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Previous: NORTHLAND CRANBERRIES INC /WI/, 10-Q, 2000-01-14 |
Next: FRESHSTART VENTURE CAPITAL CORP, 10-Q, 2000-01-14 |
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1999 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, 972-243-7000.
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
--- ---
4,604,088 shares of common stock, $.01 par value (the issuer's only class of
common stock), were outstanding as of November 30, 1999.
-17-
<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, 1999 (unaudited) and May 31, 1999.......................................1
Statements of Operation for the Three Months Ended November 30, 1999
and November 30, 1998 (unaudited) .....................................................................2
Statements of Operation for the Six Months Ended November 30, 1999
and November 30, 1998 (unaudited) .....................................................................3
Statements of Cash Flows for the Six Months Ended November 30, 1999
and November 30, 1998 (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
1999 1999
(UNAUDITED)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 173,668
Trade receivables, net of allowance for doubtful accounts
of $101,483 at November 30 and $73,221 at May 31 2,907,712 2,181,222
Inventories 1,409,333 1,409,887
Deferred taxes 103,622 103,232
Income Tax Receivable 304,824 352,120
Prepaid expenses and other assets 204,600 83,913
------------ ------------
Total current assets 4,930,091 4,304,042
Property and equipment, net 706,823 755,400
Goodwill, net of accumulated amortization of $683,200 at
November 30 and $650,242 at May 31 1,958,752 1,991,709
Other assets 64,665 59,008
------------ ------------
Total assets $ 7,660,331 $ 7,110,159
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,722,966 $ 927,953
Accrued expenses 302,612 343,863
------------ ------------
Total current liabilities 2,025,578 1,271,816
Deferred Tax Liability -- 37,626
Shareholders' equity:
Common shares, $.01 par value:
Authorized shares, 10,000,000
Issued and Outstanding shares
4,604,088 at November 30 and 4,354,088 at May 31 46,041 43,541
Additional paid-in-capital 3,367,047 3,299,546
Retained earnings 2,261,045 2,497,010
------------ ------------
Total shareholders' equity 5,674,133 5,840,097
Less: Common stock in treasury at cost, 100,000 shares in 1999 (39,380) (39,380)
------------ ------------
$ 5,634,753 $ 5,800,717
Total Liabilities and Shareholders' Equity $ 7,660,331 $ 7,110,159
============ ============
</TABLE>
See accompanying notes
1
<PAGE> 4
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATION
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
NOVEMBER 30 NOVEMBER 30
1999 1998
------------ ------------
<S> <C> <C>
Net Sales $ 5,198,049 $ 5,678,720
------------ ------------
Cost of sales: 3,689,163 4,102,851
------------ ------------
Gross margin 1,508,886 1,575,869
Operating expenses:
Sales and marketing 897,366 834,788
General and administrative 647,209 771,212
------------ ------------
1,544,575 1,606,000
------------ ------------
Operating income (loss) (35,689) (30,131)
Interest expense -- (4,297)
------------ ------------
Earnings before income taxes (35,689) (34,428)
Income tax provision (benefit) (13,067) 6,597
------------ ------------
Net earnings (loss) $ (22,622) $ (41,025)
============ ============
Net earnings (loss) per share - basic and diluted $ (.01) $ (.01)
============ ============
Weighted average shares outstanding 4,838,243 4,354,088
============ ============
</TABLE>
See accompanying notes
2
<PAGE> 5
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATION
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------------
NOVEMBER 30 NOVEMBER 30
1999 1998
------------ ------------
<S> <C> <C>
Net Sales $ 9,486,168 $ 11,180,531
------------ ------------
Cost of sales: 6,717,554 8,119,852
------------ ------------
Gross margin 2,768,614 3,060,679
Operating expenses:
Sales and marketing 1,794,985 1,727,829
General and administrative 1,276,541 1,399,403
------------ ------------
3,071,526 3,127,232
------------ ------------
Operating income (loss) (302,912) (66,553)
Interest income (expense) 4,837 (8,594)
------------ ------------
Earnings before income taxes (298,075) (75,147)
Income tax provision (62,207) 1,585
------------ ------------
Net earnings (loss) $ (235,868) $ (76,732)
============ ============
Net earnings (loss) per share - basic and diluted $ (.05) $ (.02)
============ ============
Weighted average shares outstanding 4,838,243 4,418,942
============ ============
</TABLE>
See accompanying notes
3
<PAGE> 6
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30
1999 1998
------------ ------------
<S> <C> <C>
Operating Activities
Net earnings $ (235,868) $ (76,732)
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 140,554 117,420
Deferred taxes (38,016) (424)
Provision for losses on accounts receivable 28,262 22,355
Provision for inventory obsolescence (80,597) 8,335
Net changes in operating assets and liabilities:
Accounts receivable (754,752) (65,790)
Inventories 81,058 (4,178)
Prepaid expenses and other assets (120,687) 12,369
Accounts payable 795,011 406,577
Accrued expenses (41,251) (221,503)
Income tax payable 47,297 --
------------ ------------
Net cash provided by operating activities (178,989) 198,429
INVESTING ACTIVITIES
Purchase of property and equipment (58,346) (111,528)
Increase in other assets (6,333) (19,169)
Decrease (increase) in capitalized service inventory -- 4,080
------------ ------------
Net cash used in investing activities (64,679) (126,617)
FINANCING ACTIVITIES
Net change in bank borrowings -- --
Net increase (decrease) in notes payable -- --
Proceeds from stock issued 70,000 --
------------ ------------
Net cash used in financing activities 70,000 --
------------ ------------
Change in cash and cash equivalents (173,668) 71,812
Cash and cash equivalents, beginning of period 173,668 362,830
------------ ------------
Cash and cash equivalents, end of period $ -- $ 434,642
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ 8,641
Income taxes $ -- $ --
</TABLE>
See accompanying notes
4
<PAGE> 7
INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 1999
(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, 1999.
2. LONG-TERM DEBT
On September 23, 1999, the Company secured a new agreement with Bank One,
Texas, N.A. for a one-year revolving credit facility of up to $500,000.
The credit line provides for borrowings based on the Company's
receivables, at the bank's prime rate plus one per cent and is secured by
receivables and inventory.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 2000 COMPARED TO SECOND QUARTER 1999
The Company's total sales decreased 8.5% to $5,198,049 for the second quarter
ended November 30, 1999 from $5,678,720 for the second quarter of the prior
year. Sales decreased during the second quarter of fiscal year 2000 as compared
to the second quarter of fiscal year 1999 by $480,671 due primarily to a soft
market. Because of the dramatic downturn in activity in our two key customer
categories - manufacturing and petro-chemical, and the impact of project dollars
being channeled into Y-2K fixes, Inotek endured one of its slowest quarters in
recent memory. The former conditions have begun to correct themselves and
spending for capital projects should resume at normal to higher rates.
Sales and marketing costs during the second quarter of fiscal year 2000
increased 7.5% or $62,578 as compared with the second quarter of the previous
year. General and administrative costs decreased 16.1% or $124,003 during the
second quarter ending November 30, 1999 as compared with the second quarter of
fiscal year 1999.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $ -0- and $173,668 at November 30, 1999 and May
31, 1999, respectively. At November 30, 1999 the maximum available borrowings
under the revolving credit facility amounted to $500,000. The Company's current
assets exceeded its current liabilities at November 30, 1999 and May 31, 1999 by
$2,904,513 and $3,032,226, respectively.
The Company's funding requirements during the quarter were met through cash on
hand and cash provided by operations. On September 23, 1999, the Company secured
a new agreement with Bank One, Texas, N.A. for a one-year revolving credit
facility of up to $500,000. The credit line provides for borrowings based on the
value of the Company's receivables, at the bank's prime rate plus one per cent
and is secured by receivables and inventory. The Company has no material
commitment for capital expenditures as of November 30, 1999.
YEAR 2000 COMPLIANCE
The Company has reviewed all of its current computer applications with respect
to Year 2000 functionality. The Company believes all of its relevant
applications are Year 2000 compliant and that no material costs with respect to
Year 2000 compliance will be incurred by the Company. The Company is unable to
determine the effects of the Year 2000 issue, if any, on its suppliers and
customers.
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 14, 2000 /s/Neal E. Young
-----------------------------------
(Officer)
Neal E. Young
Chairman of the board
Date: January 14, 2000 /s/Dennis W. Stone
-----------------------------------
(Officer)
Dennis W. Stone
Chief Executive Officer
8
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
20 Report furnished to security holders
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT (20)
INOTEK TECHNOLOGIES CORP.
REPORT FURNISHED TO SECURITY HOLDERS
9
<PAGE> 2
TO OUR SHAREHOLDERS:
INOTEK Technologies Corp. reported a loss of $22,622 or $(.01) per share on
revenues of $5,198,049 for its second quarter ended November 30, 1999 compared
with a loss of $41,025 or $(.01) on revenues of $5,678,720 for the second
quarter of the previous year.
Total sales decreased during the second quarter of fiscal year 2000 as compared
to the second quarter of fiscal year 1999 by 8.5% or $480,671 due primarily to a
soft market.
Because of the dramatic downturn in activity in our two key customer categories
- - manufacturing and petro-chemical, and the impact of project dollars being
channeled into Y-2K fixes, Inotek endured one of its slowest quarters in recent
memory. The former conditions have begun to correct themselves and spending for
capital projects should resume at normal to higher rates.
Thank you for your continued support.
Neal E. Young Dennis W. Stone
Chairman Chief Executive Officer
January 15, 2000
INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATION (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
30-Nov 30-Nov
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 5,198,049 $ 5,678,720 $ 9,486,168 $ 11,180,531
COST AND EXPENSES:
COST OF SALES 3,689,163 4,102,851 6,717,554 8,119,852
SALES AND MARKETING 897,366 834,788 1,794,985 1,727,829
GENERAL AND ADMINISTRATIVE 647,209 771,212 1,276,541 1,399,403
------------ ------------ ------------ ------------
TOTAL COST AND EXPENSES 5,233,738 5,708,851 9,789,080 11,247,084
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (35,689) (30,131) (302,912) (66,553)
INTEREST INCOME (EXPENSES) 0 (4,297) 4,837 (8,594)
------------ ------------ ------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES (35,689) (34,428) (298,075) (75,147)
INCOME TAXES (13,067) 6,597 (62,207) 1,585
------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ (22,622) $ (41,025) $ (235,868) $ (76,732)
============ ============ ============ ============
NET EARNINGS (LOSS) PER SHARE $ (0.01) $ (0.01) $ (0.05) $ (0.02)
============ ============ ============ ============
</TABLE>
INOTEK TECHNOLOGIES CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER MAY 31
1999 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ -- $ 173,668
TRADE RECEIVABLES, (NET OF
ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $101,483 AND $73,221) 2,907,712 2,181,222
INVENTORIES 1,409,333 1,409,887
DEFERRED TAX ASSET 103,622 103,232
INCOME RECEIVABLE 304,824 352,120
PREPAID EXPENSES & OTHER ASSETS 204,600 83,913
------------ ------------
TOTAL CURRENT ASSETS 4,930,091 4,304,042
PROPERTY AND EQUIPMENT, NET 706,823 755,400
GOODWILL,NET 1,958,752 1,991,709
OTHER ASSETS 64,665 59,008
------------ ------------
TOTAL ASSETS $ 7,660,331 $ 7,194,072
============ ============
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
ACCOUNTS PAYABLE $ 1,722,996 $ 927,953
ACCRUED EXPENSES 302,612 343,863
CURRENT PORTION OF NOTES
PAYABLE -- --
------------ ------------
TOTAL CURRENT LIABILITIES 2,025,578 1,271,816
DEFERRED TAX LIABILITY -- 37,626
SHAREHOLDERS' EQUITY:
COMMON SHARES, $.01 PAR VALUE;
AUTHORIZED SHARES - 10,000,000
ISSUED SHARES - 4,604,088
OUTSTANDING SHARES - 4,604,088 46,041 43,541
ADDITIONAL PAID-IN CAPITAL 3,367,047 3,299,546
RETAINED EARNINGS 2,261,045 2,497,010
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 5,674,133 5,840,097
LESS: COMMON TREASURY STOCK (39,380) (39,380)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 5,634,753 5,800,717
------------ ------------
EQUITY $ 7,660,331 $ 7,110,159
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,009,195
<ALLOWANCES> 101,483
<INVENTORY> 1,409,333
<CURRENT-ASSETS> 4,930,091
<PP&E> 3,011,088
<DEPRECIATION> 2,304,265
<TOTAL-ASSETS> 7,660,331
<CURRENT-LIABILITIES> 2,025,578
<BONDS> 0
0
0
<COMMON> 46,041
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,660,331
<SALES> 9,486,168
<TOTAL-REVENUES> 9,486,168
<CGS> 6,717,554
<TOTAL-COSTS> 6,717,554
<OTHER-EXPENSES> 3,071,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,837)
<INCOME-PRETAX> (298,075)
<INCOME-TAX> (62,207)
<INCOME-CONTINUING> (235,868)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (235,868)
<EPS-BASIC> (.05)
<EPS-DILUTED> 0
</TABLE>
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