<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended November 30, 1995 Commission File
Number 0-16101
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.
NOT APPLICABLE
(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 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
----- -----
4,439,197 shares of common stock, $.01 par value (the issuer's only class of
common stock), were outstanding as of November 30, 1995.
<PAGE> 2
INOTEK TECHNOLOGIES CORP.
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Part I. Financial information
Item 1. Financial Statements:
Balance Sheets as of November 30, 1995 (unaudited) and May 31, 1995 . . . . . . . . . . . . . . . . 1
Statements of Operations for the Three Months Ended November 30, 1995
and 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations for the Six Months Ended November 30, 1995
and 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Cash Flows for the Six Months Ended November 30, 1995
and 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Index to Exhibits
Exhibit (20)-Report Furnished to Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 3
INOTEK TECHNOLOGIES CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30 MAY 31
1995 1995
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 474,621 $ 576,799
Trade receivables, net of allowance for doubtful accounts
of $20,259 at November 30 and $45,048 at May 31 2,559,148 2,664,396
Inventories 2,314,258 2,284,406
Deferred taxes 48,676 52,000
Prepaid expenses and other assets 235,245 115,393
- -------------------------------------------------------------------------------------------------------------
Total current assets 5,631,948 5,692,994
Property and equipment, net 424,561 449,975
Goodwill, net of accumulated amortization of $419,555 at
November 30 and $386,601 at May 31 2,222,396 2,255,350
Other assets 66,226 43,990
Deferred taxes 169,222 160,000
- -------------------------------------------------------------------------------------------------------------
Total assets $ 8,514,353 $ 8,602,309
=============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,568,729 $ 1,874,760
Accrued expenses 804,359 727,601
Income taxes payable 69,592 5,215
Current portion of notes payable including indebtedness to
shareholders of $17,383 at November 30 and $22,298 at May 31 317,383 222,298
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 2,760,063 2,829,874
Notes payable to shareholders - 5,945
Redeemable common shares, $.01 par value - 85,109 at November 30
and 121,109 at May 31 268,776 381,276
Shareholders' equity:
Common shares, $.01 par value:
Authorized shares, 10,000,000
Issued shares - 4,439,197 at November 30 and May 31
Outstanding shares - 4,354,088 at November 30 and May 31 43,541 43,541
Additional paid-in-capital 3,299,546 3,299,546
Retained earnings 2,142,427 2,042,127
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 5,485,514 5,385,214
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 8,514,353 $ 8,602,309
=============================================================================================================
</TABLE>
See accompanying notes
1
<PAGE> 4
INOTEK TECHNOLOGIES CORP.
INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30
1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales:
Products $ 5,399,090 $ 5,805,450
Services 708,544 565,511
Other - -
- -------------------------------------------------------------------------------------------------------------
6,107,634 6,370,961
Cost of sales:
Products 3,994,935 4,257,489
Services 364,776 353,550
Other - -
- -------------------------------------------------------------------------------------------------------------
4,359,711 4,611,039
- -------------------------------------------------------------------------------------------------------------
Gross margin 1,747,923 1,759,922
Operating expenses:
Sales and marketing 895,073 1,137,848
General and administrative 718,828 676,981
- -------------------------------------------------------------------------------------------------------------
1,613,901 1,814,829
- -------------------------------------------------------------------------------------------------------------
Operating income (loss) 134,022 (54,907)
Interest expense (7,667) (35,226)
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations before income taxes 126,355 (90,133)
Income tax provision (benefit) 61,012 (23,446)
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 65,343 (66,687)
Discontinued operations - 29,310
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 65,343 $ (37,377)
=============================================================================================================
Per share:
Earnings (loss) from continuing operations $ .01 $ (.02)
Discontinued operation - .01
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ .01 $ (.01)
=============================================================================================================
Weighted average shares outstanding 4,445,395 4,537,486
=============================================================================================================
</TABLE>
See accompanying notes
2
<PAGE> 5
INOTEK TECHNOLOGIES CORP.
INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30
1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales:
Products $10,682,280 $11,688,102
Services 1,379,019 1,129,995
Other - 48,722
- -------------------------------------------------------------------------------------------------------------
12,061,299 12,866,819
Cost of sales:
Products 7,906,567 8,600,080
Services 724,715 729,537
Other - 11,171
- -------------------------------------------------------------------------------------------------------------
8,631,282 9,340,788
- -------------------------------------------------------------------------------------------------------------
Gross margin 3,430,017 3,526,031
Operating expenses:
Sales and marketing 1,777,878 2,374,242
General and administrative 1,432,225 1,380,439
- -------------------------------------------------------------------------------------------------------------
3,210,103 3,754,681
- -------------------------------------------------------------------------------------------------------------
Operating income (loss) 219,914 (228,650)
Interest expense (15,042) (61,926)
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations before income taxes 204,872 (290,576)
Income tax provision (benefit) 104,572 (92,405)
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 100,300 (198,171)
Discontinued operations - 113,668
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 100,300 $ (84,503)
=============================================================================================================
Per share:
Earnings (loss) from continuing operations $ .02 $ (.04)
Discontinued operation - .02
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ .02 $ (.02)
=============================================================================================================
Weighted average shares outstanding 4,454,410 4,572,976
=============================================================================================================
</TABLE>
See accompanying notes
3
<PAGE> 6
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30
1995 1994
<S> <C> <C>
Operating Activities
Net earnings (loss) $ 100,300 $ (84,503)
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 162,690 171,852
Deferred taxes (5,898) -
Net changes in operating assets and liabilities:
Accounts receivable 105,248 (245,204)
Inventories (29,852) 910,852
Prepaid expenses and other assets (119,852) (140,778)
Accounts payable (306,031) (272,460)
Accrued expenses 76,758 101,588
Income tax payable 64,377 (313,449)
Discontinued operation - 82,585
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 47,740 210,483
INVESTING ACTIVITIES
Purchase of property and equipment (34,505) (81,499)
Decrease (increase) in other assets (22,333) 14,565
Increase in capitalized service inventory (69,720) (15,865)
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (126,558) (82,799)
FINANCING ACTIVITIES
Net increase (decrease) in bank borrowings 100,000 (131,608)
Reduction in notes payable (10,860) (26,700)
Purchase of redeemable common shares (112,500) (112,500)
Exercise of stock options - 13,485
- -------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (23,360) (257,323)
- -------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents (102,178) (129,639)
Cash and cash equivalents, beginning of period 576,799 729,037
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 474,621 $ 599,398
=============================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 12,022 $ 40,053
Income taxes 46,076 296,449
</TABLE>
See accompanying notes
4
<PAGE> 7
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S- X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the results for the
interim periods presented have been made. The results of operations for
such interim periods are not necessarily indicative of the results of
operations for a full year. The interim unaudited financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the year ended May 31, 1995.
Certain amounts have been reclassified in the 1995 financial statements in
order to conform to the 1996 presentation.
2. LONG-TERM DEBT
On September 30, 1995, the Company extended its bank revolving credit
agreement through September 30, 1996 under the same terms as its previous
agreement.
3. REDEEMABLE COMMON SHARES
On January 2, 1996, the Company purchased all outstanding redeemable
common shares for $265,966 in cash.
4. SALE OF ENTRONICS DIVISION
On March 16, 1995, the Company sold its Entronics division. The
identifiable revenues and expenses related to the Entronics division have
been reclassified in the accompanying statements of operations from their
historical classification to separately identify them as net results from
discontinued operations. Revenues of the Entronics division amounted to
$483,681 for the six months ended November 30, 1994.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
The Company's sales decreased 4% to $6,107,634 for the second quarter ended
November 30, 1995 from $6,370,961 for the second quarter ended November 30,
1994. Sales for the first six months of fiscal year 1996 decreased 6% to
$12,061,299 from $12,866,819 for the first six months of fiscal year 1995. The
decrease during the second quarter and during the first six months was the
result of lower volume sales in the Company's core distribution business.
Gross margin as a percent of sales increased from 27.6% during the second
quarter of fiscal year 1995 to 28.6% for the second quarter of the current
fiscal year principally as a result of higher gross margins from the Company's
computer service operations.
Sales and marketing costs during the second quarter decreased by $242,775 as
compared with the second quarter of fiscal 1995 primarily due to headcount
reductions in December 1994. General and administrative expenses increased by
$41,847 due to somewhat higher compensation costs.
Interest expense decreased by $27,559 due primarily to lower outstanding
borrowings.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $474,621 and $576,799 at November 30, 1995 and
May 31, 1995, respectively. Outstanding borrowings under the Company's
revolving credit agreement amounted to $300,000 and $200,000 at November 30,
1995 and May 31, 1995, respectively. At November 30, 1995, the maximum
available borrowings under the revolving credit facility amounted to
$2,413,162. The Company's current assets exceeded its current liabilities at
November 30, 1995 and May 31, 1995 by $2,871,885 and 2,863,120, respectively.
The Company's funding requirements during the quarter were met through cash on
hand, cash provided from operations and borrowings against INOTEK's revolving
credit agreement. During September 1995, the Company extended its revolving
credit agreement with Texas Commerce Bank for one year under the same terms as
its previous agreement. The Company has no material commitment for capital
expenditures as of August 31, 1995
In January 1996, the Company repurchased all outstanding redeemable common
shares for $265,966 in cash.
6
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None pending
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1. Exhibit (20)-Report furnished to security holders.
(b) Reports on 8-K:
No reports on Form 8-K were filed in the quarter for which this
report is filed.
7
<PAGE> 10
SIGNATURES
Pursuant to the requirements 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)
Date: January 12, 1996 /s/ David L. White
----------------------------------------
(Officer)
David L. White
Chief Executive Officer
Date: January 12, 1996 /s/ R. Lee Simpson
----------------------------------------
(Officer)
R. Lee Simpson
Chief Financial Officer
8
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit - 20 Report furnished to security holders
Exhibit - 27 Financial Data Schedule
</TABLE>
<PAGE> 1
TO OUR SHAREHOLDERS:
INOTEK Technologies Corp. reported earnings of $65,343 or $.01 per share on
revenues of $6,107,634 for its second quarter ended November 30, 1995 compared
with a net loss of $37,377 or $.01 per share on revenues of $6,370,961 for the
second quarter of the previous year.
For the first six months of the year, the Company reported earnings of $100,300
or $.02 per share on revenues of $12,061,299 compared with a net loss of
$84,503 or $.02 per share on revenues of $12,866,819 for the first six months
of the previous year.
Thank you for your continued support.
/s/ NEAL E. YOUNG /s/ DAVID L. WHITE
- --------------------------------- -------------------------------------
Neal E. Young David L. White
Chairman Chief Executive Officer
January 12, 1996
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30 NOVEMBER 30
1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 6,107,634 $ 6,370,961 $ 12,061,299 $ 12,866,819
COST AND EXPENSES:
COST OF SALES 4,359,711 4,611,039 8,631,282 9,340,788
SALES AND MARKETING 895,073 1,137,848 1,777,878 2,374,242
GENERAL AND ADMINISTRATIVE 718,828 676,981 1,432,225 1,380,439
- -------------------------------------------------------------------------------------------------------------------
TOTAL COST AND EXPENSES 5,973,612 6,425,868 11,841,385 13,095,469
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 134,022 (54,907) 219,914 (228,650)
INTEREST EXPENSE (7,667) (35,226) (15,042) (61,926)
- -------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 126,355 (90,133) 204,872 (290,576)
INCOME TAXES 61,012 (23,446) 104,572 (92,405)
- -------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS 65,343 (66,687) 100,300 (198,171)
DISCONTINUED OPERATION - 29,310 - 113,668
- -------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 65,343 $ (37,377) $ 100,300 $ (84,503)
===================================================================================================================
PER SHARE:
EARNINGS (LOSS) FROM CONTINUING OPERATIONS $ .01 $ (.02) $ .02 $ (.04)
DISCONTINUED OPERATION - .01 - .02
NET EARNINGS (LOSS) $ .01 $ (.01) $ .02 $ (.02)
===================================================================================================================
</TABLE>
INOTEK TECHNOLOGIES CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30 MAY 31
1995 1995
- ---------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 474,621 $ 576,799
TRADE RECEIVABLES, (NET OF
ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $20,259 AND
$45,048) 2,559,148 2,664,396
INVENTORIES 2,314,258 2,284,406
DEFERRED TAX ASSET 48,676 52,000
PREPAID EXPENSES & OTHER ASSETS 235,245 115,393
- ---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 5,631,948 5,692,994
PROPERTY AND EQUIPMENT, NET 424,561 449,975
GOODWILL, NET 2,222,396 2,255,350
OTHER ASSETS 66,226 43,990
DEFERRED TAX ASSET 169,222 160,000
- ---------------------------------------------------------------------------
TOTAL ASSETS $ 8,514,353 $ 8,602,309
===========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 1,568,729 $ 1,874,760
ACCRUED EXPENSES 804,359 727,601
INCOME TAXES PAYABLE 69,592 5,215
CURRENT PORTION OF NOTES PAYABLE 317,383 222,298
- ---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,760,063 2,829,874
NOTES PAYABLE - 5,945
REDEEMABLE COMMON SHARES,
$.01 PAR VALUE, 85,109 SHARES
AT NOVEMBER 30, 1995 AND 121,109
SHARES AT MAY 31, 1995 268,776 381,276
SHAREHOLDERS' EQUITY:
COMMON SHARES, $.01 PAR VALUE;
AUTHORIZED SHARES - 10,000,000
ISSUED SHARES - 4,439,197 AT
NOVEMBER 30 AND MAY 31
OUTSTANDING SHARES - 4,354,088
AT NOVEMBER 30 AND MAY 31 43,541 43,541
ADDITIONAL PAID-IN CAPITAL 3,299,546 3,299,546
RETAINED EARNINGS 2,142,427 2,042,127
- ---------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 5,485,514 5,385,214
- ---------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 8,514,353 $ 8,602,309
===========================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 474,621
<SECURITIES> 0
<RECEIVABLES> 2,579,407
<ALLOWANCES> 20,259
<INVENTORY> 2,314,258
<CURRENT-ASSETS> 5,631,948
<PP&E> 2,421,368
<DEPRECIATION> 1,996,807
<TOTAL-ASSETS> 8,514,353
<CURRENT-LIABILITIES> 2,760,063
<BONDS> 0
<COMMON> 43,541
0
0
<OTHER-SE> 5,441,973
<TOTAL-LIABILITY-AND-EQUITY> 8,514,353
<SALES> 10,682,280
<TOTAL-REVENUES> 12,061,299
<CGS> 7,906,567
<TOTAL-COSTS> 8,631,282
<OTHER-EXPENSES> 3,210,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,042
<INCOME-PRETAX> 204,872
<INCOME-TAX> 104,572
<INCOME-CONTINUING> 100,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,300
<EPS-PRIMARY> .02
<EPS-DILUTED> .0
</TABLE>
