QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS
SUBJECT TO THE 1934 ACT REPORTING REQUIREMENTS
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
Commission File Number: 001-14005
FRISBY TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 62-1411534
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
77 East Main Street
Suite 2000
Bay Shore, New York 11706
(Address of Principal Executive Offices and Zip Code)
(516) 969-8570
(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 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 ________
Number of shares outstanding of the issuer's Common Stock, par value $.001
per share, as of July 31, 1999, 5,708,113 shares.
<PAGE>
FRISBY TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
INDEX
PAGE NO.
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 1999 (unaudited) and
December 31, 1998 3
Statements of Operations - Three Month and Six Month Periods Ended
June 30, 1999 (unaudited) and June 30, 1998
(unaudited) 4
Statement of Stockholders' Equity - Six Month Period
Ended June 30, 1999 (unaudited) 5
Statements of Cash Flows - Six Month Period Ended
June 30, 1999 (unaudited) and June 30, 1998 (unaudited) 6
Notes to Financial Statements - June 30, 1999 (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II Other Information 13
Signatures 16
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Frisby Technologies, Inc.
Balance Sheets
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,824,381 $ 6,516,138
Marketable securities 1,556,441 1,555,683
Accounts receivable 1,704,897 1,104,134
Inventory 791,806 671,569
Prepaid and other current assets 279,433 595,998
--------------------- -------------------
Total current assets 7,156,958 10,443,522
Property and equipment, net 568,107 277,494
Intangible assets, less accumulated amortization 1,986,103 2,000,700
Other assets 291,994 391,516
--------------------- -------------------
Total assets $ 10,003,162 $ 13,113,232
===================== ===================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,026,889 $ 868,649
Accrued expenses and other current liabilities 154,641 385,533
Payable to Triangle Research and Development Corporation - 400,000
License fees payable 257,683 189,726
Deferred license revenues 58,752 85,000
--------------------- -------------------
Total current liabilities 1,471,715 1,928,908
Accrued license agreement costs 120,250 120,250
Deferred license revenues 55,000 46,250
Other liability 1,300,000 1,300,000
--------------------- -------------------
Total liabilities 2,973,215 3,395,408
Commitments
Stockholders' equity:
Preferred Stock, 1,000,000 shares authorized; 587,500 shares issued and
outstanding at December 31, 1998 - 2,479,000
Common Stock, $.001 par value; 10,000,000 shares authorized;
shares issued and outstanding: 5,708,113 in 1999 and 5,120,613 in 1998 5,708 5,121
Additional paid-in capital 14,678,241 12,199,828
Accumulated other comprehensive income 21,745 21,000
Accumulated deficit (7,675,747) (4,987,125)
--------------------- -------------------
Total stockholders' equity 7,029,947 9,717,824
--------------------- -------------------
Total liabilities and stockholders' equity $ 10,003,162 $ 13,113,232
===================== ===================
</TABLE>
See accompanying notes.
<PAGE>
Frisby Technologies, Inc.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three month period ended Six month period ended
June 30, June 30,
------------------------------------------- ----------------------------------------
1999 1998 1999 1998
------------------- -------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 1,668,526 $ 546,765 $ 2,498,946 $ 818,140
Research and development 44,875 79,421 146,250 128,692
projects
Licenses and royalties 162,249 48,050 257,280 74,668
------------------- -------------------- ---------------- -------------------
Total revenues 1,875,650 674,236 2,902,476 1,021,500
Cost of sales:
Product sales 1,272,039 530,886 1,929,240 752,699
Research and development 86,907 64,203 168,842 98,981
projects
Licenses and royalties 130,800 5,541 237,257 7,304
------------------- -------------------- ---------------- -------------------
Total cost of sales 1,489,746 600,630 2,335,339 858,984
------------------- -------------------- ---------------- -------------------
Gross profit 385,904 73,606 567,137 162,516
Selling and marketing expense 748,185 224,719 1,496,185 444,867
General and administrative expense 976,184 641,553 1,892,140 1,042,546
------------------- -------------------- ---------------- -------------------
Loss from operations (1,338,465) (792,666) (2,821,187) (1,324,897)
Interest income 57,336 111,135 132,565 114,019
------------------- -------------------- ---------------- --------------------
Net loss $ (1,281,129) $ (681,531) $ (2,688,622) $ (1,210,878)
=================== ==================== ================ ===================
Net loss per common share - basic $ (0.22) $ (0.14) $ (0.50) $ (0.30)
and diluted
=================== ==================== ================ ===================
</TABLE>
See accompanying notes.
<PAGE>
Frisby Technologies, Inc.
Statement of Stockholders' Equity (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
Accumu-
lated
Other
Additional Compre- Accumu-
Preferred Stock Common Stock Paid-In hensive lated
Shares Amount Shares Amount Capital Income Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1998 587,500 $2,479,000 5,120,613 $5,121 $12,199,828 $21,000 $(4,987,125) $9,717,824
Conversion of
Preferred Stock (587,500) (2,479,000) 587,500 587 2,478,413
Net loss --- --- --- --- --- --- (2,688,622) (2,688,622)
Unrealized gains
on marketable
securities --- --- --- --- --- 745 --- 745
----------
Comprehensive
(loss) --- --- --- --- --- --- --- (2,687,877)
--------- ---------- --------- ------ ----------- ------- ------------ -----------
Balance at
June 30, 1999 --- $ --- 5,708,113 $5,708 $14,678,241 $21,745 $(7,675,747) $7,029,947
========= ========== ========= ====== =========== ======= ============ ==========
</TABLE>
See accompanying notes.
<PAGE>
Frisby Technologies, Inc.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six month period ended
June 30,
-------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Operating activities
Net loss $ (2,688,622) $ (1,210,878)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 84,937 9,304
Non cash consulting expense 70,000 60,000
Amortization of intangibles 102,600 --
Changes in assets and liabilities, prior to effect of acquisition:
Accounts receivable (595,159) (207,498)
Inventory (91,714) (281,918)
Other current assets 246,565 (388,427)
Other non-current assets 99,522 62,097
Accounts payable 139,961 318,084
Accrued expenses and other current liabilities (230,892) 169,648
Licenses fees payable 67,957 (133,710)
Deferred licenses reveneues (17,498) 1,436
------------------- -------------------
Net cash used in operating activities (2,812,343) (1,601,862)
------------------- -------------------
Investing activities
Purchases of property and equipment (375,550) (19,944)
Purchases of short-term investments -- (8,753,702)
Purchase of intangible assets (400,000) --
Purchase of business, net of cash acquired (103,864) --
------------------- -------------------
Net cash used in investing activities (879,414) (8,773,646)
------------------- -------------------
Financing activities
Net proceeds from exercise of convertible preferred stock option -- 2,479,000
Net proceeds from initial public offering -- 10,396,592
------------------- -------------------
Net cash provided by financing activities -- 12,875,592
------------------- -------------------
Net (decrease) increase in cash and cash equivalents (3,691,757) 2,500,084
Cash and cash equivalents - beginning of period 6,516,138 375,222
------------------- -------------------
Cash and cash equivalents -end of period $ 2,824,381 $ 2,875,306
=================== ===================
</TABLE>
See accompanying notes
<PAGE>
Frisby Technologies, Inc.
Notes to Financial Statements
June 30, 1999 (Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
conformity with generally accepted accounting principles and reflect all
adjustments consisting of normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the periods
shown. The results of operations for such periods are not necessarily indicative
of the results expected for the full fiscal year or for any future period. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.
The accompanying financial statements should be read in conjunction with
the audited financial statements of Frisby Technologies, Inc. (the "Company")
for the year ended December 31, 1998 and the notes thereto contained in the
Company's Annual Report on Form 10-KSB, filed with the Securities and Exchange
Commission on March 31, 1999, as amended.
2. Summary of Significant Accounting Policies
Net Loss Per Share
Net loss per share for the three and six month periods ended June 30, 1999
and 1998 are based on the weighted average number of common shares outstanding
during the period in accordance with the Statement of Financial Accounting
Standard ("SFAS") No. 128 "Earnings Per Share."
Shares used in the computation of net loss per share for the three and six
month periods ended June 30, 1999 were 5,708,113 and 5,414,363, respectively.
Shares used in the computation of net loss per share for the three and six month
periods ended June 30, 1998 were 5,037,995 and 4,036,259 respectively. The
number of shares used in the calculation of net loss per share on a basic and
diluted basis is the same.
3. Shareholders' Equity
On April 6, 1999, the Company received notice from the shareholder of the
Convertible Preferred Stock of its decision to convert the 587,500 shares of
Convertible Preferred Stock shares into Common Stock. This transaction increased
the number of outstanding common stock to 5,708,113.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations for the three and six month periods ended June 30,
1999 compared with the three and six month periods ended June 30, 1998
Revenues. The Company generates revenue from three primary sources: (i)
sales of its Thermasorb(R) additives and ComforTemp(R) foam products for use in
its strategic partners' products; (ii) sales of its SteeleVest(R) personal
cooling systems; (iii) revenue from research and development contracts related
to the United States government and private companies; and (iv) license fees and
royalties from the use of the Thermasorb(R) and ComforTemp(R) trademarks by
strategic partners in end-use products, as well as other fees earned in
connection with its agreements with strategic partners. Total revenues for the
three month period ended June 30, 1999 increased by $1,201,414 to $1,875,650
from $674,236 for the three month period ended June 30, 1998. Total revenues for
the six month period ended June 30, 1999 increased by $1,880,976 to $2,902,476
from $1,021,500 for the six month period ended June 30, 1998.
Product sales. Product sales for the three month period ended June 30, 1999
increased by $1,121,761 to $1,668,526 from $546,765 for the three month period
ended June 30, 1998. Product sales for the six month period ended June 30, 1999
increased by $1,680,806 to $2,498,946 from $818,140 for the six month period
ended June 30, 1998. These increases were primarily the result of product
shipments to additional licensees since the second quarter of 1998.
Specifically, sales to Titleist and Footjoy Worldwide and Pacific Coast
Feathers, as well as SteeleVest(R) sales, contributed to these increases.
Research and development projects. Revenues from research and development
projects for the three month period ended June 30, 1999 decreased $34,546 to
$44,875 from $79,421 for the three month period ended June 30, 1998. Revenues
from research and development projects for the six month period ended June 30,
1999 increased by $17,558 to $146,250 from $128,692 for the six month period
ended June 30, 1998. These variances reflect the timing of work performed on
funded United States government research and development contracts and
undisclosed private companies for potential applications incorporating the
Company's thermal management products.
Licenses and royalties. Revenues from license fees and royalties for the
three month period ended June 30, 1999 increased by $114,199 to $162,249 from
$48,050 for the three month period ended June 30, 1998. Revenues from license
fees and royalties for the six month period ended June 30, 1999 increased by
$182,612 to $257,280 from $74,668. This increase reflects the recognition of
fees received from strategic partners for license agreements entered into after
the second quarter 1998. License fees are recognized as revenue ratably over the
life of the license agreement. Additionally, the increase is due to royalty
income received from a third party as a result of the assignment of a license
agreement from Triangle Research Development Corporation ("TRDC") to the Company
in September 1998.
Cost of Sales. The Company's cost of sales consists of: (i) direct and
indirect costs incurred in connection with product sales, including
SteeleVest(R); (ii) direct and indirect costs incurred in connection with
revenue from research and development contracts for the United States government
and private companies; (iii) royalty payments required to be made to the
inventor of the thermal management technology or another party licensed by the
inventor; and (iv) the amortization expense associated with the September 1998
transaction with the inventor to lower the royalty rates. Costs of sales for the
three month period ended June 30, 1999 increased by $889,116 to $1,489,746
compared to $600,630 for the three month period ended June 30, 1998. The cost of
sales related to products for the six month period ended June 30, 1999 increased
by $1,476,355 to $2,335,339 compared to $858,984 for the six month period ended
June 30, 1998.
Cost of sales - Products. The cost of sales related to products for the
three month period ended June 30, 1999 increased by $741,153 to $1,272,039
from $530,886 for the three month period ended June 30, 1998. The cost of
sales related to products for the six month period ended June 30, 1999
increased by $1,176,541 to $1,929,240 from $752,699 for the six month
period ended June 30, 1998. These increases reflect the higher volume of
product sales and the corresponding costs related to such product sales in
the three month and six month periods ended June 30, 1999 as compared to
the corresponding periods in the prior year.
Cost of sales -- Research and development projects. The cost of sales
related to research and development projects for the three month period
ended June 30, 1999 increased by $22,704 to $86,907 from $64,203 for the
three month period ended June 30, 1998. The cost of sales related to
research and development projects for a the six month period ended June 30,
1999 increased by $69,861 to $168,842 from $98,981 for the six month period
ended June 30, 1998. This increase reflects the higher research and
development revenues in the six month period ended June 30, 1999 as
compared to the corresponding period in the prior year.
Cost of Sales -- Licenses and royalties. The cost of sales related to
licenses and royalties for the three month period ended June 30, 1999
increased by $125,259 to $130,800 from $5,541 for the three month period
ended June 30, 1998. The cost of sales related to licenses and royalties
for the six month period ended June 30, 1999 increased by $229,953 to
$237,257 from $7,304 for the six month period ended June 30, 1998. These
increased are primarily due to amortization of intangible and royalties
expense related to the September 1998 transaction with TRDC.
Selling and marketing expense. Selling and marketing expense for the three
month period ended June 30, 1999 increased by $523,466 to $748,185 from $224,719
for the three month period ended June 30, 1998. Selling and marketing expense
for the six month period ended June 30, 1999 increased by $1,051,318 to
$1,496,185 compared to $444,867 for the six month period ended June 30, 1998.
This increase was primarily the result of the Company increasing its marketing
and advertising activity in order to build brand name recognition of its
Thermasorb(R), ComforTemp(R) and SteeleVest(R) products and trademarks. These
activities included the hiring of additional sales personnel, advertising
placements in many national trade and consumer publications and tradeshow
participation. Additionally, selling expense related to the SteeleVest(R) unit
contributed to these increases.
General and administrative expense. General and administrative expense for
the three month period ended June 30, 1999 increased by $334,631 to $976,184
from $641,553 for the three month period ended June 30, 1998. General and
administrative expense for the six month period ended June 30, 1999 increased by
$849,594 to $1,892,140 compared to $1,042,546 for the six month period ended
June 30, 1998. The increase reflects the increase in personnel and
personnel-related expenses, including travel, and recruiting costs of new
employees. Additionally, fees and expenses paid to consultants have also
increased over the comparable period for the prior year. These increases are in
connection with the expansion of the Company's operations and commercialization
of its thermal management products.
Net interest income/expense. Net interest income for the three month period
ended June 30, 1999 decreased by $53,799 to $57,336 from $111,135 for the three
month period ended June 30, 1998. The decrease reflects the higher cash and
investment balances, in the prior year, due to receipts of proceeds from the
Initial Public Offering ("IPO") in April, 1998. Net interest income for the six
month period ended June 30, 1999 increased by $18,546 to $132,565 from $114,019
for the six month period ended June 30, 1998.
Net loss. As a result of the foregoing, the net loss for the three month
period ended June 30, 1999 increased to $1,281,129 from $681,531 for the three
month period ended June 30, 1998. Additionally, the net loss for the six month
period ended June 30, 1999 increased to $2,688,622 from $1,210,878 for the six
month period ended June 30, 1998.
Liquidity and capital resources. From its inception through June 30, 1999,
the Company has incurred cumulative losses of approximately $7,676,000. The
Company has financed its operations to date through research and development
contracts relating to United States government programs, bank borrowings and
issuance of common stock and convertible preferred stock.
At June 30, 1999, the Company had working capital of $5,685,000, including
cash and marketable securities of $4,381,000 accounts receivable billed of
$1,705,000 and inventory of $792,000, offset by accounts payable of $1,027,000
and license fees payable of $258,000.
Cash used by operating activities was $2,812,000 and $1,602,000
respectively, for the six month period ended June 30, 1999 and 1998. The
principal factor contributing to the cash used in operating activities for the
six month periods ended June 30, 1999 and 1998 were the net loss for each of the
respective periods. Cash used in investing activities was $879,000 for the six
month periods ended June 30, 1999. The principal investing activities for 1999
were: an installment payment to TRDC for the agreement signed in September 1998,
the purchase of the assets of Steele Incorporated, and the purchase of equipment
for the development facility in North Carolina. The principal investing activity
for 1998 was the purchase of short-term investments. Cash provided by financing
activities was $12,876,000 for the six month period ended June 30, 1998. The
principal financing activities for the six month period ended June 30, 1998 were
the receipt of the net proceeds of $2,479,000 from the exercise of the
Convertible Preferred Stock Option by one holder of record and of $10,397,000
from the Company's IPO.
The Company is relocating its North Carolina operations to a newly
constructed facility located in Winston Salem, North Carolina during the second
half of fiscal 1999. The cash requirement with respect to that relocation will
be expended in the third and fourth quarters of 1999 and total 1999 capital
expenditures are not expected to exceed $1,000,000.
The Company has a $2,000,000 line of credit with a bank. The line of credit
bears interest at the lower of the bank's prime rate or a two point spread
versus the London Interbank Overnight Rate ("LIBOR") and will expire on June 30,
2000. The full amount of the line is currently available and uncommitted. It is
the Company's intent to renew or replace the line of credit in order to
accommodate possible future funding requirements.
The Company has incurred cumulative losses since its inception and,
therefore, has not been subject to significant federal income taxes. Through
June 30, 1999, the Company has generated net operating loss carryforwards of
approximately $7,300,000, which may be available to reduce future available
taxable income and future tax liabilities. These carryforwards expire in the
year 2018. The Tax Reform Act of 1986 provides for an annual limitation on the
use of net operating loss carryforwards (following certain ownership changes)
that could significantly limit the Company's ability to utilize these
carryforwards. Due to the cumulative effect of the IPO and the subsequent
exercise of options or warrants in connection with other future sales of equity,
the Company's ability to utilize the aforementioned carryforwards may be
limited. Additionally, because the United States tax laws limit the time during
which these carryforwards may be applied against future taxes, the Company may
not be able to take full advantage of these attributes for federal tax purposes.
Based on the Company's current operating plan, the Company believes that
its available cash, cash flow from operations and available line of credit, will
be sufficient to satisfy its operational and capital requirements through
December 1999. Such belief is based upon certain assumptions, and there can be
no assurance that such assumptions are correct. In the event that the Company's
plans change, or its available cash, cash flow from operations and available
line of credit are insufficient to fund operations due to unanticipated delays,
problems, expenses or otherwise, the Company would be required to seek
additional financing sooner than anticipated. Further, depending on the
Company's progress in marketing its product lines, gaining acceptance of its
thermal management technology and its other products and services among the
business community or the identification of strategic acquisition or licensing
opportunities, the Company may determine that it is advisable to raise
additional capital sooner than was anticipated.
The Company is in the early stages of evaluating various financing
alternatives to increase cash available to fund operations in the Year 2000.
Inflation
The impact of general inflation on the Company's business has been
insignificant to date and the Company believes that it will continue to be
insignificant for the foreseeable future.
Year 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on recent assessments, the Company determined that it will not
require significant modifications of its hardware or software so that those
systems will properly utilize dates beyond December 31, 1999. The Company
presently believes that with modifications of its existing software, the Year
2000 Issue can be mitigated.
The Company's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing, and implementation. As of April
30, 1999, the Company has fully completed its assessment of all internal systems
that could be significantly affected by the Year 2000. The completed assessment
indicated that most of the Company's significant information technology systems
will not be significantly affected, particularly the general ledger, billing,
and inventory systems. The Company does not believe that the Year 2000 presents
a material exposure as it relates to the Company's products. In addition, the
Company has begun to gather information about the Year 2000 compliance status of
its external agents and continues to monitor their compliance. To date, the
Company is not aware of any external agent with a Year 2000 issue that would
materially impact the Company's results of operations, liquidity, or capital
resources. The Company has requested from its bank an assessment of the extent
of the bank's Year 2000 compliance. In the event the bank is not Year 2000
compliant in a timely manner, the Company is prepared to change banks. However,
the Company has no means of ensuring that external agents will be Year 2000
ready. The inability of external agents to complete their Year 2000 resolution
process in a timely fashion could materially and adversely impact the Company.
The effect of non-compliance by external agents is not determinable.
The Company will utilize its external software and service provider to
reprogram, test and implement the software for the Year 2000 modification as
needed, the cost of which is not expected to be significant. The Company will
evaluate the status of completion of Year 2000 modifications in the third
quarter and will undertake all remaining necessary steps to seek to ensure its
systems are Year 2000 compliant. In the event the Company is unable to resolve
its Year 2000 modifications in a timely fashion, the business of the Company may
be materially and adversely impacted.
In the event the Company's computer systems are materially adversely
affected by the Year 2000 issue, the Company's business and operations could be
materially adversely affected by disruptions in the operations of other entities
with which the Company interacts. However, the Company believes that the most
likely worst case scenario is that there will be some localized disruptions of
systems that will affect individual processes, facilities or service technology
providers for a short time rather than systematic or long-term problems
affecting its business operations as a whole. In such event the Company has
contingency plans for certain critical applications and is working on plans for
others. These contingency plans involve, among other actions, manual
workarounds, increasing inventories, and adjusting staffing strategies.
Forward-Looking Statements
Certain information contained in this Quarterly Report on Form 10-QSB,
including, without limitation, information appearing under Part I, Item 2,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," are forward-looking statements (within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). Factors set forth in the Company's Prospectus filed April 1, 1998, or in
the Company's other Securities and Exchange Commission filings, could affect the
Company's actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company in this Quarterly Report on Form 10-QSB.
Those statements are subject to numerous risks and uncertainties that could
cause actual results, performance and achievements to differ materially from
those described or implied in the forward-looking statements, and reported
results should not be considered an indication of future performance. Those
potential risks and uncertainties include without limitation the uncertainty of
the economic environment for the remainder of this year, the need for further
development of certain Frisby Technologies' products and markets, the
development of alternative technologies by third parties, Year 2000 issues
affecting the Company and its customers and suppliers, and the uncertainty of
market acceptance and demand for the Company's products in the future.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
On April 6, 1999, the Company received notice from the shareholder of the
Convertible Preferred Stock of its decision to convert the 587,500 shares of
Convertible Preferred Stock shares into Common Stock. This transaction increased
the number of outstanding common stock to 5,708,113.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On June 10, 1999, the Company held its Annual Meeting of Shareholders, at
which the following items were voted on and approved by the Shareholders:
(1) The election of the following members of the Board of Directors to
another term to expire at the Company's next annual meeting and after successors
are duly elected and qualified:
Greg Frisby (4,408,693 votes "For", 18,300 votes "Against", 0 "Abstained")
Jeffry D. Frisby (4,408,693 votes "For", 18,300 votes "Against",
0 "Abstained")
Pietro A. Motta (4,408,593 votes "For", 18,400 votes "Against", 0 Abstained")
Domenico DeSole (4,408,593 votes "For", 18,400 votes "Against",
0 "Abstained")
Robert C. Grayson (4,408,693 votes "For", 18,300 votes "Against", 0 "Abstained")
(2) The amendment of the Company's 1998 Stock Option Plan to increase the
number of authorized shares from 250,000 to 750,000 (3,256,026 votes "For",
51,820 votes "Against", 14,200 "Abstained", 1,104,947 "Unvoted").
(3) The ratification of the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1999 (4,405,793
votes "For", 15,100 votes "Against", 6,100 "Abstained").
Item 5. Other Information
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
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.
Dated: August 16, 1999
FRISBY TECHNOLOGIES, INC.
By: /s/ Gregory S. Frisby
---------------------
Gregory S. Frisby
President and Chief Executive Officer
By: /s/ Stephen P. Villa
--------------------
Stephen P. Villa
Chief Financial Officer
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