FORM 10-QSB
- --------------------------------------------------------------------------------
U.S. Securities and Exchange Commission
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 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: 0-21394
DEVELOPED TECHNOLOGY RESOURCE, INC.
(Exact name of issuer as specified in its charter)
MINNESOTA 41-1713474
State of Incorporation I.R.S. Employer Identification No.
7300 METRO BOULEVARD, SUITE 550
EDINA, MINNESOTA 55439
Address of Principal Executive Office
(612) 820-0022
Issuer's Telephone Number
Check whether the issuer (1) has 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___
As of June 26, 1998, there were 805,820 shares of the issuer's Common Stock,
$0.01 par value per share, outstanding.
<PAGE>
DEVELOPED TECHNOLOGY RESOURCE, INC.
INDEX
FOR THE QUARTER ENDED APRIL 30, 1998
PAGE NO.
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 15
<PAGE>
ITEM 1. CONDENSED UNAUDITED FINANCIAL STATEMENTS
DEVELOPED TECHNOLOGY RESOURCE, INC.
CONDENSED BALANCE SHEETS
ASSETS
APRIL 30, OCTOBER 31,
1998 1997
---------- ----------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 196,444 $ 311,441
Inventory 16,294
Receivables:
Trade, net 67,150 97,939
Sale of discontinued operations 480,000 440,000
FoodMaster International L.L.C. (FMI) 161,396 579,582
Other 714 714
Note receivable 623,875 --
Prepaid and other current assets 128,790 46,046
---------- ----------
Total current assets 1,674,663 1,475,722
Furniture and Equipment, net 48,560 45,466
Investment in FMI 895,477 788,785
Receivable from Sale of Discontinued Operations -- 40,000
---------- ----------
$2,618,700 $2,349,973
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 108,735 $ 100,269
Accrued liabilities 111,936 124,838
Deferred gain short-term 467,065 426,590
---------- ----------
Total current liabilities 687,736 651,697
Non-current Deferred Gain 37,224 80,675
Commitments and Contingencies -- --
Shareholders' Equity:
Common stock 8,058 7,908
Additional paid-in capital 5,341,648 5,319,298
Accumulated deficit (3,455,966) (3,709,605)
---------- ----------
Total shareholders' equity 1,893,740 1,617,601
---------- ----------
$2,618,700 $2,349,973
========== ==========
See accompanying notes to the financial statements.
<PAGE>
DEVELOPED TECHNOLOGY RESOURCE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30, SIX MONTHS ENDED APRIL 30,
1998 1997 1998 1997
----------- ------------ ---------- ------------
(As Restated (As Restated
See Note 4) See Note 4)
<S> <C> <C> <C> <C>
Revenues:
Sales $ 71,318 $ 861,417 $ 418,162 $ 2,193,103
Management fees from FMI joint venture 293,472 199,111 581,435 199,111
Commissions and other income 1,306 39,943 2,976 49,620
----------- ----------- ----------- -----------
366,096 1,100,471 1,002,573 2,441,834
----------- ----------- ----------- -----------
Cost and Expenses:
Cost of sales 59,350 222,402 333,712 1,179,078
Selling, general and administrative 337,214 381,264 646,682 840,042
----------- ----------- ----------- -----------
396,564 603,666 980,394 2,019,120
----------- ----------- ----------- -----------
Operating (Loss) Income (30,468) 496,805 22,179 422,714
Other Income:
Interest income, net 82,504 1,650 124,767 8,357
Equity in earnings of FMI joint venture 62,305 15,663 106,693 15,663
----------- ----------- ----------- -----------
Income before Minority Interest 114,341 514,118 253,639 446,734
Minority Interest in Earnings of FoodMaster -- (59,939) -- (93,553)
----------- ----------- ----------- -----------
Net Income $ 114,341 $ 454,179 $ 253,639 $ 353,181
=========== =========== =========== ===========
Net Income per Common Share:
Basic $ 0.14 $ 0.57 $ 0.32 $ 0.44
============ =========== =========== ===========
Diluted $ 0.10 $ 0.52 $ 0.23 $ 0.42
============ =========== =========== ===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
DEVELOPED TECHNOLOGY RESOURCE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(As Restated
See Note 4)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 253,639 $ 353,181
Adjustments to Reconcile Net Income to Cash
Provided/(Used) by Operating Activities:
Depreciation 10,268 23,531
Provision for doubtful accounts -- (24,683)
Loss on sale of furniture and equipment 688 3,865
Minority interest in earnings of joint venture -- 93,553
Equity in earnings of FMI joint venture (106,692) (15,662)
Changes in Operating Assets and Liabilities,
net of transfers to joint venture:
Receivables (93,086) (109,859)
Receivable from FMI joint venture 418,186 (396,579)
Inventories (16,294) (226,517)
Prepaid and other current assets (82,744) 24,493
Accounts payable and accrued liabilities (4,436) 125,800
Deferred gains (2,976) (65,958)
Customer deposits -- (11,370)
--------- ---------
Net cash provided/(used) by operating activities 376,553 (226,205)
--------- ---------
INVESTING ACTIVITIES:
Proceeds from Sale of Furniture and Equipment 1,400 70,736
Purchases of Furniture and Equipment (15,450) (260,877)
Notes Receivable (500,000) --
Advances to Joint Venture -- (46,145)
Deferred Acquisition Costs -- 35,616
--------- ---------
Net cash used by investing activities (514,050) (200,670)
--------- ---------
FINANCING ACTIVITIES:
Principal Payments on Note Payable -- (8,900)
Proceeds from Exercise of Stock Options 22,500 --
--------- ---------
Net cash provided/(used) by financing activities 22,500 (8,900)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (114,997) (435,775)
CASH AND CASH EQUIVALENTS, Beginning of Period 311,441 635,609
--------- ---------
CASH AND CASH EQUIVALENTS, End of Period $ 196,444 $ 199,834
========= =========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
DEVELOPED TECHNOLOGY RESOURCE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Developed Technology Resource, Inc. (DTR or the Company) owns and manages
food businesses in the countries of the former Soviet Union (fSU) through
FoodMaster International L.L.C. (FMI), its joint venture with Agribusiness
Partners International L.P. (API). FMI purchases dairy manufacturing
facilities in the fSU and provides equipment and necessary capital. DTR
manages the dairies and pursues future acquisitions for FMI. Using modern
marketing techniques and packaging equipment, the dairies provide customers
in the fSU better quality branded dairy products.
In fiscal 1998 and 1997, DTR also sold equipment to various customers
throughout the fSU.
During fiscal 1998, DTR's 100% owned subsidiary, SXD, Inc., distributed
X-ray tubes under an exclusive arrangement with a Russian manufacturer and
held ownership interests in the coatings technology business of Phygen,
Inc. and the cancer detection business of Armed. These operations were
formerly operated by DTR in fiscal 1997.
Basis of Presentation
The interim financial statements of Developed Technology Resource, Inc.
(DTR) are unaudited, but in the opinion of management, reflect all
necessary adjustments for a fair presentation of the financial position, as
well as, the results of operations and cash flows for the periods
presented.
From November 1996 through February 1997, the financial statements include
the operations of DTR and FoodMaster Corporation (FoodMaster), DTR's 50%
owned subsidiary in Almaty, Kazakhstan. All significant intercompany
transactions and balances were eliminated in consolidation. On March 3,
1997, DTR contributed its 50% ownership of FoodMaster to the FMI joint
venture for a 40% ownership in FMI. Effective March 1997, DTR records its
proportionate share of the net income or loss of FMI in the statement of
operations as equity in earnings of FMI joint venture under the equity
method of accounting. The excess of DTR's underlying equity in net assets
of FMI over the carrying value of its investment is being amortized to
income over 15 years.
The results of operations for any interim period are not necessarily
indicative of results for the full year. These financial statements should
be read in conjunction with the Company's Annual Report and Notes thereto
on Form 10-KSB for the year ended October 31, 1997 as filed with the
Securities and Exchange Commission.
Segment Reporting
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 131, DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. This statement is
effective for fiscal years beginning after December 15, 1997. The Company
has not yet evaluated the full impact of the adoption of SFAS 131.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expense during the reporting period. Actual results could differ from those
estimates.
2. AK-BULAK OPTION
Effective August 1996, the Company obtained an option to purchase 80% of
Ak-Bulak, an inactive company which owned the other 50% of the FoodMaster
joint venture. This purchase of 80% of Ak-
<PAGE>
Bulak would give DTR an additional 40% ownership of FoodMaster. To exercise
the option, the Company agreed to pay certain pre-defined outstanding debts
of Ak-Bulak, the other owner of FoodMaster, and to make capital
improvements to the dairy owned by FoodMaster. As of March 2, 1997, DTR had
paid $171,774 in connection with the exercise of this option. On March 3,
1997, DTR contributed its 50% ownership in FoodMaster along with its option
to acquire the additional 40% ownership to the FMI joint venture. FMI
repaid DTR for all but $14,045 of the costs paid through March 2, 1997 to
exercise the option (See Note 3).
3. INVESTMENT IN FOODMASTER INTERNATIONAL L.L.C. (FMI)
On March 3, 1997, DTR and API established the FMI joint venture, to acquire
and operate dairies in the former Soviet Union. DTR contributed to FMI its
50% ownership in FoodMaster, the Ak-Bulak option (See Note 2) and its
opportunities for a future acquisition of a dairy in Moldova. API agreed to
fund $2.945 million to further develop the dairy operations in Kazakhstan
and Moldova and to provide an additional $3.055 million over two years to
expand FMI. By April 30, 1998, API contributed $5.533 million of its $6
million commitment to FMI. Under the agreement, API currently owns 60% and
DTR owns 40% of FMI. However, DTR has a right to earn a greater ownership
interest of FMI by achieving certain defined performance targets based on
returns to API. Effective March 1997, DTR records its proportionate share
of the net income or loss of FMI in the statement of operations as equity
in earnings of FMI joint venture under the equity method of accounting.
DTR also entered into a management agreement with FMI, whereby DTR manages
the day to day operations of FMI and the dairy operations owned by FMI, and
pursues future dairy acquisitions for FMI for a management fee. The Company
recorded management fee income of $581,435 and $199,111 for the six months
ended April 30, 1998 and 1997, respectively, in accordance with its
management agreement with FMI which began March 3, 1997.
Summarized financial information from the unaudited financial statements of
FMI carried on the equity basis is as follows:
<TABLE>
<CAPTION>
April 30, 1998
----------------
<S> <C>
Current assets $ 7,308,870
Total assets 14,551,446
Noncurrent liabilities 1,343,431
Shareholders' equity 9,130,799
DTR's share of FMI's equity 3,652,320
DTR's carrying value of FMI's equity 895,477
Six Months Ended
April 30, 1998
----------------
Sales $ 8,371,548
Gross profit 1,282,853
Net loss (6,090)
DTR's share of FMI's loss before adjustment of DTR's excess
of net equity over carrying value of the investment (2,436)
DTR's share of equity in earnings of FMI joint venture after adjustment 106,693
</TABLE>
4. RESTATEMENT The Company has restated its financial statements for the three
and six months ended April 30,1997 to properly account for the transfer of
DTR's FoodMaster operations to the FMI joint venture which occurred in
March 1997. The effects of these adjustments on the financial statements
for the three and six month periods ended April 30, 1997 are as follows:
<PAGE>
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Three Months Ended April 30, Six Months Ended April 30,
---------------------------- ----------------------------
1997 1997 1997 1997
----------- ----------- ----------- -----------
As previously As Restated As previously As Restated
reported reported
<S> <C> <C> <C> <C>
Revenues $ 1,027,536 $ 1,100,471 $ 2,368,899 $ 2,441,834
Cost of sales 547,795 222,402 1,504,471 1,179,078
Selling, general & administrative 311,455 381,264 726,225 840,042
----------- ----------- ----------- -----------
Operating income 168,286 496,805 138,203 422,714
Interest income, net 6,531 1,650 13,238 8,357
Equity in earnings(loss) of FMI (36,712) 15,663 (36,712) 15,663
Minority interest in earnings of FoodMaster (36,789) (59,939) (70,403) (93,553)
Income taxes (31,492) -- (75,500) --
----------- ----------- ----------- -----------
Net income(loss) $ 69,824 $ 454,179 $ (31,174) $ 353,181
=========== =========== =========== ===========
Net income(loss) per share - basic $ 0.08 $ 0.57 $ (0.04) $ 0.44
=========== =========== =========== ===========
Net income(loss) per share - diluted $ 0.07 $ 0.52 $ (0.04) $ 0.42
=========== =========== =========== ===========
</TABLE>
April 30, 1997
--------------------------
BALANCE SHEET DATA: As Previously
Reported As Restated
----------- -----------
A/R from FoodMaster International L.L.C. (FMI) $ 403,724 $ 396,579
Advance payments to suppliers 23,172 --
Prepaid and other current assets 40,030 62,123
Furniture and equipment, net 31,883 31,747
Investment in FMI 407,060 741,797
Accounts payable 48,626 59,486
Accrued liabilities 184,002 70,527
Deferred revenues 625,086 669,724
Shareholders' equity 876,012 1,260,366
5. STOCK ACTIVITY
On November 6, 1997, the Board of Directors adopted the 1997 Outside
Directors Stock Option Plan, superseding the 1993 Outside Directors Stock
Option Plan. In exchange for the surrender of all stock options previously
granted to the outside directors, the Board granted stock options of 15,000
shares of common stock to the two current outside directors at an exercise
price of $1.50 per share, which was equal to the market price on the grant
date. As of April 30, 1998, 15,000 of the 30,000 issued options were
exercised.
In the first quarter of fiscal 1997, 48,190 shares of common stock were
redeemed in exchange for the satisfaction of a $29,035 account receivable
owed by a former employee.
6. NET INCOME PER COMMON SHARE
Effective November 1, 1997, DTR adopted Statement of Financial Accounting
Standards (SFAS) No. 128, EARNINGS PER SHARE. Under this new standard,
basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted net income
per share includes the dilutive effect of shares which would be issued upon
the exercise of outstanding stock options and warrants, reduced by the
number of shares which are assumed to be purchased by the Company from the
resulting proceeds at the average market price during the period.
<PAGE>
<TABLE>
<CAPTION>
Three months ended April 30, Six months ended April 30,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 114,341 $ 454,179 $ 253,639 $ 353,181
========== ========== ========== ==========
Denominator:
Weighted average shares-basic earnings 805,820 790,820 800,350 801,203
Dilutive effect of stock options/warrants 332,727 88,764 316,627 36,435
---------- ---------- ---------- ----------
Weighted average shares-diluted earnings 1,138,547 879,584 1,116,977 837,638
========== ========== ========== ==========
Net income per share - Basic $ 0.14 $ 0.57 $ 0.32 $ 0.44
========== ========== ========== ==========
Net income per share - Diluted $ 0.10 $ 0.52 $ 0.23 $ 0.42
========== ========== ========== ==========
</TABLE>
Options and warrants to purchase 50,000 and 78,501 shares of common stock
as of April 30, 1998 and 1997, respectively, were not included in the
computation of diluted earnings per share because their exercise prices
were greater than the average market price of the common shares and,
therefore, their inclusion would be antidilutive.
7. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash operating and investing activities:
In the first quarter of fiscal 1997, the Company redeemed 48,190 shares of
common stock in exchange for the satisfaction of a $29,035 account
receivable owed by a former employee. On March 2, 1997, the Company
contributed $626,917 in net assets of its FoodMaster joint venture to
FoodMaster International L.L.C. (FMI) for its 40% interest as discussed in
Note 3.
The non-cash effects of these transactions have been removed from the
appropriate categories in the operating and investing section of the
Company's Statements of Cash Flows for the six months ended April 30, 1997.
Supplemental cash flow information:
For the six months ended April 30, 1998 1997
---------------------------------- -------- --------
Cash paid for:
Interest $ 256 $ --
Taxes $ -- $ --
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements other than current or historical information included in
this Management's Discussion and Analysis and elsewhere in this Form 10-QSB, in
future filings by Developed Technology Resource, Inc. (the Company or DTR) with
the Securities and Exchange Commission and in DTR's press releases and oral
statements made with the approval of authorized executive officers, 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. DTR wishes to caution the reader not to place undue
reliance on any such forward-looking statements.
On March 3, 1997, DTR and API established the FMI joint venture to
acquire and operate dairies in the former Soviet Union. DTR contributed to FMI
its 50% ownership in FoodMaster, the Ak-Bulak option and its opportunities for a
future acquisition of a diary in Moldova. API agreed to fund $2.945 million to
further develop the dairy operations in Kazakhstan and Moldova and to provide an
additional $3.055 million over two years to expand FMI. By April 30, 1998, API
contributed $5.533 million of its $6 million commitment to FMI. Under the
agreement, API currently owns 60% of FMI. DTR owns 40% of FMI. However, DTR has
a right to earn a greater ownership interest of FMI by achieving certain defined
performance targets based on returns to API. Effective March 1997, DTR records
its proportionate share of the net income or loss of FMI in the statement of
operations as equity in earnings of FMI joint venture under the equity method of
accounting.
In November 1997, DTR's Board of Directors voted to establish a
wholly-owned subsidiary company called SXD, Inc. with an investment of $800,000
in cash and receivables. SXD will own and operate the non-dairy portion of DTR's
business, which includes the x-ray tube distribution business, ownership
interests in the coating technology business of Phygen, Inc., and the cancer
detection business of Armed.
RESULTS OF OPERATIONS
REVENUES
The Company generated total revenues of $366,096 and $1,002,573 during
the three and six months ended April 30, 1998, respectively, compared to
$1,100,471 and $2,441,834 during the three and six months ended April 30, 1997,
respectively. This 59% and 67% respective decrease in revenues from fiscal
periods in 1997 to 1998 is the result of the change from the consolidated method
of reporting joint venture operating results to the equity method as discussed
above. The decrease in revenues was offset by management fee income of $293,472
and $581,435 for the three and six month periods in fiscal 1998. During fiscal
1997, this fee did not begin until March 3, 1997. Therefore, the fee from March
3,1997 to April 30, 1997 was $199,111.
Sales for the three months ended April 30, 1998 and 1997 totaled
$71,318 and $861,417, respectively. Sales for the six months ended April 30,
1998 and 1997 totaled $418,162 and $2,193,103, respectively. Sales resulted from
three areas within DTR - dairy operations of FoodMaster (until March 2, 1997),
equipment sales, and x-ray tube sales.
Since March 3, 1997, the dairy operations of FoodMaster are no longer
reported on a consolidated basis with DTR due to the transfer of FoodMaster to
FMI. The dairy operations of FoodMaster are consolidated in the financial
statements of FMI, and DTR recognizes 40% of FMI's income or loss as equity in
earnings of FMI joint venture in DTR's Statements of Operations. FoodMaster
sales from
<PAGE>
November 1996 through February 1997 were $1,774,870 or 80.9% of DTR's total
sales for the first six months of fiscal 1997.
Sales commissions on food packaging equipment were $2,618 (3.7%) of
total sales in the second quarter ended April 30, 1998. There were $318,125 of
equipment sales in the second quarter of fiscal 1997. Total equipment sales for
the first six months of fiscal 1998 and fiscal 1997 were $282,262 and $317,203,
respectively. Sales of equipment occur sporadically throughout the year. Thus,
in fiscal 1998, equipment sales occurred in the first quarter and not the second
quarter, and in fiscal 1997, sales did not occur until the second quarter.
Sales of x-ray tubes by SXD, Inc., DTR's 100% owned subsidiary,
increased to $135,900 in the first six months of fiscal 1998 from $101,030 in
the first six months of fiscal 1997. The 35% increase occurred due to an
increase in the quantity of orders from repeat customers during fiscal 1998.
COST OF SALES
Cost of sales for the three and six months ended April 30, 1998 was
$59,350 and $333,712, respectively. For the three and six months ended April 30,
1997, cost of sales was $222,402 and $1,179,078. The 72% decrease in cost of
sales between the six months ended April 30, 1998 and 1997 is the result of the
change in accounting methods discussed above. Cost of sales reflects the cost of
manufacturing the dairy products of FoodMaster for the first four months of
fiscal 1997, the cost of purchasing food packaging equipment and x-ray tubes.
There is no cost of sales reflected for FoodMaster in fiscal 1998.
FoodMaster cost of sales was $871,937 or 49.1% of FoodMaster sales for the six
months ended April 30, 1997.
Cost of sales on equipment sales was $216,762 resulting in a gross
profit of $65,500 or 23.2% for the first six months of fiscal 1998 compared to
$219,211 resulting in a gross profit of $97,992 or 30.9% in the first six months
of fiscal 1997. During fiscal 1998, the Company spent more on sales commissions,
thus reducing their overall gross profit. X-ray tubes cost of sales were
$116,950 and $87,930 in the first six months of fiscal 1998 and 1997,
respectively. Gross profit remained consistent with a 13% to 14% margin received
on sales. Management does not expect these trends to change significantly.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the three months ended
April 30, 1998 and 1997 were $337,214 and $381,264, respectively. Selling,
general and administrative expenses for the six months ended April 30, 1998 and
1997 were $646,682 and $840,042, respectively. During the first six months of
fiscal 1997, FoodMaster operations comprised $488,516 of the $840,042 SG&A
expenses. Therefore, the Company's other SG&A expenses excluding the FoodMaster
operations was $351,526. The $295,156 increase in SG&A expenses excluding
FoodMaster operations is the result of DTR hiring additional employees and
consultants and increasing their travel to manage the dairy operations of FMI.
However, these costs are offset by the management fees billed to FMI as
discussed above under REVENUES.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
DTR increased its cash provided by operating activities to $376,553 in
the first six months of fiscal 1998 compared to cash used of $226,205 in the
first six months of fiscal 1997. This large swing
<PAGE>
between cash usage and cash provided occurred because a majority of the
operating expenses were paid in accordance with the management agreement between
DTR and FMI during all six months of fiscal 1998. In addition, the first six
months of fiscal 1998 do not reflect FoodMaster's operations which significantly
affected the use of cash during the first four months of fiscal 1997.
INVESTING ACTIVITIES
In the first quarter of fiscal 1998, DTR's 100% owned subsidiary, SXD,
Inc. used $500,000 of its excess cash to invest in a note receivable from an
unaffiliated private company. In the first six months of fiscal 1997, DTR
purchased $260,877 of equipment largely for its FoodMaster operations. Most of
the proceeds of $70,736 resulted from the sale of equipment owned by DTR.
FINANCING ACTIVITIES
In the first quarter of fiscal 1998, 15,000 options to purchase DTR's
Common Stock were exercised for a purchase price of $1.50 per share. DTR's
FoodMaster operations obtained $70,910 in bank financing during fiscal 1996 and
began to make principal payments on this note in the first quarter of fiscal
1997. FoodMaster made total principal payments of $8,900 on its bank note
payable during the period from November 1996 to February 1997, before the
operations were transferred to FMI.
Based on current projections, the Company believes there will be
sufficient working capital and liquidity to fund its current operations through
fiscal 1998. Management is continually looking for new sources of funding to
finance the expansion for its subsidiaries FMI and SXD.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Shareholders meeting on April 14,
1998. The shareholders voted by a majority vote to re-elect the
current board of directors (Peter L. Hauser, John P. Hupp and Roger
W. Schnobrich) and to retain the services of Deloitte & Touche LLP
as the Company's independent auditors. No other matters were
submitted to a vote of the shareholders during the second quarter of
fiscal 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following new Exhibits are filed as part of this Form 10-QSB:
(a) List of Exhibits
27.1 Financial Data Schedule (April 30, 1998)
27.2 Financial Data Schedule (April 30, 1997 restated)
(b) Reports on Form 8-K
There no reports on Form 8-K filed during the quarter ended
April 30, 1998.
<PAGE>
EXHIBIT INDEX
The following Exhibits are filed as part of this Form 10-QSB:
No. EXHIBIT DESCRIPTION
27.1 Financial Data Schedule (April 30, 1998)
27.2 Financial Data Schedule (April 30, 1997 restated)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DEVELOPED TECHNOLOGY RESOURCE, INC.
Date: June 30, 1998 By /s/ John P. Hupp
--------------------------------------------------
Name: John P. Hupp
Title: President
Date: June 30, 1998 By /s/ LeAnn H. Davis
Name: LeAnn H. Davis, CPA
Title: Chief Financial Officer
(Principal Financial & Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
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<FISCAL-YEAR-END> OCT-31-1998 OCT-31-1998
<PERIOD-END> APR-30-1998 APR-30-1998
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0 0
0 0
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0 0
0 0
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