<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Current Report Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): 12/31/97
--------
Marlton Technologies, Inc.
(Exact name of registrant as specified in its charter)
NEW JERSEY ------------- 22-1825970
----------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) (Commission File Number) Identification No.)
2828 Charter Road, Philadelphia, PA 19154
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 215-676-6900
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of DMS Store Fixtures, L.P., attached hereto
as Annex E-1.
1. Balance Sheet as of September 30, 1997 (unaudited) and
December 31, 1996.
2. Statement of Operations for the nine months ended September
30, 1997 and 1996 (unaudited).
3. Statement of Cash Flows for the nine months ended September
30, 1997 and 1996 (unaudited).
4. Statement of Partners' Equity for the nine months ended
September 30, 1997 (unaudited).
5. Notes to Financial Statements.
(b) Unaudited Pro Forma Condensed Financial Information of Marlton
Technologies, Inc. and DMS Store Fixtures, L.P.
1. Unaudited Pro Forma Condensed Combined Statement of Earnings
for the nine months Ended September 30, 1997.
2. Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1997.
3. Notes to Unaudited Pro Forma Condensed Combined Financial
Information.
(c) Management's Discussion and Analysis of DMS Store Fixtures, L.P.
Financial Condition and Results of Operations
<PAGE>
ANNEX E-1
DMS Store Fixtures, L.P. Financial Statements (Unaudited)
For the Nine Months Ended September 30, 1997
<PAGE>
Contents
Audited Financial Statements:
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Statement of Partners' Equity 4
Notes to Financial Statements 5
<PAGE>
Annex E-1
DMS STORE FIXTURES, L.P.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Current:
Cash and cash equivalents $ 534,121 $ 3,533,874
Accounts receivable, net 6,451,314 2,997,769
Inventory (Note 1) 2,565,592 2,440,310
Prepaids and other current assets 376,781 121,790
----------- -----------
Total current assets 9,927,808 9,093,743
Property and equipment,net of accumulated
depreciation of $174,503 and $147,139, respectively 121,944 142,535
----------- -----------
Total assets $10,049,752 $ 9,236,278
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, partners & affiliate $ 3,101,674 $ 3,815,467
Accounts payable 948,591 571,360
Accrued expenses and other 1,027,853 786,225
----------- -----------
Total current liabilities 5,078,118 5,173,052
Partners' equity 4,971,634 4,063,226
----------- -----------
Total liabilities and partners' equity $10,049,752 $ 9,236,278
=========== ===========
</TABLE>
See notes to financial statements.
Page 1
<PAGE>
DMS STORE FIXTURES, L.P.
STATEMENT OF OPERATIONS
(Unaudited)
For the nine months ended
September 30,
1997 1996
------------ ------------
Net sales $ 25,628,604 $ 21,669,021
Cost of sales 19,523,196 16,763,578
------------ ------------
Gross profit 6,105,408 4,905,443
------------ ------------
Expenses:
Selling 1,038,537 899,322
Administrative and general 2,196,401 2,158,946
------------ ------------
3,234,938 3,058,268
------------ ------------
Operating income 2,870,470 1,847,175
------------ ------------
Other income (expense):
Interest income 78,545 60,895
Interest (expense), partners (207,929) (192,974)
Other income (Note 3) 67,320 (315,886)
------------ ------------
(62,064) (447,965)
------------ ------------
Income before income taxes 2,808,406 1,399,210
Provision for income taxes (Note 1) -- --
------------ ------------
Net income $ 2,808,406 $ 1,399,210
============ ============
See notes to financial statements.
Page 2
<PAGE>
DMS STORE FIXTURES, L.P.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
1997 1996
----------- -----------
<S> <C> <C>
Cash flows provided by operating activities:
Net income $ 2,808,406 $ 1,399,210
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 27,364 37,300
Change in assets and liabilities:
(Increase) in accounts receivable, net (3,453,546) (1,454,305)
(Increase) decrease in inventory (475,041) 413,363
(Increase) decrease in prepaids and other assets 95,031 (757,812)
Increase in accounts payable and other accrued expenses 618,597 487,896
----------- -----------
-----------
Net cash provided by (used in) operating activities (379,189) 125,652
----------- -----------
Cash flows (expended through) investing activities:
Capital expenditures (6,773) (89,860)
----------- -----------
Net cash (expended through) investing activities (6,773) (89,860)
----------- -----------
Cash flows (expended through) financing activities:
Payments against notes payable to partners and officers (713,791) (182,925)
Distributions to partners (1,900,000) (576,000)
----------- -----------
Net cash (expended through) financing activities (2,613,791) (758,925)
----------- -----------
(Decrease) in cash and cash equivalents (2,999,753) (723,133)
Cash and cash equivalents - beginning of period 3,533,874 1,766,609
----------- -----------
Cash and cash equivalents - end of period $ 534,121 $ 1,043,476
=========== ===========
Supplemental cash flow information:
Cash paid for interest $ 207,929 $ 192,974
=========== ===========
</TABLE>
See notes to financial statements.
Page 3
<PAGE>
DMS STORE FIXTURES, L.P.
STATEMENT OF PARTNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
General Limited Total
Partner Partner Equity
-------------- ---------------- -----------------
<S> <C> <C> <C>
Balance, December 31, 1996 $ 31,792 $ 4,031,436 $ 4,063,228
Distributions during the nine month period -- (1,900,000) (1,900,000)
Net income for the nine month period 24,905 2,783,501 2,808,406
----------- ----------- -----------
Balance, September 30, 1997 $ 56,697 $ 4,914,937 $ 4,971,634
=========== =========== ===========
</TABLE>
See notes to financial statements.
Page 4
<PAGE>
DMS STORE FIXTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Summary of Accounting Policies:
1. Business and organization and basis of presentation:
DMS Store Fixtures, L.P. (the "Company") is a Pennsylvania
limited partnership which was formed on January 1, 1995.
Upon formation of the Company, DMS Store Fixtures, Inc. (DMS),
an S-Corporation, transferred all of its assets and liabilities to the Company
in exchange for an initial capital account stated at $3 million. All amounts
were transferred at historical book value for financial reporting purposes. The
general partners and other limited partners entered into subscription agreements
for their initial capital of $303,000. The operations of the Company are a
continuation of that of DMS.
The Company (formerly operating as DMS) is a designer and
manufacturer of store fixtures and point of purchase displays primarily for sale
to large retail department stores.
The financial statements include all of the accounts of DMS.
In the opinion of the Company's management, all adjustments (primarily
consisting of normal recurring accruals) have been made which are necessary to
present fairly the financial condition as of September 30, 1997 and the results
of operations and cash flows for the nine month periods ended September 30, 1997
and 1996, respectively. The December 31, 1996 balance sheet data was derived
from audited financial statements but does not include all disclosures required
by generally accepted accounting principles and may include certain account
reclassifications for comparative purposes with the September 30, 1997
consolidated balance sheet.
Fiscal year:
The Company's fiscal year ends on the Friday closest to
December 31. The 1996 fiscal year includes the fifty-two weeks ended December
27, 1996.
Inventories:
Inventories consist principally of finished goods and are
stated at the lower of cost (first-in, first-out method) or market. Inventory
balances also include advances to vendors for inventory on order of $246,516 as
of December 31, 1996.
Property and equipment and depreciation:
Property and equipment are stated at cost. Depreciation is
provided by accelerated methods over the estimated and useful lives of the
related assets.
Income taxes:
The company is not a taxpaying entity for federal or state
income tax purpose. As such, no income tax expense has been presented in the
financial statements. Income from the Company is taxed to the
partners/shareholders in their individual returns.
5
<PAGE>
DMS STORE FIXTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
2. Major customers:
Percentage of Percentage of
net sales accounts receivable
------------------- -------------------
Nine Months Ended
September 30, September 30,
Customer 1997 1996 1997 1996
---- ---- ---- ----
"A" 34% 42% 10% 18%
"B" 33% 26% 62% 49%
--- --- --- ---
Total 67% 68% 72% 67%
=== === === ===
3. Other Income:
During the second quarter of 1996 the partnership incurred a
charge of $322,792 representing deferred compensation to the partners.
4. Subsequent event:
During May 1997, the partners of the Company signed a letter of intent
to sell their interests in the Company to Marlton Technologies, Inc.
Consideration will consist of stock and cash.
6
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Combined Balance sheet as of
September 30, 1997, and the Pro Forma Condensed Combined Statement of Earnings
for the nine months ended September 30, 1997 and the fiscal year ended December
31, 1996, are presented to give effect to the Acquisition.
Historical financial data regarding the Company used to prepare the pro
forma financial statements were derived from the unaudited consolidated
financial statements included in the Company's quarterly report on Form 10-Q,
for the period ended September 30, 1997. These pro forma financial statements
should be read in conjunction with such historical financial statements.
Historical financial data regarding DMS used to prepare the pro forma
financial statements were derived from the unaudited financial statements of DMS
for the nine months ended September 30, 1997, which is attached to this 8K
statement as Annex E-1 and made a part hereof. These pro forma financial
statements should be read in conjunction with such historical financial
statements.
The pro forma adjustments herein are based on available information and
certain assumptions that the Company's management believes are reasonable. Pro
forma adjustments made in the Pro Forma Condensed Combined Balance Sheet assume
that the Acquisition of DMS was consummated on September 30, 1997, and do not
reflect the impact of DMS' operating results or changes in balance sheet amounts
subsequent to September 30, 1997. The pro forma adjustments to the Pro Forma
Condensed Combined Statement of Earnings assume that the Acquisition of DMS was
consummated at the beginning of the fiscal year presented (January 1, 1996) and
carried through the interim period presented (nine months ended September 30,
1997).
The Pro Forma Condensed Balance Sheet and Pro Forma Condensed Combined
Statements of Earnings are based on assumptions and approximations and,
therefore, do not reflect in precise numerical terms the impact of the
transaction on the historical financial statements. In addition, such pro forma
financial statements should not be used as a basis for forecasting the future
operations of the Company.
7
<PAGE>
MARLTON TECHNOLOGIES, INC. and DMS STORES FIXTURES
PRO-FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 1997
<TABLE>
<CAPTION>
Historical Pro-forma
--------------------------------------- ---------------------------------------
Acquisition
Marlton DMS Adjustments
Technologies Store Incr. (Decr.) Pro-forma
Inc. Fixtures (Note 1) Combined
---------------- ---------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
ASSETS
CASH $ 5,627,644 $ 534,121 ($ 2,573,308)c $ 1,938,457
($ 1,650,000)a
ACCOUNTS RECEIVABLE, NET 7,119,291 6,451,314 13,570,605
INVENTORY 5,702,132 2,565,592 500,000 a 8,767,724
PREPAIDS AND OTHER ASSETS 795,713 376,781 1,172,494
DEFERRED INCOME TAXES 419,000 0 1,082,000 e 1,501,000
------------ ------------ ------------
TOTAL CURRENT ASSETS 19,663,780 9,927,808 26,950,280
PROPERTY & EQUIPMENT 5,718,445 296,447 (124,503)a 5,890,389
ACCUMULATED DEPRECIATION, PP&E (3,552,969) (174,503) 174,503 a (3,552,969)
RENTAL ASSETS 2,026,214 0 2,026,214
ACCUM. AMORTIZATION (1,277,424) 0 (1,277,424)
GOODWILL, 3,697,094 0 16,813,000 a 20,510,094
ACCUM. AMORTIZATON (838,690) 0 0 a (838,690)
DEFERRED INCOME TAXES 1,159,870 0 (1,082,000)e 77,870
OTHER ASSETS 1,652,632 0 71,000 d 1,723,632
ACCUM. AMORTIZATON (1,091,450) 0 0 d (1,091,450)
------------ ------------ ------------
TOTAL ASSETS $ 27,157,502 $ 10,049,752 $ 50,417,946
============ ============ ============
LIABILITIES AND STOCKHOLDER EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE, PARTNERS & AFFILIATE $ 3,101,674 ($ 3,101,674)c
CURRENT PORTION OF LONG-TERM DEBT $ 18,924 0 1,350,000 a $ 1,368,324
ACCOUNTS PAYABLE 2,897,959 948,591 3,846,550
ACCRUED EXPENSES AND OTHER 9,035,521 1,027,853 100,000 a 10,163,374
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 11,952,404 5,078,118 15,378,848
LONG-TERM DEBT, NET OF
CURRENT PORTION 122,531 0 12,150,000 a 12,272,531
------------ ------------ ------------
TOTAL LIABILITIES 12,074,935 5,078,118 27,651,379
------------ ------------ ------------
STOCKHOLDERS' EQUITY
COMMON STOCK 477,241 0 225,000 a 702,241
ADDITIONAL PAID-IN-CAPITAL 21,406,443 0 7,459,000 a 28,865,443
ACCUMULATED EARNINGS (DEFICIT) (6,689,440) 4,971,634 (4,971,634)b (6,689,440)
TREASURY STOCK (111,677) 0 (111,677)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 15,082,567 4,971,634 22,766,567
------------ ------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 27,157,502 $ 10,049,752 $ 50,417,946
============ ============ ============
</TABLE>
Page 8
<PAGE>
MARLTON TECHNOLOGIES, INC. and DMS STORES FIXTURES
PRO-FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Historical Pro-forma
--------------------------------------- -------------------------------------
Acquisition
Marlton DMS Adjustments
Technologies Store Incr. (Decr.) Pro-forma
Inc. Fixtures (Note 1) Combined
------------------ -------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
NET SALES $ 36,037,550 $ 25,628,604 $ 61,666,154
COST OF SALES 25,793,688 19,523,196 45,316,884
------------ ------------ ------------
GROSS PROFIT 10,243,862 6,105,408 16,349,270
OPERATING EXPENSES:
SELLING 5,789,634 1,038,537 6,828,171
GENERAL & ADMINISTRATIVE 2,776,851 2,196,401 438,750 f 5,412,002
------------ ------------ ------------ ------------
OPERATING PROFIT 1,677,377 2,870,470 4,019,097
------------ ------------ ------------
OTHER INCOME (EXPENSE):
INTEREST INCOME 226,832 78,545 (67,500) g 237,877
INTEREST EXPENSE:
PARTNERS 0 (207,929) 207,929 h
OTHER (30,157) 0 (567,000) I (597,157)
OTHER (43,003) 67,320 24,317
------------ ------------ ------------
153,672 (62,064) (334,963)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,831,049 2,808,406 3,774,134
PROVISION FOR INCOME TAXES 724,000 0 755,000 j 1,479,000
------------ ------------ ------------
NET INCOME $ 1,107,049 $ 2,808,406 $ 2,295,134
------------ ============ ============
EARNINGS PER SHARE:
PRIMARY AND FULLY DILUTED $ 0.29
============
</TABLE>
Page 9
<PAGE>
NOTES TO PRO-FORMA FINANCIAL INFORMATION FOR
NINE MONTHS ENDED SEPTEMBER 30, 1997
Note 1. Pro-forma Adjustments
Note: Adjustments (a), (b), (c), (d) and (e) reflect the allocation
of the purchase price based on the estimated fair value of the
assets acquired and the liabilities assumed as if the
acquisition had occurred on September 30, 1997.
(a) Reflects the consideration exchanged for the DMS partnership
consisting of cash of $14,500,000, of which $13,500,000 is to be provided by a
financial institution simultaneous with the Closing, and approximately $650,000
of acquisition fees, issuance of a total of 162,500 warrants for the Company's
Common Stock as additional fees to the financial institution and the Company's
investment banker for services in connection with the Acquisition of DMS (valued
at $1.425 per warrant due to certain restrictions on the warrants), issuance to
certain holders of DMS partnership interests, at Closing, 2.25 million shares of
the Company's Common Stock (valued at $3.32 per share due to certain
restrictions on the issued stock) of which 250,000 shares are contingent upon
DMS achieving defined cumulative pre-tax earnings over a five year period, and
the accrual of expected incremental costs to be incurred by the Company in
connection with the Acquisition.
Total consideration exchanged for the DMS partnership interests and
the related costs of the transaction less the estimated fair market value of the
net assets acquired, as determined by Company management, is classified as
goodwill and is amortized over a period of 30 years.
Cash payment $14,500,000
Company common stock ($3.32 per share) 7,470,000
-----------
$21,970,000
Additional costs:
- Professional fees $ 650,000
- Warrants to broker 143,000
- Incremental direct costs 100,000 893,000
--------- -----------
Total consideration plus additional costs 22,863,000
less:
Net assets acquired, at book value 5,500,000
Write-up of inventory to estimated
fair market value 500,000
Write-up of property & equipment
to estimated fair market value 50,000 6,050,000
--------- -----------
Goodwill $16,813,000
===========
A higher cost of sales will result during the quarter subsequent to the
Acquisition from the revaluation of DMS' inventory to its estimated fair value.
This revaluation is not an ongoing cost of operations and accordingly, an
adjustment of $500,000 is not reflected in the pro forma statement of earnings
for 1996.
In calculating the value of the Company's Common Stock to be issued to the
to the DMS Principals in the Acquisition for purposes of completing these
pro-forma financial statements, the Company utilized a 20% discount factor off
the average per share trading price of the Company's Common Stock for the ten
day period comprised of the five day period prior to and the five day period
following the press release announcing the Acquisition. This discount factor
takes into account both (i) the overall lack of marketability of the Company's
Common Stock issued to the DMS Principals in the Acquisition, due to the Rule
144 trading restrictions attached to them, and (ii) the quantity of shares
issued to the DMS Principals in the Acquisition, which if sold into the
marketplace by them, would depress the trading price of the Company's stock.
10
<PAGE>
(b) Reflects elimination of the historical equity accounts of DMS.
(c) Reflects payment to DMS Principals for notes due them from DMS
as of September 30, 1997.
(d) Reflects the valuation of 62,500 warrants for the Company's
Common Stock at Closing issued to a financial institution.
(e) Reflects the reclassification of deferred income tax asset
balances from long term assets to current assets based on a
change in the estimated timing of the utilization of deferred
income tax benefits by the Company as a result of the
Acquisition.
Note: Adjustments (f) through (j) reflect the allocation of the
purchase price based on the estimated fair value of the assets
acquired and liabilities assumed as if the acquisition had
occurred on January 1, 1996.
(f) Reflects increase in depreciation and amortization resulting
from adjustments to the carrying amounts of property, plant
and equipment, amortization of goodwill over a period of 30
years and amortization of the value of warrants issued to a
financial institution over the 5 year term of the financing
arrangement.
(g) Reflects decrease in interest income resulting from the use of
available cash for the Acquisition.
(h) Reflects the elimination of interest expense paid by DMS to
its partners which will not be required subsequent to the
Acquisition.
(i) Reflects interest expense paid by the Company to a financial
institution resulting from borrowings utilized to partially
fund the acquisition. Interest expense is based on the
adjusted LIBOR rate plus an expected spread of approximately
80 basis points. During September 1997 the non-euro dollar
LIBOR rate approximated 5.7%. Accordingly, the pro-forma
adjustment reflects a 6.5% annual interest rate. Should that
rate increase or decrease by 1/8%, the impact during the
period would be to increase or decrease interest expense by
approximately $12,000 for the nine month period ended
September 30, 1997.
(j) Reflects income tax provision at 39% based on the net earnings
of DMS after accounting for all pro-forma adjustments.
Note 2. Impact of Charge Against Income for Stock Consideration paid to DMS
Employees.
The pro forma financial statements did not take into consideration the
impact of a $792,000 charge against DMS' income when Designated Employees
received Stock Consideration as a result of the Acquisition, which was a result
from DMS having to deduct from income the difference between the fair market
value of such equity interests and the absence of consideration paid by the
Designated Employees. This charge assumed that the full 10% of the equity
interests in Fixtures were transferred to the Designated Employees immediately
prior to Closing resulting in the Designated Employees receiving not more than
200,000 shares of the Company's Common Stock. To the extent Designated Employees
receive equity interests in Fixtures, such shares will be issued as bonus
compensation to no more than 25 such Designated Employees, and no single
Designated Employee received shares of Fixtures that entitled such Designated
Employee to receive in excess of 25,000 shares of Common Stock of the Company.
See, "The Acquisition - General Description of the Acquisition."
11
<PAGE>
DMS STORE FIXTURES, L.P.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Nine months ended September 30, 1997 as compared with nine months ended
September 30, 1996
Sales
Revenues for the first nine months of 1997, approximating $25.6 million,
exceeded the first nine months of 1996 revenues of approximately $21.7 million
by 18% due to increased sales to both new and existing customers.
Gross Profits
Gross profits increased from approximately 22.6% during the first nine
months of 1996 to 23.8% during the related nine months of 1997. This increase
was primarily attributed to higher margins on certain international sales orders
which occurred during the first nine months of 1997.
Operating Income
Operating income increased from $1,847,175 during the first nine months
of 1996 to $2,870,470 during the first nine months of 1997, an increase of 55%.
Additionally, operating profits increased, as a percentage of sales, from 8.5 %
to 11.2 % during the first nine months of 1996 and 1997, respectively. The
overall increase in operating income is a direct result of higher sales and
higher margins achieved by the Company during the first nine months of 1997 as
well as lower selling and general and administrative costs. As a percentage of
sales, selling and general and administrative costs decreased to 12.6% during
the first nine months of 1997, as compared with 14.1% during the first nine
months of 1996. The significant increase in operating profits during the first
nine months of 1997 as compared with the first nine months of 1996 was
predominantly due to the higher gross profit margins achieved on the $25.6
million of revenues during 1997 as compared with $21.7 million of 1996 revenues
for the comparative nine month period.
Other Income (Expense)
Interest expense to partners and affiliate increased from $193,000 to
$208,000 during respective first nine month periods of 1996 and 1997 relative to
demand notes bearing interest at a bank's prime rate. Interest income increased
to $78,545 from $60,895 during the respective nine month periods of 1997 and
1996. This increase was due to higher cash balances available for investment
during 1997 as compared with 1996. DMS incurred a second quarter 1996 charge of
$322,792 relative to partner deferred compensation payments.
Income Taxes
DMS is structured as a partnership with any federal or state income tax
liabilities being assumed by the respective partners. Accordingly, the DMS did
not provide for federal and state income taxes during the respective nine month
periods of 1997 and 1996.
12
<PAGE>
Net Income
Net income increased from $1,399,210 during the first nine months of
1996 to $2,808,406 for the first nine months of 1997. The increase in sales and
the higher gross profit percentage achieved on those sales, as well as lower
other costs relative to the 1996 non-recurring restructuring of its partners'
interests, significantly contributed to the higher 1997 net income level when
compared with the 1996 net income level for the nine month periods. Due to the
DMS's status as a non-taxable entity (see Income Taxes, above), both net income
and income before the provision for income taxes are the same.
Backlog
DMS maintained a backlog of orders approximating $7.3 million September
30, 1997 as compared with $6.1 million as of September 30, 1996.
Liquidity
DMS's cash balances decreased from December 31, 1996 to September 30,
1997 by approximately $3.0 million. This decrease occurred primarily from cash
distributions and payments against notes to the DMS partners during the first
nine months of 1997 which approximated $2.6 million. Inventory increased by
approximately $500,000 primarily due to the backlog of orders not delivered as
of September 30, 1997. Accounts receivable increased by approximately $3.5
million due to the higher level of sales during 1997 as compared with 1996.
Prepaid expenses decreased by $95,000 while accounts payable and accrued
expenses increased by approximately $619,000. There were no significant
purchases of property and equipment during the first nine months of 1997.
DMS did not utilize an available $1.0 million unsecured working capital
facility from a bank during the initial nine months of 1997.
DMS's current ratio of 1.9 to 1 improved slightly as of September 30,
1997 as compared with the December 31, 1996 ratio of 1.8 to 1. Exclusive of $3.1
million of notes payable due to partner's at September 30, 1997, the Company's
current ratio was approximately 5 to 1. Due to the changing nature of the
partner's capital accounts, debt to equity ratios are not comparable.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: February 26, 1997 MARLTON TECHNOLOGIES, INC.
--------------------------
Registrant
By: /s/ E. D. Costantini , Jr.
------------------------------------
Chief Financial Officer
14
