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 MAY 31,
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
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(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 1,646,733
- ----------------------------- --------------------
(Title of Class) (Shares Outstanding)
<TABLE>
Part I - Financial Information
Item 1: Financial Statements
TECHNOLOGY 80 INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
May 31, August 31,
ASSETS 1998 1997
----------- ----------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 187,298 $ 284,261
Short-term investments 5,000 64,402
Accounts receivable (less allowance for doubtful
accounts: May 31 - $12,000; Aug. 31 - $12,000) 716,685 882,224
Inventories 1,351,571 1,177,452
Deferred taxes 44,000 44,000
Other current assets 17,591 24,383
---------- ----------
TOTAL CURRENT ASSETS 2,322,145 2,476,722
---------- ----------
PROPERTY AND EQUIPMENT
Furniture and equipment 514,713 473,934
Leasehold improvements 23,060 23,060
---------- ----------
537,773 496,994
Less accumulated depreciation 418,637 395,830
---------- ----------
119,136 101,164
---------- ----------
OTHER ASSETS
Investments 3,628,562 3,284,214
Deferred taxes 155,800 147,000
---------- ----------
3,784,362 3,431,214
---------- ----------
TOTAL ASSETS $6,225,643 $6,009,100
========== ==========
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 49,058 $ 95,117
Accrued payroll and payroll taxes 217,552 464,659
Accrued income taxes 121,000 36,990
Payable to investment company 60,449 285,392
Accrued liabilities - other 31,103 182,054
---------- ----------
TOTAL CURRENT LIABILITIES 479,162 1,064,212
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value (authorized -
5,000,000 shares; issued and outstanding -
May 31, 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 (298,621) (265,933)
Retained earnings 2,749,608 1,948,873
---------- ----------
5,746,481 4,944,888
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,225,643 $6,009,100
========== ==========
See notes to condensed financial statements.
</TABLE>
<TABLE>
TECHNOLOGY 80 INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three months ended Nine months ended
May 31, May 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $1,498,149 $1,235,805 $4,251,423 $3,390,514
COST OF GOODS SOLD 536,652 468,739 1,633,858 1,270,184
---------- ---------- ---------- ----------
GROSS PROFIT 961,497 767,066 2,617,565 2,120,330
---------- ---------- ---------- ----------
OPERATING EXPENSES
General and administrative 180,026 119,724 485,751 365,851
Research and development 185,895 163,896 566,785 501,011
Selling 224,852 206,472 607,911 511,210
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 590,773 490,092 1,660,447 1,378,072
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 370,724 276,974 957,118 742,258
OTHER INCOME 40,889 52,450 265,618 243,319
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 411,613 329,424 1,222,736 985,577
PROVISION FOR INCOME TAXES 143,000 112,000 422,000 335,000
---------- ---------- ---------- ----------
NET INCOME $ 268,613 $ 217,424 $ 800,736 $ 650,577
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $0.16 $0.14 $0.49 $0.41
===== ===== ===== =====
DILUTED EARNINGS PER SHARE $0.15 $0.13 $0.46 $0.38
===== ===== ===== =====
See notes to condensed financial statements.
</TABLE>
<TABLE>
TECHNOLOGY 80 INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine months ended
May31,
1998 1997
---------- ----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 800,736 $ 650,577
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 31,644 25,691
Deferred taxes 39,700 30,125
Gain on sale of investments (184,945) (134,843)
Gain on sale of fixed asset (384) (1,483)
Changes in operating assets and liabilities:
Accounts receivable 165,539 (101,037)
Inventories (174,119) (28,423)
Other current assets 6,792 (3,496)
Accounts payable (46,059) 5,905
Accrued income taxes 84,010 (134,137)
Accrued liabilities (623,001) (146,110)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 99,913 162,769
---------- ----------
INVESTING ACTIVITIES
Proceeds from sale of equipment 1,350 1,750
Purchase of equipment (50,582) (41,180)
Proceeds from sales and maturities
of investments 1,645,062 1,409,738
Purchases of investments (1,826,252)(1,557,529)
NET CASH USED IN INVESTING ACTIVITIES (230,422) (187,221)
---------- ----------
FINANCING ACTIVITIES
Proceeds from exercise of stock options 33,546 6,609
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,546 6,609
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (96,963) (17,843)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE PERIOD 284,261 419,136
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 187,298 $ 401,293
========== ==========
See notes to condensed financial statements.
</TABLE>
TECHNOLOGY 80 INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
May 31, 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
May 31, 1998 and 1997 follow:
<TABLE>
<CAPTION>
Per share
1998 Income Shares amount
---- ------ ------ ---------
<S> <C> <C> <C>
Earnings per share of common
stock - basic $268,613 1,640,420 $0.16
Stock options - 123,367 -
-------- --------- -----
Earnings per share of common
stock - assuming dilution $268,613 1,763,787 $0.15
======== ========= =====
Per share
1997 Income Shares amount
---- ------ ------ ---------
Earnings per share of common
stock - basic $217,424 1,575,391 $0.14
Stock options - 157,907 -
-------- --------- -----
Earnings per share of common
stock - assuming dilution $217,424 1,733,298 $0.13
======== ========= =====
</TABLE>
Item 2: Management's Discussion and Analysis
Results of Operations
- ---------------------
Revenues for the third quarter ended May 31, 1998 increased 21% over the
same period the preceding year and increased 25% for the nine months ended
May 31, 1998. The revenue increase for the three and nine months ended May
31, 1998 was due to an increase in sales volume. One customer accounted
for 14% of the sales volume for the nine months ended May 31, 1998.
Gross profit percentages for the third quarter ended May 31, 1998 and 1997
was 64% and 62% respectively. Gross profit percentages for the nine months
ended May 31, 1998 was 62% compared to 63% for the nine months ended May
31, 1997.
Operating expenses as a percentage of sales was 39% for the three and nine
months ended May 31, 1998 compared to 40% and 41% for the same periods the
prior year, respectively.
Other income decreased $11,561 for the quarter ended May 31, 1998 and
increased $22,299 for the nine months ended May 31, 1998 from the same
periods the preceding year. The increase for the nine months was primarily
due to increased investment income.
Net income was $268,613 and $217,424 for the quarter ended May 31, 1998 and
1997 respectively. This represents a 24% increase. For the nine months
ended May 31, 1998 and 1997, net income was $800,736 and $650,577
respectively. This represents a 23% increase.
Liquidity and Capital Resources
- -------------------------------
Registrant's balance sheet shows a strong capital position. Operations
provided $99,913 in cash compared to $162,769 the same period the prior
year. Cash and cash equivalents decreased $96,963 since August 31, 1997.
Investing activities used $230,422 primarily for the purchase of investments.
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)
July 14, 1998 /s/ Duane Markus, President, CEO
- --------------------------- --------------------------------
(Date) Duane Markus, President, CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 187298
<SECURITIES> 5000
<RECEIVABLES> 728685
<ALLOWANCES> 12000
<INVENTORY> 1351571
<CURRENT-ASSETS> 2322145
<PP&E> 537773
<DEPRECIATION> 418637
<TOTAL-ASSETS> 6225643
<CURRENT-LIABILITIES> 479162
<BONDS> 0
0
0
<COMMON> 16404
<OTHER-SE> 5730077
<TOTAL-LIABILITY-AND-EQUITY> 6225643
<SALES> 4251423
<TOTAL-REVENUES> 4251423
<CGS> 1633858
<TOTAL-COSTS> 1633858
<OTHER-EXPENSES> 1660447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18385
<INCOME-PRETAX> 1222736
<INCOME-TAX> 422000
<INCOME-CONTINUING> 800736
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 800736
<EPS-PRIMARY> .49
<EPS-DILUTED> .46
</TABLE>
