Inotek Technologies 10QSB 2001 Q3 Quarterly report (small business)

United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-QSB

Quarterly Report Pursuant to Section 13 or 15(d)
0f the Securities Exchange Act of 1934

For Quarter Ended February 28, 2001	Commission File
	Number 0-16101

INOTEK Technologies Corp.
(Exact name of registrant as specified in its charter)

Delaware	75-1986151
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

11212 Indian Trail, Dallas, Texas	75229
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number including area code, 972-243-7000.

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  _x_ No __

4,754,088 shares of common stock,$.01 par value (the issuer’s only class of common stock), were outstanding as of February 28, 2001.

INOTEK Technologies Corp.

INDEX

	Page No.
Part I.  Financial information
Item 1.  Financial Statements:
Balance Sheets as of February 28, 2001 (unaudited) and May 31, 2000	1
Statements of Operations for the Three Months Ended February 28, 2001
and February 29, 2000 (unaudited)	2
Statements of Operations for the Nine Months Ended February 28, 2001
and February 29, 2000 (unaudited)	3
Statements of Cash Flows for the Nine Months Ended February 28, 2001
and February 29, 2000 (unaudited)	4
Notes to Financial Statements	5
Item 2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations	6
Part II.  Other Information
Item 1.  Legal Proceedings	7
Item 4.  Submission of Matters to a Vote of Security Holders	7
Item 6.  Exhibits and Reports on Form 8-K	7
Signatures	8
Index to Exhibits
Exhibit (20)-Report Furnished to Security Holders	9

INOTEK Technologies Corp.

Balance Sheets

	February 28 2001 (unaudited)		May 31 2000
ASSETS
Current assets:
Cash and cash equivalents	$    320,837		$    632,970
Trade receivables, net of allowance for doubtful accounts
of $125,422 at February 28 and $111,837 at May 31	2,572,858		2,336,758
Inventories	1,249,946		1,247,903
Deferred taxes	66,685		89,028
Income tax receivable	48,235		74,899
Prepaid expenses and other assets	97,334		156,314
Total current assets	4,355,895		4,537,872
Property and equipment, net	758,115		801,553
Goodwill, net of accumulated amortization of $765,593 at
February 28 and $716,157 at May 31	1,876,359		1,925,795
Other assets	39,561		63,332
Total assets	$ 7,029,930		$ 7,328,552
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$ 1,353,769		$ 1,281,474
Accrued expenses	277,434		308,374
Total current liabilities	1,631,203		1,589,848
Deferred tax liability	18,070		38,191
Shareholders’ equity:
Common shares, $.01 par value:
Authorized shares, 10,000,000
Issued and Outstanding shares
4,854,088 at February 28 and 4,604,088 May 31	48,541		46,041
Additional paid-in-capital	3,434,547		3,367,046
Retained earnings	1,936,949		2,326,806
Total shareholders’ equity	5,420,037		5,739,893
Less: Common stock in treasury at cost, 100,000 shares	(39,380	)	(39,380	)
	$ 5,380,657		$ 5,700,513
Total Liabilities and Shareholders’ Equity	$ 7,029,930		$ 7,328,552

See accompanying notes

INOTEK Technologies Corp.

Statements of Operations

(unaudited)

	Three Months Ended
	February 28 2001		February 29 2000
Net Sales	$ 4,697,851		$ 4,779,322
Cost of goods sold:	3,252,343		3,357,695
Gross margin	1,445,508		1,421,627
Operating expenses:
Sales and marketing	911,868		879,265
General and administrative	668,354		603,056
	1,580,222		1,482,321
Operating loss	(134,714	)	(60,694	)
Interest income	7,421		11,835
Loss before income taxes	(127,293	)	(48,859	)
Income tax benefit	—		(20,521	)
Net loss	$  (127,293	)	$   (28,338	)
Net loss per share - basic and diluted	$          (.03	)	$         (.01	)
Weighted average shares outstanding	4,754,088		4,504,088

See accompanying notes

2

INOTEK Technologies Corp.

Statements of Operations

(unaudited)

	Nine Months Ended
	February 28 2001		February 29 2000
Net sales	$ 13,871,266		$ 14,265,490
Cost of goods sold:	9,610,408		10,075,248
Gross margin	4,260,858		4,190,242
Operating expenses:
Sales and marketing	2,757,247		2,674,249
General and administrative	1,966,510		1,879,578
	4,723,757		4,553,827
Operating loss	(462,899	)	(363,585	)
Interest income	34,514		16,672
Loss before income taxes	(428,385	)	(346,913	)
Income tax benefit	(38,648	)	(82,728	)
Net loss	$    (389,737	)	$    (264,185	)
Net loss per share - basic and diluted	$           (.08	)	$           (.06	)
Weighted average shares outstanding	4,673,502		4,541,587

See accompanying notes

3

INOTEK Technologies Corp.

Statements of Cash Flows

(unaudited)

	Nine Months Ended
	February 28 2001		February 29 2000
Operating Activities
Net loss	$(389,737	)	$(264,185	)
Adjustments to reconcile net earnings
to net cash provided by (used in) operating activities:
Depreciation and amortization	248,951		211,211
Deferred taxes	2,222		(48,600	)
Provision for losses on accounts receivable	13,585		32,295
Net changes in operating assets and liabilities:
Accounts receivable	(249,685	)	(208,003	)
Inventories	(2,041	)	152,604
Prepaid expenses and other assets	58,979		(68,079	)
Accounts payable	72,133		568,073
Accrued expenses	(30,940	)	(97,151	)
Income tax receivable	26,664		372,766
Other assets	23,334		(50,277	)
Net cash provided by (used in) operating activities	(226,535	)	600,654
Investing Activities
Purchase of property and equipment	(155,598	)	(85,750	)
Net cash used in investing activities	(382,133	)	(85,750	)
Financing Activities
Proceeds from stock issued	70,000		70,000
Net cash (used in) financing activities	70,000		70,000
Change in cash and cash equivalents	(312,133	)	584,904
Cash and cash equivalents beginning period	632,970		173,668
Cash and cash equivalents, end of period	$ 320,837		$ 758,572
Supplemental Disclosures of Cash Flow Information:
Cash received during the period for:
Interest	$    7,421		$  11,835

See accompanying notes

4

INOTEK Technologies Corp.
Notes to Financial Statements
Nine Months Ended February 28, 2001
(UNAUDITED)

1.   Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented have been made. The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year. The interim unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended May 31, 2000.

2.   Line of Credit

On September 15, 2000, the Company secured a new agreement with Bank One, Texas, N.A. for a one-year revolving credit arrangement of up to $500,000. The credit arrangement provides for borrowings based on the Company’s trade receivables, at the bank’s prime rate plus one per cent and is collateralized by trade receivables and inventories.

5

Item 2.   Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Results of Operations

Nine Months ended Feb 28,2001, Compared to Nine Months ended Feb 29,2000

The Company’s total sales decreased by (2.8%) to $13,871,266 for the nine months ended February 28, 2001 from $14,265,490 for the same period of the prior year, while gross margin increased 1.68% to $4,260,858 from $4,190,242 for the same period. Sales decreased during the third quarter of fiscal year 2001 as compared to the third quarter of fiscal year 2000 by $81,471 due primarily to a soft market. The oil and gas market is beginning to show signs of a turnaround in spending on our types of products. However, softness of the overall U.S. economy is off setting any of our potential gain from oil and gas. Our initiatives placed on improving our gross margin has begun to pay off with a slight increase of 1.68% while our G&A costs increased $86,932 over prior period.

Three Months ended Feb 28, 2001, Compared to Three Months ended Feb 29, 2000

Our quote activity is picking up, especially in the market areas that have a large share of oil and gas business. Sales and marketing costs during the third quarter of fiscal year 2001 increased 3.71% or $32,603 as compared with the third quarter of the previous year. General and administrative costs increased 10.83% or $65,298 during the third quarter ending February 28, 2001 as compared with the third quarter of fiscal year 2000.

Financial Condition, Liquidity and Capital Resources

Cash and cash equivalents were $320,837 and $632,970 at February 28, 2001 and May 31, 2000, respectively. At February 28, 2001 the maximum available borrowings under the revolving credit arrangement amounted to $500,000. The Company’s current assets exceeded its current liabilities at February 28, 2001 and May 31, 2000 by $2,724,692 and $2,948,024, respectively.

The Company’s funding requirements during the quarter were met through cash on hand. On September 15, 2000, the Company secured a new agreement with Bank One, Texas, N.A. for a one-year revolving credit arrangement of up to $500,000. The credit arrangement provides for borrowings based on the value of the Company’s trade receivables, at the bank’s prime rate plus one per cent and is collateralized by trade receivables and inventories. The Company has no material commitment for capital expenditures as of February 28, 2001.

6

Part II — Other Information

Item 1.   Legal Proceedings

None pending

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 6.   Exhibits and Reports on Form 8-K

(a) Exhibits:

1. Exhibit (20)-Report furnished to security holders.

(b) Reports on 8-K:

No reports on Form 8-K were filed in the quarter for which this report is filed.

7

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 thereunto duly authorized.

Date: April 15, 2001 INOTEK Technologies Corp.
(Registrant)


By: /s/ Neal E. Young
——————————————
(Officer)
Neal E. Young
Chairman of the Board

Date: April 15, 2001  


By: /s/ Dennis W. Stone
——————————————
(Officer)
Dennis W. Stone
Cheif Executive Officer

8