<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-12646
ANGSTROM TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 31-1065350
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1895 Airport Exchange Boulevard, Erlanger, KY 41018
(Address of principal executive offices)
(606) 282-0020
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
As of April 30, 1996, there were 21,985,118 shares of Common Stock outstanding.
TOTAL PAGES IN THIS REPORT: 13 (excluding cover but including signature page)
<PAGE>
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements
Balance Sheets 2-3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-11
PART II. Other Information
Item 6. Exhibits 12
SIGNATURES 13
<PAGE>
ANGSTROM TECHNOLOGIES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 66,413 $ 129,308
Short-term investments held to maturity 695,121 901,633
Interest receivable 11,231 11,489
Accounts receivable 143,023 120,622
Inventories
Finished goods 21,896 14,052
Raw materials and parts 393,008 277,364
---------- -----------
414,904 291,416
Prepaid expenses 31,746 111,961
---------- -----------
Total current assets 1,362,438 1,566,429
Furniture and equipment, at cost 95,990 68,676
Less: accumulated depreciation (38,561) (31,104)
---------- -----------
57,429 37,572
Other assets
Long-term investments 448,752 448,092
Patents, Net of amortization 86,620 61,076
Other assets 1,237 1,237
---------- -----------
Total assets $1,956,476 $ 2,114,406
========== ===========
</TABLE>
NOTE: The balance sheet at October 31, 1995 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
2
<PAGE>
ANGSTROM TECHNOLOGIES, INC.
BALANCE SHEET(CONTINUED)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable $ 137,029 $ 105,332
Accrued liabilities 49,575 47,223
Long-term debt due within one year 23,134 23,134
------------- --------------
Total current liabilities 209,738 175,689
Long-term debt 83,222 94,454
Capital
Preferred stock, $.01 par value; 5,000,000
shares authorized, 1,603,490 and 1,663,450
shares issued and outstanding at April 30,
1996 and at October 31, 1995. 2,638,513 2,737,175
Common stock, $.01 par value; 45,000,000 shares
authorized, 21,985,118 and 21,745,278 shares issued
and outstanding at April 30, 1996 and at October 31,
1995. 219,851 217,453
Additional paid-in capital 4,531,894 4,435,631
Accumulated deficit (5,726,742) (5,545,996)
----------- -----------
Net capital 1,663,516 1,844,263
----------- -----------
Total liabilities and capital $ 1,956,476 $ 2,114,406
=========== ============
</TABLE>
NOTE: The balance sheet at October 31, 1995 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
3
<PAGE>
ANGSTROM TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30, April 30, April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 244,083 $ 168,706 $ 442,582 $ 309,096
Cost of sales 120,150 64,611 260,307 148,739
--------- ----------- ----------- ----------
Gross Profit 123,933 104,095 182,275 160,357
Selling, general and
administrative expenses 215,338 276,324 395,197 524,993
--------- ----------- ----------- ----------
(91,405) (172,229) (212,922) (364,636)
Other income (expense)
Interest income 17,415 19,754 34,926 39,482
Interest expense (3,305) (3,946) (6,778) (8,041)
Gain on sale of security 0 0 4,028 0
--------- ----------- ----------- ----------
14,110 15,808 32,176 31,441
--------- ----------- ----------- ----------
Net income (loss) (77,295) (156,421) (180,746) (333,195)
--------- ----------- ----------- ----------
Less preferred dividend
requirement (62,855) (68,460) (106,900) (136,920)
--------- ----------- ----------- ----------
Net (loss) applicable to
common stockholders $(140,150) $ (244,881) $ (287,646) $ (470,115)
========= =========== =========== ==========
Net (loss) per share $ (0.01) $ (0.01) $ (0.01) $ (0.02)
========= =========== =========== ==========
Weighted Average Number
of Shares Outstanding 21,760,958 21,553,078 21,985,118 21,553,078
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
ANGSTROM TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended April 30,
1996 1995
Operating Activities
Net loss $(180,746) $(333,195)
Adjustment to reconcile net loss
to net cash used in operations
Depreciation 7,457 6,793
Amortization 566 0
Changes in operating assets and
liabilities:
Increase in receivables (22,143) (32,677)
Decrease (Increase) in inventories (123,488) 17,013
Increase in prepaid expenses 80,215 19,399
Increase (Decrease) in accounts payable 31,697 (45,119)
Increase (Decrease) in other liabilities 2,352 (11,772)
--------- ---------
Net cash used in operating activities (204,090) (379,558)
Investing activities
Purchase of furniture and equipment (27,315) (1,304)
Proceeds from maturity of investments 205,852 642,700
Capitalization of Patents (26,110) 0
--------- ---------
Net cash provided by
investing activities 152,427 641,396
Financing activities
Payment on preferred stock dividend 0 (256,725)
Payments on long-term debt (11,232) (9,958)
Net cash used in financing
activities (11,232) (266,683)
--------- ---------
Net decrease in cash (62,895) (4,845)
Cash, beginning of period 129,308 47,680
--------- ---------
Cash, end of period $ 66,413 $ 42,835
========= =========
Supplemental information:
Interest paid $ 6,778 $ 8,041
See accompanying notes
5
<PAGE>
ANGSTROM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the six month period ended April 30, 1996 is not
necessarily indicative of the results that may be expected for the year
ended October 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended October 31, 1995.
Note 2 Earnings per common share are calculated based upon a weighted
average of shares outstanding after giving effect to the preferred
dividend requirements.
Note 3 The preferred stock issued December 22, 1993 provided for an annual
cumulative dividend to be paid on November 1, 1995. Management has
determined that available funds would be more prudently utilized in its
ongoing research and development efforts and as a result no accrual or
payment of dividend will be made until such time as sufficient cash
flows are generated from operations. Management intends to hold the
dividend payable as of November 1, 1995, in arrears. No dividend was
accrued for the year ended October 31, 1995. The amount that would have
been accrued at October 31, 1995 if a dividend had been recorded, would
have been $266,152 ($.16 per preferred stock share payable at November
30, 1995 to holders of record 15 days prior to such date). No dividend
has been accrued for the six month period ended April 30, 1996.) The
amount that would have been accrued at April 30, 1996, if a dividend
had been recorded, would have been approximately, $106,900 ($.16 per
preferred stock share outstanding at that date).
Note 4 On December 3, 1993, the shareholders of the Company approved an
amendment to the Company's certificate of incorporation increasing the
authorized number of shares of common stock to 45,000,000 from
25,000,000, increasing the authorized number of preferred stock to
5,000,000 from 2,000,000 and reducing the par value of the preferred
stock to $.01 per share from $10.00 per share.
On December 22, 1993, the Company completed the issuance of 1,725,000
units of its securities through a public offering, resulting in net
proceeds of $2,838,454 after offering expenses. Each unit consists of
one share of the redeemable convertible preferred stock and one Class A
redeemable common stock purchase warrant. Each share of preferred stock
is convertible into four shares of the Company's common stock and each
Class A warrant entitles the holder to purchase one share of the
Company's common stock for $1.00 and to receive one Class B redeemable
common stock purchase warrant which entitles the holder to purchase one
share of the Company's common stock for $1.50.
6
<PAGE>
ANGSTROM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 4 (Continued)
The following conversions of preferred stock for common stock have
occurred during the period ended April 30, 1996 as follows:
Conversion Preferred Stock Common Stock
Date Converted Received
11/16/95 11,760 47,040
2/7/96 14,800 59,200
2/13/96 5,200 20,800
3/12/96 3,450 13,800
3/20/96 2,550 10,200
4/2/96 8,700 34,800
4/15/96 3,500 14,000
4/16/96 8,000 32,000
4/19/96 2,000 8,000
--------- ---------
59,960 239,840
======== =======
The preferred stock has a liquidation preference of $2.00 per share, an
aggregate of $3,206,980.
Note 5 Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." The
standard requires the use of the liability method to recognize
deferred income tax assets and liabilities, using expected future tax
rates. The cumulative effect of adopting the standard and the effect
of applying the standard on the operating statement for the period
ended January 31, 1994 was zero. The tax effects of temporary
differences that give rise to a deferred income tax asset, a
corresponding valuation allowance and deferred tax liability at April
30, 1996 and October 31, 1995 are presented below:
April 30, October 31,
1996 1995
Deferred tax assets:
Net operating loss $ 1,361,000 $ 1,320,000
Reserve for inventory obsolescence 2,000 4,000
----------- -----------
Total deferred tax asset 1,363,000 1,324,000
Less: valuation allowance (1,359,400) (1,319,800)
----------- -----------
Net Deferred Tax Asset $ 3,600 $ 4,200
----------- -----------
Deferred tax liabilities:
Note payable; rate differential 3,600 4,200
----------- -----------
Net deferred tax liability $ 3,600 $ 4,200
----------- -----------
Net deferred tax $ 0 $ 0
=========== ===========
7
<PAGE>
ANGSTROM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 5 (Continued)
The Company entered fiscal 1996 with cumulative net operating loss
carryforwards of approximately $3,310,000 for federal income tax
purposes which expire in the years 2000 to 2010. As a result of a
capital stock transaction in May 1989, a change in ownership, as
defined by Section 382 of the Internal Revenue Code, occurred. The
effect of the change in ownership is to severely limit the future
utilization of the net operating loss carryforward existing at that
date.
8
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Fiscal 1996 Second Quarter and six months compared to Fiscal 1995 periods
Net sales for the second quarter of Fiscal 1996 were approximately
$244,000, an increase of 44.7% from the approximately $168,700 in net sales in
the corresponding quarter of 1995. Sales for the six month period ended April
30, 1996 were approximately $442,600, an increase of 43.2% from the
approximately $309,100 in sales for the corresponding six month period of the
prior fiscal year. This increase in sales was a result of higher sales of
chemicals and scanner equipment; this increase more than offset a reduction of
revenues from repair and servicing of equipment, the latter resulting from the
fact that the new scanners require significantly less maintenance and servicing
than prior models. It is anticipated that the trend of decreased repair and
servicing sales will continue, as more new units are sold. Cost of sales
increased as a percentage of overall sales in the second quarter from 38.3% to
49.2%; this was due to the increase in cost of direct materials and in
consultants' fees and costs of production of molds to prepare for higher volume
production at lower cost in the manufacturing process for production of the
Company's new reduced-function low-cost scanner and document reader.
Selling, general and administrative expenses decreased from
approximately $276,300 in the prior year's first quarter to approximately
$215,300 in the first quarter of Fiscal 1996 and from approximately $525,000 to
approximately $395,200 in the six month periods. These decreases were due to (i)
greatly decreased marketing and direct selling expenses incurred as a result of
the Company's emphasis on meeting with specific customers and potential accounts
rather than reliance upon general advertising, (ii) to the fact that legal and
other expenses in connection with patent applications were capitalized in the
current period due to the issuance of patents to the Company relating thereto,
while such items were treated as expenses in the corresponding period of Fiscal
1995. These decreases collectively acted to more than offset the increase in
sales commissions, directly tied into the increase in sales.
Research and development expenses remained significant, though
decreasing somewhat to approximately $198,500 from approximately $268,800 in the
corresponding six months of Fiscal 1995, as the Company completed development of
a lower cost version of its scanner not encompassing all the features of its
current model and commenced design of a special semi-conductor chip designed to
"sweep" various components onto this chip and thereby lower manufacturing costs.
The Company has been incurring expenses in an attempt to upgrade and
broaden its product line and its marketing capability. It recently completed
development of a miniaturized hand-held scanner and/or reader. It also has other
hardware items in development and has reformulated some of its chemical
compounds. In addition, Company executives and independent sales representatives
have visited a number of potential customers to educate them about the Company's
history and product lines. There can be no assurance, however, that such efforts
will result in increased sales or that such sales will result in profitability.
9
<PAGE>
Interest expense of $6,778 was less than the $8,041 of such expense in
the prior period. The Company was also able to generate interest income of
$34,926 as compared with interest income of $39,482 in the corresponding quarter
of Fiscal 1994.
As a result of the foregoing, the Company incurred a net loss of
$180,746 before dividend requirements during the first six months of Fiscal 1996
as opposed to a net loss of $333,195 before dividend requirements for the first
six months of Fiscal 1995.
Liquidity and Capital Resources
The Company's primary need for cash is to support its programs and its
ongoing operating activities. The Company's primary sources of liquidity have
historically been cash provided by financing activities. The Company has never
generated sufficient cash flows from its operations and has depended upon
financing from outside sources to maintain itself.
On December 22, 1993 the Company consummated a public offering of its
securities consisting of 1,725,000 units. Each unit was comprised of one share
of 8% redeemable convertible preferred stock (convertible into four shares of
Common Stock) and one Class A redeemable common stock purchase warrant. The
Company received net proceeds of approximately $2,838,000 from such offering,
after underwriting discounts and commissions and other expenses of the offering.
The Company ultimately utilized approximately $382,000 of such proceeds to repay
outstanding loans to the underwriter and the Company's officers, directors and
stockholders. The Company anticipates that the proceeds of such public offering,
together with existing funds, will enable it to fund its operating and capital
needs through at least the end of its current fiscal year. The Company may
require additional financing after such time depending on the status of its
sales efforts and whether sufficient revenues and contractual commitments have
been received from its customers to enable it to function with sufficient
liquidity. The Company is not able at this time to predict the amount or
potential source of such additional funds and has no commitment to obtain such
funds.
At the end of the second quarter of Fiscal 1996 as compared with the
status prevailing as at the end of the Company's fiscal year ended October 31,
1995: the Company had a net decrease in cash and short-term investments of
approximately $268,700 (primarily due to funding of operating losses as well as
the expenditure of approximately $27,000 on an "IBM Fourth Shift Network"
computer system to computerize accounting and inventory control functions), an
increase in trade accounts receivable of approximately $22,400 (owing to timing
of collections) and an increase in inventory of approximately $123,500 due to
stocking of the new reduced-feature model of scanner. As in Fiscal 1995, the
Company is continuing to pass upon the declaration of a dividend upon the
preferred stock in order to conserve available funds.
Federal Income Taxes
Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". The standard
requires the use of the liability method to recognize deferred income tax assets
and liabilities, using expected future tax rates.
10
<PAGE>
The tax effects of temporary differences that give rise to deferred
income tax assets, a corresponding valuation allowance and deferred tax
liabilities at October 31, 1995 and April 30, 1996 is presented below.
Deferred tax assets: April 30, 1996 October 31, 1995
-------------- ----------------
Net Operating Loss $ 1,361,000 $ 1,320,000
Reserve for inventory obsolescence 2,000 4,000
------------- -------------
Total deferred tax asset: 1,363,000 1,324,000
Less: Valuation allowance (1,359,400) (1,319,800)
------------ ------------
Net deferred tax asset $ 3,600 $ 4,200
============= =============
Deferred tax liabilities:
Note payable; rate differential 3,600 4,200
------------- -------------
Net deferred tax liability $ 3,600 $ 4,200
============= =============
Net deferred tax $ -0- $ -0-
============= =============
The Company has cumulative net operating loss carryforwards of
approximately $3,310,000 million for federal income tax purposes which expire
between the years 2000 to 2010. As a result of a capital stock transaction in
May 1989, a change in ownership, as defined by Section 382 of the Internal
Revenue Code, occurred. The effect of the change in ownership is to severely
limit the future utilization of the net operating loss carryforward existing at
that date.
Other
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
11
<PAGE>
Part II
Other Information
Item 6. Exhibits
(a) Exhibits
No exhibits are being filed with this Quarterly Report on
Form 10-QSB.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report on Form 10-QSB to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANGSTROM TECHNOLOGIES, INC.
DATE: June 12, 1996 By: /s/ Daniel A. Marinello
-------------------------
Daniel A. Marinello
Chief Executive Officer
and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1996
<CASH> 66,413
<SECURITIES> 695,121
<RECEIVABLES> 154,254
<ALLOWANCES> 0
<INVENTORY> 414,904
<CURRENT-ASSETS> 1,362,438
<PP&E> 95,990
<DEPRECIATION> 38,561
<TOTAL-ASSETS> 1,956,476
<CURRENT-LIABILITIES> 209,738
<BONDS> 83,222
0
2,638,513
<COMMON> 219,851
<OTHER-SE> 4,531,894
<TOTAL-LIABILITY-AND-EQUITY> 1,663,516
<SALES> 442,582
<TOTAL-REVENUES> 481,536
<CGS> 260,307
<TOTAL-COSTS> 395,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,778
<INCOME-PRETAX> (180,746)
<INCOME-TAX> 0
<INCOME-CONTINUING> (180,746)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (180,746)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
