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, 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 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, 1999 942,387 ------- EXOTECH INCORPORATED INDEX PART I FINANCIAL INFORMATION PAGE NO. CONSOLIDATED CONDENSED BALANCE SHEET SEPTEMBER 30, 1999 AND JUNE 30, 1999................... 2 CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998............................ 3 STATEMENT OF CASH FLOWS FOR THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998............... 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, 1999 1999 ---- ---- (Unaudited) CURRENT ASSETS Accts. Receivable, Net $ 65,051 $ 85,270 Inventories Work in Process 229,976 284,510 Raw Materials 32,625 32,625 Finished Goods 14,000 14,000 Cash and Other Current Assets 52,788 11,943 --------- --------- Total Current Assets $394,440 $428,348 PROPERTY, PLANT AND EQUIPMENT NET 2,740 1,726 OTHER NON CURRENT ASSETS 4,312 4,343 -------- -------- TOTAL ASSETS $401,492 $434,418 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Accts. Payable & Other Accrued Expenses $ 23,277 $20,099 Other Current Liabilities 403,656 413,818 Notes Payable 389,972 399,072 ------- ------- Total Current Liabilities $852,805 $913,889 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 (1,605,552) (1,633,710) Treasury Stock (27,748 shares) (112,420) (112,420) --------- --------- Total Shareholders' Equity (451,313) (479,471) TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $401,492 $434,418 ======== ======== See accompanying Notes to Consolidated Condensed Financial Statements. 2 EXOTECH INCORPORATED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS 1999 1998 THREE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------- ---------------- REVENUES Contract Sales $207,081 $ 99,930 EXPENSES Direct Labor 302 202 Overhead 2,829 2,666 Materials 10,820 -0- Other Direct 100 -0- General & Administrative 1,872 398 Inventory Costs 155,214 86,939 ------- ------- Cost of Contract Sales 171,137 90,205 Operating Income (Loss) 35,944 9,725 Other Revenue (Expenses): -0- 151 Interest & Other 7,784 (10,130) NET INCOME BEFORE TAXES 28,160 (254) State Income Tax -0- -0- NET INCOME (LOSS) 28,160 (254) Weighted Average Number of Common Stock Outstanding 942,387 942,387 EARNINGS (LOSS) PER COMMON SHARE .03 (.00) 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, -------------------------------------- 1999 1998 ---- ---- CASH FLOWS FROM OPERATING TRANSACTIONS - -------------------------------------- Net Income (Loss) $ 28,160 $ (254) Add: Non cash Income Determinants Depreciation and Amortization 367 261 Add (Deduct): Changes in Current Assets & Liabilities (Increase) Decrease in Accounts Receivable 20,219 11,977 (Increase) Decrease in Prepaid Expenses 600 (937) (Increase) Decrease in Inventory 54,534 (20,981) Increase (Decrease) in Accts. Payable 3,178 (3,823) Increase (Decrease) in Payroll/Emp. Benefits (17,947) (1,275) Increase (Decrease) in Accrued Interest 7,784 8,255 Increase (Decrease) in Deferred Revenue (45,000) -0- -------- -------- Cash Provided By or (Used) For Operating Transactions 51,895 (6,777) CASH FLOWS FROM FINANCING TRANSACTIONS: - --------------------------------------- Proceeds from Notes -0- 1,798 Payment on Notes 9,100 -0- -------- -------- Cash Provided By or (Used For) Financing Transactions (9,100) 1,798 CASH FLOWS FROM INVESTING TRANSACTIONS: - --------------------------------------- Deposits (200) -0- Purchase of Equipment (1,149) -0- -------- -------- Cash Provided By or (Used For) Investing Transactions (1,349) -0- INCREASE (DECREASE) IN CASH 41,446 (4,979) - --------------------------- CASH BALANCE - BEGINNING 8,868 6,441 --------- --------- CASH BALANCE - ENDING $ 50,314 $ 1,462 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, 1999 and June 30, 1999 and the results of operations and changes in financial position for the three months ended September 30, 1999 and 1998 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, 1999 and 1998. NOTE 3. Notes Payable at September 30, 1999 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 $234,972 are payable with interest at 8.5% per annum to one officer/employee. 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. NOTE 5. The Company received cash deposits from its principal customer on orders for instruments and services amounting to $80,900 at June 30, 1999. The balance of this liability is reduced incrementally upon discounted billing for delivered instruments and services. At September 30, 1999 the balance of this liability was $35,900. 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 1999 1999 1999 1998 ---- ---- ---- ---- Net Sales $207,081 $253,480 $207,081 $99,930 Direct Cost & Overhead 14,051 9,169 14,051 2,868 General & Administrative Expense 1,872 708 1,872 398 Inventory Cost 155,214 172,654 155,214 86,939 Cost of Sales 171,137 182,531 171,137 90,205 Interest & Other 7,784 6,890 7,784 9,979 I. CHANGE IN FINANCIAL POSITION IN THE THREE MONTHS ENDED SEPTEMBER 30, 1999. In the three months period ended September 30, 1999, a decrease in the deficit of working capital of $27,176 resulted from a net profit from operations of $28,160 and non-fund charges of $367, less equipment purchase and deposit totaling about $1,350. Discounted billings for delivery of 24 Autoplate instruments and services reduced the liability for deferred revenue by $45,000. II. INCOME AND EXPENSE IN THE MOST RECENT QUARTER AND THE SAME THREE MONTH PERIOD LAST YEAR. Revenue for the quarter ended September 30, 1999, was $207,081, 107% higher than the results one year earlier. Operating costs were higher in the most recent quarter by $80,932 or 90% compared to the prior year. The result was an operating profit of $35,944 and a net profit of $28,160 compared to a net loss of $254 in the quarter ended one year earlier. The 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, deliveries of twenty-four Autoplate instruments was a continuation of deliveries from a large order that was put into production late in the second quarter of fiscal year 1999. The increase in volume of orders for these instruments required substantial effort and expenditures for purchased parts and materials. This activity is reflected in the recent quarter by the increase of about $68,275 in inventory costs. Sales in the period were calibration, maintenance and repair services in addition to twenty-four Autoplate and one radiometer instrument deliveries. In the same period of the prior year, the manufacturing cycle was less advanced so that only thirteen Autoplate and two radiometer instruments were delivered. In the opinion of Management, the current backlog of orders for the Company's products and continued stringent control of costs will provide for similar 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, hampering the development of new business to the fullest extent possible. The shortage is the result of debt in the form of notes and interest payable to a current and three former directors of the Company. In the opinion of Management, the Company is in a position to sustain operations at least until such time as the results of current contracts and negotiations for new business are 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, 1999 was $186,230; a decrease of $113,770 from the backlog of the preceding quarter ended June 30, 1999. ITEM 6 (B) No reports on Form 8-K were filed in this quarter, ended September 30, 1999. 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 13, 1999 ------------------------------ /s/Robert G. Lyle - ----------------------------------- ROBERT G. LYLE, PRESIDENT AND CHIEF EXECUTIVE OFFICER 9