U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarterly period ended
May 31, 1997.
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from______to_____
Commission File Number 33-36198
NET/TECH INTERNATIONAL, INC.
----------------------------
(Exact name of Small Business Issuer as Specified in its Charter)
DELAWARE 22-3038309
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(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
1 WEST FRONT STREET, SUITE 30, RED BANK, NEW JERSEY 07701
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(Address of Principal Executive Offices) (Zip Code)
Issuer's phone number, including area code: (908) 345-1100
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(Former name, former address and former fiscal year, if changed since last
report).
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the preceding 12 months (or for
such shorter period that 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 [ ]
State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date. As of May 31, 1997, 5,775 ,212
shares of $0.01 par value common stock were outstanding.
Transitional Small Business Disclosure Format (check one).
Yes [ ] No [X]
<PAGE>
NET/TECH INTERNATIONAL, INC.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Loss 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
2
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
MAY 31, NOVEMBER 30,
1997 1996
(UNAUDITED)
----------- ------------
CURRENT ASSETS
Cash 103,715 $77,560
Prepaid Expenses 3,500 0
----------- ------------
Total Current Assets 107,215 77,560
----------- ------------
FIXED ASSETS
Furniture and Equipment 56,222 19,999
Less: Accumulated Depreciation 7,510 6,460
----------- ------------
Net Fixed Assets 48,712 13,539
----------- ------------
INTANGIBLE ASSETS
Patent Application Costs (net of 62,291 64,352
accumulated amortization of $11,486 and
$9,424 respectively) Unamortized
Organization Costs 84 84
----------- ------------
62,375 64,436
OTHER ASSETS
Security Deposits 21,950 21,950
----------- ------------
TOTAL ASSETS $240,252 $177,485
=========== ============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
MAY 31, NOVEMBER 30,
1997 1996
(UNAUDITED)
----------- ------------
CURRENT LIABILITIES
Accounts Payable 2,063 $22,939
Accrued Expenses and Interest 6,403 4,625
Obligations Under Capital Lease 1,287 1,287
----------- ------------
Total Current Liabilities 9,753 28,851
LONG TERM LIABILITIES 0 0
Obligations Under Capital Lease 2,646 3,264
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 par value; 20,000,000
authorized; 5,775,212 and
5,697,212 shares issued and
outstanding, respectively 65,752 56,972
Additional Paid-In Capital 2,950,479 2,661,759
Deficit Accumulated During
the Developmet Stage (2,788,378) (2,573,361)
----------- ------------
Total Stockholders' Equity 227,854 145,370
----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $240,252 $177,485
=========== ============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue $ 0 $ 0 $ 0 $ 0
COSTS AND EXPENSES:
General & Administrative Expense 96,509 6,002 140,195 14,820
Legal and Professional Fees 60,614 10,107 71,711 15,465
Depreciation 525 308 1,049 2,177
Amortization of Intangibles 1,031 0 2,062 167
OPERATING LOSS ($ 158,678) ($ 16,417) ($ 215,017) ($ 32,629)
OTHER (INCOME) AND EXPENSE:
Interest (Income) 0 0 0 0
----------- ----------- ----------- -----------
NET INCOME (LOSS) ($ 158,678) ($ 16,417) ($ 215,017) ($ 32,629)
NET INCOME (LOSS) PER SHARE ($ 0.03) ($ 0.00) ($ 0.04) ($ 0.01)
=========== =========== =========== ===========
Number of Shares Used In Computation 5,855,417 5,521,925 5,727,498 5,193,991
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
MAY 31, MAY 31,
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES ($234,504) ($88,292.00)
CASH FLOW FROM INVESTING ACTIVITIES ($36,223) $0
CASH FLOW FROM FINANCING ACTIVITIES 296,882 164,882
----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 26,156 76,591
----------- -----------
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 77,559 0
----------- -----------
CASH AND CASH EQUIVALENTS END OF YEAR $103,715 $76,591
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest $338 $0
Income Taxes $0 $0
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
<PAGE>
NOTE 1
FINANCIAL STATEMENTS
The Balance Sheet as of May 31, 1997, the Statement of Operation for
the six months ended May 31, 1997 and the Statement of Cash Flows for the six
months ended May 31, 1997 have been prepared by the Company, without audit. In
the opinion of Management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and changes in cash flows at May 31, 1997 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's November 30, 1996 annual
report to shareholders. The results of operations for the period ended May 31,
1997 are not necessarily indicative of the operating results for the full year.
In March 1997, the Company received $200,000 from the sale of 800,000
options to purchase its common stock at $2.50 per share. These options are valid
for a period of two years. Exercise of these options would result in a cash
infusion of $2,000,000 to the Company.
In June, subsequent to the balance sheet date, the Company received a
total of $480,000 from the sale of stock options and Common Stock. Of this
total, $270,000 was raised from the sale of 1,080,000 options to purchase common
stock at an exercise price of $2.50 per share. Exercise of these options would
result in an additional cash infusion of $2,700,000 to the Company. All stock
issued as a result will be subject to Rule 144 restrictions.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Net/Tech International, Inc.'s core technology is the patented Hygiene
Guard Hand Washing Monitoring System. The Hygiene Guard is an innovative,
potentially life saving technology used to monitor employee hand washing at any
hand washing station. The system can be utilized in the food service, food
processing, health care and child care industries as well as any environment
where hygiene and control of the spread of infectious disease is a priority.
Net/Tech designs and assembles hygiene, food safety and health care
related monitoring and data acquisition systems. These systems provide
accountability reporting and are designed to proactively satisfy regulatory
requirements which relate to food and health safety.
Net/Tech was incorporated in 1990 and has devoted a substantial portion
of its resources to the research and development of it's patented technology.
Net/Tech was conceived as "Network of Innovative Technology." The Company's
mission is to develop innovative products and systems which incorporate the most
up to date technology in order to solve industry specific problems, satisfy
regulatory requirements and/or create new opportunities.
GENERAL
Since the January 1996 appointment of Glenn E. Cohen as President and
Chief Operating Officer, the Company has made significant progress towards the
commercialization of the Hygiene Guard Hand Washing Monitoring System. During
that time period, the Company has achieved the following milestones:
/bullet/ The Company has completed the design and development of it's
prototype Hygiene Guard System, which was successfully tested on May
8, 1997.
/bullet/ The Company unveiled the Hygiene Guard System at the National
Restaurant Show in Chicago in May, 1997. The Hygiene Guard received
an overwhelming response resulting in tremendous media exposure both
in the United States and Internationally. On May 20, the Hygiene
Guard was the focus of a front page article in USA Today and a page
one article in the Marketplace Section of the Wall Street Journal.
The Associated Press also ran an article which was picked up by
hundreds of newspapers world wide. In addition, the system was also
featured on the Good Morning America Show and CNN News among other
television media.
/bullet/ The Company has signed agreements for Beta Test Site locations for
the Hygiene Guard System at the William Beaumont US Army Medical
Center and the Tropicana Casino and Resort. Both Beta Test systems
are scheduled to be installed in August 1997.
/bullet/ The Company has contracted an Infrared manufacturer to supply all
necessary infrared components to complete an additional 12 prototype
systems and as exclusive infrared supplier for production
manufacturing. Also, the Company has contracted with Precision Flow
Technologies to manage it's assembly facility, to be located in
Saugerties, NY.
8
<PAGE>
PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
In March 1997, the Company received $200,000 from the sale of 800,000
options to purchase its common stock at $2.50 per share. These options are valid
for a period of two years. Exercise of these options would result in a cash
infusion of $2,000,000 to the Company. Stock issued will be subject to Rule 144
restrictions.
In June 1997, the Company received a total of $480,000 from the sale of
stock options and Common Stock. Of this total, $270,000 was raised from the sale
of 1,080,000 options to purchase common stock at an exercise price of $2.50 per
share. Exercise of these options would result in an additional cash infusion of
$2,700,000 to the Company. All stock issued as a result will be subject to Rule
144 restrictions.
The Company believes that the current cash resources will fund
operation for the current year. Furthermore, the Company expects to receive an
additional $900,000 from the sale of common stock during this fiscal year.
U.S. AND INTERNATIONAL MARKETING ACTIVITIES
As a result of the National Restaurant Show and tremendous media
attention, the Company has been approached by major food service and hygiene
related companies both in the U.S. and abroad.
The Company's immediate focus is the negotiation and finalizing of
Joint Venture and Distributor relationships for the Hygiene Guard System.
The Company is currently in negotiation for the expansion of marketing
activities overseas. Discussions are underway with a firm interested in a joint
marketing program for Europe and 5 major South American countries.
MANAGEMENT TEAM EXPANSION
Mark Hersh was appointed to serve as the company's Vice President of
Sales and Marketing. Prior to joining Net/Tech International, Inc., Mr. Hersh
was President of Eden Classic Inc., where he developed and implemented a
wholesale/retail marketing strategy and distribution network. Mr. Hersh is a
graduate of the University of Florida with a concentration in International
Marketing. Mr. Hersh recently presented, on behalf of the Company, at the
Education Conference for the Association of Professionals in Infection Control
(APIC) and at the National Environmental Health Association Conference (NEHA).
Wayne K. Spillner was contracted as Technology Consultant and assistant
to the President. Mr. Spillner is a professional engineer and principal of
Aspect Engineering. During his tenure in food service and sanitation industries,
Mr. Spillner was a Technology Development Engineer for Proctor and Gamble and
Director of Research and Development for Taco Bell, a division of PepsiCo. Mr.
Spillner brings important industry specific knowledge and contacts necessary to
ensure the Hygiene Guard System is user friendly and gains market acceptance.
Mr. Spillner intends to present the Hygiene Guard System at the North American
Association of Food Equipment Manufacturers (NAFEM) in September 1997.
FORWARD LOOKING STATEMENTS
Statements wherein the terms "believes", "intends", or "expects" are
intended to reflect "forward looking statements" of the Company. The information
contained herein is subject to various risks, uncertainties and other factors
that could cause actual results to differ materially from the results
anticipated in such forward looking statements or paragraphs. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission, including the
most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation(1)
3.2 By-Laws(1)
27 Financial Data Schedule (EDGAR version only)
- -------------------
(1) Incorporated by reference to the Company's Registration Statement
on Form S-1 (No. 33-36198).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed since the last report.
10
<PAGE>
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 thereunto duly authorized.
NET/TECH INTERNATIONAL, INC.
/S/ GLENN E. COHEN
----------------------------
Glenn E. Cohen
President and Chief Operating Officer
/S/ BRIAN K BURKE
----------------------------
Brian K. Burke
Chief Financial Officer, Secretary
and Treasurer
Date: July 15, 1997
11
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
- ------- -----
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 103,715
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 107,215
<PP&E> 56,222
<DEPRECIATION> 7,510
<TOTAL-ASSETS> 240,252
<CURRENT-LIABILITIES> 9,753
<BONDS> 0
0
0
<COMMON> 65,752
<OTHER-SE> 162,101
<TOTAL-LIABILITY-AND-EQUITY> 240,252
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 215,017
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (215,017)
<INCOME-TAX> 0
<INCOME-CONTINUING> (215,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,017)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
