SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-KSB
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
OR
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-21394
DEVELOPED TECHNOLOGY RESOURCE, INC.
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
Securities registered pursuant to Section 12(b) of the Exchange Act:
NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE PER SHARE
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 ___
Check if no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B contained in this form, and no disclosure will be contained, to the best of
the registrant's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB { }
Issuer's revenues for its most recent fiscal year: $3,310,043
As of March 6, 1998, 805,820 shares of the Registrant's Common Stock were
outstanding. The aggregate market value of the Common Stock held by
non-affiliates of the registrant on such date, based upon the closing bid price
of the Common Stock as reported by the OTC Bulletin Board on March 6, 1998 was
$2,140,459. For purposes of this computation, affiliates of the registrant are
deemed only to be the registrant's executive officers and directors. See Item
11.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement for its April 14, 1998 Annual Meeting
are incorporated by reference in Part III.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Developed Technology Resource, Inc. (the Company or DTR) was
incorporated on November 13, 1991 in the State of Minnesota to locate
potentially viable technologies in the former Soviet Union (fSU) for transfer
and sale to companies in the West. During the first two years of operations, the
Company experienced limited success in technology transfer and shifted its focus
to the sale and distribution of aviation security equipment in the fSU. In 1995,
the Company formed a joint venture called FoodMaster Corporation (hereinafter
FoodMaster) with Ak-Bulak to re-open the dairy in Almaty, Kazakhstan to produce
and sell yogurt and other dairy products.
During the first quarter of 1996, the Company sold its aviation
security sales and service business to Gate Technologies for $810,000 which
includes reimbursement of expenses of $45,000. This transaction is more fully
described in Item 6, "Discontinued Operations." The financial statements and
related information reflect the sale of this business as discontinued
operations. Additionally, overhead was reduced to the level necessary to
effectively support continuing operations.
After the sale of the aviation security business, the Company focused
its attention almost exclusively on development of the dairy business. 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-Bulak would give DTR an additional 40% ownership of
FoodMaster. In January 1997, FoodMaster formed a joint venture in Akmola, the
new capital of Kazakhstan, and began production at this location in March 1997.
In March 1997, DTR formed a limited liability company called FoodMaster
International L.L.C. (FMI) with Agribusiness Partners International L.L.C. and
affiliates (API) to expand the dairy business in Kazakhstan and elsewhere in the
fSU. DTR contributed its ownership interest in FoodMaster and API agreed to
contribute a total of $6 million in cash, of which $3.245 million was
contributed as of October 31, 1997. DTR owns 40% of FMI and has a right to earn
a greater ownership interest of FMI by achieving certain defined performance
targets based on returns to API. DTR manages the day-to-day operations of FMI
under a management contract.
FMI currently owns 90% of FoodMaster and 73.8% of a dairy in Hincesti,
Moldova. In December 1997, FMI received the right, by shareholder approval to
obtain at least 50% of the shares of a dairy located in Uman, Ukraine.
In November 1997, DTR's Board of Directors voted to establish a
wholly-owned subsidiary company called SXD, Inc. with a contribution of $800,000
consisting primarily of 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.
ONGOING BUSINESS STRATEGY
The Company's strategy is to expand its food business both by acquiring
additional dairies for FMI and selling additional products, including but not
limited, to dairy products. Standard dairy products
<PAGE>
will be used to enter new markets. FMI plans to increase the profitability of
the dairy operations through the introduction of additional value added
products.
BUSINESS OPERATIONS
DAIRY AND FOOD PROCESSING
DTR manages all of the dairy operations which are owned by FMI. These
dairy operations manufacture and sell a variety of different dairy products,
including but not limited to kefir, yogurt, cottage cheese, ice cream, ice pops,
and sour cream.
From November 1996 through February 1997, FoodMaster sales, which are
included in the statement of operations for the year ended October 31, 1997,
were $1,774,870. After February 1997, FoodMaster's income and expenses were no
longer reported on a consolidated basis with DTR due to the transfer of
FoodMaster's dairy operations to FMI. Since March 1997, FoodMaster's income and
expenses are consolidated in the financial statements of FMI, and DTR recognizes
40% of FMI's income or loss using the equity method of accounting. FoodMaster
recorded sales of $3,393,705 for the twelve months ended October 31, 1996.
X-RAY TUBES
The Company continues to distribute x-ray tubes under an exclusive
distribution agreement with Svetlana-Rentgen ("Svetlana"), a company located in
the fSU. Revenues from the sale of x-ray tubes accounted for 8% and 5% of DTR's
total revenues in fiscal 1997 and 1996, respectively.
FOOD PACKAGING EQUIPMENT
In November 1994, the Company signed an International Distribution
Agreement with NiMCO Corporation, of Crystal Lake, Illinois, granting the
Company exclusive rights to sell certain NiMCO products in most areas of the
fSU. From June 1995 to December 1996, the Company had a sub-distribution
agreement with Professional Packaging, Inc. (ProPak), under which the Company
received commissions on sales made by ProPak. Through this sub-distribution
agreement, DTR sold eight NiMCO packaging machines, which accounted for 16% of
DTR's revenues in fiscal 1996. The exclusive agreement with NiMCO and the
distribution agreement with ProPak expired as of December 31, 1996. DTR
continues to distribute NiMCO packaging machines on a non-exclusive basis. Sales
from these machines accounted for 13% of DTR's fiscal 1997 revenues.
COMPETITION
DAIRY AND FOOD PROCESSING. These operations compete with several local
companies, as well as foreign importers of products. However, the Company
believes that its products are superior to any other local competitors and it is
price competitive with the current imports. Currently, the Company cannot
measure its market share.
X-RAY TUBES. There are several companies that manufacture and sell x-ray tubes
in direct competition to DTR. At present, the Company does not have a measurable
market share.
FOOD PACKAGING EQUIPMENT SALES. Manufacturers producing competing equipment of
similar performance to the NiMCO line of equipment include Tetra-Laval of
Sweden, Elo-Pak of Norway, International Paper of the United States, Pastu-Pack
of the UK, and Galdi of Italy. Some of these
<PAGE>
companies have been selling equipment in the fSU more than 20 years. The Company
does not currently have a measurable market share.
PRINCIPAL SUPPLIERS
DAIRY AND FOOD PROCESSING. Suppliers to the dairy operations consist of numerous
dairy farmers located in the vicinity of the dairies. In addition, the Company
receives packaging supplies from many suppliers throughout Europe and the United
States.
X-RAY TUBES. Svetlana Rentgen, based in the fSU, is the exclusive supplier of
tubes to DTR.
FOOD PACKAGING EQUIPMENT. NiMCO, based in Crystal Lake, Illinois, is the sole
supplier of food packaging equipment to the Company.
MAJOR CUSTOMERS
For the fiscal years ended October 31, 1997 and 1996, the Company
recorded net sales of $2,467,790 and $4,466,463, respectively. The Company had
one customer that made up more than 10% of its sales in fiscal 1997. S.J.
Agro-Leasing accounted for 12.9% of the Company's net sales in fiscal 1997
through its purchases of food packaging equipment. In fiscal 1996, the Company
had no one customer that accounted for more than 10% of its sales.
GOVERNMENTAL REGULATIONS
The Company's principal revenue-generating business activity in fiscal
1997 and 1996 was the manufacturing and selling of dairy products in the fSU.
The governmental, political, social, and legal structures within countries of
the fSU are evolving. In general, business must comply with decrees, laws, and
instructions issued from a multitude of government bodies at the national and
local levels.
The government regulations that most affect the Company are in the
areas of taxation, currency and customs regulation, business registration, and
labor laws. The Company attempts to fully comply with the laws in all the
countries of the fSU in which business is conducted, and as necessary, may seek
legal counsel in the United States or from local counsel in the applicable fSU
country.
EMPLOYEES
As of March 6, 1998, the Company has three full-time employees in its
offices in Edina, Minnesota; two full-time employees in Almaty, Kazakhstan; two
full-time employees in Hincesti, Moldova; and one full-time employee in Uman,
Ukraine. All of the foreign based employees are responsible for managing the
dairy operations of FMI. The Company is not a party to any collective bargaining
agreements and it considers its employee relations to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
During fiscal 1997, the Company moved its Corporate Headquarters in
Minnentonka, Minnesota to Edina, Minnesota. This move allowed the Company to
reduce its space from 2,139 to 1,009 square feet and its monthly base rent from
approximately $2,900 to $1,500. The lease has a term of 60 months and expires on
April 30, 2002.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In 1996, the Company filed suit against a former officer for breach of
contract. The employee filed a counterclaim for breach of the severance
agreement. In January 1997, the lawsuit was settled with the former officer
relinquishing 48,190 shares of the Company's Common Stock to satisfy a $29,035
receivable. DTR has no contingent future liability.
In 1996, a former employee filed a claim with the Minnesota Department
of Human Rights and concurrently with the Equal Employment Opportunity
Commission (EEOC), charging the Company with age and national origin
discrimination. In 1997, the Minnesota Department of Human Rights denied the
claim. No further action has been taken by the former employee since the
Department's decision.
In the opinion of management, there are no material legal proceedings
pending or threatened against the Company as of October 31, 1997 or as of the
date of filing of this Form 10-KSB.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders during the
fourth quarter ended October 31, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock was traded on the National Association of
Securities Dealer Automated Quotation System (NASDAQ) from April 23, 1993 until
November 3, 1995, when the Company was de-listed as a result of noncompliance
with minimum per-share price requirements. After a three for one reverse split
in December 1995, the Company was re-listed. In the first quarter of 1996, the
Company fell below the listing requirements and was again de-listed. Since then,
the Company's Common Stock has been quoted on the OTC Bulletin Board under the
symbol of DEVT.
The following table sets forth the high and low daily average between
the bid and sales prices for each quarter as reported on the NASDAQ or the OTC
Bulletin Board during the fiscal years ended October 31, 1997 and 1996.
Average Price
FISCAL 1997 Low High
----------- --- ----
First Quarter $ 7/8 $ 1 17/32
Second Quarter 1 1 15/16
Third Quarter 1 3/16 1 31/32
Fourth Quarter 1 1/8 2
FISCAL 1996
-----------
First Quarter $ 3/4 $ 1 1/8
Second Quarter 7/8 1 1/4
Third Quarter 7/8 1 1/8
Fourth Quarter 7/8 1/1/2
<PAGE>
As of March 6, 1998, the Company had 76 shareholders of record of its
Common Stock. The Company estimates there are 660 beneficial owners of its
Common Stock.
The transfer agent for the Company's Common Stock is Norwest Bank
Minnesota, N.A., 161 North Concord Exchange, South St. Paul, Minnesota,
55075-0738, telephone: (800) 468-9716 or (612) 450-4058.
The Company has never declared or paid any dividends on its Common
Stock. The Board of Directors presently intends to retain all earnings, if any,
for use in the Company's business in the foreseeable future. Any future
determination as to declaration and payment of dividends will be made at the
discretion of the Board of Directors.
ITEM 6. 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-KSB, 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 October 31, 1997, API
contributed $3.245 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.
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 $802,492 from March 1997 to October 31, 1997
in accordance with its management agreement with FMI.
Fiscal 1996 revenues and operating expenses have been adjusted to
eliminate the sales and operating expenses of discontinued operations related to
the aviation security system and service divisions which were sold in the first
quarter of 1996.
RESULTS OF OPERATIONS
REVENUES
The Company generated total revenues of $3,310,043 in fiscal 1997,
compared to $4,616,361 in fiscal 1996. This 28.3% decrease in revenues is the
result of a 44.7% decrease in sales primarily due to
<PAGE>
DTR's consolidating only four months of FoodMaster revenue in 1997, compared to
twelve months in 1996 as a result of the transfer discussed above. The decrease
in sales was offset by the receipt of management fee revenue of $802,492 from
FMI for eight months of fiscal 1997.
Sales for fiscal 1997 and 1996 totaled $2,467,790 and $4,466,463,
respectively. Sales resulted from four areas within DTR - dairy operations of
FoodMaster, equipment, x-ray tubes and communication services. FoodMaster sales
from November 1996 through February 1997 were $1,774,870 or 71.9% of DTR's total
sales for the year ended October 31, 1997. After February 1997, FoodMaster's
income and expenses were no longer reported on a consolidated basis with DTR due
to the transfer of FoodMaster to FMI. Since March 1997, FoodMaster's income and
expenses 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 of $3,393,705 made up 76% of DTR's
fiscal 1996 sales.
Sales of food packaging equipment were $428,890 (17.4%) and $728,800
(16.3%) of total sales in fiscal 1997 and 1996, respectively. This $299,910
decrease in sales revenue is the result of DTR's shift in focus to its dairy
operations in the fSU. Sales of x-ray tubes increased slightly to $264,030 in
fiscal 1997 from $243,860 in fiscal 1996. In fiscal 1996, DTR also had $100,097
in sales of copy centers, communication services and other miscellaneous
services, which the Company discontinued in fiscal 1996 due to the shift in
focus mentioned above.
COST OF SALES
Cost of sales for fiscal 1997 was $1,398,449, compared to $3,434,683
for the same period last year. The gross profit percentage on sales for fiscal
1997 was 43.3% compared to 23.1% for fiscal 1996. Cost of sales reflects the
cost of manufacturing the dairy products in Kazakhstan for the first four months
of fiscal 1997 and twelve months of fiscal 1996 as noted above, and to a lesser
extent, the cost of purchasing food packaging equipment, x-ray tubes and
communication services.
Gross profit on dairy sales was $902,933 and $925,545 in fiscal 1997
and 1996, respectively. Gross profit on equipment sales of $130,823 or 30.5% in
fiscal 1997 also increased from gross profit of $73,137 or 10% in fiscal 1996.
Although sales of equipment was down due to the shift in DTR's focus, the gross
profit has improved due to sales to fewer but higher margin customers and
improved pricing from DTR's supplier. Gross profit on x-ray tubes decreased
slightly to $35,585 or 13.5% in fiscal 1997 compared to $41,400 or 17.0% in
fiscal 1996 due to sales price reductions on x-ray tubes.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for fiscal 1997 were
$1,382,334 compared to $1,104,187 for 1996. FoodMaster comprised $515,491 and
$524,355 of the expenses in fiscal 1997 and 1996, respectively. The increase in
the remaining SG&A of approximately $287,000 is the result of DTR hiring
additional employees and extensive traveling in the management of its dairy
operations. Any dairy related expenses after February 1997 were reimbursed 100%
through the management fees billed to FMI.
DISCONTINUED OPERATIONS
Effective December 31, 1995, DTR entered into an agreement to sell
certain assets and the rights to its airport security equipment in the fSU to
Gate Technologies, Inc., a United Kingdom company owned by a former DTR
employee. DTR transferred assets, inventory, customer lists, promotional
materials, and other items with a net book value on January 31, 1996 of
$143,293. In exchange for these items, DTR received a cash payment of $45,000 to
reimburse DTR for expenses related to this business during the first quarter of
fiscal 1996 and a note receivable totaling $765,000 payable over 30 months. A
portion of these
<PAGE>
payments is personally guaranteed by the former employee, and is collateralized
by 16,430 shares of DTR's common stock owned by the former employee. Additional
contingent payments may also be received based on future performance. DTR
retained the right to pursue airport security management contracts.
Due to the inherent risks associated with operating in the fSU,
including credit risk, the gain on this sale has been deferred and is being
recognized as payments are received. DTR received total payments of $200,000 and
$170,000 during fiscal 1997 and 1996, respectively. As a result, DTR recorded a
gain (loss) on discontinued operations of $200,000 and ($30,166) in fiscal 1997
and 1996, respectively.
In August 1997, the Board of Directors approved a revision in the sale
agreement that increased the balance due to DTR by $40,000 representing interest
on the outstanding balance. The increase in the receivable balance was accounted
for as an increase in deferred revenues. In addition, the payment terms were
revised to require two payments in 1998 with the final payment due on January 1,
1999.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
DTR increased its cash received from operating activities to $488,156
in fiscal 1997 due to improvements in its gross profit margins. In addition, a
majority of the operating expenses from March 1997 to October 1997 were
reimbursed in accordance with the management agreement between DTR and FMI. In
fiscal 1996, DTR used net cash of $277,042 primarily to pay down its debt from
vendors and to fulfill customer orders.
INVESTING ACTIVITIES
DTR used $803,424 and $454,502 of cash for investing activities largely to
support its FoodMaster and FMI joint ventures during fiscal 1997 and to support
its FoodMaster joint venture in 1996, respectively. Most of the 1997
expenditures will be reimbursed by the FMI joint venture in the future as FMI
improves its cash flows.
FINANCING ACTIVITIES
DTR's FoodMaster operations obtained $70,910 in bank financing during
fiscal 1996 and began to make principal payments on this note in fiscal 1997.
FoodMaster made total principal payments of $8,900 on its bank note payable
during the period from November 1996 to February 1997. After this period, the
FoodMaster cash flows were consolidated with FMI per the transfer discussed
above.
Based on current projections, the Company believes there will be
sufficient working capital and liquidity to fund its current operations through
fiscal 1998. In November 1997, DTR's Board of Directors voted to establish a
wholly-owned subsidiary company called SXD, Inc. with a contribution of $800,000
consisting primarily of 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.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS - DEVELOPED TECHNOLOGY RESOURCE, INC.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
DEVELOPED TECHNOLOGY RESOURCE, INC.
We have audited the accompanying balance sheet of Developed Technology Resource,
Inc. as of October 31, 1997 and the related statements of operations,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Developed Technology
Resource, Inc. as of October 31, 1997 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
March 20, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Developed Technology Resource, Inc.
Edina, Minnesota
We have audited the accompanying statements of operations, shareholders' equity,
and cash flows of DEVELOPED TECHNOLOGY RESOURCE, INC. for the year ended October
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of DEVELOPED
TECHNOLOGY RESOURCE, INC. for the year ended October 31, 1996 in conformity with
generally accepted accounting principles.
/s/ LURIE, BESIKOF, LAPIDUS & CO., LLP
Minneapolis, Minnesota
January 2, 1997
<PAGE>
DEVELOPED TECHNOLOGY RESOURCE, INC.
BALANCE SHEET
OCTOBER 31, 1997
ASSETS
Current Assets:
Cash and cash equivalents $ 311,441
Receivables:
Trade, net of allowance of $10,508 97,939
Sale of discontinued operations 440,000
FoodMaster International L.L.C. (FMI) 579,582
Other 714
Prepaid and other current assets 46,046
-----------
Total current assets 1,475,722
Furniture and Equipment, net 45,466
Investment in FMI 788,785
Receivable from Sale of Discontinued Operations 40,000
-----------
$ 2,349,973
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 100,269
Accrued liabilities 124,838
Deferred gain short-term 426,590
-----------
Total current liabilities 651,697
Non-current Deferred Gain 80,675
Shareholders' Equity:
Undesignated stock, $.01 par value, 1,666,667
shares authorized, no shares issued or
outstanding --
Common stock, $.01 par value, 3,333,334
shares authorized, 790,820 shares issued
and outstanding 7,908
Additional paid-in capital 5,319,298
Accumulated deficit (3,709,605)
-----------
Total shareholders' equity 1,617,601
-----------
$ 2,349,973
===========
See accompanying notes to the financial statements.
<PAGE>
DEVELOPED TECHNOLOGY RESOURCE, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1997 AND 1996
1997 1996
----------- -----------
Revenues:
Sales $ 2,467,790 $ 4,466,463
Management fees from FMI joint venture 802,492 --
Commissions and other income 39,761 149,898
----------- -----------
3,310,043 4,616,361
----------- -----------
Cost and expenses:
Cost of sales 1,398,449 3,434,683
Selling, general and administrative 1,382,334 1,104,187
----------- -----------
2,780,783 4,538,870
----------- -----------
Operating income 529,260 77,491
Other income:
Interest income, net 12,059 52,548
Equity in earnings of FMI joint venture 62,650 --
----------- -----------
Income from continuing operations before
income taxes and minority interest 603,969 130,039
Income tax expense -- 125,500
----------- -----------
Income from continuing operations
before minority interest 603,969 4,539
Minority interest in earnings of FoodMaster (93,553) (131,522)
----------- -----------
Income (loss) from continuing operations 510,416 (126,983)
Income (loss) from discontinued operations:
Loss from discontinued operations (30,166)
Gain from discontinued operations 200,000 --
----------- -----------
Net Income (Loss) $ 710,416 $ (157,149)
=========== ===========
Net Income (Loss) per Common Share:
Continuing operations $ 0.45 $ (0.15)
Discontinued operations 0.16 (0.04)
----------- -----------
$ 0.61 $ (0.19)
=========== ===========
Weighted Average Common Shares
Outstanding 1,285,110 839,010
=========== ===========
See accompanying notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
DEVELOPED TECHNOLOGY RESOURCE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1997 AND 1996
Common Stock Additional
------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1995 838,966 $ 8,389 $ 5,347,852 $ (4,262,872) $ 1,093,369
Adjustment for fractional
shares related to the
December 1995, 1 for
3 reverse stock split 44 1 (1) -- --
Net loss -- -- -- (157,149) (157,149)
--------------- ---------------- --------------- ---------------- ---------------
Balance, October 31, 1996 839,010 8,390 5,347,851 (4,420,021) 936,220
Redemption of shares
in exchange for
accounts receivable (48,190) (482) (28,553) -- (29,035)
Net income -- -- -- 710,416 710,416
--------------- ---------------- --------------- ---------------- ---------------
Balance, October 31, 1997 790,820 $ 7,908 $ 5,319,298 $ (3,709,605) $ 1,617,601
=============== ================ =============== ================ ===============
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
DEVELOPED TECHNOLOGY RESOURCE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1997 AND 1996
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ 710,416 $ (157,149)
Adjustments to Reconcile Net Income (Loss)
to Cash Provided/(Used) by Operating Activities:
Depreciation 39,390 98,762
Provision for doubtful accounts (224,492) 22,000
(Gain) loss on sale of furniture
and equipment (2,541) 6,122
Gain on sale of discontinued
operations (200,000) --
Minority interest in earnings
of joint venture 93,553 131,522
Equity in earnings of FMI joint
venture (62,650) --
Changes in Operating Assets and Liabilities,
net of transfers to joint venture:
Receivables 212,826 128,386
Inventories (226,517) 294,707
Prepaid and other current assets 40,570 (201,667)
Accounts payable and accrued
liabilities 220,894 (458,667)
Deferred gains (68,417) (23,480)
Customer deposits (44,876) (117,578)
----------- -----------
Net cash provided/(used) by
operating activities 488,156 (277,042)
----------- -----------
INVESTING ACTIVITIES:
Net sales of short-term investments -- 53,717
Proceeds from sale of furniture
and equipment 81,438 6,904
Purchases of furniture and equipment (294,751) (230,615)
Advances/contributions to joint
ventures (625,727) (256,198)
Cash of FoodMaster -- 7,306
Deferred acquisition costs 35,616 (35,616)
----------- -----------
Net cash used by investing
activities (803,424) (454,502)
----------- -----------
FINANCING ACTIVITIES:
Principal payments on note payable (8,900) --
Proceeds from note payable -- 70,910
----------- -----------
Net cash provided/(used) by
financing activities (8,900) 70,910
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (324,168) (660,634)
CASH AND CASH EQUIVALENTS, Beginning
of year 635,609 1,296,243
----------- -----------
CASH AND CASH EQUIVALENTS, End of year $ 311,441 $ 635,609
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
DEVELOPED TECHNOLOGY RESOURCE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1997 AND 1996
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
its joint venture, FoodMaster International L.L.C. (FMI), 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.
During fiscal 1997 and 1996, DTR also distributed X-ray tubes under an
exclusive arrangement with a Russian manufacturer, sold food packaging
equipment, and held ownership interests in the coatings technology business
of Phygen and the cancer detection business of Armed.
Basis of Presentation
From November 1995 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.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with
original maturities of three months or less at the time of purchase.
The Company maintains its cash in bank deposit accounts, which at times may
exceed federally insured limits. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit
risk on cash.
Furniture and Equipment
Furniture and equipment are recorded at cost. Depreciation is calculated on
the straight-line basis over the estimated useful lives of the assets,
primarily three to ten years.
Revenue Recognition
Revenue is recognized upon shipment of products to the customer and as
services are provided to FMI under the management agreement.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common and common equivalent
shares outstanding during the year. Common equivalent shares, such as
options or warrants, were not included in computing the net loss per common
share for the year ended October 31, 1996 since the effect would be
antidilutive.
<PAGE>
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) No. 128, EARNINGS PER
SHARE, which is required to be adopted by DTR in the reporting period
ending January 31, 1998. At that time, DTR will be required to change the
method currently used to compute net income (loss) per share and restate
all prior periods. Under the new standard for calculating basic net income
(loss) per share, the dilutive effect of stock options and warrants will be
eliminated. However, stock options and warrants will be included in the
calculation of diluted net income (loss) per share. The impact of
implementing FAS No. 128 on the calculation of net income (loss) per share
for fiscal 1997 has not yet been fully evaluated.
Segment Reporting
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) 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 FAS 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.
Financial Instruments
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosure of fair value information about financial instruments.
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of October
31, 1997.
The respective carrying value of financial instruments approximated their
fair values. These financial instruments include cash and cash equivalents,
trade receivables, accounts payable and accrued liabilities. Fair values
were assumed to approximate carrying values for these financial instruments
since they are short term in nature and their carrying amounts approximate
fair values or they are receivable or payable on demand.
Reclassifications
Certain reclassifications were made to the 1996 financial statements to
present those financial statements on a basis comparable with the current
year. The reclassifications had no effect on previously reported net loss
or accumulated deficit.
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-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 and October 31, 1996, DTR had paid $171,774
and $35,616, respectively, 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).
<PAGE>
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 October 31, 1997, API contributed $3.245 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 $802,492 from March 1997 to October 31,
1997 in accordance with its management agreement with FMI.
Summarized financial information from the audited financial statements of
FMI carried on the equity basis is as follows:
October 31, 1997
----------------
Current assets $ 3,944,710
Total assets 10,514,329
Noncurrent liabilities 946,832
Shareholders' equity 7,032,719
DTR's share of FMI 's equity 2,813,088
DTR's carrying value of FMI's equity 788,785
Eight Months Ended
October 31, 1997
----------------
Sales $ 6,784,384
Gross profit 2,504,523
Net loss (207,138)
DTR's share of FMI's loss before adjustment
of DTR's excess of net equity over carrying
value of the investment (82,855)
DTR's share of equity in earnings of
FMI joint venture after adjustment 62,650
4. FURNITURE AND EQUIPMENT
Furniture and equipment are summarized as follows:
Estimated
Useful Life
-----------
Software 5 years $ 23,605
Furniture & equipment 5 years 148,869
Leasehold improvements 5 years 4,982
-----------
177,456
Less accumulated depreciation 131,990
-----------
Furniture and equipment, net $ 45,466
===========
5. DISCONTINUED OPERATIONS
Effective December 31, 1995, DTR entered into an agreement to sell certain
assets and the rights to its airport security equipment in the fSU to Gate
Technology, a United Kingdom company owned by a
<PAGE>
former DTR employee. DTR transferred assets, inventory, customer lists,
promotional materials, and other items with a net book value on January 31,
1996 of $143,293. In exchange for these items, DTR received a cash payment
of $45,000 to reimburse DTR for expenses related to this business during
the first quarter of fiscal 1996 and a note receivable totaling $765,000
payable over 30 months. A portion of these payments is personally
guaranteed by the former employee, and is collateralized by his ownership
of 16,430 shares of DTR's common stock. Additional contingent payments may
also be received based on future performance. DTR retained the right to
pursue airport security management contracts.
Due to the inherent risks associated with operating in the fSU, including
credit risk, the gain on this sale has been deferred and will be recognized
as payments are received. DTR received total payments of $200,000 and
$170,000 during fiscal 1997 and 1996, respectively. As a result, DTR
recorded a gain (loss) on discontinued operations of $200,000 and ($30,166)
in fiscal 1997 and 1996, respectively. The operations of the business
segment and the gain on sale are presented as discontinued operations in
the statements of operations.
In August 1997, the Board of Directors approved a revision in the sale
agreement that increased the balance due to DTR by $40,000 representing
interest on the outstanding balance. The increase in the receivable balance
was accounted for as an increase in deferred revenues. In addition, the
payment terms were revised to require two payments in 1998 with the final
payment due on January 1, 1999.
6. COMMITMENTS & CONTINGENCIES
Leases
The Company leases its operating facilities under a five year operating
lease that expires on April 30, 2002. The following schedule sets forth the
future minimum rental payments required under the operating lease:
Year Ending Operating
October 31, Leases
----------- --------------
1998 $ 18,414
1999 18,919
2000 19,423
2001 19,928
2002 10,090
--------------
$ 86,774
==============
Rental expense was approximately $25,500 and $40,500 for the fiscal years
ended October 31, 1997 and 1996, respectively.
7. STOCK OPTIONS AND WARRANTS
Under the Company's 1992 Stock Option Plan (the Plan), the Board of
Directors may grant qualified or nonqualified options for up to 66,667
shares of common stock to employees and non-employees. Options granted to
employees generally vest over a three to five year period. Certain options
granted to employees contain provisions whereby vesting is accelerated in
the event the employee is terminated without cause as defined in the option
agreements. Options granted to non-employees, including directors and
consultants, vest one year after the date of grant and are exercisable for
three years from the date of grant. Effective September 30, 1996, the Plan
was amended to increase the shares available for granting to 600,000
shares.
In March 1994, the shareholders ratified the 1993 Outside Directors Stock
Option Plan. Under the terms of this plan, the Company reserved 83,333
shares of common stock for issuance to outside
<PAGE>
directors as compensation for their services as board members. Options for
1,667 shares are issued to the directors each year upon their election at
the annual shareholders meeting. The options vest after one year.
The Company applies APB Opinion 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations in accounting for the above employee
plans. Under the provisions of APB Opinion 25, if options are granted or
extended at exercise prices less than fair market value, compensation
expense is recorded for the difference between the grant price and the fair
market value at the date of the grant.
SFAS No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION, requires the Company
to provide pro- forma information regarding net income (loss) and per share
amounts as if compensation cost for the Company's stock options had been
determined in accordance with the fair value based method prescribed by
SFAS No. 123. The Company estimates the fair value of each stock option at
the grant date by using a Black-Scholes option-pricing model with the
following assumptions used for grants in 1997: no dividend yield,
volatility from 102.6% to 120.8%, risk-free interest rates of 6%, and
expected lives ranging from 18 months to 10 years. Assumptions used in the
fiscal 1996 option-pricing models are as follows: no dividend yield,
volatility from 103.6% to 132.9%, risk-free interest rates of 6%, and
expected lives ranging from 18 months to 10 years. Had compensation costs
been determined based on the fair value of options at their grant dates in
accordance with SFAS No. 123, the Company's net income would have decreased
by $98,567 in fiscal 1997 and the Company's net loss would have increased
by $462,634 in fiscal 1996. The effect on net income (loss) per share is
$0.08 and $0.55 per share for fiscal 1997 and 1996, respectively.
The following table summarizes the information about the Company's warrant
and stock option activity for the years ended October 31, 1997 and 1996:
<TABLE>
<CAPTION>
1992 Stock Option Plan Outside Weighted-
---------------------- Directors Average
Employee Stock Option Exercise
Warrants Options Plan Total Price/Share
-------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1995 46,667 41,444 6,667 94,778 $ 12.34
Granted -- 500,972 3,334 504,306 $ 1.22
------ ------- ------ -------
Balance, October 31, 1996 46,667 542,416 10,001 599,084 $ 2.90
Cancelled/expired/
or surrendered (18,334) (17,416) (3,333) (39,083) $ 11.84
Granted -- 85,000 3,334 88,334 $ 1.23
------ ------- ------ -------
Balance, October 31, 1997 28,333 610,000 10,002 648,335 $ 2.22
====== ======= ====== =======
Exercisable, October 31, 1997 28,333 125,000 6,668 160,001 $ 5.28
====== ======= ====== =======
</TABLE>
<PAGE>
The following table summarizes information about the Company's stock plans
at October 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted- Weighted- Weighted-
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Price at 10/31/97 Life (years) Price at 10/31/97 Price
-------------- ----------- ------------ ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$1.19 to $3.00 608,335 4.61 $1.27 120,001 $1.47
$6.75 5,001 .36 6.75 5,001 6.75
$15.00 to $22.50 34,999 .28 18.14 34,999 18.14
------------- --------------
648,335 160,001
============= ==============
</TABLE>
8. ECONOMIC DEPENDENCE
For the fiscal year ended October 31, 1997 and 1996, the Company had two
customers which comprised 100% of its x-ray tube sales of $264,030 and
$243,860, respectively. In addition, the Company had one supplier for these
x-ray tubes. Purchases from this supplier totaled $228,445 and $202,460 in
fiscal 1997 and 1996, respectively.
9. INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards (FAS) No. 109,
Accounting for Income Taxes. FAS No. 109 requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed annually for differences
between the financial statement and tax basis of assets and liabilities
that will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Deferred income tax assets and liabilities as of October 31, were as
follows:
1997 1996
------------ ----------
Deferred tax asset $ 1,256,400 $ 1,542,700
Deferred tax liabilities (6,500) (6,500)
Valuation allowance (1,249,900) (1,536,200)
------------ ----------
-- --
============ ==========
Deferred income tax assets and liabilities consist primarily of NOL's and
the allowance for doubtful accounts, and differences between the financial
and tax basis of furniture and equipment, respectively.
At October 31, 1997, the Company had a net operating loss (NOL)
carryforwards of approximately $3,354,000 for income tax purposes. The NOL
carryforwards expire in years 2007 through 2011 if not previously utilized.
Utilization of the available NOL carryforward may be limited due to future
significant changes in ownership under Internal Revenue Codes Section 382.
These potential future tax benefits are not recognized in the financial
statements since realization is not currently supportable.
The Company intends to permanently reinvest the earnings of FMI. Therefore,
no U.S. deferred income taxes are provided on these earnings.
<PAGE>
10. STOCK REDEMPTION
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.
11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash operating and investing activities:
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. In addition, the Company redeemed 48,190 shares of
common stock in exchange for the satisfaction of a $29,035 account
receivable as discussed in Note 10. Finally, the Company increased the
deferred gain and a corresponding receivable from the sale of discontinued
operations by $40,000 for additional interest due to DTR as discussed in
Note 5.
In fiscal 1996, DTR contributed $364,450 in inventory and equipment to its
FoodMaster joint venture. In addition, the Company recorded a note
receivable of $765,000 for the sale of its aviation security business as
discussed in Note 5 of which $15,934 was related to the transfer of
equipment and $621,707 was offset by an increase in deferred gain.
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 year ended October 31, 1997 and
1996.
Supplemental cash flow information: 1997 1996
----------------------------------- ----------- ----------
Cash paid for:
Interest -- 6,600
Taxes -- 91,376
12. SUBSEQUENT EVENTS
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 for
15,000 shares of common stock at an exercise price of $1.50 per share to
the current outside directors. As of November 6, 1997, 13,750 of the 15,000
options were vested. The remaining 1,250 were vested by December 31, 1997.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 23, 1997, Developed Technology Resource, Inc. dismissed
Lurie, Besikof, Lapidus & Co., LLP, the principal accountant previously engaged
to audit the registrant's financial statements for the fiscal year ended October
31, 1996, as its independent accountant. The registrant's financial statements
for the fiscal year ended October 31, 1995 were audited by another independent
accountant and a Form 8-K was filed in accordance with such dismissal on April
23, 1996. Lurie, Besikof, Lapidus & Co., LLP's reports on the financial
statements for the fiscal year ended October 31, 1996 do not contain an adverse
opinion or disclaimer of opinion, and was not modified as to uncertainty, audit
scope, or accounting principles. In connection with the audit for the fiscal
year ended October 31, 1996 and through December 23, 1997, there have been no
disagreements with Lurie, Besikof, Lapidus & Co., LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Lurie, Besikof, Lapidus & Co., LLP would have caused them to make reference
thereto in their report on the financial statements for such period. The
decision to change accountants has been approved by the Board of Directors of
the registrant.
On December 23, 1997 Deloitte & Touche LLP was appointed as the
registrant's new independent accountant to audit the registrant's financial
statements. During the past fiscal year and through December 23, 1997, the
registrant has not, prior to engaging the new accountant, consulted the new
accountant regarding the application of accounting principles to a specific or
contemplated transaction or regarding the type of audit opinion that might be
rendered on the registrant's financial statements.
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information required by Item 9 is incorporated herein by reference
to the section entitled "Principal Shareholders and Ownership of Management" in
the Company's proxy statement for its 1997 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days of the Company's fiscal year ended October 31, 1997.
ITEM 10. EXECUTIVE COMPENSATION
The information required by Item 10 is incorporated herein by reference
to the section entitled "Compensation of Directors and Executive Officers" in
the Company's proxy statement for its 1997 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days of the Company's fiscal year ended October 31, 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in Item 11 is incorporated herein by reference
to the section entitled "Principal Shareholders and Ownership of Management" in
the Company's proxy statement for its 1997
<PAGE>
Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days of the Company's
fiscal year ended October 31, 1997.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 12 is incorporated herein by reference
to the section entitled "Certain Transactions" in the Company's proxy statement
for its 1997 Annual Meeting of Shareholders, which will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days of
the Company's fiscal year ended October 31, 1997.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are submitted herewith:
3.1 Articles of Incorporation of the Company(1)
3.2 Certificate of Amendment of Articles of Incorporation of the
Company(1)
3.3 Bylaws of the Company(1)
3.4 Certificate of Amendment of Articles of Incorporation of the
Company, changing registered office address(1)
3.5 Certificate of Amendment of Articles of Incorporation of the
Company as filed on Form 8-A/A dated November 30, 1995(5)
4.1 Form of stock certificate representing Common Stock, $.01 par
value per share, of the Company, as filed on Form 8-A/A dated
November 30, 1995 and issued by Company after 1 for 3 reverse
split effective 12/12/95(5)
4.2 Form of Subscription Agreement and Investment Representations
in connection with private placement of 300,000 shares of
Common Stock(1)
10.1 Asset Sale Agreement between Company and a corporation to be
organized by Oleg Yermakov selling the Company's security
equipment distribution business and certain assets to Oleg
Yermakov, contingent on certain future events(6)
10.2 Exclusive Distributor Agreement dated October, 1995 between
Company and SECTOR 6, Security Division of N.V. COMAUTO
S.A.(6)
10.4 1992 Stock Option Plan(1)
10.5 Form of Stock Option Agreement(1)
10.6 Technology Agreement effective May 1, 1992 between the Company
and Fluxatron Systems International, Inc.(1)
10.7 Consulting Agreement effective May 1, 1992 between Atarius
U.S., Inc. and the Company, attaching the separate employment
agreements, as amended, between Atarius U.S., Inc. and Anatoli
Z. Kvaktounov and Oleg Yermakov(1)
<PAGE>
10.8 Five-Year Common Stock Purchase Warrant granted to Peter L.
Hauser IRA, #310200-9, Equity IRA Company on May 26, 1992, for
the purchase of 27,500 shares of Common Stock of the Company
at an exercise price of $2.00 per share, with certain demand
and piggyback registration rights(1)
10.9 Five-Year Common Stock Purchase Warrant granted to Equity
Securities P.S.T. for the Benefit of Nathan Newman on May 26,
1992, for the purchase of 27,500 shares of Common Stock of the
Company at an exercise price of $2.00 per share, with certain
demand and piggyback registration rights(1)
10.10 Replacement Promissory Note dated January 11, 1993 from Robert
L. Porter to the Company in the principal amount of $10,000(1)
10.11 Replacement Promissory Note dated January 11, 1993 from Erich
C. Steinbergs to the Company in the principal amount of
$10,000(1)
10.12 Form of Assignment of Financial Advisory Agreement from the
Company to FAI Limited Partnership, effective January 31,
1993(1)
10.13 Exclusive Distributor Agreement dated June 1, 1992 between
EG&G Astrophysics Research Corporation and the Company(1)
10.14 Nonexclusive Distributor Agreement dated June 1, 1992 between
EG&G Astrophysics Research Corporation and the Company, as
amended(1)
10.15 Developed Technology Resource, Inc. 1993 Outside Directors
Stock Option Plan(2)
10.16 Application - Foundation Agreement on Establishment of Closed
Joint Stock Company "ICP Int." among the Company, the
Institute of Chemical Physics of the Russian Academy of
Sciences and A.M. Shapiro, and English text of ICP Charter and
Agreement(1)
10.20 Partnership Agreement dated January 16, 1992 among the
Company, Armen P. Sarvazyan and Stanislav Yemelyanov
concerning the formation of Medical Biophysics International,
as amended by Partnership Agreement Amendment dated August 20,
1992(1)
10.21 Letter of Understanding dated June 18, 1992 between the
Company and Armen P. Sarvazyan concerning Medical Biophysics
International, and May 22, 1992 letter from the Company to Dr.
Armen P. Sarvazyan, Ph.D.(1)
10.22 Assignment of rights to Intracavity Ultrasonic Device for
Elasticity Imaging from Armen P. Sarvazyan, Stanislav
Emelianov and Andrei R. Skovoroda to Medical Biophysics
International(1)
10.23 Assignment of rights to Method and Apparatus for Elasticity
Imaging from Armen P. Sarvazyan and Stanislav Emelianov to
Medical Biophysics International(1)
10.24 Assignment of rights to Method and Device for Mechanical
Tomography of Tissue from Armen P. Sarvazyan to Medial
Biophysics International(1)
10.26 Agreement between the Board of the Designers of Kazakhstan and
the Company(1)
10.27 Office Lease dated October 1, 1993 between the Company
(Lessee) and Minnesota Master Limited Partnership (Lessor)(2)
<PAGE>
10.28 Registration of DTR Moscow office as Registered Office #105(1)
10.29 Amendment No. 2 to lease for office space between Developed
Technology Resource, Inc. and Cargill, Incorporated dated
August 15, 1994(3)
10.32 Memorandum from A. Shapiro to the Company concerning the
transfer of technologies or exclusive license to ICP-INT(1)
10.38 Consulting Agreement dated March 31, 1993 between the Company
and Donald V. Murray(1)
10.39 Confidentiality Agreement and Letter of Understanding between
the Company and NordicTrack(1)
10.42 Form of Underwriter's Warrants dated April 23, 1993 between
the Company and Equity Securities Trading Co., Inc.(2)
10.43 Form of Directors and Officers Indemnification Agreement
issued to each of the Company's officers and directors on
October 15, 1993 by action of the Board of Directors(2)
10.44 Developed Technology Resource, Inc. 1997 Outside Directors
Stock Option Plan(7)
10.45 Amendment to Asset Sale Agreement (Exhibit 10.1) (7)
11.1 Statement of computation of per share earnings (7)
21.1 Subsidiaries of the Company(2)
23.1 Consent of Deloitte & Touche LLP(7)
23.2 Consent of Lurie, Besikof, Lapidus & Co., LLP (7)
27 Financial Data Schedule (7)
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the same exhibit number included in the
Company's registration statement on Form SB-2, as Amended, filed with the
Commission as file number 33-58626C.
(2) Incorporated by reference to the same exhibit number included in the
Company's Annual Report on Form 10-KSB filed with the Commission for the
fiscal year ended October 31, 1993.
(3) Incorporated by reference to the same exhibit number included in the
Company's Annual Report on Form 10-KSB filed with the Commission for the
fiscal year ended October 31, 1994.
(4) Incorporated by reference to the same exhibit number included in the
Company's Quarterly Report on Form 10-QSB for the second fiscal quarter
ended April 30, 1995.
(5) Incorporated by reference to the same exhibit included in the Company's
Form 8-A/A filed with the Commission on December 12, 1995.
(6) Incorporated by reference to the same exhibit number included in the
Company's Annual Report on Form 10-KSB filed with the Commission for the
fiscal year ended October 31, 1995.
.
(7) Filed herewith.
<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: March 20, 1998 By /s/ John P. Hupp
Name: John P. Hupp
Title: President
Date: March 20, 1998 By /s/ LeAnn H. Davis, CPA
Name: LeAnn H. Davis, CPA
Title: Chief Financial Officer
(Principal Financial &
Accounting Officer)
EXHIBIT 10.44
DEVELOPED TECHNOLOGY RESOURCE, INC.
1997 OUTSIDE DIRECTORS STOCK OPTION PLAN
I.
PURPOSE OF PLAN
1.1 The purpose of the Developed Technology Resource, Inc. 1997 Outside
Directors Stock Option Plan (the "Plan") is to provide a means whereby Developed
Technology Resource, Inc. (the "Company") may grant options to purchase common
stock of the Company to those members of the Company's Board of Directors who
are not employees of the Company or any of its subsidiaries ("Eligible
Directors"). Options granted under the Plan are not intended to and do not
qualify as incentive stock options as described in Section 422A of the Internal
Revenue Code.
II.
NUMBER OF SHARES AVAILABLE UNDER THE PLAN
2.1 Options will be granted by the Company at the times described
below, to Eligible Directors to purchase an aggregate of up to 100,000 shares of
common stock ($.01 par value) of the Company and 100,000 shares shall be
reserved for options granted under the Plan (subject to adjustment as provided
in Section 4.9 below). The shares issued upon exercise of options granted under
the Plan may be authorized and unissued shares or reacquired shares held by the
Company. If any option granted under the Plan shall terminate, expire or with
the consent of the optionee, be canceled as to any shares, new options may
thereafter be granted covering such shares without affecting the amount of the
option reserve noted above.
III.
ADMINISTRATION
3.1 The Plan shall be administered by a Committee consisting of the
Chief Executive Officer and Chief Financial Officer of the Company who are not
eligible to participate in the Plan (the "Committee"). Committee members shall
have no discretion concerning the grant of options, the price at which options
are to be granted or times at which options may be exercised.
The Committee may interpret the Plan, amend and rescind any rules and
regulations necessary or appropriate for the administration of the Plan and make
other determinations and take such other action as it deems necessary or
advisable. No such action will affect the rights of Eligible Directors who have
been granted options prior to such action. Any interpretation or other action
made or taken by the Committee shall be final, binding and conclusive.
IV.
TERMS AND CONDITIONS
4.1 Time of Grant and Form. Each option granted under the Plan shall be
evidenced by an option agreement which shall be subject to the
<PAGE>
terms and conditions of the Plan, including, without limitation, the following:
(a) Existing options previously issued from the company's 1993
Outside Directors Stock Option Plan shall be rescinded. As a
replacement for such rescinded options, each existing Eligible
Director shall receive a grant of options for the purchase of
15,000 shares of common stock of the Company, as of the date
this Plan is adopted by the Board of Directors at a price of
$1.50 per share. Of these options, 13,750 shall vest
immediately and 1,250 shall vest on December 31, 1997.
(b) Each Eligible Director who is initially appointed or elected
to the Board of Directors of the Company shall receive a grant
for the purchase of shares of the Company's common stock in an
amount to be determined by the Board of Directors, with the
director who is to be granted the options not voting, on the
effective date of the initial appointment or election as
Director, which shall vest as follows: 25 per cent on the date
of such election or appointment; 25 per cent on June 30; 25
per cent on September 30; and 25 per cent on December 31 of
the year in which such election or appointment occurs.
(c) Effective January 1, 1998, each Eligible Director shall
receive a grant of options for the purchase of shares of
common stock of the Company in an amount to be determined by
the Board of Directors, with the director who is to be granted
the options not voting, on each successive anniversary date,
if reelected or reappointed to the Board of Directors, which
shall vest as follows: 25 per cent on the date of each
re-election or reappointment; 25 per cent on June 30; 25 per
cent on September 30; and 25 per cent on December 31 of the
year in which such re-election or reappointment occurs.
The foregoing respective dates of grant are referred to herein as the "Grant
Date." Notwithstanding the foregoing, if on the scheduled Grant Date, the Chief
Executive Officer or General Counsel of the Company determines, in their sole
discretion, that the Company is in possession of material, undisclosed
information that would prevent the Company from issuing securities, then the
grant of options to Eligible Directors pursuant to this Section 4.1 will be
suspended until the third day after public dissemination of such information.
The Chief Executive Officer or General Counsel may only suspend the grant; the
amount and other terms of the grant will remain as set forth in the Plan, with
the exercise price of the option to be determined in accordance with the Plan on
the date the option is finally granted.
4.2. Exercisability. Subject to Sections 4.6 and 4.9 below, each option
agreement shall provide that the option will become first exercisable on the
first day following the first anniversary of Grant Date.
4.3 Option Period. Subject to Sections 4.6 and 4.9 below, each option
agreement shall provide that the option shall expire at the end
<PAGE>
of five (5) years from the date granted or upon dissolution of the Company, if
earlier.
4.4 Option Price. Except as otherwise provided in Section 4.1, the
exercise price per share for options granted under the Plan shall be the mean
between the bid and asked prices of the common stock of the Company on the Grant
Date or in the case of Eligible Directors granted options during the Plan Year,
the mean between the bid and asked prices of the common stock of the Company on
the date the option is granted. As used herein, the term the bid and asked
prices shall mean the bid and asked prices of the Company's common stock as
reported on the National Association of Securities Dealers Automated Quotation
system or applicable securities exchange.
4.5 Payment of Option Price. The purchase price of the shares as to
which an option shall be exercised shall be paid in cash, certified check, bank
draft or money order made payable to the Company, or with shares of common stock
of the Company at the time of exercise (valued based on the closing price on the
date of exercise), unless the tender of shares as payment violates federal or
state securities laws.
4.6 Exercise in the Event of Death or Ceasing to be a Board Member.
Each option agreement shall be subject to the following:
(a) Except as otherwise provided in Section 4.6(b), if an optionee
ceases to be a director of the Company or dies, the options
which are then vested may be exercised for one year after the
date of death or the date the optionee ceases to be a director
of the Company.
(b) If an optionee ceases to be a director of the Company because
of removal for cause, all vested options, held by the removed
Director, regardless of issue date, shall become void
immediately as of the time the optionee ceases to be a
director of the Company.
Options that are not exercisable (not vested) as of the date of death of an
optionee or as of the date that an optionee ceases to be a director of the
Company shall immediately lapse on that date.
4.7 Non-Transferability. No option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution.
During the lifetime of the optionee, an option shall be exercisable only by such
optionee.
4.8 Investment Representation. Each option agreement shall contain an
agreement that upon demand by the Board the optionee shall deliver to the Board
at the time of exercise of an option a written representation that the shares to
be acquired upon such exercise are to be acquired for investment and not for
resale or with a view to distribution thereof. Upon such demand, delivery of
such representation prior to the delivery of any shares issued upon exercise of
an option and prior to the expiration of the option period shall be a condition
precedent to the right of the optionee or to such other person to purchase any
shares.
<PAGE>
4.9 Adjustments. In the event that the outstanding shares of the common
stock of the Company are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares or dividends payable in
capital stock, appropriate adjustment shall be made in the number and kind of
shares as to which options may be granted under the Plan and as to which
outstanding options or portions thereof then unexercised shall be exercisable,
so that the proportionate interest of the participant shall be maintained as
before the occurrence of such event; such adjustment in outstanding options
shall be made without change in the total price applicable to the unexercised
portion of such options and with a corresponding adjustment in the option price
per share. If the Company is a party to a merger, consolidation, reorganization
or similar corporate transaction and if, as a result of that transaction, its
shares of common stock are exchanged for (a) other securities of the Company or
(b) securities of another corporation which has assumed the outstanding options
under the Plan or has substituted for such options its own options, then each
holder of options under the Plan shall be entitled (subject to the conditions
stated herein or in such substituted options, if any), in respect of that
person's options, to purchase that amount of such other securities of the
Company or of such other corporation as is sufficient to ensure that the value
of that person's options immediately before the corporate transaction is
equivalent to the value of such options immediately after the transaction,
taking into account the option price of the option before such transaction, the
fair market value per share of the common stock immediately before such
transaction and the fair market value immediately after the transaction, of the
securities then subject to that option (or to the option substituted for that
option, if any). Upon the happening of any such corporate transaction, the class
and aggregate number of shares subject to the Plan which have been heretofore or
may be hereafter granted under the Plan shall be appropriately adjusted to
reflect the events specified in this Section 4.9.
4.10 Expiration Date. This plan shall terminate on granting of all
shares allowed hereunder, or on such earlier date determined by the Board. Any
termination shall not affect any options then outstanding under the Plan. No
options may be granted after termination.
4.11 Shareholder Rights. No Optionee shall have any rights as a
shareholder with respect to any shares subject to his or her option prior to the
date of issuance to the optionee of a certificate or certificates for such
shares.
V.
COMPLIANCE WITH OTHER LAWS AND REGULATIONS
5.1 The Plan, the option agreement and exercise of options thereunder
and the obligation of the Company to sell and deliver shares under such option
shall be subject to all applicable federal and state laws, rules and regulations
and to such approval by any government or regulatory agency as may be required.
The Company shall not be required to issue or deliver any certificates for
shares of common
<PAGE>
stock prior to (a) the listing of any such shares on any stock exchange on which
the common stock may be listed; and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any governmental body which the Company shall in its sole
discretion determine necessary or advisable.
VI.
AMENDMENT AND TERMINATION
6.1 The Board may from time to time amend, suspend or discontinue the
Plan provided, subject to the provisions of Section 4.9 above, no action of the
Board may permit the granting of any option at the option price less than the
price determined in accordance with the terms of this Plan; adjust or change the
Grant Date determined under Section 4.1 above; or shorten the period provided
for in Section 4.3 above. However, the Plan may not be amended more than once
every six months other than to comply with changes in the Internal Revenue Code,
the Employee Retirement Income Security Act, or the rules thereunder. Without
the written consent of an optionee, no amendment or suspension of the Plan shall
alter or impair any option previously granted to him or her under the Plan. The
Board may, subject to limitations in the Plan, modify, extend or renew
outstanding options granted under the Plan, or accept the surrender of
outstanding options to the extent unexercised.
VII.
EFFECTIVE DATE
7.1 The Plan shall be effective November 1, 1997.
VIII.
PLAN YEAR
8.1 The Plan year shall be the same as the Company's fiscal year.
IX.
NAME OF PLAN
9.1 The Plan shall be known as the Developed Technology Resource, Inc.
1997 Outside Directors Stock Option Plan.
EXHIBIT 10.45
AMENDMENT
TO
ASSET SALE AGREEMENT
This Amendment to Asset Sale Agreement is entered into effective as of
August 20, 1997 by and between Gate Technologies Ltd., a United Kingdom
corporation ("Buyer"), Developed Technology Resource, Inc., a Minnesota
corporation ("Seller") and Oleg Yermakov ("Guarantor").
WHEREAS, Seller and Buyer entered into an Asset Sale Agreement
effective December 31, 1995 and a portion of the payment relating to such sale
has been paid; and
WHEREAS, the Seller, Buyer and Guarantor wish to set forth the revised
terms of payment and guarantee relating to such agreement.
NOW, therefore, it is agreed as follows:
1. Schedule 2.2 is amended in its entirety according to the Amended
Schedule 2.2 attached hereto as Exhibit A.
2. As consideration for the amendment of the agreement:
A. Buyer agrees that no payment shall be made other than
normal and regular expenses including wages, bonuses
and operating expenses comparable to those indicated
in the attached Exhibit B, it being the intent hereof
that no distribution should be made to third parties
or employees other than the routine operating
expenses of the company prior to the full and
complete payment of the obligation of Buyer set forth
in the Amended Schedule 2.2.
B. Guarantor, as a majority shareholder in the
corporation to induce Seller to amend the Asset Sale
Agreement as provided herein, will execute the
guarantee agreement attached hereto as Exhibit C.
Other than as amended herein, the Asset Sale Agreement entered into on
December 31, 1995 is hereby confirmed and ratified in all respects.
GATE TECHNOLOGIES LTD. DEVELOPED TECHNOLOGY RESOURCE, INC.
By_________________________ By________________________________
Oleg Yermakov John P. Hupp
<PAGE>
AMENDED SCHEDULE 2.2
Date Amount of Payment
February 1, 1998 $ 220,000
September 1, 1998 220,000
January 1, 1999 40,000
---------------
TOTAL: $ 480,000
===============
Any payments not received on the date
specified shall bear interest from such date until the date
paid at the rate of 12% per annum.
EXHIBIT A
<PAGE>
GUARANTY
In consideration of the entry into an Amendment to Asset Sale Agreement
("Agreement") effective August 20, 1997, by Developed Technology Resources,
Inc., a Minnesota corporation (the "Seller") Gate Technologies Ltd., a United
Kingdom corporation (the "Buyer"), the undersigned, Oleg Yermakov ("Guarantor")
hereby guarantees to the Seller the full and prompt payment when due, of the
amount owing to Seller in the Amended Agreement as follows:
The balance of the fixed payments of $480,000 as provided in Schedule
2.2 of the Amended Agreement.
Guarantor shall reimburse the Seller for all costs and expenses,
including reasonable attorneys fees, incurred by or on behalf of the Seller in
enforcing the obligations of Guarantor hereunder.
Guarantor waives all notices and consents which may be otherwise
necessary, whether by statute, rule of law or otherwise, to preserve the
Seller's rights and remedies against the Guarantor hereunder.
This is a continuing guaranty of the payment of the Obligations of
Buyer to the Seller and shall continue to be in force until all obligations of
Buyer to the Seller are paid in full.
Any dispute or claim arising out of or relating to this Guaranty or the
validity, interpretation, enforceability or breach of this Guaranty, which is
not settled by agreement between the parties, will be settled by binding
arbitration in London, England, in accordance with the rules of the London Court
of Arbitration then in effect, and judgment upon any award rendered in such
arbitration may be entered in any court having competent jurisdiction. The
prevailing party in such arbitration, in addition to all other relief provided,
shall be entitled to an award against the losing party of its costs and
expenses, including reasonable attorney's fees, incurred in such arbitration,
and the losing party shall also bear all fees and expenses of arbitration. In
the event that there is no party that has prevailed on substantially all issues,
such legal expenses and expenses of arbitration shall be allocated between the
parties as the arbitrator deems appropriate.
This Guaranty shall be construed as to both validity and performance
and governed by and enforced in accordance with the laws of the State of
Minnesota, without giving effect to the choice of law principles.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
executed on the 20th day of August, 1997.
_______________________
Oleg Yermakov
EXHIBIT C
DEVELOPED TECHNOLOGY RESOURCE, INC.
EXHIBIT 11 -- STATEMENT REGARDING COMPUTATION OF PER-SHARE EARNINGS
YEARS ENDED OCTOBER 31, 1997 AND 1996
1997 1996
----------- -----------
Primary:
Average shares outstanding 795,969 839,010
Shares assumed exercised from
exercise of stock options 648,335 --
Shares assumed to be repurchased
with proceeds from exercise
(subject to 20 percent limit) (159,194) --
----------- -----------
Total 1,285,110 839,010
=========== ===========
Net income (loss) $ 710,416 $ (157,149)
Assumed interest revenue from
purchase of government securities 72,639 --
----------- -----------
Adjusted net income (loss) $ 783,055 $ (157,149)
=========== ===========
Per-share amount $ 0.61 $ (0.19)
=========== ===========
Fully Diluted:
Average shares outstanding 795,969 839,010
Shares assumed exercised from
exercise of stock options 648,335 --
Shares assumed to be repurchased
with proceeds from exercise
(subject to 20 percent limit) (159,194) --
----------- -----------
Total 1,285,110 839,010
=========== ===========
Net income (loss) $ 710,416 $ (157,149)
Assumed interest revenue from
purchase of government securities 67,415 --
----------- -----------
Adjusted net income (loss) $ 777,831 $ (157,149)
=========== ===========
Per-share amount $ 0.61 $ (0.19)
=========== ===========
NOTE: As the stock options assumed to be repurchased exceeds 20% of
the shares already outstanding, the treasury stock method has
been modified, as required, to assume the repurchase of up to
20% of the stock outstanding with the excess invested in
government securities.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement No.
33-6867 of Developed Technology Resource, Inc. on Form S-8 of our report dated
March 20, 1998, appearing in the Annual Report of Form 10-KSB for the year ended
October 31, 1997.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
March 20, 1998
Exhibit 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-6867 of DEVELOPED TECHNOLOGY RESOURCE, INC. on Form S-8 of our report dated
January 2, 1997, appearing in this Annual Report on Form 10-KSB of DEVELOPED
TECHNOLOGY RESOURCE, INC. for the year ended October 31, 1997.
/s/ LURIE, BESIKOF, LAPIDUS & CO., LLP
Minneapolis, Minnesota
March 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 311,441
<SECURITIES> 0
<RECEIVABLES> 1,128,743
<ALLOWANCES> (10,508)
<INVENTORY> 0
<CURRENT-ASSETS> 1,475,722
<PP&E> 177,456
<DEPRECIATION> (131,990)
<TOTAL-ASSETS> 2,349,973
<CURRENT-LIABILITIES> 651,697
<BONDS> 0
0
0
<COMMON> 7,908
<OTHER-SE> 1,609,693
<TOTAL-LIABILITY-AND-EQUITY> 2,349,973
<SALES> 2,467,790
<TOTAL-REVENUES> 3,310,043
<CGS> 1,398,449
<TOTAL-COSTS> 2,780,783
<OTHER-EXPENSES> 18,844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 510,416
<INCOME-TAX> 0
<INCOME-CONTINUING> 510,416
<DISCONTINUED> 200,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 710,416
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
