<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 December 31, 1995 Commission File Number 33-14201
----------------- --------
MONITEK TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-1689129
- ------------------------------- ---------------------
(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
--------------
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 December 31, 1995
----- -----------------
<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.
--------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
- ---- ----------- ----
<C> <S> <C>
PART I - FINANCIAL INFORMATION
------------------------------
1. Financial Statements
Consolidated Balance Sheets as of March 31,1995
(audited) and December 31, 1995 (unaudited)............ 3
Consolidated Statements of Operations (unaudited)
for the Three Months and Nine Months Ended December
31, 1994 and December 31, 1995......................... 5
Consolidated Statements of Cash Flows (unaudited)
for the Nine Months Ended December 31, 1994
and December 31, 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 SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
March 31, December 31,
1995 1995
(Audited) (Unaudited)
----------- -------------
<S> <C> <C>
ASSETS
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Current Assets:
Cash and equivalents...................................... $ 59,908 $ 135,763
Accounts receivable, less allowance for
doubtful accounts of $35,465 and $40,457 896,704 1,100,757
Inventories............................................... 1,488,502 1,151,961
Prepaid expenses.......................................... - 19,088
Other current assets...................................... 113,213 82,824
---------- ----------
Total Current Assets................................. 2,558,327 2,490,393
Property and equipment, less accumulated
depreciation and amortization of
$910,964 and $951,739..................................... 158,708 123,126
Product line acquisition costs, less
accumulated amortization of
$75,715 and $83,547....................................... 52,912 45,080
Other assets............................................... 1,808 2,136
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Total Assets......................................... $2,771,755 $2,660,735
========== ==========
</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 DECEMBER 31, 1995
<TABLE>
<CAPTION>
March 31, December 31,
1995 1995
(Audited) (Unaudited)
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable to related parties.......................... $ 200,000 $ 300,000
Current capital lease obligations......................... 5,005 1,331
Trade accounts payable.................................... 345,573 557,992
Accrued liabilities....................................... 626,675 660,853
----------- ------------
Total Current Liabilities............................. 1,177,253 1,520,176
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) (5,050,924)
Cumulative translation adjustment......................... 50,277 44,876
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Total Stockholders' Equity............................ 1,594,502 1,140,559
----------- ------------
Total Liabilities and
Stockholders' Equity................................ $2,771,755 $2,660,735
=========== ============
</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 NINE MONTHS ENDED
DECEMBER 31, 1994 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ -------------------------
December 31, December 31,
1994 1995 1994 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $1,515,346 $1,794,329 $4,730,631 $5,455,786
Cost of sales 677,649 814,834 2,125,139 2,506,156
---------- ---------- ---------- ----------
Gross profit 837,697 979,495 2,605,492 2,949,630
Selling, general and
administrative expenses 852,874 976,702 2,441,369 2,933,774
Research, development and
product engineering 88,992 88,372 229,219 398,165
---------- ---------- ----------- -----------
Operating loss (104,169) (85,579) (65,096) (382,309)
Other income (expense):
Interest expense (2,745) (15,052) (9,470) (46,462)
Foreign currency trans-
action gain 1,662 (2,232) 45,965 (25,694)
Other income 1,902 2,139 13,634 5,923
Interest income - - 1,389 -
---------- ---------- ----------- -----------
Loss before
income tax expense (103,350) (100,724) (13,578) (448,542)
Income tax expense - - - -
---------- ---------- ----------- -----------
Net loss $ (103,350) $ (100,724) $ (13,578) $ (448,542)
========== ========== =========== ===========
Net loss per share $ (.04) $ (.03) $ - $ (.15)
========== ========== =========== ===========
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
<PAGE>
MONITEK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
December 31,
1994 1995
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<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 4,472,779 $ 5,257,456
Cash paid to suppliers and employees (4,736,410) (5,225,088)
Interest received 1,389 -
Interest paid (9,470) (46,462)
Income taxes paid - -
Other miscellaneous cash
receipts (disbursements) 64,708 (834)
----------- -----------
Net cash used in operations (207,004) (14,928)
Cash flows from investing activities:
Capital expenditures (28,107) (5,543)
Cash flows from financing activities:
Net borrowings on line of credit 50,000 100,000
Capital lease obligation payments (7,907) (3,674)
----------- -----------
Net cash obtained from
financing activities 42,093 96,326
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Net increase (decrease) in
cash and equivalents (193,018) 75,855
Cash and equivalents at beginning of period 254,473 59,908
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Cash and equivalents at end of period $ 61,455 $ 135,763
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
6
<PAGE>
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 December 31, 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, December 31,
1995 1995
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<S> <C> <C>
Raw Materials $ 393,586 $ 302,686
Component parts and
work in progress 236,964 212,518
Finished goods 857,952 636,757
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$1,488,502 $1,151,961
========== ============
</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
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
Net sales increased by 18% for the three months and 15% for the nine months
ended December 31, 1995 ("Fiscal 1996 Three Months") and ("Fiscal 1996 Nine
Months") compared with the three months and nine months ended December 31, 1994
("Fiscal 1995 Three Months") and ("Fiscal 1995 Nine Months"). Domestic sales
decreased by 2% for the Fiscal 1996 Three Months and increased by 9% for the
Fiscal 1996 Nine Months, while export sales from the United States increased by
55% and 3% for the Fiscal 1996 Three Months and Fiscal 1996 Nine Months,
respectively, compared with the comparable prior year periods. Sales to
Continental Europe by Monitek GmbH increased by 31% for the Fiscal 1996 Three
Months and 26% for the Fiscal 1996 Nine Months compared with the Fiscal 1995
periods. The fluctuations in export sales are not surprising to management,
inasmuch as there are normally a number of large orders that are shipped during
each fiscal year, but the timing of the deliveries does not fall into any
predictable seasonal pattern. Management attributes the increase in sales by
Monitek GmbH primarily to a strengthening of the European economy, coupled with
the Company's concerted effort to ship as much product as possible prior to
December 31, 1995. The European Community has adopted more stringent standards
on electrical products as of January 1, 1996, and every effort was made to
deplete the inventory of items that would not comply with the new standards.
Cost of sales, as a percentage of net sales, varied from 45% for both the Fiscal
1995 Three Months and Fiscal 1995 Nine Months to 45% and 46%, respectively, for
the Fiscal 1996 Three Months and Nine Months. Material costs, as a percentage
of net sales, varied from 34% for both the Fiscal 1995 Three Months and Nine
Months to 35% and 36%, respectively, for the comparable Fiscal 1996 periods as a
result of a change in product mix and cost increases for certain metal parts,
primarily those made from stainless steel. Direct labor and factory overhead
varied from 11% of net sales for both the Fiscal 1995 Three Months and Nine
Months to 10% for the comparable Fiscal 1996 periods.
Selling, general and administrative expenses, as a percentage of net sales,
varied from 56% and 52% for the Fiscal 1995 Three Months and Fiscal 1995 Nine
Months, respectively, to 54% for both
9
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of the comparable Fiscal 1996 periods. During the Fiscal 1995 Nine Months, an
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,
varied from 6% and 5% for the Fiscal 1995 Three Months and Nine Months compared
to 5% and 7% 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 subsequent periods.
Operating losses varied from $104,000 and $65,000 for the Fiscal 1995 Three
Months and Fiscal 1995 Nine Months, respectively, to $86,000 and $382,000 for
the Fiscal 1996 Three Months and Nine Months, primarily as a result of the
variations in selling, general and administrative expenses, and research,
development and engineering expenses, as a percentage of sales, during said
periods.
Foreign currency transactions resulted in gains of $2,000 and $46,000 for the
Fiscal 1995 Three Months and Nine Months compared with losses of $2,000 and
$26,000 for the Fiscal 1996 Three Months and Nine 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 $970,000 on
December 31, 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 $136,000 on December 31, 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, 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
10
<PAGE>
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 December 31, 1995,
borrowings under this agreement totaled $300,000.
At December 31, 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
$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) No exhibits are filed herewith.
(b) No reports on Form 8-K were filed by the Registrant
during the quarter ended December 31, 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: February 12, 1996
- ------------------------
/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 9-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996
<PERIOD-START> OCT-01-1995 APR-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 135,763 135,763
<SECURITIES> 0 0
<RECEIVABLES> 1,141,214 1,141,214
<ALLOWANCES> 40,457 40,457
<INVENTORY> 1,151,961 1,151,961
<CURRENT-ASSETS> 2,490,393 2,490,393
<PP&E> 1,074,865 1,074,865
<DEPRECIATION> 951,739 951,739
<TOTAL-ASSETS> 2,660,735 2,660,735
<CURRENT-LIABILITIES> 1,520,176 1,520,176
<BONDS> 0 0
0 0
0 0
<COMMON> 29,431 29,431
<OTHER-SE> 1,111,128 1,111,128
<TOTAL-LIABILITY-AND-EQUITY> 2,660,735 2,660,735
<SALES> 1,794,329 5,455,786
<TOTAL-REVENUES> 1,796,468 5,461,709
<CGS> 814,834 2,506,156
<TOTAL-COSTS> 814,834 2,506,156
<OTHER-EXPENSES> 1,067,306 3,357,633
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,052 46,462
<INCOME-PRETAX> (100,724) (448,542)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (100,724) (448,542)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (100,724) (448,542)
<EPS-PRIMARY> (.03) (.15)
<EPS-DILUTED> (.03) (.15)
</TABLE>
