-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NfCd6AleIeCwPaxVvuhKNvybq8ywJq8+ZaYKamws4nRI+3SEAdjH/cQt7OB1zp59 XvXHyu1S2fYpsTdN7E/TDQ== 0000897101-96-000403.txt : 19960617 0000897101-96-000403.hdr.sgml : 19960617 ACCESSION NUMBER: 0000897101-96-000403 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960614 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVELOPED TECHNOLOGY RESOURCE INC CENTRAL INDEX KEY: 0000890725 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 411713474 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21394 FILM NUMBER: 96581506 BUSINESS ADDRESS: STREET 1: 12800 WHITEWATER DR SUITE 170 CITY: MINNETONKA STATE: MN ZIP: 55343 BUSINESS PHONE: 6129387080 MAIL ADDRESS: STREET 1: 12800 WHITEWATER DRIVE STREET 2: SUITE 170 CITY: MINNETONKA STATE: MN ZIP: 55343 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended April 30, 1996. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _________________ COMMISSION FILE NO. 0-21394 DEVELOPED TECHNOLOGY RESOURCE, INC. (Exact name of registrant as specified in its charter) MINNESOTA 41-1713474 (State or other jurisdiction (I.R.S. Employer Identification Number) of incorporation or organization) 12800 WHITEWATER DRIVE, SUITE 170, MINNETONKA, MINNESOTA 55343 (Address of principal executive offices) (Zip Code) (612) 938-7080 (Registrant's telephone number, including area code) 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 (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 ___. 838,966 common shares, $.01 par value, were outstanding as of April 30, 1996. DEVELOPED TECHNOLOGY RESOURCE, INC. INDEX Page Number PART I. FINANCIAL INFORMATION ITEM 1. Condensed Unaudited Financial Statements Condensed Balance Sheets as of April 30, 1996 and October 31, 1995 3 Condensed Statements of Operations for the three and six month periods ended April 30, 1996 and 1995 4 Condensed Statements of Cash Flows for the six month periods ended April 30, 1996 and 1995 5 Notes to Condensed Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION 11 DEVELOPED TECHNOLOGY RESOURCE, INC. CONDENSED BALANCE SHEETS (UNAUDITED)
APRIL 30, OCTOBER 31, ASSETS 1996 1995 ---------- ---------- Current assets: Cash and cash equivalents $ 719,585 $1,296,243 Short-term marketable securities 81,127 53,717 Net receivable from sale of security equipment business 143,292 -- Accounts receivable, net 58,304 98,547 Inventory -- 87,880 Prepaid and other current assets 11,411 20,136 Advance payments to suppliers 70,034 46,601 ---------- ---------- Total current assets 1,083,753 1,603,124 Property and equipment, net 74,630 106,507 Investment in partnerships and joint ventures, net 272,698 217,479 ========== ========== Total assets $1,431,081 $1,927,110 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 49,318 $ 468,985 Accrued liabilities 237,635 175,395 Deferred grant revenue 53,948 137,455 Customer deposits 76,709 51,906 ---------- ---------- Total current liabilities 417,610 833,741 Shareholders' equity 1,013,471 1,093,369 ========== ========== Total liabilities and shareholders' equity $1,431,081 $1,927,110 ========== ==========
See accompanying notes to the condensed financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED APRIL 30, SIX MONTHS ENDED APRIL 30, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Equipment sales $ 137,392 $ 205,122 $ 470,821 $ 284,400 Commissions and other income 61,496 1,012 164,530 54,614 ----------- ----------- ----------- ----------- Total revenues 198,888 206,134 635,351 339,014 ----------- ----------- ----------- ----------- Cost of equipment sales 114,204 160,871 361,363 228,470 Selling, general, and administrative expenses 190,468 449,827 463,353 895,549 ----------- ----------- ----------- ----------- Total costs and expenses 304,672 610,698 824,716 1,124,019 ----------- ----------- ----------- ----------- Operating loss (105,784) (404,564) (189,365) (785,005) Interest income 12,961 24,259 31,663 54,343 Interest expense (3) (101) (3) (202) Equity in net income (loss) of partnerships and joint ventures 25,607 (2,136) 55,774 (4,711) ----------- ----------- ----------- ----------- Loss from continuing operations (67,219) (382,542) (101,931) (735,575) Income (loss) from discontinued operations (3,254) 72,958 22,033 65,566 ----------- ----------- ----------- ----------- Net loss ($ 70,473) ($ 309,584) ($ 79,898) ($ 670,009) =========== =========== =========== =========== Net loss per common share - continuing operations ($ 0.08) (0.43) ($ 0.12) ($ 0.82) Net income (loss) per share - discontinued operations (0.00) 0.08 0.02 0.07 ----------- ----------- ----------- ----------- Net loss per share ($ 0.08) ($ 0.35) ($ 0.10) ($ 0.75) =========== =========== =========== =========== Weighted average common shares outstanding 838,966 893,333 838,966 893,333 =========== =========== =========== ===========
See accompanying notes to the condensed financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 1996 1995 --------- --------- Cash flow from operating activities: Net loss ($79,898) ($670,009) Reconciliation of net loss to net cash used in operating activities: Depreciation and amortization 27,603 24,030 Equity in net (income) loss of partnerships and joint ventures (55,774) 4,711 Changes in operating assets and liabilities: Increase in accounts receivable (103,049) (117,721) Decrease (increase) in inventories 87,880 (446,802) Decrease (increase) in prepaid and other current assets 8,725 (34,944) (Increase) decrease in advance payments to suppliers (23,433) 45,783 (Decrease) increase in accounts payable and accrued liabilities (357,427) 513,003 Decrease in deferred grant revenue (83,507) -- Increase in customer deposits 24,803 312,586 --------- --------- Net cash used in operating activities (554,077) (369,363) --------- --------- Cash flow from investing activities: (Purchase) sale of short-term investments (27,410) 1,886,986 Sale (purchase) of property and equipment 4,274 (5,059) Advances/contributions to joint ventures, net 555 23,575 --------- --------- Net cash (used in) provided by investing activities (22,581) 1,905,502 --------- --------- Increase (decrease) in cash and cash equivalents (576,658) 1,536,139 Cash and cash equivalents: Beginning of period 1,296,243 230,199 ========= ========= End of period $ 719,585 $1,766,338 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 3 $ 202
See accompanying notes to the condensed financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 1996 (UNAUDITED) 1. Basis of Presentation The interim financial statements are unaudited, but in the opinion of management reflect all normal recurring adjustments necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the Company's Annual Report and Notes thereto on Form 10-KSB for the year ended October 31, 1995, and filed with the Securities and Exchange Commission on January 26, 1996, and the 10-KSB/A, filed with the Commission on February 27, 1996. Certain prior period amounts have been reclassified to conform to the current period presentation with no impact on net loss or shareholders' equity. 2. Short-Term Marketable Securities Short-term marketable securities consist of U.S. Treasury Notes, commercial paper and bank certificates of deposit with a maturity of greater than three months but less than one year. These securities are carried at cost, which approximates market, adjusted for amortization of premiums and accretion of discounts under the interest method. The Company intends to hold these securities to maturity. 3. Accounts Receivable Accounts receivable are net of the allowance for doubtful accounts. The receivable balance as of April 30, 1996 was $411,913, net of an allowance for doubtful accounts of $210,317. 4. Stock Split In December, 1995, the Company declared a 1 for 3 reverse stock split. All amounts included in the financial statements and related notes give retroactive effect to the reverse stock split. The Company also amended its articles of incorporation to reduce all authorized shares by two-thirds. 5. Discontinued Security Systems Sales and Service Business Effective December 31, 1995, the Company entered into an agreement selling certain assets and the rights to the sale of airport security equipment in the former Soviet Union to a company owned by a former employee. For payments over the next 30 months totaling $810,000, the Company transferred assets, inventory, customer lists, promotional materials, and other items having book value of $143,293 net of liabilities. The $810,000 amount includes reimbursement of $45,000 in expenses incurred by the Company during the first quarter of fiscal 1996 and related to this business. Due to the inherent risks of operating in the former Soviet Union, including the granting of credit, the gain on this sale will be recognized only as realized in the form of cash receipts. The prior year's condensed unaudited financial statements have been restated to reflect the effects of the sale of the Security Systems Sales and Service Business. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW Developed Technology Resource, Inc. (the "Company" or "DTR") was incorporated on November 13, 1991 in the State of Minnesota to locate potentially viable technologies in the former Soviet Union (FSU) for transfer and sale to companies in the West. During the first two years of operation, the Company experienced limited success from its efforts to locate and sell technology, and shifted its focus from the transfer of FSU technology to the United States to the sale and distribution of equipment and services to organizations in the FSU. The Company also developed business opportunities in the FSU, including the opening of business centers and the forming of a joint venture to process and sell dairy products in Kazakhstan. Revenue in fiscal 1995 was primarily from the sale and installation of airport security and food packaging equipment, and also included proceeds from a one-time sale of sports-related technology. A limited amount of revenue was from the Company's Moscow post office-based business centers and from the sales of x-ray tubes manufactured in Russia and sold by DTR in the United States. In June, 1995 the Company, through FoodMaster, its joint venture in Kazakhstan, started manufacturing and selling dairy products. While no significant contribution was made to the Company's operations in 1995, revenues continued to grow during the second quarter of fiscal 1996, exceeding $290,000 for the month of April, 1996. As the Company is not a majority or controlling shareholder, the activities of this joint venture are not consolidated, and only that portion of net operating results are recorded. In the third quarter of fiscal 1995, the Company's Board of Directors approved a restructuring plan that focused efforts on those businesses felt to offer the greatest potential for future profitability. After reviewing each business unit individually, a restructuring plan was implemented that reduced the Company's activities in Russia to those areas offering the greatest potential for increasing long-term shareholder value. As part of the plan, management reduced or eliminated participation in those under-performing profit centers (food packaging equipment sales and technology joint ventures) not having the future business potential necessary to provide an acceptable rate of return at an acceptable level of risk. At the same time the number of business activities was reduced, overhead was reduced to the level necessary to effectively support continuing operations. SALE OF SECURITY EQUIPMENT DISTRIBUTION BUSINESS During the quarter ended January 31, 1996 the Company executed an agreement with its Director of Security Equipment Sales agreeing to the sale of certain assets and the Company's rights to sell airport security equipment in regions of the former Soviet Union. This transaction is more fully described at the end of Item 2, Discontinued Operations. The financial statements and related information have been adjusted to reflect the sale of this business. FOODMASTER JOINT VENTURE IN KAZAKHSTAN During fiscal year 1995, the Company formed FoodMaster, a Kazakhstan limited liability company owned in equal parts by the Company and a Kazakhstan company, for the purpose of manufacturing and selling dairy products under license from the Company. The Company applied for and received a $299,000 grant from the United States Agency for International Development (USAID) to help finance the project. During fiscal 1995, the Company received $151,871 from the USAID under terms of the grant, with an additional $79,606 received during the first quarter of fiscal 1996. FoodMaster started producing yogurt in July, 1995 and kefir, milk, sour cream and cottage cheese in October, 1995. Sales have increased steadily, reaching $290,000 for the month of April, 1996. Additional growth is anticipated due to well received and competitively priced products, and the introduction of new products such as ice cream. The Company currently accounts for its FoodMaster joint venture under the equity method of accounting, recording only its share of FoodMaster's operating results as equity in net income or loss of partnerships and joint ventures. DTR also derives revenue from FoodMaster in the form of a licensing fee at 25% of net income before the licensing fee, having supplied the joint venture with marketing expertise, proprietary formulas and trade secrets, and DTR-owned brand names. Licensing fees of $25,607 and $55,774 were included in other income for the second quarter of fiscal 1996 and year to date, respectively. Because of the licensing payments received by the Company from FoodMaster, the Company has agreed to receive only a one-third share of operating results. As all activity conducted by FoodMaster is conducted in the local currency (the Tenge), conversion, timing, and other translation issues may arise that in the future may affect the amount actually realized by DTR. The Company is currently negotiating additional voting rights on FoodMaster's board of directors to obtain effective control of the joint venture. This potential future change in control would allow the Company to present its financial statements on a consolidated basis, including the results of FoodMaster's operations. RESULTS OF OPERATIONS REVENUES Revenue from operations has been adjusted to eliminate discontinued operations related to sales and distribution of security equipment. For the three and six month periods ended April 30, 1996, total revenues were $198,888 and $635,351, respectively, compared to $206,134 and $339,014 for the three and six month periods ended April 30, 1995. Revenues decreased in the second quarter of fiscal 1996 compared to the second quarter of fiscal 1995 due to reduced sales of food packaging equipment, and the elimination of the business center activity which took place in fiscal 1995. Food packaging equipment sales declined during the quarter due to the delay in receiving final payments and completion of manufacturing. These decreases were offset by increases in the licensing fee received from FoodMaster and sales of x-ray tubes. Revenue for the six month period ended April 30, 1996 increased over the prior year due to increases in the sale of food packaging equipment, a licensing fee from FoodMaster and the favorable one-time adjustments related to the elimination of business center activity. COST OF EQUIPMENT SALES Cost of equipment sales reflects the cost to purchase equipment and the shipping, insurance and other expenses directly related to the sale and installation. Cost of equipment sales for the three and six month periods ended April 30, 1996 were $114,204 and $361,363. Cost of equipment sales were $160,871 and $228,470 for the three and six month periods April 30, 1995. The decrease in cost of equipment sales for the three month period, and increase for the six month period, are directly related to the fluctuation in sales. The gross profit on equipment sales for the three and six months ended April 30, 1996 was 16.9% and 23.2%, compared to 21.6% and 19.7% for the same periods last year. The decrease in the first quarter gross profit compared to fiscal 1995 is the result of food packaging equipment being sold through a subdistributor at a lower margin than in prior periods. The increase in gross profit for the six month period ended April 30, 1996, is the result of the higher gross profit on the favorable one-time adjustments related to the elimination of business center activity, offset by the reduced profit margin on the sale of food packaging equipment. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the three and six month periods ended April 30, 1996 were $190,468 and $463,353, respectively, compared to $449,827 and $895,549 for the three and six month periods ended April 30, 1995. Selling, general and administrative expenses for the second quarter and year to date, have been reduced by $259,359 and $432,196, respectively. These reductions are due primarily to staff cutbacks resulting from the restructuring, combined with the reduction in related administrative costs, including communications, rent, travel and lodging. The reduction in SG&A for the current quarter also reflects the savings resulting from the closing of the Moscow office, which took place at the end of February 1996. Operating results for the second quarter ended April 30, 1995 also included expenses related to operating the laboratory in Tver, Russia, which was closed during the third quarter of last year. INTEREST INCOME Interest income for the three and six month periods ended April 30, 1996 was $12,961 and $31,663, respectively, compared to $24,259 and $54,343 for the three and six month periods ended April 30, 1995. The higher interest earned last year was due to a higher level of excess working capital available for investment. Interest income is derived from investing excess cash in short-term instruments and cash equivalents, and other high grade marketable instruments including commercial paper, treasury notes, and bank certificates of deposit. EQUITY IN NET INCOME AND LOSS OF PARTNERSHIPS AND JOINT VENTURES Equity in net income of partnerships and joint ventures of $25,607 and $55,774 for the three and six month periods ended April 30, 1996, respectively, reflects the Companies one-third share of FoodMaster's operating profit. LIQUIDITY AND CAPITAL RESOURCES The Company's net losses since inception have been funded primarily from financing activities, advance deposits received from customers, and profits on the sale of equipment. Financing activities consisted of two private placements in 1992 and an initial public offering of the Company's common stock in 1993, resulting in total net proceeds of $4,623,052. As of April 30, 1996, the Company had working capital of $666,143. As of October 31, 1995, the Company's working capital balance was $769,383. Excess cash is invested in short-term interest bearing instruments. Funding of the Company's $79,898 loss for the six months ended April 30, 1996 and prior losses accounts for the major use of working capital provided. There were no significant purchases of furniture, fixtures or other fixed assets. Planned uses of working capital include the funding of selling, general and administrative expenses. As approved and authorized by the Company's Board of Directors, the Company may elect to invest limited amounts in future dairy processing and packaging joint ventures if additional outside funding can be obtained, along with a suitable partner and facilities. Based on projections, the Company believes there will be sufficient working capital and liquidity to fund operations through fiscal 1996, including the funding of partnerships and joint ventures at the present level. However, if projected revenues are less than anticipated, the Company may be forced to reduce or forego future investments in partnerships or joint ventures, reduce overhead, or seek additional financing. DISCONTINUED OPERATIONS Effective December 31, 1995, the Company entered into an agreement selling certain assets and the rights to the sale of airport security equipment in the former Soviet Union to a U.K. company owned by a former DTR employee. For a combination of fixed and contingent payments, the Company transferred assets, inventory, customer lists, promotional materials, and other items having an approximate net book value on January 31, 1996 of $143,293, net of liabilities assumed by the buyer. Under terms of the agreement, the Company assigned to the former employee all its rights under exclusive distribution agreements with its principal suppliers, and agreed to cooperate to effect a smooth transfer of the business. Consideration to be received by the Company includes a cash payment of $45,000 intended to reimburse the Company for expenses related to this business during the first quarter of Fiscal 1996, and payments over the next 30 months totaling $765,000. A portion of these payments are personally guaranteed and are collateralized by his ownership of 16,430 shares of the Company's Common Stock. Additional contingent payments may also be received based on future performance. The Company retained the right to pursue airport security management contracts. Due to the inherent risks associated with doing business in the FSU, including credit risk, the Company intends to record the note receivable at the net value of the underlying assets sold and liabilities assumed by the buyer totaling $143,293. As funds are collected beyond this amount, a process the Company intends to actively manage, such amounts will be recognized as gain on sale of discontinued operations. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) List of Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K Form 8-K Current Report Dated April 29, 1996. The items reported on this 8-K concerned an announcement from the Registrant's Board of Directors that Price Waterhouse, LLP the independent accountant who was previously engaged as the principal accountant to audit the registrant's financial statements, declined to stand for re-election. The Registrant's Board of Directors also announced the appointment of Lurie, Besikof, Lapidus & Co., LLP as the registrant's new independent accountant to audit the registrant's financial statements. SIGNATURES 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. Dated: June 13, 1996 DEVELOPED TECHNOLOGY RESOURCE, INC. (Registrant) /s/ John P. Hupp John P. Hupp, President /s/ David Gardner David Gardner Controller EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS OCT-31-1996 APR-30-1996 71,301 729,861 411,914 210,317 0 1,083,753 192,976 118,345 1,431,081 417,610 0 0 0 8,390 1,005,081 1,431,081 470,821 635,351 361,363 361,363 0 0 3 (157,705) 0 (101,931) 22,033 0 0 (79,898) (.03) (.03)
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