<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1995
-------------------------
COMMISSION FILE NUMBER O-17580
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FIRETECTOR INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2941299
(State or jurisdiction of (IRS Employer identification
incorporation or organization) Number)
262 Duffy Avenue, Hicksville, New York 11801
(Address of principal executive offices Zip Code)
(516) 433-4700
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that Registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: As of February 12, 1996, 3,243,400 shares of Registrant's
Common Stock were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
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<PAGE>
Part I - FINANCIAL INFORMATION
Firetector Inc. and Subsidiaries
Consolidated Balance Sheet
Unaudited
<TABLE>
<CAPTION>
December 31,
1995
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<S> <C>
ASSETS
Current assets:
Accounts receivable, principally
trade, less allowance for
doubtful accounts of $146,608 $3,300,834
Accounts receivable from affiliated
companies 322,467
Inventories 2,083,283
Prepaid expenses and other current assets 113,599
-------------
Total current assets 5,820,183
Property and equipment at cost, less
accumulated depreciation and
amortization of $567,025 505,974
Software development costs, net 86,142
Other assets 599,162
Deferred taxes 178,000
-------------
Total assets $7,189,461
=============
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
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<PAGE>
Firetector Inc. and Subsidiaries
Consolidated Balance Sheet (continued)
Unaudited
<TABLE>
<CAPTION>
December 31,
1995
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<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable bank $1,958,509
Other notes payable 126,042
Accounts payable and accrued expenses 1,650,212
Unearned service revenue 342,060
Current portion of capital lease obligations 4,765
------------
Total current liabilities 4,081,588
Note payable bank 339,287
Other notes payable, less current portion 330,471
Due to affiliated companies 149,473
-----------
Total liabilities 4,900,819
Stockholders' equity:
Convertible preferred stock, 2,000,000
shares authorized - 675,000 shares issued
and outstanding 675,000
Common stock, 25,000,000 shares authorized,
$.001 par value; issued and outstanding
3,243,400 shares 3,243
Capital in excess of par 5,310,551
Deficit (3,700,152)
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Total stockholders' equity 2,288,642
-----------
Total liabilities and stockholders' equity $7,189,461
===========
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
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<PAGE>
Firetector Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
December 31,
1995 1994
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<S> <C> <C>
Net sales $1,929,121 $2,044,668
Service revenues 1,012,995 1,029,232
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Total revenues 2,942,116 3,073,900
-----------------------
Cost of sales 1,159,121 1,204,784
Cost of service 595,352 665,291
Selling, general and administrative 1,002,358 1,054,911
Interest expense 76,482 77,047
Depreciation and amortization expense 61,794 51,984
Other (income) net (4,747)
----------------------
2,890,360 3,054,017
Income from continuing operations
before provision (credit) for
income taxes $ 51,756 $ 19,883
Provision (credit) for taxes:
Current
Deferred (18,000) --
----------------------
Net income $ 69,756 $ 19,883
Per share data: ----------------------
Net income $ 0.01 $ 0.01
======================
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
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<PAGE>
Firetector Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION> For The Three Months
Ended
December 31,
1995 1994
-----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 69,756 $ 19,883
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 71,095 51,984
Provision for doubtful accounts 15,000
Changes in operating assets and liabilities:
Accounts receivable 494,571 360,909
Inventories, prepaid expenses and other
current assets (144,223) (20,936)
Accounts receivable from affiliated
company (25,855)
Other assets (35,756) (103,364)
Accounts payable and accrued expenses (329,330) (428,325)
Unearned service revenue 17,922 (62,104)
Due to affiliated companies 10,508 28,751
---------------------
Net cash provided by (used in)
operating activities 128,688 (138,202)
INVESTING ACTIVITIES
Purchases of property and equipment (67,804) (35,516)
Software development costs (800)
---------------------
Net cash used in investing activities (68,604) (35,516)
FINANCING ACTIVITIES
Principal payments on revolving line of
credit, long term debt, notes payable
and capital lease obligations (120,988) (159,802)
Proceeds from revolving line of credit,
notes payable and capital
lease obligstions 60,904 249,321
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Net cash (used in) provided by
financing activities (60,084) 89,519
Net decrease in cash and cash equivalents 0 (84,199)
Cash and cash equivalents at beginning
of year 0 94,258
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Cash and cash equivalents at end of period $ 0 $10,059
<FN> =====================
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
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FIRETECTOR INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 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. 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
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Results for the three
months ended December 31, 1995 are not necessarily indicative of
the results that may be expected for the year ending September
30, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Registrant Company and Subsidiary's annual report on Form 10-KSB
for the year ended September 30, 1995.
2. INVENTORY
Inventories are priced at the lower of cost (first-in, first-out)
or market and consist primarily of raw materials.
3. LONG TERM DEBT
The Registrant has a credit facility with a New York City bank
for $2,500,000. The credit facility provides for a $500,000 three
year term loan (with a seven year amortization) and a $2,000,000
revolving line of credit through March 31, 1996. The credit
facility provides for interest at prime plus 2% on outstanding
balances. Advances under the credit facility are measured against
a borrowing base calculated on eligible receivables and
inventory. The credit facility is secured by all of the assets of
the Registrant and all of its operating subsidiaries, as well as
a $500,000 letter of credit provided by the Registrant's majority
shareholder.
Further, in exchange for options to acquire 500,000 unregistered
shares of the Registrant s common stock at an exercise price of
$.30 per share, an affiliate of Mirtronics has guaranteed minimum
increases in retained earnings of $100,000 for fiscal 1994 (with
a maximum guarantee of $100,000) and, if the credit facility is
renewed, $250,000 for fiscal 1995 (with a maximum guarantee of
$250,000). Due to the loss in fiscal 1994, the guarantor loaned
the Registrant the required $100,000 which is subordinated to the
bank. This loan bears interest at a rate of 5% above the prime
<PAGE>
FIRETECTOR INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
THREE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
3. LONG TERM DEBT (continued)
rate of The Royal Bank of Canada and is payable upon demand
subject to its subordination.
The credit facility includes certain restrictive covenants, which
among other things, impose limitations on declaring or paying
dividends, acquisitions and capital expenditures. The Registrant
is also required to maintain various financial ratios. At
September 30, 1995, and continuing through December 31, 1995,
the Registrant was not in default of any of its financial
covenants.
4. TRANSACTIONS WITH RELATED PARTIES
At December 31, 1995, the Registrant was indebted to Mirtronics
and its subsidiaries for materials, loans, and miscellaneous
advances in the aggregate amount of $149,473. This indebtedness
is secured by a pledge of all of the Registrant's assets and is
subordinate to debt payable to the Registrant s bank. The
Registrant is also indebted, on a demand basis to First Corporate
Equity Ltd., an affiliate of a director of Mirtronics, for notes
payable in the aggregate amount of $191,893 at December 31, 1995.
The Registrant has a receivable from Mirtronics and its
subsidiaries in the amount of $322,467 at December 31, 1995.
In July 1994, in consideration of Mirtronics extending the term
of its letter of credit in connection with the Company's credit
facility (see Note 6) and making further advances to the Company,
the Company's Board of Directors restated the price, terms and
conditions of previously granted conversion rights and options to
Mirtronics. In addition, the Board also granted Mirtronics
500,000 additional options. Presently, Mirtronics has the right
to acquire up to an aggregate of 1,840,000 shares of common stock
at an exercise price of $.30 per share. The options expire on
December 31, 1998.
In March 1995 the Registrant entered into a Debt/Equity Agreement
with Mirtronics, whereby Mirtronics will have the right,
exercisable from time to time until September 30, 1996, to
convert all or part of the Registrant's debt to Mirtronics into
shares of Class A, Series 1 Preferred Stock, at the conversion
price of $1.00 per share, or one share of Preferred Stock for
each dollar of debt converted. The Preferred Stock may be
converted into Common Stock at the rate of two Common shares for
<PAGE>
FIRETECTOR INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
THREE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
4. TRANSACTIONS WITH RELATED PARTIES (continued)
one share of Preferred. In March 1995, Mirtronics converted
$425,000 of debt into 425,000 shares of Class A, Series 1
Preferred Stock and on May 17, 1995, Mirtronics converted an
additional $250,000 of debt into 250,000 shares of Class A,
Series 1 Preferred Stock.
5. STOCKHOLDERS' EQUITY
In May 1995, the Registrant granted Judson Enterprises, Ltd.
100,000 options to purchase common stock at a price of $1.00 per
share in exchange for investment banking services.
In September 1995, a director of the Registrant exercised a
subscription of 60,000 shares of Common Stock at an exercise
price of $0.30 per share. The options were originally issued to
Mirtronics at the exercise price of $0.30 per share.
6. LEGAL PROCEEDINGS
On December 29, 1994 Casey Systems, Inc. ("Casey") filed suit in
the United States District Court for the Southern District of New
York against its largest competitor in the New York City life
safety market, Firecom, Inc. and a number of its affiliates. The
suit, which seeks legal damages in excess of $10,000,000 and
certain equitable remedies, is based on numerous Federal and
State claims including, without limitations, violation of Federal
and New York State anti-trust statutes, unfair competition,
unlawful theft of proprietary information, deceptive trade
practices, tortious interference with contract and other claims.
The suit also sets forth a breach of contract claim against a
customer of Casey who improperly breached a binding contract with
Casey.
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Unaudited)
Liquidity and Capital Resources
The Registrant has a credit facility with a New York City bank
for $2,500,000. At December 31, 1995 the Registrant owed
$2,297,796 under the terms of the credit facility. The credit
facility provides for a $500,000 three year term loan (with a
seven year amortization) and a $2,000,000 revolving line of
credit through March 31, 1996. The credit facility provides for
interest at prime plus 2% on outstanding balances. Advances under
the credit facility are measured against a borrowing base
calculated on eligible receivables and inventory. The credit
facility is secured by all of the assets of the Registrant and
all of its operating subsidiaries, as well as a $500,000 letter
of credit provided by the Registrant's majority shareholder.
Further, in exchange for options to acquire 500,000 shares of the
Registrant's common stock at an exercise price of $.30 per share,
an affiliate of Mirtronics has guaranteed minimum increases in
retained earnings of $100,000 for fiscal 1994 (with a maximum
guarantee of $100,000) and, if the credit facility is renewed,
$250,000 for fiscal 1995 (with a maximum guarantee of $250,000).
Due to the loss in fiscal 1994, the guarantor loaned the
Registrant the required $100,000 which is subordinated to the
bank. This loan bears an interest rate of 5% above the prime
rate of The Royal Bank of Canada and is payable upon demand
subject to its subordination.
The credit facility includes certain restrictive covenants, which
among other things, impose limitations on declaring or paying
dividends, acquisitions and capital expenditures. The Registrant
is also required to maintain various financial ratios. At
September 30, 1995, and continuing through December 31, 1995,
the Registrant was not in default of any of its financial
covenants.
Net cash provided by operations for the three months ended
December 31, 1995 amounted to $128,688 as compared to net cash
used by operations of $138,202 for the comparable prior year
period. The primary reason for the provision of cash was net
income of $69,756 as compared to $19,883 for the comparable prior
year period. The reduction in trade accounts receivable of
approximately $500,000 was also a primary factor in the provision
of cash for the three months ended December 31, 1995. The
decrease in trade accounts receivable was primarily due to a
program of negotiation of terms prior to the beginning of a
project, the monitoring of its terms during a project and
completing projects in a more timely fashion resulting in faster
final payments. It is the intention of the Registrant to continue
this program throughout fiscal 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Unaudited)
(continued)
Results of Operations
The Registrant's total revenues during the three month period
ended December 31, 1995 decreased to $2,942,116 as compared to
$3,073,900 for the comparable period of the prior year. This
decrease was primarily the result of delays in customer
requirement/capacity to accept shipment on current orders for
transit and school projects. In addition, the consolidation of
the New York fire operations delayed certain other projects. The
first quarter was budgeted to be the lowest of fiscal 1996.
Gross profit on product sales for the three month period ended
December 31, 1995 was 40% as compared with 41% for the comparable
1994 period. This slight decrease is a result of the change in
the timing of product mix from fire alarms to packaged systems
(sound, security, fire, etc.). The higher volumes anticipated for
the balance of the year should correct this situation.
Net income for the three month period ended December 31, 1995
increased to $69,756 as compared to net income of $19,883 for the
comparable period of the prior year. This increase is primarily
due to continued tighter controls being placed on all
expenditures, realization of the impact of personnel reductions,
lower occupancy costs and other cost reductions.
The backlog of orders at February 2, 1996 amounted to $8,615,194
as compared to $7,186,000 at December 31, 1995 and $6,200,000 at
September 30, 1995. Management expects to improve profitability
as the increased backlog is shipped or performed. It is
anticipated that a significant portion of the current backlog
will be completed by the end of fiscal 1996.
<PAGE>
<PAGE> 13
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable
Item 2. Changes in Securities.
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Item 6. a. Exhibits and Reports on Form 8-K.
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K. None
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRETECTOR, INC.
(Registrant)
Date: February 13, 1996 DENNIS P. McCONNELL
------------------------------------
DENNIS P. McCONNELL,
(ASSISTANT SECRETARY)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Consolidated Balance Sheet at December 31, 1995
(Unaudited), the Consolidated Statements of Operations for the
Three Months Ended December 31, 1995 (Unaudited) and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,447,442
<ALLOWANCES> 146,608
<INVENTORY> 2,083,283
<CURRENT-ASSETS> 5,820,183
<PP&E> 1,072,999
<DEPRECIATION> 567,025
<TOTAL-ASSETS> 7,189,461
<CURRENT-LIABILITIES> 4,081,588
<BONDS> 0
<COMMON> 3,243
0
675,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,189,461
<SALES> 2,942,116
<TOTAL-REVENUES> 2,942,116
<CGS> 1,754,473
<TOTAL-COSTS> 2,890,360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,482
<INCOME-PRETAX> 51,756
<INCOME-TAX> (18,000)
<INCOME-CONTINUING> 69,756
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,756
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
