U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY
28, 1998.
[ ] 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)
N/A
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(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 [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practible date.
Common Stock, $0.01 par value 1,640,420
- ------------------------------ -------------------
(Title of Class) (Shares Outstanding)
Part I - Financial Information
<TABLE>
Item 1: Financial Statements
TECHNOLOGY 80 INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
February 28, August 31
1998 1997
ASSETS ---------- ----------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalent $129,756 $284,261
Short-term investments 5,000 64,402
Accounts receivable (less allowance for doubtful
accounts: Feb. 28 - $12,000; Aug. 31 - $12,000) 889,546 882,224
Inventories 1,137,433 1,177,452
Deferred taxes 44,000 44,000
Other current assets 25,488 24,383
---------- ----------
TOTAL CURRENT ASSETS 2,231,223 2,476,722
---------- ----------
PROPERTY AND EQUIPMENT
Furniture and equipment 502,037 473,934
Leasehold improvements 23,060 23,060
---------- ----------
525,097 496,994
Less accumulated depreciation 407,109 395,830
---------- ----------
117,988 101,164
---------- ----------
OTHER ASSETS
Investments 3,283,017 3,284,214
Deferred taxes 210,800 147,000
---------- ----------
3,493,817 3,431,214
---------- ----------
TOTAL ASSETS $5,843,028 $6,009,100
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 91,910 $ 95,117
Accrued payroll and payroll taxes 162,691 464,659
Accrued income taxes 78,100 36,990
Payable to investment company 72,842 285,392
Accrued liabilities - other 19,656 182,054
---------- ----------
TOTAL CURRENT LIABILITIES 425,199 1,064,212
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value (authorized -
5,000,000 shares; issued and outstanding -
Feb. 28, 1,640,420, Aug. 31, 1,605,045 shares) 16,404 16,051
Paid-in capital 3,441,353 3,408,160
Other - loans (162,263) (162,263)
Unrealized loss on available-for-sale securities (358,661) (265,933)
Retained earnings 2,480,996 1,948,873
---------- ----------
5,417,829 4,944,888
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,843,028 $6,009,100
========== ==========
See notes to condensed financial statements.
</TABLE>
<TABLE>
TECHNOLOGY 80 INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three months ended Six months ended
February 28, February 28,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $1,429,677 $1,160,828 $2,753,274 $2,154,708
COST OF GOODS SOLD 556,959 413,908 1,097,206 801,443
---------- ---------- ---------- ----------
GROSS PROFIT 872,718 746,920 1,656,068 1,353,265
---------- ---------- ---------- ----------
OPERATING EXPENSES
General and administrative 156,026 117,426 305,725 246,127
Research and development 203,996 183,130 380,890 337,114
Selling 180,170 152,503 383,059 304,739
---------- ---------- --------- ----------
TOTAL OPERATING EXPENSES 540,192 453,059 1,069,674 887,980
---------- ---------- --------- ----------
INCOME FROM OPERATIONS 332,526 293,861 586,394 465,285
OTHER INCOME 165,189 73,475 224,729 190,868
---------- ---------- --------- ----------
INCOME BEFORE INCOME TAXES 497,715 367,336 811,123 656,153
PROVISION FOR INCOME TAXES 175,000 130,000 279,000 223,000
---------- ---------- --------- ----------
NET INCOME $ 322,715 $ 237,336 $ 532,123 $ 433,153
========== ========== ========== ==========
EARNINGS PER SHARE $0.20 $0.15 $0.33 $0.27
===== ===== ===== =====
See notes to condensed financial statements.
</TABLE>
<TABLE>
TECHNOLOGY 80 INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six months ended
February 28,
1998 1997
---------- -----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 532,123 $ 433,153
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 20,116 16,381
Deferred taxes 24,700 19,750
Gain on sale of investments (174,924) (118,031)
Gain on sale of fixed asset (384) 0
Changes in operating assets and liabilities:
Accounts receivable (7,322) (127,830)
Inventories 40,019 (38,208)
Other current assets (1,105) (8,959)
Accounts payable (3,207) 6,505
Accrued income taxes 41,110 (158,137)
Accrued liabilities (676,916) (177,601)
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (205,790) (152,977)
----------- -----------
INVESTING ACTIVITIES
Proceeds from sale of equipment 1,350 0
Purchase of equipment (37,906) (33,799)
Proceeds from sales and maturities
of investments 1,273,514 1,090,672
Purchases of investments (1,219,219) (1,112,915)
----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 17,739 (56,042)
----------- -----------
FINANCING ACTIVITIES
Proceeds from exercise of stock options 33,546 2,476
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,546 2,476
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (154,505) (206,543)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE PERIOD 284,261 419,136
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 129,756 $ 212,593
=========== ===========
See notes to condensed financial statements.
</TABLE>
TECHNOLOGY 80 INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
February 28, 1998
NOTE A - FINANCIAL INFORMATION
The unaudited interim financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission;
accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The
condensed balance sheet at August 31, 1997 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. These interim financial
statements should be read in conjunction with the financial statements
and notes in the Company's 1997 Annual Report on Form 10-KSB filed with
the Securities and Exchange Commission.
In the opinion of management, the financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary
for a fair presentation of the interim periods.
NOTE B - EARNINGS PER SHARE
Earnings per share are calculated in accordance with the provisions of
Statement of Financial Accounting Standards No. 128 - "Earnings per
Share" (SFAS No. 128), effective for interim and annual periods ending
after December 15, 1997. SFAS No. 128 requires the Company to report
both basic earnings per share which is based on weighted-average number
of common shares outstanding and diluted earnings per share which is
based on the weighted-average number of common shares outstanding and
all dilutive potential common shares outstanding. All prior years
earnings per share in this report have been recalculated to reflect the
provisions of SFAS No. 128. All earnings per share data in this report
reflect basic earnings per share, unless otherwise indicated. The
details of the earnings per share calculations for the quarter ending
February 28, 1998 and 1997 follow:
<TABLE>
<CAPTION>
Per share
1998 Income Shares amount
---- ------ ------ ---------
<S> <C> <C> <C>
Earnings per share of common
stock - basic $322,715 1,635,651 $0.20
Stock options - 124,655 -
Earnings per share of common -------- --------- -----
stock - assuming dilution $322,715 1,760,306 $0.18
======== ========= =====
Per share
1997 Income Shares amount
---- ------ ------ ---------
Earnings per share of common
stock - basic $237,336 1,572,894 $0.15
Stock options - 145,437 -
Earnings per share of common -------- --------- -----
stock - assuming dilution $237,336 1,718,331 $0.14
======== ========= =====
</TABLE>
Item 2: Management's Discussion and Analysis
Results of Operations
- ---------------------
Revenues for the second quarter ended February 28, 1998 increased 23% over
the same period the preceding year and increased 28% for the six months
ended February 28, 1998. The revenue increase for the three and six months
ended February 28, 1998 was due to an increase in sales volume. One
customer accounted for 15% of the sales volume for the six months ended
February 28, 1998.
Gross profit percentages for the second quarter ended February 28, 1998 and
1997 was 61% and 64% respectively. Gross profit percentages for the six
months ended February 28, 1998 was 60% compared to 63% for the six months
ended February 28, 1997.
Operating expenses as a percentage of sales was 38% for the three months
and 39% for the six months ended February 28, 1998 compared to 39% and 41%
for the same periods the prior year, respectively.
Other income increased $91,714 for the quarter ended February 28, 1998 and
increased $33,861 for the six months ended February 28, 1998 from the same
periods the preceding year. The increase was primarily due to increased
investment income.
Net income was $322,715 and $237,336 for the quarter ended February 28,
1998 and 1997 respectively. This represents a 36% increase. For the six
months ended February 28, 1998 and 1997, net income was $532,123 and
$433,153 respectively. This represents a 23% increase.
Liquidity and Capital Resources
- -------------------------------
Registrant's balance sheet shows a strong capital position. Operations
used $205,790 in cash compared to $152,977 the same period the prior year.
Cash and cash equivalents decreased $154,505 since August 31, 1997.
Investing activities provided for $17,739. Proceeds from the exercise of
stock option was $33,546. Registrant expects that there will be sufficient
capital to fund its operations during fiscal year 1998.
Registrant has no long-term debt and does not anticipate, at this time,
that it will be necessary to seek any 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-QSB, 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.
Part II - Other Information
Item 1: Legal Proceedings
-----------------
None.
Item 2: Changes in Securities
---------------------
None.
Item 3: Defaults Upon Senior Securities
-------------------------------
None.
Item 4: Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5: Other Information
-----------------
None.
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
-------------------
None.
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.
Technology 80 Inc.
----------------------------
(Registrant)
April 14, 1998 /s/ Duane Markus, President, CEO
- ------------------------ ---------------------------------
(Date) Duane Markus, President, CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 129756
<SECURITIES> 5000
<RECEIVABLES> 901546
<ALLOWANCES> 12000
<INVENTORY> 1137433
<CURRENT-ASSETS> 2231223
<PP&E> 525097
<DEPRECIATION> 407109
<TOTAL-ASSETS> 5843028
<CURRENT-LIABILITIES> 425199
<BONDS> 0
0
0
<COMMON> 16404
<OTHER-SE> 5401425
<TOTAL-LIABILITY-AND-EQUITY> 5843028
<SALES> 2753274
<TOTAL-REVENUES> 2753274
<CGS> 1097206
<TOTAL-COSTS> 1097206
<OTHER-EXPENSES> 1069674
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16128
<INCOME-PRETAX> 811123
<INCOME-TAX> 279000
<INCOME-CONTINUING> 532123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 532123
<EPS-PRIMARY> .33
<EPS-DILUTED> .30
</TABLE>
