhibits and Reports on Form 8-K.
(a) No exhibits are filed herewith.
(b) No reports on Form 8-K were filed by the Registrant
during the quarter ended September 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: November 13, 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> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996
<PERIOD-START> JUL-01-1995 APR-01-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 70,988 70,988
<SECURITIES> 0 0
<RECEIVABLES> 1,082,698 1,082,698
<ALLOWANCES> 44,578 44,578
<INVENTORY> 1,253,420 1,253,420
<CURRENT-ASSETS> 2,495,945 2,495,945
<PP&E> 1,076,175 1,076,175
<DEPRECIATION> 937,312 937,312
<TOTAL-ASSETS> 2,684,634 2,684,634
<CURRENT-LIABILITIES> 1,442,214 1,442,214
<BONDS> 0 0
<COMMON> 29,431 29,431
0 0
0 0
<OTHER-SE> 1,212,989 1,212,989
<TOTAL-LIABILITY-AND-EQUITY> 2,684,634 2,684,634
<SALES> 1,897,662 3,661,457
<TOTAL-REVENUES> 1,899,773 3,665,241
<CGS> 886,071 1,691,322
<TOTAL-COSTS> 886,071 1,691,322
<OTHER-EXPENSES> 1,189,872 2,290,327
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 24,394 31,410
<INCOME-PRETAX> (200,564) (347,818)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (200,564) (347,818)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (200,564) (347,818)
<EPS-PRIMARY> (.07) (.12)
<EPS-DILUTED> (.07) (.12)
</TABLE>
