UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999 Commission File No. 33-20015-NY
SENTECH EAS CORPORATION
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0734041
(State of Incorporation) (I.R.S. Employer Identification Number)
484 SOUTHWEST 12TH AVENUE
DEERFIELD BEACH, FLORIDA 33442-3108
(Address of principal executive offices including zip code)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: 954-426-2965
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- -------------------
Not applicable None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.00024 PAR VALUE PER SHARE
Title of Class
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. Yes X No __
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 __
The Registrant's revenues for the year ended December 31, 1999 was $1,438,000.
The aggregate market value of Common Stock held by non-affiliates of the
Registrant as of April 17, 2000 was $0.
As of April 17, 2000 there were 1,707,219 shares of the common stock
outstanding.
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PART I
ITEM 1. BUSINESS
THE COMPANY
SenTech EAS Corporation and its wholly owned subsidiary, SenTech EAS
International, Inc., hereinafter referred to collectively as the "Company" or
"SenTech", manufactures, distributes, and services electronic article
surveillance ("EAS") systems and accessories worldwide. The Company's products
are used, primarily, by retailers to prevent financial losses attributed to
theft of merchandise. EAS equipment is composed of (i) a detachable or
disposable security circuit, label or other material (often referred to as a
"tag" or "target") , which is attached to or placed on the article to be
protected, and is either removed upon sale of the article or, if not removed,
activates a detection system if the article is transported beyond the protected
area, and (ii) a detection system which is usually located in the exit path of
the protected area and is activated when an article, to which a tag or target is
attached, is transported beyond the protected area. EAS equipment has developed
over the last 30 years in response to problems associated with theft and
inventory control in the retail industry.
The Company's original focus was sourcing, refurbishing, marketing, installing,
and servicing EAS equipment developed by other companies in the EAS industry.
Over the past five years, the Company's business has evolved more towards
assembling, marketing, and servicing EAS equipment developed by the Company. The
Company's current strategy is to further expand its operations focusing
primarily on its own EAS equipment while continuing to refurbish, market,
install, and service EAS equipment developed and sold by other companies. The
EAS equipment developed by the Company is compatible with EAS equipment
developed by other companies allowing the Company to market its own products to
retailers who have existing compatible equipment. Therefore, the Company
believes that it is able to attract customers who desire to upgrade their
existing systems as well as those customers who desire to purchase a new system
from an alternative supplier at lower prices.
The Company was incorporated in the State of Florida in February 1990 as
"Ultimate EAS Corporation" and changed its name on several occasions. Prior to
September 1995, the Company's name was "SenTech EAS Corporation." On September
22, 1995, all of the outstanding capital stock of SenTech EAS Corporation was
acquired by Lorry Bay & Co., Inc. through the merger of its subsidiary, Lorry
Bay Capital, into SenTech EAS Corporation. The resulting entity was renamed
SenTech EAS International, Inc. Lorry Bay & Co., Inc. was then merged into a
newly formed Florida corporation, SenTech EAS Corporation whereby the ultimate
surviving entity was SenTech EAS Corporation and its wholly-owned subsidiary,
SenTech EAS International, Inc. The Company's offices are located at 484
Southwest 12th Avenue, Deerfield Beach, Florida 33442-3108, (954) 426-2965.
ELECTRONIC ARTICLE SURVEILLANCE (EAS) INDUSTRY
Three distinct technologies are utilized in the EAS industry; radio frequency
("RF") detection, electromagnetic ("EM") detection, and acousto-magnetic ("AM")
detection. The Company manufactures, distributes, and services only EAS
equipment with RF detection.
EM DETECTION SYSTEMS
EM detection systems also utilize detection monitors at exit points combined
with detectable tags. The tags for EM detection systems also take the form of
reusable hard plastic tags or adhesive tags, however, instead of containing RF
circuitry, the detectable tags are electromagnetically sensitized strips. One of
the disadvantages of utilizing EM detection systems is the systems, unlike RF
detection systems, must be installed
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close together in order to detect EM tags passing out of the protected area. EM
systems are primarily used in food stores, video stores, and libraries, where
store operators are not as concerned with the visual appeal of the entrances.
One of the advantages of utilizing EM detection systems is EM detection tags,
unlike RF detection tags, are not detuned or rendered ineffective when applied
to metallic surfaces.
AM DETECTION SYSTEMS
Products utilizing acousto-magnetic technology are capable of covering broader
areas, and have a higher ability to detect labels and tags than standard EM
detection systems. However, systems utilizing acousto- magnetic technology, and
the required tags, are more expensive than standard EM detection systems.
RF DETECTION SYSTEMS
RF detection systems are the most prevalent in the marketplace. RF detection
systems utilize low ("LF"), high ("HF") or ultra high ("UHF" or "microwave")
frequency systems. In RF detection systems, electronic detectors, consisting of
antennas which emit radio waves of a specified frequency, are housed in
pedestals, overhead units, floor mats or other panels located at the exits of
protected areas (such as checkout counters, doorways, elevators, and escalator
locations). Tags for RF detection systems, which contain electronic circuitry
that interferes with the signal established between the detector panels, are
attached to or placed on the article to be protected.
The tags for RF detection systems take the form of either reusable hard plastic
tags or adhesive tags. Reusable hard plastic tags are attached to the
merchandise being protected usually by means of a specially designed fastener.
The reusable plastic tags can only be removed, without causing damage to the
article, by using a special decoupling device. Adhesive tags are disposable,
intended to be used only once, and are deactivated at the point of purchase by
passing the adhesive tag through a de-activation field. When an adhesive tag is
transported through the area between the detector panels, the radio interference
caused by the tag's circuitry triggers an alarm such as a flashing light, a
buzzer, or a central control point signal.
RF detection systems protect a large entrance or exit area because of their
broad scope of detection stemming from the broad range of radio waves. Although
systems using microwave frequencies (900 MHz) protect the widest entrances, the
Company's EAS equipment does not utilize microwave frequencies because the
Company believes that 8.2 MHz systems, such as those manufactured by the
Company, will be utilized in most of the future growth in the EAS industry. Tags
must be attached to merchandise upon arrival at a store or distribution center
and removed at the time of purchase. RF detection systems are most widely used
in the protection of "soft goods" (i.e., clothing, footwear), although RF tags
in the form of metallic stickers, referred to as "labels", are becoming widely
used in the protection of "hard goods" (i.e., health and beauty supplies,
electronics, books). Increasingly, there is a trend towards source tagging
whereby the manufacturer attaches the EAS tags on products before shipping the
products to retailers.
THE COMPANY'S PRODUCT LINE
The Company currently assembles, refurbishes, markets, installs, and services
the following EAS Equipment for use in the retail industry, all of which were
developed by the Company.
"X" AISLE(TM) SYSTEM
The "X" Aisle System is SenTech's newest and most powerful extended aisle Swept
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RF system which was introduced during the third quarter of 1998. The "X" Aisle
System consists of a set of pedestals constructed of durable lightweight
injection molded plastic which contain the RF detection circuits with each
pedestal measuring 60.5" tall, 18.25" wide and 4" deep. The primary color
available is beige, although custom-designed colors may be offered if requested
by customers. Two pedestals are capable of protecting entrances/exits up to 6
feet wide using an 8.2 MHz tag and up to 5.5 feet wide with a 1.5" adhesive
label. Since the "X" Aisle System detects any tags with 8.2 or 9.5 MHz RF, which
are commonly used frequencies, it is compatible with 8.2 or 9.5 MHz RF tags
designed by the Company and its competitors. The "X" Aisle System also uses
advanced software programmable circuit design including a Digital Signal
Processor, surface mounted electronic components, self testing circuitry, and
fiber optics. Its adaptive filtering circuitry is largely immune to false alarms
and electrical interference. The electronics are designed for easy installation
by field technicians, dealers, or end users. The Company believes the "X" Aisle
System is among the most effective, wide aisle, EAS detection systems currently
available. The "X" Aisle System was designed by the Company and is manufactured
and assembled by an unrelated party company.
MULTITAG(TM) II SYSTEM
The MultiTag II System consists of a set of pedestals which contain RF detection
circuits. Each pedestal measures 60" tall, 12" wide and 4.25" deep and is
constructed of a solid all metal frame and composite components. The primary
color available is black although custom-designed colors may be offered if
requested by customers. The MultiTag II System is capable of protecting
entrances/exits up to six feet wide. Since the MultiTag II System detects any
tags with 8.2 or 9.5 MHz RF, which are commonly used frequencies, it is
compatible with 8.2 or 9.5 MHz RF tags designed by the Company and its
competitors. The Company believes the MultiTag II System is among the most
effective EAS detection systems currently available. The Company also believes
the MultiTag II System is less susceptible to false alarm sources than other EAS
detection systems currently available. The MultiTag II System was designed by
the Company, and its sub- assemblies are manufactured by outside sub-contractors
and are assembled by employees of the Company at the Company's facilities.
DEFENDER SYSTEM
The Defender System consists of a set of pedestals which contain RF detection
circuits. Each pedestal measures 60" tall, 12" wide and 3" deep and is
constructed of textured satin black galvanized tubular steel open-frame
construction with charcoal gray molded plastic covers. The primary color
available is black tubing with charcoal gray covers although custom-designed
colors may be offered if requested by customers. The Defender System is capable
of protecting entrances/exits up to five feet wide. Since the Defender System
detects any tags with 8.2 or 9.5 MHz RF, which are commonly used frequencies, it
is compatible with 8.2 or 9.5 MHz RF tags designed by the Company and its
competitors. The Defender System is a low-cost system intended for dealer and
domestic price competitive sales. The Company believes the Defender System is
among the highest in target detection rates of EAS detection systems currently
available. The Company also believes the Defender System is less susceptible to
false alarm sources than other EAS detection systems currently available. The
Defender System was designed by the Company, and its sub-assemblies are
manufactured by outside sub-contractors and are assembled by employees of the
Company at the Company's facilities.
SOLO SYSTEM
The Solo System, introduced during the fourth quarter of 1997, consists of a
single pedestal which contains RF detection circuits. The pedestal measures
60.5" tall, 12" wide and 3" deep and is constructed of textured
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satin black galvanized tubular steel open-frame construction with charcoal gray
molded plastic covers. The primary color available is black tubing with charcoal
gray covers although custom-designed colors may be offered if requested by
customers. The Solo System is capable of protecting entrances/exits up to 9 feet
wide. Since the Solo System is available in either 2.0 or 3.25 MHz frequency
allowing for the detection of any tags with 2.0 or 3.25 MHz RF which are
commonly used frequencies, it is compatible with 2.0 and 3.25 MHz RF tags
designed by the Company and its competitors. The Company believes the Solo
System is among the most effective single pedestal EAS detection systems
currently available. The Company also believes the Solo System is less
susceptible to false alarm sources than other single pedestal EAS detection
systems currently available. The Solo System was designed by the Company, and
its sub-assemblies are manufactured by outside sub-contractors and are assembled
by employees of the Company at the Company's facilities.
DEACTIVATION PAD
The deactivation pad is an instrument that permanently deactivates any 8.2 MHz
RF disposable label. Disposable tags are adhesive labels that are attached to
the merchandise and often disguised as a simulated bar code or as a
point-of-purchase advertising message. The deactivation pad electronically
deactivates the RF circuitry contained within the disposable tag. The
deactivation pad was designed by the Company, and its sub-assemblies are
manufactured by outside sub-contractors and are assembled by employees of the
Company at the Company's facilities. The deactivation pad contains all necessary
electronics and does not need to be "slaved" together with other components like
most EAS deactivation equipment. The deactivation pad is a 10.5" by 10.5" square
pad consisting of a black plastic chassis with a solid black metal base.
Multiple deactivation pads may be used together without causing interference
with the RF circuitry unlike most other deactivators available in the EAS
industry.
MAGNETIC DETACHERS
Magnetic Detachers are instruments used to remove reusable hard tags that
contain RF circuitry from the merchandise to which they are attached. A magnetic
lock releases the pins contained within the reusable hard tags. The Company
offers two types of magnetic detachers; (i) the Table Top Detacher, and (ii) the
Surface Mount Detacher. Both magnetic detachers were designed by the Company,
and their sub-assemblies are manufactured by outside sub-contractors and
assembled by employees of the Company at the Company's facilities. The Table Top
Detacher measures 5" in diameter, is constructed of a durable scratch-resistant
finish, and is designed to be secured to a counter-top using a security lanyard.
The Surface Mount Detacher measures 2.5" or 3" in diameter and is designed to be
permanently attached to a surface such as a counter-top. The magnetic detachers
are compatible with tags that are designed by the Company and its competitors.
THIRD PARTY PRODUCT LINES
The Company currently sells the following EAS equipment which were developed by
other companies in the EAS Industry but are made to the Company's
specifications.
MINI SOLO TAG
The Mini Solo Tag, introduced during the fourth quarter of 1997, is a durable
lightweight 2.0 or 3.25 MHz RF tag which is used with SenTech's Solo System. The
Mini Solo Tag is light gray or beige and is compatible with all 2.0 or 3.25 MHz
RF systems and most ink tags.
INK TAGS
Introduced during 1998, the SenTech Ink Tag contains two vials of ink on the
head of the tag which breaks
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and disperses permanent ink onto the item to which it is attached if improperly
removed. This feature provides an extra level of deterrence against shoplifting
by adding the threat of permanent garment damage if the tag is improperly or
forcibly removed. The SenTech Ink Tag may be used together with an EAS hard tag
or with a locking clutch.
OMNI TAG/MINI TAG
The Omni Tags and Mini Tags are reusable hard tags constructed of strong
lightweight plastic. The Omni Tag is a 2.75" by 2.25" rectangular tag and the
Mini Tag is a 1.875" by 1.625" rectangular tag, both of which contain 8.2 MHz RF
circuitry. Both tags are available in black, beige, or custom-designed colors.
If either tag passes between an RF detection system an alarm is triggered. The
tags are attached to merchandise using special fasteners prior to the
merchandise being placed on the sales floor and are detached at the point of
purchase using a magnetic detacher. Removal of the tags without the magnetic
detacher will damage the protected merchandise. The Omni Tag and the Mini Tag
are compatible with 8.2 MHz RF detection systems.
LANYARDS
Lanyards are used in conjunction with any type of tag. It allows for the tagging
of hard good items which have closed loop openings such as handbags, luggage and
tennis rackets.
PINS
Several styles of pins are available for use with various types of reusable hard
tags.
PRODUCT DEVELOPMENT
During the fourth quarter of 1997, the Company developed and marketed the Solo
System, described above, which has been well received in the marketplace. The
Company believes the Solo System is among the most effective single pedestal EAS
detection systems currently available.
In June 1997 (and amended December 1999), the Company entered into an agreement
with an unrelated company which provides for the development and manufacture of
the Company's third generation EAS system, the "X" Aisle System, and the
electronic printed circuit boards for the MultiTag II System and the Defender
System. The Agreement requires the Company to pay for non-recurring engineering
costs in exchange for an assignment of fifty percent of the joint technology, as
defined, by the Agreement.
Management believes that any new EAS equipment it develops, combined with the
Company's existing equipment, customer and market base, may provide the Company
with the potential for significant growth. Historically, the Company's research
and development expenses have been immaterial relative to the Company's
operations.
ASSEMBLY AND MANUFACTURING OPERATIONS
The Company's manufacturing operations consist primarily of the procurement of
component parts and the assembly of finished products at the Company's leased
facility in Deerfield Beach, Florida. Most of the EAS equipment developed by the
Company consists of component parts manufactured for the Company or purchased
from third parties. The Company does not maintain an extensive finished goods
inventory since the Company believes it is able to obtain required component
parts, assemble, and ship its product within competitive lead times acceptable
to its customers. The Company subcontracts with local vendors to assemble
printed circuit boards, and machine, mold, and finish various component parts.
The Company anticipates it
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will continue to rely primarily on such third party manufacturers and vendors in
order to minimize overhead. The Company minimizes dependence on any one supplier
by maintaining sufficient alternatives for its raw materials and finished goods
requirements.
REFURBISHING OPERATIONS
The Company acquires and refurbishes existing products developed by its major
competitors primarily from customers who are upgrading or changing their current
detection systems and from liquidation and foreclosure sales. All of the
Company's refurbishing activities, including the inspection and testing of the
refurbished product, are performed by employees of the Company at the Company's
leased facility in Deerfield Beach, Florida.
INSTALLATION AND CUSTOMER SERVICE
The Company usually provides one-year warranties on all its products covering
both parts and labor and offers optional extended warranties which may be
purchased by customers. In July 1995, the Company entered into a service
agreement effective August 1995 with a national service organization which
provides for the installation and servicing of any 8.2 MHz EAS system. The
national service organization has 31 service centers throughout the United
States and is capable of providing service on a national level. Any EAS systems
not covered by the agreement are handled by the Company's service personnel or
other third party service providers. The agreement is for a one-year term and is
automatically renewable for one-year periods unless terminated in writing by
either party. The Company has not received any termination notices and believes
its relationship with the service provider is favorable. Although there can be
no assurance the agreement will not be terminated or will be renewed in the
future, the Company anticipates the agreement will automatically be renewed
through August 2000.
MARKETS AND MARKETING STRATEGY
The Company markets and sells EAS equipment in the United States and abroad
through an internal sales force of two individuals and Company management. The
Company's current regional sales representatives primarily cover the Eastern
United States. The Company is in the process of recruiting a national sales
force to expand its coverage of the United States market. Domestic dealer and
foreign distributor sales are conducted primarily by internal sales people.
Management markets EAS equipment through a direct-calling program in addition to
attending trade shows, advertising in trade publications, a direct-mailing
program, and internet advertising.
There were no material concentrations of sales or accounts receivable outside
the United States during December 31, 1999 and 1998.
The Company's sales and marketing efforts are focused on retailers who do not
yet utilize EAS equipment as well as retailers who presently utilize EAS
equipment developed by the Company's major competitors and are seeking an
alternative supplier of EAS equipment offering lower prices with more
personalized service. Since the Company refurbishes, markets, and services EAS
equipment developed and sold by other companies, and its own products are
compatible with such other products, the Company believes it is able to compete
for many of the needs of retailers presently utilizing EAS equipment.
With respect to EAS equipment developed by other companies, the Company
purchases such equipment from third party manufacturers and distributors in the
United States and abroad and resells such EAS equipment at discounted rates. The
Company is able to purchase such equipment from third parties at favorable rates
based upon its relationship with such third parties.
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BACKLOG
At December 31, 1999, the Company ended the year with $26,100 in backlog of
sales orders compared to $28,000 in backlog at December 31, 1998. The Company
expects the entire backlog of sales orders at the end of 1999 to be shipped
prior to the end of the first quarter of 2000. The amount of backlog at any time
during the year is not necessarily indicative of the volume of business for the
upcoming year. The Company's revenues are substantially dependent on its
customers' seasonal retail sales.
EMPLOYEES
The Company currently has 7 full time employees, none of whom have entered into
employment agreements with the Company nor are represented by a labor union.
From time to time, the Company hires temporary personnel to accommodate special
requirements for larger projects. The Company does not have key-man life
insurance on any of its employees.
COMPETITION
The Company competes in the EAS industry with several companies. Many of these
companies are larger and better known and have significantly greater financial,
technological, manufacturing and marketing resources than the Company. The
Company's principal competitors are Sensormatic Electronics Corporation
("Sensormatic"), Checkpoint Systems, Inc. ("Checkpoint"), Sentry Technology
Corporation ("Sentry"), and a number of smaller companies. Although the Company
believes it has strived to compete effectively in the past by offering
innovative products and competitive prices, no assurance can be given that the
Company will be capable of effectively competing successfully in the future, or
that the Company will be successful in maintaining or expanding its share of the
market for its products. No assurance can be given the products or technologies
that may be developed and introduced by competitors will not render the
Company's products less competitive or obsolete. The Company remains competitive
in the EAS industry because the equipment developed by the Company is compatible
with EAS equipment developed by other companies. In addition, the Company
purchases EAS equipment developed by other companies from third party
manufacturers and distributors at favorable rates and resells such equipment at
discounted prices.
GOVERNMENT REGULATION
The EAS Industry is subject to extensive regulation by various federal and state
regulatory agencies including the Federal Communications Commission (the "FCC").
Any equipment manufactured by other companies that is refurbished and resold by
the Company has received the required approvals from the FCC. The Company
intends to submit applications for approval by the FCC of equipment invented and
developed by the Company. There can be no assurance that the Company will obtain
the requisite approvals, and the failure to obtain such approvals could have a
materially adverse effect upon the Company's business.
From time to time, legislation and regulations that could potentially affect the
Company, either beneficially or adversely, have been proposed by federal and
state legislators and regulators. Management is not aware of any currently
pending or proposed legislation or regulations which would have a materially
adverse impact on the Company's operations if adopted. There can be no assurance
that the FCC or various state regulators will not adopt regulations or take
other actions that would materially adversely affect the business of the
Company.
ABSENCE OF PATENT PROTECTION
The Company does not currently have patent protection on most of its products.
Its ability to compete
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effectively with other companies will depend, in part, on its ability to
maintain the proprietary nature of its products. The Company may apply for
patent protection on future products it develops, however, there can be no
assurance that it will be successful in obtaining such patents or, if obtained,
that such patents will afford the Company sufficient protection. The Company
intends to rely substantially on unpatented proprietary information and
technological know-how, and there can be no assurance that others will not
develop such information and know-how independently or otherwise obtain access
to its technology. Also, it is not certain that the Company's proprietary
technology will not infringe patents or other rights owned by others. In the
event that patent infringement claims are brought against the Company, the
Company may be forced to obtain a license for such technology, and there can be
no assurance that it will be successful in obtaining such licenses. In the event
that the Company contests an infringement claim, it may divert the Company's
resources from other purposes.
TECHNOLOGICAL OBSOLESCENCE OR FAILURE AND UNCERTAIN MARKET ACCEPTANCE OF FUTURE
PRODUCTS
The markets served by the Company are to a certain extent characterized by
technological advances, changes in customer requirements, and occasional new
product introductions and enhancements. The Company's business may require, at
times, ongoing research and development efforts and expenditures, and its future
success may depend on its ability to enhance its current products and develop
and introduce new products which keep pace with technological developments in
response to evolving customer requirements. There can be no assurance the
Company's failure to anticipate or respond adequately to technological
developments and changing customer requirements, or the occurrence of
significant delays in new product development or introduction, or the
technological failures of its products or the systems in which they are
incorporated, would not result in a material loss of anticipated future revenues
and seriously impair the Company's competitiveness. In addition, the Company may
misgauge market needs and introduce products which fail to gain the necessary
market acceptance for whatever reason. Hence, it is also uncertain whether new
products or enhancements of existing products can be successfully marketed and
sold by the Company.
ITEM 2. PROPERTIES
The Company's offices, warehouse, and distribution center are located in 6,300
square feet of leased facilities in Deerfield Beach, Florida of which
approximately 3,600 square feet are used for offices. Through the end of the
lease term on January 31, 2000, the lease provides for payments of approximately
$5,000 per month including sales tax and common area maintenance expenses. The
Company believes these facilities are adequate to accommodate operations through
the end of the lease term. A new lease was entered into for 5500 square feet of
new office, warehouse and distribution located at 2843 Centerport Circle,
Pompano Beach, Florida of which the lease term will expire in June 2005. The new
lease provides for payments of approximately $4,500 per month plus sales tax .
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the
ordinary course of business. Although the Company is unable to predict the
ultimate disposition of these matters, the Company does not believe the
resolution of such matters will have a material adverse effect on its
consolidated financial position, results of operations, or liquidity.
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. On January 11, 2000,
the matter was dismissed with prejudice without payment of damages.
Other than the above claim, the Company is not involved in any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A meeting of the Company Board of Directors was held on December 16, 1999. Four
of the Company's incumbent directors : Edward A. Mulhare, Thomas A. Nicolette,
Milan Resanovich, and Richard J. Spagna appointed the new President and CEO,
Jeff Wiebell as the fifth Director replacing Saul Pozensky. The appointment of
Richard J. Spagna as the trustee for the employee 401K benefit plan "The
ChamberPlan" was ratified. The re-appointment of Spear, Safer, Harmon & Co. as
the Company's independent certified public accountants for the ensuing year was
ratified.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
The Company's common stock has not commenced trading.
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.
In June 1998 the Company issued 30,000 shares of the Company's common stock
pursuant to directors' and officers' compensation agreements. (None in 1999)
The Company has never paid a cash dividend on its common stock since its
inception nor does it anticipate paying any cash dividends in the near future.
The Company intends to retain any future earnings to finance the operations of
the Company.
At December 31, 1999, the Company had approximately 111 record holders of its
common stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS
Except for historical information contained herein, certain matters discussed
herein are forward looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These forward
looking statements are generally based on the Company's expectations and are
subject to certain risks and uncertainties, including but not limited to;
economic, competitive, regulatory, growth strategies, available financing, and
other factors discussed elsewhere in this Form 10-KSB and other documents filed
by the Company with the SEC. The associated risks and uncertainties could cause
actual results to differ materially from historical results or the Company's
expectations. In light of these risks and uncertainties, there can be no
assurance the forward looking statements contained in this Form will occur. The
Company undertakes no obligation to publicly update or revise any forward
looking statements resulting from future events, new information, or from any
other circumstances.
YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
REVENUES
Revenues were approximately $1,438,000 for the year ended December 31, 1999, a
decrease of nearly $612,000 or 30% from revenues of $2,050,000 for the year
ended December 31, 1998. The decrease in revenues for the year ended December
31, 1999 was primarily attributed to the decrease in sales from a significant
customer which generated 2% and 20% of the Company's total revenues for the
years ended December 31, 1999 and 1998, respectively. The Company began doing
business with a new significant customer which accounted for 12% of revenues in
1999 and in year 2000 the Company anticipates sales to the customer to continue
to grow. Excluding revenues from significant customers, 1999 revenues decreased
more than 14% from revenues in 1998 although the Company's customer base
remained relatively constant during 1999.
GROSS PROFIT
Gross profit was approximately $618,000 for the year ended December 31, 1999, a
decrease of over $204,000 or 25% from gross profit of $822,000 for the year
ended December 31, 1998. Gross profit margin were 43% for the year ended
December 31, 1999, an increase from 40% for the year ended December 31, 1998,
primarily as a result of the sales mix of products sold and a combination of
lower product cost. Gross profit margins are expected to remain fairly constant
in the near term due to the ongoing maintenance of the Company's cost control
management program and pricing structure. 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 constant as the Company attempts to
expand its customer base.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE
Selling, general, and administrative expenses were nearly $834,000 for the year
ended December 31, 1999, an increase of approximately $23,000 or 3% from
selling, general, and administrative expenses of $811,000 for the year ended
December 31, 1998. Overall, selling, general and administration expenses
remained stable during 1999 except for a one time expense related to the
terminated merger proposal with Ensec. Despite changes and reductions in Company
personnel, compensation expense remained relatively constant including the
payment of $40,000 of non-employee directors' cash compensation. Professional
fees were approximately $89,000 for 1999 and $105,000 for 1998. Selling,
general, and administrative expenses, especially marketing
<PAGE>
costs, are expected to moderately increase over the next year relative to the
expected increase in revenues resulting from the Company's new President and
CEO's focused sales plan.
INTEREST EXPENSE AND INTEREST INCOME
Interest expense was approximately $4,200 for the year ended December 31, 1999,
a decrease of over $300 or 7% from interest expense of $4,500 for the year ended
December 31, 1998. Interest income for each of the years ended December 31, 1999
and 1998 primarily represents interest earned on cash balances in excess of
operating requirements.
NET INCOME/(LOSS) AND NET INCOME/(LOSS) PER SHARE
Net loss was approximately $(216,000) for the year ended December 31, 1999, a
decrease of over $230,000 from net income of $14,000 for the year ended December
31, 1998 principally as a result of a decrease of approximately $204,000 in
gross profit and an increase in selling, general and administrative expenses of
over $23,000.
Net loss per share was $(0.13) at December 31, 1999, a decrease of $0.14 per
share from the net profit per share of $0.01 at December 31, 1998 resulting from
the $230,000 decrease in net income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's accumulated deficit was approximately $(1,904,000) and
$(1,688,000) at December 31, 1999 and 1998, respectively. Working capital was
decreased to $621,000 from $784,000 at December 31, 1999 and 1998, respectively.
Net cash used in operating activities was approximately $(94,000) in 1999, a
decrease of $(56,000) from $(150,000) in 1998 primarily as a result of an
increase in gross margins by over 7%, operating efficiencies and cost cutting
measures. The Company believes its working capital plus the expected results of
operations in 2000 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 2000.
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 has communicated 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. During 1999,the Company completed its plan to be year 2000
compliant and therefore, expects no material impact to its financial position,
operations and cash flows. There can be no assurance whether the Company or such
third parties will successfully address their respective year 2000 issues and
whether the failure to do so will not
<PAGE>
have a material adverse effects on the Company's business, financial condition,
cash flows, and results of operations.
ITEM 7. FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
Independent Auditors' Report 11
Consolidated Balance Sheets at December 31, 1999 and 1998 12
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998 13
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999 and 1998 14
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998 15
Notes to Consolidated Financial Statements 16-23
Consolidated Financial Statement schedules have been omitted because they are
not applicable or the required information is shown in the Consolidated
Financial Statements or the notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
SenTech EAS Corporation and Subsidiary
Deerfield Beach, Florida
We have audited the accompanying consolidated balance sheets of SenTech EAS
Corporation and Subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of SenTech
EAS Corporation and Subsidiary, as of December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/S/ SPEAR, SAFER, HARMON & CO.
Miami, Florida
February 6, 2000
<PAGE>
<TABLE>
<CAPTION>
SENTECH EAS CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
DECEMBER 31, DECEMBER 31,
1999 1998
----------------------------------------------
ASSETS
- ----------------------------------------------------------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 211,642 $ 305,307
Accounts receivable, net of allowances of $5,000 148,043 110,576
Inventories 401,974 478,886
Other current assets 8,176 23,847
------------------- ------------------------
Total current assets 769,835 918,616
Property and equipment, net 18,684 33,450
Other assets 154,457 192,570
------------------- ------------------------
$ 942,976 $ 1,144,636
=================== ========================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------
Current liabilities
Accounts payable $ 112,743 $ 110,090
Accrued liabilities 67,630 55,814
------------------- ------------------------
Total current liabilities 180,373 165,904
------------------- ------------------------
Long-term debt 203,000 203,000
------------------- ------------------------
Shareholders' equity
Common stock; $0.00024 par value; 20,833,333 authorized;
1,677,219 issued and outstanding 403 403
Additional capital 2,463,182 2,463,182
Accumulated deficit (1,903,982) (1,687,853)
------------------- ------------------------
Total shareholders' equity 559,603 775,732
------------------- ------------------------
$ 942,976 $ 1,144,636
=================== ========================
</TABLE>
- ----------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
SENTECH EAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
YEARS ENDED DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C>
Revenues $ 1,438,167 $ 2,049,856
Cost of revenues (820,137) (1,227,780)
--------------------- -----------------------
Gross profit 618,030 822,076
Selling, general, and administrative expenses 833,987 810,967
--------------------- -----------------------
Operating (loss)/income (215,957) 11,109
Interest expense (4,239) (4,458)
Interest income 4,067 7,676
--------------------- -----------------------
(Loss)/income before provision for income taxes (216,129) 14,327
Provision for income taxes -- --
Net (loss)/income $ (216,129) $ 14,327
===================== =======================
(Loss)/Earnings per common share-Basic $ (0.13) $ 0.01
===================== =======================
</TABLE>
- ----------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
SENTECH EAS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
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 2,136 -- 2,137
Issued in lieu of payment for
professional services 5,901 1 13,999 -- 14,000
Issued pursuant to compensation
arrangements 30,000 7 2,993 -- 3,000
Net income -- -- -- 14,327 14,327
---------------- ---------------- -------------------- ---------------------- ---------------
BALANCE AT DECEMBER 31, 1998 1,677,219 $ 403 $ 2,463,182 $ (1,687,853) $ 775,732
Net loss -- -- -- (216,129) (216,129)
---------------- ---------------- -------------------- ---------------------- ---------------
BALANCE AT DECEMBER 31, 1999 1,677,219 $ 403 $ 2,463,182 $ (1,903,982) $ 559,603
================ ================ ==================== ====================== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
SENTECH EAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
YEARS ENDED DECEMBER 31, 1999 1998
- ---------------------------------------------------- ------------- ----------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income/(loss) $ (216,129) $ 14,327
Adjustments to reconcile net income/(loss) to net
cash used in operating activities:
Depreciation and amortization 52,166 23,658
Debt interest converted to common stock --- 2,138
Stock issued in lieu of payment for professional services --- 14,000
Stock based compensation --- 3,000
Net changes in operating assets and liabilities:
Accounts receivable (37,467) 89,226
Inventories 76,912 52,311
Other current assets 15,671 7,303
Other assets 713 (68,085)
Accounts payable 2,653 (280,669)
Accrued liabilities 11,816 (7,238)
--------------- --------------
Net cash used in operating activities (93,665) (150,029)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures --- (3,270)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable to bank --- (16,657)
Net cash (used in) provided by financing activities --- (16,657)
--------------- --------------
Net decrease in cash and cash equivalents (93,665) (169,956)
Cash and cash equivalents at beginning of year 305,307 475,263
--------------- --------------
Cash and cash equivalents at end of year $ 211,642 $ 305,307
=============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest --- $ 200
- --------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
SenTech EAS Corporation manufactures, distributes, and services electronic
article surveillance (EAS) systems and accessories worldwide used
primarily by retailers to prevent financial losses attributed to theft of
merchandise.
PRINCIPLES OF CONSOLIDATION
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.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements, the Company considers all
highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. Cash in excess of operating requirements is
invested in short term income producing instruments with stable, high
quality financial institutions which may exceed insurable limits. The book
value of the Company's investments approximates fair value because of the
short maturity of these instruments.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful
lives of the assets or the lease term ranging from three to eight years.
REVENUE RECOGNITION
Revenue from sales of systems and accessories is recognized upon shipment
of the equipment or upon acceptance by a third party leasing company of an
operating lease and the related equipment. Revenue from services are
recognized as earned, and maintenance revenues are recognized ratably over
the term of the maintenance contract.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement
assets and liabilities and their respective tax bases including operating
losses and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income
in the years in which those differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized as income
<PAGE>
in the period which includes the tax enactment date. A valuation allowance
is recorded to reduce deferred tax assets when realization of a tax
benefit is unlikely.
EARNINGS/(LOSS) PER COMMON SHARE-BASIC
Earnings/(loss) per common share-basic 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 1,677,219 and 1,677,219 at December 31, 1999 and 1998,
respectively. Potential common stock, when included in the computation of
dilutive earnings per share, was anti- dilutive at December 31, 1999 and
1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
IMPAIRMENT
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and For Long- Lived Assets to Be Disposed Of", the
Company reviews long-lived assets and related goodwill for impairment on
an exception basis whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be fully recoverable
through future cash flows. If this review indicates that the assets and
related goodwill will not be recoverable, as generally determined based on
estimated undiscounted cash flows over the remaining amortization period,
the carrying amount would be adjusted to fair value and any loss will be
recognized in the statement of operations and certain disclosures
regarding the impairment will be disclosed in the notes to financial
statements. At December 31, 1999 and 1998, the Company believes no
material impairments existed.
RECENT PRONOUNCEMENTS IN ACCOUNTING STANDARDS
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.
<PAGE>
In June of 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which is effective for fiscal periods
beginning after June 15, 2000. The Company does not expect a material
impact upon its financial reporting or presentation due to the adoption of
SFAS No. 133.
In October 1998, the Financial Accounting Standards Board Issued Statement
of Financial Accounting Standards No. 134 "Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise" which is effective for the first
fiscal quarter beginning after December 15, 1998. There is no impact to
the Company's financial reporting or presentation due to the adoption of
SFAS No. 134.
In February 1999, the Financial Accounting Standards Board Issued
Statement of Financial Accounting Standards No. 135 "Recission of FASB
Statement No. 75 and Technical corrections" which is effective for
financial statements issued after February 15, 1999. There is no impact to
the Company's financial reporting or presentation due to the adoption of
SFAS No. 135.
RECLASSIFICATION - Certain reclassifications have been made in the 1998
financial statements to conform to the 1999 presentation.
2. INVENTORIES
Inventories consisted of the following at December 31, :
1999 1998
----------------- -----------------
Raw materials $ 119,440 $ 249,129
Finished goods 282,534 229,757
----------------- -----------------
$ 401,974 $ 478,886
================= =================
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31,:
1999 1998
------------- ----------
Furniture, fixtures and office equipment $95,707 $ 95,707
Machinery and equipment 87,850 87,850
Leasehold improvements 5,250 5,250
------------- ----------
188,807 188,807
Accumulated depreciation and amortization (170,123) (155,357)
------------- ----------
$18,684 $ 33,450
============= ==========
<PAGE>
Depreciation expense for the years ended December 31, 1999 and 1998, was
approximately $15,000 and $20,000, respectively.
4. OTHER ASSETS
Other assets consisted of the following at December 31,:
1999 1998
-------------- ----------
Non-recurring engineering costs $ 187,000 $ 187,000
Accumulated amortization of non-recurring
engineering costs (41,035) (2,922)
Deposits 8,492 8,492
------------- ----------
$ 154,457 $ 192,570
============= ==========
Amortization expense for the years ended December 31, 1999 and 1998 was
approximately $38,000 and $3,000, respectively.
5. LONG-TERM DEBT
Long-term debt consisted of the following at December 31,:
1999 1998
--------------- ------------
8% mandatory convertible notes $ 53,000 $ 53,000
6% senior notes payable 150,000 150,000
--------------- ------------
203,000 203,000
Current maturities of long-term debt _ -
--------------- ------------
$ 203,000 $ 203,000
=============== ============
NOTE PAYABLE TO BANK
In March 1998, the Company paid in full the balance of a $225,000 four year loan
agreement bearing interest at 7.5% with its principal lending bank. The note was
collateralized by substantially all the assets of the Company and contained
certain restrictive covenants. Principal and interest payments of $5,429 were
paid monthly through March 1998.
MANDATORY CONVERTIBLE NOTES
Through December 1994, the Company issued 8% Mandatory Convertible Notes
totaling in the aggregate $932,250 due June 1997 of which $226,000 of the notes
<PAGE>
were issued to related parties. Upon an event resulting in the Company's common
stock being publicly held as defined by the note, the notes provide for
mandatory conversion at the rate of one share of common stock for each $3.49 of
outstanding amount of principal and accrued interest. Interest at 8% is payable
annually in arrears.
During 1995, $816,250 of the convertible notes plus $125,642 accrued interest
were converted into common stock.
In June 1996, the Company tendered an offer to the holders of the convertible
notes a one time reduced conversion rate of $1.35 to induce note holders to
convert their notes to shares of the Company's common stock. Accordingly, during
1996, $63,000 of the notes plus $19,492 accrued interest were converted to
58,381 shares of the Company's common stock.
The maturity date for the remaining $53,000 of the convertible notes was
extended to January 2001 in exchange for warrants to purchase 5,000 shares of
common stock at $2.40 per share. The warrants were issued during 1998 and 1997.
SENIOR NOTES PAYABLE
In May 1995, the Company issued to two directors of the Company 6% Senior Notes
totaling in the aggregate $330,000 due June 1997 with detachable warrants to
purchase 137,500 common stock shares expiring January 1, 2001. Interest at 6% is
payable annually in arrears subject to certain net income requirements.
In June 1996, the Company tendered an offer to the holders of the senior notes a
one time reduced conversion rate of $1.35 to induce note holders to convert
their notes to shares of the Company's common stock. Accordingly, during 1996,
one holder of $180,000 of the senior notes tendered the full amount in payment
of the exercise price of the detachable warrant and received 133,333 shares of
the Company's common stock.
The maturity date for the remaining $150,000 of the senior notes was extended to
January 1, 2001 in exchange for warrants to purchase 20,000 shares of common
stock at $2.40 per share. The warrants were issued during 1998 and 1997.
No interest was paid or payable on the senior notes during 1999 and 1998. The
total long-term debt of $203,000 matures January 1, 2001.
6. SHAREHOLDERS' EQUITY
In June 1998, the Company issued 30,000 shares of the Company's common
stock pursuant to directors' and officers' compensation arrangements,
respectively (none in 1999). The Company has accounted for the issuance of
the shares of the Company's common stock to the Company's directors and
officers in accordance with Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation". Accordingly, the
Company included in the consolidated statement of operations approximately
$3,000 of compensation expense during 1998 (none in 1999). For purposes of
recording compensation expense related to the Company's directors' and
officers' stock based compensation, each share of stock was valued using
the net tangible book value per share.
<PAGE>
7. STOCK OPTIONS AND WARRANTS
The following schedule summarizes stock warrant activity and status:
1999 1998
---------------- -----------
Outstanding at beginning of year 892,180 879,680
Issued pursuant to compensation arrangements 50,000 ---
Issued to related parties --- 12,500
------------ ---------
Outstanding at end of year 942,180 892,180
============ =========
Price range of warrants outstanding at
end of year $1.92 to 5.50 $1.92 to
5.50
Price range of warrants exercised during the year - -
Weighted average exercise price of currently
exercisable warrants $4.58 $4.58
Weighted average exercise price of
exercisable warrants outstanding $4.58 $4.58
8. INCOME TAXES
At December 31, 1999, the Company had net operating loss carryforwards for
income tax purposes of approximately $1,788,000 which may be available to
offset future taxable income, if any, through 2019.
Deferred tax liabilities (assets) consisted of the following at December
31,:
1999 1998
---------------- --------------
Net operating loss carryforwards $(608,000) $(540,000)
Valuation allowance 608,000 540,000
---------------- --------------
- -
================ ==============
Since such tax benefit is dependant upon future tax earnings, the Company
has chosen not to recognize such benefit for financial reporting purposes
in 1999 and 1998. Consequently, there was an increase in the valuation
allowance of approximately $ 68,000 in 1999 due to the aforementioned
uncertainty.
<PAGE>
8. INCOME TAXES (CONTINUED)
A reconciliation of the statutory income tax rate with the Company's
effective income tax rate follows:
<TABLE>
<CAPTION>
1999 1998
------------------ -----------------
<S> <C> <C>
Statutory federal income tax rate 34.0% 34.0%
State income tax, net of federal income tax benefit 3.6 3.6
Federal tax benefit of net operating loss carryforward (37.6) (37.6)
------------------ -----------------
Effective income tax rate - -
================== =================
</TABLE>
9. CONCENTRATION OF CREDIT RISK
The Company's revenues included sales to one customer in 1999 and 1998
representing 12% and 20% of total revenues, respectively. Approximately
$22,000 was due from the customer and included in accounts receivable at
December 31, 1998 (none in 1999). The Company minimizes credit risk
through diversification and continued evaluation of its customers'
financial condition and account status.
During 1999 and 1998, the Company purchased approximately 21% and 29% of
its inventory from one vendor in 1999 and in 1998, respectively, of which
approximately $15,000 was payable to the supplier and included in accounts
payable at December 31, 1998 (none in 1999). The Company minimizes
dependence on any one supplier by maintaining sufficient alternatives for
its raw materials and finished goods requirements.
There were no material concentrations of sales, accounts receivable, nor
identifiable assets outside of the United States during December 31, 1999
and 1998.
10. EMPLOYEE BENEFIT PLANS
Since January 1, 1998, the Company provides a 401(k) and profit sharing
plan (the "Plan") for eligible employees whereby the Company's annual
contributions to the Plan are made at the discretion of the board of
directors. The Company did not make any contributions to the Company's
Plan during 1999 and 1998.
An employee stock option plan (the "Plan") was adopted by the shareholders
of the Company in 1995. The plan provides for 312,500 shares of common
stock to be issued at the discretion of the Compensation Committee of the
Board of Directors. Of this amount, 156,250 shares may be purchased
pursuant to the exercise of incentive stock options, and 156,250 shares
may be purchased pursuant to the exercise of non- qualified stock options.
No stock options under the Plan have been granted since the inception of
the Plan.
<PAGE>
11. COMMITMENTS AND CONTINGENCIES
AGREEMENT AND PLAN OF MERGER
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% of the outstanding common shares of Sensec,
and the Ensec stockholders will receive approximately 60% 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".
Effective December 16, 1999, the Company and Ensec mutually agreed to
terminate the agreement and plan of merger.
PURCHASE AND MANUFACTURING AGREEMENT
In June 1997, the Company entered into a three year purchase and
manufacturing agreement (the "Agreement"). with a company whose former
President and Chief Executive Officer is a Director of the Company. The
Agreement, as amended in1999, provided 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 were
capitalized at cost pursuant to paragraphs 11 and 12 of SFAS 2 and are
amortized as a component of cost of revenues using the straight-line
method over the estimated useful life of the technology anticipated to be
five years. Effective January 1, 1999, the Company changed its method of
amortization from the units of production method to the straight line
method. The change was applied on prospective basis.
LEASES
The Company leases its office and production facility and certain
equipment under non-cancelable operating leases expiring through 2000.
Rent expense for all operating leases approximated $65,000 and $45,000 in
1999 and 1998, respectively. Future minimum lease payments for operating
leases having non-cancelable terms in excess of one year at December 31,
1999 are approximately $4,000 in 2000. During March 2000, a new lease was
entered into for 5,500 square feet of new office, warehouse and
distribution space. The terms of the lease provide for monthly payments of
$4,500 plus sales tax through June 2005.
INSTALLATION AND CUSTOMER SERVICE AGREEMENT
In July 1995, the Company entered into a service agreement effective
August 1995 with a national service organization which provides for the
installation and servicing of any 8.2 MHz EAS system. Any EAS systems not
covered by the agreement are handled by the Company's service personnel or
other third party service providers. The agreement is for a one-year term
and is automatically renewable for one-year periods unless terminated in
writing by either party. The Company has not received any termination
<PAGE>
notices and believes its relationship with the service provider is
favorable. Although there can be no assurance the agreement will not be
terminated or will be renewed in the future, the Company anticipates the
agreement will automatically be renewed through August 2000. Costs
incurred in connection with this agreement were approximately $11,000 and
$24,000 for each of the years ended December 31, 1999 and 1998.
LITIGATION
The Company is involved in various claims and legal actions arising in the
ordinary course of business. Although management is unable to predict the
ultimate disposition of these matters, the Company does not believe the
resolution of such matters will have a material adverse effect on its
consolidated financial position, results of operations, or liquidity.
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. The Company has recorded in accrued liabilities a
provision of approximately $20,000 for any liability which may result from
the plaintiff's claims.
On January 11, 2000, the matter was dismissed with prejudice without
payment of damages.
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 communicated 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. During
1999,the Company completed its plan to be year 2000 compliant and
therefore, expects no material impact to its financial position,
operations and cash flows. There can be no assurance whether the Company
or such third parties will successfully address their respective year 2000
issues and whether the failure to do so will not have a material adverse
effects on the Company's business, financial condition, cash flows, and
results of operations.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in nor disagreements with the Company's Accountants on
accounting or financial disclosures.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth certain current information concerning the
directors and executive officers of the Company, including their ages, position,
and tenure as of the date hereof:
DIRECTOR/
NAME AGE OFFICER SINCE POSITIONS WITH THE COMPANY
- ---- --- ------------- --------------------------
Jeff Wiebell 38 1999 President, Chief Executive
Officer and Director
Richard J. Spagna 38 1990 Vice President Operations
and Director Secretary and
Treasurer
Edward A. Mulhare 73 1994 Chairman of the Board of
Directors
Milan Resanovich 69 1994 Vice Chairman of the Board
of Directors
Thomas A. Nicolette 49 1997 Director
Jeffrey A. Wiebell has been President and Chief Executive Officer of SenTech
since August 1999. Between September 1990 and August 1999 he has worked in
various capacities at Pinkertons USA Security Integration Division, Cardkey
Systems and Sensormatic Electronics Corporation. For the last 9 years, Mr.
Wiebell has been focused on management, marketing and sales of security related
products, security system design and security product integration. From 1984 to
1990 Mr. Wiebell managed various insurance departments at Midland Guardian, he
was an Asset Manager for a division of USF&G and managed international sports
venues at Heritage Sports. He received a B.A. in Economics from Indiana
University in 1983 where he attended on full scholarship.
Richard J. Spagna founded the Company in 1990 when it was originally named
Ultimate EAS Inc. and served as President until May 1991. Since May 1991, Mr.
Spagna has served as a Director and Vice President Operations and Secretary and
Treasurer since 1999. Mr. Spagna was employed by Sensormatic Electronics
Corporation from February 1980 to October 1989 in a variety of positions
including six years as Technical Support Specialist. While at Sensormatic, Mr.
Spagna was the inventor of two key patented products which remain the property
of Sensormatic.
Edward A. Mulhare has served as the Chairman of the Board of the Company since
May 1994. From 1982 to 1992, Mr. Mulhare served as the Chairman of the Board and
Chief Executive Officer of Merrill Lynch Interfunding, Inc., a wholly-owned
subsidiary of Merrill Lynch, engaged in the management of a $1.6 billion
leverage acquisition portfolio. From 1980 to 1982, he served as Executive Vice
President of Republic
<PAGE>
National Bank of New York. For the prior twelve years, he was a Vice President
of Prudential Insurance Company of America where he managed a $4 billion
portfolio of long term commercial loans and was Prudential's specialist for
rebuilding troubled companies. Mr. Mulhare currently serves as a director of
Advance Publishers, L.C., Akers Laboratories, Inc., and Realtec, Inc. Over the
past ten years, Mr. Mulhare has served as a director of fifteen companies
including Aldila Inc., Truck Components, Inc., PanAmerica Diamond Co., McGraw
Industries, Inc., and American Silver Co. Mr. Mulhare received a B.S. in
Accounting from Boston University in 1950 and an M.B.A. from Farleigh Dickenson
University in 1978.
Milan Resanovich has served as a Director of the Company since October 1994 and
has been a management consultant since 1992. From 1986 to 1992, he served as a
Senior Vice President, and then President, at Merrill Lynch Interfunding, Inc.
At Merrill Lynch Interfunding, Inc. he aided in the management of a
leveraged-buyout investment fund. Prior to such time, Mr. Resanovich served as a
Vice President at Prudential Insurance Company of America where he was employed
in investment management from 1956 to 1986. Mr. Resanovich serves as a director
of Advance Publishers, L.L.C., and Lancaster Composites, Inc. and has served as
a director of more than ten companies including IMCO Recycling, a company traded
on the New York Stock Exchange from 1986 through 1995. Mr. Resanovich received a
B.A. from Gettysburg College in 1952 and an M.B.A. from the University of
Pennsylvania in 1956.
Thomas A. Nicolette has served as a Director of the Company since October 1997.
He was President and Chief Executive Officer of Sentry Technology Corporation
from January 1997 until December 1999 and of Knogo North America, Inc. since its
inception in August 1994 until December 1999. Prior thereto, Mr. Nicolette
served in various capacities at Knogo Corporation where he was Chief Executive
Officer from May 1994 to December 1994; President and Chief Operating Officer
from 1990 to May 1994; President of the North America Division from 1989 to
1990; Vice President from 1986 to 1990; and a Director from 1987 to December
1994. Mr. Nicolette is a Director of STC and is Vice Chairman of the Board of
Trustees of WLIW, the Long Island-based affiliate of the Public Broadcasting
System. Mr. Nicolette received a B.S. in Criminal Justice and a B.A. in
Management from Michigan State University in 1972.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors, its
executive and certain other officers, and any persons holding ten percent or
more of the Company's common stock must report on their ownership of the
Company's common stock and any changes in that ownership to the Securities and
Exchange Commission. The Company does not believe any Section 16(a) reports were
filed or were required to be filed.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation for services rendered in all
capacities to the Company and its subsidiary for each of the years ended
December 31, 1999 and 1998 by the Company's President and Chief Executive
Officer. There were no other executive officers or other persons whose total
compensation exceeded $100,000 during the years ended December 31, 1999 and
1998.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
NAME/ RESTRICTED OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER STOCK SARS COMPENSATION
- ------------------ ---- ------ ----- ----- ----- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeff Wiebell
President & CEO 1999 $33,766 0 $25 $500 0 0
Ronald L. Meggison, Jr
Former President & CEO 1999 67,523 0 5,000 0 0 0
1998 74,607 0 25 500 0 0
</TABLE>
Directors of the Company receive 1,000 shares of common stock per year for
acting in such capacities. In addition, Directors receive 1,000 shares of common
stock for each Board of Directors meeting attended, however, no Director shall
receive more than 5,000 shares of common stock in any one year period. For each
of the years ended December 31, 1999 and 1998, 25,000 shares of the Company's
common stock was granted pursuant to the Company's Board of Director's
Compensation policy. Effective January 1, 1998, in addition to the Board of
Director's stock based compensation described above, non-management Directors
receive $10,000 annually payable quarterly in arrears.
The Company does not currently have employment agreements with any of the
Company's executive officers or any other members of management. There were no
performance options granted by the Company during the years ended December 31,
1999 and 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the common stock of the Company
beneficially owned as of April 17, 2000 by each director, each executive
officer, and each beneficial owner owning more than five percent (5%) of the
outstanding shares of common stock of the Company, and by all directors and
executive officers as a group. The table includes all shares of common stock
which may be acquired by the following beneficial owners within 60 days of the
date hereof through the exercise of options or warrants, if any. Unless
otherwise indicated, the address of each such beneficial owner is 484 Southwest
12th Avenue, Deerfield Beach, Florida, 33442.
<TABLE>
<CAPTION>
PERCENT
AMOUNT OF OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL COMMON
- ------------------------------------ OWNERSHIP STOCK
- ------------------------------------ --------- -----
<S> <C> <C>
Edward A. Mulhare ....................................(1) 360,149 20.2%
Thomas A. Nicolette ................................. (2) 75,267 4.3%
Milan Resanovich .....................................(3) 213,072 11.3%
Richard J. Spagna ....................................(4) 156,683 9.1%
All directors and executive officers
as a group(1)(2)(3)(4)............................. 805,171 40.0%
============ =====
<PAGE>
Saul Pozensky...........................................(5) 182,158 10.6%
Maurice Shahrabani...................................... 98,926 5.9%
============== =====
<FN>
(1) Includes (i) warrants to purchase 63,851 shares of common stock at an
exercise price equal to the lesser of $5.50 per share or 10% above
the exercise price of warrants offered in a public offering of the
Company's securities of which 55,555 expire in July 2000 and 8,296
expire in October 2001, and (ii) warrants to purchase 10,504 shares
of common stock at an exercise price equal to the lesser of $5.50 per
share or 10% above the exercise price of warrants offered in a public
offering of the Company's securities expiring in December 2001.
(2) Includes 8,000 shares of common stock held in trust for the benefit
of Kara N. Nicolette (4,000 shares) and Alexa J. Nicolette (4,000
shares), each of whom are Mr. Nicolette's daughters, in which Mr.
Nicolette disclaims any beneficial ownership. Includes (i) warrants
to purchase 7,756 shares of common stock at an exercise price equal
to the lesser of $5.50 per share or 10% above the exercise price of
warrants offered in a public offering of the Company's securities
expiring in October 2001, and (ii) warrants to purchase 4,000 shares
of common stock at an exercise price equal to the lesser of $5.50 per
share or 10% above the exercise price of warrants offered in a public
offering of the Company's securities expiring in October 2001, which
consists of 2,000 warrants held in trust for the benefit of Kara N.
Nicolette and 2,000 warrants held in trust for the benefit of Alexa
J. Nicolette, each of whom are daughters of Mr. Nicolette, in which
Mr. Nicolette disclaims any beneficial ownership, or (iii) warrants
to purchase 30,000 shares of common stock at an exercise price of
$2.40 per share expiring in June 2002.
(3) Includes (i) warrants to purchase 9,859 shares of common stock at an
exercise price equal to the lesser of $5.50 per share or 10% above
the exercise price of warrants offered in a public offering of the
Company's securities expiring in October 2001, (ii) warrants to
purchase 25,000 shares of common stock at an exercise price of $2.40
per share expiring in January 2001, and (iii) detatchable warrants to
purchase 137,500 common stock shares at an exercise price of $2.40
per share expiring January 1, 2001. Does not include shares of common
stock which may be issued to Mr. Resanovich upon the occurrence of an
initial public offering of the Company's securities. This note is
convertible at the rate of one share of common stock for each $3.49
of outstanding principal and accrued interest at the time of
conversion. The original principal amount of the convertible
promissory note is $53,000.
(4) Includes warrants to purchase 16,889 shares of common stock at an
exercise price equal to the lesser of $5.50 per share or 10% above
the exercise price of warrants offered in a public offering of the
Company's securities expiring in July 2000.
(5) Includes warrants to purchase 16,889 shares of common stock at an
exercise price equal to the lesser of $5.50 per share or 10% above
the exercise price of warrants offered in a public offering of the
Company's securities expiring in July 2000.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the fourth quarter of 1996 and the first and second quarters of 1997, the
Company sold an aggregate of 343,894 units, each unit consisting of one share of
common stock and one common stock purchase warrant, in a private placement. The
Company's Chairman, Edward A. Mulhare, purchased 10,504 units in this private
placement.
In the second quarter of 1997, the Company entered into a three year purchase
and manufacturing agreement (the "Agreement") with a company whose former
President is a Director of the Company. The Agreement, as amended in 1999,
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. As of December 31, 1998, the Company
paid the entire $187,000 of the non-recurring engineering costs.
In the third quarter of 1997, warrants to purchase 12,500 shares of common stock
at an exercise price of $2.40 per share expiring June 2000 were issued to Milan
Resanovich, the Vice Chairman of the Board of Directors, in exchange for
extending the maturity date to December 31, 1998 on both the 8% mandatory
convertible promissory note in the amount of $53,000 and the 6% senior note in
the amount of $150,000 both of which are due to Messr. Resanovich. Additionally,
$4,325 of accrued interest on the 8% mandatory convertible promissory note due
to Messr. Resanovich was converted to 1,802 shares of the Company's common
stock.
In the third quarter of 1997, warrants to purchase 30,000 shares of common stock
at an exercise price of $2.40 per share expiring
<PAGE>
June 25, 2002 were issued to Thomas A. Nicolette, a director of the Company, as
an incentive for Messr. Nicolette to serve on the Board of Directors of the
Company.
In the fourth quarter of 1997, 45,000 shares of the Company's common stock was
granted for additional compensation to Ronald L. Meggison, Jr., the Company's
Former President and Chief Executive Officer.
In the first quarter of 1998, in exchange for extending the maturity date to
January 2001 on both the 8% mandatory convertible promissory note in the amount
of $53,000 and the 6% senior note in the amount of $150,000 both of which are
due to Messr. Resanovich, the Vice Chairman of the Board of Directors, the
Company (i) issued to Messr. Resanovich warrants to purchase 12,500 shares of
common stock at an exercise price of $2.40 per share expiring January 2001 and
(ii) amended the warrants to purchase 12,500 shares of common stock at an
exercise price of $2.40 per share expiring June 2000 issued to Messr. Resanovich
in the second quarter of 1997, to expire January 2001.
In the second quarter of 1998, $2,138 of accrued interest on the 8% mandatory
convertible promissory note due to Messr. Resanovich, the Vice Chairman of the
Board of Directors, was converted to 891 shares of the Company's common stock.
In the second quarter of 1998, 5,000 shares of the Company's common stock was
granted for additional compensation to Ronald L. Meggison, Jr., the Company's
Former President and Chief Executive Officer.
In the third quarter of 1999, warrants to purchase 50,000 shares of common stock
at an exercise price of $2.40 per share expiring August 2004 were issued to Jeff
Wiebell, the Company's President and Chief Executive Officer as part of his
compensation package.
In 1999, none of the accrued interest was paid or converted.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(A) Financial statements
See Item 7.
(B) Reports on Form 8-K
There were no reports filed in 1999 on form 8-K
(C) Exhibits
3.1 Articles of Incorporation. (i)
3.2 Articles of Amendment. (i)
3.3 Bylaws. (i)
10.1 Agreement by and between SenTech EAS Corporation and Knogo
North America Inc. dated June 1, 1997. (ii)
22 Registrant's Subsidiaries. (i)
27 Financial Data Schedule (i)
(I) Filed herewith
(II) Incorporated by reference to Registrant's Form
10-KSB for the year ended December 31, 1998 filed February
25, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on April 13, 2000.
SENTECH EAS CORPORATION
By: /s/ JEFF WIEBELL
Jeff Wiebell
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company and in
the capacities indicated on April 13, 2000.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JEFF WIEBELL April 13, 2000
Jeff Wiebell President and Chief Executive Officer
Director
/s/ RICHARD J. SPAGNA April 13, 2000
Richard J. Spagna Vice President Operations
Secretary and Treasurer and Director
/s/ EDWARD A. MULHARE April 13, 2000
Edward A. Mulhare Chairman of the Board of Directors
/s/ MILAN RESANOVICH April 13, 2000
Milan Resanovich Vice Chairman and Director
/s/ THOMAS A. NICOLETTE April 13, 2000
Thomas A. Nicolette Director
EXHIBIT 22
SENTECH EAS CORPORATION
REGISTRANT'S SUBSIDIARIES
SenTech EAS International, Inc. is a wholly owned subsidiary of SenTech EAS
Corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 211,642
<SECURITIES> 0
<RECEIVABLES> 148,043
<ALLOWANCES> 5,000
<INVENTORY> 401,974
<CURRENT-ASSETS> 800,835
<PP&E> 18,684
<DEPRECIATION> 14,766
<TOTAL-ASSETS> 942,976
<CURRENT-LIABILITIES> 180,373
<BONDS> 230,000
403
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 942,976
<SALES> 1,438,167
<TOTAL-REVENUES> 1,438,167
<CGS> 820,137
<TOTAL-COSTS> 820,137
<OTHER-EXPENSES> 833,987
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,239
<INCOME-PRETAX> 216,129
<INCOME-TAX> 0
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<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 216,129
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
