-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IuCOHFymhv7m65xQZXSN6591o4y+cSfOtZ6a/xstwlNsu5h3cKl5Z/L1Y7OAPyFM yUrzwaQ1FgiAvyeAV3A6rQ== 0000950168-99-002518.txt : 19990928 0000950168-99-002518.hdr.sgml : 19990928 ACCESSION NUMBER: 0000950168-99-002518 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXOTECH INC CENTRAL INDEX KEY: 0000034047 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 540700888 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-04076 FILM NUMBER: 99717598 BUSINESS ADDRESS: STREET 1: 8502 DAKOTA DR CITY: GAITHERSBURG STATE: MD ZIP: 20877 BUSINESS PHONE: 3019483060 MAIL ADDRESS: STREET 1: 8502 DAKOTA DR CITY: GAITHERSBURG STATE: MD ZIP: 20877 FORMER COMPANY: FORMER CONFORMED NAME: RADIATION SYSTEMS INC DATE OF NAME CHANGE: 19681121 10-K 1 EXOTECH INCORPORATED SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. FORM 10-K ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED: JUNE 30, 1999 COMMISSION FILE NO. 0-4076 EXOTECH INCORPORATED (Exact name of Registrant as Specified in Charter) STATE OR JURISDICTION OF INCORPORATION OR ORGANIZATION: DELAWARE IRS IDENTIFICATION NO: 54-0700888 ADDRESS OF PRINCIPAL OFFICE: 8502 DAKOTA DRIVE GAITHERSBURG, MD. 20877 REGISTRANT'S TELEPHONE NUMBER: (301) 948-3060 SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE EXCHANGE ACT NONE SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT COMMON STOCK PAR VALUE $0.10 PER SHARE. Indicate by checkmark 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 requirement for the past 90 days. Yes [x] No [ ] At June 30, 1999, 942,387 shares of Common Stock were outstanding, and the aggregate market value of the Common Stock of Exotech Inc. held by nonaffiliates was approximately $73,280. DOCUMENTS INCORPORATED BY REFERENCE NONE PART I ITEM 1. GENERAL DESCRIPTION AND BUSINESS ACTIVITIES A. GENERAL - There have been no changes in the organization of the Company during the past fiscal year. The Company has been neither a party to, nor contemplates, any actions of bankruptcy, receivership, or reorganization during the past or current fiscal years. No material assets were acquired, no acquisitions or dispositions are anticipated. The basic nature and conduct of the business is expected to continue as in the past. B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS - In the opinion of Management, the Company has one industry segment: (1) electro-optics and electronic instrument systems and related services. 1. Electro-optics products - The Company's principal products are: (1) a laser bacteria colony counter used in food and drug processing and laboratory testing environments, (2) a printed circuit board (PCIB) which interfaces the laser-scanner instrument with many models of the personal computers, (3) a crystallographic scanner that evaluates the lattice structure orientation of semiconductor crystals on the basis of surface morphology measurements, (4) a hand-held four channel-ground truth radiometer used for earth resource studies in conjunction with the LANDSAT satellite and also independent studies, and (5) an automated spiral plater that precisely and rapidly dispenses microbial samples onto rotating agar plates used in laboratories performing bacterial enumeration work. These products are currently marketed world-wide. Spiral Biotech, Inc. is the exclusive representative of products 1, 2 and 5. These products and related service work have accounted for 90 percent of the Company's sales in the past year and about 91 and 86 percent in the prior two fiscal years. The other products are sold directly by the Company. They are built for inventory in lots of 25 or more units, with two or more lots of the well established products generally being sold in about one year. It is intended that these products will be updated periodically to keep them abreast of new technological developments and will remain products of the Company. In December 1994 the Company accepted a contract from Spiral Biotech, Inc. to design an automated spiral plater (Autoplate) to replace a model that was being imported from Holland. In May 1995 a demonstration model of the instrument was delivered and subsequently the Company received an order for 22 production units. This production was completed in the first six months of fiscal year 1996. An additional 160 units of this instrument have been manufactured and delivered in fiscal years 1997 through 1999. A modulation transfer function (MTF) tester, used for quality control in the manufacture of low light level image intensifier tubes, is not in regular production but would be manufactured to fill customers' orders. This instrument was initially produced for the U. S. Army and delivered during fiscal year 1979. The Company developed an adapter assembly for these test instruments that updates them to test the latest versions of image intensifier tubes. Over the past eighteen years the Company has provided support to the U. S. Army and its contractors in the form of repair maintenance and calibration services. The contracts for these services are fixed price. There were two contracts for these services in the past fiscal year and purchase orders for calibration services in the current fiscal year are expected from government contractors using four of the MTF tester systems. The Crystallographic Scanner, developed in fiscal year 1987, redesigned into a manufacturing model in fiscal year 1988, was put into production in 1989. The first unit was delivered to the customer 2 in May 1989. In 1992, a system upgrade was designed and sold for this instrument. Marketing effort continues through correspondence and personal contacts, as well as personal presentations to introduce this product to semiconductor crystal growers, processors and manufacturers. However, there have been no sales of this instrument over the past seven years. The Company is currently engaged with the National Institute of Standards and Technology in a cooperative R&D agreement with the objective to calibrate the Exotech Scanner method with respect to the Bragg Angle method of determining crystal axis orientation. Validation of our instrument's capability vis-a-vis the X-ray methods will overcome a persistent impediment to sales of Exotech's Scanner to producers of semiconductor wafers. There are well-known potential customers that show continued interest in the scanner, but must be convinced of correlation with the traditional X-ray results. Some of the component parts for the products discussed above are fabricated to the Company's specifications and design. Other parts are standard electronic or optical components available off-the-shelf. The availability of these components is dependent upon several independent manufacturers and distributors. Delays due to strikes, material availability or scheduling problems could adversely affect the Company's assembly and delivery schedules. A few parts have only one source; however, the suppliers are proven, reliable businesses. The Company does not rely on foreign sources for raw materials, other than to the extent U. S. manufacturers acquire their supplies overseas. An energy crisis or fuel shortage would have no more of an adverse effect on the Company than on other firms requiring lighting, heat and modest amounts of electric power for offices and shops. Among its electro-optical products the Company holds an exclusive license and foreign patent applications on the Crystallographic Scanner. There are little or no seasonal variations in the business, other than for radiometers which tend to attract greater interest during the spring and fall seasons. Working capital is a continuing problem for the Company. There is currently no working capital financing available through a financial institution, although producer loans made by Spiral Biotech, Inc. were used to finance microbiological laboratory instruments' production in the most recent and prior fiscal years. The limited availability of working capital results in occasional cash on delivery orders for materials. All products are guaranteed as to parts and workmanship for a period of six months to one year. The only warranty work incurred in the past year was repair of a Model 4000 Autoplate at nominal cost. The Colony Counter, Autoplate, Crystallographic Scanner and Radiometer products are used principally in the scientific research and high technology manufacturing communities and therefore customers tend to be concentrated in these areas of activities. Sales in July and August 1999 amounted to $142,444, comprising 8 Autoplates, 10 Vacuum Sources, a Radiometer and miscellaneous repair and calibration services. Backlog in this segment at June 30, 1999 was $300,000. Business performed for the Government is on a fixed-price basis and therefore not subject to renegotiation; however, the contracts could be terminated for non-delivery or failure to meet specifications. There are other manufacturers of the Company's products, most of them larger and with greater resources available to fund development and production. Competition is very keen for the available market. The Company strives to improve its existing products and produce highly reliable state- 3 of-the-art instruments. 2. General Description of Business - Research and development by the Company in the past affected four products: (1) bacteria colony counters; (2) four channel radiometers, (3) data processors for bacteria colony counters and, (4) Model 500 Crystallographic Scanners. In fiscal year 1992 , the Company, in collaboration with Spiral Biotech, Inc., engaged in development of computer controlled, stepper motor actuated automation for bacteria colony plating and counting instruments. The applications comprise coordinated precise motions on as many as four axes. The purpose of this work is to enhance the technological excellence and competitive edge of the next generation of the Company's products for the microbiological laboratory market. This work, completed in March, 1992, resulted in a colony counter with automated features, and a proof-of-concept and demonstration model of a new spiral plater instrument. Total expenditures for the spiral plater effort amounted to $63,000 of which $20,000 was funded by Spiral Biotech, Inc. The preliminary design of the new plating instrument was completed, and produced by a development and manufacturing firm in Holland. Following the termination of importing of the instrument from Holland, the Company, early in 1995, designed a replacement instrument and, concurrent with development work, began production of Autoplates on an order from Spiral Biotech, Inc. Follow-on orders for these instruments resulted in shipments of 182 units prior to June 30, 1999. In the electro-optical instruments business, Autoplates, Colony Counters and related equipment sales accounted for 90% of the year's sales, 5% from radiometer sales, 0.5% from the MTF, calibration and maintenance, and 4.5% from miscellaneous sales and repair work. For the fiscal year ended June 30, 1999, as has been the case for prior years, the Company's independent auditors' report has included an explanatory paragraph, following the opinion paragraph, describing the existence of a going concern uncertainty. Management has been advised that the principal cause of the going concern uncertainty was cash flow shortage which in prior years caused delays in meeting some current obligations. It is the opinion of Management that progress in resolving cash flow related problems, although elusive in past years, was markedly improved in fiscal year 1999. Provided that the current level in instrument sales, and maintenance and repair work continue, Management expects to sustain adequate cash flow and improve working capital. The capital expenditures, earnings and competitive position have not been affected by compliance with Federal, State or local regulations enacted to control the discharge of materials into the environment or otherwise relating to the protection of the environment. Prompted by the many published statements of warning about data management problems at the turn of the century, the Company has carefully examined its internal data systems for susceptibility to such problems. The current internal data processing systems service engineering design and quality assurance, shareholder records and word processing for document preparation. These systems have no susceptibility to problems relating to year 2000 and beyond. Inquiries have been posed to the Company's principle providers of banking, payroll processing, and materials and parts to obtain assurance of suitable uninterrupted service throughout the turn of the century period. Where any doubt of such assurance is found, alternative providers will be engaged prior to the end of October 1999. The Company and its subsidiary employ five persons; two are classified as professional and three as semi-professional. The Company did not conduct operations in foreign countries. 4 ITEM 2. PROPERTIES The Company, and its wholly-owned subsidiary, Exotech Research & Analysis, Inc. have been in their present facilities at 8502 Dakota Drive, Gaithersburg, Maryland 20877 since November, 1987. The premises consist of approximately 4,500 square feet of office space and laboratory facilities. In May 1999, the Company entered into a three year lease extension with McShea Management, Inc. of Gaithersburg, Maryland for the presently occupied facility. 5 ITEM 3. LEGAL PROCEEDINGS Neither the company nor its subsidiary are parties to any material pending legal proceedings nor is any of their property the subject of any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the past fiscal year. 6 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. a. Price range of Common Stock The following table shows the Bid and Ask prices for the Common Stock in the over-the-counter market for the fiscal years and calendar quarters indicated, as obtained upon request from stockbrokers in the Washington area. The quotations represent prices in the over-the counter market between dealers in securities, do not include retail mark-up, mark-down or commission, and do not necessarily represent actual transactions. (Transaction data was insufficient to obtain an average for 1998 and 1999.) -------------BID AND ASK PRICES--------------
1999 1998 ---- ---- FIRST QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8 SECOND QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8 THIRD QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8 FOURTH QUARTER Bid, Nominal / Ask, 1/8 Bid, Nominal / Ask, 1/8
b. Approximate number of Equity Security Holders. TITLE OF CLASS: Common Stock APPROXIMATE NUMBER OF SHAREHOLDERS (As of September 21, 1999) 596 --- c. Dividends. No dividends were declared or paid during the most recent or any prior fiscal year. 7 ITEM 6. SELECTED FINANCIAL DATA Selected Income Statement Data:
-----------------------------------FISCAL YEAR------------------------------ 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Net Sales $821,158 $499,476 $443,176 $367,259 $370,102 Income (Loss) before Taxes & Extraordinary Credit 31,494 9,878 (265,432) (152,584) (68,130) Net Income (Loss) $31,494 $9,878 $(265,432) $(152,584) $(68,130) Per Share: Net Income (Loss) .03 .01 (.28) (.16) (.07) Selected Balance Sheet Data: -----------------------------------FISCAL YEAR------------------------------ 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Current Assets $428,348 $375,031 $329,315 $563,209 $587,808 Current Liabilities 913,889 896,328 856,445 825,952 699,068 Working Capital (485,541) (521,297) (527,130) (262,743) (111,260) Total Assets 434,418 385,363 335,602 570,541 596,241 Stockholders' Equity and Accumulated Deficit $(479,471) $(510,965) $(520,843) $(255,411) $(102,827)
8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS. The Company's revenues of $821,158 were 64% higher than in fiscal year 1998, and 85% higher than in fiscal year 1997. The declines in earlier years related in part to organizational and personnel disruptions in the Company's principal customer and marketing agent for biotechnology instruments, Spiral Biotech, Inc. The increase of the past year is largely attributable to new ownership of Spiral Biotech, Inc., that has purchased a substantially larger quantity of instruments. Sales of instruments, parts, repairs and calibration services in the past three years are shown in the following table. Instrument sales have increased 97% over the period with the increase related to the introduction of the automated plater. The reduced sales of miscellaneous service, parts and repairs in fiscal year 1999 resulted from a shift in prioritites by the new management of the Company's principal customer in this period.
1999 1998 1997 -------- -------- -------- Biotechnology Instruments $736,467 $411,273 $347,445 Radiometer 40,504 22,555 47,015 MTF Tester Service 6,100 10,550 9,590 Miscellaneous Parts and Service 38,087 55,098 39,126
The cost of operations, $754,126, includes a $34,188 write-off of aging inventory and resulted in an operating income of $67,032, compared to fiscal year 1998 income of $50,819 and operating loss of $227,552 in fiscal year 1997. The impact of interest costs resulted in a net profit of $31,494 compared to a net profit of $9,878 and a loss of $265,432 in 1998 and 1997, respectively. A net decrease in demand notes of $12,703 allowed a decrease in interest expense to $36,279, compared to $41,529 in the prior year, and $37,880 in fiscal 1997. The objective of Management following successful, but costly, development of a state-of-the-art automated plater instrument in fiscal year 1996 was to demonstrate its sales potential in a highly competitive market. In the opinion of Management, that objective was achieved through intense effort to improve the production efficiency, and prove the reliability of the instrument in the past three fiscal years. Production costs for the instrument have been steadily improved during that period. In the past year, orders for instruments and services related to biotechnology products increased by 79% above the level of the prior year. In the opinion of Management, recent improvements in the marketing of the biotechnology products may rejuvenate sales of the laser scanner instruments together with increasing sales of services products related to the automated plater. Sales of the Model 100BX radiometer rebounded by 80% over the results in the prior fiscal year, without the benefit of any marketing effort. Management recognizes a continuing demand for this instrument which deserves attention. A Web site is being implemented to market this product on the Internet. The radiometer enjoys a long-standing reputation for value in the remote sensing field and efforts will be renewed to increase sales. Despite financial and staffing limitations that have impeded marketing of the Crystallographic Scanner instruments, Management believes that the results of on-going collaborative studies and 9 demonstrations of capabilities will improve the prospects of sales to the potential customers who continue to show interest in that instrument system. Furthermore, Management is committed to explore the prospects for collaborative arrangements with several well established suppliers of manufacturing equipment to the semiconductor industry as a means to generate increased exposure and sales potential for this product. Substantive results from this effort were not achieved prior to June 30, 1999. Over the past three fiscal years, as in prior years, the independent accountants' report has included an explanatory paragraph, following the opinion paragraph, describing the existence of a going concern uncertainty. The accountants have advised Management that the principal cause for the going concern uncertainty is cash flow shortages which have caused delays in meeting current obligations. In the opinion of Management, the recent years of seriously depressed markets for the Company's products caused substantial impediments to overcoming the qualification stated by the accountants. Continued stringent control of costs and cash outlays has enabled the Company to sustain high quality and timely upgrades of its products while nurturing improved results from marketing efforts in a very competitive environment. With a new product now experiencing a good level of acceptance in the market, and growth in the Company's backlog for its other biotechnology-related products, Management believes that increasing revenue will provide sufficient cash to support operations throughout fiscal year 2000. As shown in the Statements Of Cash Flows for the three years ended June 30 of 1999, 1998 and 1997, each period ended with a small positive cash balance. Negative cash flow from operations have been experienced in two of the past three years. In fiscal year 1999, a net profit of $31,494 was offset by substantial increases in accounts receivable, accounts payable and other accrued expenses, and a decrease in inventories. The result of an operating net loss in 1997 and a small profit in 1998 caused negative cash flow from operating transactions of ($9,674) and ($18,387) respectively. Offsetting in these cases were net proceeds from notes of $26,479 in 1998 and $13,000 in 1997. The Company managed to meet its cash flow obligations in the past year with receipts from sales and financing activities comprised of deposits received with purchase orders and waiver of compensation by the Company's Chief Executive Officer. A careful examination by Management, prompted by well-publicized risks of year 2000 anomalies with some computer operating systems and programs, has resulted in assurance that the company's current data processing and record-keeping will not be in jeopardy of such difficulties. It is noted that the Company's property, plant and equipment are nearly fully depreciated. However, all essential items of these assets are maintained in good repair and no significant replacements nor additions are anticipated in the next year or more. The Company's management and employees continue to be committed to reestablishing progress toward our goal of profitability. 10 Linton, Shafer & Company, P.A. Certified Public Accountants 6 West Second Street Frederick, MD 21701 301-663-5122 Principals: Edmond B. Gregory III, CPA, CBA Kevin R. Hessler, CPA Donald C. Linton, CPA, CFP Joseph M. McCathran, CPA Ronald W. Shafer, CPA REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Shareholders Exotech, Incorporated and Subsidiary We have audited the accompanying consolidated financial statements and related schedules of Exotech, Incorporated and Subsidiary included on pages 12 through 21 of the annual report on Form 10-K of Exotech, Incorporated and Subsidiary as of June 30, 1999 and 1998 and for the years ended June 30, 1999, 1998 and 1997. These financial statements and related schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and related schedules 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 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Exotech, Incorporated and Subsidiary as of June 30, 1999 and 1998 and the results of their operations and their cash flows for the years ended June 30, 1999, 1998 and 1997, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, there is substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. August 30, 1999 /s/ LINTON, SHAFER & COMPANY, P.A. 11 EXOTECH INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED JUNE 30 Reference is made to Note 1 of the Notes to the Consolidated Financial Statements for a description of operations of the Company and to Note 2 for a description of the principal accounting policies followed by the Company.
1999 1998 1997 ------ ------ ------ REVENUES Instrument Sales $776,971 $433,828 $394,460 Parts, Repairs and Services 44,187 65,648 48,716 --------- --------- -------- TOTAL SALES $821,158 $499,476 $443,176 COST OF OPERATIONS Direct Cost and Overhead Instrument Sales 646,114 362,084 319,705 Repairs, Parts and Service 24,549 37,596 30,548 R & D Costs -- -- -- Inventory Adjustment 34,188 -- 281,117 General and Administrative Instrument Sales 47,243 44,615 36,191 Repairs, Parts and Service 2,032 4,362 3,167 R & D Costs -- -- -- -------- -------- -------- TOTAL COST OF OPERATIONS 754,126 448,657 670,728 -------- -------- -------- OPERATING PROFIT (LOSS) 67,032 50,819 (227,552) - ----------------------- OTHER REVENUES (EXPENSES) Miscellaneous 741 588 -- Interest (36,279) (41,529) (37,880) -------- -------- -------- NET PROFIT (LOSS) BEFORE TAXES 31,494 9,878 (265,432) - ------------------------------ INCOME TAXES -- -- -- ---------- ---------- --------- NET PROFIT (LOSS) $31,494 $9,878 $(265,432) - ----------------- ======== ======= ========== Gain or (Loss) per Common Share .03 .01 (.28) Weighted average number of common shares outstanding 942,387 942,387 942,387
The accompanying notes are an integral part of these statements. 12 EXOTECH INCORPORATED AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
1999 1998 ------ ------ CURRENT ASSETS Cash $8,868 $6,442 Accounts Receivable (Note 2) Billed 85,270 33,912 Less: Allowance for Doubtful Account -- -- Inventories, at lower of average cost or market 331,135 334,062 Prepaid Expenses and Advances 3,075 615 --------- --------- TOTAL CURRENT ASSETS 428,348 375,031 PROPERTY, PLANT AND EQUIPMENT, at cost Laboratory Equipment 160,980 160,980 Office Furniture & Equipment 72,245 70,550 --------- --------- 233,225 231,530 Less accumulated depreciation and amortization (231,498) (231,354) --------- --------- Total Property, Plant and Equipment - Net 1,727 176 OTHER ASSETS Miscellaneous 4,343 10,156 -------- -------- TOTAL ASSETS $434,418 $385,363 --------- ---------
The accompanying Notes are an integral part of these statements. 13 EXOTECH INCORPORATED AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF JUNE 30
1999 1998 ---- ---- CURRENT LIABILITIES Notes Payable and Current Maturities of Long Term Debt (Note 5) $399,072 $411,775 Accounts Payable and Other Accrued Liabilities 20,099 87,022 Accrued Payroll and Employee Benefits 67,501 71,250 Accrued Officer Salary and Benefits 169,730 181,169 Accrued Interest 176,587 145,112 Deferred Revenue 80,900 -- --------- ---------- TOTAL CURRENT LIABILITIES 913,889 896,328 SHAREHOLDERS' DEFICIT Common Stock, par value $.10 per share; 1,500,000 shares authorized; 970,135 shares issued and outstanding 97,014 97,014 Paid in Surplus 1,169,645 1,169,645 Accumulated Deficit (1,633,710) (1,665,204) Treasury Stock 27,748 shares at cost (112,420) (112,420) --------- --------- TOTAL SHAREHOLDERS' DEFICIT (479,471) (510,965) --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $434,418 $385,363 ======== =========
The accompanying Notes are an integral part of these statements. 14 EXOTECH INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED JUNE 30
INCREASE (DECREASE) IN CASH 1999 1998 1997 - --------------------------- ------ ------ ------ CASH FLOWS FROM OPERATING TRANSACTIONS Net Profit (Loss): $31,494 $9,878 $(265,432) Add: Non Cash Income Determinants Depreciation & Amortization 1,073 1,045 1,045 Add (Deduct): Changes in Current Assets and Liabilities: (Increase) Decrease in Accounts Receivable (51,358) (15,687) (7,152) (Increase) Decrease in Prepaid Expenses & Advances (2,460) (615) 344 (Increase) Decrease in Inventories 2,927 (26,403) 244,028 Increase (Decrease) in Accounts Payable & Other Accrued Liabilities (66,924) (12,345) (6,295) Increase (Decrease) in Accrued Payroll & Related Expenses (15,188) (7,284) (8,987) Increase (Decrease) in Accrued Interest 31,475 33,033 32,775 Deferred Revenue 80,900 -- -- -------- --------- -------- Cash Provided By (or) Used In Operating Transactions $11,939 $(18,378) $(9,674) ----------- ------- -------- --------- -------- CASH FLOWS FROM FINANCING TRANSACTIONS: Proceeds from Notes 22,195 75,306 43,000 Payment on Notes (34,898) (48,827) (30,000) -------- -------- -------- Cash Provided By (or) Used In Financing Transactions (12,703) 26,479 13,000 ----------- ------- -------- ------- ------- CASH FLOWS FROM INVESTING TRANSACTIONS: Purchase of Equipment (1,695) (5,090) -- Deposits 4,885 -- -- ------- -------- -------- Cash Provided By (or) Used In Investing Transactions 3,190 (5,090) -- ----------- ------- ------- ------- -------- INCREASE (DECREASE) IN CASH 2,426 3,011 3,326 CASH BALANCE - BEGINNING 6,442 3,431 105 ------ ------ -------- CASH BALANCE - ENDING $8,868 $6,442 $3,431 ======= ======= ======= SUPPLEMENTAL INFORMATION Interest Paid $4,804 $8,496 $5,105 Taxes -- -- --
The accompanying notes are an integral part of these statements. 15 EXOTECH INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT FOR THE THREE YEARS ENDED JUNE 30, 1999
COMMON STOCK -------------------- ($0.10) PAID-IN ACCUMULATED TREASURY STOCK -------------------- SHARES PAR VALUE SURPLUS (DEFICIT) SHARES COST -------- --------- ------------ ------------ ------ ------- Balance, June 30, 1996 970,135 $97,014 $1,169,645 $(1,409,650) 27,748 $(112,420) Add (Deduct) -- -- -- -- -- -- Net Profit (Loss) -- -- -- (265,432) -- -- -------- --------- ------------ ------------- ------- --------- Balance, June 30, 1997 970,135 $97,014 $1,169,645 $(1,675,082) 27,748 $(112,420) Add (Deduct) -- -- -- -- -- -- Net Profit (Loss) -- -- -- 9,878 -- -- -------- --------- ------------ ------------- ------- --------- Balance, June 30, 1998 970,135 $97,014 $1,169,645 $(1,665,204) 27,748 $(112,420) Add (Deduct) -- -- -- -- -- -- Net Profit (Loss) -- -- -- 31,494 -- -- -------- --------- ------------ ------------- ------- --------- Balance, June 30, 1999 970,135 $97,014 $1,169,645 $(1,663,710) 27,748 $(112,420) ======= ======= ========== ============ ======= =========
The accompanying notes are an integral part of these statements. 16 EXOTECH INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) DISCUSSION OF OPERATIONS AND REALIZATION OF ASSETS For the fiscal year ended June 30, 1999, the Company had an operating profit of $67,032, after a year-end write-off of $34,188 in manufacturing inventory. The Company had an operating profit of $50,819 in the fiscal year ended June 30, 1998. At June 30, 1997, there was an operating loss of $227,552 which included an inventory write-off of $281,117. At June 30, 1999, all accounts payable were less than 30 days old. The accompanying financial statements have been prepared on the "going concern" basis of generally accepted accounting principles. The ability of the Company to continue normal operations is dependent upon its ability to obtain the required amounts of working capital to finance the existing contracts, to continue the acquisition of additional contracts, and to pursue instrument sales at prices sufficient to recover costs and some profits. Management believes that improved revenues now being experienced with the Company's new product, the automatic plater for microbiological laboratories, together with stringent control of costs and cash outlays will provide sufficient cash to support its operations throughout the coming fiscal year. Crystallographic Scanners have experienced no sales activity since their development approximately five years ago. Efforts are ongoing to develop a marketing agreement with an established marketer of capital equipment to the crystal growers and processors, or alternatively to sell the products, design package, software, patents and licenses to larger manufacturers of instruments with a significant presence in the semiconductor processing equipment market. However, substantive results were not achieved prior to June 30, 1999. In the fiscal year ended June 30, 1997 this product line was deleted from inventory. At June 30, 1999, the remaining value (backlog) of existing sales contracts was approximately $300,000. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business - ------------------ The Company is a manufacturer of Electro-optical instruments. It performs the research and development required for those products. Principle of Consolidation - -------------------------- The accompanying consolidated financial statements include the accounts of the Company and its subsidiary, after elimination of all significant intercompany transactions. Revenue Accounting - ------------------ The Company records revenue earned based on shipments of units of its products. Inventory - --------- Finished goods inventory is stated on the basis of the lower of average cost or market value. Depreciation and Amortization - ----------------------------- The Company uses a straight-line method of depreciation and amortization for both tax and financial 17 reporting purposes. The following time periods are used: DEPRECIATION: Laboratory equipment 5 or 8 years Office furniture and equipment 5 years AMORTIZATION: Leasehold improvements Life of lease Patents 12 years Depreciation expense recorded in the consolidated statement of operations is as follows: 1997 - $1,045, 1998 - $1,045, and 1999 - $1,073, including amortization of patents at the rate of $928 in each year. The Company's limit for capitalization of property and equipment is $500 or more. Income Taxes - ------------ Provisions for income taxes are based on pre-tax income reported in the financial statements, using the guidance of Financial Accounting Standards Board Statement No. 109 (FAS #109) ?Accounting for Income Taxes.? Differences between income (loss) for financial reporting purposes and tax reporting arise from (a) the capitalization and amortization of research and development costs for income tax reporting purposes, but deducting these costs as expenses in the period incurred for financial statement purposes; and (b) timing differences in deducting net losses on contracts. There were no provisions for income taxes required in the three year period ended June 30, 1999 due to the operating losses and loss carryforwards for each of those years. At June 30, 1999, the Company had net operating loss carryforwards of $661,376 which begin to expire in 2000. The Company also has incurred research and experimental expenses of $183,368 in prior years that have been capitalized to be amortized over a sixty month period for income tax purposes, but have been expensed in the period incurred for financial statement reporting. While the accounting standard allows companies to recognize a deferred tax asset on the tax effect of these timing differences, the Company has provided a valuation allowance for the full amount since it is more likely than not the deferred tax asset will not be realized. The approximate tax effect of the carryforward and temporary difference for the three years ended June 30 consist of:
1999 1998 1997 -------- -------- -------- Net operating loss carryforward $264,550 $269,993 $263,624 Deferred research and experimental expenses 15,480 25,800 36,120 Less: Valuation allowance (280,030) (295,793) (299,744) --------- --------- --------- Deferred Tax Asset - net - 0 - - 0 - - 0 - ========= ========= ========= Net (increase) decrease in valuation allowance $15,763 $3,951 $(103,027) ========= ======= ==========
18 Following is a table reconciling the Company's accounting net loss or (income) for each of the last three years ended June 30.
1999 1998 1997 -------- -------- -------- Accounting Net (Income) Loss $(31,494) $(9,878) $265,432 Nondeductible expense -- -- -- Research and experimental costs: Capitalized on tax return -- -- -- Tax amortization 25,800 25,800 30,135 --------- -------- -------- Taxable Net (Income) Loss $(5,694) $ 15,922 $295,567 ========= ======== ========
Repairs and Betterments - ----------------------- Repairs are expensed as incurred. Betterments are capitalized and depreciated over the remaining useful life of the assets. Accounts Receivable - ------------------- Accounts receivable consist of amounts billed from sales as of June 30, 1999 and 1998. There is no allowance for doubtful accounts as of June 30, 1999, as the Company considers accounts receivable to be fully collectible. Cash And Cash Equivalents - ------------------------- The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Use of Estimates - ---------------- In preparing financial statements in conformity with generally accepted accounting principles, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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 these estimates. (3) INVENTORY Inventories are summarized as follows: 1999 1998 ------ ------ Raw Materials $32,625 $32,625 Goods in Process 284,510 287,437 Finished Goods 14,000 14,000 --------- --------- $331,135 $334,062 (4) RESEARCH AND DEVELOPMENT COSTS The Company's accounting policy is to write off research and development costs as incurred. There were no R&D costs in the fiscal year 1997, 1998 nor in 1999. 19 (5) NOTES PAYABLE Notes payable at June 30, 1999, consist of three demand notes of $100,000, $8,000 and $47,000 with interest at 8.5% per annum to three of the Company's former directors. In addition, Notes amounting to $244,072 are payable with interest at 8.5% per annum to one officer/employee.
1999 1998 ---- ---- Average* aggregate amount outstanding during year $410,093 $416,624 Maximum amount outstanding during year 429,273 434,719 Average* interest rate on loans outstanding at end of year 8.50% 8.26% Average* interest rate incurred during the period 7.80% 7.93%
*Average amounts outstanding during the year and related average interest rates were determined from the average of the month-end amounts outstanding. The average interest rate at each year-end was determined from the weighted average of amounts outstanding at that time. (6) COMMITMENTS AND CONTINGENCIES The Company received cash deposits from its principal customer of $158,900 on orders for instruments and technical services amounting to $598,000. The balance of this liability at June 30, 1999 was $80,900 which will be reduced incrementally upon discounted billing for delivered instruments and services. At the end of August 1999, the balance of the liability was further reduced in this manner to $59,900. All operations of the Company and subsidiary were conducted in leased facilities. In March 1990, the Company entered into a lease agreement for a three-year period for the present facilities at 8502 Dakota Drive, Gaithersburg, MD. This lease was renegotiated and extended in three year increments through May 31, 2002. Non-Financing 2002 2001 2000 ------ ------ ------ Building $30,873 $32,781 $31,826 (7) EARNINGS PER SHARE Per share computations were based on the weighted average number of shares outstanding during the periods, excluding options because the market price and option price were the same. (8) SUPPLEMENTAL PROFIT AND LOSS INFORMATION
Description 1999 1998 1997 - ----------- ---- ---- ---- Taxes other than income: Payroll $11,299 $8,938 $7,796 Franchise, Personal Property and other Miscellaneous 873 1,587 1,168 Rents, including equipment rental 42,318 41,573 38,653
20 (9) DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No disagreements exist between Management and its independent public accounting firm. (10) TRANSACTIONS WITH SHAREHOLDERS Sales to a company owned by a shareholder aggregated $87,361, $457,018 and $381,130 (about 11, 91 and 86 percent, respectively, of total sales) for the fiscal years ended June 30, 1999, 1998 and 1997, respectively. Amounts due from such sales at June 30, 1998 and 1997 were $23,042 and $12,725, respectively. There was nothing due from such sales after October 1998. Sales were consummated on terms similar to those prevailing with unaffiliated customers. (11) VALUATION AND QUALIFYING ACCOUNTS The following is a schedule of Valuation and Qualifying Accounts:
Additions: Balance Charged to Balance Beginning Costs and End of Description of Period Expenses Deductions Period ----------- --------- -------- ---------- ------ Allowance for Depreciation: Year Ended June 30, 1999 231,354 144 231,498 Year Ended June 30, 1998 231,236 118 231,354 Year Ended June 30, 1997 231,119 117 231,236 Allowance for Amortization of Patents: Year Ended June 30, 1999 9,743 928 10,671 Year Ended June 30, 1998 8,815 928 9,743 Year Ended June 30, 1997 7,887 928 8,815
21 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (a), (b), (e) NAME: ROBERT G. LYLE (70) President, CEO of the Company and subsidiary; Director. Business experience during past 5 years: Same as above, since 1977. Other Positions: None. Other Directorships: None. - ------------------- NAME: THEODORE J. PARRECO (42) Secretary (1999) and Director and Member of Audit Committee (1999). Business experience during past 5 years: - President and Treasurer, James Parreco & Son Inc. Construction Equipment Leasing (1990-present) - Vice President, Indcom Land Inc. (1994-present) Other Positions: None. Other Directorships: None. - --------------------- NAME: JOHN M. TALBOT (43) Treasurer (1999), Secretary (1997-1999) and Director and Member of Audit Committee (1997-1999). Business experience during past 5 years: - Senior Electronic Engineering Technician and Data Processing Supervisor (1987-1999). Electronic Technician and Computer Programmer (1979-1987) Other Positions: None. Other Directorships: None. - ---------------------- Note: All terms expire in December, 1999 c. Not applicable. d. There are no family relationships between any of the above listed directors and any other director or executive officer of the Company. f. None of the directors or executive officers have been subject to any bankruptcy or insolvency proceedings, criminal proceedings, or injunctions against dealing in investments during the past three years. 22 ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS A. No individual in Management received remuneration of $100,000 or more. Officers as a group of three people received no payments except for $8,925 in disbursements for the group health and life insurance premiums for the Chief Executive Officer. The total compensation for the Chief Executive Officer in fiscal year 1999 was $8,925. Mr. Talbot was elected to be Secretary and Director subsequent to June 30, 1997 at no added compensation over his salary as a full-time employee. B. No annuity, pension or retirement benefits are proposed to be paid to any director or officer in the event of his retirement. No remuneration payments are proposed to be made in the future, directly or indirectly, to any director or officer by the Company or its subsidiary pursuant to any existing plan or arrangement. C. There are no fees paid to directors for services in that capacity. D. No officer, or director of the Company: (1) received options during the reporting period; or (2) exercised options during the reporting period, or (3) held options as of September 1, 1999. The officers and directors of the Company as a group did not: (1) receive options during the reporting period, or (2) exercise options during the reporting period, or (3) hold options as of September 1, 1999. E. Termination of employment - the Company has no employment termination agreements with officers or employees. 23 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of September 21, 1999, the information with respect to common stock ownership of each person known by the Company to own beneficially more than 5% of the shares of the Company's common stock, par value $0.10 per share, and of all officers and directors as a group:
AMOUNT AND NATURE OF % NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS - ---------------- -------------------- ----- Carter C. Chinnis Of Record 90,244 303 N. Vine Street Beneficially 1,200 ----- Richmond, VA 23220 Total 91,444 9.70 Robert G. Lyle Of Record 160,318 17.01 41957 Brightwood Lane Leesburg, VA 22075 Theodore Parreco Of Record 44,100 PO Box 1357 Benefically 5,126 ------- Upper Marlboro, MD 20773 Total 49,226 6.27 Denzil C. Pauli Of Record 204,547 21.70 13021 Bluhill Road Aspen Hill, MD 20906 William T. Stephens Of Record 96,449 10.23 PO Box 1096 McLean, VA 22075 Current officers and directors as a group own a total of 209,544, representing 22.24% of Common Stock.
24 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS a. Transactions with Management and others. The Company was not a party to material transactions since the beginning of its last fiscal year in which a holder of 5% of the securities of the Company had or has a direct or indirect material interest, other than in the normal course of microbiology laboratory instruments and related equipment sales on an exclusive basis with Spiral Biotech, Inc. owned prior to September 1999 by a shareholder holding 9.77% of the Company's stock. b. Certain Business relationships. None of the Company's directors, executive officers, or nominees for director have a working relationship with any of the Company's vendors, customers or sources of working capital that would be sizeable enough to generate a conflict of interest or undue influence, to the best knowledge of Management. William T. Stephens, is the Company's legal counsel; however, revenue generated by services rendered to the Company do not exceed 1% of that law firm's revenues. c. Indebtedness of Management. No director or officer of the Company or any associate of any director or officer were indebted to the Company. 25 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K A. 1. LIST OF FINANCIAL STATEMENTS IN PART II OF THIS REPORT.
PAGE NO. -------- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...................................................... 11 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THREE YEARS ENDED JUNE 30, 1999.................................................................................... 12 CONSOLIDATED BALANCE SHEETS - JUNE 30, 1999 AND 1998.................................................... 13-14 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED JUNE 30, 1999.............................................................................. 15 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT - FOR THE THREE YEARS ENDED JUNE 30, 1999...................................................... 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................................................. 17-21 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................................................................... 24 FINANCIAL DATA SCHEDULE (EX-27)......................................................................... 29 Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. Individual financial statements of the Company are omitted because it is primarily an operating company and the subsidiary included in the consolidated financial statements being filed in the aggregate does not have minority equity interests and/or indebtedness to any person other than the parent in the amounts which together exceed 5% of the total consolidated assets at the date of the latest balance sheet filed excepting indebtedness incurred in the ordinary course of business which is not overdue and which matures within one year of its creation, whether evidenced by securities or not, and indebtedness which is collateralized by the parent by guarantee, pledge, assignment or otherwise. A. 2. PARENT AND SUBSIDIARY The Company has no parent. The subsidiary of the Company is: NAME: EXOTECH RESEARCH & ANALYSIS, INC. STATE OF INCORPORATION: DELAWARE SECURITIES OWNED BY THE COMPANY: COMMON STOCK, 100% The foregoing is included in the consolidated statements of the Company and subsidiary.
26 A. 3. EXHIBITS 3.1 Restated Certificate of Incorporation of the Company which is hereby identified as a BASIC DOCUMENT. The document was originally filed pursuant to a Registration Statement (Form S-1) filed on November 8, 1968, and is incorporated herein by reference. 3.2 By-Laws of the Company as revised amended on April 16, 1971, which is hereby identified as a BASIC DOCUMENT. The document has been filed pursuant to FORM 10-K for the fiscal year ended June 30, 1971, and is incorporated herein by reference. 3.4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION - EXOTECH SYSTEMS, INC. changing its name to EXOTECH RESEARCH AND ANALYSIS, INC. certified by the Secretary of the State of Delaware on the 12th day of August 1975, which is identified as a BASIC DOCUMENT. The document was originally filed with the Form 10-K for the fiscal year ended June 30, 1976, and is incorporated herein by reference. 3.5 CERTIFICATE OF OWNERSHIP AND MERGER merging EXO-REALTY, INC. into EXOTECH INCORPORATED, certified by the Secretary of State, State of Delaware on the 28th day of June, 1976, which is identified as a BASIC DOCUMENT. The document was originally filed with the Form 10-K for the fiscal year ended June 30, 1976, and is incorporated herein by reference. 4.1 Specimen copy of a certificate for the Company's common stock, par value $.10 per share, which is hereby identified as a BASIC DOCUMENT. The specimen was filed pursuant to a Registration Statement (form S-1) filed on November 8, 1968, and is incorporated herein by reference. 4.1(a) Specimen copy of a certificate for the Company's common stock, par value $.10 per share, reprinted due to exhaustion of the initial supply. This specimen copy was identified as a BASIC DOCUMENT. This exhibit was filed with Form 8 for the fiscal year ended June 30, 1975, and is incorporated herein by reference. B. No Form 8-K reports were filed in the fiscal year covered in this report. 27 SIGNATURE Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of 1934, the Company has duly caused this amended Report to be signed on its behalf by the undersigned, thereunto duly authorized. September 21, 1999 BY: /s/ Robert G. Lyle ----------------------- ---------------------------- DATE ROBERT G. LYLE, CHIEF EXECUTIVE OFFICER, PRINCIPAL ACCOUNTING OFFICER AND DIRECTOR September 21, 1999 BY: /s/ John M. Talbot ----------------------- ---------------------------- DATE JOHN M. TALBOT, TREASURER (PRINCIPAL FINANCIAL OFFICER) AND DIRECTOR September 21, 1999 BY: /s/ Theodore J. Parreco ----------------------- ----------------------------- DATE THEODORE J. PARRECO, SECRETARY AND DIRECTOR 28 EX-27 2 EXHIBIT 27
5 12-MOS JUN-30-1999 JUN-30-1999 8,868 0 85,270 0 331,135 428,348 233,225 231,498 434,418 913,889 0 0 0 97,014 (576,485) 434,418 821,158 821,899 754,126 754,126 0 0 36,279 31,494 0 31,494 0 0 0 31,494 0.03 0.03
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