1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended February 29, 2000 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
--- ----
4,604,088 shares of common stock, $.01 par value (the issuer's only class of
common stock), were outstanding as of February 29, 2000.
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INOTEK TECHNOLOGIES CORP.
INDEX
Page
No.
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Part I. Financial information
Item 1. Financial Statements:
Balance Sheets as of February 29, 2000 (unaudited) and May 31, 1999.......................................1
Statements of Operation for the Three Months Ended February 29, 2000
and February 28, 1999 (unaudited) .....................................................................2
Statements of Operation for the Nine Months Ended February 29, 2000
and February 28, 1999 (unaudited) .....................................................................3
Statements of Cash Flows for the Nine Months Ended February 29, 2000
and February 28, 1999 (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
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INOTEK TECHNOLOGIES CORP.
BALANCE SHEETS
FEBRUARY 29 MAY 31
2000 1999
(UNAUDITED)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 758,572 $ 173,668
Trade receivables, net of allowance for doubtful accounts
of $105,515 at February 29 and $73,221 at May 31 2,356,932 2,181,222
Inventories 1,257,329 1,409,887
Deferred taxes 114,206 103,232
Income Tax Receivable 352,120
Prepaid expenses and other assets 151,992 83,913
----------- ------------
Total current assets 4,639,031 4,304,042
Property and equipment, net 680,052 755,400
Goodwill, net of accumulated amortization of $699,678 at
February 29 and $650,242 at May 31 1,942,273 1,991,709
Other assets 108,610 59,008
----------- ------------
Total assets $ 7,369,967 $ 7,110,159
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,496,190 $ 927,953
Accrued expenses 246,712 343,863
Income Tax payable 20,645
----------- ------------
Total current liabilities 1,763,547 1,271,816
Deferred Tax Liability -- 37,626
Shareholders' equity:
Common shares, $.01 par value:
Authorized shares, 10,000,000
Issued and Outstanding shares
4,604,088 at February 29 and 4,354,088 May 31 46,041 43,541
Additional paid-in-capital 3,367,047 3,299,546
Retained earnings 2,232,711 2,497,010
----------- ------------
Total shareholders' equity 5,645,799 5,840,097
Less: Common stock in treasury at cost, 100,000 shares (39,380) (39,380)
----------- ------------
$ 5,606,419 $ 5,800,717
Total Liabilities and Shareholders' Equity $ 7,369,967 $ 7,110,159
=========== ============
See accompanying notes
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INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATION
(UNAUDITED)
THREE MONTHS ENDED
FEBRUARY 29 FEBRUARY 28
2000 1999
----------- -----------
Net Sales $ 4,779,322 $ 4,735,876
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Cost of sales: 3,357,695 3,398,886
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Gross margin 1,421,627 1,336,990
Operating expenses:
Sales and marketing 879,265 948,984
General and administrative 603,056 639,666
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1,482,321 1,588,647
----------- ------------
Operating loss (60,694) (251,657)
Interest Income (expense) 11,835 (4,297)
----------- ------------
Loss before income taxes (48,859) (255,954)
Income tax benefit (20,521) (59,682)
----------- ------------
Net loss $ (28,338) $ (196,272)
=========== ============
Net loss per share - basic and diluted $ (.01) $ (.05)
=========== ============
Weighted average shares outstanding 4,604,088 4,354,088
=========== ============
See accompanying notes
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INOTEK TECHNOLOGIES CORP.
STATEMENTS OF OPERATION
(UNAUDITED)
NINE MONTHS ENDED
FEBRUARY 29 FEBRUARY 28
2000 1999
----------- -----------
Net Sales $ 14,265,490 $ 15,916,407
------------ ------------
Cost of sales: 10,075,248 11,518,738
------------ ------------
Gross margin 4,190,242 4,397,669
Operating expenses:
Sales and marketing 2,674,249 2,676,810
General and administrative 1,879,578 2,038,849
------------ ------------
4,553,827 4,715,659
------------ ------------
Operating loss (363,585) (317,990)
Interest income (expense) 16,672 (13,111)
------------ ------------
Loss before income taxes (346,913) (331,101)
Income tax benefit (82,728) (58,097)
------------ ------------
Net loss $ (264,185) $ (273,004)
============ ============
Net loss per share - basic and diluted $ (.06) $ (.06)
============ =============
Weighted average shares outstanding 4,541,587 4,354,088
============ =============
See accompanying notes
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INOTEK TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
FEBRUARY 28
2000 1999
------------- ------------
Operating Activities
Net loss $ (264,185) $ (273,004)
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 211,211 172,459
Deferred taxes (48,600) 13,630
Provision for losses on accounts receivable 32,295 32,102
Provision for inventory obsolescence (78,912) 13,336
Net changes in operating assets and liabilities:
Trade receivable (208,003) 787,868
Inventories 231,516 584,775
Prepaid expenses and other assets (68,079) (48,406)
Accounts payable 568,073 (585,384)
Accrued expenses (97,151) (253,101)
Income tax receivable 372,766 --
Unearned Billings -- (27,929)
Other Assets (50,277) (10,775)
------------- ------------
Net cash provided by operating activities 600,654 405,571
INVESTING ACTIVITIES
Purchase of property and equipment (85,750) (261,176)
Capitalized service inventory -- 4,555
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Net cash used in investing activities (85,750) (256,621)
FINANCING ACTIVITIES
Proceeds from stock issued 70,000
Purchase of treasury stock (39,380)
------------- ------------
Net cash (used in) financing activities 70,000 (39,380)
------------- ------------
Change in cash and cash equivalents 584,904 109,570
Cash and cash equivalents beginning period 173,668 362,830
------------- ------------
Cash and cash equivalents, end of period $ 758,572 $ 472,400
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ 12,938
Income taxes $ -- $ --
See accompanying notes
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INOTEK TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED FEBRUARY 29, 2000
(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-Q 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, 1999.
2. LINE OF CREDIT
On September 23, 1999, the Company secured a new agreement with Bank One,
Texas, N.A. for a one-year revolving credit facility of up to $500,000.
The credit line provides for borrowings based on the Company's
receivables, at the bank's prime rate plus one per cent and is secured by
receivables and inventory.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRD QUARTER 2000 COMPARED TO THIRD QUARTER 1999
The Company's total sales increased by only 0.9% to $4,779,322 for the third
quarter ended February 29, 2000 from $4,735,875 for the third quarter of the
prior year, while gross margin increased 6.3% to $1,421,627 from $1,336,990 for
the same period. Sales increased during the third quarter of fiscal year 2000 as
compared to the third quarter of fiscal year 1999 by only $43,447 due primarily
to a soft market. The Company continued to experience a downturn in the
petro-chemical market and the impact of project dollars being channeled in Y-2K
fixes not related to our equipment. The increase in gross margin dollars is due
to the increase in contribution of our calibration service business. The Y-2K
issues should be over and the petro-chemical market has begun to show signs of a
turnaround. Their spending for capital projects should resume at normal rates.
Sales and marketing costs during the third quarter of fiscal year 2000 decreased
7.3% or $69,719 as compared with the third quarter of the previous year. General
and administrative costs decreased 5.7% or $36,610 during the third quarter
ending February 29, 2000 as compared with the third quarter of fiscal year 1999.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $758,572 and $173,668 at February 29, 2000 and
May 31, 1999, respectively. At February 28, 2000 the maximum available
borrowings under the revolving credit facility amounted to $500,000. The
Company's current assets exceeded its current liabilities at February 29, 2000
and May 31, 1999 by $2,875,484 and $3,032,226, respectively.
The Company's funding requirements during the quarter were met through cash on
hand and cash provided by operations. On September 23, 1999, the Company secured
a new agreement with Bank One, Texas, N.A. for a one-year revolving credit
facility of up to $500,000. The credit line provides for borrowings based on the
value of the Company's receivables, at the bank's prime rate plus one per cent
and is secured by receivables and inventory. The Company has no material
commitment for capital expenditures as of February 29, 2000.
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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.
2. Exibit 27 - Financial Data Schedule
(b) Reports on 8-K:
No reports on Form 8-K were filed in the quarter for which this
report is filed.
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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.
INOTEK TECHNOLOGIES CORP.
(REGISTRANT)
Date: April 14, 2000 /s/ Neal E. Young
--------------------------------------
(Officer)
Neal E. Young
Chairman of the board
Date: April 14, 2000 /s/ Dennis W. Stone
--------------------------------------
(Officer)
Dennis W. Stone
Chief Executive Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
20 - Report furnished to security holders.
27 - Financial Data Schedule