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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 September 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 September 30, 2000, there were
4,682,522 shares of Common Stock, $.01 par value per share, outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No[X]
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APOGEE TECHNOLOGY, INC.
INDEX OF INFORMATION CONTAINED IN FORM 10-QSB FOR THE
QUARTER ENDED SEPTEMBER 30, 2000
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at September 30, 2000
and December 31, 1999........................................... 3
Condensed Consolidated Statements of Operations and Accumulated
Deficit for the Three and Nine Months Ended September 30, 2000 and
September 30, 1999.............................................. 4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and September 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
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
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SEPTEMBER 30, DECEMBER 31,
2000 1999
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(Audited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash............................................ $ 159,953 $ 2,629
Accounts receivable............................. 51,886 50,558
Prepaid expenses................................ 78,475 13,304
Subscriptions receivable........................ 420,000 100,000
----------- -----------
Total current assets........................ 710,314 166,491
----------- -----------
EQUIPMENT, AT COST, NET OF ACCUMULATED DEPRECIATION
OF $86,895 AND $64,011................... 103,656 30,459
----------- -----------
OTHER ASSETS:
Digital Amplifier patent, net of amortization of
$50,398 and $41,764............................ 33,996 28,558
----------- -----------
Total Other Assets 33,996 28,558
----------- -----------
Total Assets $ 847,966 $ 225,508
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses........... $ 292,750 $ 294,927
Bank Line of Credit............................. -.- 200,000
Current Portion - Capitalized Lease
obligations.................................... 10,781 -.-
Loans payable - stockholders.................... 215,168 295,168
Accrued interest - stockholders................. -.- 51,529
Subscription deposit............................. -.- 20,000
----------- -----------
Total current liabilities................... 518,699 861,624
----------- -----------
OTHER LIABILITIES
Capitalized lease obligations, net of current
portions........................................ 25,932 -.-
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STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.01 par value;
9,000,000 shares authorized, 4,682,522 and -----------
4,155,022 shares issued and outstanding in
2000 and 1999, respectively.................... 41,550
46,825
Common stock subscribed (112,000and 165,000
shares, respectively) 1,120,000 330,000
Additional paid-in capital...................... 7,579,308 6,287,233
Accumulated deficit............................. (8,442,798) (7,294,899)
----------- -----------
Total stockholders' equity (deficiency)..... 303,335 (636,116)
$ 847,966 $ 225,508
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Consulting income $ 47,700 $ 16,000 $ 47,700 $ 16,000
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Research and development 341,232 216,508 618,708 478,490
Selling, general and administrative 234,580 131,432 558,655 266,513
----------- ----------- ----------- -----------
575,812 347,940 1,177,363 745,003
----------- ----------- ----------- -----------
LOSS BEFORE OTHER EXPENSES (528,112) (331,940) (1,129,663) (729,003)
OTHER EXPENSES
Interest expense (1,455) (5,242) (18,236) (19,672)
Loss on disposal of asset -.- -.- -.- (320)
----------- ----------- ----------- -----------
Total other expenses (1,455) (5,242) (18,236) (19,992)
----------- ----------- ----------- -----------
NET LOSS (529,567) (337,182) (1,147,899) (748,995)
Accumulated deficit - beginning (7,913,231) (6,644,305) (7,294,899) (6,232,492)
----------- ----------- ----------- -----------
ACCUMULATED DEFICIT - ENDING $(8,442,798) $(6,981,487) $(8,442,798) $(6,981,487)
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $(0.11) $ (0.09) $(0.25) $(0.23)
BASIC AND DILUTED WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING 4,679,489 3,667,851 4,502,219 3,295,445
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
2000 1999
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CASH FLOWS FROM OPERATIONS
Net loss........................................ $(1,147,899) $ (748,995)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on sale of assets........................ -.- 320
Accrued interest - stockholders............... 10,071 15,100
Depreciation and amortization................. 31,520 20,011
Change in operating assets and liabilities:
Accounts receivable........................ (1,328) -.-
Prepaid expenses........................... (65,171) (408)
Accounts payable and accrued expenses (2,177) 29,890
----------- ---------
Net cash used in operating activities... (1,174,984) (648,082)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment........................... (59,369) (10,173)
Patent costs.................................... (14,073) (3,186)
----------- ---------
Net cash used in investing
activities......................... (73,422) (13,359)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Bank Line of Credit............... 170,000 200,000
Repayment of Bank Line of Credit................ (370,000) -.-
Proceeds from common stock subscriptions........ 1,625,750 321,668
Other capital contributions..................... -.- 29,166
Proceeds of loans from stockholders............. -.- 144,000
Repayments of stockholder loans................. (20,000) (40,000)
Increase in bank overdraft . -.- 50,491
Repayment of capital lease obligations.......... -.- (7,884)
Net cash provided by financing activities 1,405,750 697,441
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Increase in cash.................................. 157,324 -.-
Cash - beginning.................................. 2,629 -.-
----------- ---------
Cash - ending..................................... $ 159,953 $ -.-
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 10-QSB. 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 nine month periods ended September 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)).
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. As of September 30,
2000, the Company had no borrowings under this line.
3. STOCK TRANSACTIONS
In July and September 2000, the Company issued 10,000 shares and 3,000
shares, respectively, of common stock at $1.25 per share to a former director
and former employee, respectively, upon the exercise of vested options issued
pursuant to the 1997 stock option plan.
In August 2000, the Board of Directors authorized a new private placement for
up to 200,000 shares of common stock at $10 per share for a total amount of
$2,000,000. At September 30, 2000, the Company had received subscriptions
for 112,000 shares for a total of $1,120,000, of which $700,000 was received
as of September 30, 2000 and the remaining $420,000 was received in October
2000.
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APOGEE TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
3. STOCK TRANSACTIONS (CONTINUED)
During the fourth quarter through November 3, 2000, the Company received
additional subscriptions totaling $930,000 for 93,000 shares of common stock.
4. STOCK OPTIONS
In August 2000, the Company awarded two directors nonqualified options to
purchase 10,000 shares of common stock each at $12.00 per share, vesting over
five years.
5. ADDITIONAL PAID-IN CAPITAL
As of September 2000, all interest has been waived on stockholder loans to
the Company. Such accrued interest totaling $61,600 has been credited to
additional paid-in capital.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations for the Three and Nine Month Periods Ended September 30,
2000 and September 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. At September 30, 2000, the Company had an accumulated deficit
of $8,442,798, 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 have been incurred through September 30, 2000 to
fabricate engineering device samples and in connection with the hiring of
additional engineering personnel.
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RESULTS OF CONTINUING OPERATIONS OF THE COMPANY
Revenues. To date, the Company has not generated any revenues from the
sale of its DDX products. For the three and nine month periods ended
September 30, 2000 and September 30, 1999, revenues increased to $47,000 from
$16,000, or 190%. This increase was due to a consulting arrangement which
generated income in the quarter ended September 30, 2000.
Research and Development Expenses. Research and development expenses
increased approximately 58% to $341,232 in the three months ended September 30,
2000 compared with $216,508 for the same period in 1999. For the nine month
period ended September 30, 2000, research and development expenses increased 29%
to $618,708 compared with $478,490 for the same period in 1999. These increases
over the three and nine 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. The Company continues to focus its
activities on DDX product development. During the three month period ended
September 30, 2000, the Company completed its first DDX semiconductor products
and developed technical information and evaluation circuitry to support the
marketing of these 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 78% to $234,580 in the quarter ended September 30, 2000 compared
with $131,432 for the same period in 1999. For the nine month period ended
September 30, 2000, SG&A expenses increased 110% to $558,655 compared with
$266,513 for the same period in 1999. These increases reflect the Company's
expansion of management and administrative staff to support the marketing of 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 nine month periods ended September 30, 2000 as it hired
marketing consultants to help promote its first DDX products. The higher
percentage increase in the nine month period rather than the three month period
ended September 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 three month period ended
September 30, 2000 totaled $529,567, or $0.11 per basic and diluted common
share, compared to a loss of $337,182, or $0.09 per basic and diluted common
share, for the three month period ended September 30, 1999. The Company's net
loss for the nine month period ended September 30, 2000 totaled $1,147,899, or
$0.25 per basic and diluted common share, compared to a loss of $748,995, or
$0.23 per basic and diluted common share, for the nine month period ended
September 30, 1999. These increase were 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 September 30, 2000, the Company had approximately $160,000 in cash
compared to $3,000 at December 31, 1999. Net cash used in operations during the
nine months ended September 30, 2000 was $1,174,984 compared to $684,082 used in
the nine months ended September 30, 1999. During the nine month period ended
September 30, 2000, the Company received from private placements of its common
stock $215,000 at $2.00 per share, $670,000 at $3.00 a share, $291,000 of which
was
9
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contributed by the Company's directors, and $700,000 at $10.00 per share.
An additional $420,000 at $10.00 per share was collected during October 2000.
Through the nine month period ended September 30, 2000, the Company also
received $40,750 upon the exercise of stock options. The Company has a revolving
line of credit with one bank in the amount of $200,000, which, as of September
30, 2000 was at a zero balance. 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 successfully develop and
market its DDX products or 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.
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.
In July and September 2000, the Company issued 10,000 shares and 3,000
shares, respectively, of common stock at $1.25 per share to a former director
and former employee, respectively, upon the exercise of vested options issued
pursuant to the 1997 stock option plan.
During the three months ended September 30, 2000, the Company sold 112,000
shares of Common Stock in a private placement under Section 4(2) of the
Securities Act at a price of $10.00 per share.
In August 2000, the Company granted options to purchase 10,000 shares of
Common Stock under the Plan to each of two directors of the Company at an
exercise price of $12.00 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
September 30, 2000
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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: November 14, 2000
11
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EXHIBIT INDEX
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Exhibit
Number Description
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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.
</TABLE>
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