UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended - September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from ________ to _________
Commission File Number 0-24242
PRODUCTIVITY TECHNOLOGIES CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3764753
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
509 Madison Avenue, New York, New York 10022
-----------------------------------------------------------
(Address of principal executive offices)
(212) 843-1480
--------------
(Issuer's telephone number)
Not Applicable
----------------------------------------------
(Former name, former address and former fiscal
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
12, 13 or 15 (d) of the Exchange Act during the past 12 months (or 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 14, 1997: 2,125,000 shares $ .001 par value common stock.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Part I : Financial Information for
Productivity Technologies Corp. (PTC) and
Subsidiary Atlas Technologies, Inc. (Atlas)
Item 1. Interim Financial Statements 3
Consolidated Balance Sheets of PTC and Atlas (amended) 4-5
Consolidated Income Statements of PTC and Atlas 6
Consolidated Statement of Stockholders' Equity of PTC 7
Consolidated Statement of Cash Flows of PTC and Atlas 8-9
Notes to Financial Statements 10-12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE>
PRODUCTIVITY TECHNOLOGIES CORP. AND SUBSIDIARY
PART I: FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with instruction to Form 10-Q and Article 10 of Regulation S-X.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted from the accompanying interim financial statements. The
information furnished in the accompanying balance sheets, statements of
operations, stockholders' equity and cash flows, reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
aforementioned financial statements for the interim periods. Operation results
for the three months ended September 30, 1997, are not necessarily indicative of
the results that may be expected for the year ending June 30, 1998.
The aforementioned consolidated financial statements should be read in
conjunction with Productivity Technologies Corp. and Subsidiary's Form 10-K for
the fiscal year ended June 30, 1997. Information provided includes the
consolidated audited financial statements, including footnotes, for the year
ended June 30, 1997 and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
3
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Unaudited Audited
Assets September 30, 1997 June 30, 1997
<S> <C> <C>
Current Assets
Cash and cash equivalents $102,815 $843,709
Short-term investments, and accrued interest 1,466,675 929,204
Contracts receivable 5,980,774 9,199,302
Notes receivable 0 160,631
Costs and estimated earnings in excess of
billings on uncompleted contracts 11,807,586 8,640,731
Inventories 497,056 619,242
Prepaid expenses and other 200,921 675,070
Deferred income taxes 616,618 622,000
Assets held for sale 0 937,549
- --------------------------------------------------------------------------------------------------------
Total Current Assets 20,672,445 22,627,438
- --------------------------------------------------------------------------------------------------------
Property and Equipment
Land 591,514 591,514
Buildings and improvements 4,807,459 1,329,113
Machinery and equipment 2,998,449 1,909,879
Construction in progress 0 4,142,725
Transportation equipment 31,500 31,500
- --------------------------------------------------------------------------------------------------------
Total Fixed Assets 8,428,922 8,004,731
Less Accumulated Depreciation 445,144 337,350
- --------------------------------------------------------------------------------------------------------
Net Property and Equipment 7,983,778 7,667,381
- --------------------------------------------------------------------------------------------------------
Other Assets
Goodwill, net of accumulated amortization 2,465,102 2,490,842
Three months ending
Non competition agreement, net of amortization 206,833 211,083
Other assets 756,439 412,988
- --------------------------------------------------------------------------------------------------------
Total Other Assets 3,428,374 3,114,913
- ------------------------------------------------------------------------------------------------------------
Total Assets $32,084,597 $33,409,732
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to Financial Statements.
4
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Unaudited Audited
September 30, 1997 June 30, 1997
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $2,443,368 $2,472,828
Payroll and related withholdings 198,139 271,930
Executive Bonus Agreement 1,093,241 1,254,842
Commission payable 521,265 437,185
Other accrued liabilities 886,309 811,220
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,184,322 1,165,271
Current maturities of long term debt 712,216 714,140
- -----------------------------------------------------------------------------------------------------------
Total Current Liabilities 7,038,860 7,284,416
Deferred Income Taxes 832,000 832,000
Long Term Debt Less Current Maturities 14,081,829 15,327,253
Total Liabilities 21,952,689 23,443,669
- -----------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred Stock, .001 par value, 1,000,000 authorized -- --
authorized and non outstanding
Common Stock, .001 par value, 20,000,000
shares authorized and 2,125,000 outstanding 2,125 2,125
Additional paid-in capital 9,177,488 9,177,488
Retained earnings 952,295 786,450
- -----------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 10,131,908 9,966,063
- -----------------------------------------------------------------------------------------------------------
Total Liabilities Stockholders' Equity $32,084,597 $33,409,732
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to Financial Statements.
5
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Income Statements
<TABLE>
<CAPTION>
First Quarter Ending
Sept 30, 1997 Sept 30,1996
<S> <C> <C>
Net Sales $9,352,486 $8,426,298
- ------------------------------------------------------------------------------
Cost of Sales 6,635,080 6,325,350
- ------------------------------------------------------------------------------
Gross Profit 2,717,406 2,100,948
Selling, General and Administrative
expenses, including officers' bonuses 2,267,554 1,912,618
- ------------------------------------------------------------------------------
Income (Loss) From Operations 449,852 188,330
- ------------------------------------------------------------------------------
Other Income ( Expenses)
Interest income 25,498 19,157
Interest expense (291,851) (187,853)
Miscellaneous 92,846 19,199
- ------------------------------------------------------------------------------
Total Other Expenses (173,507) (149,497)
- ------------------------------------------------------------------------------
Income Before Income taxes 276,345 38,833
Income Taxes 110,500 24,500
- ------------------------------------------------------------------------------
Net Income (Loss) 165,845 14,333
- ------------------------------------------------------------------------------
Net Income Per Share of
Common Stock $0.08 $0.01
- ------------------------------------------------------------------------------
Weighted Average Common
Shares Outstanding 2,125,000 2,125,000
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Stockholders' Equity of PTC(Unaudited)
Additional Total
Common Stock Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1996 2,125,000 $2,125 $9,177,488 $786,450 $9,966,063
Net Income $165,845 $165,845
- -------------------------------------------------------------------------------------------------------
Balance, 2,125,000 $2,125 $9,177,488 $952,295 $10,131,908
September 30, 1997
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Cash Flow From Operating Activities
Net Income $165,845 $14,333
Adjustments to reconcile net income to net cash
provided by (used in ) operating activities:
Depreciation 107,794 96,912
Amortization (417,271) 29,991
Deferred income tax 5,382 0
Changes in operating assets and liabilities
Contracts receivable 3,218,528 1,674,528
Inventories, prepaid expenses and other 596,335 155,154
Costs and estimated earnings in excess of
billings on uncompleted contracts (3,147,804) 489,675
Accounts payable, accrued exp and other (262,683) (1,366,753)
- ------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Operating Activities 266,126 1,093,840
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Cash Flows From Investing Activities
Collection of Notes Receivable 160,631 240,606
Investment of US Securities (537,471) 235,133
Expenditures for property and equipment 513,358 (127,721)
Increase in notes receivable 103,810 (261,613)
- ------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Investing Activities 240,328 86,405
- ------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Net borrowings (payments) - line of credit 0 (905,300)
(Payments) or Borrowings on long term (1,924) 0
debt, capital leases and notes payable
Proceeds from additional long-term debt (1,245,424) (115,891)
Distribution to former stockholders 0 0
- ------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Financing Activities (1,247,348) (1,021,191)
- ------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Cash and Cash equivalents
(740,894) 159,054
Cash and Cash equivalents at the beginning of the period
843,709 512,179
- ------------------------------------------------------------------------------------------------------------
Cash and Cash equivalents at the end of the period 102,815 671,233
- ------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information
Cash Paid during the period for:
Interest $291,851 $187,853
Income Taxes $110,500 $24,500
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Notes to Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements for the first quarter ended
September 30, 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The consolidated balance
sheet at June 30, 1997 has been derived from the audited consolidated financial
statements at that date. Operating results for the first quarter ended September
30, 1997 are not necessarily indicative of the results that may be expected for
the year ending June 30, 1998 or any other interim period. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report for the period ended June 30,
1997.
2. Summary of Significant Accounting Policies
Formation of the Company and Basis of Presentation
The Company, formerly named Production Systems Acquisition Corporation, was
incorporated in June 1993 with the objective of acquiring an operating business
engaged in the production systems industry. The Company originally selected
March 31 as its fiscal year-end. The Company completed an initial public
offering ("Offering") of common stock in July 1994 and raised net proceeds of
approximately $9.0 million. In May 1996 The Company changed its name to
Productivity Technologies, Corp. (PTC), and acquired, through a merger, Atlas
Technologies, Inc. ( Atlas ) as a wholly owned subsidiary.
The accompanying financial statements presented for the first quarter ended
September 30, 1997 include the consolidated accounts of PTC and Atlas. All
significant inter-company accounts and transactions have been eliminated upon
consolidation.
Nature of Business
Atlas is PTC's sole operating subsidiary at this time. Atlas is a leading
innovator and supplier of quick die change, flexible transfer, and
stacking/destacking equipment used to automate automotive and appliance metal
stamping operations. Atlas operates three manufacturing plants and has sales and
engineering offices in Michigan, Georgia, England and China. The main plants are
located in Fenton, Michigan with an additional plant operating in nearby Linden,
Michigan.
Sales of products have principally been to automobile and automotive parts
manufacturers and appliance manufacturers. Other customers include manufacturers
of garden and lawn equipment, office furniture, heating, ventilation and air
conditioning equipment and aircraft. Sales to automotive related customers have
accounted for the majority of sales during the past two years.
Revenue and Cost Recognition
Contract revenues from fixed price contracts, and the related contract costs,
are recognized using the percentage-of-completion method. The
percentage-of-completion method measures the percentage of contract costs
incurred to date and compares these costs to the total estimated costs for each
contract. The Company estimates the status of individual contracts when progress
reaches a point where experience is sufficient to estimate final results with
reasonable accuracy.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, repairs
and depreciation costs. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined. Changes in job
performance, job condition, estimated profitability, and final contract
settlement may result in revisions to costs and income, and are recognized in
the period the revisions are determined.
Revenues from time-and-material contracts are recognized currently as the work
is performed.
10
<PAGE>
Net Income Per Common Share
Net income per common share for the first quarter ended September 30, 1997 has
been computed based on the weighted average number of common and diluted common
equivalent shares outstanding.
3. Commitments
(1) In connection with the merger agreement, Atlas has entered into employment
agreements which changed the compensation of two executive officers of
Atlas. The employment agreements in regards to annual compensation are
identical, except that one agreement expires on December 31, 1998, and the
other expires on December 31, 2001. Each agreement requires the executive
to devote substantially all of his business time and attention to the
affairs of the Company. Annual compensation under each agreement is
$195,052, subject to cost of living increases after December 31, 1997.
The employment agreements also provide for two bonus calculations based on
the earnings of Atlas before interest and taxes (as defined). Under one of
the bonus arrangements, each of the two executives mentioned in the above
paragraph will be paid $208,333 for each of the six years beginning January
1, 1996 in which the "Adjusted Earnings" of Atlas (as defined in the
related agreements) exceeds $2,000,000.
Under the other bonus arrangement, if during the five years beginning
January 1, 1996, the "Average Adjusted Earnings" (as defined in the related
agreements) are at least $2,626,000, each executive will be paid, on
December 31, 2000, an amount equal to the amount by which such average
earnings exceed $2,626,000. Both bonus arrangements are also subject to
various conditions described in the related agreements. The bonus
arrangements do not terminate in the event of death of the executive, but
payments will be reduced by the amount of insurance benefits paid to the
executive's estate pursuant to life insurance in effect.
11
<PAGE>
4. Contingencies
(1) Atlas has received a "Demand For Arbitration" dated October 1, 1996 by a
former customer who alleges, among other issues, a $15,400,000 claim for
damages resulting from a breach of contract and breach of warranties
related to the design and manufacture of certain industrial equipment.
Atlas believes the lawsuit is without merit and will vigorously defend its
position. Further, with respect to the alleged damages, the total purchase
amount on this contract was $1,360,000. The former customer has
acknowledged receiving the Company's standard terms and conditions. These
terms and conditions provide in pertinent part that the Company will not,
in any event, be liable for any incidental or consequential damages,
including loss of profits. Further, the Company warranty policy states that
the buyer's sole remedy is limited to either repair or replacement of the
equipment or defective parts, or, after negotiated settlement, return of
the goods to seller. While the final outcome of the litigation cannot be
determined at this early date in the proceedings, management believes that
the final outcome will not have a material adverse effect on the Company's
results of operations or its financial position. Atlas is not involved as a
defendant in any other substantial litigation. Initial arbitration was
reported in PTCs' 10-K for the year ended June 30, 1997.
(2) Atlas is undergoing an Internal Revenue Service audit for the fiscal year
ended June 30, 1995. The main area of review is a research and
experimentation tax credit Atlas has calculated and filed for over the past
six years. Atlas had applied $383,000 of credit towards Federal Taxes due
for the fiscal period ended June 1995 and had a carry forward of $481,400
expected to be used as a reduction in the calculation of 1996 and 1997
alternative minimum tax payments. Management and Atlas' accountants believe
this issue is a matter of interpretation of the research and
experimentation regulations. Management believes that the IRS may seek a
reduction in the amount of credit calculated which may adversely affect the
financial statements of the Company. PTC has an established escrow account
for uncertainties that occur from activities of Atlas prior to the
acquisition date of May 23, 1996. Atlas may contractually participate in
this audit.
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits
27 Financial Data Schedule (Amended)(filed electronically only).
B. Reports on Form 8-K -- None
12
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PRODUCTIVITY TECHNOLOGIES CORP.
Date: December 30, 1997 By: /s/ Samuel N. Seidman
----------------------------------
Samuel N. Seidman, President
Date: December 30, 1997 By: /s/ Jesse Levine
----------------------------------
Jesse Levine, Chief Financial Officer
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 102,815
<SECURITIES> 1,466,675
<RECEIVABLES> 5,980,774
<ALLOWANCES> (45,500)
<INVENTORY> 497,056
<CURRENT-ASSETS> 20,672,445
<PP&E> 8,428,922
<DEPRECIATION> (445,144)
<TOTAL-ASSETS> 32,084,597
<CURRENT-LIABILITIES> 7,038,860
<BONDS> 0
<COMMON> 2,125
0
0
<OTHER-SE> 10,131,908
<TOTAL-LIABILITY-AND-EQUITY> 32,084,597
<SALES> 9,352,486
<TOTAL-REVENUES> 9,352,486
<CGS> 6,635,080
<TOTAL-COSTS> 6,635,080
<OTHER-EXPENSES> 2,267,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 291,851
<INCOME-PRETAX> 276,345
<INCOME-TAX> 110,500
<INCOME-CONTINUING> 88,845
<DISCONTINUED> 0
<EXTRAORDINARY> 77,000
<CHANGES> 0
<NET-INCOME> 165,845
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.03
</TABLE>
