SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED: SEPTEMBER 30, 1997 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 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 [ ] INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT. CLASS: COMMON STOCK, PAR VALUE $0.10 OUTSTANDING AT SEPTEMBER 30, 1997 942,387 ------- EXOTECH INCORPORATED INDEX PART I FINANCIAL INFORMATION PAGE NO. CONSOLIDATED CONDENSED BALANCE SHEET SEPTEMBER 30, 1997 AND JUNE 30, 1997.............. 2 CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996........................ 3 STATEMENT OF CASH FLOWS FOR THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996........... 4 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS............................... 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS...................................... 6 PART II OTHER INFORMATION OTHER FINANCIAL INFORMATION........................ 8 SIGNATURES......................................... 9 EXOTECH INCORPORATED CONSOLIDATED BALANCE SHEET ASSETS SEPTEMBER 30, JUNE 30, 1997 1997 ------------- -------- (Unaudited) CURRENT ASSETS Accts. Receivable, Net $ 10,780 $ 18,225 Inventories Work in Process 326,230 261,034 Raw Materials 32,625 32,625 Finished Goods 14,000 14,000 Cash and Other Current Assets 8,087 3,431 --------- --------- Total Current Assets $391,722 $329,315 PROPERTY, PLANT AND EQUIPMENT NET 264 294 OTHER NON CURRENT ASSETS 5,761 5,993 -------- -------- TOTAL ASSETS $397,747 $335,602 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accts. Payable & Other Accrued Expenses $115,225 $99,369 Other Current Liabilities 382,071 371,782 Notes Payable 425,794 385,294 ------- ------- Total Current Liabilities $923,090 $856,445 SHAREHOLDERS EQUITY Common Stock, Par Value $.10 per share; 1,500,000 shares authorized; 970,135 issued; 942,387 outstanding 97,014 97,014 Paid-in-Surplus 1,169,645 1,169,645 Deficit (1,679,582) (1,675,082) Treasury Stock (27,748 shares) (112,420) (112,420) --------- --------- Total Shareholders' Equity (525,343) (520,843) TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $397,747 $335,602 ======== ======== See accompanying Notes to Consolidated Condensed Financial Statements. 2 EXOTECH INCORPORATED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS 1997 1996 THREE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------- -------------- REVENUES Contract Sales $ 51,935 $110,796 EXPENSES Direct Labor 4,994 654 Overhead 7,764 786 Materials 585 - General & Administrative 1,758 144 Inventory Costs 32,075 98,712 ------ ------- Cost of Contract Sales 47,176 100,296 Operating Income (Loss) 4,759 10,500 Other Revenue (Expenses): - - Interest & Other (9,257) (7,130) NET INCOME BEFORE TAXES (4,498) 3,370 State Income Tax - - NET INCOME (LOSS) (4,498) 3,370 Weighted Average Number of Common Stock Outstanding 942,387 942,387 EARNINGS (LOSS) PER COMMON SHARE (.005) .004 DIVIDENDS PER COMMON SHARE NONE NONE See accompanying Notes to Consolidated Condensed Financial Statements. These statements have been prepared from the books of account without audit. 3 EXOTECH INCORPORATED AND SUBSIDIARY STATEMENT OF CASH FLOWS FOR THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 ---- ---- CASH FLOWS FROM OPERATING TRANSACTIONS Net Income (Loss) $ (4,498) $ 3,370 Add: Non cash Income Determinants Depreciation and Amortization 260 275 Add (Deduct): Changes in Current Assets & Liabilities (Increase) Decrease in Accounts Receivable 7,445 (7,487) (Increase) Decrease in Prepaid Expenses (114) 6 (Increase) Decrease in Inventory (65,196) (28,355) Increase (Decrease) in Accts. Payable 15,856 16,948 Increase (Decrease) in Payroll/Emp. Benefits 2,034 (11,493) Increase (Decrease) in Accrued Interest 8,255 7,130 -------- ------- Cash Provided By or (Used) For Operating Transactions (35,958) (19,606) CASH FLOWS FROM FINANCING TRANSACTIONS: Proceeds from Notes 40,500 30,000 Payment on Notes 10,000 ---------- --------- Cash Provided By or (Used For) Financing Transactions 40,500 20,000 CASH FLOWS FROM INVESTING TRANSACTIONS: Deposits -0- -0- ---------- --------- Cash Provided By or (Used For) Investing Transactions -0- -0- INCREASE (DECREASE) IN CASH 4,542 394 CASH BALANCE - BEGINNING 3,431 105 --------- -------- CASH BALANCE - ENDING $ 7,973 $ 499 4 EXOTECH INCORPORATED NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1. In the opinion of Management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 1997 and June 30, 1997 and the results of operations and changes in financial position for the three months ended September 30, 1997 and 1996 of Exotech Incorporated and its inactive wholly-owned consolidated subsidiary, Exotech Research & Analysis, Inc. There are no significant intercompany transactions. NOTE 2. Per share computations have been based on the weighted average shares outstanding of 942,387 for the three months ended September 30, 1997 and 1996. NOTE 3. Notes Payable at September 30, 1997 consist of four demand notes of $100,000, $8,000 and $47,000, payable with interest at 8.5% per annum to three of the Company's former directors. In addition, notes amounting to $250,794 are payable with interest at 8.5% per annum to one officer/employee. Periodically, the Company has obtained producer loans from Spiral Biotech, Inc. that are secured by inventory instruments (bacteria colony counters). At September 30, 1997, there was an outstanding Producer Loan of $20,000 with interest at 9% per annum. This loan may be prepaid, in whole or in part, at any time, without penalty. NOTE 4. Inventory cost shown in the cost of sales represents the cost of production of goods sold that were incurred in the prior fiscal year. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS The following is Management's discussion and analysis of certain significant factors which have affected the Company's earnings during the periods included in the accompanying consolidated condensed statement of operations. A summary of the period to period changes in the principal items included in the consolidated statement of operations is shown below: --------------------------- COMPARISON OF --------------------------- THREE MONTHS ENDED THREE MONTHS ENDED Sept 30 June 30 Sept 30 Sept 30 1997 1997 1997 1996 ------- ------- ------- -------- Net Sales $51,935 $108,001 $51,935 $110,796 Direct Cost & Overhead 13,343 5,886 13,343 1,440 General & Administrative Expense 1,758 805 1,758 144 Inventory Cost 32,075 84,921 32,075 98,712 Cost of Sales 47,176 91,612 47,176 100,296 Interest & Other 9,257 14,180 9,257 7,130 Inventory Adjustment -- 281,117 -- -- I. CHANGE IN FINANCIAL POSITION IN THE THREE MONTHS ENDED SEPTEMBER 30, 1997. In the three months period ended September 30, 1997, a decrease of working capital of $4,238 resulted from a net loss from operations of $4,498 and non-fund charges of $260. A loan of $20,000 was obtained from Spiral Biotech, Inc.. It is secured by the work-in-progress inventory of Autoplate instruments being produced under a purchase order from the lender for a total of $180,000. The pay down of the loan is scheduled out of the receipts for the instruments as they are delivered. The order covers thirty instruments, the last of which is to be delivered in December 1997. The loan will be repaid in full at the delivery of the twelfth unit in October 1997. Additional financing in the amount of $20,500 was obtained by a loan from an officer/employee. II. INCOME AND EXPENSE IN THE MOST RECENT QUARTER AND THE SAME THREE MONTH PERIOD LAST YEAR. Revenue for the quarter ended September 30, 1997, was lower by $58,861 or 53% than the results one year earlier. Operating costs were lower in the most recent quarter by $53,120 or 53% compared to the prior year. The result was an operating profit of $4,759 and a net loss of $4,498 compared to a net profit of $3,370 in the quarter ended one year earlier. The large variations shown in the period-to-period comparison are principally related to the phase of the product manufacturing that characterizes the three month period. In the most recent quarter, production of a new lot of thirty Autoplate instruments was begun, requiring substantial effort and expenditures for purchased parts and materials. This activity is reflected in the increase of about $65,000 in inventory value. Sales in the period were principally calibration, maintenance and repair services with only two instrument products delivered. In the same period of the prior year, the manufacturing cycle was further advanced so that eight new instruments were delivered, accounting for $48,000 of the sales in the period. In the opinion of Management, the increased backlog of orders for the Company's products and continued stringent control of costs will provide for improved results in the following quarter. 7 PART II. OTHER FINANCIAL INFORMATION ITEM 5. As in the past, a shortage of working capital continues to be a significant problem, resulting in occasional slow payments to creditors, and hampering the development of new business to the fullest extent possible. In the opinion of Management, the Company should be in a position to sustain operations at least until such time as the results of current contracts and negotiations for new business is determinable. Ultimate realization of the carrying value of prepaid expenses and advances, property and equipment, and miscellaneous other assets shown in the accompanying balance sheet depends upon sustained operations as a going concern. The dollar amount of the backlog as of September 30, 1997 was $350,000, an increase of $150,000 from the backlog of the preceding quarter ended June 30, 1997. ITEM 6 (B) No reports on Form 8-K were filed in this quarter, ended September 30, 1997. 8 SIGNATURES Pursuant to the requirements 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. EXOTECH INCORPORATED REGISTRANT DATE: November 18, 1997 /s/ Robert G.Lyle ___________________________________ ROBERT G. LYLE, PRESIDENT AND CHIEF EXECUTIVE OFFICER 9