<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission file number: 0-12646
ANGSTROM TECHNOLOGIES, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Delaware 31-1065353
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1895 Airport Exchange Boulevard, Erlanger, Kentucky 41018
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(606) 282-0020
---------------------------
(Issuer's telephone number)
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 January 31, 2000, 23,794,598 shares of common stock, no par value per
share, were outstanding.
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE> 2
ANGSTROM TECHNOLOGIES, INC.
TABLE OF CONTENTS
Part I. Financial Information Page No.
--------
Item 1. Financial Statements:
Balance Sheets as of January 31, 2000 2-3
and October 31, 1999
Statements of Operations for the Quarters 4
Ended January 31, 2000 and 1999
Statements of Cash Flows for the Three 5
Months Ended January 31, 2000 and 1999
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis of 9-10
Financial Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
<PAGE> 3
ANGSTROM TECHNOLOGIES, INC.
---------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
JAN. 31, OCT. 31,
-------- --------
2000 1999
---- ----
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 296,253 $ 456,857
Short-term investments 518,500 511,346
Accounts receivable, less bad debt $10,000 183,232 59,287
Inventories:
Finished goods 108,072 108,628
Work in process 7,622 6,097
Raw materials and parts 673,605 650,086
--------------------- ---------------------
789,299 764,811
Prepaid expenses 20,675 13,981
--------------------- ---------------------
Total current assets 1,807,959 1,806,282
Furniture and equipment, at cost 179,275 178,722
Less: accumulated depreciation 165,128 162,864
--------------------- ---------------------
Net furniture and equipment 14,147 15,858
Patents, less accumulated amortization of $27,718 148,463 141,310
--------------------- ---------------------
Total assets $ 1,970,569 $ 1,963,450
===================== =====================
</TABLE>
NOTE: The balance sheet at October 31, 1999 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> 4
ANGSTROM TECHNOLOGIES, INC.
---------------------------
BALANCE SHEETS (CONTINUED)
--------------------------
<TABLE>
<CAPTION>
JAN. 31, OCT. 31,
-------- --------
2000 1999
---- ----
(UNAUDITED) (NOTE)
<S> <C> <C>
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable $ 34,733 $ 20,636
Accrued liabilities 58,415 52,847
Customer deposits - 27,535
Long-term debt due within one year - 5,911
--------------------- ---------------------
Total current liabilities 93,148 106,929
Capital:
Preferred stock, $.01 par value; 5,000,000 shares
authorized, 1,294,230 issued and outstanding
(liquidation preference of $2.00 per share) 2,082,398 2,082,398
Common stock, $.01 par value; 45,000,000
shares authorized, 23,637,158 shares issued
and outstanding 237,946 237,946
Additional paid in capital 5,110,165 5,110,165
Accumulated deficit (5,553,088) (5,573,988)
--------------------- ---------------------
Net capital 1,877,421 1,856,521
--------------------- ---------------------
Total liabilities and capital $ 1,970,569 $ 1,963,450
===================== =====================
</TABLE>
NOTE: The balance sheet at October 31, 1999 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 completefinancial statements. See accompanying notes.
-3-
<PAGE> 5
ANGSTROM TECHNOLOGIES, INC.
---------------------------
STATEMENTS OF OPERATIONS
------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUG. 1, 1999 TO YEAR ENDED
-------------------------------- --------------- -----------
JANUARY 31, JANUARY 31, OCTOBER 31, OCTOBER 31,
----------- ----------- ----------- -----------
2000 1999 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 291,242 $ 414,694 $ 236,844 $ 936,587
Cost of sales 100,902 122,394 92,628 444,980
------------------- ------------------- ------------------ -------------------
Gross profit 190,340 292,300 144,216 491,607
Selling, general and
administrative expenses 118,378 124,044 120,202 407,701
Research and development
expense 61,500 44,638 43,351 174,239
Interest expense 89 1,092 351 2,900
Interest income (3,371) (10,664) (3,710) (30,742)
Dividend income (7,154) - (6,531) (11,346)
------------------- ------------------- ------------------ -------------------
169,442 159,110 153,663 542,752
------------------- ------------------- ------------------ -------------------
Net income (loss) 20,898 133,190 (9,447) (51,145)
Less dividend requirement
on preferred stock (50,645) (51,769) (58,773) (202,579)
------------------- ------------------- ------------------ -------------------
Net income (loss) applicable
to common stock (29,747) 81,421 (68,220) (253,724)
Net income (loss) per
common share $ - $ - $ - $ (0.01)
=================== =================== ================== ===================
Weight average number
of shares outstanding 23,794,598 23,280,918 23,794,598 23,724,864
=================== =================== ================== ===================
</TABLE>
-4-
<PAGE> 6
ANGSTROM TECHNOLOGIES, INC.
---------------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUG. 1, 1999 TO YEAR ENDED
------------------ --------------- ----------
JANUARY 31, JANUARY 31, OCTOBER 31, OCTOBER 31,
----------- ----------- ----------- -----------
OPERATING ACTIVITIES 2000 1999 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 20,898 $ 133,190 $ (9,447) $ (51,145)
Adjustment to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization 4,412 11,263 11,691 45,984
Changes in operating assets
and liabilities:
Accounts receivable (123,945) 139,197 (3,814) 150,161
Inventory (24,488) 270 22,204 75,274
Prepaid expenses (6,694) (2,676) 8,674 8,607
Accounts payable 14,098 (3,402) 3,807 (22,548)
Accrued liabilities 5,569 (20,887) 1,773 (18,580)
Customer deposits (27,535) - 27,534 27,534
---------------- ---------------- --------------- ----------------
Net cash (used in) provided by
operating activities (137,685) 256,955 62,422 215,287
INVESTING ACTIVITIES
Purchases of furniture and equipment (553) (1,032) (2,268) (4,902)
Changes in short-term investments (7,154) - (6,531) (511,346)
Capitalization of patents (9,301) (954) (15,216) (23,975)
---------------- ---------------- --------------- ----------------
Net cash used in investing activities (17,008) (1,986) (24,015) (540,223)
FINANCING ACTIVITIES
Proceeds from stock option exercises 5,625
Principal repayments of long-term debt (5,911) (7,908) (8,649) (33,100)
---------------- ---------------- --------------- ----------------
Net cash used in financing activities (5,911) (7,908) (8,649) (27,475)
---------------- ---------------- --------------- ----------------
Net increase (decrease) in cash (160,604) 247,061 29,758 (352,411)
Cash and cash equivalents at
beginning of period 456,857 809,268 427,099 809,268
---------------- ---------------- --------------- ----------------
Cash and cash equivalents at
end of period $ 296,253 $ 1,056,329 $ 456,857 $ 456,857
================ ================ =============== ================
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest $ 89 $ 1,092 $ 351 $ 2,900
Conversion of preferred stock
to common stock $ 46,382
-5-
</TABLE>
<PAGE> 7
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 of 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 three month period ended January 31, 2000 is
not necessarily indicative of the results that may be expected for the
year ended October 31, 2000. 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, 1999.
Note 2 In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement No. 128, "Earnings per Share." Statement No. 128
replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive
effects of stock options and convertible securities. Diluted earnings
per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to Statement
No. 128 requirements.
Note 3 The preferred stock issued December 22, 1993 provided for an annual
cumulative dividend to be paid on November 1st each year. 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 October 31, 1999 ($1,126,772) and 1998
($924,193), in arrears. No dividend was accrued for the years ended
October 31, 1999 and 1998. The amount that would have been accrued at
October 31, 1999 and 1998, if a dividend had been recorded, would have
been $202,579 and $207,077, respectively ($.16 per preferred stock
share outstanding at November 1, 1999 and 1998). No dividend has been
accrued for the three month period ended January 31, 2000. The amount
that would have been accrued at January 31, 2000 and 1999, if a
dividend had been recorded, would have been $50,645 and $51,769
respectively.
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. The
Class A purchase warrant expired on December 12, 1998. There were no
preferred stock conversions for the three months ended January 31,
2000. The preferred stock has a liquidation preference of $2.00 per
share, an aggregate of $2,588,460.
-6-
<PAGE> 8
ANGSTROM TECHNOLOGIES, INC.
---------------------------
NOTES TO FINANCIAL STATEMENTS
------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------ AUG. 1, 1999 TO YEAR ENDED
JANUARY 31, OCTOBER 31, OCTOBER 31,
2000 1999 1999 1999
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 20,898 $ 133,190 $ (9,447) $ (51,145)
Preferred stock dividend requirement (50,645) (51,769) (58,773) (202,579)
---------------- ---------------- ---------------- ---------------
Numerator for basic earnings per
share - net income
(loss) applicable to common stock (29,747) 81,421 (68,220) (253,724)
Effect of dilutive securities - preferred
stock dividends and adjustments
resulting from assumed conversion - - - -
---------------- ---------------- ---------------- ---------------
Numerator for diluted earnings per
share - net income (loss) applicable to
common stock after assumed conversion $ (29,747) $ 81,421 $ (68,220) $ (253,724)
================ ================ ================ ===============
Denominator:
Denominator for basic earnings per
share - weighted average shares
outstanding 23,794,598 23,280,918 23,794,598 23,724,864
Effect of dilutive securities:
Convertible preferred stock
Assumed issuance of stock under stock
option plans based on treasury
stock method - 1,749,121 - -
---------------- ---------------- ---------------- ---------------
Denominator for diluted earnings per share -
weighted average shares outstanding and
impact of dilutive securities 23,794,598 25,030,039 23,794,598 23,724,864
================ ================ ================ ===============
Basic earnings (loss) per share $ (0.00) $ 0.00 $ (0.00) $ (0.01)
================ ================ ================ ===============
Fully diluted earnings (loss) per common share $ (0.00) $ 0.00 $ (0.00) $ (0.01)
================ ================ ================ ===============
</TABLE>
-7-
<PAGE> 9
ANGSTROM TECHNOLOGIES, INC.
---------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(UNAUDITED)
-----------
Note 5 (continued)
Securities that could potentially dilute basic earnings per share in
the future that were not included in the computation of diluted
earnings per share above because to do so would have been antidulitive
are as follows: convertible preferred stock (5,064,480 and 5,343,960
shares at January 31, 2000 and 1999, respectively) .
Note 6 Earnings per common share are calculated based upon a weighted
average of shares outstanding after giving effect to the preferred
dividend requirements.
Note 7 The tax effects of the net operating loss carryforwards and temporary
differences that give rise to deferred income tax assets and a
corresponding valuation allowance at January 31, 2000 and October 31,
1999 are presented below:
<TABLE>
<CAPTION>
January 31, October 31,
2000 1999
--------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss $1,311,700 $1,315,700
Other, net 11,600 11,200
---------- ----------
Total deferred tax assets 1,323,300 1,326,900
Less: valuation allowance (1,323,300) (1,326,900)
---------- ----------
Net Deferred Tax Assets $ -- $ --
=========== ==========
</TABLE>
The company entered fiscal 2000 with cumulative net operating loss
carryforwards of approximately $3,300,000 for federal income tax
purposes which expire in the years 2000 to 2019.
Note 8 Patents included in the other assets section of the balance sheet are
certain costs associated with patents, which are capitalized and
amortized over the shorter of their statutory lives or their estimated
useful lives using the straight-line method. The Company periodically
evaluates the recoverability of these assets in accordance with
Statement of Financial Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of (SFAS #121)."
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
-8-
<PAGE> 10
SPECIAL CAUTIONARY NOTICE REGARD FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" may constitute
forward-looking statements for purposes of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. The words "expect," "estimate," "anticipate,"
"predict," "may," "should," and similar expressions are intended to identify
forward-looking statements. All written or oral forward-looking statements
attributable to the Company are expressly qualified as set forth herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Quarter-to-quarter revenue has improved from $236,844 to $291,242 representing
an increase of 23%. The Company has also returned to profitability by recording
a net income of $20,898 versus a net loss of $9,447 for the quarter ended in
October 31, 1999. This was accomplished under the full impact of across the
board major price reduction in all of our products that have become effective on
October 1, 1999.
Comparing to a year ago, same quarter results, we, obviously, still have some
distance to go. The difference rests with the loss of a key customer in the
second quarter of fiscal 1999. Recovering the major customer or securing the
postal project business should return the Company to a strong financial position
and back in a dynamic growth path.
We have increased R&D activities by introducing several new products including a
patent pending Money Checker that provides a simple and effective way to
authenticate the new US currency bills. Several new chemicals have been
developed for security as well as entertainment-leisure applications. We
continue to aggressively promote our Glow-Hard product line by courting
potential distributors and attending trade shows.
Selling, general and administrative expenses were relatively flat in spite of
the extraordinary expenses associated with the year-end audit. The Management
believes the Company's cost control effort continues to be effective.
The decrease in Cash and Cash Equivalents was mainly due to late billings. The
Management continues to believe that the Balance Sheet remains relatively strong
and there is sufficient liquidity to allow the Company to operate through at
least October 31, 2000, the end of its current fiscal year, and for some time
thereafter. Additionally, the Company has become debt free beginning January 1,
2000.
-9-
<PAGE> 11
We have begun to see some activities in the long delayed postal business. Gross
margin should continue to improve if the postal project finally develops into a
steady business.
We continue to face potential increases in chemical inventory because of the
loss of a major customer and over purchase made early last fiscal year. We are
diligently attempting to reduce the exposure through price reduction and
aggressive promotion of those chemicals.
In general the Management believes the Company is making strong recovery from
the dismal performance in the last three quarters of fiscal year 1999. The
prospect of continuing to make improvements over the next several quarters
appears to be good. The Company is also making progress in regaining some
business from the major customer lost through new and genuine efforts in
excellent customer service and price reduction to become more competitive in the
market place.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Angstrom's Annual Shareholder's meeting was held on December 6, 1999,
at which the following issues were voted upon by Shareholders:
Issue No. 1. Election of four Directors.
Name Shares for Shares Withheld
---- ---------- ---------------
Louis Liang 18,531,574 100,400
William J. Ryan 18,520,674 111,300
Douglas B. Kruger 18,530,474 101,500
Vivek Dutta 18,530,474 101,500
Issue No. 2. Stockholder satisfaction of Board granting of
stock options to Directors and Officers, Outside
Directors and enactment of compensation plan for
Outside Directors.
Yes 8,050,807 No 423,148
--------- -------
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<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
None were filed in this quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGSTROM TECHNOLOGIES, INC.
By: /s/ Louis Liang
--------------------------------------
Louis Liang, Interim Chief Executive
Officer
By: /s/ William Ryan
--------------------------------------
William Ryan, Interim Chief Financial
Officer
Dated: March 7, 2000
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 296,253
<SECURITIES> 518,500
<RECEIVABLES> 193,232
<ALLOWANCES> 10,000
<INVENTORY> 789,299
<CURRENT-ASSETS> 1,807,959
<PP&E> 179,275
<DEPRECIATION> 165,128
<TOTAL-ASSETS> 1,970,569
<CURRENT-LIABILITIES> 93,148
<BONDS> 0
0
2,082,398
<COMMON> 237,946
<OTHER-SE> 5,110,165
<TOTAL-LIABILITY-AND-EQUITY> 1,970,569
<SALES> 291,242
<TOTAL-REVENUES> 301,767
<CGS> 100,902
<TOTAL-COSTS> 280,780
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89
<INCOME-PRETAX> 20,898
<INCOME-TAX> 0
<INCOME-CONTINUING> 20,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,898
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
