SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-8489
APOGEE ROBOTICS, INC.
(Exact name of Registrant as specified in its charter)
COLORADO 84-0916585
(State of incorporation) (IRS Employer
Identification NO.)
1625 Broadway, Suite 1600
enver, Colorado 80202
(Address of Principal Executive Office) Zip Code
Registrant's telephone number, including Area Code: (303) 573-1600
N/A
(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.
X
YES NO
APPLICABLE ONLY TO CORPORATE ISSUES:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class of Stock No. of Shares Outstanding Date
- -------------- -------------------------- ----
Common Stock 18,195,022 January 24, 1996
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APOGEE ROBOTICS, INC.
10-Q INDEX
September 30, 1994
PAGE NO.
Part I - Financial Information
Item 1. - Financial Reports
Balance Sheets - September 30, 1994 and
June 30, 1994 3 - 4
Statements of Operations - Three months
Ended September 30, 1994 and 1993 5
Statements of Cash Flows - Three months
Ended September 30, 1994 and 1993 6
Notes to Financial Statements 7 - 8
Item 2. - Management's Discussion and Analysis of
the Financial Condition and Results of
Operations 9 - 11
Part II - Other Information
Item 5. - Other Information 12 - 13
Item 6. - Exhibits and Reports on Form 8-K 14
Signatures 15
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PART I - FINANCIAL INFORMATION
Item 1. Fiancial Statements.
APOGEE ROBOTICS, INC
(Debtor-in-Possession)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1994 1994
ASSETS
<S> <C> <C>
Current Assets
Cash $ 43,333 $ 49,675
Certificates of deposit 200,000 200,000
Contract receivables 114,954 7,317
Inventories 319,390 299,738
Costs and estimated earnings in excess of billings on
uncompleted contracts 223,242 176,650
Nonmarketable securities at net realizable value, aggregate
cost of $1,726,665 and $1,595,675, respectively 967,140 824,250
Other current assets 107,617 106,133
---------- -------
Total current assets 1,975,676 1,663,763
--------- ---------
OTHER ASSETS
Purchased AGVS software, net 321,944 345,126
Equipment, net 109,805 130,873
Deposits and other assets 35,513 17,397
------ -------------
Total other assets 467,262 493,396
------- ------------
TOTAL ASSETS $2,442,938 $2,157,159
---------- ----------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 539,289 $ 526,105
Note payable - related party 338,534 288,534
Accounts payable 360,002 268,719
Estimated losses on uncompleted contracts 107,766 107,766
Other accrued liabilities 147,388 178,018
Billings in excess of costs and estimated earnings on
uncompleted contracts 160,814 219,231
------- ------------
Total current liabilities 1,653,743 1,588,373
---------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 100,000 shares authorized;
1,082,912 shares outstanding in 1994 10,829
Common stock, no par value; 50,000,000 shares authorized;
18,205,151 and 16,472,110 shares issued and outstanding in
1995 and 1994, respectively 10,849,047 9,968,153
Redeemable preferred stock of invested received in
exchange for common stock (165,456) (600,000)
Other capital 33,349 853,414
Accumulated deficit (9,927,745) (9,663,610)
----------- -----------
Total stockholders' equity 789,195 568,786
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,442,938 $2,157,159
---------- ----------
</TABLE>
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STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September30,
1994 1993
<S> <C> <C>
CONTRACT REVENUES AND SALES $424,170 $385,005
COSTS OF REVENUES AND SALES 432,942 365,022
--------- ---------
GROSS PROFIT (LOSS) (8,772) 19,983
----------- ----------
OPERATING EXPENSES:
Selling, G & A 234,204 221,317
Research & Development - 3,706
----------- -----------
Total Operating Expenses 234,204 225,023
--------- ---------
LOSS FROM OPERATIONS (242,976) (205,040)
--------- ---------
OTHER INCOME (EXPENSES):
Investment gains (losses) - -
Interest expense (22,577) (12,990)
Other, net 1,418 -
---------- ---------
Net other income (expense) (21,159) (12,990)
NET LOSS $(264,135) $(218,030)
========== ==========
LOSS PER COMMON SHARE $ (.02) $ (.02)
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 17,620,718 8,721,672
---------- ----------
</TABLE>
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APOGEE ROBOTICS, INC.
(Debtor-in-Possession)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
SEPTEMBER 30,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (264,135) $ (218,030)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amoritization 44,250 41,458
Increase (decrease) from changes in assets and liabilities:
Contract receivables (114,954) (97,491)
Inventories (19,652) (22,315)
Cost and estimated earnings in excess of billings on
uncompleted contracts (46,952) (33,884)
Precontract costs (84,154)
Accounts payable and accrued liabilities 110,603 -
Billings in excess of costs and estimated earnings on
uncompleted contracts (58,417) (59,991)
Other (12,283) (20,193)
-------- --------------
Net cash used in operating activities (361,180) (494,600)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of certificates of deposit
Redemptions of certificates of deposit
Proceeds from investments 21,250 -
Purchase of AGVS software - (25,308)
Other - (3,038)
------------- ---------------
Net cash provided by (used in) investing activities 21,250 (28,346)
------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash advance from an affiliate of a former director 50,000 -
Borrowings under short-term debt agreements 19,000 -
Repayments under short-term debt agreements (5,816) (50,762)
Proceeds from issuance of common stock and common stock
warrants 270,404 -
Proceeds from issuance of preferred shares - 411,437
Deferred offering costs - (5,450)
------------- --------------
Net cash provided by financing activities 333,588 355,255
------------- --------------
DECREASE IN CASH (6,342) (167,721)
CASH, at beginning of year 49,675 171,527
------------ -------------
CASH, at end of year $ 43,333 $ 3,806
----------- --------------
</TABLE>
6
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Apogee Robotics, Inc.
Notes to Financial Statements
1. In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (all of which were normal recurring accruals) necessary
to present fairly the Company's financial position as of September 30, 1994 and
June 30, 1994 and the results of its operation and the statements of cash flows
for the three month periods ended September 30, 1993 and 1994.
The accounting policies followed by the Company are set forth in the 1994 Apogee
Robotics, Inc. 10-K Annual Report.
2. Inventories at September 30, 1994 and June 30, 1994 consisted of robot
components, assembly parts and AGVS vehicles.
3. Earnings (loss) per common share is based on the weighted average number of
common shares outstanding during the period. Outstanding convertible preferred
stock, common stock warrants and options have not been included in the
computation of net (loss) per common share when the effect would have been
antidilutive.
4. Contingencies.
(a) Apogee had significant capital commitments as a result of its
purchase of the AGVS Division of SI Handling Systems, Inc. for $2,000,000 in
cash and $1,000,000 in convertible preferred stock. Should Apogee be unable to
complete the subscription of additional equity offerings, the Company will be
unable to fund this acquisition. Furthermore, should funding from Conagher
terminate, there is a significant probability that the Company will be unable to
fund any current operations.
During the period, Conagher and Apogee amended the original Stock
Acquisition Agreements, reducing the total subscription by Conagher from $3
million to approximately $1.2 million. Furthermore, shortly after the conclusion
of the current three month period, an article appeared in The Wall Street
Journal raising substantial issues concerning Conagher's principal stockholder
and Apogee's Chairman, Pattinson Hayton, III, which seriously jeopardized the
Company's access to other sources of equity funding. Despite assurances from
Hayton that the contents of this article were patently false, the reduction of
the Conagher subscription funding and inaccessibility of funding from other
equity sources as a consequence of The Wall Street Journal article, pose serious
questions regarding the Company's ability to fund current operations and
obligations. (See Part II, Item 5, Relationship with Conagher below for a
discussion of this matter.)
Subsequent to the conclusion of the quarter ended September 30, 1994,
Conagher revoked its obligations under the amended subscription agreement on
November 21, 1994. This
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revocation caused the collapse of the SI acquisition resulting in the suspension
of operations November 28, 1994 and the declaration of bankruptcy on December 9,
1994. Conagher initiated legal action against the Company and certain of its
officers and directors on December 2, 1994 alleging financial misrepresentation.
(b) As reported in prior filings, AGV Acquisitions, Inc. ("AGV") (which
became Apogee's wholly owned subsidiary simultaneous with the acquisition)
acquired SI's AGVS Division on October 4, 1994 for $2,000,000 cash and
$1,000,000 in convertible preferred stock. Closing was evidenced by the payment
of $250,000 cash (which management subsequently discovered was funded by Quadrax
Corporation rather than Conagher under the Revised Agreement). Amendment #2 to
the Asset Purchase Agreement between AGV and SI, required SI to furnish Apogee
with certain assignment consents and lein waivers no later than November 4,
1994, which items were omitted under the original purchase documentation. After
receipt of those consents and waivers, Apogee would be required to pay an
additional $250,000 to close the transaction. SI subsequently failed to provide
these consents and waivers. Apogee management attempted to restructure certain
terms and conditions of the Asset Purchase Agreement to avoid declaration of
default. Hayton's abrupt resignation from Apogee's Board of Directors and
revocation of Conagher's stock subscription agreements with Apogee terminated
those negotiations.
The Company initiated an Adversary Proceeding against SI in the Denver
Bankruptcy Court on January 20, 1995. A compromise agreement between the parties
was entered into on September 12, 1995, that was approved by the Bankruptcy
Court on October 30, 1995.
(c) Management is unable to ascertain with any certainty to amount and
extent of creditor claims that may be filed against the bankruptcy estate.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
Revenues derived from long-term contracts are recognized according to
the percentage-of-completion method, measured by the percentage of costs
incurred to date versus the estimated total contract cost for each contract.
Costs include materials, direct labor, subcontractors, and engineering and
maunfacturing overhead. Provision for estimated losses is made in the period for
which they become determinable.
Since Apogee's contract revenues have historically consisted of large
sales to a limited number of customers and since large projects are billed under
the percentage-of-completion method, certain balance sheet items will fluctuate
substantially between periods. As many large projects are billed at certain
intervals, as opposed to monthly, the balance sheet category Costs and Estimated
Earnings will increase as costs on the project accumulate. Once an invoice is
sent to the customer, such amounts are transferred to Contract Receivables.
Contract receivables in turn will vary as Costs and Earnings on large projects
are billed and subsequently collected. Conversely, if Apogee receives an advance
or down payment on an order, the amounts received are reflected as Billings in
Excess of Costs and Estimated Earnings. Such amounts are gradually transferred
to Contract Revenues Earned as Apogee progresses with work on the particular
project.
On November 28, 1994, Apogee suspended operations pending the filing of
a petition under Chapter 11 of the Federal Bankruptcy Rules on December 9, 1994.
Liquidity and Capital Resources
Apogee's current assets increased 18.7% to $1,975,676 on September 30,
1994 from $1,663,763 on June 30, 1994. This increase was the result of the
following conditions:
1) Increase in contract receivables from $7,317 on June 30, 1994 to
$114,954 on June 30, 1994 which was the result of billings on AGVS
contracts during the period; and
2) Inventories and Costs and estimated earnings in excess of billings
on uncompleted contracts collectively increased 13.9% from
$299,738 and $176,650 respectively on June 30, 1994 to $319,390
and $223,242 respectively on September 30, 1994 as a result of
work on existing AGVS projects.
3) Investments increased 17.3% from June 30, 1994 to September 30,
1994 to $967,140 as a result of proceeds from Conagher's
redemption of its preferred shares under its subscription
agreement with the Company in the Company's subscequent quarterly
period.
9
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Current liabilities increased 4.1% on June 30, 1994 to $1,653,743 on
September 30, 1994 primarily as a result of increases in Accounts payable and
Accrued liabilities associated with increased activity on AGVS projects. Apogee
had no long-term debt.
Total shareholder's equity increased 38.7% to $789,195 on September 30,
1994 from $568,786 on June 30, 1994 as a result of the redemption of the
Conagher preferred shares by Conagher. This increase was offset by the loss for
the period of $264,135.
Historically, the Company's operations have not generated cash. Apogee
has derived working capital through public and private sales of its Common Stock
and from short-term borrowings. Since 1983, the Company has received
approximately $9.5 million from the sale of its Common Stock.
Apogee had significant capital commitments as a result of its purchase
of the AGVS Division of SI Handling Systems, Inc. for $2,000,000 in cash and
$1,000,000 in convertible preferred stock. Should Apogee be unable to complete
the subscription of additional equity offerings, the Company will be unable to
fund this acquisition. Furthermore, should funding from Conagher terminate,
there is a significant probability that the Company will be unable to fund any
current operations.
During the period, Conagher and Apogee amended the original Stock
Acquisition Agreements, reducing the total subscription by Conagher from $3
million to approximately $1.2 million. Furthermore, shortly after the conclusion
of the current three month period, an article appeared in The Wall Street
Journal raising substantial issues concerning Conagher's principal stockholder
and Apogee's Chairman, Pattinson Hayton, III, which seriously jeopardized the
Company's access to other sources of equity funding. Despite assurances from
Hayton that the contents of this article were patently false, the reduction of
the Conagher subscription funding and inaccessibility of funding from other
equity sources as a consequence of The Wall Street Journal article, pose serious
questions regarding the Company's ability to fund current operations and
obligations. (See Part II, Item 5, Relationship with Conagher below for a
discussion of this matter.)
Subsequent to the conclusion of the quarter ended September 30, 1994,
Conagher revoked its obligations under the amended subscription agreement on
November 21, 1994. This revocation caused the collapse of the SI acquisition
resulting in the suspension of operations November 28, 1994 and the declaration
of bankruptcy on December 9, 1994. Conagher initiated legal action against the
Company and certain of its officers and directors on December 2, 1994 alleging
financial misrepresentation.
Results of Operations
Revenues for the three month period ended Spetember 30, 1994 increased
10.2% over the comparable three month period ended September 30, 1993 to
$424,170 due to a slight increase in
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contracts awarded. Cost of Revenues and Sales increased 18.6% to $432,942 over
the same comparable periods and more significantly increased to 102.1% of
Contract Revenues and Sales in the current three month period from 94.8% of
Contract Revenues and Sales in the comparable three month period ended September
30, 1993, thus producing a Gross Loss in the current period of $8,772 from a
Gross Profit in the comparable period of $19,983. This condition was the result
of significant delays and cost overruns in the completion of the Levi Strauss
and OEA projects.
Total operating expenses as a percentage of Contract Revenues and Sales
decreased from 58.4% in the three month period ended September 30, 1993 to 55.2%
in the three month period ended September 30, 1994, and represented only a
negiligible increase of 4% between the periods. This represented stable S,G, & A
expenses between the periods. Notwithstanding the relatively stable S, G, & A
expenses between the periods, the Company's Loss from Operations inflated 18.5%
from $205,040 in the three month period ended September 30, 1993 to $242,976 in
the three month period ended September 30, 1994. This loss reflected the
continued inability of management to increase Contract Revenues and Sales
sufficient to support S, G, & A expenses; to manage costs on projects with
sufficient margins to support overhead costs; or reduce S, G, & A expenses to
levels consistent with Contract Revenues and Sales.
Company management believes that the AGVS industry is the victim of
spurious technology proliferation that can be ameloriated only by the
consolidation of AGVS suppliers. The Company's purchase of the AGVS assets of SI
Handling Systems, Inc. and its aggressive pursuit of other AGVS acquisitions
could generate sufficient "critical mass" to enhance the Company's prospects of
increasing Contract Revenues and Sales, project management skills, and cost
containment of S, G, & A expenses in the future.
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PART II - OTHER INFORMATION
Item 5. Other Information.
1) Relationship with Conagher.
On May 12, 1994, Apogee entered into a Stock Subscription Agreement
with Conagher, wherein Apogee exchanged 6,000,000 shares of its Common Stock for
6,000,000 shares of Conagher's Preferred Stock. The Subscription Agreement
provided that between June 15, 1994 and September 15, 1994, Conagher would
redeem all or a portion of its Preferred Shares for $2,000,000. At the end of
that period, shares of Conagher Preferred Stock that remained unredeemed could
be exchanged by Apogee for an equal number of shares of Apogee's Common Stock
held by Conagher. Subsequent to the execution of the Subscription Agreement,
Conagher assigned, conveyed, transferred, or sold (which cannot be determined by
Apogee) 5,200,000 shares of the Apogee Common Stock it acquired from Apogee
under the Subscription Agreement, to Importationes y Exportationes, SA
("IMEXSA"), a Nicaraguan company, that subsequently filed a Regulation S
registration of the Apogee Common Stock. On June 5, 1994, Conagher agreed to
purchase an additional 3,000,000 shares of Apogee's Common Stock for $1,000,000.
On September 23, 1994, officers of Apogee and Conagher executed an
Amended and Restated Stock Acquisition Agreement (hereinafter the "Revised
Agreement"), amending the May 12, 1994 Subscription Agreement and terminating
the June 5, 1994 agreement. This Revised Agreement reduced the total payments to
Apogee from $3,000,000 to $1,200,000. It also provided for the purchase of an
additional 1,250,000 shares of Apogee's Common Stock for $250,000 prior to
October 1, 1994.
The Revised Agreement was purportedly ratified by Apogee's Board of
Directors consisting of Hayton, principal officer, director, and shareholder of
Conagher, and Apogee's Chairman; Sven Kraumanis and William G. Conway, both
nominees of Conagher; and Robert Oliphant. The Company contends that the Revised
Agreement never closed.
Subsequent to the foregoing events, Apogee's management determined that
the ratification of the Revised Agreement by Apogee's then current Board of
Directors on September 21, 1994 was improper. Further investigation by Apogee
management revealed other irregularities relating to Conagher's actions on
behalf of Apogee, in addition to their ongoing obligations to Apogee under the
various agreements. Negotiations with Conagher to cure these irregularities were
complicated as a result of Hayton's chairmanship of the Company and his
effective control of the Company's Board of Directors, as well as overseas
travel by Mr. Hayton. Furthermore, an article in the October 13, 1994 edition of
The Wall Street Journal revealed serious allegations regarding Hayton's
character, integrity, and business practices that effectively terminated
Apogee's access to public financial markets and damaged Apogee's reputation such
that it could not execute it's published business plan.
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Subsequent negotiations with Conagher contained various unfulfilled
commitments for funding the Company, which were ultimately terminated by the
abrupt resignation of Hayton and his designees from Apogee's Board of Directors
on November 21, 1994. In a press release by Conagher dated on the same day,
Hayton accused Apogee and certain of its managers and directors of fradulent
misrepresentation. Conagher initiated legal action against the Company and
certain of its officers and directors on December 2, 1994 in the U.S. District
Court for the Central District of California. This action was stayed as a result
of the Company's bankruptcy filing December 9, 1994 and was removed to U.S.
District Court for Colorado on February 16, 1995.
2) Acquisition of SI Handling AGVS Division.
As reported in prior filings, AGV Acquisitions, Inc. ("AGV") (which
became Apogee's wholly owned subsidiary simultaneous with the acquisition)
acquired SI's AGVS Division on October 4, 1994 for $2,000,000 cash and
$1,000,000 in convertible preferred stock. Closing was evidenced by the payment
of $250,000 cash (which management subsequently discovered was funded by Quadrax
Corporation rather than Conagher under the Revised Agreement). Amendment #2 to
the Asset Purchase Agreement between AGV and SI, required SI to furnish Apogee
with certain assignment consents and lein waivers no later than November 4,
1994, which items were omitted under the original purchase documentation. After
receipt of those consents and waivers, Apogee would be required to pay an
additional $250,000 to close the transaction. SI subsequently failed to provide
these consents and waivers. Apogee management attempted to restructure certain
terms and conditions of the Asset Purchase Agreement to avoid declaration of
default. Hayton's abrupt resignation from Apogee's Board of Directors and
revocation of Conagher's stock subscription agreements with Apogee terminated
those negotiations.
The Company initiated an Adversary Proceeding against SI in the Denver
Bankruptcy Court on January 20, 1995. A compromise agreement between the parties
was entered into on September 12, 1995, that was approved by the Bankruptcy
Court on October 30, 1995.
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Item 6. Exhibits and Reports on Form 8-K.
b) Report on Form 8-K
The Company filed a Form 8-K on September 23, 1994 announcing the
Amended and Restated Stock Acquisition Agreement with Conagher, a Consulting
Agreement with Pattinson Hayton, III, the purchase of the AGVS assets of SI, and
the Employment Agreement with James R. Currier, Sr.
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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 therunto duly authorized.
APOGEE ROBOTICS, INC.
Date: /s/ James R. Currier, Sr.
James R. Currier, Sr.
Chairman, President, C.E.O., & C.F.O.
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