<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number 333-11591
Tice Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware 62-1647888
(State of incorporation) (IRS Employer
Identification Number)
______________________________________________
6711 Tice Plaza
Knoxville, Tennessee 37918
(Address of principal executive office)
(423) 925-4501
(Registrant's telephone number, including area code)
______________________________________________
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 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 ___ No X
---
(the Registrant has not been subject
to filing requirements for 90 days)
The number of shares outstanding of each of the registrants' two classes of
common stock on August 11, 1997 were 5,838,780 Common Shares and 750,000 Class B
Common Shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Combined Balance Sheets -- As of June 30, 1997 and
March 31, 1997 2
Condensed Combined Statements of Operations -- For the Three Months
Ended June 30, 1997 and 1996 4
Condensed Combined Statements of Cash Flows -- For the Three Months
Ended June 30, 1997 and 1996 5
Notes to Condensed Combined Financial Statements 6
</TABLE>
<PAGE>
TICE TECHNOLOGY, INC. AND AFFILIATE
CONDENSED COMBINED BALANCE SHEETS
---------------------------------
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997 (1)
(unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 62,021 $ 69,393
Accounts receivable 148,235 88,435
Prepaid expenses 90,229 48,408
Inventory, net 381,323 367,603
---------- ----------
Total current assets 681,808 573,839
Property and equipment:
Land 130,000 130,000
Equipment 523,931 521,574
Vehicles 124,599 124,599
---------- ----------
Total property and equipment 778,530 776,173
Less accumulated depreciation (593,452) (590,360)
---------- ----------
Property and equipment, net 185,078 185,813
Patents 165,061 159,432
Note receivable - split dollar life insurance 69,209 64,008
Other assets 27,140 24,640
---------- ----------
Total assets $1,128,296 $1,007,732
========== ==========
</TABLE>
See accompanying Notes to Condensed Combined Financial Statements
(1) The March 31, 1997 Condensed Combined Balance Sheet was derived from
audited financial statements.
2
<PAGE>
TICE TECHNOLOGY, INC. AND AFFILIATE
CONDENSED COMBINED BALANCE SHEETS
---------------------------------
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997 (1)
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Notes payable to related parties $ 251,786 $ 217,542
Notes payable and current maturities of long-term debt 340,043 350,054
Accounts payable and accrued liabilities 366,968 257,000
---------- ----------
Total current liabilities 958,797 824,596
Stockholders' equity:
Capital stock, no par value, 2,000 shares authorized, 8,634 8,634
750 shares issued and outstanding at June 30, 1997 and
March 31, 1997
Common Shares, par value $.01, 30,000,000 shares 0 0
authorized, none issued or outstanding
Class B Common Shares, convertible, par value $.01, 0 0
5,000,000 shares authorized, none issued or outstanding
Class D Common Shares, convertible, par value $.01, 0 0
600,000 shares authorized, none issued or outstanding
Preferred Shares, par value $.01, 10,000,000 shares 0 0
authorized, none issued or outstanding
Additional paid in capital - 30 stock warrants 4,859 4,859
Retained earnings 156,006 169,643
---------- ----------
Total stockholders' equity 169,499 183,136
---------- ----------
Total liabilities and stockholders' equity $1,128,296 $1,007,732
========== ==========
</TABLE>
See accompanying Notes to Condensed Financial Statements
(1) The March 31, 1997 Condensed Combined Balance Sheet was derived from
audited financial statements.
3
<PAGE>
TICE TECHNOLOGY, INC. AND AFFILIATE
CONDENSED COMBINED STATEMENTS OF OPERATIONS
-------------------------------------------
<TABLE>
<CAPTION>
Three months ended
June 30, June 30,
1997 1996
(unaudited)
<S> <C> <C>
Operating revenues:
Sales and service revenues $ 248,920 $ 166,065
License fees 250,000 0
----------- -----------
Total operating revenues 498,920 166,065
Operating expenses:
Cost of revenues 215,426 105,418
Research and development 45,379 25,822
Selling, general and administrative 236,543 125,304
----------- -----------
Total operating expenses 497,348 256,544
----------- -----------
Operating income (loss) 1,572 (90,479)
Other income (expense):
Rental income 0 12,575
Rental expense 0 (9,796)
Interest expense - related parties (4,602) (2,593)
Interest expense (8,244) (25,237)
Other income (expense) 2,637 (3,688)
----------- -----------
Total other income (expense) (10,209) (28,739)
----------- -----------
Loss before income taxes (8,637) (119,218)
Provision (benefit) for income taxes 5,000 (20,585)
----------- -----------
Net loss $ (13,637) $ (98,633)
=========== ===========
Earnings per share (Note 5): 0.00
Pro forma primary income (loss) per share $ 0 $ ---
=========== ===========
</TABLE>
See accompanying Notes to Condensed Combined Financial Statements
4
<PAGE>
TICE TECHNOLOGY, INC. AND AFFILIATE
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
-------------------------------------------
<TABLE>
<CAPTION>
Three months ended
June 30, June 30,
1997 1996
(unaudited)
<S> <C> <C>
Net cash used by operating activities $ (17,116) $ (120,165)
------------ -------------
Cash flows from investing activities:
Capital expenditures, net (2,357) (3,827)
Additions to patents and other assets (12,132) (28,489)
------------ -------------
Net cash used by investing activities (14,489) (32,316)
------------ -------------
Cash flows from financing activities:
Net proceeds (payments) from notes payable to 34,574 (12,506)
related parties
Net proceeds (payments) from notes payable (10,341) 185,445
------------ -------------
Net cash provided by financing activities 24,233 172,939
------------ -------------
Net increase (decrease) in cash and cash equivalents (7,372) 20,458
Cash and cash equivalents, beginning of period 69,393 2,822
------------ -------------
Cash and cash equivalents, end of period $ 62,021 $ 23,280
============ =============
</TABLE>
5
<PAGE>
TICE TECHNOLOGY INC. AND AFFILIATE
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying condensed combined financial statements include the
accounts of Tice Technology, Inc. ("TTI") and, in accordance with
Accounting Research Bulletin 51, the accounts of its affiliate, Tice
Engineering and Sales, Inc. ("TES"). The combination of these entities
will collectively be referred to as the Company. All significant
intercompany balances and transactions have been eliminated.
These financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with Generally Accepted
Accounting Principles have been omitted. The condensed combined financial
statements should be read in conjunction with the financial statements and
notes thereto included in the audited financial statements of the
respective companies as of and for the period ended March 31, 1997.
The information furnished reflects all adjustments which are necessary for
a fair presentation of the Company's financial position as of June 30,
1997; the results of its operations for the three months ended June 30,
1997 and 1996; and its cash flows for the same periods. All such
adjustments are of a normal recurring nature.
2. RESULTS OF OPERATIONS
The results of operations for the three months ended June 30, 1997 and 1996
are not necessarily indicative of the results to be expected for the
respective full years.
3. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
<S> <C> <C>
Raw Materials $ 388,737 $ 306,920
Work In Process 91,854 124,810
Finished Goods 20,732 55,873
--------- ---------
501,323 487,603
Reserve for Obsolescence (120,000) (120,000)
--------- ---------
Inventory, net $381,323 $ 367,603
========= =========
</TABLE>
6
<PAGE>
4. SUBSEQUENT EVENT
The Company's registration statement became effective on August 1, 1997.
At that time, TTI acquired all of the issued and outstanding stock of TES
including 750 shares outstanding at June 30, 1997 and 30 shares issued in
connection with the exercise of warrants subsequent to June 30, 1997, from
the shareholders of TES in exchange for 5,450,220 Common Shares and 750,000
Class B Common Shares. In addition, Monogenesis Corporation purchased
300,000 Common Shares and 1,000,000 warrants to purchase Common Shares at
par value ($.01). A portion of the shares and warrants will be distributed
to Monogenesis shareholders. Each warrant entitles the holder to purchase
one Common Share of TTI at an exercise price of $8.00. In addition, TTI
issued 88,560 Common Shares at a conversion price of $3.00 per share to
holders of $265,680 of TES convertible debt. Also, 54,750 Common Shares
may be issued upon the exercise of options granted to employees of TES soon
after the effective date of the registration statement at an exercise price
of $1.00 per share. Based upon an initial share value of $3.50, the
conversion of debt, the issuances to Monogenesis and the granting of the
options will give rise to interest charges of $44,280, offering expense of
$1,047,000 and compensation expense of approximately $136,000 in the second
quarter of fiscal 1998.
The Company will follow Statement of Financial Accounting Standard No. 123,
Accounting for Stock Based Compensation (SFAS 123). In accordance with
this Statement, the Company will record all stock based compensation
awarded to vendors at the fair value of the services received. As
permitted by SFAS 123, the Company will apply APB Opinion 25, Accounting
for Stock Issues to Employees (APB 25) and related interpretations in
accounting for any stock based compensation awarded to employees or outside
directors.
5. EARNINGS PER SHARE
Historical primary loss per share was $(18.18) and $(131.51) for the
respective three-month periods ended June 30, 1997 and 1996, and were
computed by dividing net loss applicable to common stock by the common
shares outstanding during each period. The 30 warrants issued to Joseph
Walker & Sons, Inc. in May 1995 were not included for purposes of computing
historical primary loss per share because they are anti-dilutive. The
historical amounts have been computed for June 30, 1997 and 1996 based on
the assumed weighted average number of shares outstanding of 750 in both
years.
Pro forma loss per share for June 30, 1997 was computed by dividing net
loss applicable to common stock as increased by $22,502 for the add back of
interest expense on the converted indebtedness by the pro forma shares
which became outstanding upon effectiveness of the registration statement
on August 1, 1997 (excluding those related to the offering), assuming such
shares were outstanding April 1, 1997, and are comprised of the following:
7
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
SHARES
<S> <C>
Conversion of 750 common shares of TES outstanding 5,961,750
Conversion of 30 warrants of TES outstanding 238,470
Common equivalent shares for 54,750 options granted 39,107
Shares converted for TES debt outstanding 88,560
---------
Pro forma shares assumed outstanding 6,327,887
=========
</TABLE>
Under SFAS 128, which the Company will adopt for fiscal year end 1998, both
basic and diluted loss per share would have been the same as historical
primary loss per share at June 30, 1997.
6. EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, Reporting Comprehensive Income,
which is effective for fiscal years beginning after December 15, 1997.
Additionally, in June 1997, the FASB issued SFAS 131, Disclosures about
Segments of an Enterprise and Related Information, which is also effective
for fiscal years beginning after December 15, 1997. The Company expects
that SFAS 130 will have no material impact on the financial statements of
the Company. SFAS 131, which relates to additional disclosures regarding
business segments, will have no impact on the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The following analysis of the financial condition and results of operations
of Tice Technology, Inc. ("TTI") and its affiliate, Tice Engineering and Sales,
Inc. ("TES"), collectively referred to as the "Company," should be read in
conjunction with the Condensed Combined Financial Statements and Notes thereto
included herein.
Since 1964, TES has been developing products which provide technical
solutions to problems relating to the manufacturing process of various companies
with a primary concentration in the sewing industry. TES designs,
manufacturers, assembles and markets its products direct to existing customers
as well as through its dealer network. Ninety-five percent (95%) of TES's
customers are repeat customers with much of its product line having been
produced to address the problems of a particular customer. TES generally
retains the right to market the resulting equipment to other customers with
similar requests. TES also obtains patents on a majority of its products and
licenses its technology on a non-exclusive basis to customers who want to
manufacture various products using the technology developed and patented by TES.
TTI was formed on June 21, 1996, to acquire and hold all of the issued and
outstanding stock of TES. Upon effectiveness of TTI's registration statement
and closing on August 1, 1997, all of TES shares were exchanged for shares of
TTI. TTI's only activity through June 30, 1997 has been in conjunction with the
incorporation and registration process.
RESULTS OF OPERATIONS
TES's revenues historically have been generated primarily from the sales of
its products and services, with service revenues representing less than 1% of
such revenues. Since TES obtained a patent on its electronic gearing technology
in 1995 and in 1997 began licensing to other manufacturers the non-exclusive
rights to manufacture equipment using the technology, TES has begun receiving
license fees and expects to soon receive royalties under such license
agreements. During the first quarter of fiscal 1997, revenues were generated
from product sales and service alone, whereas product sales and services
revenues for the first quarter of fiscal 1998 exceed that of the prior year by
50%, and significant additional revenues were received in the first quarter of
fiscal 1998 from license fees. Management expects that during the next two
years, license fee revenues will become a larger portion of total revenues for
TES. The principal reason for the expected growth in this area is the
anticipation of additional earnings under the license agreement currently in
place with Brother Industries, Ltd. of Nagoya Japan as well as expected
successful results of current negotiations with other manufacturers to enter
into such license agreements.
TES's product sales and service revenues have previously been largely
attributable to sales to three primary customers. Two of these customers
represented 76% of product sales revenues in the first quarter of fiscal 1997.
Due to TES's concentration on its international sales efforts, one of
9
<PAGE>
its distributors in Mexico has also become a primary customer representing 33%
of product sales for the first quarter of fiscal 1998. Although international
sales as a whole have increased from 3% in the first quarter of fiscal 1997 to
37% in the first quarter of fiscal 1998, there are no gains or losses included
in operations related to foreign currency exchanges due to TES's terms of
international sales which require payment in U.S. Currency.
The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain items reflected in the Company's
condensed combined statements of operations.
<TABLE>
<CAPTION>
Percentage of Total Revenues
Three Months Ended
-------------------------------
June 30, June 30,
1997 1996
--------------- ----------------
<S> <C> <C>
Operating revenues:
Sales and service revenues 49.9% 100.0%
License fees 50.1% ---
--------------- ----------------
Total operating revenues 100.0% 100.0%
Operating expenses:
Cost of revenues 43.2% 63.5%
Research and development 9.1% 15.5%
Selling, general and administrative 47.4% 75.5%
--------------- ----------------
Total operating expenses 99.7% 154.5%
Other income (loss) 0.3% (54.5)%
Other income (expense)
Rental income 0.0% 7.6%
Rental expense 0.0% (5.9)%
Interest expense - related parties (0.9)% (1.6)%
Interest expense (1.7)% (15.2)%
Other income (expense) 0.5% (2.2)%
--------------- ----------------
Total other income (expense) (2.1)% (17.3)%
Loss before income taxes (1.8)% (71.8)%
Provision (benefit) for income taxes 1.0% (12.4)%
--------------- ----------------
Net loss (2.8)% (59.4)%
=============== ================
</TABLE>
10
<PAGE>
THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Total Revenues. Total revenues for the first quarter of fiscal 1998 which
--------------
ended June 30, 1997 increased by 200% to $498,920 from $166,065 in the first
quarter of the previous year as a result of the increase in international
product sales as well as the receipt of license fee income whereas the first
quarter of the 1997 year had no comparable international sales or license fees.
Product sales revenues for the first quarter 1998 contained high volume sales of
three standard products. Sales of the Single Needle Belt Loop Machines, Label
Loader/Folders and Automatic J-Tackers represented 34.5%, 15% and 14%
respectively of total product sales revenue, whereas the first quarter of the
prior year consisted of sales of the Label Loader/Folders and Ergonomic Stands
representing 23% and 17% respectively of total revenues for that period.
Remaining product sales in both periods were generated from a mix of TES's other
traditional products. The timing of sales of a particular product from period
to period may fluctuate greatly depending on customer needs. Typically a
customer will replace or upgrade a particular piece of equipment throughout one
plant in one quarter as their budget permits and therefore product sales broken
down by item by period is not necessarily indicative of the total sales volume
of that item for the year. License fee income received during the first quarter
of fiscal 1998 was the result of license fees from the second class of machines
produced by Brother Industries, Ltd., of Nagoya Japan under the non-exclusive
license agreement to manufacture equipment using the patented Tice electronic
gearing technology, whereas license fee income for fiscal year 1997 was not
received until the fourth quarter.
Cost of Revenues. Cost of revenues increased 104% to $215,426 in the first
----------------
quarter of 1998 from $105,418 in the first quarter of 1997 primarily due to
increases in material purchases needed for completion of orders of 142% to
$134,297 in the first quarter of fiscal 1998 from $55,597 in the first quarter
of fiscal 1997 which is directly related to the increase in sales revenue for
the 1998 fiscal period and an increase in total overhead expenses of which a
portion is applied to cost of revenues. Cost of revenues as a percentage of
total product and service revenues increased from 63.5% in the 1997 period to
86.5% in the 1998 period as a result of increases in total overhead costs
allocated to costs of revenue related to: (i) rent expenses which were not
incurred in the 1997 period as TES owned the facility it occupied until
September 1996 and (ii) increased salary and related benefits expenses which
became effective in the fourth quarter of fiscal 1997.
Research and Development (net of reimbursements). Research and development
------------------------------------------------
costs increased by 75.7% to $45,379 in the first quarter of fiscal 1998 from
$25,822 in the first quarter of fiscal 1997 due to increased salaries and
benefits relating to engineering as well as the allocated portion of increases
in officers salaries. As the demand for the Tice electronic gearing technology
is expected to grow, TES is making preparations to meet the existing and
expected future demand by increasing engineering personnel. The research and
development department also works to develop products which do not use the
electronic gearing technology to add to TES's standard product line.
Selling, General and Administrative. Selling, general and administrative
-----------------------------------
expense increased by approximately $111,000 or 89% to $236,543 in the first
quarter of fiscal 1998 from $125,304
11
<PAGE>
in the first quarter of fiscal 1997 primarily due to a 254% increase in salaries
and related benefits which was a direct reflection of the salary increases that
had taken place in the fourth quarter of the fiscal 1997 year and five
additional personnel hired within the past year. Airplane and travel related
expenses had a 66% reduction in the 1998 period from the 1997 period due to less
travel in the first quarter 1998 while management focused on the registration
and capital formation process, whereas legal and accounting expenses increased
136% from $15,486 in the 1997 period to $36,544 in the 1998 period due to an
increase in fees related to the fiscal 1997 annual audit performed in the first
quarter of fiscal 1998. The 1998 period also reflected approximately $40,000 in
organization and registration expenses not incurred in the previous 1997 period
which were related to the registration process.
Operating Income (Loss). Operating income (loss) improved from a net
-----------------------
operating loss of $90,479 in the first quarter of fiscal 1997 to net operating
income of $1,572 for the first quarter of fiscal 1998 primarily as a result of
$250,000 in license fee income for the 1998 period which offset the increased
operating expenses for the quarter.
Rental Income and Expense. Rental income and expenses were not incurred in
-------------------------
the first quarter of fiscal 1998 as the result of the sale of the Company's
rental property in September, 1996.
Interest Expense and Interest Expense - Related Parties. Interest expense
-------------------------------------------------------
- - related parties increased 77.5% from $2,593 in the 1997 period to $4,602 in
the 1998 period as TES incurred additional indebtedness from related parties
subsequent to June 30, 1996. Interest expense decreased by 67% to $8,244 in the
first quarter of 1998 from $25,237 in the first quarter of 1997 as a result of
the sale of rental property and subsequent elimination of substantial debt in
September 1996.
Income Taxes. The Company's income tax provision was $5,000 in the 1998
------------
period as compared to a benefit of $20,585 in the 1997 period, principally due
to the Company not recording a valuation allowance of $67,990 against deferred
tax assets until the fourth quarter of fiscal 1997. The decision was made in the
first quarter of fiscal 1998 that a full valuation allowance is still deemed
necessary.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations through a
combination of cash flows from operations, bank borrowings and borrowings from
individuals. The Company's capital requirements have arisen primarily in
connection with purchases of fixed and intangible assets. The Company also
makes significant expenditures each year for research and development and
marketing new technology.
Net cash used by operating activities was $17,116 in the first quarter of
fiscal 1998 and $120,165 in the first quarter of fiscal 1997. The primary cause
of the net use of cash from operations was the operating income of only $1,572
in the first quarter of fiscal 1998 and the operating loss of $90,479 in the
first quarter of fiscal 1997 offset by increases and decreases in working
capital items.
12
<PAGE>
Net cash used by investing activities was $14,489 in the 1998 period and
$32,316 in the 1997 period. Primary use of funds were related to capital
expenditures, patents and notes receivable. Capital expenditures totaled
approximately $2,300 in the 1998 period and $3,800 in the 1997 period. Capital
expenditures are expected to increase over the next two years during which time
the Company expects to move from its existing facility. See "Future
Operations."
Net cash provided by financing activities was $24,233 in the 1998 period
and $172,939 in the 1997 period. The cash provided by financing activities in
both periods was related to proceeds from notes payable issued to related
parties and others. The cash provided by financing activities in the 1997
period was also related to the restructuring of long term debt and subsequent
elimination of some short term debt.
At June 30, 1997, the ratio of current assets to current liabilities
remained stable at 0.71 to 1 compared to 0.70 to 1 at June 30, 1996. Quick
liquidity (current assets less inventories to current liabilities) was 0.31 to 1
at June 30, 1997 compared to 0.25 to 1 at June 30, 1996. The increase from the
1997 period to the 1998 period was primarily due to increases in accounts
receivable, prepaid expenses and inventory. The ratio of debt to total
capitalization was 3.49 to 1 at June 30, 1997 and 3.10 to 1 at June 30, 1996.
This increase was primarily the result of a decrease in retained earnings.
The Company's principal commitments at June 30, 1997 consisted primarily of
notes payable to related parties a well as other notes payable. The Company
used the proceeds of these notes to provide working capital for operations and
for the continuing development of the electronic gearing technology as well as
to fund the costs of license and royalty agreement negotiations and registration
of securities of TTI. Several of these notes were extended to retain working
capital. On August 1, 1997, the effective date of the registration statement,
$145,770 of the $251,786 notes payable to related parties and $119,910 of the
$340,043 notes payable were converted to 88,560 Common Shares of TTI at $3.00
per share. Remaining notes payable, with interest rates ranging from 10% to
prime plus 1% are due in fiscal 1998, and management believes that cash balances
and cash flows from operations will be sufficient to meet the Company's working
capital needs, including payment of the notes payable, for at least the next 12
months. The Company plans to extend the remaining related party notes payable
if working capital is not sufficient to repay the loans. There are no
significant restrictive covenants relating to the notes payable, although
several of the notes are personally guaranteed by the President of the Company.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement of Accounting Standards No.
128, Earnings Per Share (SFAS 128). The Statement simplifies the standards for
computing earnings per share ("EPS"). Additionally, the Statement requires dual
presentation of the basic and diluted EPS on the face of the income statement
and requires a reconciliation of the numerator and denominator of the diluted
EPS calculation. The Company plans to adopt the provisions of SFAS 128 for
fiscal year end 1998. Had the pronouncement been in effect at June 30, 1997 and
1996, basic EPS would have been ($18.18) and ($131.51) respectively. The
diluted EPS would have been the same as the effect of common stock equivalents
and other potentially dilutive securities would be anti-dilutive.
13
<PAGE>
In June 1997, the FASB issued SFAS 130, Reporting Comprehensive Income,
which is effective for fiscal years beginning after December 15, 1997.
Additionally, in June 1997, the FASB issued SAFS 131, Disclosures about Segments
of an Enterprise and Related Information, which is also effective for fiscal
years beginning after December 15, 1997. The Company expects that SFAS 130 will
have no material impact on the financial statements of the Company. SAFS 131,
which relates to additional disclosures regarding business segments, will have
no impact on the Company.
FUTURE OPERATIONS
To provide for continued growth, the Company plans to build a new facility
on undeveloped land it currently owns. Management is currently negotiating an
arrangement in which a facility will be constructed to the Company's
specifications and occupied under a sale-leaseback arrangement. Management
expects that the lease will have a 15-year term and include a purchase option.
The contractors bidding on the construction and sale-leaseback arrangement are
not affiliated with any of the stockholders, officers, directors or management
of the Company. The Company is also obtaining bids to consider having the
facility constructed by a contractor, but with outright ownership of the
facility by the Company. The estimated cost of the facility is $1,600,000 which
management expects to be completed by December 1997. The cost is expected to be
funded through a combination of cash flows from operations and notes payable.
Management believes that its traditional products will continue to generate
sales revenue and that TES will continue to solve other problems for customers
as they arise in their manufacturing processes. In addition, management
believes that there is a great demand for products incorporating the electronic
gearing technology and is designing various machines using the new technology
including a multi-head button hole machine, a multi-head button sewing machine,
a felling machine, a single needle plain sewer and a heavy duty spinning
machine. In addition to revenues which may be generated from the sale of
products using the new technology, TES also expects to continue to develop
additional license and royalty agreements with its customers and is currently in
both formal and informal negotiations in this regard. While TES has signed one
such agreement, management believes that other sewing machine manufacturers will
license the technology to remain competitive with the initial licensee.
Management intends to use these funds to market its traditional product line and
to expand operations to ensure that all orders for the new technology are
efficiently filled.
As of June 30, 1997, TES had backlog orders it believes to be firm totaling
approximately $418,000 for equipment using traditional technology. This backlog
of orders is expected to be completed by September 1997. In addition, TES has
received indications of interest for additional orders totaling approximately
$750,000 relating to products using the new electronic gearing technology upon
completion of production models and for equipment using traditional technology.
There is no assurance that these indications of interest will become firm
orders.
TES has plans to exhibit its standard products as well as products
containing the patented electronic gearing technology at the 1997 Bobbin Show to
be held in Atlanta, Georgia September 23 - 26, 1997 which is the annual
equipment trade show as presented by The Bobbin International trade magazine.
14
<PAGE>
Although the Company has no present acquisition agreement or arrangements,
management may make strategic acquisitions in the future which may or may not be
in related industries, using stock, cash, debt or a combination thereof.
Depending on the terms of the acquisition, the Company may need to incur
additional indebtedness or issue equity securities to make any such acquisition.
Management has not identified any particular targets for acquisition.
The Company believes that future results of operations will be influenced
by a number of factors, including general economic conditions, dependence on key
customers and market acceptance of new technology. Because of these factors, as
well as other factors, historical results should not be relied upon as an
indicator of future performance.
INFLATION
Inflation has not had a significant impact on the Company's operations to
date.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
TTI does not have any market risk sensitive instruments.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which TTI or its
subsidiaries or their properties are a party, or were a party during the first
quarter of fiscal 1998.
ITEM 2. CHANGES IN SECURITIES.
There have been no changes in the instruments defining the rights of
holders of any class of securities of TTI or material limitations or
qualifications of the rights evidenced by any class of securities of TTI.
No equity securities of TTI have been sold during the period covered by
this report. The first shares issued by TTI were issued on August 1, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There have been no material defaults with respect to any indebtedness of
TTI and its subsidiaries which exceeds 5% of its total assets.
There is no arrearage with respect to the payment of dividends on any class
of preferred stock of TTI or its subsidiaries.
15
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of TTI during the
first quarter of fiscal 1998.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits Index
<TABLE>
<CAPTION>
Exhibit Page
Table Number Number
--------------- ------
<S> <C> <C>
I. Plan of Acquisition, Reorganization, Arrangement, 2
Liquidation or Succession
(i) Stock Purchase Agreement and Plan of +
Reorganization (including all schedules)
II. Articles of Incorporation and Bylaws 3
(i) Certificate of Incorporation of Tice Technology, Inc. (i) +
(ii) Bylaws of Tice Technology, Inc. (ii) +
III. Instruments Defining Rights of Security Holders 4
(i) Common Stock Purchase Warrant Agreement *
Between Tice Technology, Inc. and Warrant Agent
IV. Material Contracts 10
(i) Agreement Between Tice Technology, Inc. and *
Transfer Agent
(ii) Patent, Technical Data and Assistance License x
Between Tice Engineering and Sales, Inc. and
Brother Industries, Ltd.
V. Statement re Computation of Per Share Earnings 11 18
VI. Financial Data Schedule 27 19
</TABLE>
* Previously filed as an exhibit to the Registration Statement on Form S-1 of
Tice Technology, Inc. which became effective August 1, 1997.
16
<PAGE>
+ Previously filed as an exhibit to Pre-Effective Amendment No. 1 to the above
described Registration Statement.
x Previously filed as an exhibit to Pre-Effective Amendment No. 2 to the above
described Registration Statement.
(b) No reports have been filed on Form 8-K.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Tice Technology, Inc.
By: /s/ William A. Tice
----------------------------------------
William A. Tice, President
Date: August 8, 1997
By: /s/ Karen A. Walton
----------------------------------------
Karen A. Walton, Chief Financial Officer
Date: August 8, 1997
0101188.01
17
<PAGE>
EXHIBIT 11
----------
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
TICE TECHNOLOGY, INC.
PRO FORMA SHARES: 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Shares to be outstanding after conversion 5,961,750 1 54,750 X $1 = $54,750
750 o/s shares X 7,949 conversion ratio $54,750 / $3.50 = 15,643
54,750 - 15,643 = 39,107
Thirty warrants of TES to be converted 238,470
Common Eq. Shares for options granted 39,107 1
Shares to be converted from debt 88,560
----------
TOTAL SHARES 6,327,887
==========
</TABLE>
HISTORICAL SHARES: 06/30/97 06/30/96
Shares outstanding (1) 750 750
(1) Common equivalent shares related to the thirty warrants outstanding are not
included because their effect would be anti-dilutive.
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES:
06/30/97 06/30/96
Net income (loss) per financial statements ($13,637) ($98,633)
========= ========
PRO FORMA EPS: 1997
$8,865 (3)
------
6,327,887 $0.00
=====
(3) Net income per financial statements plus the interest expensed on
convertible debt of $22,502.
HISTORICAL EPS: 06/30/97 06/30/96
($13,637) ($98,633)
--------- ---------
750 ($18.18) 750 ($131.51)
======== =========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Condensed Combined Financial Statements of Tice Technology, Inc. and
Affiliate and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 62,021 0<F1>
<SECURITIES> 0 0<F1>
<RECEIVABLES> 148,235 0<F1>
<ALLOWANCES> 0 0<F1>
<INVENTORY> 381,323 0<F1>
<CURRENT-ASSETS> 681,808 0<F1>
<PP&E> 778,530 0<F1>
<DEPRECIATION> 593,452 0<F1>
<TOTAL-ASSETS> 1,128,296 0<F1>
<CURRENT-LIABILITIES> 958,797 0<F1>
<BONDS> 0 0<F1>
0 0<F1>
0 0<F1>
<COMMON> 8,634 0<F1>
<OTHER-SE> 160,865 0<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,128,296 0<F1>
<SALES> 248,920 166,065
<TOTAL-REVENUES> 498,920 166,065
<CGS> 215,426 105,418
<TOTAL-COSTS> 497,348 256,544
<OTHER-EXPENSES> 0 13,484
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,846 27,830
<INCOME-PRETAX> (8,637) (119,218)
<INCOME-TAX> 5,000 (20,585)
<INCOME-CONTINUING> 1,572 (90,479)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (13,637) (98,633)
<EPS-PRIMARY> 0.00 0
<EPS-DILUTED> 0.00 0
<FN>
<F1> June 30, 1996 balance sheet items not included in filing.
</FN>
</TABLE>
