U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________________ to __________________.
Commission file number 0-24242
PRODUCTIVITY TECHNOLOGIES CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3764753
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
509 Madison Avenue, New York, New York 10022
(Address of (Zip Code)
Principal Offices)
Registrant's Telephone Number, Including Area Code (212) 843-1480
Not Applicable
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Indicate by check [X] whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 10, 1999: 2,475,000 shares, $ .001 par value common
stock.
<PAGE>
TABLE OF CONTENTS
Page
Part I. Financial Information for Productivity Technologies Corp.
("PTC" or "Company") and Subsidiary Atlas
Technologies, Inc. ("Atlas")
Item 1. Interim Financial Statements.......................................3
Consolidated Balance Sheets........................................4
Consolidated Statements of Operations..............................6
Consolidated Statement of Stockholders' Equity.....................7
Consolidated Statements of Cash Flows..............................8
Notes to Financial Statements......................................9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................11
Part II. Other Information
Item 3. Exhibits and Reports on Form 8-K..................................15
Signatures.................................................................15
2
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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 nine months ended March 31, 1999, are not necessarily indicative of the
results that may be expected for the year ending June 30, 1999.
The aforementioned consolidated financial statements should be read in
conjunction with the Productivity Technologies Corp. Annual Report on Form 10-K
for the fiscal year ended June 30, 1998. Information provided therein includes
the consolidated audited financial statements, including footnotes for the year
ended June 30, 1998 and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
3
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Balance Sheets ( Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
---------- -----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $184,014 $2,172,457
Short-term investments and accrued interest 1,024,658 482,280
Contracts receivable 6,049,901 5,217,421
Notes receivable 0 86,415
Costs and estimated earnings in excess of billings on
uncompleted contracts 7,345,382 5,435,957
Inventories 1,048,203 628,481
Prepaid expenses and other 126,717 773,522
Deferred income taxes 846,239 475,000
---------- -----------
Total current assets 16,625,114 15,271,533
---------- -----------
Property and equipment
Land $591,514 $591,514
Buildings and improvements 4,854,798 4,854,799
Machinery and equipment 3,827,030 3,676,415
Transportation equipment 31,500 31,500
---------- -----------
Total fixed assets 9,304,842 9,154,228
Less accumulated depreciation 1,279,549 865,473
---------- -----------
Net property and equipment 8,025,293 8,288,755
---------- -----------
Other assets
Goodwill, net of accumulated amortization of $289,041 and
$237,562 2,547,886 2,587,164
Other assets 550,935 661,936
---------- -----------
Total other assets 3,098,821 3,249,100
---------- -----------
Total assets $27,749,228 $26,809,388
========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Balance Sheets (Unaudited), continued
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
---------- ----------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities
Accounts payable $2,348,850 $1,970,769
Accrued expenses
Executive bonus agreement 0 810,000
Commissions payable 729,057 482,512
Payroll and related withholdings 153,901 240,329
Other 749,004 770,096
Billings in excess of costs and estimated
earnings on uncompleted contracts 587,011 580,262
Current maturities of long term debt 769,034 615,677
---------- ----------
Total current liabilities $5,336.857 $5,469,645
Executive deferred compensation 1,436,383 1,436,383
Long-term debt less current maturities 12,068,080 11,254,127
---------- ----------
Total liabilities 18,841,320 18,160,155
---------- ----------
Stockholders' equity
Preferred Stock, $.001 par value, 1,000,000
shares authorized; none outstanding
Common Stock, .$001 par value, 20,000,000
shares authorized; 2,425,000 and 2,125,000 shares
outstanding 2,425 2,125
Common Stock to be issued 0 695,520
Additional paid-in capital 9,872,708 9,177,488
Retained Earnings (deficit) (967,225) (1,225,900)
---------- ----------
Total stockholders' equity 8,907,908 8,649,233
---------- ----------
Total liabilities and stockholders' equity $27,749,228 $26,809,388
=========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
---------------------------- -------------------------------
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $8,193,888 $9.097,216 $24,194,140 $29,786,043
Cost of sales 5,988,940 7,006,476 17,611,494 21,515,345
--------- --------- ---------- ----------
Gross profit 2,204,948 2,090,740 6,582,646 8,270,698
Selling, general and administrative expenses 1,773,725 2,324,258 5,678,402 6,605,101
Officers' bonuses 0 (201,380) 0 458,445
--------- --------- ---------- ----------
Income (loss) from operations 431,223 (32,138) 904,244 1,207,152
--------- --------- ---------- ----------
Other income (expenses)
Interest income 5,621 28,641 45,047 91,093
Interest expense (233,815) (251,763) (620,514) (825,949)
Miscellaneous (10,050) (26,856) 22,398 118,165
--------- --------- ---------- ----------
Total other expenses (238,244) (249,978) (553,069) (616,691)
--------- --------- ---------- ----------
Income before income taxes 192,979 (282,116) 351,175 590,461
Income taxes 46,838 (81,500) 92,500 201,000
--------- --------- ---------- ----------
Net income $146,140 ($200,616) $258,675 $389,461
========= ========= ========== ==========
Net income per share of Common Stock $0.06 ($0.09) $0.11 $0.18
========= ========= ========== ==========
Weighted average number of
common shares outstanding 2,425,000 2,125,000 2,425,000 2,125,000
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Statement of Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Common Stock Common Additional Total
--------------------- Stock to be Paid-In Stockholders'
Shares Amount Issued Capital Deficit Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance July 1, 1998 2,125,000 $2,125 $695,520 $9,177,488 ($1,225,900) $8,649,233
Common Stock issued 300,000 $300 ($695,520) $695,220
Net income (unaudited) 258,675 $258,675
--------- ------ -------- ---------- ----------- ----------
Balance as of March 31, 1999 2,425,000 $2,425 $0 $9,872,708 ($967,225) $8,907,908
========= ====== ======== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Productivity Technologies Corp. and Subsidiary
Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended
------------------------------------
March 31, March 31,
1999 1998
----------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income $258,675 $389,461
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation 414,076 386,781
Amortization 39,278 89,969
Deferred income tax (371,239) 5,382
Changes in operating assets and liabilities:
Contract receivables (832,480) 1,309,494
Inventories, prepaid expenses and other 227,083 521,441
Costs and estimated earnings in excess of
billings on uncompleted contracts (1,902,676) 3,496,925
Accounts payable, accrued expenses and other (292,894) (1,675,360)
----------- ------------
Net cash provided by (used in) operating activities ($2,460,177) $4,524,093
=========== ===========
Cash flows from investing activities
Collection of notes receivable $86,415 $160,631
Maturity of US securities in deposited trust fund (542,378) (1,732,272)
Expenditures for property and equipment (150,614) 78,610
Increase in notes receivable 111,001 152,598
----------- ------------
Net cash provided by (used in) investing activities ($495,576) ($1,340,433)
=========== ===========
Cash flows from financing activities
(Payments) or borrowings on long-term debt 813,953 (3,149,944)
Proceeds from additional long-term debt 153,357 (1,924)
----------- ------------
Net cash provided by (used in) financing activities $967,310 $(3,151,868)
=========== ===========
Net increase (decrease) in cash and cash equivalents (1,988,443) $31,792
Cash and cash equivalents at the beginning of the period 2,172,457 843,709
----------- ------------
Cash and cash equivalents at the end of the period $184,014 $875,501
=========== ===========
Supplemental cash flow Information
Cash paid during the period for interest $620,514 $825,949
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Notes to Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements for the third quarter ended
March 31, 1999 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, 1998 has been derived from the audited consolidated financial
statements at that date. Operating results for the third quarter ended March 31,
1999 are not necessarily indicative of the results that may be expected for the
year ended June 30, 1999 or any other interim period. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the period ended June 30, 1998.
2. Summary of Significant Accounting Policies
History of the Company and Basis of Presentation
The Company was incorporated in June 1993 under the name Production Systems
Acquisition Corporation 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" or the "Company"), and acquired, through
a merger, Atlas Technologies, Inc. ("Atlas") as a wholly owned subsidiary.
The accompanying financial statements presented for the third quarter ended
March 31, 1999 include the consolidated accounts of PTC and Atlas. All
significant inter-company accounts and transactions have been eliminated upon
consolidation.
Nature of Business
Atlas, PTC's sole operating subsidiary, is a leading supplier of quick die
change, flexible transfer, and stacking/destacking equipment used to automate
automotive and appliance metal stamping operations. Atlas operates two
manufacturing plants in Fenton, Michigan and has sales and engineering offices
in the United States, Europe and China.
Sales of products have principally been to automobile and automotive parts
manufacturers. Other customers include manufacturers of appliances, garden and
lawn equipment, office furniture, heating, ventilation and air conditioning
equipment and large construction equipment. Sales to automotive related
customers have accounted for the majority of sales during the past two years.
9
<PAGE>
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 that the revisions are determined.
Revenues from time-and-material contracts are recognized currently as the work
is performed.
Net Income Per Common Share
Net income per common share for the third quarter ended March 31, 1999 has been
computed based on the weighted average number of 2,425,000 common and diluted
common equivalent shares outstanding. In September 1998, 300,000 shares were
issued as partial consideration for the restructuring of the Atlas executive
bonus program. The issuance of the 300,000 shares was effective as of June 1998.
The bonus restructuring agreement is described in detail in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1998.
3. Commitments
Atlas is a party to employment agreements with its principal executive officer,
which expires on March 31, 2001. Annual compensation under the agreement is
$203,776, subject to cost of living increases after December 31, 1999. The
employment agreement also provides that the executive, regardless of future
employment, will receive four annual payments of $207,571 commencing July 30,
1999. The executive also received 150,000 shares of restricted common stock of
the Company, which were issued effective as of June 1998. The following items
related to the employment agreement, and a similar agreement with a former
executive which expired on December 31, 1998, are included in the accompanying
financial statements as of and for the year ended June 30, 1998:
Balance Sheet
Executive Deferred Compensation Agreement $1,436,383
Common stock issued (.001 par value) 300
Paid in capital 696,320
Statement of Operations
Bonus restructuring expense $2,131,903
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net sales for the quarter ended March 31, 1999 were $8,193,888, down 10% from
$9,097,216 for the quarter ended March 31, 1998. Net sales for the nine months
ended March 31, 1999 were $24,194,140, down 19% from nine months ended March 31,
1998 net sales of $29,786,043. These decreases reflect lower order closings and
production delays related to certain key projects which began during the first
half of the year and continued into the third fiscal quarter. The order backlog
as of March 31, 1999 was $13.0 million, down 29% from the June 30, 1998 backlog
of $18.2 million. The decline in backlog was due to slower closings of new
orders.
Cost of sales for the quarter ended March 31, 1999 was $5,988,940, down 15% from
$7,006,476 for the quarter ended March 31, 1998. For the nine months ended March
31, 1999, cost of sales was $17,611,494, down 18% from the cost of sales of
$21,515,345 for the quarter ended March 31, 1998. Cost of sales declined versus
one year ago due principally to lower net sales versus that of the comparable
periods of the prior year. Cost of sales as a percent of net sales decreased to
73% of revenues during the quarter compared to 77% one year ago due to an
improved product mix and reduction in new product design compared to the quarter
ended March 31, 1998. For the nine months ended March 31, 1999, cost of sales as
a percent of revenues was 73% compared to 72% for the nine months ended March
31, 1998.
Gross profit for the quarter ended March 31, 1999 was $2,204,948, a 5% increase
compared to $2,090,740 for the quarter ended March 31, 1998. For the nine months
ended March 31, 1999, gross profit was $6,582,646, a 20% decrease compared to
$8,270,698 for the nine months ended March 31, 1998. The gross profit increase
for the quarter versus one year ago derived from improved product mix and a
reduction in new product design costs. The decline in gross profit for the nine
months ended March 31, 1999 was due principally to a decline in net sales as
well as increased research and development costs and warranty expenses versus
the nine months period one year ago.
Consolidated selling, general and administrative (SG&A) expenses for the quarter
ended March 31, 1999 were $1,773,725, down 24% from the quarter ended March 31,
1998 of $2,324,258. For the nine months ended March 31, 1999, SG&A expenses were
$5,678,402, a 14% decline from SG&A expenses of $6,605,101 for the nine months
ended March 31, 1998. SG&A expenses during the quarter ended March 31, 1999
declined versus a year ago as the Company began to implement a cost reduction
program during the third quarter of fiscal 1999. During the first part of the
nine month period ended March 31, 1998, the Company incurred approximately
$780,000 in legal defense and settlement expenses with a lawsuit and relocation
expenses related to the opening of and moving to a new manufacturing facility.
Lawsuit defense and settlement costs and relocation expenses were not incurred
in the nine months ended March 31, 1999. While overall SG&A expenses decreased
during the nine months ended March 31, 1999, direct sales costs increased
approximately $265,000 due principally to increased commissions and royalties.
There were no officers' bonuses during the quarter ended March 31, 1999,
compared to a reversal of previously incurred officers' bonuses of $201,380 for
the quarter ended March 31, 1998. For the nine months ended March 31, 1999,
there were no officer bonuses, compared to officers' bonuses of $458,445 during
the nine months ended March 31, 1998. Officer bonuses were eliminated effective
as of the fourth quarter of fiscal 1998 as part of the bonus restructuring plan,
as more fully described in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998.
11
<PAGE>
Income from operations for the quarter ended March 31, 1999 was $431,223,
compared to a loss of $32,138 for the quarter ended a year ago as a result of
the increased gross profit and reduced SG&A expenses described above. For the
nine months ended March 31, 1999, income from operations was $904,244, which was
25% lower than income from operations of $1,207,152 reported for the nine months
ended March 31, 1998. As adjusted for the elimination of officer bonuses, income
from operations during the nine month period was approximately 66% lower than
the previous year. The decrease resulted from slower than expected sales
combined with the increases in direct sales, research, and warranty expenses
described above.
Interest expense for the quarter ended March 31, 1999 was $233,815, down 7% from
$251,763 for the quarter ended March 31, 1998. For the nine months ended March
31, 1999 interest expense was $620,514, down 25% from $825,949 for the nine
month period ended March 31, 1998. Interest expense decreased as a result of
reductions in the Company's borrowings under its line of credit due to a decline
in the average volume of work in process and the levels of outstanding
receivables during the three months and nine months ended March 31, 1999 versus
the respective periods one year ago. In addition, the Company's bank lowered the
interest rates it charged the Company during fiscal 1999.
The Company's net income for the quarter ended March 31, 1999 was $146,140,
compared to net loss of $200,616 for the quarter ended March 31, 1998. For the
nine months ended March 31, 1999, net income was $258,675, down 34% from
$389,461 for the nine month period ended March 31, 1998. Net income for the nine
months one year ago included a one-time $77,000 profit from the sale of the
Company's Argentine, Michigan facility during the first quarter. The third
quarter fiscal 1999 earnings per share of $0.06 compared to a loss per share of
$0.09 for the third quarter of fiscal 1998. For the nine months ended March 31,
1999 earnings per share were $0.11, down approximately 39% from $0.18 per share
earnings reported for the nine-month period ended March 31, 1998. There were
2,425,000 weighted average common shares outstanding during the quarter and the
nine months ended March 31,1999, compared to 2,125,000 weighted average common
shares outstanding during the quarter and the nine months ended at March 31,
1998.
Liquidity and Capital Resources
Management believes that the Company has sufficient capital and credit
availability to meet short and long term funding needs. Management expects
financing facilities currently in place, along with anticipated continued cash
available from operations, will be sufficient for general operations and any
required current year asset purchases.
During the fiscal year ended June 30, 1998, the Company entered into a new debt
financing agreement with First of Chicago NBD. The bank consolidated all of the
Company's long and short term debts, bundling the various notes and lines of
credit into one new three year committed line of credit, with increased maximum
debt usage of $16,000,000 based on collateral of the Company's receivables,
work-in-process inventories, and other assets.
Interest rates were reduced to 0.25 percent below the bank's prime rate.
First of Chicago NBD also funded the construction of the new building and
equipment through the sale of $4,500,000 in tax exempt Industrial Revenue Bonds.
Except for approximately $280,000 reserved for capital expenditures over the
next 12 months, all of the proceeds were spent as of March 31, 1999, and were
used for the construction, furnishing and equipping of the new 59,000 square
foot manufacturing building and the purchase of a new manufacturing resource
planning system for the Company's Atlas subsidiary. The unused funds reserved
for capital expenditures have been invested and earn interest until spent. The
bonds are state and federal tax exempt and, consequently, the floating rate of
interest is significantly reduced compared to conventional construction or real
estate financing. The terms of the bonds are as follows for each fiscal year:
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1991--2001 $400,000 annual principal payments plus quarterly interest payments.
2001--2012 $300,000 annual principal payments plus quarterly interest payments.
At March 31, 1999, the Company had (a) debt of $8,152,665 under the line of
credit and $4,100,000 under the Industrial Revenue Bonds, payable over 15 years,
(b) deferred executive compensation of $1,436,382 scheduled to be paid over four
equal annual installments commencing July 1999, (c) $560,000 due to Atlas
executives and held as a corresponding current asset on the books of the Company
in escrow awaiting written confirmation of the IRS audit results, and (d) other
debt of $24,450. Long term debt totaled $14,273,497 as of March 31, 1999,
compared to $13,306,187 at June 30, 1998.
Working capital at March 31, 1999 was $11,288,257 and the current ratio (i.e.,
the ratio of current assets to current liabilities) was 3.1 to 1.0, compared to
working capital of $9,801,888 and a current ratio of 2.8 to 1 for the Company at
June 30, 1998.
Year 2000 Compliance
The Company is installing an "enterprise resource planning" system at the
Company, which includes computer systems for its internal accounting and
reporting activities and its manufacturing operations and processes which are
"Year 2000 compliant" (which means that such computer systems and other
information technology will accurately process date/time data regardless of
whether the date is in the twentieth or twenty-first century). The acquisition
and installation of the system are expected to cost approximately $340,000, of
which approximately $270,000 was expensed as of March 31, 1999. Because the
system is being implemented as an overall upgrade to the Company's operations
and not specifically to address Year 2000 compliance concerns, management has
not estimated the portion of the cost which may be allocable to Year 2000
compliance. The Company management has not yet assessed whether or not the
failure of the Company's internal information technology to be Year 2000
compliant would have a material adverse effect upon the Company's financial
position, liquidity or results of operations although it believes that
installation and operation of the new system will be accomplished in advance of
December 31, 1999.
The Company is also assessing its vendors, customers, utilities, banks and
others with whom it does business to determine if their failure to be Year 2000
compliant would have a material adverse effect upon the Company or its financial
position, liquidity or results of operations. To date, nothing has come to the
attention of management that leads it to conclude that the likelihood of such
adverse effect reasonably exists. The Company and the Company's operations
utilize relatively little electronic data interchange with vendors, customers
and other third parties. However, to the extent that such third parties,
particularly utilities and banks, may not be Year 2000 compliant, the Company
and the Company may be adversely effected, although the magnitude of such effect
cannot be estimated. The cost to the Company of making its third-party Year 2000
compliance assessment is not expected to be material.
Certain Company products contain processors which address and utilize date/time
data. Management believes that such processors incorporated in equipment sold
within the past five years are virtually all Year 2000 compliant. However, it is
not able to determine the compliance status of processors used in equipment sold
in earlier periods with any reasonable degree of certainty. Although such
equipment is beyond the warranty periods applicable to the Company's products,
it is possible that customers who purchased equipment from the Company which is
not Year 2000 compliant may nevertheless assert claims against the Company to
correct the compliance deficiencies or for resulting damages. While management
believes that the Company would not be legally responsible to such persons,
based on the terms of its purchase orders and warranties, there can be no
assurance that this position would prevail if challenged. Management is unable
to estimate the potential cost that the Company might incur if such
13
<PAGE>
claims are made and successfully sustained or whether or not such cost would
have a material adverse effect upon its financial position, liquidity or results
of operations.
Forward-Looking Statements
When used in this and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer of the Company, the words
or phrases "will likely result," "plans," "will continue," "is anticipated,"
"estimated," "project" or "outlook" or similar expressions (including
confirmations by an authorized executive officer of the Company or any such
expressions made by a third party with respect to the Company) are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company wishes to caution readers
not to place undue reliance on any such forward-looking statements, each of
which speaks only as of the date made. Such 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. Factors
that may cause actual results to differ materially from those contemplated by
such forward-looking statements include, among others, the following:
competitive pressures in the industry in which the Company is engaged; adverse
changes in the Company's banking loan requirements; major fluctuations in the
strength of the U.S. dollar versus international currencies; the Company's
inability to fully become Year 2000 compliant; any claims made against the
Company for products delivered to its customers in prior years for not being
Year 2000 compliant; and general economic conditions. The Company has no
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
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ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 Financial Data Schedule (filed electronically only).
B. Reports on Form 8-K -- None
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: May 17, 1999 By: /s/ Samuel N. Seidman
---------------------------------------
Samuel N. Seidman, President
Date: May 17, 1999 By: /s/ Jesse Levine
---------------------------------------
Jesse Levine, Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
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