<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the Quarterly Period Ended: SEPTEMBER 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT.
Commission File Number: 0-25602
TECH SQUARED INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1591872
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
5198 WEST 76TH STREET
EDINA, MINNESOTA 55439
(Address of principal executive offices)
(612) 832-5622
(Registrant's telephone number)
Indicate whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of the close of business on November 1, 1998, 11,400,825 shares of
Common Stock, no par value, of the Company were outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TECH SQUARED INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1998
(unaudited) and December 31, 1997 3
Consolidated Statements of Operations (unaudited)
for the three months and nine months ended
September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
TECH SQUARED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,237 $ 300
Restricted cash 197,177 143,623
Available-for-sale securities - 467,438
Accounts receivable, net of allowance
for doubtful receivables of $259,000
and $306,000 respectively 2,630,267 2,727,883
Inventories 2,342,776 1,890,480
Prepaids and other current assets 384,397 234,936
----------- ----------
TOTAL CURRENT ASSETS 5,572,854 5,464,660
Property and equipment, net 428,122 346,419
Receivable from officer/stockholder 201,512 201,512
Mining assets 748,276 748,276
Investment in Digital River 27,966,028 839,202
----------- ----------
$34,916,792 $7,600,069
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit $ 781,353 $ 765,728
Current maturities of long term debt 35,000 80,000
Accounts payable 3,843,793 2,816,959
Accrued compensation and benefits 201,425 239,748
Accrued expenses 623,224 791,743
Dividends payable to officer/shareholder 200,721 200,721
----------- ----------
TOTAL CURRENT LIABILITIES 5,685,516 4,894,899
Dividends payable to officer/shareholder 83,136 283,136
Long term debt, less current maturities - 15,000
Deferred income taxes 10,765,500 -
Redeemable preferred stock, 12% cumulative convertible,
$1 par value; 1,000,000 shares authorized; 160,000
shares issued and outstanding 216,700 216,700
STOCKHOLDERS' EQUITY:
Common stock: no par value; 25,000,000 shares authorized
11,039,179 and 10,374,870 issued and outstanding - -
Additional paid-in capital 3,417,356 3,189,436
Retained earnings (deficit) 948,283 (912,539)
Unrealized gain/(loss) on available-for-sale securities 13,800,300 (86,563)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 18,165,939 2,190,334
----------- ----------
$34,916,791 $7,600,069
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TECH SQUARED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $9,721,350 $8,973,227 $27,816,363 $27,421,266
Cost of sales 8,477,919 7,850,190 24,293,303 24,145,836
---------- ---------- ----------- -----------
GROSS PROFIT 1,243,431 1,123,037 3,523,060 3,275,430
Selling and marketing expenses 817,110 486,967 2,101,104 1,430,357
General and administrative expenses 734,455 503,956 1,781,535 1,615,919
---------- ---------- ----------- -----------
Total Operating Expenses 1,551,565 990,923 3,882,639 3,046,276
---------- ---------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (308,134) 132,114 (359,579) 229,154
Interest expense, net (32,515) (25,801) (74,021) (78,971)
Investment income (271,200) 1,090 (266,589) 35,728
Equity in losses of Digital River (370,029) (317,367) (1,829,207) (897,304)
---------- ---------- ----------- -----------
NET LOSS ($981,878) ($209,964) ($2,529,396) ($711,393)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Net loss per common share, basic and diluted ($0.09) ($0.02) ($0.23) ($0.07)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Weighted average shares outstanding, basic and diluted 11,212,665 10,374,870 10,923,462 10,374,870
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
TECH SQUARED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss ($2,529,396) ($711,393)
Non-cash items included in loss:
Depreciation and amortization 134,320 167,858
Equity in losses of Digital River 1,829,207 897,304
Loss/(Gain) on sale of available-for-sale securities 266,589 (26,438)
Changes In Operating Assets And Liabilities:
Accounts receivable, net 97,616 (3,825)
Inventories (452,296) (109,993)
Prepaid and other current assets (149,461) 16,484
Accounts payable 1,026,834 (332,623)
Accrued compensation and benefits (38,323) (24,060)
Other accrued expenses (228,519) 245,039
----------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (43,429) 118,353
----------- ---------
Cash Flows From Investing Activities:
Change in restricted cash (53,554) -
Purchases of property and equipment (216,036) (116,493)
Proceeds from sale of available-for-sale securities 287,411 236,438
Decrease in cash due to deconsolidation of Digital River - (799,721)
----------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 17,821 (679,776)
----------- ---------
Cash Flows From Financing Activities:
Net change in revolving line of credit 15,625 (108,347)
Stock options exercised, net 227,920 -
Dividends paid (200,000) (135,745)
----------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 43,545 (244,092)
----------- ---------
NET INCREASE (DECREASE) IN CASH 17,937 (805,515)
Cash At Beginning Of Period 300 898,558
----------- ---------
Cash At End Of Period $18,237 $93,043
----------- ---------
----------- ---------
Supplemental cash flow information:
Cash paid for interest $75,895 $78,971
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
TECH SQUARED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements 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.
Operating results for the three and nine month periods ended September 30, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. The accompanying consolidated financial statements
and notes should be read in conjunction with the audited financial statements
and notes thereto included in the Company's 1997 annual report on Form 10-K.
NOTE 2 - INVENTORIES
The Company's inventories consist primarily of goods held for resale and are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out method.
NOTE 3 - DIGITAL RIVER
In December 1995 the Company obtained an option to acquire 3,200,000 shares of
Digital River common stock from the Company's majority stockholder and chief
executive officer, representing at the time a 60% ownership of Digital River.
The option is exercisable at any time through December 31, 2000 for a total
exercise price of $1.00. Digital River has developed and is operating a
proprietary system which allows the secure sale and delivery of software, fonts
and images on-line, via the Internet.
During the nine month period ended September 30,1998, Digital River completed
various private placements and an initial public offering of its common stock
which resulted in net proceeds of approximately $36,307,000 and issuance of
6,492,000 new shares of its common stock and 1,500,000 new shares of its Series
A preferred stock which were converted into an additional 1,000,000 shares of
common stock upon completion of Digital River's public offering. For the three
and nine month periods ended September 30, 1998, the Company recorded gain on
issuance of stock by Digital River of approximately $2,509,000 and $4,374,000
respectively, net of deferred income taxes, which was recorded as an adjustment
to stockholder's equity. The impact of the issuance of the additional shares
resulted in a reduction in the Company's effective ownership of Digital River
from approximately 35% at December 31, 1997 to approximately 19% as of August
1998. As a result, beginning August 12, 1998, the Company is accounting for its
investment in Digital River as available-for-sale securities, which are valued
at $8.75 per share, the closing market price on September 30, 1998.
6
<PAGE>
Summarized unaudited condensed financial information of Digital River is as
follows: (In 000's)
BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets $29,723 $ 2,126
Total assets 32,961 3,616
Current liabilities 3,616 1,076
Stockholders' equity $29,345 $ 2,540
</TABLE>
OPERATING INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER, 30 SEPTEMBER 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $5,758 $ 683 $11,504 $1,144
Cost of product sold and
operating expenses 9,967 1,631 21,215 3,287
Interest income, net 269 26 419 45
Net loss ($3,940) ($ 922) ($ 9,292) ($2,098)
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME
During June 1997, the Financial Accounting Standards Board released SFAS No.
130, "Reporting Comprehensive Income," effective for fiscal years beginning
after December 15, 1997. SFAS No. 130 established standards for reporting and
display in the financial statements of total net income and the components of
all other nonowner changes in equity, referred to as comprehensive income. The
Company has adopted SFAS No. 130 beginning in 1998. Other comprehensive income,
net of deferred taxes, for the three and nine month periods ended September 30,
1998 was approximately $13,936,000 and $13,887,000, respectively, compared to
($182,000) and ($212,000) for the same periods of 1997. Other comprehensive
income was comprised of changes in the market value of the available-for-sale
securities and the investment in Digital River.
NOTE 5 - Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Statement 133 is
effective for fiscal years beginning after June 15, 1999. The Company believes
that the adoption of Statement 133 will have no material impact on its financial
condition or results of operations.
7
<PAGE>
TECH SQUARED INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements contained herein are forward-looking statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934
that involve a number of risks and uncertainties. Such forward-looking
information may be indicated by words such as will, may be, expects or
anticipates. In addition to the factors discussed herein, among the other
factors that could cause actual results to differ materially are the following:
business conditions and growth in the personal computer industry and the general
economy; competitive factors such as rival computer and peripheral product
sellers and price pressures; availability of vendor products at reasonable
prices; inventory risks due to shifts in market demand; and risks presented from
time to time in reports filed by the Company with the Securities and Exchange
Commission, including but not limited to the annual report on Form 10-K for the
year ended December 31, 1997.
The Company through its DTP Direct catalog sells computer and peripheral
products targeted at the graphic arts market, which currently employs primarily
Apple Macintosh related products. In May 1998, the Company launched a new
catalog, Net Direct, which is directed at developers of internal corporate
intranet and external Internet sites. The Company also markets through direct
marketing channels and to value added resellers.
The following table is a summary of the operating results for Tech Squared Inc.
consolidated and Tech Squared Inc., excluding Digital River, for the three and
nine month periods ended September 30, 1998 and 1997, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER, 30 SEPTEMBER 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C>
Net income/(loss) - Tech Squared
Consolidated ($982,000) ($210,000) ($2,529,000) ($711,000)
Per Share ($0.09) ($0.02) ($0.23) ($0.07)
Net income/(loss) - Tech Squared
(excluding Digital River) ($612,000) $107,000 ($700,000) $186,000
</TABLE>
RESULTS OF OPERATIONS
NET SALES
Net sales for the Company's third quarter ended September 30, 1998 totaled
$9,721,000 compared to $8,973,000 for the corresponding period of 1997, an
increase of 8.3%. Sales to DTP Direct catalog customers increased $907,000, a
15.3% increase over the same period last year which is primarily due to an
increase in computer system sales. Total computer system sales dollars for the
third quarter increased 60.0% over the same period a year ago. Sales through
the Company's distribution business decreased $669,000 during the third quarter
of 1998, a decrease of 22.4% compared to the same period last year. The
decrease was mainly attributable to the elimination of Macintosh clone system
sales. There were no Macintosh clone system sales in the third quarter of 1998,
compared to $570,000 for the same period of 1997. Sales to Net Direct catalog
customers, the Company's network-focused catalog which was launched in May 1998,
contributed $511,000 to the third quarter sales. Net sales for the first nine
months of 1998 totaled $27,816,000 compared to $27,421,000 for the same period
of 1997.
Fluctuations in the Company's net sales from period to period can be expected
due to a number of factors, including the timing of new product introductions by
the Company's major vendors and their competitors, seasonal cycles commonly
experienced in computer-related industries, and changes in product mix, product
pricing and market conditions. In addition, the potential delay of customers'
purchase decisions because of uncertainty about the year 2000 issues may have a
significant effect on sales. As a result, the operating results for any
particular period are not necessarily indicative of the results of any future
period.
8
<PAGE>
GROSS PROFIT
Gross profit increased slightly for the quarter ended September 30, 1998. Gross
profit for the period was $1,243,000 or 12.8% of net sales compared to
$1,123,000 or 12.5% of net sales for the comparable period of 1997. Gross
profit for the nine month period ended September 30, 1998 was $3,523,000 or
12.7% compared to $3,275,000 or 11.9% of net sales for the same period in 1997.
The Company expects ongoing competitive pressure on gross profit, and,
consequently, changes in pricing and product configuration will be necessary in
order to remain competitive.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses totaled $817,000 or 8.4% of sales during the
quarter ended September 30, 1998, compared to $487,000 or 5.4% of sales during
the corresponding period of 1997. For the nine month period ended September 30,
1998, selling and marketing expenses were $2,101,000 or 7.6% of sales versus
$1,430,000 or 5.2% of sales for the same period in 1997. This increase was
primarily due to an increase in the number of outbound sales consultants from 3
to 12, an increase in net marketing costs related to the development, production
and distribution of DTP Direct catalogs, and the costs related to the
development, production and distribution of a new catalog, Net Direct. Although
the Company believes the potential target market for the Net Direct catalog is
substantially larger than that for the DTP Direct catalog, and that the new
catalog could provide significant opportunity for revenue growth, there are
significant costs and risks associated with the launch of a new catalog
including: a completely new target audience, lack of any historical direct
marketing data on which to base mailing decisions, competitive forces and new
product lines. As a result, the Company believes the launch of the Net Direct
catalog will have a negative impact on the profitability of the Company in 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the quarter ended September 30, 1998
were $734,000 compared to $504,000 for the comparable period of 1997. For the
nine month period ended September 30, 1998, general and administrative expenses
were $1,782,000 compared to $1,616,000 for the related period of 1997. The
increase for the quarter ended September 30, 1998 over the same period of 1997
is attributable to several factors including payroll expense, consulting
services and transaction processing fees. The increase in payroll expense is
primarily the result of reallocation of personnel within the company.
INVESTMENT INCOME/(LOSS)
The Company recorded investment income/(loss) of ($271,000) for the third
quarter of 1998 compared to $1,000 for the corresponding period in 1997. The
loss relates to the write off of available-for-sale securities of Cam Designs
Inc. On October 21, 1998, Cam Designs Inc. announced that it agreed to have its
U.K. companies, which constitute almost all of its operations, placed in
receivership because of its inability to secure adequate banking facilities and
reduce outstanding debt. Investment income/(loss) for the nine month period
ended September 30, 1998 was ($267,000) compared to $36,000 for the comparable
period in 1997.
NET INTEREST EXPENSE
Net interest expense for the quarter ended September 30, 1998 was $33,000
compared to $26,000 for the same period in 1997. Interest expense for the
nine-month period ended September 30, 1998 was $74,000 compared to $79,000 for
the same period in 1997.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity at September 30, 1998, consisted of
liquid funds, a revolving line of credit agreement with US Bancorp National
Association ("US Bank"), and vendor trade credit lines.
The Company has a Revolving Line of Credit Agreement with US Bank through June
1999. Borrowings under the $2,500,000 agreement are payable on demand, limited
by eligible percentages of accounts receivable and inventory and bear interest
at the prime rate plus 1.75%. Borrowings under the agreement are secured by
substantially all the Company's assets, and are personally guaranteed up to
$500,000 by the Company's Chairman. As of September 30, 1998, the Company had
unused availability under the line of credit of approximately $679,000 and
outstanding borrowings of $781,000.
The Company has a flooring program with a financing company covering up to
$625,000 in inventory purchases. The flooring program is secured by a standby
letter of credit in the amount of $550,000 issued pursuant to the Company's line
of credit with US Bank. The Company uses the flooring program to take advantage
of certain programs with its major distributors.
As of September 30, 1998, the Company had a working capital deficit of
($113,000). The working capital has been reduced by approximately $200,000,
which represents the current portion of the remaining balance of a dividend
declared in April 1995, but not yet paid. The dividend payable is subordinated
to the Revolving Line of Credit and the aggregate payout of the dividend cannot
exceed $200,000 in any calendar year. In April 1998, the Company paid $200,000
related to the dividend payable to an officer/shareholder.
In anticipation of increasing sales, inventories increased to $2,343,000 as of
September 30,1998, from $1,949,000 as of June 30, 1998, and $1,890,000, as of
December 31, 1997. Although inventory levels increased in the third quarter of
1998, inventory turns were 12.3 in the third quarter of 1998, down from 13.8
turns in the second quarter of 1998, but up from 11.9 turns in the fourth
quarter of 1997. Capital expenditures totaled $216,000 in the third quarter of
1998 compared to $116,000 in the third quarter of 1997. The increase in capital
expenditures in the third quarter of 1998 is primarily due to office renovation
and computer system upgrades and enhancements.
The Company believes that funds generated from management of receivable and
inventory levels, advances under its line of credit, further expansion of lines
with trade creditors, and the cash on hand, will be sufficient to fund its
operations through the end of 1998. However, maintaining an adequate level of
working capital through the end of 1998 and thereafter depends in part on the
success of the Company's sales and marketing efforts and the Company's ability
to control operating expenses. In addition, the potential delay of customers'
purchase decisions because of uncertainty about the year 2000 issues may have a
significant effect on sales. Furthermore, funding of the Company's operations
in future periods may require additional investments in the Company in the form
of equity or debt. There can be no assurance that the Company will achieve
desired levels of sales or profitability or that future capital infusions will
be available.
10
<PAGE>
YEAR 2000 COMPLIANCE
The Company's computer systems and those of third parties with whom it does
business will be affected by issues and problems related to changes required as
a result of the year 2000 problem ("Y2K"). The Company's two key systems and
assets that may be directly impacted by the Y2k issue are its financial and data
system and its telephone system. The financial and data system requirements
have been assessed and are currently being upgraded and modified to be Y2K
compliant. Anticipated rollout and testing of the Y2K compliant system is
expected by March 31, 1999. The telephone system is believed to be Y2K
compliant, and testing is scheduled for the fourth quarter of 1998. The Company
does not anticipate at this time that the cost to modify its systems or the
upgrading of its current system to be Y2K compliant will be material to its
financial condition or results of operations. Maintenance and modification costs
incurred by the Company specifically related to being Y2K will be expensed as
incurred and costs of new software (whether purchased or internally developed)
will be capitalized and amortized over the useful life of the applicable
software.
While the Company has exercised its best efforts to identify and remedy any
potential Y2K exposures within its control, certain risks exist with vendors and
suppliers which, to a significant extent, are beyond the immediate control of
the Company. To date, the Company has not identified any vendors or suppliers
who will not be Y2K compliant; however, this analysis is still in process. The
Company plans to develop appropriate contingency plans if non-compliant vendors
are identified. Failure to achieve timely completion of required modifications
or conversions or failure of the third parties with whom the Company has
relationships (e.g., vendors, clients, credit card processors) to be Y2K
compliant could have a material affect on the financial condition and operations
of the Company. The Company, however, is unable to assess disruption that may
occur as a result of supplier's and customer's non-compliance. Because the
Company markets products manufactured by multiple sources and typically sells
the products as 'packages', Y2K problems affecting the Company's vendors may
have a significant affect on the Company. In addition, customers may delay
purchase decisions because of the uncertainty about Y2K issues.
11
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
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) Exhibits
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURE
Pursuant to 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.
TECH SQUARED INC.
November 12, 1998
----------------------------------------
Richard Apple, Chief Executive Officer
----------------------------------------
Jeffrey F. Martin, Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Index Description
- ------------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 215
<SECURITIES> 0
<RECEIVABLES> 2,630<F1>
<ALLOWANCES> 0
<INVENTORY> 2,343
<CURRENT-ASSETS> 5,573
<PP&E> 428<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,917
<CURRENT-LIABILITIES> 5,686
<BONDS> 0
217
0
<COMMON> 0
<OTHER-SE> 3,417
<TOTAL-LIABILITY-AND-EQUITY> 34,917
<SALES> 27,816
<TOTAL-REVENUES> 27,816
<CGS> 24,293
<TOTAL-COSTS> 24,293
<OTHER-EXPENSES> 3,883
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 74
<INCOME-PRETAX> (2,529)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,529)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
<FN>
<F1>AMOUNTS REPORTED FOR ACCOUNTS RECEIVABLE AND PROPERTY, PLANT & EQUIPMENT ARE
NET AMOUNTS.
</FN>
</TABLE>
