- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-QSB
( X ) QUARTERLY REPORT ( ) TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File No. 33-20015-NY
September 30, 1998
------------------------
SENTECH EAS CORPORATION
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0734041
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
484 SOUTHWEST 12TH AVENUE
DEERFIELD BEACH, FLORIDA 33442-3108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: 954-426-2965
Former name, former address and former fiscal year,
if changed since last report: SAME
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 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 No X
--- ---
As of October 31, 1998, there were 1,677,201 shares of the common stock
outstanding.
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<PAGE>
SENTECH EAS CORPORATION
INDEX
FORM 10-QSB
NINE MONTHS ENDED SEPTEMBER 30, 1998
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statement of Shareholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Conditionand Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
<PAGE>
SENTECH EAS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 DECEMBER 31,
(UNAUDITED) 1997
-----------------------------
ASSETS
- ------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 275,286 $ 475,263
Accounts receivable, net of allowances of $5,000 132,973 199,802
Inventories 464,229 531,197
Other current assets 81,924 62,150
----------- -----------
Total current assets 954,412 1,268,412
Property and equipment, net 36,747 50,916
Other assets 127,457 96,407
----------- -----------
$ 1,118,616 $ 1,415,735
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------
Current liabilities
Accounts payable $ 126,103 $ 390,759
Accrued liabilities 98,285 63,051
Current maturities of long-term debt -- 16,657
----------- -----------
Total current liabilities 224,388 470,467
----------- -----------
Long-term debt less current maturities 203,000 203,000
----------- -----------
Shareholders' equity
Common stock; $0.00024 par value; 20,833,333 authorized;
1,677,201 and 1,640,427 issued and outstanding 403 394
Additional capital 2,470,683 2,444,054
Accumulated deficit (1,779,858) (1,702,180)
----------- -----------
Total shareholders' equity 691,228 742,268
----------- -----------
$ 1,118,616 $ 1,415,735
=========== ===========
</TABLE>
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
SENTECH EAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
- --------------------------------------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues $ 407,467 $ 714,496 $ 1,624,147 $ 1,334,116
Cost of revenues (220,080) (462,872) (1,016,916) (856,191)
----------- ----------- ----------- -----------
Gross profit 187,387 251,624 607,231 477,925
Selling, general, and administrative expenses (213,175) (196,183) (689,082) (560,105)
----------- ----------- ----------- -----------
Operating (loss)/income (25,788) 55,441 (81,851) (82,180)
Interest expense (1,069) (1,898) (3,389) (6,714)
Interest income 4,263 2,864 7,562 10,996
----------- ----------- ----------- -----------
Net (loss)/income $ (22,594) $ 56,407 $ (77,678) $ (77,898)
=========== =========== =========== ===========
Net (loss)/income per share $ (0.02) $ 0.04 $ (0.05) $ (0.05)
=========== =========== =========== ===========
</TABLE>
- ------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
SENTECH EAS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL ACCUMULATED
--------------------
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 1,640,427 $ 394 $ 2,444,054 $(1,702,180) $ 742,268
Conversion of debt interest 891 1 2,137 -- 2,138
Issued in lieu of payment for professional 5,883 1 13,999 -- 14,000
services
Issued pursuant to compensation agreements 30,000 7 10,493 -- 10,500
Net loss -- -- -- (77,678) (77,678)
----------- -------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1998
(UNAUDITED) 1,677,201 $ 403 $ 2,470,683 $(1,779,858) $ 691,228
=========== ======= =========== =========== ===========
</TABLE>
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
SENTECH EAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
- -------------------------------------------------------------------- ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (77,678) $ (77,898)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 15,552 18,364
Debt interest converted to common stock 2,138 4,325
Stock issued in lieu of payment for professional services 14,000 --
Stock based compensation 10,500 --
Net changes in operating assets and liabilities:
Accounts receivable 66,829 25,130
Inventories 66,968 (109,705)
Other current assets (19,774) (180,289)
Other assets (31,050) (58,333)
Accounts payable (264,656) 117,451
Accrued liabilities 35,234 32,521
--------- ---------
Net cash used in operating activities (181,937) (228,434)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,383) (4,128)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable to bank (16,657) (45,542)
Payments on notes payable to shareholders -- (17,500)
Net proceeds from issuance of common stock -- 190,366
--------- ---------
Net cash (used in) provided by financing activities (16,657) 127,324
--------- ---------
Net decrease in cash and cash equivalents (199,977) (105,238)
Cash and cash equivalents at beginning of year 475,263 567,212
--------- ---------
Cash and cash equivalents at end of quarter $ 275,286 $ 461,974
========= =========
</TABLE>
- ------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
SENTECH EAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the financial statements of
SenTech EAS Corporation and its wholly owned subsidiary, SenTech EAS
International, Inc., (collectively, the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
The interim consolidated financial statements presented have been prepared
by the Company without audit and, in the opinion of the management, reflect
all adjustments of a normal recurring nature necessary for a fair statement
of (a) the results of operations for each of the three and nine months
ended September 30, 1998 and September 30, 1997, (b) the financial position
at September 30, 1998, and (c) the cash flows for the nine months ended
September 30, 1998 and September 30, 1997. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1997 has been
derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes
included herein should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-KSB.
2. INVENTORIES
Inventories consisted of the following:
SEPTEMBER 30,
1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- -------------
Raw materials $ 316,529 $ 339,015
Finished goods 147,700 192,182
--------- ---------
$ 464,229 $ 531,197
========= =========
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
3. NET (LOSS)/INCOME PER SHARE
Net (loss)/income per share is calculated using the weighted average number
of common shares and dilutive potential common stock outstanding during the
year. The number of shares used in the per share computations were
1,677,201 and 1,542,927 for the three months ended September 30, 1998 and
1997, respectively; and 1,656,624 and 1,528,302 for the nine months ended
September 30, 1998 and 1997, respectively. Potential common stock, when
included in the computation of dilutive earnings per share, was
anti-dilutive at September 30, 1998 and 1997.
6
<PAGE>
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" and
Statement of Financial Accounting Standards No. 129 "Disclosure of
Information about Capital Structure" which are both effective for fiscal
years beginning after December 15, 1997. SFAS No. 128 simplifies the
current required calculation of earnings per share ("EPS") under APB No.
15, "Earnings per Share", by replacing the existing calculation of primary
EPS with a basic EPS calculation. It requires a dual presentation for
complex capital structures of basic and diluted EPS on the face of the
income statement and requires a reconciliation of basic EPS factors to
diluted EPS factors. SFAS No. 129 requires disclosure of the Company's
capital structure. There was no material impact to the Company's financial
reporting or presentation due to the adoption of SFAS No. 128 and SFAS No.
129.
4. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid cash for interest of approximately $0 and $200 for the
three and nine months ended September 30, 1998 and $1,000 and $3,500 for
the three and nine months ended September 30, 1997, respectively.
The Company paid no cash for income taxes for the three and nine months
ended September 30, 1998 and 1997.
5. RECENT PRONOUNCEMENTS IN ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income"
which is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements which requires the Company to (i) classify items of
other comprehensive income by their nature in a financial statement and
(ii) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in-capital in the
equity section of the balance sheet. There was no material impact to the
Company's financial reporting or presentation due to the adoption of SFAS
No. 130.
Also in June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise and Related Information" which is effective for
fiscal years beginning after December 15, 1997. SFAS No. 131 supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise",
and amends SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries".
SFAS No. 131 requires annual financial statements to disclose information
about products and services, geographic areas, and major customers based on
a management approach, along with interim reports. The management approach
requires disclosing financial and descriptive information about an
enterprise's reportable operating segments based on reporting information
the way management organizes the segments for making business decisions and
assessing performance. It also eliminates the requirement to disclose
additional information about subsidiaries that were not consolidated. This
new management approach may result in more information being disclosed than
presently practiced and require new interim information not previously
presented. There was no material impact to the Company's financial
reporting or presentation due to the adoption of SFAS No. 131.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 "Employers' Disclosures About
Pensions and Other Postretirement Benefits-an amendment of FASB Statements
No. 87, 88, and 106" which is effective for fiscal years beginning after
December 15, 1997. SFAS No. 132 revises only the employers' disclosures
about pension and other postretirement benefit plans; it does not change
the measurement or recognition of such plans. Since the Company does not
have such plans, there is no impact to the Company's financial reporting or
presentation due to the adoption of SFAS No. 132.
7
<PAGE>
6. PURCHASE AND MANUFACTURING AGREEMENT
In June 1997, the Company entered into a three year purchase and
manufacturing agreement (the "Agreement") with a company whose President
and Chief Executive Officer is a director of the Company. The Agreement, as
amended, provides for the development and manufacture of the Company's
third generation EAS system. The Agreement requires the Company to pay
$187,000 of non-recurring engineering costs in exchange for an assignment
of fifty percent of the joint technology as defined by the Agreement.
Payments made for non-recurring engineering are recorded at cost and are
amortized as a component of cost of revenues using the units-of-production
method. As of September 30, 1998, approximately $152,000 of non-recurring
engineering costs were capitalized of which $31,000 and $119,000 are
included in other current assets and other assets, respectively. For the
three and nine months ended September 30, 1998, approximately $2,000 of
non-recurring engineering costs are included in cost of revenues. The
Agreement also requires the Company to purchase minimum quantities of the
system representing a total purchase commitment of $2,250,000 through
January 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The Company's actual results
could differ materially from those set forth in the forward-looking
statements.
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto and with the Company's
audited financial statements and notes thereto for the fiscal year ended
December 31, 1997.
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE
MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997
REVENUES
Revenues were approximately $407,000 for the third quarter 1998, a decrease
of $307,000 or 43% from revenues of $714,000 for the third quarter 1997.
Revenues of approximately $1,624,000 for the nine months ended September
30, 1998 increased $290,000 or 22% from revenues of approximately
$1,334,000 for the nine months ended September 30, 1997. The change in
revenues for the three and nine months ended September 30, 1998 and 1997
was primarily attributed to sales to a new customer which generated 0% and
40% of the Company's total revenues for the third quarter 1998 and 1997 and
26% and 25% of the Company's total revenues for the nine months ended
September 30, 1998 and 1997, respectively. There is no assurance of future
sales from the new customer. At September 30, 1998, the Company ended the
quarter with over $94,000 in backlog compared to over $600,000 in backlog
at September 30, 1997.
GROSS PROFIT
Gross profit was approximately $187,000 for the third quarter 1998, a
decrease of $64,000 or 26% from gross profit of $251,000 for the third
quarter 1997. Gross profit of approximately $607,000 for the nine months
ended September 30, 1998 increased $129,000 or 27% from gross profit of
approximately $478,000 for the nine months ended September 30, 1997. The
change in gross profit for the three and nine months ended September 30,
8
<PAGE>
1998 and 1997 was primarily a result of the change in revenues and the
sales mix of products sold. Gross profit margins approximated 46% and 35%
for the third quarter 1998 and 1997 and 37% and 36% for the nine months
ended September 30, 1998 and 1997, respectively. The Company realizes
substantially higher gross profit margins on its manufactured products than
it realizes on its purchased products due to the proprietary nature of
purchased products, however, the current sales mix is expected to remain
consistent as the Company's customer base expands.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses were approximately $213,000
for the third quarter 1998, an increase of $17,000 or 9% from selling,
general, and administrative expenses of approximately $196,000 for the
third quarter 1997. Selling, general, and administrative expenses of
approximately $689,000 for the nine months ended September 30, 1998
increased $129,000 or 23% from approximately $560,000 for the nine months
ended September 30, 1997. Overall, operating expenses remained stable
during 1998 with the exception of compensation expense and legal fees.
Compensation expense increased over $18,000 for the three months ended
September 30, 1998 primarily as a result of an increase of approximately
$10,000 paid to new employees net of employee turnover and $7,500 of
non-employee directors' compensation. Compensation expense increased nearly
$60,000 for the nine months ended September 30, 1998 primarily as a result
of an increase of approximately $27,000 paid to new employees net of
employee turnover, $22,500 of non-employee directors' compensation, and
$10,500 of common stock granted to the Company's officers and directors.
Legal expenses increased approximately $33,000 for the nine months ended
September 30, 1998 primarily due to the costs of litigating existing trade
claims against a competitor of the Company and the costs of increased
compliance reporting.
INTEREST EXPENSE AND INTEREST INCOME
Interest expense decreased to approximately $1,000 and $3,400 for the third
quarter 1998 and for the nine months ended September 30, 1998 compared to
$2,000 and $6,700 for the comparable periods in 1997 primarily due to the
payment in full of the Company's 7.5% note payable to bank in March 1998.
Interest income for each of the third quarters and the nine months ended
September 30, 1998 and 1997 primarily represents interest earned on cash
balances in excess of operating requirements.
NET (LOSS)/INCOME AND NET (LOSS)/INCOME PER SHARE
Net loss was approximately $(23,000) for the third quarter 1998, a decrease
of $79,000 or 141% from the net income of $56,000 for the third quarter
1997 primarily as a result of a decrease of approximately $64,000 in gross
profit and an increase in operating costs of nearly $15,000.
Net loss was nearly $(78,000) for the nine months ended September 30, 1998
and 1997 primarily as a result of an increase of approximately $129,000 in
both gross profit and operating costs during 1998.
Net loss per share was $(0.02) for the third quarter 1998, a decrease of
$0.06 per share or 150% from the net income per share of $0.04 for the
third quarter 1997 resulting from the $79,000 decrease in net income offset
by an increase of 134,274 weighted average number of common shares from
1,542,927 during the third quarter 1997 to 1,677,201 during the third
quarter 1998.
Net loss per share was approximately $(0.05) from a net loss of nearly
$78,000 for both the nine months ended September 30, 1998 and 1997 despite
an increase of 128,322 weighted average number of common shares from
1,528,302 during the nine months ended September 30, 1997 to 1,656,624
during the nine months ended September 30, 1998.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's accumulated deficit was approximately $(1,780,000) and
$(1,702,000) at September 30, 1998 and December 31, 1997, respectively.
Working capital decreased approximately $68,000 from $798,000 at December
31, 1997 to $730,000 at September 30, 1998.
Net cash used in operating activities was approximately $(182,000) during
the nine months ended September 30, 1998, a decrease of $46,000 from
$(228,000) during the nine months ended September 30, 1997.
The Company believes the expected results of operations in 1998 will be
sufficient to fund current business operations and anticipated growth.
However, the Company believes it may need to raise additional capital
through debt or equity financing to fund its anticipated growth beyond
1998. There is no assurance that such additional financing will be
available when needed or available with terms acceptable to the Company.
SEASONALITY
The Company's revenues are substantially dependent on its customers'
seasonal retail sales. Historically, the Company has experienced higher
sales volume in the third and fourth quarters of each year.
YEAR 2000 ISSUE
Computer programs used by businesses worldwide were written using two
digits rather than four digits to define the applicable year. Accordingly,
these programs recognize the dates "00" and "01" as the years 1900 and 1901
rather than the years 2000 and 2001. The Company recognizes the need to
ensure its operations will not be adversely impacted by year 2000 computer
program failures arising from program processes and calculations
misinterpreting the year 2000 date. The Company is currently evaluating its
financial and operational systems to determine the impact the year 2000
issue will have on its operations. The Company also plans to communicate
with its significant suppliers, dealers, financial institutions, and others
with which it conducts business to determine the extent the Company may be
impacted by third parties' failure to address the year 2000 issue. Although
the Company plans to be year 2000 compliant prior to December 31, 1999 and
expects no material impact to the Company's operations, there can be no
assurance that the failure of the Company or such third parties to
successfully address their respective year 2000 issues will not have a
material adverse effect on the Company's business, financial condition,
cash flows, and result of operations.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1996, the Company was named as a defendant in a lawsuit filed in
New Jersey Superior Court whereby the plaintiff is seeking damages with
respect to certain alleged invoices totaling approximately $20,000. A
motion to amend the pleadings was filed and granted to assert counterclaims
and third party claims against the plaintiff and its officers for, among
other things, false designation of origin under the federal Lanham Act,
violations of statutory and common law unfair competition, trademark and
trade dress infringement, and breach of contract all of which may result in
damages exceeding $1,000,000. The Company's counterclaim and third party
claims arose from an alleged intentional breach of a requirements type
contract in which the plaintiff was authorized to manufacture for the
Company certain equipment for sale to third parties. Although the Company
has recorded in accrued liabilities a provision of approximately $20,000
for any liability which may result from the plaintiff's claims, the Company
plans to continue to vigorously defend against the plaintiff's alleged
claims and to pursue its counterclaims and third party claims against the
plaintiff. While there is no assurance as to the outcome of this legal
action, management and legal counsel for the Company believe the ultimate
resolution of this matter will not have a material adverse effect on its
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on April 30,
1998. The election of directors and the ratification of the appointment of
the Company's independent certified public accountants were the only
matters submitted to a vote of security holders. All five of the Company's
incumbent directors were re-elected for the ensuing year which are Edward
A. Mulhare, Thomas A. Nicolette, Saul Pozensky, Milan Resanovich, and
Richard J. Spagna. The re-appointment of Spear, Safer, Harmon & Co. as the
Company's independent certified public accountants for the ensuing year was
ratified.
ITEM 5. OTHER INFORMATION
MARKET FOR REGISTRANT'S COMMON STOCK
The Company's common stock has not commenced trading but is listed on the
National Association of Securities Dealers, Inc. ("NASD") OTC Bulletin
Board ("Bulletin Board") under the symbol "SETE". There have been no quotes
on the Company's common stock since its listing on the Bulletin Board.
No assurance can be given that a public trading market for the Company's
common stock will develop or if developed will be sustained.
In April 1997, in connection with a private placement of the Company's
common stock under Regulation D Rule 506 of the Securities Act of 1933, as
amended, the Company consummated the sale of 343,894 units, each unit
consisting of one share of common stock and one common stock purchase
warrant. Each warrant expires after five years of issuance and entitles the
registered holder to purchase one share of common stock at a purchase price
equal to the lesser of $5.50 or ten percent above the offering price of a
share of common stock in a proposed public offering. The net proceeds
received by the Company from this offering were approximately $707,000 of
which approximately $198,000 from the sale of 88,173 units was received
during the year ended December 31, 1997.
11
<PAGE>
APPOINTMENT OF NEW PRESIDENT AND CHIEF EXECUTIVE OFFICER
On August 14, 1998, the Board of Directors appointed the Company's
Executive Vice President, Ronald L. Meggison, Jr., as the Company's new
President and Chief Executive Officer.
Saul Pozensky relinquished his duties and responsibilities as the Company's
President and Chief Executive Officer on August 14, 1998 and is no longer
an employee of the Company. The Company is currently negotiating a proposed
Separation Agreement for Saul Pozensky.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On October 28, 1998, the Company entered into an Agreement and Plan of
Merger with Ensec International, Inc. ("Ensec") which, upon completion of
the merger, will result in the Company and Ensec becoming wholly owned
subsidiaries of a newly formed holding company, Sensec International, Inc.
("Sensec"). Under the terms of the agreement, the Company's stockholders
will receive approximately 40% or 950,000 shares of the outstanding common
shares of Sensec, and the Ensec stockholders will receive approximately 60%
or 1,425,000 shares of the outstanding common shares of Sensec. Completion
of the merger is subject to the approval of the boards of directors and
stockholders of both the Company and Ensec. Ensec is a systems integrator
and services provider in commercial and industrial integrated security
systems, video remote surveillance, and data information security systems
and is listed on the OTC Bulletin Board under the symbol "ENSC". In
connection with the planned merger, the Company is actively seeking various
sources of capital. This transaction is more fully explained in the Form
8-K filed by the Company on November 9, 1998 with the Securities and
Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SENTECH EAS CORPORATION
By: /s/ RONALD L. MEGGISON, JR.
---------------------------
Ronald L. Meggison, Jr.
President and Chief Executive Officer
(Principal Financial and Accounting
Officer)
Date: October 30, 1998
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 275,286
<SECURITIES> 0
<RECEIVABLES> 132,973
<ALLOWANCES> 5,000
<INVENTORY> 464,229
<CURRENT-ASSETS> 954,412
<PP&E> 36,747
<DEPRECIATION> 5,184
<TOTAL-ASSETS> 1,118,616
<CURRENT-LIABILITIES> 224,388
<BONDS> 0
<COMMON> 403
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,118,616
<SALES> 407,467
<TOTAL-REVENUES> 407,467
<CGS> 220,080
<TOTAL-COSTS> 220,080
<OTHER-EXPENSES> 213,175
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,069
<INCOME-PRETAX> (22,594)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,594)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
