<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, 1996 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 June 30, 1996
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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 31,1996
(audited) and June 30, 1996 (unaudited)................3
Consolidated Statements of Operations (unaudited)
for the Three Months Ended June 30, 1995 and
June 30, 1996..........................................5
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended June 30, 1995
and June 30, 1996......................................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 SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND JUNE 30, 1996
<TABLE>
<CAPTION>
March 31, June 30,
1996 1996
(Audited) (Unaudited)
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<S> <C> <C>
ASSETS
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Current Assets:
Cash......................................... $ 51,235 $ 45,166
Accounts receivable, less allowance for
doubtful accounts of $35,111 and $34,988.... 859,810 862,414
Inventories.................................. 1,382,433 1,437,363
Other current assets......................... 167,596 183,361
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Total Current Assets.................... 2,461,074 2,528,304
Property and equipment, less accumulated
depreciation and amortization of
$976,151 and $980,872........................ 103,171 107,472
Product line acquisition costs, less
accumulated amortization of
$86,158 and $88,769.......................... 42,469 39,858
Other assets.................................. 1,486 1,486
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Total Assets............................ $2,608,200 $2,677,120
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</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND JUNE 30, 1996
<TABLE>
<CAPTION>
March 31, June 30,
1996 1996
(Audited) (Unaudited)
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Liability for factored receivables....................... $ 157,219 $ 144,622
Notes payable to related party........................... 300,000 476,940
Trade accounts payable................................... 504,886 683,617
Accrued liabilities...................................... 621,909 577,502
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Total Current Liabilities............................ 1,584,014 1,882,681
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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.................................... (5,164,429) (5,391,157)
Cumulative translation adjustment...................... 42,008 38,989
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Total Stockholders' Equity......................... 1,024,186 794,439
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Total Liabilities and
Stockholders' Equity................................. $2,608,200 $2,677,120
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</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, 1995 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
June 30, 1995 June 30, 1996
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<S> <C> <C>
Net sales $1,763,795 $1,543,784
Cost of sales 805,251 729,030
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Gross profit 958,544 814,754
Selling, general and
administrative expenses 955,660 903,156
Research, development and
product engineering expenses 141,296 99,113
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Operating loss (138,412) (187,515)
Other income (expense):
Interest expense (7,016) (21,414)
Foreign currency transaction loss (3,499) (19,813)
Other income 1,673 2,014
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Loss before income tax expense (147,254) (226,728)
Income tax expense - -
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Net loss $ (147,254) $ (226,728)
========== ==========
Net loss per share $ (.05) $ (.08)
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Weighted average number of
common shares outstanding 2,943,100 2,943,100
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
5
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MONITEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
June 30, June 30,
1995 1996
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<S> <C> <C>
Cash flows used in operating activities:
Cash received from customers $ 1,598,740 $ 1,541,670
Cash paid to suppliers and employees (1,614,732) (1,674,544)
Interest paid (7,016) (21,414)
Other misc. payments (20,920) (7,103)
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Net cash used in operating activities (43,928) (161,391)
Cash flows from investing activities:
Capital expenditures (5,178) (9,021)
Cash flows provided by financing activities:
Borrowings (repayments) against
trade receivables - (12,597)
Borrowings under notes to related party 50,000 176,940
Payments under capital lease obligations (1,175) -
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Net cash provided by
financing activities 48,825 164,343
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Net decrease in cash (281) (6,069)
Cash at beginning of period 59,908 51,235
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Cash at end of period $ 59,627 $ 45,166
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</TABLE>
See accompanying notes to unaudited consolidated financial statements
6
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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, 1996 (Commission File No. 0-16544).
Results of operations for the three months ended June 30, 1996 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,
1996 1996
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<S> <C> <C>
Raw Materials $ 174,160 $ 164,778
Component parts and
work in progress 521,716 560,821
Finished goods 817,589 847,796
Less: Reserve for obsolescence (131,032) (140,032)
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$1,382,433 $1,433,363
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</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
-----------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net working capital decreased from $877,000 on March 31, 1996 to $646,000 on
June 30, 1996. This decrease was the result of the loss for the period and
various minor changes in non-current assets.
The Company's unused sources of liquidity, consisting of unrestricted cash,
decreased from $51,000 on March 31, 1996 to $45,000 on June 30, 1996. As set
forth in the notes to audited financial statements (Note 17) included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996,
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. On June 24, 1996, the
Company's Board of Directors approved an Agreement and Plan of Merger (the
"Merger Agreement") with Sentex Sensing Technology, Inc. ("Sentex") and a Sentex
subsidiary. On the same date, the Merger Agreement was approved by the Boards
of Directors of Sentex and its subsidiary. Sentex develops and manufactures
automated devices designed to identify and measure the concentrations of certain
chemicals and its stock is traded on the NASDAQ Small Cap stock market. The
Merger Agreement will be submitted to the Company's shareholders and the Sentex
shareholders at special meetings expected to be held later in the year. The
Merger Agreement provides for the merger (the "Merger") of the Sentex subsidiary
into the Company. Consummation of the Merger is subject to a variety of
customary conditions and, accordingly, there can be no assurance that the Merger
will take place. The Company believes that Sentex has a sufficiently strong
cash position to satisfy the intermediate term needs of the Company for working
capital. During the months of July and August 1996, the Company obtained
working capital loans in the aggregate amount of $125,000 from its major share-
holder, Clarion Capital Corporation ("Clarion"). The Company expects to seek an
additional working capital loan or loans from Clarion pending completion of the
Merger. However, there can be no assurance that Clarion will loan additional
funds to the Company. It is a condition of the consummation of the Merger that
any such loans by Clarion be repaid by the time of the closing of the Merger.
9
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In the event that the Merger does not take place, the Company's management will
continue to seek 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.
At June 30, 1996, the Company had available net operating loss carryforwards of
approximately $5,405,000 and $1,700,000 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.
RESULTS OF OPERATIONS
- ---------------------
Total net sales decreased by 12%, from $1,764,000 for the three months ended
June 30, 1995 ("Fiscal 1996 Three Months") to $1,544,000 for the three months
ended June 30, 1996 ("Fiscal 1997 Three Months"). Domestic sales decreased by
23%, export sales from the United States decreased by 6% and sales to
continental Europe by the Company's wholly owned subsidiary, Monitek GmbH,
decreased by 3%. The decline in domestic sales has been a subject of much
concern to management and every effort is being made to increase market
penetration. A poll of the Company's independent representatives indicates that
their sales into the process control market, as a whole, have been lower than
anticipated for the past several months. The general consensus is that there are
a significant number of pending projects that should result in orders for the
Company's products, but that the timing of the orders has yet to be determined.
10
<PAGE>
Cost of sales, as a percentage of net sales, increased from 46% for the Fiscal
1996 Three Months to 47% for the Fiscal 1997 Three Months. Material costs
increased from 36% to 37% 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 1996 Three Months and the Fiscal 1997 Three Months.
Selling, general and administrative expenses, as a percentage of net sales,
increased from 54% for the Fiscal 1996 Three Months to 58% for the Fiscal 1997
Three Months. Actual expenses decreased from $956,000 to $903,000 but the
percentage of decline was not as great as the decrease in sales.
Research, development and product engineering expenses decreased from $141,000,
or 8% of net sales, for the Fiscal 1996 Three Months to $99,000, or 6% of net
sales, for the Fiscal 1997 Three Months. Spending during the Fiscal 1996 Three
Months increased sharply as a result of product redesigns to meet new European
electrical specifications that went into effect on January 1, 1996.
Operating losses went from $138,000 for the Fiscal 1996 Three Months to $188,000
for the Fiscal 1997 Three Months as a result of the increase in cost of sales
and selling, general and administrative expenses, as a percentage of sales,
partially offset by the decrease in research, development and product
engineering expenses.
Interest expense increased from $7,000 for the Fiscal 1996 Three Months to
$21,000 for the Fiscal 1997 Three Months as a result of increased borrowings
from Clarion Capital Corporation and the factoring of certain accounts
receivable.
Foreign currency transactions resulted in losses of $3,000 for the Fiscal 1996
Three Months and $20,000 for the Fiscal 1997 Three Months as a result of
fluctuations in the value of the U.S. Dollar relative to the German Deutsche
Mark.
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 for the three months ended June 30,
1996, but a report on Form 8-K was filed on July 1, 1996 to disclose the
Agreement and Plan of Merger that was entered into by the Company and Sentex
Sensing Technology, Inc. on June 24, 1996.
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 13, 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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 45,166
<SECURITIES> 0
<RECEIVABLES> 897,402
<ALLOWANCES> 34,988
<INVENTORY> 1,437,363
<CURRENT-ASSETS> 2,528,304
<PP&E> 1,088,344
<DEPRECIATION> 980,872
<TOTAL-ASSETS> 2,677,120
<CURRENT-LIABILITIES> 1,882,681
<BONDS> 0
0
0
<COMMON> 29,431
<OTHER-SE> 765,008
<TOTAL-LIABILITY-AND-EQUITY> 2,677,120
<SALES> 1,543,784
<TOTAL-REVENUES> 1,545,798
<CGS> 729,030
<TOTAL-COSTS> 729,030
<OTHER-EXPENSES> 1,022,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,414
<INCOME-PRETAX> (226,728)
<INCOME-TAX> 0
<INCOME-CONTINUING> (226,728)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (226,728)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
