<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995 Commission File Number 0-9669
------------------ ------
TECHNALYSIS CORPORATION
- ---------------------------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
Minnesota 41-0918564
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6700 France Avenue South
Minneapolis, Minnesota 55435
- ----------------------------------- -----------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code (612) 925-5900
-----------------------
Not Applicable
- ---------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last year)
Indicate by check mark 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, and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
2,201,303 Common Shares were outstanding as of September 30, 1995.
<PAGE>
TECHNALYSIS CORPORATION
INDEX
<TABLE>
<S> <C>
PAGE
PART I. FINANCIAL INFORMATION NO.
Item 1. Financial Statements
Condensed Balance Sheet 3
September 30, 1995 (Unaudited) and
December 31, 1994
Condensed Statement of Earnings 4
Three months and nine months ended
September 30, 1995 and 1994 (Unaudited)
Condensed Statement of Cash Flows 5
Nine months ended September 30, 1995
and 1994 (Unaudited)
Notes to Condensed Financial 6
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
<PAGE>
TECHNALYSIS CORPORATION
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DEC. 31,
1995 1994
----------- -----------
ASSETS (Unaudited) Note
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $2,399,128 $4,156,239
Investment in Available-For-Sale Securities 1,103,222 1,057,255
Trade Accounts Receivable 4,140,239 2,254,825
Unbilled Work on Contracts in Process 38,872 1,056,513
Other Current Assets 400,841 237,146
---------- ----------
TOTAL CURRENT ASSETS $8,082,302 $8,761,978
EQUIPMENT AND OFFICE FURNITURE:
At cost less accumulated depreciation
of 713,712 & 658,955 respectively 157,858 157,789
---------- ----------
$8,240,160 $8,919,767
---------- ----------
---------- ----------
LIABILITIES & STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Trade Accounts Payable $ 317,594 $ 210,757
Salaries, Wages and Commissions 160,578 105,462
Accrued Vacation Pay 84,724 80,482
Income Taxes 0 0
Dividends Payable 0 637,218
Advance Billings on Contracts 44,688 154,273
---------- ----------
TOTAL CURRENT LIABILITIES $ 607,584 $1,188,192
STOCKHOLDER'S EQUITY:
Common Stock, Par Value $.10 a Share;
Authorized 5,000,000 Shares
Issued and outstanding 2,201,303
& 2,197,303 shares, respectively $ 220,130 $ 219,730
Additional Paid-In Capital 1,006,546 973,446
Retained Earnings 6,431,414 6,591,746
Unrealized Loss on Available-For-Sale
Securities (25,514) (53,347)
---------- ----------
$7,632,576 $7,731,575
---------- ----------
$8,240,160 $8,919,767
---------- ----------
---------- ----------
</TABLE>
NOTE: The balance sheet at December 31, 1994 has been taken from the audited
financial statements at that date, and condensed.
<PAGE>
TECHNALYSIS CORPORATION
CONDENSED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-----------------------------------------------
1995 1994 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Sales and Reimbursed Expenses $4,026,974 $4,089,490 $14,063,137 $12,675,931
EXPENSES:
Salaries, Contracted Services
and Reimbursed Expenses $2,998,994 $2,410,790 $ 8,958,264 $ 7,381,315
Selling, Administrative
and Other Operating Costs 787,597 720,351 2,609,546 2,215,348
Employee Benefits 555,927 471,847 1,896,876 1,537,418
---------- ---------- ----------- -----------
TOTAL EXPENSES $4,342,518 $3,602,988 $13,464,686 $11,134,081
---------- ---------- ----------- -----------
OTHER INCOME:
Interest Income 60,548 66,426 202,435 180,225
---------- ---------- ----------- -----------
EARNINGS BEFORE INCOME TAXES $ (254,996) $ 552,928 $ 800,886 $ 1,722,075
INCOME TAXES (103,000) 224,000 324,000 697,000
---------- ---------- ----------- -----------
NET EARNINGS $ (151,996) $ 328,928 $ 476,886 $ 1,025,075
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
PER COMMON SHARE
Net Earnings:
Primary $(0.07) $0.15 $0.22 $0.47
Fully Diluted $(0.07) $0.15 $0.22 $0.47
Cash Dividends:
Current Year (Semi-Annual) $0.00 $0.00 $0.29 $0.28
</TABLE>
<PAGE>
TECHNALYSIS CORPORATION
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------------
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 13,085,779 $11,769,199
Cash paid for salaries, wages & benefits (10,795,575) (8,983,582)
Cash paid for selling, administrative &
other operating costs (2,386,906) (2,264,731)
Interest Received 211,116 158,067
Income Taxes Paid (557,628) (722,080)
------------ -----------
Net cash used by operating activities (443,214) (43,127)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (54,828) (56,863)
Purchases of Available-For-Sale Securities (18,133) 0
------------ -----------
Net cash used by investing activities (72,961) (56,863)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,274,436) (1,230,210)
Proceeds from issuance of common stock 33,500 52,990
------------ -----------
Net cash used by financing activities (1,240,936) (1,177,220)
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS: (1,757,111) (1,277,210)
CASH AND CASH EQUIVALENTS:
At beginning of period 4,156,239 6,371,620
------------ -----------
At end of period $ 2,399,128 $ 5,094,410
------------ -----------
------------ -----------
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 476,886 $ 1,025,075
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 54,758 22,649
(Increase) decrease in trade A/R (1,885,414) 91,794
(Increase) decrease in unbilled
work on contracts in process 1,017,641 (833,271)
(Increase) decrease in other assets (163,695) (88,263)
Increase (decrease) in accounts payable 106,837 (21,648)
Increase (decrease) in accrued expenses 59,358 (49,128)
Increase (decrease) in income taxes payable 0 (25,080)
Increase (decrease) in advance
billings on contracts in process (109,585) (165,255)
------------ -----------
Total adjustments (920,100) (1,068,202)
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ (443,214) $ (43,127)
------------ -----------
------------ -----------
</TABLE>
<PAGE>
TECHNALYSIS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheets of September 30, 1995 and December 31,
1994, the condensed statement of earnings for the three and nine-month
periods ended September 30, 1995 and 1994, and the condensed statements
of cash flows for the nine-month periods then ended have been prepared by
the company, without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and
changes in cash flows at September 30, 1995 and for all periods presented
have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the company's December
31, 1994 annual report to shareholders. The results of operations for
the periods ended September 30, 1995 are not necessarily indicative of
the operating results for the full year.
2. STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1995, stockholder's equity
changed for the following items:
- Cash Dividends declared for $637,218.
- Net Earnings of $476,886.
- $33,500 was received per the exercise of stock options.
- $27,833 adjustment in unrealized loss on available-for-sale
securities.
<PAGE>
TECHNALYSIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES
Revenues from sales and reimbursed expenses decreased 2% for the third
quarter of 1995, ended September 30, compared to 1994. Revenues increased
11% for the nine-month period comparing 1995 to 1994. The decrease in
revenues in the third quarter was due to the mutually agreed upon termination
of a large fixed price contract resulting in a one-time reduction in revenues
of $841,400. The parties negotiated a settlement for the completed portion
of the contract that allowed both parties to avoid litigation over the issue.
Interest income increased 12% during the first nine months of 1995, but
decreased 9% for the third quarter in 1995 compared to 1994 due to a lesser
amount of cash available for investment purposes.
OPERATING COSTS AND EXPENSES
Before the above mentioned reduction in revenues, operating costs were 89% of
revenues for the third quarter of 1995 compared to 88% for the third quarter
of 1994, and 90% of revenues for the nine-month period for 1995 compared to
88% for 1994.
NET EARNINGS
Due to the above-mentioned reduction in revenues, a net loss of $151,996 was
incurred for the third quarter of 1995 compared to net earnings of $328,928
for 1994. The corresponding nine-month comparison of net earnings for 1995
compared to 1994 was $476,886 versus $1,025,075, respectively. Earnings per
share for the third quarter decreased from $.15/share in 1994 to a loss of
($.07) in 1995. The corresponding nine-month decrease was from $.47/share to
$.22/share.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1995, Technalysis had working capital of $7,474,718 versus
$7,573,786 as of December 31, 1994 and $8,132,683 as of September 30, 1994.
Technalysis has neither short nor long term debt. The Company believes it
has adequate cash and cash flow to support its present operation.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibit No. 1: Computations of Net Income per
Common Share.
(B) There were no reports on Form 8-K filed for the
three months ended September 30, 1995.
<PAGE>
TECHNALYSIS CORPORATION
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Technalysis Corporation
-------------------------------
Registrant
Date November 9, 1995 /S/ Victor A. Rocchio
-------------------------- -------------------------------
Victor A. Rocchio
President
Date November 9, 1995 /S/ Milan L. Elton
-------------------------- -------------------------------
Milan L. Elton
Vice President, Administration
<PAGE>
Exhibit No. 1
TECHNALYSIS CORPORATION
COMPUTATION OF NET EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY:
Net Earnings $ (151,996) $ 328,928 $ 476,886 $1,025,075
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding 2,198,248 2,197,303 2,198,248 2,196,892
Dilutive effect of stock
options outstanding after
application of treasury
stock method 0 5,671 5,668 6,971
---------- ---------- ---------- ----------
2,198,248 2,202,974 2,203,916 2,203,863
Net earnings per common
equivalent share, based
upon weighted average
number of shares
outstanding $(0.07) $0.15 $0.22 $0.47
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED:
Net Earnings $ (151,996) $ 328,928 $ 476,886 $1,025,075
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding 2,198,248 2,197,303 2,198,248 2,196,892
Dilutive effect of stock
options outstanding after
application of treasury
stock method 0 5,671 5,668 7,126
---------- ---------- ---------- ----------
2,198,248 2,202,974 2,203,916 2,204,018
Net earnings per common
equivalent share, based
upon weighted average
number of shares
outstanding $(0.07) $0.15 $0.22 $0.47
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,399,128
<SECURITIES> 1,103,222
<RECEIVABLES> 4,140,239
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,082,302
<PP&E> 871,570
<DEPRECIATION> 713,712
<TOTAL-ASSETS> 8,240,160
<CURRENT-LIABILITIES> 607,584
<BONDS> 0
<COMMON> 220,130
0
0
<OTHER-SE> 7,412,446
<TOTAL-LIABILITY-AND-EQUITY> 8,240,160
<SALES> 0
<TOTAL-REVENUES> 14,063,137
<CGS> 0
<TOTAL-COSTS> 13,464,686
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 800,886
<INCOME-TAX> 324,000
<INCOME-CONTINUING> 476,886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 476,886
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
