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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 000-17053
Apogee Technology, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3005815
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
129 MORGAN DRIVE, NORWOOD, MASSACHUSETTS 02062
(Address of principal executive offices)
(781) 551-9450
Issuer's telephone number
NOT APPLICABLE.
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities after a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares of each of the Issuer's classes of common equity, as
of the latest practicable date: As of June 30, 2000, there were 4,669,522
shares of Common Stock, $.01 par value per share, outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No[X]
<PAGE>
APOGEE TECHNOLOGY, INC.
INDEX OF INFORMATION CONTAINED IN FORM 10-QSB FOR THE
QUARTER ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I - Financial Information
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 2000 and
December 31, 1999................................................ 3
Condensed Consolidated Statements of Operations and Accumulated
Deficit for the Three and Six Months Ended June 30, 2000 and
June 30, 1999.................................................... 4
Condensed Consolidated Statements of Cash Flows for the six Months
Ended June 30, 2000 and June 30, 1999............................ 5
Notes to Condensed Consolidated Financial Statements............... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 8
Item 3 - Quantitative and Qualitative Disclosure About Market Risk.......... 10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.................................................. 10
Item 2 - Changes in Securities.............................................. 10
Item 3 - Defaults Upon Senior Securities.................................... 10
Item 4 - Submission of Matters to a Vote of Security Holders................ 10
Item 5 - Other Information.................................................. 10
Item 6 - Exhibits and Reports on Form 8-K................................... 10
Signatures.................................................................. 11
Exhibit Index............................................................... 12
</TABLE>
2
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---- ----
ASSETS (Audited)
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<S> <C> <C>
CURRENT ASSETS:
Cash............................................ $ 12,035 $ 2,629
Accounts receivable............................. -.- 50,558
Prepaid expenses................................ 32,643 13,304
Subscriptions receiveable....................... -.- 100,000
----------- -----------
Total current assets.......................... 44,678 166,491
----------- -----------
EQUIPMENT, AT COST, NET OF ACCUMULATED
DEPRECIATION OF $71,043 AND $64,011........... 38,410 30,459
----------- -----------
OTHER ASSETS:
Digital Amplifier patent, net of amortization
of $47,450 and $41,764........................ 24,969 28,558
----------- -----------
$ 108,057 $ 225,508
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Bank line of credit............................. $ -.- $ 200,000
Accounts payable and accrued expenses........... 196,237 294,927
Loans payable - stockholders.................... 215,168 295,168
Accrued interest - stockholders................. 61,600 51,529
Subscription deposit............................ -.- 20,000
----------- -----------
Total current liabilities..................... 473,005 861,624
----------- -----------
STOCKHOLDERS' DEFICIENCY
Common stock, $.01 par value;
9,000,000 shares authorized, 4,669,522 and
4,155,022 shares issued and outstanding in
2000 and 1999, respectively................... 46,695 41,550
Common stock subscribed (-0- and 165,000 shares,
respectively)................................. -.- 330,000
Additional paid-in capital...................... 7,501,588 6,287,233
Accumulated deficit............................. (7,913,231) (7,294,899)
Total stockholder' deficiency.... (364,948) (636,116)
----------- -----------
$ 108,057 $ 225,508
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
COSTS AND EXPENSES:
Research and development........ $ 150,886 $ 170,230 $ 277,474 $ 261,982
Selling, general and
administrative................ 147,616 72,516 324,077 135,081
----------- ----------- ------------ -----------
298,502 242,746 601,551 397,063
----------- ----------- ------------ -----------
LOSS BEFORE OTHER EXPENSES (298,502) (242,746) (601,551) (397,063)
----------- ----------- ------------ -----------
OTHER EXPENSES
Interest expense................ (6,279) (7,225) (16,781) (14,430)
Loss on disposal of asset....... -.- -.- -.- (320)
----------- ----------- ------------ -----------
(6,279) (7,225) (16,781) (14,750)
----------- ----------- ------------ -----------
NET LOSS...................... (304,781) (249,971) (618,332) (411,813)
Accumulated deficit - beginning... (7,608,450) (6,394,334) (7,294,899) (6,232,492)
----------- ----------- ------------ -----------
ACCUMULATED DEFICIT - ENDING...... $(7,913,231) $(6,644,305) $(7,913,231) $(6,644,305)
=========== =========== ============ ===========
BASIC AND DILUTED LOSS PER
COMMON SHARE.................... $(0.06) $(0.10) $(0.14) $(0.13)
=========== =========== ============ ===========
BASIC AND DILUTED WEIGHTED AVERAGE
OF COMMON SHARES OUTSTANDING.... 4,377,522 3,106,156 4,348,181 3,106,156
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
<S> <C> <C>
2000 1999
---- ----
CASH FLOWS FROM OPERATIONS
Net loss........................................... $(618,332) $(411,813)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on sale of assets........................... -.- 320
Accrued interest - stockholders.................. 10,071 12,792
Depreciation and amortization.................... 12,719 10,892
Change in operating assets and liabilities:......
Accounts receivable........................... 50,558 -.-
Prepaid expenses.............................. (19,339) 669
Accounts payable and accrued expenses......... (98,690) (2,505)
--------- ---------
Net cash provided by operating activities.. (663,013) (389,645)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment.............................. (14,983) (7,748)
Patent costs....................................... (2,098) (289)
--------- ---------
Net cash used in investing activities...... (17,081) (8,037)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Bank Loan............................ -.- 150,000
Proceeds from common stock subscriptions........... 909,500 135,000
Other capital contributions........................ -.- 29,166
Proceeds of loans from stockholders................ -.- 104,000
Repayments of stockholder loans.................... (20,000) (20,000)
(Decrease) Increase in bank overdraft.............. -.- 7,400
Repayment of capital lease obligations............. -.- (7,884)
Repayment of bank loan............................. (200,000) -.-
--------- ---------
Net cash provided by financing activities.. 689,500 397,682
--------- ---------
Increase in cash..................................... 9,406 -.-
Cash - beginning..................................... 2,629 -.-
--------- ---------
Cash - ending........................................ $ 12,035 $ -.-
========= =============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
1. BASIS OF PRESENTATION
The condensed consolidated interim financial statements have been prepared
in accordance with the requirements of Regulation SB and with the instructions
to Form 10Q-SB. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial position, results of operations and
cash flows have been included. The results of operations for the three month and
six month periods ended June 30, 2000 are not necessarily indicative of the
operating results to be expected for the year ending December 31, 2000. These
financial statements should be read in conjunction with the financial statements
and accompanying notes for the year ended December 31, 1999.
The balance sheet at December 31, 1999 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.
The financial statements include the accounts of Apogee Technology, Inc.
("Technology"), and its wholly owned subsidiary, DUBLA, Inc. (collectively the
"Company"). All significant intercompany transactions and accounts have been
eliminated.
The Company is engaged in the development and design of digital amplifier
technology. The Company is presently focused on computer based audio and
entertainment media applications derived from its all-digital amplifier design
trademarked as Direct Digital Amplification (DDX(R)).
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. However, the Company has negative
working capital, a stockholders' deficiency, recurring losses, and had no
operations other than development or any significant current income, all of
which raise substantial doubt about its ability to continue as a going concern.
The Company plans to raise capital to commercialize and license its digital
amplifier technology. The continued viability of the Company is dependent upon
its ability to successfully develop and market the aforementioned application
for its digital amplifier technology and raise sufficient funds for such
purposes. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
2. BANK LINE OF CREDIT
In April 2000, the Company converted its bank line of credit into a
revolving line of credit with maximum borrowings of up to $200,000. The line
matures in January 2001, and calls for interest at prime plus 1%, with an
initial rate of 10%. The line is secured by the assets of the Company and is
personally guaranteed by a director of the Company. In May 2000, the Company
repaid the entire outstanding balance on this line. As of June 30, 2000, the
Company had no borrowings under this line.
6
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3. STOCK TRANSACTIONS
In April 2000, the Company issued 40,000 shares of common stock at
$0.55 per share and 2,000 shares of common stock at $1.25 per share for options
exercised by three directors of the Company pursuant to the 1997 stock option
plan.
In June 2000, the Company issued 250,000 shares at $3 per share pursuant to
a private placement in the amount of $750,000.
4. STOCK OPTIONS
In April 2000, the Board of Directors, subject to stockholder approval,
authorized an increase in the shares available under the 1997 incentive stock
option plan from 300,000 to 600,000, and awarded options to purchase 58,500
shares to seven employees at $3.38 per share.
In April 2000, the Company awarded an executive officer of the Company
options to purchase 25,000 shares of common stock at $3.00 per share.
In May 2000, the Company awarded a director nonqualified options to
purchase 40,000 shares of common stock at $2.48 per share.
In June 2000, the Company granted stock options to two employees for the
purchase of 5,000 shares each of common stock at $2.50 and $3.00 per share,
respectively.
5. SUBSEQUENT EVENTS
In July 2000, the Company granted an employee options to purchase 25,000
shares of common stock at $4.15 per share.
In July 2000, a former director and officer of the Company exercised his
vested stock options to purchase 10,000 shares of common stock at $1.25 per
share.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations for the Three- and Six- Month Periods Ended June 30, 2000
and June 30, 1999.
GENERAL
The following Discussion and Analysis of the Company's Financial Condition
and Results of Operations should be read in conjunction with the Company's
Financial Statements and the related Notes included elsewhere in this Report.
This discussion contains, in addition to historical statements, express or
implied forward-looking statements. The words "believes," "expects,"
"anticipates," "may," "will," "should," "intends," "forecasts," "projects,"
"plans," "estimates" and similar expressions identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events and financial performance or operations and speak only
as of the date the statements are made. Such forward-looking statements involve
risks and uncertainties and readers are cautioned not to place undue reliance on
forward-looking statements. The Company's actual results may differ materially
from such statements. Factors that cause or contribute to such differences
include, but are not limited to, the Company's limited operating history in its
present business, unpredictability of operating results, loss of market share
and pressure on prices from competition in various aspects of its business, the
risks of rapid growth, the Company's dependence on key personnel, uncertainty of
product acceptance, inability to timely develop and introduce new technologies,
products and applications, changes in the level of activity in the audio
industry, changes in economic conditions and an inability to obtain financing,
as well as those discussed elsewhere in this Form 10-QSB. Although the Company
believes that the assumptions underlying its forward-looking statements are
reasonable, any of the assumptions could prove inaccurate and, therefore, there
can be no assurance that the results contemplated in such forward-looking
statements will be realized. The inclusion of such forward-looking information
should not be regarded as a representation by the Company or any other person
that the future events, plans or expectations contemplated by the Company will
be achieved. The Company undertakes no obligation to publicly update, review or
revise any forward-looking statements to reflect any change in the Company's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statements are based.
OVERVIEW
Prior to 1995, the Company was in the business of engineering,
manufacturing and marketing high quality, high-end patented ribbon loudspeaker
systems for use in home audio and video entertainment systems. The Company
discontinued this loudspeaker business in 1994. Since 1995, the Company's
business has shifted to the design and marketing of digital amplifier
technology, DDX(R). The Company has completed development of its first DDX
software, semiconductor and amplifier products and has entered into one
licensing agreement but has not yet begun to generate revenues from the sale of
its DDX products. The Company has incurred net losses of approximately
$1.1 million for the year ended December 31, 1999 and just under $1 million for
each of the years ended December 31, 1998 and December 31, 1997. At December 31,
1999, the Company had an accumulated deficit of $7,294,899, of which
approximately $4 million was attributable to the Company's now defunct
loudspeaker business. These net losses and accumulated deficit (since 1995)
result primarily from the costs associated with the Company's DDX development
efforts. DDX development costs during 1996 and 1997 were used to develop the
conceptual design and to market the solution to potential customers. With the
design concept validated, efforts during 1998 and 1999 were devoted to
converting the concept into semiconductor solutions. This activity was performed
using internal and external engineering resources. Additional development costs
were incurred during 1999 to fabricate engineering device samples.
8
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RESULTS OF CONTINUING OPERATIONS OF THE COMPANY
Revenues. The Company did not generate any revenues for the three- and
six-month periods ended June 30, 2000 and June 30, 1999.
Research and Development Expenses. Research and development expenses
decreased approximately 11% to $150,886 in the quarter ended June 30, 2000
compared with $170,230 for the same period in 1999. Research and development
expenses would have increased 15% in this period compared to the same period in
1999 but for a one-time period charge of $38,500 for consulting expenses
incurred in connection with the advancement of certain product development
efforts during the second quarter of 1999. For the six-month period ended June
30, 2000, research and development expenses increased 6% to $277,474 compared
with $261,982 for the same period in 1999. These increases over the three- and
six-month periods resulted primarily from greater personnel expenses, including
the hiring in the quarter ended June 30, 2000 of a vice president of engineering
and planning, as the Company continued to expand its new product design and
development capabilities and completed the development of its first DDX
products. The Company is strongly committed to accelerating its research and
development and new product development efforts and expects expenses in this
area to continue to grow significantly.
Selling, General and Administrative Expenses. SG&A expenses increased
approximately 104% to $147,616 in the quarter ended June 30, 2000 compared with
$72,516 for the same period in 1999. For the six-month period ended June 30,
2000, SG&A expenses increased 140% to $324,077 compared with $135,081 for the
same period in 1999. These increases reflect the Company's increased efforts to
market its first DDX products. In the quarter ended June 30, 2000, the Company
hired a new chief operating officer as well as a vice president of engineering
and planning and, for the first time during the past three years, Apogee began
to incur executive compensation expenses. The Company also incurred additional
expenses in the three- and six-month periods ended June 30, 2000 as it hired
marketing consultants to help promote its first DDX products. The higher
percentage increase in the six-month period rather than the three-month period
ended June 30, 2000 is a reflection of one-time, first quarter 2000, higher
legal expenses incurred in connection with the Company's re-registration under
the Exchange Act of 1934 and higher accounting fees incurred in connection with
the auditing of the company's financials for the three years ended December 31,
1999 required for the Exchange Act registration.
Net Loss. The Company's net loss for the six-month period ended June 30,
2000 totaled $618,332, or $0.14 per basic and diluted common share, compared to
a loss of $411,813, or $0.13 per basic and diluted common share, for the six-
month period ended June 30, 1999. This increase was a result, primarily, of
increased research and development costs as well as higher marketing and sales
and general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had approximately $12,035 in cash compared to
$2,629 at December 31, 1999. The Company has a revolving line of credit with
one bank in the amount of $200,000, which, as of June 30, 2000 was at a zero
balance. During the six month period ended June 30, 2000, the Company raised
$750,000 in a private placement of its common stock at $3.00 a share, $291,000
of which was contributed by the Company's directors. The Company is currently
engaged in a new private placement of its Common Stock to raise an additional
$1 million for working capital purposes. The continuance of the Company is
dependent upon its ability to successfully develop and market its DDX digital
amplifier technology and raise additional funds for such purposes. There can be
no assurance, however, that the Company will be able to raise the funds that it
needs to continue its operations in the long term or that additional funds will
be available to the Company on acceptable terms, if at all.
9
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not Applicable
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
None
ITEM 2 - CHANGES IN SECURITIES.
During the first half of 2000, the Company sold 250,000 shares of Common
Stock in a private placement under Section 4(2) of the Securities Act at a price
of $3.00 per share.
In April 2000, the Company sold, upon the exercise of options, 20,000
shares of Common Stock to each of two directors, Messrs. Spiegel and Stein, at
$0.55 per share, and 2,000 shares of Common Stock to Mr. Tuck, at $1.25 per
share. In May 2000, the Company sold, upon the exercise of options, 10,000
shares of Common Stock at $1.25 per share to a former director of the Company.
During the second quarter of 2000, the Company granted options to purchase an
aggregate of 81,000 shares of Common Stock under the Plan at exercise prices
ranging from $2.50 to $3.38 per share to nine employees of the Company and
options to purchase 40,000 shares of Common Stock under the Plan at an exercise
price of $2.48 to one director of the Company, Mr. Herbert Stein. In July 2000,
the Company granted options to purchase 25,000 shares of Common Stock under the
Plan to one employee of the Company at an exercise price of $4.15 per share.
Item 3 - Defaults Upon Senior Securities.
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER.
None
ITEM 5 - OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed in the three months
ended June 30, 2000
10
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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.
Apogee Technology, Inc.
/s/ David Spiegel
--------------------------------------------------
David Spiegel
Its President and Treasurer
(principal financial and chief accounting officer)
Date: August 14, 2000
11
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EXHIBIT INDEX
-------------
Exhibit
Number Description
------- -----------
3.1 Certificate of Incorporation of Apogee Technology, Inc., incorporated
herein by reference to Exhibit 3.1 to the Registrant's Form 10-SB, as
amended (File No. 000- 17053).
3.2 Amendment of Certificate of Incorporation of Apogee Technology, Inc.,
incorporated herein by reference to Exhibit 3.2 to the Registrant's
Form 10-SB, as amended (File No. 000- 17053).
3.3 Restated By-Laws of Apogee Technology, Inc., incorporated herein by
reference to Exhibit 3.3 to the Registrant's Form 10-SB, as amended
(File No. 000- 17053).
10.1 Form of 1999 Stock and Warrant Subscription Agreement, incorporated
herein by reference to Exhibit 10.1 to the Registrant's Form 10-SB, as
amended (File No. 000- 17053).
10.2 Form of 1999 Warrant to purchase shares of common stock of the
Registrant, incorporated herein by reference to Exhibit 10.2 to the
Registrant's Form 10-SB, as amended (File No. 000- 17053).
10.3 Form of 2000 Stock Subscription Agreement, incorporated herein by
reference to Exhibit 10.3 to the Registrant's Form 10-SB, as amended
(File No. 000- 17053).
10.4 Development and licensing Agreement dated August 13, 1999,
incorporated herein by reference to Exhibit 10.4 to the Registrant's
Form 10-SB, as amended (File No. 000- 17053).
27 Financial Data Schedule is attached hereto as Exhibit 27.
12
