<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended May 31, 1995 Commission File Number-16101
INOTEK TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1986151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11212 INDIAN TRAIL, DALLAS, TEXAS 75229
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 243-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NASDAQ
.01 PAR VALUE
(Title of Class) (Name of each exchange on which registered)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 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 past 90 days. Yes X No
----- -----
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 21, 1995 was $2,741,783.
Shares of Common Stock outstanding at August 21, 1995 were 4,457,197.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into the
indicated part of this report: Proxy statement for annual meeting of
shareholders to be held October 16, 1995 which will be filed with the
Securities and Exchange Commission on September 15, 1995----Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Inotek Technologies Corp. (the Company), previously known as Entronics
Corporation, was incorporated in Texas in June 1984 and began operations in
October 1984. In October 1991, the Company merged with and assumed the name of
its wholly-owned subsidiary, INOTEK Technologies Corp. In June 1987, the
Company entered into an Agreement and Plan of Reorganization whereby the
Company was dissolved as a Texas corporation and incorporated as a Delaware
corporation. The Texas corporation transferred substantially all of its assets
and liabilities to the Delaware corporation in exchange for 3,806,250 shares of
the Delaware corporation's common stock which was distributed to shareholders
of the Texas corporation. In addition, 10,000,000 shares of $.01 par value
common stock were authorized and a three-for-two split of the Company's common
stock was effected. In August 1987, the Company consummated its initial public
offering with the registration of 1,000,000 shares of common stock with the
Securities and Exchange Commission. The offering consisted of 400,000 shares
sold by the Company and 600,000 shares sold by officers/shareholders.
In June 1989, the Company acquired INOTEK Corporation, a privately-held Texas
corporation, through the merger with the Company's wholly-owned subsidiary,
Entronics INOTEK Acquisition Corporation which later changed its name to INOTEK
Technologies Corp. In fiscal year 1990, INOTEK Technologies Corp. acquired
three distribution and sales representative companies which provide the same
basic services as INOTEK Technologies Corp.
The Company had two principal operating divisions: (1) INOTEK, a marketing and
service company for instrumentation, process controls, factory automation, and
test and measurement equipment; and (2) Entronics, which designs, manufactures,
and markets a line of Automatic Money Order Dispensers (AMOD's). The Entronics
division was sold on March 16, 1995 as a result of an unsolicited offer from
one of the division's largest customers. The Company's principal executive
offices are located at 11212 Indian Trail, Dallas, Texas 75229.
DISTRIBUTION/REPRESENTATIVE SALES AND SERVICE
PRODUCTS AND OPERATIONS
INOTEK's role as a high technology marketing and service company is a function
of meeting the needs of two constituencies: (1) the customers (end users) of
its products and services; and (2) the product vendors that it represents.
INOTEK's base distribution business covers a broad range of product lines from
highly-engineered, technically-advanced items to commodity-oriented components
where customers purchase single or multiple quantities of specific products.
Representative product lines are shipped by the manufacturer to the end
customer with INOTEK receiving a commission for its marketing and support
effort. The industrial marketplace includes: (1) Process control - products
utilized in the manipulation of pressures, temperatures, and flows and the
measurement of their physical properties; (2) Test equipment - portable
instrumentation used in diagnostic evaluation of electronic, process, or
automation equipment; and (3) Factory automation - the computer hardware and
software, the programmable logic controller, sensors, and final control devices
responsible for the master control of a factory process. Among INOTEK's major
product lines are IBM industrial computers, Reliance programmable controls,
OPTO 22, Fluke electronic test equipment and Tektronix oscilloscopes.
INOTEK operates a technical services business which involves the repair and
calibration of customer-owned factory equipment. Technical services also are
provided for products manufactured in a semi-finished state (i.e. process
control/factory automation products) which require final configuration to meet
customer's specification. Many of these services are provided at an additional
charge to the customer.
2
<PAGE> 3
ITEM 1. BUSINESS (CONTINUED)
PATENTS AND TRADEMARKS
INOTEK believes that its corporate name and logo has significant recognition
throughout the industry and has registered it as a trademark.
MAJOR CUSTOMERS
INOTEK, through the purchase of Mill-Power Technologies in April 1990, has been
able to develop its marketing of service contracts on office and industrial
equipment. Pursuant to this acquisition, the Company has one major customer
for this service, Duke Power Company. Sales to this customer for fiscal 1995
for industrial equipment and service contracts were approximately $2,333,000.
MARKETING
At May 31, 1995, INOTEK had a sales force of 44 employees marketing in 21
southern and midwestern states. INOTEK's success as a high profile
distributor/representative of medium-to-high technological products has been
made possible through the establishment and cultivation of relationships with
well known product vendors. Already well established in the southwest, INOTEK
expanded into the midwest through the purchase of Pacific Indicator Company in
August 1989; into the south and southeast in November 1989, through the
acquisition of the Sesco Division of Austin-based Quinstar, Inc. and in April
1990, into Virginia, and North and South Carolina through the acquisition of
Mill-Power Technologies, an affiliate of Charlotte-based Duke Power Company.
In addition, INOTEK publishes a catalogue that is distributed widely to current
and potential customers.
COMPETITION
Competition in the high-technology, product distribution/representative market
is based on product features, customer service, quality distribution channels,
technical sales force, and consumer brand preferences. INOTEK competes with a
large number of other distributors on primarily a local or regional basis.
There are few national competitors. The ability to handle a broad range of
products and services for those products has allowed INOTEK to compete in the
existing market. In the process control and test equipment product lines,
vendors and manufacturers are shifting their marketing direction to make
greater use of the high tech sales and service channel. This channel continues
to develop as manufacturers recognize the value that distributors with service
capabilities have to offer, both to themselves and to their end user.
EMPLOYEES
At May 31, 1995, INOTEK had 101 full time employees. INOTEK's employees are
not covered by collective bargaining agreements and management believes that
its employee relations are good.
MANUFACTURING/SERVICE
PRODUCTS AND OPERATIONS
Entronics derived manufacturing/service sales solely from its AMODs, repair
service and related spare parts. Entronics' AMOD represented the first widely
accepted application of high speed microprocessor-based technology to what has
traditionally been a process carried out by hand or by mechanical devices. The
principal market for these machines consists of convenience stores, and
Entronics has sold over 19,000 machines to the Southland Corporation, the
Circle K Corporation, and other retail operations. Entronics focused its
marketing efforts primarily in the areas of smaller regional convenience chains
and oil companies that operate combination convenience stores and gas stations,
service organizations and government agencies.
3
<PAGE> 4
ITEM 1. BUSINESS (CONTINUED)
Entronics subcontracted all sub-assembly manufacturing of its products beyond a
prototype stage to outside firms on a firm bid basis. The manufacturing
process includes the assembly of individual integrated circuits and other
electronic components on internally designed printed circuit boards. Once
complete, the board is added to the prefabricated parts, such as cable harness,
power supplies, money order printer, and metal housing, forming the completed
product. Entronics' staff performed final assembly, testing, inspection, and
quality control prior to delivery. All of the components required for the
manufacture of the product are available for purchase from various suppliers to
the industry for quick and economical delivery.
RESEARCH AND DEVELOPMENT
All research and development costs are nominal and are associated with changes
to the existing model's software.
INTELLECTUAL PROPERTY RIGHTS
There are no patents, licenses, franchises, or concessions on which the
business of Entronics is dependent. Management does not believe such
protection is important to its competitive position.
MARKETING
Entronics developed a nationwide dealer network to both market and service its
line of AMODs. The dealers are established professionals which are currently
operating in a multi-state environment. This network adds the option of field
service which was previously unavailable to many of Entronics' customers.
Additionally, Entronics generated sales from repeat customers, referral by
current customers, and referral by representatives of money order form sales
companies (e.g. Fidelity Express Money Order Company).
MAJOR CUSTOMERS
In past years, Entronics had two major customers, The Southland Corporation and
the Circle K Corporation. Subsequently, Entronics increased its customer base
to include a larger number of gas station, convenience and grocery stores and
therefore sales to Southland and Circle K are a smaller percentage of total
sales.
COMPETITION
At this time, the Company is aware of only three competitors marketing AMODs
for sale. Standard Register Company, whose primary focus is printing and
financial forms, purchased the forms division of Burroughs Corporation
effective June 1986. As a part of that acquisition, Standard Register Company
acquired the rights to an AMOD which it currently markets. Travelers Express
Company, Inc. who purchased Republic Money Orders, Inc., has contracted to have
AMODs manufactured to their specifications. This machine is available only to
customers who sell Traveler's or Republic's money orders. In addition,
American Express Travel Related Services Company, Inc. markets an AMOD that is
used exclusively for imprinting its money orders. Finally, there are several
manufacturers of mechanical imprinters whose products are generally much less
expensive than the Entronics' AMOD.
EMPLOYEES
At March 16, 1995, the date the division was sold, Entronics had 5 full time
employees of which two were involved in marketing, one in administration, and
two in manufacturing and service. Entronics' employees are not covered by
collective bargaining agreements and management believes that its employee
relations are good.
4
<PAGE> 5
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases a 24,000 square foot facility in Dallas, Texas at a base
rent of $5,775 per month or $69,300 per year. Management believes that this
facility, which houses the Company's corporate personnel and certain INOTEK
operations, sales, and service personnel, will be adequate for the foreseeable
future; however, the Company's future facilities requirements will depend upon
the success of the Company's business.
INOTEK also has branch offices in the following locations:
Houston, Texas Richmond, Virginia
Tulsa, Oklahoma Greensboro, North Carolina
Chicago, Illinois Charlotte, North Carolina
ITEM 3. LEGAL PROCEEDINGS
On November 23, 1994, the Company filed suit against Central Moloney, Inc.
(CMI) of Pine Bluff, Arkansas in the 192nd Judicial District Court of Dallas,
County, Texas to recover $12,764 plus expenses the Company claimed it was owed
by CMI for the completion and installation of an automated product testing
system. In response, on December 20, 1994, CMI filed suit in the United States
District Court for the Eastern District of Arkansas, Pine Bluff Division
claiming breach of contract and seeking to recover $121,088 plus damages and
expenses. After several months of discovery, the two parties executed a
Compromise Settlement Agreement whereby the Company agreed to pay CMI $85,000
and CMI agreed to return all equipment to the Company. The entire cost of the
settlement including expenses has been included in the 1995 Results of
Operations. The matters have now been dismissed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended May 31, 1995.
5
<PAGE> 6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market in the
United States and is quoted on the National Association of Security Dealer's,
Inc. Automatic Quotation System (NASDAQ) under the symbol INTK. The following
table sets forth the quarterly high and low prices reported on the NASDAQ
National Market System for the years ended May 31, 1995 and 1994.
QUARTERLY STOCK PRICES
FISCAL YEARS ENDED MAY 31
<TABLE>
<CAPTION>
1995 1994
--------------------- ----------------------
High Low High Low
--------------------- ----------------------
<S> <C> <C> <C> <C>
June - Aug 1-5/8 15/16 1 15/32
Sep - Nov 1-1/4 3/4 1-7/8 11/32
Dec - Feb 1 5/8 2-1/16 1
Mar - May 1 9/16 2-1/4 1- 3/8
</TABLE>
At August 21, 1995, 4,457,197 shares of the Company's Common Stock were issued
and outstanding to 1,219 holders of record.
DIVIDENDS
The Company has not declared cash dividends since inception and has no
intention to do so in the foreseeable future.
6
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
financial statements and notes thereto, and Item 7--"Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere herein. The following selected financial data is not covered by the
"Report of Independent Auditors" included elsewhere herein. See Note 2 to the
financial statements for information regarding business acquisitions and
divestitures.
Fiscal Year Ended May 31
(000's except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $24,892 $27,997 $25,738 $23,550 $27,026
Gross profit 6,570 8,278 8,002 7,758 9,192
Earnings (loss) from continuing operations
before income taxes, extraordinary credit
and cumulative effect of accounting change (656) 525 229 117 (1,063)
Earnings (loss) from continuing operations
before extraordinary credit and cumulative
effect of accounting change (468) 282 74 25 (998)
Net earnings (loss) (66) 815 196 431 (1,039)
PER SHARE:
Earnings (loss) from continuing operations
before extraordinary credit and cumulative
effect of accounting change (.10) .06 .02 .01 (.20)
Net earnings (loss) (.01) .17 .04 .09 (.21)
BALANCE SHEET DATA:
Total assets 8,602 10,509 9,764 12,107 12,807
Long-term obligations (including redeemable
common stock) 387 635 902 1,177 1,565
Shareholders' equity 5,385 5,456 4,652 4,456 3,979
</TABLE>
7
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 VS. 1994
Sales decreased 11% to $24,891,783 in 1995 from $27, 996,666 in 1994, due
principally to lower shipment volumes in the Company's instrumentation, process
controls, and test equipment product lines. The Company's service revenues
declined by 23% to $2,366,221 in 1995 from $3,092,324 in 1994 as a result of
lower revenues from the Company's service agreement with Duke Power Co. Gross
margins related to INOTEK's industrial equipment distribution business declined
from 26% in 1994 to 25% in 1995 primarily as a result of a more competitive
market while service gross margins declined from 48% in 1994 to 39% in 1995 as
a result of lower contract billings to Duke Power Co.
In addition, in an effort to concentrate its focus on its core distribution
business areas, the Company terminated its systems engineering operations
effective July 31, 1994 which had contributed approximately a $200,000 loss to
the Company's results of operations for the 1995 fiscal year.
Operating expenses decreased by 7% from $7,666,884 in 1994 to $7,124,341 in
1995 as a result of the elimination of expenses related to the systems
engineering operations as well as lower personnel costs resulting from a
reduction in force in December 1994. These savings offset approximately
$100,000 in cost related to the settlement in fiscal year 1995 of a dispute
regarding the performance of a single systems engineering contract. Operating
expenses as a percent of total sales increased from 27% in 1994 to 29% in 1995.
At each balance sheet date, the Company evaluates the realizability of goodwill
based on nondiscounted cash flows and operating income. Based upon its most
recent analysis, the Company believes that no material impairment of goodwill
exists at May 31, 1995.
Interest expense increased from $86,512 in 1994 to $101,166 in 1995 due to
higher interest rates in effect during the period.
Tax expense amounted to $187,632 benefit in 1995 as compared with a $243,232
provision in 1994. The effective tax rates were 29% and 46% in 1995 and 1994,
respectively. The difference in effective rates from the two years was
primarily the result of the amortization of goodwill and other expenses which
are not deductible for income tax purposes. In the first quarter of fiscal
year 1994, the Company adopted Financial Accounting Statement No. 109,
"Accounting for Income Taxes". The cumulative effect of applying the change in
method was recognized as a credit to income of $138,000 in 1994. Realization
of deferred tax assets is based on available taxable income during the
carryback period.
1994 VS. 1993
Sales increased 9% to $27,996,666 in 1994 from $25,738,300 in 1993, due
principally to a 17% increase in unit sales from INOTEK's industrial equipment
product lines. Service revenues declined in fiscal year 1994 by approximately
22% from previous year levels due to the five-year renewal on December 1, 1993
of the contract with Duke Power Co. for the service of certain computer
equipment. Monthly billings under the new contract are approximately one-half
of the previous contract's billing level. Gross margins declined slightly from
31% as a percent of sales in 1993 to 30% in 1994 due principally to the
decrease in service contract revenues as well as a 1% decline in the gross
margin realized from the Company's sales of process control, instrumentation
and test equipment products.
Operating expenses increased by $30,245 to $7,666,884 in 1994 from $7,636,639
in 1993, with somewhat higher compensation costs offset by lower depreciation
and amortization charges. Operating expenses as a percent of sales decreased
from 30% during 1993 to 27% during 1994.
Interest expense decreased $50,171 to $86,512 during 1994 from $136,683 during
1993 due primarily to lower average borrowings.
8
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Tax expense amounted to $243,232 in 1994 compared with $155,124 in 1993. The
effective tax rate decreased to 46% in 1994 from 68% in 1993 due principally to
the effect of certain expenses which are not deductible for income tax purposes
and for which no tax benefit was recognized.
INFLATION
The impact of inflation or changing prices has not had a material economic
effect (other than normal industry trends) on past business operations or
projected future activity.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash amounted to $576,799 and $729,037, at May 31, 1995 and 1994,
respectively. Cash provided by operations during the years ended May 31, 1995,
1994, and 1993 amounted to $1,781,351, $399,551, and $645,820, respectively.
In September 1994, the Company reached an agreement with Texas Commerce Bank of
Dallas to provide a one-year revolving credit facility of up to $3 million,
depending on the value of the borrowing base, as defined in the agreement.
Borrowings under the agreement bear interest at either a Eurodollar-based rate
plus 250 basis points or the bank's prime rate and are secured by the Company's
accounts receivable and inventory. The agreement includes certain covenants
specifying the maximum ratio of debt to tangible net worth and the minimum
tangible net worth that the Company must maintain. As of May 31, 1995, the
balance due under the revolving credit facility totaled $200,000 while the
maximum available borrowings amounted to $2,004,526.
On March 16, 1995, the Company sold its Entronics division for $958,302 as a
result of an unsolicited offer received from one of the division's largest
customers. Income from the Entronics division net of related taxes amounted to
$187,357, $395,187, and $122,182 in 1995, 1994, and 1993, respectively and was
estimated to diminish further in future years. The divestiture allows the
Company to focus further on its core distribution operations. Cash proceeds
from the sale were used substantially to reduce borrowings under the Company's
bank revolving credit agreement.
During 1995, the Company purchased 72,000 shares of the Company's common stock
from a shareholder/former officer under an agreement requiring the Company, at
the shareholder's option, to acquire no more than 6,000 shares per month
through January 1, 1997 at a price of $3.125 per share. At May 31, 1995,
121,109 shares were eligible for repurchase. There are no other commitments on
behalf of the Company to acquire its stock and none are contemplated.
In February 1991, two officer/shareholders agreed to make available to the
Company an unsecured, ten-year, standby line of credit of $500,000, available
on demand and renewable annually. During 1992, $94,000 was advanced to the
Company under the line of credit with an agreement to repay the amount over a
five-year period. During 1995, $20,104 was repaid to the officer/shareholders
leaving $28,243 outstanding at May 31, 1995. There were no advances during the
year under the line of credit agreement.
Other than that previously mentioned, the Company has not identified any matter
out of the normal course of operations that may have an impact on the Company's
future operations and has no material commitments of capital resources other
than normal business operations. Expenditures for working capital and property
and equipment should remain consistent with previous operating requirements and
with the size of a company in our industry.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements on page 10.
9
<PAGE> 10
INOTEK TECHNOLOGIES CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements and Notes:
Balance Sheets as of May 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Statements of Operations for the Years Ended May 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . 14
Statements of Shareholders' Equity for the Years Ended May 31, 1995, 1994, and 1993 . . . . . . . . . 16
Statements of Cash Flows for the Years Ended May 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . 17
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Schedule II-Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the financial
statements or notes thereto.
10
<PAGE> 11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
INOTEK Technologies Corp.
We have audited the accompanying balance sheet of INOTEK Technologies Corp. as
of May 31, 1995, and the related statements of operations, shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of INOTEK Technologies Corp. as
of May 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
We have also audited Schedule II of INOTEK Technologies Corp. for the year
ended May 31, 1995. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
GRANT THORNTON LLP
Dallas, Texas
August 14, 1995
11
<PAGE> 12
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
INOTEK Technologies Corp.
We have audited the accompanying balance sheet of INOTEK Technologies Corp. as
of May 31, 1994 and the related statements of operations, shareholders' equity
and cash flows for each of two years in the period ended May 31, 1994. Our
audits also included the financial statement schedule listed in the index to
the financial statements. The financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of INOTEK Technologies Corp. at
May 31, 1994, and the results of its operations and its cash flows for each of
the two years in the period ended May 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 8 to the financial statements, the Company changed its
method of accounting for income taxes, effective June 1, 1993.
ERNST & YOUNG LLP
Dallas, Texas
July 18, 1994
12
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INOTEK TECHNOLOGIES CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31
---------------------------
1995 1994
---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 576,799 $ 729,037
Trade receivables, net of allowance for doubtful accounts
of $25,770 in 1995 and $56,714 in 1994 2,664,396 3,085,966
Inventories 2,284,406 2,680,965
Deferred tax asset 52,000 51,000
Prepaid expenses and other assets 115,393 83,083
---------------------------
Total current assets 5,692,994 6,630,051
Property and equipment, net 449,975 485,539
Goodwill, net of accumulated amortization of $386,601 in 1995
and $321,395 in 1994 2,255,350 2,319,574
Intangible assets, net - 20,834
Other assets 43,990 64,280
Deferred tax asset 160,000 136,000
Assets of discontinued operation - 852,779
---------------------------
Total assets $ 8,602,309 $10,509,057
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,874,760 $ 1,678,870
Accrued expenses 727,601 669,835
Income taxes payable 5,215 318,864
Current portion of notes payable, including indebtedness
to shareholders of $22,298 in 1995 and $20,103 in 1994 222,298 1,750,557
---------------------------
Total current liabilities 2,829,874 4,418,126
Notes payable to shareholders 5,945 28,244
Redeemable common shares, $.01 par value - 121,109 shares in
1995 and 193,109 shares in 1994 381,276 606,276
Shareholders' equity:
Common shares, $.01 par value:
Authorized shares - 10,000,000
Issued shares - 4,475,197 in 1995 and 4,581,697 in 1994
Outstanding shares - 4,354,088 in 1995 and 4,388,588 in 1994 43,541 43,886
Additional paid-in capital 3,299,546 3,399,204
Retained earnings 2,042,127 2,107,790
Treasury shares, at cost - 30,000 shares in 1994 - (94,469)
---------------------------
Total shareholders' equity 5,385,214 5,456,411
---------------------------
Total liabilities and shareholders' equity $ 8,602,309 $10,509,057
===========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
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INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Net sales
Products $22,476,840 $24,205,315 $20,700,942
Services 2,366,221 3,092,324 3,988,723
Other 48,722 699,027 1,048,635
------------------------------------------------
24,891,783 27,996,666 25,738,300
Cost of sales
Products 16,878,393 17,907,602 15,196,313
Services 1,432,275 1,605,131 1,893,874
Other 11,171 205,780 645,891
------------------------------------------------
18,321,839 19,718,513 17,736,078
------------------------------------------------
Gross margin 6,569,944 8,278,153 8,002,222
Operating expenses
Sales and marketing 4,671,618 4,951,279 4,743,674
General and administrative 2,452,723 2,715,605 2,892,965
------------------------------------------------
7,124,341 7,666,884 7,636,639
------------------------------------------------
Operating income (loss) (554,397) 611,269 365,583
Net interest expense (101,166) (86,512) (136,683)
------------------------------------------------
Earnings (loss) from continuing operations
before income taxes and cumulative effect
of change in accounting principle (655,563) 524,757 228,900
Income tax provision (benefit) (187,632) 243,232 155,124
------------------------------------------------
Earnings (loss) from continuing operations
before cumulative effect of change in
accounting principle (467,931) 281,525 73,776
Discontinued operation
Income from discontinued operation
(less income taxes of $123,174 in 1995,
$260,781 in 1994, and $122,304 in 1993) 187,357 395,187 122,182
Gain on sale of discontinued operation
(less income taxes of $141,768) 214,911 - -
------------------------------------------------
Earnings (loss) before cumulative effect of change
in accounting principle (65,663) 676,712 195,958
Cumulative effect of change in accounting principle - 138,000 -
------------------------------------------------
Net earnings (loss) $ (65,663) $ 814,712 $ 195,958
================================================
</TABLE>
14
<PAGE> 15
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Per share:
Earnings (loss) from continuing operations
before cumulative effect of change in
accounting principle $(.10) $ .06 $ .02
Discontinued operation .09 .08 .02
Cumulative effect of change in accounting
principle - .03 -
------------------------------------------------
Net earnings (loss) $(.01) $ .17 $ .04
================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 16
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Shares Additional Treasury Shares
---------------------- Paid-in Retained ----------------------
Shares Amount Capital Earnings Shares Amount Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1992 4,493,717 $ 44,937 $3,408,156 $1,097,120 (30,000) $(94,469) $4,455,744
Acquisition of common shares 72,000 720 224,280 - (72,000) (225,000) -
Cancellation of treasury shares (12,000) (120) (37,380) - 12,000 37,500 -
Net earnings - - - 195,958 - - 195,958
--------------------------------------------------------------------------------------
Balance at May 31, 1993 4,553,717 45,537 3,595,056 1,293,078 (90,000) (281,969) 4,651,702
Issuance of common shares to
previous owner of INOTEK 61,538 616 49,384 - - - 50,000
Acquisition of common shares 72,000 720 224,280 - (238,667) (285,003) (60,003)
Cancellation of treasury shares (298,667) (2,987) (469,516) - 298,667 472,503 -
Net earnings - - - 814,712 - - 814,712
--------------------------------------------------------------------------------------
Balance at May 31, 1994 4,388,588 43,886 3,399,204 2,107,790 (30,000) (94,469) 5,456,411
Stock options exercised 14,500 145 13,340 - - - 13,485
Cancellation of treasury shares (30,000) (300) (94,169) - 30,000 94,469 -
Acquisition of common shares (19,000) (190) (18,829) - - - (19,019)
Net earnings (loss) - - - (65,663) - - (65,663)
--------------------------------------------------------------------------------------
Balance at May 31, 1995 4,354,088 $43,541 $3,299,546 $2,042,127 - $ - $5,385,214
======================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 17
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
----------------------------------------
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ (65,663) $ 814,712 $ 195,958
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Gain on sale of discontinued operation (356,679) - -
Cumulative effect of change in accounting principle - (138,000) -
Depreciation and amortization 334,241 390,602 667,436
Deferred taxes (25,000) 39,820 -
Provision for losses on accounts receivable - 54,000 31,000
Provision for inventory obsolescence 47,841 90,000 170,000
Net changes in operating assets and liabilities:
Trade receivables 421,570 (226,660) (89,767)
Inventories 348,718 (461,771) 499,307
Prepaid expenses and other assets (32,310) 90,401 81,319
Accounts payable 195,890 104,515 (854,908)
Income taxes payable (313,649) 84,617 228,059
Accrued expenses 57,766 (152,423) (366,459)
Discontinued operation 210,324 (290,262) 83,875
----------------------------------------
Net cash provided by operating activities 823,049 399,551 645,820
INVESTING ACTIVITIES
Purchases of property and equipment (161,584) (109,873) (107,845)
Decrease (increase) in capitalized service inventory (74,164) 122,701 (195,996)
Change in other assets 20,290 12,133 (14,421)
Proceeds from asset sales 22,129 - _
Proceeds from sale of discontinued operation 958,302 - -
Investing activities of discontinued operation 40,832 6,818 18,592
----------------------------------------
Net cash provided by (used in) investing activities 805,805 31,779 (299,670)
FINANCING ACTIVITIES
Increase (decrease) in bank borrowings (1,507,767) 178,394 (670,627)
Exercise of stock options 13,485 - -
Reduction in notes payable (42,791) (50,102) (288,642)
Purchase of treasury shares (19,019) (60,003) -
Purchase of redeemable common shares (225,000) (225,000) (225,000)
----------------------------------------
Net cash used in financing activities (1,781,092) (156,711) (1,184,269)
----------------------------------------
Increase (decrease) in cash (152,238) 274,619 (838,119)
Cash at beginning of year 729,037 454,418 1,292,537
----------------------------------------
Cash at end of year $ 576,799 $ 729,037 $ 454,418
========================================
</TABLE>
17
<PAGE> 18
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
----------------------------------------
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 100,913 $ 86,512 $ 155,030
Income taxes $ 338,242 $ 441,676 $ 50,595
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES
Modifications of purchase price for inventory
of MPT $ - $ - $ 361,182
Modifications of purchase price for stock issued $ - $ 50,000 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995, 1994, AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
INOTEK Technologies Corp. (the Company) sells and services process control
and instrumentation, factory automation, and test and measurement
equipment. The Company's Entronics division, which was sold in March,
1995, designs, manufactures, markets, and repairs a line of Automatic
Money Order Dispensers (AMODs).
Cash Equivalents
The Company considers all highly liquid investment instruments with
original maturities of three months or less when purchased to be cash
equivalents.
Inventories
Inventories consist of finished goods and are valued at the lower of
average cost or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on a
straight-line basis over the estimated lives of the individual assets,
ranging from three to seven years.
Goodwill and Intangible Assets
The Company has classified as goodwill the cost in excess of fair value of
the net assets of acquire companies. Goodwill is being amortized on a
straight-line basis over 40 years. At each balance sheet date, the
Company evaluates the realizability of goodwill based on nondiscounted
cash flows and operating income. Based upon its most recent analysis, the
Company believes that no material impairment of goodwill exists at May 31,
1995. Noncompete agreements and other intangible assets are being
amortized on a straight-line basis over the estimated lives of the
individual assets, ranging from one to seven years. Accumulated
amortization of noncompete agreements and other intangible assets was
$665,398 and $644,564 at May 31, 1995 and 1994, respectively.
Revenue Recognition
Sales of products and services are recorded as products are shipped or
services are rendered. Revenue earned on systems engineering contracts is
reported using the percentage-of-completion method. The percentage of
completion is based primarily on contract costs incurred to date as a
percentage of the total estimated costs on an individual contract. Where
there is a change in the estimated cost to complete a project, the Company
recognizes the effect of the change in the period in which it becomes
known. Charges are made to operations for any losses anticipated on
individual contracts. Sales to one customer, Duke Power Company, totaled
approximately $2,333,000, $3,380,000, and $4,177,000 in 1995, 1994, and
1993, respectively.
19
<PAGE> 20
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Earnings per Share
Earnings (loss) per share are computed by dividing net earnings (loss) by
the weighted average number of shares of common stock outstanding and,
where the effect is dilutive, common stock equivalents during the year.
The weighted average number of shares of common stock outstanding and
dilutive common stock equivalents for the years ended May 31, 1995, 1994,
and 1993, were 4,521,218, 4,766,444, and 4,823,619 respectively. The
assumed exercise of stock options and warrants is antidilutive for the
years ended May 31, 1993 and 1995.
Concentrations of Credit Risk
The Company markets its instrumentation and process control products and
services to a diverse group of manufacturing companies. The Company
performs ongoing credit evaluations of its customers and generally does
not require collateral. Credit losses are provided for in the financial
statements.
The Company has cash deposits consisting primarily of demand deposits and
time deposits with various banks. These deposits have maturities of less
than three months and bear minimal risk. The Company has not experienced
any losses on its cash deposits.
2. DIVESTITURES AND ACQUISITIONS
On March 16, 1995, the Company sold its Entronics division for cash
proceeds of $958,302. There are no assets or liabilities related to the
Entronics division included in the accompanying balance sheet at May 31,
1995. The identifiable assets and identifiable revenues and expenses
related to the Entronics division have been reclassified on the
accompanying balance sheet and statements of operations from their
historical classification to separately identify them as net assets of
discontinued operations and net results from discontinued operations.
Revenues of the Entronics division amounted to $809,113, $1,511,276, and
$744,234 in 1995, 1994, and 1993, respectively.
During 1990, the Company acquired INOTEK Corporation (INOTEK), a marketing
and service company for instrumentation, process controls, factory
automation, and systems engineering for approximately $3,000,000 in cash
and common stock of the Company and an obligation to issue additional
shares of the Company's common stock over a three-year period based upon
INOTEK's future performance. During 1994, 61,538 additional shares of
common stock valued at $50,000 were issued under the terms of the purchase
agreement and were accounted for as an adjustment to the original purchase
price. In addition, 121,109 of the shares issued in the acquisition may
be resold to the Company at a price of $3.125 per share from June 1, 1995
through January 1, 1997, at a rate not to exceed 6,000 shares per month.
20
<PAGE> 21
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment at May 31 consist of:
<TABLE>
<CAPTION>
1995 1994
-------------------------------
<S> <C> <C>
Furniture and fixtures $ 804,276 859,887
Service inventory 796,232 725,663
Machinery and equipment 606,969 537,840
Leasehold improvements 55,760 55,760
Vehicles 73,154 37,410
-------------------------------
2,336,391 2,216,560
Accumulated depreciation (1,886,416) (1,731,021)
-------------------------------
$ 449,975 $ 485,539
===============================
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses at May 31, 1995 and 1994, include accrued compensation
costs of $320,856 and $303,935, respectively.
5. NOTES PAYABLE
Notes payable at May 31 consist of:
<TABLE>
<CAPTION>
1995 1994
-------------------------------
<S> <C> <C>
Bank revolving credit agreement $ 200,000 $ 1,707,767
Notes payable to officer/shareholders 28,243 48,347
Other - 22,687
-------------------------------
228,243 1,778,801
Less current portion 222,298 1,750,557
-------------------------------
$ 5,945 $ 28,244
===============================
</TABLE>
21
<PAGE> 22
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE (CONTINUED)
The bank revolving credit agreement provides for borrowings up to
$3,000,000, depending on the amount of the borrowing base, as defined
($2,004,526 maximum available borrowings at May 31, 1995), and bears
interest at the bank's prime rate (9% at May 31, 1995). Alternatively,
the Company may elect borrowings to bear interest at a Eurodollar-based
rate plus 250 basis points however no borrowings are outstanding at May
31, 1995 at this rate. Borrowings are secured by all accounts receivable
and inventory. The revolving credit agreement contains covenants
specifying the maximum ratio of debt to tangible net worth and the minimum
tangible net worth that the Company must maintain. The agreement expires
on September 30, 1995.
The notes payable to officer/shareholders are subordinated to the bank
revolving credit agreement, bear interest at 10.5% annually, and are
payable in quarterly installments of $6,101 through June 1996. The notes
were drawn under an annually renewable ten-year standby line of credit of
$500,000, provided by the officer/shareholders. During 1995, 1994, and
1993, the Company made payments under notes payable to shareholders
totalling $20,103, $18,124 and $16,339, respectively.
At May 31, 1995, maturities of notes payable are as follows:
<TABLE>
<CAPTION>
Year ending May 31
------------------
<S> <C>
1996 $ 222,298
1997 5,945
----------
$ 228,243
==========
</TABLE>
6. LEASE COMMITMENTS
The Company leases office and manufacturing space and equipment under
various noncancelable lease agreements. Several of the space leases
contain options for renewal or early termination. Total rent expense was
$322,089, $337,485, and $355,744 for the years ended May 31, 1995, 1994,
and 1993, respectively. As of May 31, 1995, the future minimum rental
payments are as follows:
<TABLE>
<CAPTION>
Year ending May 31
------------------
<S> <C>
1996 $254,110
1997 225,629
1998 124,752
1999 28,793
2000 8,123
--------
$641,407
========
</TABLE>
22
<PAGE> 23
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. EMPLOYEE BENEFIT PLANS
In 1987, the Company established the INOTEK Technologies Corp. 401(k)
Savings Plan & Trust (the Plan) to provide eligible employees with a
retirement savings plan. On January 1, 1993, the Plan was amended to
allow employees to defer up to 15% of their compensation and provide for a
matching contribution by the Company of up to 3% of each eligible
employee's compensation. A vesting schedule was also adopted providing
for participant's vesting in Company contributions over seven years with
forfeitures allocated to remaining participants. All employees are
eligible to participate in the plan upon completing six months of service.
The Company expensed $75,312, $82,400, and $58,644 for Plan contributions
for the years ended May 31, 1995, 1994, and 1993, respectively.
8. INCOME TAXES
Effective June 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
FASB Statement No. 109, "Accounting for Income Taxes". As permitted under
the new rules, prior years' financial statements have not been restated.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities as of May 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 15,000 $ 19,000
Allowance for obsolete inventory 24,000 12,000
Property and equipment 208,000 201,000
Accrued expenses 17,000 25,000
Inventory 10,000 7,000
Other 2,000 5,000
---------------------------
Total deferred tax assets 276,000 269,000
Valuation allowance for deferred tax assets (48,000) (66,000)
---------------------------
Net deferred tax assets 228,000 203,000
---------------------------
Deferred tax liabilities:
Prepaid insurance 16,000 16,000
---------------------------
Total net deferred tax assets $212,000 $187,000
===========================
</TABLE>
23
<PAGE> 24
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Significant components of the provision for income taxes as of May 31 are as
follows:
<TABLE>
<CAPTION>
Deferred
Liability Method Method
------------------------ --------
1995 1994 1993
------------------------ --------
<S> <C> <C> <C>
Current:
Federal $(137,787) $233,030 $140,248
State (24,845) 21,871 14,876
------------------------ --------
(162,632) 254,901 155,124
Deferred:
Federal (25,000) (11,669) -
------------------------ --------
$(187,632) $243,232 $155,124
======================== ========
</TABLE>
The reconciliation of income tax at the U.S. federal statutory tax rate to
income tax expense is (%):
<TABLE>
<CAPTION>
Deferred
Liability Method Method
------------------------ --------
1995 1994 1993
------------------------ --------
<S> <C> <C> <C>
Tax at U.S. statutory rates (34)% 34 % 34 %
Amortization of goodwill 3 4 9
State income taxes (3) 4 6
Stock repurchase 2 0 0
Losses and deductions not currently benefitted 0 0 15
Other 3 4 4
------------------------ --------
(29)% 46 % 68 %
======================== ========
</TABLE>
24
<PAGE> 25
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTIONS AND WARRANTS
The Company adopted an Incentive/Nonqualified Stock Option Plan (the 1987
Plan) in June 1987 and the INOTEK Technologies Corp. Stock Option Plan (the
1993 Plan) in October 1993 whereby the Company may grant up to 100,000 and
200,000, respectively, qualified and non-qualified incentive stock options
to key employees, excluding employees who own more than 10% of the
Company's outstanding stock. The options granted under the 1987 Plan have
an exercise price of $0.93 per share and expire between 1997 and 2001. The
options granted under the 1993 Plan vest over five years, are exercisable
over a ten year period from the date of issuance, have an exercise price of
$1.06 per share, and expire between 1994 and 2004. A summary of option
transactions under both plans for the years ended May 31, 1995, 1994, and
1993 follows (number of shares):
<TABLE>
<CAPTION>
1993 1987
Plan Plan
------------------ ---------------------------
1995 1994 1995 1994 1993
------------------ ---------------------------
<S> <C> <C> <C> <C> <C>
Options outstanding at beginning of year 98,500 - 41,250 42,750 45,250
Options granted - 98,500 - - -
Options exercised - - (14,500) - -
Options canceled (52,500) - (5,500) (1,500) (2,500)
------------------ ---------------------------
Options outstanding at end of year 46,000 98,500 21,250 41,250 42,750
================== ===========================
Options exercisable at end of year 11,500 - 21,250 41,250 42,750
================== ===========================
</TABLE>
In consideration of the standby line of credit mentioned in Note 5, the
Company granted the two officer/shareholders warrants to purchase common
stock at a price of $1 per share for 250,000 shares each or a total of
500,000 shares. The warrants expire February 11, 2001. The exercise price
of all options and warrants approximates the fair market value of the
Company's common stock as of the date of grant.
10. FOURTH QUARTER ADJUSTMENT
During the fourth quarter of fiscal year 1995, the Company recorded a net
charge against income of approximately $130,000 for adjustments to inventory
and certain operating expenses.
25
<PAGE> 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the directors of the Company is set forth in the
Proxy Statement to be delivered to stockholders in connection with the
Company's Annual Meeting of Stockholders to be held on October 16, 1995 (the
Proxy Statement) under the heading "Election of Directors," which information
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information concerning executive compensation is set forth in the Proxy
Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information concerning security ownership of certain beneficial owners and
management is set forth in the Proxy Statement under the heading "Security
Ownership of Management and Principal Stockholders," which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference from
the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) AND (D) FINANCIAL STATEMENTS AND SCHEDULES
The financial statements and schedule are listed on the accompanying Index of
Financial Statements at Item 8 and are filed as part of this Annual Report on
Form 10-K.
(B) REPORTS ON FORM 8-K
On April 6, 1995, the Company filed a report on Form 8-K regarding the sale of
its Entronics Division. On May 5, 1995, the Company filed a report on Form 8-K
regarding a change in the Company's auditors for the year ended May 31, 1995.
(C) EXHIBITS
Included as exhibits are the items listed in the Exhibit Index. The Company
will furnish a copy of any of the exhibits below upon payment of $15.00 per
exhibit to cover the costs to the Company of furnishing the exhibit.
26
<PAGE> 27
EXHIBIT
NUMBER EXHIBIT INDEX
- --------------------------------------------------------------------------------
2.0 Plan and Agreement of Merger dated as of June 30, 1989 by and between
Entronics Inotek Acquisition Corporation and INOTEK Corporation (Filed on
8-K dated June 30, 1989).
2.1 Asset purchase agreement for Mill-Power Technologies and first amendment
(Filed on 8-K dated April 16, 1990).
2.2 Second amendment to the asset purchase agreement for Mill-Power
Technologies.
3.0 By-Laws of Entronics Inotek Acquisition Corporation.
(Filed on 8-K dated June 30, 1989).
3.1 Amendment to Bylaws of Entronics Inotek Acquisition Corporation for name
change.
3.2 Certificate of Ownership and Merger merging Inotek Technologies Corp.
into Entronics Corporation.
27 Financial Data Schedule.*
_________
* Filed herewith.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
INOTEK Technologies Corp.
(Registrant)
By: /s/ Neal E. Young
-----------------------------------
Neal E. Young, August 29, 1995
(Chairman of the Board)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ J. Dennis Carreker
- --------------------------------------
J. Dennis Carreker, August 29, 1995
(Director)
/s/ C. Rayford Massey
- --------------------------------------
C. Rayford Massey, August 29, 1995
(Director)
/s/ Wilson J. Prokosch
- --------------------------------------
Wilson J. Prokosch, August 29, 1995
(Director)
/s/ R. Lee Simpson
- --------------------------------------
R. Lee Simpson, August 29, 1995
(Chief Financial Officer)
/s/ David L. White
- --------------------------------------
David L. White, August 29, 1995
(Director, Chief Executive Officer)
/s/ Neal E. Young
- --------------------------------------
Neal E. Young, August 29, 1995
(Chairman of the Board)
28
<PAGE> 29
INOTEK TECHNOLOGIES CORP.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged to Balance at
beginning Costs and Other End of
Description of period Expenses Accounts Deductions Period
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
1995 $ 56,714 $ - $ 21,400 $ 52,344 $ 25,770
1994 $ 21,889 $ 54,000 $ 13,650 $ 32,825 $ 56,714
1993 $ 190,231 $ 28,644 $ - $ 196,986 $ 21,889
</TABLE>
Note: During 1994, additions charged to other accounts consist of
certain reclassifications. Deductions consist of the write-off of
uncollectible accounts, net of recoveries.
<TABLE>
<CAPTION>
Allowance for inventory obsolescence
<S> <C> <C> <C> <C> <C>
1995 $ 58,938 $ 47,841 $ - $ 13,090 $ 93,689
1994 $ 171,354 $ 90,000 $ - $ 202,416 $ 58,938
1993 $ 168,392 $ 170,000 $ - $ 167,038 $ 171,354
</TABLE>
Note: Deductions consist of the write-off of inventory determined
to be obsolete.
29
<PAGE> 30
EXHIBIT
NUMBER EXHIBIT INDEX
- --------------------------------------------------------------------------------
2.0 Plan and Agreement of Merger dated as of June 30, 1989 by and between
Entronics Inotek Acquisition Corporation and INOTEK Corporation (Filed on
8-K dated June 30, 1989).
2.1 Asset purchase agreement for Mill-Power Technologies and first amendment
(Filed on 8-K dated April 16, 1990).
2.2 Second amendment to the asset purchase agreement for Mill-Power
Technologies.
3.0 By-Laws of Entronics Inotek Acquisition Corporation.
(Filed on 8-K dated June 30, 1989).
3.1 Amendment to Bylaws of Entronics Inotek Acquisition Corporation for name
change.
3.2 Certificate of Ownership and Merger merging Inotek Technologies Corp.
into Entronics Corporation.
27 Financial Data Schedule.*
_________
* Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<CASH> 576,799
<SECURITIES> 0
<RECEIVABLES> 2,664,396
<ALLOWANCES> 25,770
<INVENTORY> 2,284,406
<CURRENT-ASSETS> 5,692,994
<PP&E> 2,336,391
<DEPRECIATION> 1,886,416
<TOTAL-ASSETS> 8,602,309
<CURRENT-LIABILITIES> 2,829,874
<BONDS> 5,945
<COMMON> 43,541
0
0
<OTHER-SE> 5,341,673
<TOTAL-LIABILITY-AND-EQUITY> 8,602,309
<SALES> 22,525,562
<TOTAL-REVENUES> 24,891,783
<CGS> 16,889,564
<TOTAL-COSTS> 18,321,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,166
<INCOME-PRETAX> (655,563)
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</TABLE>
