<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended May 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Transition Period From ____ to ____
Commission file number 0-27928
NICOLLET PROCESS ENGINEERING, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1528120
--------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
420 North Fifth Street, Ford Centre, Suite 1040
Minneapolis, MN 55401
----------------------------------------
(Address of principal executive offices)
(612) 339-7958
---------------------------
(Issuer's telephone number)
Check 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 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 [ ]
The number of shares of common stock, no par value, outstanding as of July 6,
1998 was 5,545,195.
Transitional Small Business Disclosure Format (Check One): YES [ ] NO [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
NICOLLET PROCESS ENGINEERING, INC.
Balance Sheets
May 31, 1998 (Unaudited) and August 31, 1997
<TABLE>
<CAPTION>
May 31, August 31,
ASSETS 1998 1997
- ------- ---------- ----------
(Unaudited) (Note)
<S> <C> <C>
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Short term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Net receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107,306 $ 815,942
Accounts receivable -- related parties . . . . . . . . . . . . . . . . . . . . . . 19,313 19,313
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,464 190,813
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . . . 112,694 21,103
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387,777 1,047,171
Property and equipment:
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497,596 486,594
Furnishings and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,647 173,022
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,211 70,211
---------- ----------
744,454 729,827
Less: accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . (477,093) (387,423)
---------- ----------
267,361 342,404
Other assets:
License agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,112 49,115
Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433,471 413,511
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,825 14,360
---------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,113,546 $1,866,561
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Checks written in excess of bank balance . . . . . . . . . . . . . . . . . . . . . $ 133,709 $ 128,595
Customer deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,340 0
Notes payable -- current portion . . . . . . . . . . . . . . . . . . . . . . . . . 46,652 49,655
Notes payable -- line of credit. . . . . . . . . . . . . . . . . . . . . . . . . . 142,253 486,538
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 753,643 536,360
Accrued payroll liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,593 58,173
Current portion of capitalized lease obligation. . . . . . . . . . . . . . . . . . 1,971 7,496
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,223 70,972
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,331,384 1,337,789
Long term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 23,401
Capitalized lease obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,395 0
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,0 26,000
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,299 6,610
Shareholders' equity (deficit):
Common stock, no par value:
Authorized shares -- 12,000,000; issued and outstanding shares
3,368,527 at August 31, 1997 and 4,535,095 at May 31, 1998 . . . . . . . . . . 8,931,019 7,653,600
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,162,051) (7,179,339)
---------- ----------
(231,032) 474,261
Less stock subscriptions receivable. . . . . . . . . . . . . . . . . . . . . . . . (1,500) (1,500)
---------- ----------
Total shareholders' equity (deficit). . . . . . . . . . . . . . . . . . . . . . . . . (232,532) 472,761
---------- ----------
Total liabilities and shareholders' equity. . . . . . . . . . . . . . . . . . . . . . $1,113,546 $1,866,561
---------- ----------
---------- ----------
</TABLE>
Note: The balance sheet as of August 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles.
See accompanying notes to financial statements.
2
<PAGE>
NICOLLET PROCESS ENGINEERING, INC.
Statements of Operations
For the Three Months and Nine Months Ended May 31, 1998 and May 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
May,31, 1998 May 31, 1997 May 31, 1998 May 31, 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $ 160,378 $ 683,025 $ 865,152 $ 1,797,679
Cost of sales . . . . . . . . . . . . . . . . . . 197,657 396,123 766,656 1,082,752
---------- ---------- ------------ -----------
Gross margin. . . . . . . . . . . . . . . . . . . (37,279) 286,902 135,775 714,927
Operating expenses:
Selling expenses . . . . . . . . . . . . . . 330,638 299,703 999,681 929,719
Research and development
expenses . . . . . . . . . . . . . . . . . . 118,651 207,034 374,695 427,395
General and administrative
expenses . . . . . . . . . . . . . . . . . . 151,469 281,651 583,244 712,669
---------- ---------- ------------ -----------
Total operating expenses. . . . . . . . . 600,758 788,388 1,957,620 2,069,783
---------- ---------- ------------ -----------
Operating loss. . . . . . . . . . . . . . . . . . (638,037) (501,486) (1,859,124) (1,354,856)
Other income/expenses
Interest expense . . . . . . . . . . . . . . 84,324 2,730 123,592 7,011
Interest income. . . . . . . . . . . . . . . 0 (4,628) 0 (43,329)
---------- ---------- ------------ -----------
Total other
income/expenses . . . . . . . . . . . . . 0 (759) 0 (759)
---------- ---------- ------------ -----------
Net loss. . . . . . . . . . . . . . . . . . . . . $ (722,361) $ (498,829) $ (1,982,716) $(1,317,779)
---------- ---------- ------------ -----------
Net loss per share. . . . . . . . . . . . . . . . $ (0.16) $(0.15) $(0.44) $ (0.40)
---------- ---------- ------------ -----------
Weighted average number of
shares outstanding . . . . . . . . . . . . . 4,456,816 3,324,879 4,456,816 3,317,008
---------- ---------- ------------ -----------
---------- ---------- ------------ -----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NICOLLET PROCESS ENGINEERING, INC.
Statements of Cash Flows
For the Nine Months Ended May 31, 1998 and May 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
May 31, 1998 May 31, 1997
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss. . . . . . . . . . . . . . . . . . . . . . . . (1,982,716) (1,317,779)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation/amortization . . . . . . . . . . . . . 247,522 208,165
Accounts receivable . . . . . . . . . . . . . . . 708,635 (360,527
Inventories . . . . . . . . . . . . . . . . . . . 42,348 121,407
Prepaid expenses. . . . . . . . . . . . . . . . . (91,591) (37,610)
Accounts payable. . . . . . . . . . . . . . . . . 217,282 80,000)
Other current liabilities . . . . . . . . . . . . (257,784) 21,789
Accrued liabilities . . . . . . . . . . . . . . . 8,506 (82,885)
---------- ------------
Net cash used in operating activities . . . . . . . . . (1,107,793) (1,367,440)
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Total fixed assets. . . . . . . . . . . . . . . . . . . (14,626) (43,199)
Other assets. . . . . . . . . . . . . . . . . . . . . . (36,710) (367,161)
Capital-in-process. . . . . . . . . . . . . . . . . . . (102,563) (151,027)
---------- ------------
Net cash used in investing activities . . . . . . . . . (153,900) (561,387)
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Proceeds from:
Common stock. . . . . . . . . . . . . . . . . . . . . 1,277,419 (59,174)
Stock subscription received . . . . . . . . . . . . . 0 3000
Notes payable . . . . . . . . . . . . . . . . . . . . (12,006) (87,390)
Deferred lease obligation . . . . . . . . . . . . . . (4,638) (4,638)
Capitalized lease obligation. . . . . . . . . . . . . (4,197) (4,245)
---------- ------------
Net cash (used in)/from financing activities. . . . . . 1,256,578 (152,447)
---------- ------------
Net decrease in cash. . . . . . . . . . . . . . . . . . $ (5,114) $(2,081,273
Cash at beginning of period . . . . . . . . . . . . . . 128,595 (2,171,623)
Cash at end of period . . . . . . . . . . . . . . . . . $(133,,709) $ 90,350
---------- ------------
---------- ------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
NICOLLET PROCESS ENGINEERING, INC.
Form 10-QSB
May 31, 1998
Notes to Financial Statements
1. BASIS OF PRESENTATION
The unaudited interim financial statements have been prepared by the
Company in accordance with generally accepted accounting principles,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements have been omitted or condensed
pursuant to such rules and regulations. The information furnished
reflects, in the opinion of the management of the Company, all adjustments
(of only a normally recurring nature) necessary to present a fair statement
of the results for the interim periods presented. Operating results for
the three and nine month periods ended May 31, 1998 are not necessarily
indicative of the results that may be expected for the year ended August
31, 1998. The accompanying unaudited interim financial statements should
be read in conjunction with the financial statements and related notes
included in the Company's Annual Report on Form 10-KSB dated August 31,
1997.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing the net income (loss)
for the period by the weighted average number of shares of common stock
outstanding during the period.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
THIS FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED IN THIS FORM 10-QSB THAT ARE NOT STATEMENTS
OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT
LIMITING THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE,"
"ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS
THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A
VARIETY OF FACTORS, INCLUDING THOSE DESCRIBED UNDER THE CAPTION "IMPORTANT
FACTORS TO CONSIDER" CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB,
AS AMENDED, FOR THE FISCAL YEAR ENDED AUGUST 31, 1997.
OVERVIEW
Nicollet Process Engineering, Inc.'s ("NPE" or the "Company") mission is to
assist customers in turning factory floor information into revenues and profits.
NPE is focused on the information technology requirements of manufacturers for
better managing production processes and supporting management decisions. NPE
designs, manufacturers, markets and supports high speed data acquisition systems
that bring a range of solutions to solve process automation problems, including
process visualization, machine and process control and real-time database
management products. The Company currently focuses on the die casting and
plastics injection molding industries with industry specific process monitoring
and control systems, client/server software and machine diagnostic instruments.
The Company has developed die casting industry specific, "turn-key"
manufacturing information and process control system ("Process Vision") which,
on a real-time basis, monitors, collects and displays machine performance data,
monitors process performance continuously against pre-set values, provides
feedback to the machine's controller to bring out of tolerance performance back
into conformance, and aggregates data for real-time presentation of process
reports for use by the machine operator. As part of its product offering to die
casting industry, the Company has also developed client/server software (the
"Client/Server Software" which together with Process Vision are referred to as
the "Die Casting Products"), which provides access to factory floor data stored
in file servers and distributes that data, on a real-time basis, to all levels
of an organization in either preprogrammed report formats or on a defined basis.
The Company has developed a line of products in the plastics injection
molding industry that provides process and production monitoring to all levels
of an organization. The Company's plastics monitoring product is also a "turn
key" manufacturing information system (the "Plastics Monitoring System") which
on a real-time basis, monitors, collects and displays machine performance data,
monitors process performance continuously against pre-set values and provides
the information collected and analyzed to all levels of an organization. In
February 1997, the Company introduced a second product to the plastics
industry--the PMRS. The Company's production monitoring and reporting system
(the "PMRS") collects production information, such as cycle time and number of
parts manufactured, from machines at the factory floor level and provides
specific production reports to the machine operator or, at the customer's
option, to all levels of the organization. During the first quarter of fiscal
1997, in conjunction with and at the request of several original equipment
manufacturers (OEMs), the Company developed a modified version of the Plastics
Monitoring System that offers a direct connection to the plastic injection
molding machine for process monitoring (the "Direct Connect" which together with
the Plastics Monitoring System and PMRS are referred to as the "Plastics
Products"), thereby eliminating the need for specialized computer hardware to
run process monitoring.
The Company's third product line, the Machine Capability Analyzer (the
"MCA"), is a portable, diagnostic instrument that troubleshoots machine
performance for inconsistencies in operation and
6
<PAGE>
repeatability. During the fourth quarter of fiscal 1997 and the first quarter
of fiscal 1998, the Company, under an agreement with GE Plastics, an operating
division of General Electric Corporation, developed a new software module for
the MCA to test the moldability of GE resins. The custom design of this new
module was completed for GE Plastics during the second quarter of fiscal 1998,
and the Company believes it will have broad application throughout GE Plastics
and its customers molding with GE resins. NPE has also redesigned the MCA
product to meet new specifications provided by Dow Chemical. Dow Chemical has
purchased two prototypes of the newly redesigned MCA product for testing. The
Company believes that the new software module for the MCA developed for GE
Plastics and the newly designed product for Dow Chemical will have applications
across NPE's customer base.
During the last fiscal year, the Company focused substantially all of the
Company's research and development efforts in modularizing the Company's
Plastics Monitoring System. In addition, during the second quarter of fiscal
1998, the Company converted the operation platform software for the Plastics
Products. The Company's Plastics Products are now engineered to allow customers
to mix and match modules according to a customer's specific needs, thereby
permitting easy migration from simpler starter systems, such as the PMRS, to
more sophisticated process monitoring and client/server level information
gathering systems.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MAY 31, 1998 COMPARED TO THREE MONTHS AND
NINE MONTHS ENDED MAY 31, 1997
NET SALES. Net sales decreased 77% to approximately $160,000 in the three
months ended May 31, 1998, compared to approximately $683,000 in the three
months ended May 31, 1997. Net sales decreased 52% to approximately $865,000 in
the nine months ended May 31, 1998, compared to approximately $1.8 million in
the nine months ended May 31, 1997. The decrease in the net sales for the third
fiscal quarter and nine month period ended May 31, 1998 was due to delays in
bookings, extended design efforts and the software conversion process of the
Plastics Products.
Sales of the Company's die casting NPE System in the three months ended May
31, 1998 decreased approximately 93% to approximately $27,000. Sales of the
Company's die casting NPE System in the nine months ended May 31, 1998 decreased
approximately 63% to approximately $352,000. The decrease for the nine month
period ended May 31, 1998 was due to delays in booking major orders. A number
of these orders have since been placed, and Company's die casting backlog was
approximately $390,000 as of June 30, 1998.
Sales of the Plastics Products decreased 64% to approximately $20,000 in
the three months ended May 31, 1998, compared to approximately $55,000 in the
prior year period. Sales of the Plastics Products decreased 41% to
approximately $104,000 in the nine months ended May 31, 1998, compared to
approximately $172,000 in the prior year period. The decrease for both the
three month and nine month periods ended May 31, 1998 was due primarily to data
conversion delays. This conversion was completed during the second quarter of
fiscal 1998. The new software platform was installed at existing customer sites
and the Company believes that the product is now stable.
Sales of the MCAs decreased 52% to $65,000 in the three months ended May
31, 1998, compared to approximately $136,000 in the prior year period. Sales of
MCAs decreased 47% to $219,000 in the nine months ended May 31, 1998, compared
to approximately $411,000 in the prior year period. The decrease in both the
three months and nine months ended May 31, 1998 was due to vendor technical
problems with the laptop analyzer docking station, which caused no availability
of the product. The design of a new analyzer was completed in March 1998 and
contains feature upgrades including
7
<PAGE>
integrated signal conditioning. Bookings have increased during the third
quarter, and the backlog is $48,000 as of June 30, 1998.
GROSS MARGINS. The gross margin decreased to (23%) of revenues in the
three months ended May 31, 1998, compared to 35% of revenues in the prior year
period. The gross margin decreased to 11% of revenues in the nine months ended
May 31, 1998, compared to 34% of revenues in the prior year period. The
decrease in both the three month and nine month period ended May 31, 1998 was
due primarily to the decrease in revenues and continued warranty costs
associated with software conversion installation. and training for existing
customers There was $97,000 of warranty costs for the nine month period ended
May 31, 1998.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased 10% to
approximately $331,000 in the three months ended May 31, 1998, compared to
approximately $300,000 in the prior year period. Sales and marketing expenses
increased 8% to approximately $1.0 million in the nine months ended May 31,
1998, compared to approximately $930,000 in the prior year period. This
increase in both the three months and nine months ended May 31 1998 was due to
additions to the sales force during the first quarters of fiscal 1998 and
increased advertising cost associated with the new Plastic Products.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased 43% to approximately $119,000 in the three months ended May 31, 1998,
compared to approximately $207,000 in the prior year period. Research and
development expenses decreased 12% to approximately $375,000 in the nine months
ended May 31, 1998, compared to approximately $427,000 in the prior year period.
This decrease, in both the three month and nine month periods ended May 31,
1998, was due to reductions in technical staff during the first and second
quarters of fiscal 1998. The Company capitalized approximately $133,000 in
software development costs relating to development of the NPE programmable logic
controller, the new MCA analyzer and the PMRS software.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 46% to approximately $151,000 in the three months ended May 31, 1998,
compared to approximately $282,000 in the prior year. General and
administrative expenses decreased 18% to approximately $583,000 in the nine
months ended May 31, 1998, compared to approximately $713,000 in the prior year.
This decrease, in both the three month and nine month period ended May 31, 1998,
was due to decreases in legal fees, travel expenses, investor relations and
corporate communication expenses.
INTEREST INCOME. Interest income decreased to $0 in both the three months
and the nine months ended May 31, 1998, compared to $4,628 and $43,329,
respectively, for the same prior periods. This decrease, in both the three
months and nine months ended May 31, 1998, was due to no securities investments.
INTEREST EXPENSES. Interest expenses increased to approximately $84,000
in the three months ended May 31, 1998, compared to approximately $3,000 in the
prior year period. Interest expenses increased to approximately $124,000 in the
nine months ended May 31, 1998, compared to approximately $7,000 in the prior
year period. This increase, in both the three months and nine months ended May
31, 1998, was due to an increase in outstanding debt by use of the bank line of
credit.
NET LOSS. The net loss for the three months ended May 31, 1998 was
approximately $722,000 or $0.16 per share, compared to a net loss of
approximately $498,000 or $0.15 per share for the three months ended May 31,
1997. The net loss for the nine months ended May 31, 1998 was approximately
$1,983,000 or $.44 per share, compared to a net loss of approximately $1,318,000
or $.40 per share for the nine months ended May 31, 1997. The increase in the
net loss, in both the three months and nine
8
<PAGE>
months ended May 31, 1998, is due primarily to a reduction in net sales and
increased cost of and sales and marketing expenses.
LIQUIDITY AND CAPITAL RESOURCES
In May 1997, the Company entered into two lines of credit with Norwest
Business Credit, Inc. and Norwest Bank Minnesota, National Association
(collectively, "Norwest") for an aggregate of up to $800,000 in borrowings (the
"Credit Facilities"). In June 1998, Norwest assigned all of its rights and
obligations under the Credit Facilities to TECHinspirations, Inc. (TECH). The
Credit Facilities are discretionary. Credit availability under these facilities
is based on accounts receivable of the Company's United States operations and
accounts receivable and inventories of the Company's international operations.
The Credit Facilities are used primarily to finance working capital. As of June
30 1998, the Company borrowed approximately $800,000 under the Credit
Facilities.
On November 7, 1997, the Company completed a private placement of an
aggregate of 1,266,667 shares of Common Stock. The gross proceeds to the
Company from the private placement were approximately $760,000.
On February 26, 1998, the Company sold 450,000 shares of Common Stock for
an aggregate purchase price of $250,000. On March 12, 1998, the Company sold an
additional 450,000 shares of Common Stock for aggregate proceeds of $225,000.
Management believes cash available through its Credit Facilities and
aditional equity investments will fund operations through August 1998. Net cash
used in operating activities was approximately $1.1 million and $1.4 million in
the nine months ended May 31, 1998 and May 31, 1997, respectively. The cash
used was primarily related to operations.
The Company anticipates capital expenditures of approximately $10,000
through fiscal 1998 for use in purchasing engineering test and calibration
equipment.
The Company anticipates needing additional cash to satisfy its working
capital needs on an ongoing basis. The Company is negotiating with TECH to
resolve these needs.
9
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal, governmental, administrative or
other proceedings to which the Company is a party or of which any of its
property is the subject.
ITEM 2. CHANGES IN SECURITIES.
On March 12, 1998, the Company sold 450,000 shares of Common Stock, at a
price of $0.50 per share, for an aggregate purchase price of $225,000, to
Andrew K. Boszhardt, Jr. and Anthony Scaramucci.
The sales of Common Stock in March 1998 were made in reliance on Section
4(2) and Regulation D under the 1933 Act for transactions not involving a
public offering. With regard to the reliance by the Company upon the
exemption from registration provided under Section 4(2) and Regulation D
under the 1933 Act for the sales of the securities disclosed above, certain
inquiries were made by the Company and certain representations and warranties
were obtained from the purchasers to establish that such sales qualified for
such exemption from the registration requirements. In particular, the
Company confirmed that with respect to the exemption claimed under Section
4(2) and Regulation D under the 1933 Act (i) all offers of sales and sales
were made by personal contact from officers or directors of the Company or
other persons closely associated with the Company, (ii) each purchaser made
representations that he was sophisticated in relation to the investment (and
the Company has no reason to believe such representations were incorrect),
(iii) each purchaser gave assurance of investment intent and the certificates
for the shares bear a legend accordingly, and (iv) offers and sales were made
to a limited number of persons.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company is currently in default of the minimum book net worth
covenant under the Credit Facilities and has borrowed funds in excess of the
borrowing base limitations imposed by the Credit Facilities. The Company is
continuously working with TECH to resolve these defaults.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 10.1 Nonrecourse assignment dated June 8, 1998 between
Norwest Business Credit. Inc. and TECHinspirations, Inc.
Exhibit 27.1 Financial Data Schedule.
(b) No Current Reports on Form 8-K were filed during the fiscal quarter
ended May 31 1998.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NICOLLET PROCESS ENGINEERING, INC.
Dated: July 13, 1998 By: /s/ Robert A. Pitner
------------------------
Robert A. Pitner
President, Chief Executive Officer
and Chief
Financial Officer
(principal executive officer)
By: /s/ John Sandberg
----------------------
John Sandberg
Controller
(principal accounting officer)
11
<PAGE>
NICOLLET PROCESS ENGINEERING, INC.
QUARTERLY REPORT ON FORM 10-QSB
FISCAL QUARTER ENDED FEBRUARY 28, 1998
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
10..1 Nonrecourse Assignment dated June 8, 1998 between Filed herewith
Norwest Business Credit Inc. and TECHinspirations, Inc. electronically
27.1 Financial Data Schedule. . . . . . . . . . . . . . . . Filed herewith
electronically
</TABLE>
12
<PAGE>
EXHIBIT 10.1
NONRECOURSE ASSIGNMENT
This Assignment is made as of June 8, 1998 by and between Norwest Business
Credit Inc. ("Assignor") and TECHinspirations, Inc. ("Assignee").
RECITALS
A. Assignor is the holder of the instruments and documents listed on
Exhibit A (collectively, the "Documents"), executed in connection with a credit
facility made available by the Assignor to Nicollet Process Engineering, Inc., a
Minnesota corporation (the "Borrower").
B. The Borrower is in default of certain of its obligations under the
Documents.
C. Assignee wishes to purchase, and Assignor is willing to sell, without
recourse, the Documents as more fully set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which each party
acknowledges, Assignor and Assignee agree as follows:
1. On the terms and subject to the conditions set forth in this
Assignment, Assignor sells, transfers and assigns to Assignee, without recourse,
representation or warranty of any kind, except as specifically set forth herein,
all of Assignor's right, title and interest in and to the Documents, including
all rights, privileges and obligations thereunder.
2. Upon execution of this Assignment, Assignee shall deliver to Assignor,
in immediately available funds, the sum of $144,699.67 ("Purchase Price").
3. Assignor represents and warrants to Assignee that Assignor is the
holder of the Documents, that the Documents embody all of the Assignor's
interest in the Borrower or its assets, that it has good and marketable title,
that it has the right and authority to sell and that the Documents are being
transferred free and clear of any liens or encumbrances on Assignor's interest.
Any liability of Assignor arising from the foregoing representations and
warranties is limited to the amount of the Purchase Price. Assignor makes no
other representations or warranties of any kind. Upon completion of this
Agreement, the Assignor will have no claim or rights with respect to any assets
of the Borrower.
4. Assignor agrees to execute and deliver such other documents or
instruments of transfer as Assignee may reasonably request to evidence the
assignment of the Documents under this Assignment.
<PAGE>
5. Assignee acknowledges that it has had the opportunity to inspect and
review the Documents and make such inquiry into the affairs of the Borrower as
Assignee deemed appropriate. Assignee is solely responsible for the decision to
purchase the Documents and is not relying on any representations or warranties
of Assignor except as specifically contained in this Agreement.
6. This Assignment contains the complete agreement of the parties and
supersedes any prior agreements, whether written or oral, between them with
respect to the Documents. This Assignment may not be modified or amended except
by a writing signed by both parties. This Agreement shall be governed by the
laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
duly authorized, executed and delivered as of the date set forth above.
NORWEST BUSINESS CREDIT, INC. TECHinspirations, INC.
("Assignor") ("Assignee")
By /S/ ROGER A. PFIFFNER By /S/ FRANK VAN LUTTIKHUIZEN
----------------------------------- ---------------------------------
Roger A. Pfiffner Frank Van Luttikhuizen
Its Vice President Its Chief Financial Officer
ACKNOWLEDGMENT OF BORROWER
Nicollet Process Engineering, Inc., a Minnesota corporation (the
"Borrower"), represents and warrants to TECHinspirations, Inc. that the
Documents are all of the agreements in effect governing the credit facility made
available by Norwest Business Credit, Inc. to the Borrower.
NICOLLET PROCESS ENGINEERING, INC.
By /s/ John D. Sandberg
----------------------------
John D. Sandberg
Its Controller
<PAGE>
EXHIBIT A
SCHEDULE OF CLOSING DOCUMENTS
FOR
REVOLVING CREDIT FACILITY
TO
NICOLLET PROCESS ENGINEERING, INC.
Closing Date: May 28, 1997
A. BASIC LOAN DOCUMENTS
1. $800,000 Revolving Promissory Note
2. Credit and Security Agreement
3. Disclosure
4. Certificate of Authority for Borrower
(a) Resolutions
(b) Articles of incorporation and bylaws
(c) Good Standing Certificate
5. UCC-1 Financing Statement
(a) Minnesota Secretary of State, No. 1943688, filed May 21, 1997
6. UCC-2 Fixture Financing Statement
(a) Hennepin County, Minnesota, No. 2815869, filed June 5, 1997
7. Collateral Account Agreement
8. Agreement for Lockbox Service
9. Officer's Certificate
10. Support Agreement
B. MISCELLANEOUS DOCUMENTS
11. Insurance Certificate and Loss Payee Endorsement
12. Assignment of Life Insurance Policy
(a) Original Life Insurance Policy
(b) Life Insurance Questionnaire
13. Landlord's Disclaimer and Consent
<PAGE>
(a) Copy of Lease
14. UCC, Tax and Judgment Lien Searches
(a) Nicollet Process Engineering, Inc.
(i) Minnesota
(ii) Hennepin County, Minnesota
15. Legal Opinion of Counsel to Borrower
16. UCC Terminations
(a) Republic Acceptance Corporation
(i) No. 1771890, filed June 27, 1995 with the Secretary of the
State of Minnesota, termination filed May 28, 1997 as
financing statement No. 1945301.
(b) Hillcrest Development
(ii) No. 1793810, filed October 3, 1995 with the Secretary of the
State of Minnesota, termination filed May 1, 1997 as
financing statement No. 1938045.
17. Intercreditor Agreement (Norwest Bank Minnesota) (Delivered to Lender
Only)
18. Funding Letter (Delivered to Lender Only)
19. First Amendment to Credit and Security Agreement dated November 24,
1997 and Compliance Certificate (not executed)
20. Guaranty - (Benton J. Case, Jr.) (Not Notarized) dated February 17,
1998
21. Guaranty - (Pierce McNally) dated February 17, 1998
22. Guaranty - (Robert A. Pitner) dated February 17, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 195,814
<ALLOWANCES> 91,490
<INVENTORY> 148,464
<CURRENT-ASSETS> 387,777
<PP&E> 744,454
<DEPRECIATION> 477,093
<TOTAL-ASSETS> 1,113,546
<CURRENT-LIABILITIES> 1,331,384
<BONDS> 0
0
0
<COMMON> 8,931,019
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,113,546
<SALES> 865,152
<TOTAL-REVENUES> 865,152
<CGS> 766,656
<TOTAL-COSTS> 1,957,620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123,592
<INCOME-PRETAX> (1,982,716)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,982,716)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> (0.44)
</TABLE>
