<PAGE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27102
ROMTECH, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2694937
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2000 Cabot Boulevard West, Suite 110
Langhorne, PA 19047-1833
(address of Principal executive offices)
Issuer's Telephone Number, Including Area Code: 215-750-6606
Not Applicable
(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 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 ( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ( ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 6,285,128 shares
of common stock, no par value per share, as of November 1, 1996.
Transitional Small Business Disclosure Format (check one):
Yes ( ) No ( X )
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RomTech, Inc.
The Registrant hereby amends its Form 10-QSB for the quarter ended September
30, 1996 for the purpose of amending certain financial information primarily
relating to direct mail marketing costs.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheet as of September 30, 1996...................................... 3
Consolidated Statements of Operations for the three months ended September 30,
1996 and 1995............................................................................ 4
Consolidated Statements of Cash Flows for the three ended September 30, 1996 and
1995..................................................................................... 5
Notes to Consolidated Financial Statements............................................... 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................. 8-9
Part II. Other Information
Signatures............................................................................... 10
Exhibit Index............................................................................ 11
Financial Data Schedule.................................................................. 12
</TABLE>
Page 2
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RomTech, Inc.
Consolidated Balance Sheet
(Unaudited)
September 30,
1996
-------------
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 758,596
Restricted cash ........................................ 14,788
Accounts receivable, net of allowance for doubtful
accounts of $88,970 ................................. 577,358
Inventory .............................................. 280,929
Prepaid expenses ....................................... 89,952
-----------
Total current assets ............................ 1,721,623
Furniture and equipment, net .............................. 157,338
Intangibles and other assets .............................. 105,083
-----------
Total assets .................................... $ 1,984,044
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable .......................................... $ 337,054
Accounts payable ....................................... 598,784
Accrued expenses ....................................... 643,640
-----------
Total current liabilities ....................... 1,579,478
Capital lease obligations net of current portion .......... 35,374
Notes payable-long term portion ........................... 296,519
Convertible subordinated debt ............................. 150,000
-----------
Total liabilities ............................... 2,061,371
Stockholders' deficit:
Convertible preferred stock ............................ 1,000,000
Common stock, no par value (40,000,000 shares
authorized: 6,285,128 issued and outstanding) ......... 4,237,517
Additional paid in capital ............................. 747,738
Accumulated deficit .................................... (6,062,582)
-----------
Total stockholders' deficit ..................... (77,327)
-----------
Total liabilities and stockholders' deficit ..... $ 1,984,044
===========
See accompanying notes to the consolidated financial statements.
Page 3
<PAGE>
RomTech, Inc.
Consolidated Statements of Operations
(Unaudited)
Three months ended
September 30,
------------------------------
1996 1995
---- ----
Net revenues $ 1,071,017 $ 629,124
Cost of revenues 317,457 206,517
----------- -----------
Gross profit 753,560 422,607
Operating expenses:
Product development 121,992 137,021
Selling, general and administrative 1,025,633 391,170
----------- -----------
Total operating expenses 1,147,625 528,191
----------- -----------
Operating loss (394,065) (105,584)
Interest expense, net 13,513 63,009
----------- -----------
Loss before taxes (407,578) (168,593)
Income tax refund -- 3,152
----------- -----------
Net loss ($ 407,578) ($ 165,441)
=========== ===========
Net loss per common share ($ 0.06) ($ 0.06)
Weighted average common
shares outstanding 6,285,128 2,859,440
See accompanying notes to the consolidated financial statements.
Page 4
<PAGE>
RomTech, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($407,578) ($165,441)
Adjustment to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 62,299 14,084
Loss on disposal of equipment 4,683 --
Interest expense incurred but not paid 4,350 45,945
Changes in items affecting operations net of effect from acquired
businesses:
Restricted cash (14,788) (10,469)
Accounts receivable (152,060) (69,056)
Prepaid expenses (48,542) 22,642
Inventory (75,708) 15,071
Accounts payable 222,617 62,255
Accrued expenses (82,650) 42,924
--------- ---------
Net cash used in operating activities (487,377) (42,045)
--------- ---------
Cash flows from investing activities:
Sales and maturities of short term investments 398,952 --
Purchase of furniture and equipment (27,023) (11,431)
Purchase of software rights and other assets (58,654) --
Loan to related parties 500 --
--------- ---------
Net cash provided by (used in) investing activities 313,775 (11,431)
--------- ---------
Cash flows from financing activities:
Net advances of factored receivable -- 39,925
Net advances to officers -- 3,772
Repayment of note payable (7,483) (4,967)
Repayment of lease obligations (14,982) (6,467)
--------- ---------
Net cash (used in) provided by financing activities (22,465) 32,263
--------- ---------
Net decrease in cash and cash equivalents (196,067) (21,213)
Cash and cash equivalents:
Beginning of period 954,663 85,173
--------- ---------
End of period $ 758,596 $ 63,960
========= =========
Supplemental cash flow information:
Cash paid during the quarter for interest $ 22,194 $ 6,367
========= =========
Noncash investing activities:
Capital lease additions during the quarter $ 38,388 $ --
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 5
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RomTech, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The Notes to Consolidated Financial
Statements included in the Form 10-KSB for the fiscal year ended June 30, 1996
should be read in conjunction with the accompanying statements. These
statements include all adjustments (consisting only of normal recurring
adjustments) which the Company believes are necessary for a fair presentation
of the statements. The interim operating results are not necessarily
indicative of the results for a full year.
The accompanying consolidated financial statements as of September 30, 1996
include the accounts of RomTech, Inc., ("RomTech"), which successfully
completed an initial public offering on October 18, 1995 with Applied Optical
Media Corporation ("AOMC"), which merged with RomTech concurrent with the
completion of RomTech's public offering, and Virtual Reality Laboratories,
Inc. ("VRLI"), its wholly owned subsidiary, which was acquired on April 5,
1996 in a transaction accounted for using the pooling of interests method of
accounting. As further described in Note 2, the AOMC merger was accounted for
as a reverse acquisition whereby AOMC was deemed to be the acquiring entity
for accounting purposes. In addition, the fiscal 1996 financial statements
have been restated to reflect VRLI's operations on a pooled basis.
Accordingly, the consolidated statements of operations include the activities
of the following entities for the following periods:
o July 1, 1995 to September 30, 1995 - AOMC and VRLI
o July 1, 1996 to September 30, 1996 - RomTech, AOMC and VRLI
Description of Business
RomTech, Inc. (the "Company") is a Pennsylvania Corporation which was
incorporated in July 1992. The Company develops, publishes, markets and is a
reseller of a diversified line of personal computer software for consumer,
educational and business applications. The Company's sales are primarily made
through retail stores, by direct mail and sales of CD-ROM titles in jewel case
packaging at computer trade shows.
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Virtual Reality Laboratories, Inc. All
intercompany balances and transactions have been eliminated.
2. Merger/Completion of Pubic Offering
Applied Optical Media Corporation ("AOMC")
On October 18, 1995, the Company merged with AOMC, whereby the
stockholders of AOMC exchanged all their outstanding shares for 1,575,000
common shares of the Company and 425,000 warrants to purchase common shares at
$.50 per share. In addition, concurrently with the Merger certain stockholders
of AOMC exchanged debt with a carrying value of $1,936,452 for 1,000,000
shares of convertible preferred stock, a $300,000, 8.75% note payable, a
$50,000 cash payment and forgiveness of $586,607 of debt. The preferred stock
has a face value of $1,000,000 and is convertible into common stock of the
Company beginning two years after October 18, 1995 at a price of $3.30 per
share. The Company has the right to redeem the preferred stock for an
aggregate redemption price of $1,000,000.
Page 6
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RomTech, Inc.
Notes to Consolidated Financial Statements
As a result of the AOMC merger, the former stockholders of AOMC had a
majority of the voting rights of the combined enterprise on a fully diluted,
if converted basis. Therefore, for accounting purposes, AOMC was considered
the acquirer (reverse acquisition). The cost of acquiring the Company was
based on the fair market value of the Company's net assets, which approximated
their recorded value.
In connection with the reverse acquisition, the outstanding shares of the
Company and the shares of the Company issued to AOMC stockholders have been
reflected as a recapitalization of the previously outstanding AOMC common
stock.
On October 18, 1995, the Company consummated an initial public offering
of 1,550,000 shares of common stock at a price of $3.00 per share resulting in
gross proceeds of $4,650,000 before deducting offering costs of $1,026,204.
Virtual Reality Laboratories, Inc. ("VRLI")
On April 5, 1996, the Company acquired VRLI, a California corporation, in
a transaction structured as a merger of VRLI with a newly formed subsidiary of
the Company ("RomTech subsidiary"), with the RomTech subsidiary as the
surviving corporation. VRLI, which is located in San Luis Obispo, California,
publishes software for use on desktop computers. Its products include business
forms and imaging processing software targeted for the small-office,
home-office market, three-dimensional landscape rendering software and
astronomy software for special interest users and the education market. In
connection with the acquisition, the Company issued a total of 1,284,440
shares of its common stock, in exchange for all of the equity interests of
Virtual Reality, which included common stock, stock options, convertible
subordinated debt and a $100,000 promissory note to an officer and stockholder
of VRLI. In addition, the Company incurred acquisition-related expenses of
approximately $757,804, including $204,340 in the form of the Company's Common
Stock, related to investment banking, consulting, accounting and legal costs
which were charged to operations. This acquisition was accounted for using the
pooling-of-interests method, and accordingly the Company's historical
financial statements presented have been restated to include the accounts and
results of operations of VRLI.
The following supplemental unaudited pro forma information summarizes the
combined results of operations of the Company as if the combination with AOMC
occurred July 1, 1995.
Three months ended
September 30, 1995
------------------
Revenues $861,147
Net loss (415,517)
Loss per share (.09)
Weighted average common shares 4,462,181
3. Subsequent Event
On September 27, 1996, the Company entered into an agreement in principle to
acquire FileABC(TM), a Nevada Limited Partnership, ("FileABC") in exchange for
$500,000 in cash and 200,000 shares of the Company's common stock and an
additional 1,000,000 shares contingent upon achieving certain revenue targets.
The terms of the agreement were amended on October 18, 1996, whereby FileABC
will be paid $325,000 in cash in addition to the interim payments of $50,000
on July 17, 1996 and $125,000 on October 30, 1996. Additionally, a maximum of
1,200,000 shares will be paid to FileABC for each $1,000,000 of revenues
generated from the sale of FileABC's current software product and any
enhancements or derivative products on or before March 31, 2000. FileABC
develops, publishes and markets document imaging, management and archiving
software for the Windows(TM) operating systems. The acquisition is subject to
certain conditions and is expected to be consummated during the second quarter
of fiscal 1997. If completed, the acquisition of FileABC will be accounted for
using the purchase method of accounting.
Page 7
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RomTech, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The accompanying consolidated financial statements as of September 30, 1996
include the accounts of RomTech, Inc., ("RomTech"), which successfully
completed an initial public offering on October 18, 1995 with Applied Optical
Media Corporation ("AOMC"), which merged with RomTech concurrent with the
completion of RomTech's public offering, and Virtual Reality Laboratories,
Inc. ("VRLI"), its wholly owned subsidiary, which was acquired on April 5,
1996 in a transaction accounted for using the pooling of interests method of
accounting. As further described in Note 2, the AOMC merger was accounted for
as a reverse acquisition whereby AOMC was deemed to be the acquiring entity
for accounting purposes. In addition, the fiscal 1996 financial statements
have been restated to reflect VRLI's operations on a pooled basis.
Accordingly, the consolidated statements of operations include the activities
of the following entities for the following periods:
o July 1, 1995 to September 30, 1995 - AOMC and VRLI
o July 1, 1996 to September 30, 1996 - RomTech, AOMC and VRLI
Management believes that the results of operations for the three months ended
September 30, 1996 may not be indicative of anticipated future results because
of the significant changes made in the combined businesses of AOMC, RomTech
and Virtual Reality (see note 2 to the financial statements). The acquisition
of Virtual Reality was accounted for using the pooling-of-interests method of
accounting, and accordingly the Company's historical financial statements have
been restated to include the accounts and results of operations of Virtual
Reality.
Results of Operations
Three Months Ended September 30, 1996 and 1995
Net revenues for the three months ended September 30, 1996 were $1,071,000
compared to $629,000 for the three months ended September 30, 1995,
representing an increase of $442,000 or 70.3%. This increase resulted
primarily from increases in the distribution through the retail and direct
mail channels of company developed titles and in the reselling of budget
category jewel case products through the trade show channel.
Cost of revenues for the three months ended September 30, 1996 was $317,000
compared to $207,000 for the three months ended September 30, 1995,
representing an increase of $110,000 or 53.1% due mainly from the increase in
revenues. The Company's gross profit margin increased to 70.4% in the three
months ended September 30, 1996 from 67.2% for the three months ended
September 30, 1995.
Product development expenses for the three months ended September 30, 1996
were $122,000 compared to $137,000 for the three months ended September 30,
1995, a decrease of $15,000 or 10.9%.
Selling, general and administrative expenses for the three months ended
September 30, 1996 were $1,026,000 compared to $391,000 for the three months
ended September 30, 1995 representing an increase of $635,000. The increase
was primarily from increases in marketing costs of $302,000, salary and
related costs of $113,000, commissions of $85,000 related to the increase in
revenues and amortization costs of $48,000.
Net interest expense for the three months ended September 30, 1996 was $14,000
compared to $63,000 for the three months ended September 30, 1995, a decrease
of $49,000 or 77.8%. This decrease is due primarily to the reduction of
long-term debt as a result of the merger between RomTech, Inc. and AOMC and
the proceeds from the IPO concurrent with this merger, and the investment of
the proceeds from the IPO.
Page 8
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RomTech, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
Liquidity and Capital Resources
The financial information presented reflects the Company's financial position
at September 30, 1996.
As of September 30, 1996, the Company's cash and working capital balances were
$758,596 and $142,145, respectively. To date the Company continues to operate
at a loss. At September 30, 1996 the Company does not satisfy the minimum
level of stockholders' equity required to be listed ($1,000,000) for trading
on the Nasdaq SmallCap Market(TM). The Company is seeking additional capital
to, among other things, increase its stockholders' equity to at least the
minimum level required. The Company's ability to achieve positive cash flow
depends upon a variety of factors, including the timeliness and success of
developing and selling its products, the costs of developing, producing and
marketing such products and various other factors, some of which may be beyond
the Company's control. In the future, the Company's capital requirements will
be affected by each of these factors. Although, the Company believes cash and
working capital balances will be sufficient to fund the Company's operations
for the foreseeable future, the Company plans to raise additional capital and
it will seek such funding through additional public or private financings.
There can be no assurances that the Company will achieve a positive cash flow
or that additional financing will be available if and when required or, if
available, will be on terms satisfactory to the Company. Currently, the
Company has no significant capital expenditure commitments.
On September 27, 1996, the Company entered into an agreement in principle to
acquire FileABC(TM), a Nevada Limited Partnership, ("FileABC") in exchange for
$500,000 in cash and 200,000 shares of the Company's common stock and an
additional 1,000,000 shares contingent upon achieving certain revenue targets.
The terms of the agreement were amended on October 18, 1996, whereby FileABC
will be paid $325,000 in cash in addition to the interim payments of $50,000
on July 17, 1996 and $125,000 on October 30, 1996. Additionally, a maximum of
1,200,000 shares will be paid to FileABC for each $1,000,000 of revenues
generated from the sale of FileABC's current software product and any
enhancements or derivative products on or before March 31, 2000. FileABC
develops, publishes and markets document imaging, management and archiving
software for the Windows(TM) operating systems. The acquisition is subject to
certain conditions and is expected to be consummated during the second quarter
of fiscal 1997. If completed, the acquisition of FileABC will be accounted for
using the purchase method of accounting.
Management of the Company is nearing the completion of a private placement
financing which along with funds generated from operations, management
anticipates will be sufficient to fund operations, make acquisitions of
proprietary products and software development companies, and make capital
expenditures for at least the next twelve month period. The Company currently
has no significant capital expenditure commitments.
Page 9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ROMTECH, INC.
(Registrant)
Date: November 10, 1997 /s/ Joseph A. Falsetti
---------------- -----------------------
Joseph A. Falsetti
Chief Executive Officer
Principal Financial Officer
Date: November 10, 1997 /s/ Gerald W. Klein
---------------- --------------------
Gerald W. Klein
Vice President and
Chief Financial Officer
Page 10
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RomTech, Inc.
RomTech, Inc.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page Number
----------- ---------------------- -----------
<S> <C> <C>
10.1 Asset Acquisition Agreement Between RomTech, Inc. and FileABC, L.P.
27.1 Financial Data Schedule
</TABLE>
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 758,596
<SECURITIES> 0
<RECEIVABLES> 577,358
<ALLOWANCES> 88,970
<INVENTORY> 280,929
<CURRENT-ASSETS> 1,721,623
<PP&E> 157,338
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,984,044
<CURRENT-LIABILITIES> 1,579,478
<BONDS> 0
<COMMON> 4,237,517
0
1,000,000
<OTHER-SE> 747,738
<TOTAL-LIABILITY-AND-EQUITY> 1,984,044
<SALES> 1,071,017
<TOTAL-REVENUES> 1,071,017
<CGS> 317,457
<TOTAL-COSTS> 317,457
<OTHER-EXPENSES> 1,147,625
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,513
<INCOME-PRETAX> (407,578)
<INCOME-TAX> 0
<INCOME-CONTINUING> (407,578)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (407,578)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
