U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] Annual report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended August 31, 1997.
[ ] Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______.
Commission File Number 0-13870
Technology 80 Inc.
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1373380
- ------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
658 Mendelssohn Avenue North, Minneapolis, Minnesota 55427
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 542-9545
--------------------------
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were $4,918,935.
The aggregate market value of the voting stock held by non- affiliates as of
November 15, 1997, (based upon the average between the closing bid and asked
price as reported in the local over-the-counter market) was approximately
$2,403,000. In making this computation, the share holdings of certain persons
were excluded, but such exclusion shall not be deemed an admission that such
persons are affiliates of the Registrant as that term is defined in Rule 405,
Regulation C.
Number of shares outstanding of each of the issuer's classes of common equity
as of November 15, 1997: 1,605,045 shares of common stock, par value $.01.
Documents Incorporated by Reference: None.
PART I
Item 1. Description of Business.
General
- -------
Technology 80 Inc. ("Registrant") was incorporated under the laws of the
State of Minnesota on February 12, 1980. It is engaged in the business of
developing, manufacturing, marketing and selling computer-related products.
Registrant's initial products included STD cards and systems and the
Chanalyzer (trademark); Registrant's product line has since been expanded.
Within Registrant's existing industry segment, manufacturing technical
instruments and systems, there is one principal class of products and
services; Industrial Control Products. Industrial Control Products have now
been expanded to include several industry standard interfaces, commonly known
in the industry as bus structures (STD, PC, Multibus, SBX, VME, PC/104, and
Industry Pack).
Total assets at August 31, 1997, 1996 and 1995, were $6,009,100, $4,897,556,
and $4,195,375, respectively. All of Registrant's sales have been to
unaffiliated customers.
Registrant maintains inventory levels consistent with projected sales. Due to
increased sales and expected increases in sales, Registrant has found it
necessary to maintain an increased level of inventories in order to assure
itself of a continuous allotment of parts and materials from its suppliers and
to meet rapid delivery requirements of its customers.
Registrant warrants the microcomputer interface cards for a period of two
years from date of shipment. There have been very few instances when
Registrant was required to accept the return merchandise which failed to
comply with Registrant's warranty and any such warranty related expenses have
been minimal. Registrant offers factory repair services for its products.
Industrial Control Products
- ---------------------------
Registrant designs, manufactures, and markets industrial control products with
an emphasis on motion control applications. Most of Registrant's industrial
control products fall into the category of add-in boards for various types of
industry standard micro computers. The original STD product line has been
expanded and now includes a relatively broad product line of micro computer
based boards.
Registrant also offers products which are accessories to the add- in boards.
They consist of software products, interface cables, and terminal boards.
Accessory products enhance the sales of the main product line by making it
more convenient for the customer to use Registrant's products.
Registrant's products address four categories of industrial control
applications: servo motor control, stepper motor control, encoder/data
acquisition, and industrial input/output. Most of Registrant's products
relate to motion control aspects of such applications.
Customers
- ---------
Registrant's customers for its industrial control products are numerous and
consist of both OEM and end-user (in-house) applications. The OEM business is
specifically solicited since it may lead to follow-on sales of significant
volume. Prospects for future sales growth are enhanced by a "layering"
effect; OEM design-ins typically run for several years.
Competition
- -----------
There are a large number of manufacturers of industrial control products in
the U.S. and Canada with some products now appearing from Europe and the
Orient. There are numerous manufacturers which offer one or more products
which compete with one or more of Registrant's products. Some of Registrant's
competitors are larger, have been in business longer, and are likely to have
greater resources than Registrant. Registrant, based on the most recent
information available, believes that it offers one of the most complete
product lines for the industrial control products market.
There are two types of competition in Registrant's industrial control products
business. First, there are those products that are directly competitive with
the same functions. Second, there are those products which enable the user to
implement a system in an alternative fashion to accomplish the same result.
This may be accomplished through use of different functional boards on the
same bus structure but more likely involve an alternative bus structure.
Registrant's broadened line involving various bus structures lessens this
factor. Competition also comes from customers' in-house special designs.
Registrant believes that the principal competitive factors are function,
availability of the products and, to a lesser extent, price. Registrant's
products are comparable in performance and capability to those of its
competitors. Registrant believes that its experienced design staff
(utilizing its Computer Aided Design technology) enables it to offer
standardized products to meet the customer's needs with a warranty and price
which compare favorably to competitive alternatives, including the potential
customer's in-house costs.
Suppliers
- ---------
All parts for Registrant's products are supplied by third party vendors. Most
of such parts are standard off-the-shelf items available from several sources.
Special fabricated parts made to Registrant's specifications are producible by
several local vendors. Printed circuit boards, which are a large part of
Registrant's products, are produced by several local vendors, and additional
vendors could be utilized if conditions warranted.
Registrant utilizes the latest state of the art components, especially in
integrated circuits, in its designs. Delivery of certain new products is
sometimes initially delayed due to shortage of these state of the art devices.
Once available, however, there has been no instance when such integrated
circuits were not available with reasonable lead time. Registrant does not
anticipate any parts supply problems in the foreseeable future.
Backlog
- -------
Registrant had a backlog of $1,322,250, $1,288,792, and $525,531 for its
industrial control products at August 31, 1997, 1996 and 1995, respectively.
Employees
- ---------
Registrant had 24 employees as of November 15, 1997, of which none were
part-time. Registrant is not a party to any collective bargaining agreement,
and Registrant considers its employee relations to be satisfactory. In view
of the small number of employees, the loss of certain technical or sales
personnel could adversely affect Registrant in the short-term.
Registrant requires, to the extent allowed by Minnesota law, its employees to
assign to Registrant all inventions developed during their employment by
Registrant. Registrant also requires all employees to enter into an agreement
pursuant to which, among other things, the employee agrees not to divulge
confidential or proprietary information to any competitor and, for a period
of two years following termination of employment with Registrant, not to
compete with Registrant in any subsequent employment. Registrant has such
agreements with all of its present employees. Such agreements are not binding
in the event Registrant is acquired in a transaction opposed by Registrant's
Board of Directors.
Patents and Licenses
- --------------------
One patent has been granted for an Industrial Control Product design.
Registrant claims copyright protection as to the artwork and documentation of
all of its products, but has not sought to register any of its copyrights.
There can be no assurance that any existing patents or any future patents will
prevent competitors from producing substantially similar products. Registrant
does not anticipate that any persons will have an interest in licensing its
patents.
Registrant relies less on the protection provided by patents and copyrights
than it does on the technical and creative skills of its personnel and on its
abilities to market and service its products, to establish its market position
for each of its products, and to improve its products and develop new products
to stay abreast of new technology.
Research and Development
- ------------------------
Registrant has spent $703,742 and $630,626 during the fiscal years ended
August 31, 1997 and 1996, respectively, for research and development of
industrial control products. Research and development costs were 14.3% of
revenue for the fiscal year ended August 31, 1997 and 15.0% of revenue for the
fiscal year ended August 31, 1996. For the foreseeable future, Registrant
expects research and development costs to remain approximately the same, as a
percentage of revenue, in light of the continuing need for new products and
utilization of new technology to provide the basis for future revenues.
Research and development opportunities are constantly being explored by
Registrant. If new product opportunities are found with significant
potential market demand, a sharp increase in research and development
expenditures may result as Registrant engages in efforts to develop and bring
such products to market. Such increased expenditures may have short-term
adverse effects on Registrant's profitability.
Marketing and Sales
- -------------------
Industrial control products are marketed in the United States and Canada
through independent nonexclusive manufacturers' representatives. Independent
manufacturers' representatives specializing in motion control are the main
outlets. Direct in- house sales to catalog distributors are the next largest
sales distribution method. The Registrant uses a small number of system
integrators specializing in motion control products to supplement the efforts
of the manufacturers' representatives.
Registrant employs a national sales manager for direct selling of the motion
control product line. Registrant has signed agreements with several
international distributors to implement and handle sales and marketing of
Registrant's products in foreign markets.
No one customer accounted for 10% or more of Registrant's revenue for fiscal
year 1997. One customer accounted for 11% of Registrant's revenue for fiscal
year 1996. International sales accounted for 6.0% and 5.1% of revenue for
the years ended 1997 and 1996, respectively. Registrant's business is not
seasonal in nature.
Item 2. Description of Property.
Registrant's facilities are located in a multiple-tenant building located at
658 Mendelssohn Avenue North, Minneapolis, Minnesota. The portion of the
building occupied by Registrant consists of 4,810 square feet for production,
warehouse, laboratory, drafting and engineering plus 3,690 square feet for
offices for a total of 8,500 square feet. Registrant leases this space under
a lease expiring September 30, 2000. See note 7 to financial statements.
Item 3. Legal Proceedings.
The Registrant is presently not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Registrant's common stock, $.01 par value, is traded in the Minneapolis/St.
Paul local, over-the-counter market. The information concerning the range of
high and low bid quotations for Registrant's fiscal years ended 1997 and 1996
is set forth in the table below.
Common Stock Trading Price Ranges
---------------------------------
<TABLE>
<CAPTION>
Common Stock Bid
1997 Low High
---- --- ----
<S> <C> <C>
First Quarter 2 3/8 2 1/2
Second Quarter 2 3/8 2 9/16
Third Quarter 2 3/8 2 7/8
Fourth Quarter 2 7/8 3 1/4
1996 Low High
---- --- ----
First Quarter 2 1/8 2 3/4
Second Quarter 2 1/2 3 1/4
Third Quarter 2 2 1/2
Fourth Quarter 2 1/2 3
</TABLE>
Prices were obtained from Twin Cities media. The quotations reflect
inter-dealer prices, without retail markup, markdown or commission and may
not represent actual transactions.
As of November 15, 1997, there were 158 record holders of Registrant's common
stock.
It is the present intention of Registrant to retain any earnings to finance
the development of its business and, accordingly, Registrant does not
anticipate payment of any cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
- ---------------------
Revenue increased 16.9% during the fiscal year ended August 31, 1997, over the
previous fiscal year. Revenue increased 14.7% during fiscal year 1996, over
the 1995 fiscal year. The increased revenue in fiscal years 1997 and 1996
resulted from an increased interest in the Registrant's products which has
expanded the customer base during these fiscal years.
Gross profit was 65.4% for fiscal year 1997 compared to 64.8% for the fiscal
year 1996. The Registrant continues to focus on manufacturing and purchasing
in economical quantities and taking advantage of available purchase discounts.
Order backlog at the end of fiscal years 1997 and 1996 was $1,322,250 and
$1,288,792, respectively. This backlog was a consequence of the receipt of
purchase orders with delivery scheduled over a period of several months and
may be rescheduled or canceled by the customer. Industrial control products
are built to a production schedule based on sales forecasts. Most smaller
orders require an immediate shipment which Registrant is generally able to
meet. Almost all sales are shipped within a short time, generally within days.
Customers often require same day shipment with overnight air delivery.
Selling expenses, as a percentage of revenue, were 14.3%, and 16.3% in fiscal
1997, and 1996, respectively. The decrease is a result of Management's
overall cost cutting measures. Management would consider increasing some
expenses, such as trade shows, advertising, marketing and promotion, if an
overall benefit would be realized.
General and administrative expenses were 20.3% and 15.1% of revenue for fiscal
year 1997 and 1996, respectively. Although management has continued its cost
cutting measures, increased expenditures for compensation have been necessary
to retain quality employees.
Research and development costs, as a percentage of revenue, decreased to 14.3%
in fiscal 1997, compared with 15.0% in 1996 Registrant will continue new
product development.
Income from operations was $811,182 and $776,343 for fiscal years 1997 and
1996, respectively. The increase in income for 1997 over 1996 was the result
of increased revenues and cost cutting measures offset by increased general
and administrative and research and development expenditures.
Other income for 1997 increased $73,483 or 34.9% from 1996 primarily due to
increases in both realized gains on the sale of investments and investment
income.
Net income for 1997 and 1996, respectively, was $733,327 and $665,355.
Liquidity and Capital Resources
- -------------------------------
Registrant's balance sheet shows a strong capital position. Operations
provided $358,868 in cash. Cash and cash equivalents decreased $134,875 from
the previous year. The Registrant used $52,358 to purchase equipment and
$466,207 to purchase investments (net of sales and maturities) during the
fiscal year ended August 31, 1997. Registrant received $24,555 from employees
exercising stock options. Inventories increased $220,708 from the previous
year primarily due to increased sales and the anticipated release of new
products during fiscal year 1998. Accounts receivable are up $294,687 from
the previous year, primarily due to a few large shipments to a new customer
during the last quarter of the year. Registrant expects that there will be
sufficient capital to fund its operations during fiscal year 1998.
At August 31, 1997, Registrant had investments with a cost and fair market
value of $3,765,049 and $3,348,616 respectively, consisting primarily of
investments in equity securities. This compares to a cost and fair market
value of $2,868,646 and $2,708,120 respectively, at August 31, 1996.
Approximately 45% and 41% of the fair market value is represented by
investments in three companies at August 31, 1997 and 1996, respectively.
Registrant has no long term borrowings and does not anticipate, at this time,
that it will be necessary to seek any long term debt financing in the near
future for ongoing operations, but may consider some type of financing for
other purposes.
Statements included in this Management's Discussion and Analysis or Plan of
Operation and elsewhere in this Form 10-KSB, in future filings by the
Registrant with the Securities and Exchange Commission and in the Registrant's
press releases and oral statements made with the approval of authorized
executive officers, if the statements are not historical or current facts,
should be considered "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
These statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected. Registrant wishes to caution the reader
not to place undue reliance on any such forward-looking statements, which
speak only as of the date made.
Item 7. Financial Statements
The financial statements and notes thereto are found following the signature
page of this report.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There were no changes nor disagreements with accountants of the type required
to be reported.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
The name, age and position of each person who is a director or executive
officer of Registrant as of November 15, 1997, is as follows:
Name Age Position with Company Position Held Since
---- --- --------------------- -------------------
Thomas L. Gould 55 Director, Secretary 4/90
Duane A. Markus 55 President, Chief Executive
Officer, Chief Financial
Officer, Director 4/90
Jack W. Pagel 55 Director 4/90
James A. Burkett 43 Chief Operating Officer 4/93
Mr. Gould was elected to fill a vacancy on the Board of Directors on April
23, 1990. Mr. Gould has been the President of GH Medical, Inc., since 1990
and has worked as a securities salesman at Equity Securities Trading
Co., Inc., Minneapolis, Minnesota, since July 1988. Prior to that time,
Mr. Gould was employed as a securities salesman by a number of brokerage
firms in Minneapolis, Minnesota, including Engler Budd & Co., Inc. from
July 1986, to July 1988; Craig-Hallum, Inc. from January 1986, to July 1986;
J.W. McClees, Inc. from September 1985, to January 1986; and Pagel, Inc. from
August 1981, to September 1985.
Mr. Markus was elected to fill a vacancy on the Board of Directors on April
23, 1990. Mr. Markus was elected interim Chief Executive Officer of the
Company in September 1990, and President, CEO and CFO on December 12, 1990.
Mr. Markus, from September 1985, until September 1990, was engaged in managing
his personal investments. From approximately 1983 to 1985, Mr. Markus was
employed by Pagel, Inc. as a securities trader, and for more than four years
prior to 1983, Mr. Markus was employed by Pagel, Inc. as its Executive Vice
President and Trader.
Mr. Pagel was elected to fill a vacancy on the Board of Directors on April
23, 1990. Mr. Pagel, since September 1985, has been engaged in managing his
personal investments. Prior to that time, Mr. Pagel was President and sole
shareholder of Pagel, Inc.
Mr. Burkett was promoted to Chief Operating Officer by the Board of Directors
in April 1993. Mr. Burkett was hired in August 1985 as Sales Manager and has
since held the positions of Director of Sales and Marketing and Vice President
of Industrial Control Products. Prior to his employment at Technology 80
Inc., Mr. Burkett was employed as Vice President of the North American
Office of Omni Switch, Inc., Phoenix, Arizona.
<TABLE>
Item 10. Executive Compensation
Summary Compensation Table
- --------------------------
The following table sets forth the annual and long term compensation for the
CEO and each executive officer whose compensation exceeded $100,000 for such
period:
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
Other Rest- Securities/ All
Name Annual ricted Under- LTIP Other
and Compen- Stock lying Pay- Compen-
Principal sation Award(s) Options/ outs sation
Position ($) SARs(#) ($) ($) ($)
- --------- ------- ------- ------- ---- -------
Salary Bonus
Year ($) ($)
---- ------ -----
<S> <S> <C> <C> <C> <C> <C> <C> <C>
Duane 1997 157,300 322,962 - - - - -
Markus 1996 143,750 82,635 - - - - -
CEO 1995 115,000 54,175 - - 9,000 - -
James 1997 184,767 - - - - - -
Burkett 1996 164,481 - - - - - -
COO 1995 149,301 - - - 9,000 - -
</TABLE>
Aggregated Option/SAR Exercised in Last Fiscal Year and FY-End
- --------------------------------------------------------------
<TABLE>
Option/SAR Values
- -----------------
The following table summarizes options and SARs exercised during 1997 and
presents the value of unexercised options and SARs held by the named executives
at fiscal year end.
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares
Acquired
on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Duane Markus, 29,000 $83,555 18,000/ 0 $ 63,000/ $0
CEO
James Burkett, - - 30,000/8,000 $105,000/$28,000
COO
</TABLE>
Compensation of Directors
- -------------------------
Each director who is not an employee of Registrant during the fiscal year
ended August 31, 1997 received $19,500 as compensation for serving in that
capacity (see also Item 12).
Directors did not receive options during fiscal year 1997, nor were any
exercised.
<TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of November 15, 1997, as to the
shares of the Company's Common Stock beneficially owned by Messrs. Pagel,
Markus, and Gould (the only persons known by the Registrant to own,
beneficially, more than 5% of the Registrant's outstanding Common Stock) and,
as of such date, by each of the Company's other current directors and officers
and, as of such date, by all officers and directors as a group.
<CAPTION>
Amount and Nature
of Beneficial Percent of Shares
Name of Beneficial Holder Ownership (1) (2) Ownership (2)
- -------------------------- ----------------- ----------------
<S> <C> <C>
Thomas L. Gould,
Director 101,244 (4) 5.80
Jack W. Pagel,
Director 345,947 (4) 19.80
Duane A. Markus,
Director, CEO 547,835 (3)(5) 31.36
James A. Burkett,
Chief Operating Officer 71,037 (6)(7) 4.07
All Officers, Directors
and Nominees as a Group
(four people) 1,066,063 (8) 61.03
</TABLE>
(1) All shares reflected as beneficially owned are those as to which the
shareholder has sole voting and investment power, unless otherwise
noted.
(2) Shares not outstanding, but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days, are treated as
outstanding only when determining the amount and percent owned by such
individual and when determining the amount and percent owned by the
group.
(3) Includes 57,200 shares beneficially owned by Mr. Markus's children as to
which Mr. Markus has voting power and the power of disposition.
(4) Includes 47,000 shares which may be acquired pursuant to options
currently exercisable or exercisable within 60 days of the date hereof.
(5) Includes 18,000 shares which may be acquired pursuant to options
currently exercisable or exercisable within 60 days of the date hereof.
(6) Includes 35,750 shares which may be acquired pursuant to options
currently exercisable or exercisable within 60 days of the date hereof.
(7) Includes 12,300 shares beneficially owned by Mr. Burkett's spouse and
child as to which Mr. Burkett has voting power and/or the power of
disposition.
(8) Includes 141,750 shares which may be acquired pursuant to options
currently exercisable or exercisable within 60 days of the date hereof.
Item 12. Certain Relationships and Related Transactions
See Note 6 to the financial statements.
Item 13. Exhibits and Reports on Form 8-K
(a) 1. Financial Statements
The following financial statements of the Registrant for its fiscal year ended
August 31, 1997, including the independent auditor's report, are filed as a
part of this report:
Independent Auditor's Report.
Balance Sheets - At August 31, 1997 and 1996.
Statements of Income - Years ended August 31, 1997 and 1996.
Statements of Stockholders' Equity - Years ended August 31, 1997 and 1996.
Statements of Cash Flows - Years ended August 31, 1997 and 1996.
Notes to Financial Statements.
(a) 2. Exhibits
(A) Exhibits filed with this Report.
Exhibit 11 -- Statement Re: Computation of Per- Share Earnings
Exhibit 27 -- Financial Data Schedule
(B) Exhibits incorporated by reference. [The location of
incorporated document is stated in brackets, such as those
which enclose this sentence.] The full description of each
previous Form 10-K follows this list.
3.1 Restated Articles of Incorporation, as adopted by the
shareholders of Registrant on January 12, 1988. [Exhibit 3.1,
1988 Form 10-K.]
3.2 Restated Bylaws of Registrant, as adopted by the Board of
Directors of Registrant, effective March 24, 1988. [Exhibit
3.2, 1988 Form 10-K.]
3.2-1 Amendment to Restated Bylaws of Registrant, adopted by the
Board of Directors, effective January 10, 1989. [Exhibit
3.2-1, 1989 Form 10- K.]
3.2-2 Amendment No. 2 to Restated Bylaws of Registrant, adopted by
the Board of Directors, effective December 3, 1990. [Exhibit
3.2-2, 1991 Form 10- K.]
10.2 Form of Employee Agreement presently in effect with respect to
certain technical and sale employees. [Exhibit 10.3, 1985
Form S-18.]
10.9-2 Incentive Stock Option Plan, as adopted by Registrant's
shareholders on December 12, 1984, and as amended by
Registrant's Board of Directors on November 18, 1987.
[Exhibit 10.9-2, 1987 Form 10-K.]
10.9-3 Form of stock option agreement entered into by Registrant and
certain of its employees pursuant to Incentive Stock Option
Plan, as amended on November 18, 1987. [Exhibit 10.9-3,
1987 Form 10- K.]
10.10-2 Form of Security Agreement. [Exhibit 10.10-2, 1988 Form 10-K.]
10.11-3 Form of Distribution Agreement. [Exhibit 10.11-3, 1989 Form
10-K.]
10.12 Technology 80 Inc. Directors' Stock Option Plan, as amended.
[Exhibit 10.12, 1991 Form 10-K.]
10.12-1 Form of stock option agreement entered into by Registrant and
certain of its directors pursuant to Directors' Stock Option
Plan. [Exhibit 10.12- 1, 1986 Form 10-K.]
10.13 Domestic distribution agreement. [Exhibit 10.13, 1988 Form
10-K.]
10.14 International Distribution Agreement. [Exhibit 10.14, 1988
Form 10-K.]
1986 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1986.
1987 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1987.
1988 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1988.
1989 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1989.
1990 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1990.
1991 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1991.
1992 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1992.
1993 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1993.
1994 Form 10-K: Annual Report on Form 10-K, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1994.
1995 Form 10-KSB: Annual Report on Form 10-KSB, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1995.
1996 Form 10-KSB: Annual Report on Form 10-KSB, File No. 0- 13870, for
Registrant's fiscal year ended August 31, 1996.
1985 Form S-18: Registration Statement of Form S-18, File No. 2-96972-C,
effective May 14, 1985.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by the Registrant during the
last quarter of the Registrant's fiscal year ended August 31, 1997:
Date of Report Event
-------------- -----
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Technology 80 Inc.
----------------------------------
(Registrant)
November 26, 1997 /s/ Duane A. Markus
------------------------- -----------------------------------
(Date) Duane A. Markus, President, CEO, CFO
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
November 26, 1997 /s/ Duane A. Markus
------------------------- -----------------------------------
(Date) Duane A. Markus, President, CEO,
CFO, Director (Principal
Executive Officer,
Principal Financial Officer)
November 26, 1997 /s/ Thomas L. Gould
------------------------- -----------------------------------
(Date) Thomas L. Gould, Secretary
and Director
November 26, 1997 /s/ Jack W. Pagel
------------------------- -----------------------------------
(Date) Jack W. Pagel, Director
November 26, 1997 /s/ Ricky L. Carlson
------------------------- -----------------------------------
(Date) Ricky L. Carlson, Vice President,
Finance (Principal
Accounting Officer)
TECHNOLOGY 80 INC.
FINANCIAL STATEMENTS
August 31, 1997 and 1996
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of income 3
Statements of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 6 - 12
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
TECHNOLOGY 80 INC.
Minneapolis, Minnesota
We have audited the accompanying balance sheets of TECHNOLOGY 80
INC. as of August 31, 1997 and 1996, and the related statements of
income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
TECHNOLOGY 80 INC. as of August 31, 1997 and 1996, and the results
of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
LURIE, BESIKOF, LAPIDUS & CO., LLP
Minneapolis, Minnesota
October 15, 1997
- 2 -
<TABLE>
TECHNOLOGY 80 INC.
BALANCE SHEETS
August 31, 1997 and 1996
<CAPTION>
ASSETS 1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 284,261 $ 419,136
Short-term investments 64,402 127,163
Accounts receivable (less allowance for doubtful
accounts: 1997 - $12,000 and 1996 - $9,000) 882,224 587,537
Inventories 1,177,452 956,744
Deferred income taxes 44,000 38,600
Other current assets 24,383 29,069
---------- ----------
TOTAL CURRENT ASSETS 2,476,722 2,158,249
---------- ----------
PROPERTY AND EQUIPMENT
Furniture and equipment 473,934 424,670
Leasehold improvements 23,060 23,060
---------- ----------
496,994 447,730
Less accumulated depreciation 395,830 363,780
---------- ----------
101,164 83,950
---------- ----------
OTHER ASSETS
Investments 3,284,214 2,580,957
Deferred income taxes 147,000 74,400
---------- ----------
3,431,214 2,655,357
---------- ----------
$6,009,100 $4,897,556
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 95,117 $ 49,413
Accrued payroll and payroll taxes 464,659 217,214
Payable to investment company 285,392 -
Accrued income taxes 36,990 206,137
Accrued liabilities - other 182,054 74,379
---------- ----------
TOTAL CURRENT LIABILITIES 1,064,212 547,143
---------- ----------
STOCKHOLDERS' EQUITY 4,944,888 4,350,413
---------- ----------
$6,009,100 $4,897,556
========== ==========
See notes to financial statements.
</TABLE>
- 3 -
<TABLE>
TECHNOLOGY 80 INC.
STATEMENTS OF INCOME
Years Ended August 31, 1997 and 1996
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
REVENUE $4,918,935 $4,206,691
COST OF GOODS SOLD 1,702,373 1,478,799
---------- ----------
GROSS PROFIT 3,216,562 2,727,892
---------- ----------
OPERATING EXPENSES
General and administrative 998,562 637,097
Research and development 703,742 630,626
Selling 703,076 683,826
---------- ----------
2,405,380 1,951,549
---------- ----------
INCOME FROM OPERATIONS 811,182 776,343
---------- ----------
OTHER INCOME (EXPENSE)
Gain on sales of investments 144,804 81,503
Investment income 141,830 127,448
Miscellaneous ( 2,489) 1,711
---------- ----------
284,145 210,662
---------- ----------
INCOME BEFORE INCOME TAXES 1,095,327 987,005
PROVISION FOR INCOME TAXES 362,000 321,650
---------- ----------
NET INCOME $ 733,327 $ 665,355
========== ==========
EARNINGS PER SHARE $ 0.43 $ 0.39
========== ==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 1,723,540 1,726,008
========== ==========
See notes to financial statements.
</TABLE>
- 4 -
<TABLE>
TECHNOLOGY 80 INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended August 31, 1997 and 1996
<CAPTION>
Common Stock
------------ Additional Loans Unrealized
Shares * Paid-in for Stock Gains/(Losses) Retained
Issued Amount Capital Purchases on Investments Earnings Total
---------- ------- ---------- --------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - AUGUST 31, 1995 1,561,670 $15,617 $3,372,648 ($ 163,705) $ 83,091 $ 550,191 $3,857,842
Net income - - - - - 665,355 665,355
Exercise of stock options 9,500 95 11,296 - - - 11,391
Unrealized loss on investments,
net of tax benefit of $114,000 - - - - ( 185,617) - ( 185,617)
Loan payments - - - 1,442 - - 1,442
---------- ------- ---------- --------- -------- ---------- ----------
BALANCE - AUGUST 31, 1996 1,571,170 15,712 3,383,944 ( 162,263) ( 102,526) 1,215,546 4,350,413
Net income - - - - - 733,327 733,327
Exercise of stock options 33,875 339 24,216 - - - 24,555
Unrealized loss on investments,
net of tax benefit of $92,500 - - - - ( 163,407) - ( 163,407)
---------- ------- ---------- --------- -------- ---------- ----------
BALANCE - AUGUST 31, 1997 1,605,045 $16,051 $3,408,160 ($ 162,263) ($265,933) $1,948,873 $4,944,888
========== ======= ========== ========= ======== ========== ==========
* Common stock: $.01 par value; authorized - 5,000,000 shares.
See notes to financial statements.
</TABLE>
- 5 -
<TABLE>
TECHNOLOGY 80 INC.
STATEMENTS OF CASH FLOWS
Years Ended August 31, 1997 and 1996
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 733,327 $ 665,355
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 34,877 28,350
Deferred income taxes 14,500 13,000
Gain on sales of investments ( 144,804) ( 81,503)
Changes in operating assets and liabilities:
Accounts receivable ( 294,687) ( 80,722)
Inventories ( 220,708) ( 158,950)
Other current assets 4,686 12,876
Accounts payable 45,704 ( 1,587)
Accrued liabilities 355,120 77,060
Accrued income taxes ( 169,147) 206,137
---------- ----------
Net cash provided by operating activities 358,868 680,016
---------- ----------
INVESTING ACTIVITIES
Proceeds from sale of equipment 267 1,350
Purchases of property and equipment ( 52,358) ( 23,463)
Proceeds from sales and maturities of investments 1,835,230 2,215,083
Purchases of investments ( 2,301,437) ( 3,392,846)
Payments on loans for stock purchases - 1,442
---------- ----------
Net cash used by investing activities ( 518,298) ( 1,198,434)
---------- ----------
FINANCING ACTIVITY
Proceeds from exercise of stock options 24,555 11,391
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 134,875) ( 507,027)
CASH AND CASH EQUIVALENTS
Beginning of year 419,136 926,163
---------- ----------
End of year $ 284,261 $ 419,136
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Income taxes $ 516,641 $ 104,252
Interest 5,101 5,881
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Investments purchased and payable to
investment company $ 285,392 $ -
See notes to financial statements.
</TABLE>
- 6 -
TECHNOLOGY 80 INC.
NOTES TO FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies -
Description of Business
-----------------------
TECHNOLOGY 80 INC. designs, manufactures, and markets motion
control components and systems for original equipment manufacturer
(OEM) machine and instrument builders and end users located
worldwide. Products are sold through direct sales, manufacturers'
representatives and distributors.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts
and disclosures in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash Equivalents
----------------
All highly liquid investments purchased with a maturity of three
months or less are considered to be cash equivalents.
Short-Term Investments
----------------------
Investments which mature within one year from the balance sheet
date and investments sold prior to the issuance of the financial
statements are classified as short-term.
Inventories
-----------
Inventories are stated at the lower of cost or market determined on
a first-in, first-out (FIFO) basis.
Inventory writedowns are provided, when considered appropriate,
based on the age and anticipated use of the specific inventories
and related market forecast.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is
computed over the estimated useful lives of the related assets.
The straight-line method is used for substantially all assets for
financial reporting purposes and accelerated methods are used for
tax purposes.
Earnings Per Share
------------------
Earnings per share is based on the weighted average number of
common and common equivalent shares outstanding during each year.
Common stock equivalents include the dilutive effect of the
incremental shares issuable upon the exercise of stock options.
(continued)
- 7 -
TECHNOLOGY 80 INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
- (continued)
Earnings Per Share (continued)
------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). SFAS No. 128 differs from current
accounting guidance in that earnings per share is classified as
basic earnings per share and diluted earnings per share, compared
with primary earnings per share and fully diluted earnings per
share under current standards. Basic earnings per share differs
from primary earnings per share in that it includes only the
weighted average common shares outstanding and does not include any
dilutive securities in the calculation. Diluted earnings per share
under SFAS 128 differs in certain calculations from fully diluted
earnings per share under the existing standards. Adoption of SFAS
No. 128 is required for interim and annual periods ending after
December 15, 1997. Had the Company applied SFAS No. 128 as of
August 31 1997 and 1996, basic and diluted earnings per share would
have been as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Basic $0.47 $0.43
Diluted $0.43 $0.39
</TABLE>
Comprehensive Income
--------------------
In June 1997, the Financing Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", which establishes financial accounting and
reporting standards for comprehensive income and its components
(revenues, expenses, gains and losses). The Standard is effective
for fiscal years beginning after December 15, 1997.
2. Credit Risk -
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and does not believe it is
exposed to any significant credit risk on cash.
3. Inventories -
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Raw materials $ 586,884 $ 448,907
Work in process 237,845 124,609
Finished goods 352,723 383,228
---------- ---------
$1,177,452 $ 956,744
========== =========
</TABLE>
- 8 -
TECHNOLOGY 80 INC.
NOTES TO FINANCIAL STATEMENTS
4. Investments -
<TABLE>
A summary of the cost, unrealized gains and losses, and fair value
of investment are as follows:
<CAPTION>
Gross Unrealized Estimated
------------------
Cost Gains Losses Fair Value
---------- ------- -------- ----------
<S> <C> <C> <C> <C>
August 31, 1997:
Available-for-sale -
equity securities $3,760,049 $91,822 ($508,255) $3,343,616
Held-to-maturity -
municipal bonds 5,000 - - 5,000
---------- ------- -------- ----------
$3,765,049 $91,822 ($508,255) $3,348,616
========== ======= ======== ==========
August 31, 1996:
Available-for-sale -
equity securities $2,833,633 $95,003 ($255,529) $2,673,107
Held-to-maturity -
municipal bonds 35,013 - - 35,013
---------- ------- -------- ----------
$2,868,646 $95,003 ($255,529) $2,708,120
========== ======= ======== ==========
</TABLE>
Approximately 45% and 41% of the fair market value is represented
by investments in three companies at August 31, 1997 and 1996,
respectively. Gross realized gains and (losses), using the
specific identification method, totalled $166,757 and ($21,953) for
1997 and $94,021 and ($12,518) for 1996, respectively. The held-
to-maturity securities are due in one year or less.
5. Income Taxes -
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
1997 1996
Current: -------- --------
<S> <C> <C>
Federal $347,200 $306,450
State 300 2,200
-------- --------
347,500 308,650
======== ========
Deferred:
Federal ( 9,700) ( 3,000)
State 24,200 16,000
-------- --------
14,500 13,000
-------- --------
$362,000 $321,650
======== ========
(continued)
</TABLE>
- 9 -
TECHNOLOGY 80 INC.
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes - (continued)
The Company utilized approximately $109,000 in state net operating
loss carryforwards and $13,500 of state tax credits to reduce their
1997 state tax liability. The Company utilized approximately
$326,000 of state net operating loss carryforwards and $4,000 of
federal tax credits to reduce their 1996 federal and state tax
liabilities.
The significant components of deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------- --------------------------
Total Federal State Total Federal State
-------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Deferred income tax assets:
Net operating loss and
credit carryforwards $ 52,300 $ - $52,300 $ 76,500 $ - $76,500
Unrealized losses on
investments 150,500 137,000 13,500 58,000 52,800 5,200
Other 26,000 23,800 2,200 22,000 20,100 1,900
-------- -------- ------- -------- ------- -------
228,800 160,800 68,000 156,500 72,900 83,600
-------- -------- ------- -------- ------- -------
Deferred income tax liabilities:
Impact of state net
operating loss and
credit carryforwards 17,800 17,800 - 26,000 26,000 -
Other 20,000 18,300 1,700 17,500 16,100 1,400
-------- -------- ------- -------- ------- -------
37,800 36,100 1,700 43,500 42,100 1,400
-------- -------- ------- -------- ------- -------
Net deferred tax asset $191,000 $124,700 $66,300 $113,000 $30,800 $82,200
======== ======== ======= ======== ======= =======
</TABLE>
The significant differences between income taxes at the statutory rate and
the effective tax rates were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Tax computed at the statutory rate $372,500 $336,000
State income taxes, net of federal benefit 16,200 12,000
Tax exempt investment income ( 27,800) ( 23,300)
Other 1,100 ( 3,050)
-------- --------
Income tax expense $362,000 $321,650
======== ========
</TABLE>
At August 31, 1997, the Company has a net deferred tax asset of
$34,500 reflecting the benefit of $52,300 of state tax credits. At
August 31, 1996, the Company has a net deferred tax asset of
$46,000 reflecting the benefit of $109,000 in state loss
carryforwards and $65,800 of state tax credits.
- 10 -
TECHNOLOGY 80 INC.
NOTES TO FINANCIAL STATEMENTS
6. Transactions with Related Parties -
The Company has consulting agreements with two directors and
accrued $141,800 and $53,100 for services rendered under the
agreements, at August 31, 1997 and 1996, respectively. In
addition, $39,000 and $19,000 is accrued for directors' fees to
these individuals at August 31, 1997 and 1996, respectively.
Consulting and director fees expense for these individuals totaled
$180,800 and $72,100 in 1997 and 1996, respectively.
During fiscal 1994, the Company provided loans to certain employees
and directors to purchase the Company's stock. The stock purchased
by these individuals is held by the Company as collateral against
the loan balances. The loans, which have a balance of $162,263 at
August 31, 1997, are classified as a reduction of stockholders'
equity. The loans bear interest at 6% and are due on demand.
Interest on these loans of approximately $10,000 was earned by the
Company during both 1997 and 1996.
7. Building Lease -
The Company's office and production facilities lease expired
September 30, 1997. Effective September 11, 1997, the Company
negotiated an amendment to extend this lease to September 30, 2000.
The lease provides that the Company pay certain operating expenses,
including real estate taxes, insurance, and maintenance, in
addition to the monthly base rent of $4,165.
The future minimum annual rental commitment under the above lease
is as follows:
<TABLE>
<CAPTION>
Year Ending
August 31, Amount
----------- --------
<C> <C>
1998 $ 49,505
1999 49,980
2000 49,980
2001 4,165
--------
$153,630
========
</TABLE>
Rent expense for 1997 and 1996, including operating expenses, was
approximately $68,700 and $67,200, respectively.
- 11 -
TECHNOLOGY 80 INC.
NOTES TO FINANCIAL STATEMENTS
8. Common Stock Options -
Incentive Stock Option Plan
The Company has an Incentive Stock Option Plan which expired in
fiscal 1995. Options issued under the Plan are exercisable for a
specific period of time, as determined by the Board of Directors,
but not greater than ten years. The options granted become
exercisable in four equal annual installments beginning on the
first anniversary of the date of grant. The Company reserved
200,000 shares of common stock for issuance pursuant to the Plan.
Option transactions under the Plan are summarized as follows:
<TABLE>
<CAPTION>
Number Weighted-Average
of Shares Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding at August 31, 1995 177,750 $1.25
Expired ( 125) $1.38
Cancelled ( 12,875) $1.37
Exercised ( 9,500) $1.20
-------
Outstanding at August 31, 1996 155,250 $1.25
Expired ( 375) $1.69
Cancelled ( 8,250) $1.49
Exercised ( 33,875) $0.72
-------
Outstanding at August 31, 1997 112,750 $1.38
=======
</TABLE>
The following table summarizes stock options outstanding and
exercisable at August 31, 1997:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------ ----------------
Weighted Weighted Weighted
Average Average Average
Remaining Exercise Exercise
Exercise Price Range Shares Life Price Shares Price
-------------------- ------- --------- -------- ------ ---------
<C> <C> <C> <C> <C> <C>
$0.81 28,500 4 months $0.81 28,500 $0.81
$1.38 - $1.44 37,125 15 months $1.38 30,125 $1.38
$1.69 - $1.86 47,125 27 months $1.73 29,875 $1.75
------- --------- -------- ------ ---------
$0.81 - $1.86 112,750 17 months $1.38 88,500 $1.32
======= ======
</TABLE>
(continued)
- 12 -
TECHNOLOGY 80 INC.
NOTES TO FINANCIAL STATEMENTS
8. Common Stock Options - (continued)
Directors' Stock Option Plan
The Company had a Directors' Stock Option Plan which granted stock
options to members of the Board of Directors who were not employees
of the Company. Stock options were granted at an exercise price
equal to not less than the fair market value at the date of grant
and are exercisable over ten years.
Options to purchase 96,000 shares were outstanding and exercisable
at $0.56 - $1.69 per share (average exercise price of $0.97) at
August 31, 1997. Outstanding stock options expire over a period
ending no later than December 2004 and have a weighted average
remaining exercise life of approximately 4 years. During 1997,
options to purchase 4,000 shares at an average exercise price of
$2.88 expired.
9. Pension Plan -
The Company has a Simplified Employee Pension Plan to which it can
contribute up to 15% of eligible employees' compensation.
Contributions are made at the discretion of the Company; no
contributions were made for 1997 or 1996.
10. Major Customer -
No one customer had revenues in excess of 10% in 1997. One
customer accounted for approximately 11% of 1996 revenue.
Exhibit 11 -- Statement Re: Computation of Per-Share Earnings
<TABLE>
<CAPTION>
Year ended August 31,
1997 1996
---------------------
Primary
<S> <C> <C>
Average shares outstanding 1,574,112 1,565,284
Net effect of dilutive stock options-
based on the treasury stock
method using average
market price 149,428 160,724
---------- ----------
Total 1,723,540 1,726,008
========== ==========
Net income $ 733,327 $ 665,355
========== ==========
Per-share amount $0.43 $0.39
===== =====
Fully Diluted
Average shares outstanding 1,574,112 1,565,284
Net effect of dilutive stock options-
based on the treasury stock
method using the year-end
market price, if higher
than average market price 153,370 164,343
--------- ---------
Total 1,727,482 1,729,627
========= =========
Net income $ 733,327 $ 665,355
========= =========
Per-share amount $0.42 $0.39
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 284261
<SECURITIES> 64402
<RECEIVABLES> 894224
<ALLOWANCES> 12000
<INVENTORY> 1177452
<CURRENT-ASSETS> 2476722
<PP&E> 496994
<DEPRECIATION> 395830
<TOTAL-ASSETS> 6009100
<CURRENT-LIABILITIES> 1064212
<BONDS> 0
0
0
<COMMON> 16051
<OTHER-SE> 4928837
<TOTAL-LIABILITY-AND-EQUITY> 6009100
<SALES> 4918935
<TOTAL-REVENUES> 4918935
<CGS> 1702373
<TOTAL-COSTS> 1702373
<OTHER-EXPENSES> 2405380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5101
<INCOME-PRETAX> 1095327
<INCOME-TAX> 362000
<INCOME-CONTINUING> 733327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 733327
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
</TABLE>
