-----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, CcSwhz1ShPG6sbQtphprDeFYZbYDzH2YBY8lzx2ybWZdYC4b5phBW0OUGDjhJemF iFLK1RZYTalZulVYpIj8Rw== 0000897101-98-000309.txt : 19980324 0000897101-98-000309.hdr.sgml : 19980324 ACCESSION NUMBER: 0000897101-98-000309 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19980323 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: 10KSB SEC ACT: SEC FILE NUMBER: 000-21394 FILM NUMBER: 98571145 BUSINESS ADDRESS: STREET 1: 7300 METRO BLVD SUITE 550 CITY: EDNA STATE: MN ZIP: 55439 BUSINESS PHONE: 6128200755 MAIL ADDRESS: STREET 1: 7300 METRO BLVD SUITE 550 CITY: EDNA STATE: MN ZIP: 55439 10KSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - -------------------------------------------------------------------------------- FORM 10-KSB [X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997 OR [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-21394 DEVELOPED TECHNOLOGY RESOURCE, INC. MINNESOTA 41-1713474 State of Incorporation I.R.S. Employer Identification No. 7300 METRO BOULEVARD, SUITE 550 EDINA, MINNESOTA 55439 Address of Principal Executive Office (612) 820-0022 Issuer's Telephone Number Securities registered pursuant to Section 12(b) of the Exchange Act: NONE Securities registered pursuant to Section 12(g) of the Exchange Act: COMMON STOCK, $0.01 PAR VALUE PER SHARE Check whether the Issuer (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 ___ Check if no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB { } Issuer's revenues for its most recent fiscal year: $3,310,043 As of March 6, 1998, 805,820 shares of the Registrant's Common Stock were outstanding. The aggregate market value of the Common Stock held by non-affiliates of the registrant on such date, based upon the closing bid price of the Common Stock as reported by the OTC Bulletin Board on March 6, 1998 was $2,140,459. For purposes of this computation, affiliates of the registrant are deemed only to be the registrant's executive officers and directors. See Item 11. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Proxy Statement for its April 14, 1998 Annual Meeting are incorporated by reference in Part III. PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL 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 operations, the Company experienced limited success in technology transfer and shifted its focus to the sale and distribution of aviation security equipment in the fSU. In 1995, the Company formed a joint venture called FoodMaster Corporation (hereinafter FoodMaster) with Ak-Bulak to re-open the dairy in Almaty, Kazakhstan to produce and sell yogurt and other dairy products. During the first quarter of 1996, the Company sold its aviation security sales and service business to Gate Technologies for $810,000 which includes reimbursement of expenses of $45,000. This transaction is more fully described in Item 6, "Discontinued Operations." The financial statements and related information reflect the sale of this business as discontinued operations. Additionally, overhead was reduced to the level necessary to effectively support continuing operations. After the sale of the aviation security business, the Company focused its attention almost exclusively on development of the dairy business. Effective August 1996, the Company obtained an option to purchase 80% of Ak-Bulak, an inactive company which owned the other 50% of the FoodMaster joint venture. This purchase of 80% of Ak-Bulak would give DTR an additional 40% ownership of FoodMaster. In January 1997, FoodMaster formed a joint venture in Akmola, the new capital of Kazakhstan, and began production at this location in March 1997. In March 1997, DTR formed a limited liability company called FoodMaster International L.L.C. (FMI) with Agribusiness Partners International L.L.C. and affiliates (API) to expand the dairy business in Kazakhstan and elsewhere in the fSU. DTR contributed its ownership interest in FoodMaster and API agreed to contribute a total of $6 million in cash, of which $3.245 million was contributed as of October 31, 1997. DTR owns 40% of FMI and has a right to earn a greater ownership interest of FMI by achieving certain defined performance targets based on returns to API. DTR manages the day-to-day operations of FMI under a management contract. FMI currently owns 90% of FoodMaster and 73.8% of a dairy in Hincesti, Moldova. In December 1997, FMI received the right, by shareholder approval to obtain at least 50% of the shares of a dairy located in Uman, Ukraine. In November 1997, DTR's Board of Directors voted to establish a wholly-owned subsidiary company called SXD, Inc. with a contribution of $800,000 consisting primarily of cash and receivables. SXD will own and operate the non-dairy portion of DTR's business, which includes the x-ray tube distribution business, ownership interests in the coating technology business of Phygen, Inc., and the cancer detection business of Armed. ONGOING BUSINESS STRATEGY The Company's strategy is to expand its food business both by acquiring additional dairies for FMI and selling additional products, including but not limited, to dairy products. Standard dairy products will be used to enter new markets. FMI plans to increase the profitability of the dairy operations through the introduction of additional value added products. BUSINESS OPERATIONS DAIRY AND FOOD PROCESSING DTR manages all of the dairy operations which are owned by FMI. These dairy operations manufacture and sell a variety of different dairy products, including but not limited to kefir, yogurt, cottage cheese, ice cream, ice pops, and sour cream. From November 1996 through February 1997, FoodMaster sales, which are included in the statement of operations for the year ended October 31, 1997, were $1,774,870. After February 1997, FoodMaster's income and expenses were no longer reported on a consolidated basis with DTR due to the transfer of FoodMaster's dairy operations to FMI. Since March 1997, FoodMaster's income and expenses are consolidated in the financial statements of FMI, and DTR recognizes 40% of FMI's income or loss using the equity method of accounting. FoodMaster recorded sales of $3,393,705 for the twelve months ended October 31, 1996. X-RAY TUBES The Company continues to distribute x-ray tubes under an exclusive distribution agreement with Svetlana-Rentgen ("Svetlana"), a company located in the fSU. Revenues from the sale of x-ray tubes accounted for 8% and 5% of DTR's total revenues in fiscal 1997 and 1996, respectively. FOOD PACKAGING EQUIPMENT In November 1994, the Company signed an International Distribution Agreement with NiMCO Corporation, of Crystal Lake, Illinois, granting the Company exclusive rights to sell certain NiMCO products in most areas of the fSU. From June 1995 to December 1996, the Company had a sub-distribution agreement with Professional Packaging, Inc. (ProPak), under which the Company received commissions on sales made by ProPak. Through this sub-distribution agreement, DTR sold eight NiMCO packaging machines, which accounted for 16% of DTR's revenues in fiscal 1996. The exclusive agreement with NiMCO and the distribution agreement with ProPak expired as of December 31, 1996. DTR continues to distribute NiMCO packaging machines on a non-exclusive basis. Sales from these machines accounted for 13% of DTR's fiscal 1997 revenues. COMPETITION DAIRY AND FOOD PROCESSING. These operations compete with several local companies, as well as foreign importers of products. However, the Company believes that its products are superior to any other local competitors and it is price competitive with the current imports. Currently, the Company cannot measure its market share. X-RAY TUBES. There are several companies that manufacture and sell x-ray tubes in direct competition to DTR. At present, the Company does not have a measurable market share. FOOD PACKAGING EQUIPMENT SALES. Manufacturers producing competing equipment of similar performance to the NiMCO line of equipment include Tetra-Laval of Sweden, Elo-Pak of Norway, International Paper of the United States, Pastu-Pack of the UK, and Galdi of Italy. Some of these companies have been selling equipment in the fSU more than 20 years. The Company does not currently have a measurable market share. PRINCIPAL SUPPLIERS DAIRY AND FOOD PROCESSING. Suppliers to the dairy operations consist of numerous dairy farmers located in the vicinity of the dairies. In addition, the Company receives packaging supplies from many suppliers throughout Europe and the United States. X-RAY TUBES. Svetlana Rentgen, based in the fSU, is the exclusive supplier of tubes to DTR. FOOD PACKAGING EQUIPMENT. NiMCO, based in Crystal Lake, Illinois, is the sole supplier of food packaging equipment to the Company. MAJOR CUSTOMERS For the fiscal years ended October 31, 1997 and 1996, the Company recorded net sales of $2,467,790 and $4,466,463, respectively. The Company had one customer that made up more than 10% of its sales in fiscal 1997. S.J. Agro-Leasing accounted for 12.9% of the Company's net sales in fiscal 1997 through its purchases of food packaging equipment. In fiscal 1996, the Company had no one customer that accounted for more than 10% of its sales. GOVERNMENTAL REGULATIONS The Company's principal revenue-generating business activity in fiscal 1997 and 1996 was the manufacturing and selling of dairy products in the fSU. The governmental, political, social, and legal structures within countries of the fSU are evolving. In general, business must comply with decrees, laws, and instructions issued from a multitude of government bodies at the national and local levels. The government regulations that most affect the Company are in the areas of taxation, currency and customs regulation, business registration, and labor laws. The Company attempts to fully comply with the laws in all the countries of the fSU in which business is conducted, and as necessary, may seek legal counsel in the United States or from local counsel in the applicable fSU country. EMPLOYEES As of March 6, 1998, the Company has three full-time employees in its offices in Edina, Minnesota; two full-time employees in Almaty, Kazakhstan; two full-time employees in Hincesti, Moldova; and one full-time employee in Uman, Ukraine. All of the foreign based employees are responsible for managing the dairy operations of FMI. The Company is not a party to any collective bargaining agreements and it considers its employee relations to be satisfactory. ITEM 2. DESCRIPTION OF PROPERTY During fiscal 1997, the Company moved its Corporate Headquarters in Minnentonka, Minnesota to Edina, Minnesota. This move allowed the Company to reduce its space from 2,139 to 1,009 square feet and its monthly base rent from approximately $2,900 to $1,500. The lease has a term of 60 months and expires on April 30, 2002. ITEM 3. LEGAL PROCEEDINGS In 1996, the Company filed suit against a former officer for breach of contract. The employee filed a counterclaim for breach of the severance agreement. In January 1997, the lawsuit was settled with the former officer relinquishing 48,190 shares of the Company's Common Stock to satisfy a $29,035 receivable. DTR has no contingent future liability. In 1996, a former employee filed a claim with the Minnesota Department of Human Rights and concurrently with the Equal Employment Opportunity Commission (EEOC), charging the Company with age and national origin discrimination. In 1997, the Minnesota Department of Human Rights denied the claim. No further action has been taken by the former employee since the Department's decision. In the opinion of management, there are no material legal proceedings pending or threatened against the Company as of October 31, 1997 or as of the date of filing of this Form 10-KSB. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the shareholders during the fourth quarter ended October 31, 1997. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock was traded on the National Association of Securities Dealer Automated Quotation System (NASDAQ) from April 23, 1993 until November 3, 1995, when the Company was de-listed as a result of noncompliance with minimum per-share price requirements. After a three for one reverse split in December 1995, the Company was re-listed. In the first quarter of 1996, the Company fell below the listing requirements and was again de-listed. Since then, the Company's Common Stock has been quoted on the OTC Bulletin Board under the symbol of DEVT. The following table sets forth the high and low daily average between the bid and sales prices for each quarter as reported on the NASDAQ or the OTC Bulletin Board during the fiscal years ended October 31, 1997 and 1996. Average Price FISCAL 1997 Low High ----------- --- ---- First Quarter $ 7/8 $ 1 17/32 Second Quarter 1 1 15/16 Third Quarter 1 3/16 1 31/32 Fourth Quarter 1 1/8 2 FISCAL 1996 ----------- First Quarter $ 3/4 $ 1 1/8 Second Quarter 7/8 1 1/4 Third Quarter 7/8 1 1/8 Fourth Quarter 7/8 1/1/2 As of March 6, 1998, the Company had 76 shareholders of record of its Common Stock. The Company estimates there are 660 beneficial owners of its Common Stock. The transfer agent for the Company's Common Stock is Norwest Bank Minnesota, N.A., 161 North Concord Exchange, South St. Paul, Minnesota, 55075-0738, telephone: (800) 468-9716 or (612) 450-4058. The Company has never declared or paid any dividends on its Common Stock. The Board of Directors presently intends to retain all earnings, if any, for use in the Company's business in the foreseeable future. Any future determination as to declaration and payment of dividends will be made at the discretion of the Board of Directors. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements other than current or historical information included in this Management's Discussion and Analysis and elsewhere in this Form 10-KSB, in future filings by Developed Technology Resource, Inc. (the Company or DTR) with the Securities and Exchange Commission and in DTR's press releases and oral statements made with the approval of authorized executive officers, should be considered "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. DTR wishes to caution the reader not to place undue reliance on any such forward-looking statements. On March 3, 1997, DTR and API established the FMI joint venture to acquire and operate dairies in the former Soviet Union. DTR contributed to FMI its 50% ownership in FoodMaster, the Ak-Bulak option and its opportunities for a future acquisition of a diary in Moldova. API agreed to fund $2.945 million to further develop the dairy operations in Kazakhstan and Moldova and to provide an additional $3.055 million over two years to expand FMI. By October 31, 1997, API contributed $3.245 million of its $6 million commitment to FMI. Under the agreement, API currently owns 60% of FMI. DTR owns 40% of FMI. However, DTR has a right to earn a greater ownership interest of FMI by achieving certain defined performance targets based on returns to API. Effective March 1997, DTR records its proportionate share of the net income or loss of FMI in the statement of operations as equity in earnings of FMI joint venture under the equity method of accounting. DTR also entered into a management agreement with FMI, whereby DTR manages the day to day operations of FMI and the dairy operations owned by FMI, and pursues future dairy acquisitions for FMI for a management fee. The Company recorded management fee income of $802,492 from March 1997 to October 31, 1997 in accordance with its management agreement with FMI. Fiscal 1996 revenues and operating expenses have been adjusted to eliminate the sales and operating expenses of discontinued operations related to the aviation security system and service divisions which were sold in the first quarter of 1996. RESULTS OF OPERATIONS REVENUES The Company generated total revenues of $3,310,043 in fiscal 1997, compared to $4,616,361 in fiscal 1996. This 28.3% decrease in revenues is the result of a 44.7% decrease in sales primarily due to DTR's consolidating only four months of FoodMaster revenue in 1997, compared to twelve months in 1996 as a result of the transfer discussed above. The decrease in sales was offset by the receipt of management fee revenue of $802,492 from FMI for eight months of fiscal 1997. Sales for fiscal 1997 and 1996 totaled $2,467,790 and $4,466,463, respectively. Sales resulted from four areas within DTR - dairy operations of FoodMaster, equipment, x-ray tubes and communication services. FoodMaster sales from November 1996 through February 1997 were $1,774,870 or 71.9% of DTR's total sales for the year ended October 31, 1997. After February 1997, FoodMaster's income and expenses were no longer reported on a consolidated basis with DTR due to the transfer of FoodMaster to FMI. Since March 1997, FoodMaster's income and expenses are consolidated in the financial statements of FMI, and DTR recognizes 40% of FMI's income or loss as equity in earnings of FMI joint venture in DTR's Statements of Operations. FoodMaster sales of $3,393,705 made up 76% of DTR's fiscal 1996 sales. Sales of food packaging equipment were $428,890 (17.4%) and $728,800 (16.3%) of total sales in fiscal 1997 and 1996, respectively. This $299,910 decrease in sales revenue is the result of DTR's shift in focus to its dairy operations in the fSU. Sales of x-ray tubes increased slightly to $264,030 in fiscal 1997 from $243,860 in fiscal 1996. In fiscal 1996, DTR also had $100,097 in sales of copy centers, communication services and other miscellaneous services, which the Company discontinued in fiscal 1996 due to the shift in focus mentioned above. COST OF SALES Cost of sales for fiscal 1997 was $1,398,449, compared to $3,434,683 for the same period last year. The gross profit percentage on sales for fiscal 1997 was 43.3% compared to 23.1% for fiscal 1996. Cost of sales reflects the cost of manufacturing the dairy products in Kazakhstan for the first four months of fiscal 1997 and twelve months of fiscal 1996 as noted above, and to a lesser extent, the cost of purchasing food packaging equipment, x-ray tubes and communication services. Gross profit on dairy sales was $902,933 and $925,545 in fiscal 1997 and 1996, respectively. Gross profit on equipment sales of $130,823 or 30.5% in fiscal 1997 also increased from gross profit of $73,137 or 10% in fiscal 1996. Although sales of equipment was down due to the shift in DTR's focus, the gross profit has improved due to sales to fewer but higher margin customers and improved pricing from DTR's supplier. Gross profit on x-ray tubes decreased slightly to $35,585 or 13.5% in fiscal 1997 compared to $41,400 or 17.0% in fiscal 1996 due to sales price reductions on x-ray tubes. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses for fiscal 1997 were $1,382,334 compared to $1,104,187 for 1996. FoodMaster comprised $515,491 and $524,355 of the expenses in fiscal 1997 and 1996, respectively. The increase in the remaining SG&A of approximately $287,000 is the result of DTR hiring additional employees and extensive traveling in the management of its dairy operations. Any dairy related expenses after February 1997 were reimbursed 100% through the management fees billed to FMI. DISCONTINUED OPERATIONS Effective December 31, 1995, DTR entered into an agreement to sell certain assets and the rights to its airport security equipment in the fSU to Gate Technologies, Inc., a United Kingdom company owned by a former DTR employee. DTR transferred assets, inventory, customer lists, promotional materials, and other items with a net book value on January 31, 1996 of $143,293. In exchange for these items, DTR received a cash payment of $45,000 to reimburse DTR for expenses related to this business during the first quarter of fiscal 1996 and a note receivable totaling $765,000 payable over 30 months. A portion of these payments is personally guaranteed by the former employee, and is collateralized by 16,430 shares of DTR's common stock owned by the former employee. Additional contingent payments may also be received based on future performance. DTR retained the right to pursue airport security management contracts. Due to the inherent risks associated with operating in the fSU, including credit risk, the gain on this sale has been deferred and is being recognized as payments are received. DTR received total payments of $200,000 and $170,000 during fiscal 1997 and 1996, respectively. As a result, DTR recorded a gain (loss) on discontinued operations of $200,000 and ($30,166) in fiscal 1997 and 1996, respectively. In August 1997, the Board of Directors approved a revision in the sale agreement that increased the balance due to DTR by $40,000 representing interest on the outstanding balance. The increase in the receivable balance was accounted for as an increase in deferred revenues. In addition, the payment terms were revised to require two payments in 1998 with the final payment due on January 1, 1999. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES DTR increased its cash received from operating activities to $488,156 in fiscal 1997 due to improvements in its gross profit margins. In addition, a majority of the operating expenses from March 1997 to October 1997 were reimbursed in accordance with the management agreement between DTR and FMI. In fiscal 1996, DTR used net cash of $277,042 primarily to pay down its debt from vendors and to fulfill customer orders. INVESTING ACTIVITIES DTR used $803,424 and $454,502 of cash for investing activities largely to support its FoodMaster and FMI joint ventures during fiscal 1997 and to support its FoodMaster joint venture in 1996, respectively. Most of the 1997 expenditures will be reimbursed by the FMI joint venture in the future as FMI improves its cash flows. FINANCING ACTIVITIES DTR's FoodMaster operations obtained $70,910 in bank financing during fiscal 1996 and began to make principal payments on this note in fiscal 1997. FoodMaster made total principal payments of $8,900 on its bank note payable during the period from November 1996 to February 1997. After this period, the FoodMaster cash flows were consolidated with FMI per the transfer discussed above. Based on current projections, the Company believes there will be sufficient working capital and liquidity to fund its current operations through fiscal 1998. In November 1997, DTR's Board of Directors voted to establish a wholly-owned subsidiary company called SXD, Inc. with a contribution of $800,000 consisting primarily of cash and receivables. SXD will own and operate the non-dairy portion of DTR's business, which includes the x-ray tube distribution business, ownership interests in the coating technology business of Phygen, Inc., and the cancer detection business of Armed. ITEM 7. FINANCIAL STATEMENTS - DEVELOPED TECHNOLOGY RESOURCE, INC. INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders DEVELOPED TECHNOLOGY RESOURCE, INC. We have audited the accompanying balance sheet of Developed Technology Resource, Inc. as of October 31, 1997 and the related statements of operations, shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1997 financial statements referred to above present fairly, in all material respects, the financial position of Developed Technology Resource, Inc. as of October 31, 1997 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Minneapolis, Minnesota March 20, 1998 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Developed Technology Resource, Inc. Edina, Minnesota We have audited the accompanying statements of operations, shareholders' equity, and cash flows of DEVELOPED TECHNOLOGY RESOURCE, INC. for the year ended October 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1996 financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of DEVELOPED TECHNOLOGY RESOURCE, INC. for the year ended October 31, 1996 in conformity with generally accepted accounting principles. /s/ LURIE, BESIKOF, LAPIDUS & CO., LLP Minneapolis, Minnesota January 2, 1997 DEVELOPED TECHNOLOGY RESOURCE, INC. BALANCE SHEET OCTOBER 31, 1997 ASSETS Current Assets: Cash and cash equivalents $ 311,441 Receivables: Trade, net of allowance of $10,508 97,939 Sale of discontinued operations 440,000 FoodMaster International L.L.C. (FMI) 579,582 Other 714 Prepaid and other current assets 46,046 ----------- Total current assets 1,475,722 Furniture and Equipment, net 45,466 Investment in FMI 788,785 Receivable from Sale of Discontinued Operations 40,000 ----------- $ 2,349,973 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 100,269 Accrued liabilities 124,838 Deferred gain short-term 426,590 ----------- Total current liabilities 651,697 Non-current Deferred Gain 80,675 Shareholders' Equity: Undesignated stock, $.01 par value, 1,666,667 shares authorized, no shares issued or outstanding -- Common stock, $.01 par value, 3,333,334 shares authorized, 790,820 shares issued and outstanding 7,908 Additional paid-in capital 5,319,298 Accumulated deficit (3,709,605) ----------- Total shareholders' equity 1,617,601 ----------- $ 2,349,973 =========== See accompanying notes to the financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. STATEMENTS OF OPERATIONS YEARS ENDED OCTOBER 31, 1997 AND 1996 1997 1996 ----------- ----------- Revenues: Sales $ 2,467,790 $ 4,466,463 Management fees from FMI joint venture 802,492 -- Commissions and other income 39,761 149,898 ----------- ----------- 3,310,043 4,616,361 ----------- ----------- Cost and expenses: Cost of sales 1,398,449 3,434,683 Selling, general and administrative 1,382,334 1,104,187 ----------- ----------- 2,780,783 4,538,870 ----------- ----------- Operating income 529,260 77,491 Other income: Interest income, net 12,059 52,548 Equity in earnings of FMI joint venture 62,650 -- ----------- ----------- Income from continuing operations before income taxes and minority interest 603,969 130,039 Income tax expense -- 125,500 ----------- ----------- Income from continuing operations before minority interest 603,969 4,539 Minority interest in earnings of FoodMaster (93,553) (131,522) ----------- ----------- Income (loss) from continuing operations 510,416 (126,983) Income (loss) from discontinued operations: Loss from discontinued operations (30,166) Gain from discontinued operations 200,000 -- ----------- ----------- Net Income (Loss) $ 710,416 $ (157,149) =========== =========== Net Income (Loss) per Common Share: Continuing operations $ 0.45 $ (0.15) Discontinued operations 0.16 (0.04) ----------- ----------- $ 0.61 $ (0.19) =========== =========== Weighted Average Common Shares Outstanding 1,285,110 839,010 =========== =========== See accompanying notes to the financial statements.
DEVELOPED TECHNOLOGY RESOURCE, INC. STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED OCTOBER 31, 1997 AND 1996 Common Stock Additional ------------ Paid-in Accumulated Shares Amount Capital Deficit Total ------ ------ ------- ------- ----- Balance, October 31, 1995 838,966 $ 8,389 $ 5,347,852 $ (4,262,872) $ 1,093,369 Adjustment for fractional shares related to the December 1995, 1 for 3 reverse stock split 44 1 (1) -- -- Net loss -- -- -- (157,149) (157,149) --------------- ---------------- --------------- ---------------- --------------- Balance, October 31, 1996 839,010 8,390 5,347,851 (4,420,021) 936,220 Redemption of shares in exchange for accounts receivable (48,190) (482) (28,553) -- (29,035) Net income -- -- -- 710,416 710,416 --------------- ---------------- --------------- ---------------- --------------- Balance, October 31, 1997 790,820 $ 7,908 $ 5,319,298 $ (3,709,605) $ 1,617,601 =============== ================ =============== ================ ===============
See accompanying notes to the financial statements.
DEVELOPED TECHNOLOGY RESOURCE, INC. STATEMENTS OF CASH FLOWS YEARS ENDED OCTOBER 31, 1997 AND 1996 1997 1996 ----------- ----------- OPERATING ACTIVITIES: Net Income (Loss) $ 710,416 $ (157,149) Adjustments to Reconcile Net Income (Loss) to Cash Provided/(Used) by Operating Activities: Depreciation 39,390 98,762 Provision for doubtful accounts (224,492) 22,000 (Gain) loss on sale of furniture and equipment (2,541) 6,122 Gain on sale of discontinued operations (200,000) -- Minority interest in earnings of joint venture 93,553 131,522 Equity in earnings of FMI joint venture (62,650) -- Changes in Operating Assets and Liabilities, net of transfers to joint venture: Receivables 212,826 128,386 Inventories (226,517) 294,707 Prepaid and other current assets 40,570 (201,667) Accounts payable and accrued liabilities 220,894 (458,667) Deferred gains (68,417) (23,480) Customer deposits (44,876) (117,578) ----------- ----------- Net cash provided/(used) by operating activities 488,156 (277,042) ----------- ----------- INVESTING ACTIVITIES: Net sales of short-term investments -- 53,717 Proceeds from sale of furniture and equipment 81,438 6,904 Purchases of furniture and equipment (294,751) (230,615) Advances/contributions to joint ventures (625,727) (256,198) Cash of FoodMaster -- 7,306 Deferred acquisition costs 35,616 (35,616) ----------- ----------- Net cash used by investing activities (803,424) (454,502) ----------- ----------- FINANCING ACTIVITIES: Principal payments on note payable (8,900) -- Proceeds from note payable -- 70,910 ----------- ----------- Net cash provided/(used) by financing activities (8,900) 70,910 ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS (324,168) (660,634) CASH AND CASH EQUIVALENTS, Beginning of year 635,609 1,296,243 ----------- ----------- CASH AND CASH EQUIVALENTS, End of year $ 311,441 $ 635,609 =========== ===========
See accompanying notes to the financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED OCTOBER 31, 1997 AND 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Developed Technology Resource, Inc. (DTR or the Company) owns and manages food businesses in the countries of the former Soviet Union (fSU) through its joint venture, FoodMaster International L.L.C. (FMI), with Agribusiness Partners International L.P. (API). FMI purchases dairy manufacturing facilities in the fSU and provides equipment and necessary capital. DTR manages the dairies and pursues future acquisitions for FMI. Using modern marketing techniques and packaging equipment, the dairies provide customers in the fSU better quality branded dairy products. During fiscal 1997 and 1996, DTR also distributed X-ray tubes under an exclusive arrangement with a Russian manufacturer, sold food packaging equipment, and held ownership interests in the coatings technology business of Phygen and the cancer detection business of Armed. Basis of Presentation From November 1995 through February 1997, the financial statements include the operations of DTR and FoodMaster Corporation (FoodMaster), DTR's 50% owned subsidiary in Almaty, Kazakhstan. All significant intercompany transactions and balances were eliminated in consolidation. On March 3, 1997, DTR contributed its 50% ownership of FoodMaster to the FMI joint venture for a 40% ownership in FMI. Effective March 1997, DTR records its proportionate share of the net income or loss of FMI in the statement of operations as equity in earnings of FMI joint venture under the equity method of accounting. The excess of DTR's underlying equity in net assets of FMI over the carrying value of its investment is being amortized to income over 15 years. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. Furniture and Equipment Furniture and equipment are recorded at cost. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets, primarily three to ten years. Revenue Recognition Revenue is recognized upon shipment of products to the customer and as services are provided to FMI under the management agreement. Net Income (Loss) per Common Share Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares, such as options or warrants, were not included in computing the net loss per common share for the year ended October 31, 1996 since the effect would be antidilutive. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 128, EARNINGS PER SHARE, which is required to be adopted by DTR in the reporting period ending January 31, 1998. At that time, DTR will be required to change the method currently used to compute net income (loss) per share and restate all prior periods. Under the new standard for calculating basic net income (loss) per share, the dilutive effect of stock options and warrants will be eliminated. However, stock options and warrants will be included in the calculation of diluted net income (loss) per share. The impact of implementing FAS No. 128 on the calculation of net income (loss) per share for fiscal 1997 has not yet been fully evaluated. Segment Reporting In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (FAS) No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. This statement is effective for fiscal years beginning after December 15, 1997. The Company has not yet evaluated the full impact of the adoption FAS 131. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expense during the reporting period. Actual results could differ from those estimates. Financial Instruments SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of fair value information about financial instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of October 31, 1997. The respective carrying value of financial instruments approximated their fair values. These financial instruments include cash and cash equivalents, trade receivables, accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. Reclassifications Certain reclassifications were made to the 1996 financial statements to present those financial statements on a basis comparable with the current year. The reclassifications had no effect on previously reported net loss or accumulated deficit. 2. AK-BULAK OPTION Effective August 1996, the Company obtained an option to purchase 80% of Ak-Bulak, an inactive company which owned the other 50% of the FoodMaster joint venture. This purchase of 80% of Ak-Bulak would give DTR an additional 40% ownership of FoodMaster. To exercise the option, the Company agreed to pay certain pre-defined outstanding debts of Ak-Bulak, the other owner of FoodMaster, and to make capital improvements to the dairy owned by FoodMaster. As of March 2, 1997 and October 31, 1996, DTR had paid $171,774 and $35,616, respectively, in connection with the exercise of this option. On March 3, 1997, DTR contributed its 50% ownership in FoodMaster along with its option to acquire the additional 40% ownership to the FMI joint venture. FMI repaid DTR for all but $14,045 of the costs paid through March 2, 1997 to exercise the option (See Note 3). 3. INVESTMENT IN FOODMASTER INTERNATIONAL L.L.C. (FMI) On March 3, 1997, DTR and API established the FMI joint venture, to acquire and operate dairies in the former Soviet Union. DTR contributed to FMI its 50% ownership in FoodMaster, the Ak-Bulak option (See Note 2) and its opportunities for a future acquisition of a dairy in Moldova. API agreed to fund $2.945 million to further develop the dairy operations in Kazakhstan and Moldova and to provide an additional $3.055 million over two years to expand FMI. By October 31, 1997, API contributed $3.245 million of its $6 million commitment to FMI. Under the agreement, API currently owns 60% and DTR owns 40% of FMI. However, DTR has a right to earn a greater ownership interest of FMI by achieving certain defined performance targets based on returns to API. Effective March 1997, DTR records its proportionate share of the net income or loss of FMI in the statement of operations as equity in earnings of FMI joint venture under the equity method of accounting. DTR also entered into a management agreement with FMI, whereby DTR manages the day to day operations of FMI and the dairy operations owned by FMI, and pursues future dairy acquisitions for FMI for a management fee. The Company recorded management fee income of $802,492 from March 1997 to October 31, 1997 in accordance with its management agreement with FMI. Summarized financial information from the audited financial statements of FMI carried on the equity basis is as follows: October 31, 1997 ---------------- Current assets $ 3,944,710 Total assets 10,514,329 Noncurrent liabilities 946,832 Shareholders' equity 7,032,719 DTR's share of FMI 's equity 2,813,088 DTR's carrying value of FMI's equity 788,785 Eight Months Ended October 31, 1997 ---------------- Sales $ 6,784,384 Gross profit 2,504,523 Net loss (207,138) DTR's share of FMI's loss before adjustment of DTR's excess of net equity over carrying value of the investment (82,855) DTR's share of equity in earnings of FMI joint venture after adjustment 62,650 4. FURNITURE AND EQUIPMENT Furniture and equipment are summarized as follows: Estimated Useful Life ----------- Software 5 years $ 23,605 Furniture & equipment 5 years 148,869 Leasehold improvements 5 years 4,982 ----------- 177,456 Less accumulated depreciation 131,990 ----------- Furniture and equipment, net $ 45,466 =========== 5. DISCONTINUED OPERATIONS Effective December 31, 1995, DTR entered into an agreement to sell certain assets and the rights to its airport security equipment in the fSU to Gate Technology, a United Kingdom company owned by a former DTR employee. DTR transferred assets, inventory, customer lists, promotional materials, and other items with a net book value on January 31, 1996 of $143,293. In exchange for these items, DTR received a cash payment of $45,000 to reimburse DTR for expenses related to this business during the first quarter of fiscal 1996 and a note receivable totaling $765,000 payable over 30 months. A portion of these payments is personally guaranteed by the former employee, and is collateralized by his ownership of 16,430 shares of DTR's common stock. Additional contingent payments may also be received based on future performance. DTR retained the right to pursue airport security management contracts. Due to the inherent risks associated with operating in the fSU, including credit risk, the gain on this sale has been deferred and will be recognized as payments are received. DTR received total payments of $200,000 and $170,000 during fiscal 1997 and 1996, respectively. As a result, DTR recorded a gain (loss) on discontinued operations of $200,000 and ($30,166) in fiscal 1997 and 1996, respectively. The operations of the business segment and the gain on sale are presented as discontinued operations in the statements of operations. In August 1997, the Board of Directors approved a revision in the sale agreement that increased the balance due to DTR by $40,000 representing interest on the outstanding balance. The increase in the receivable balance was accounted for as an increase in deferred revenues. In addition, the payment terms were revised to require two payments in 1998 with the final payment due on January 1, 1999. 6. COMMITMENTS & CONTINGENCIES Leases The Company leases its operating facilities under a five year operating lease that expires on April 30, 2002. The following schedule sets forth the future minimum rental payments required under the operating lease: Year Ending Operating October 31, Leases ----------- -------------- 1998 $ 18,414 1999 18,919 2000 19,423 2001 19,928 2002 10,090 -------------- $ 86,774 ============== Rental expense was approximately $25,500 and $40,500 for the fiscal years ended October 31, 1997 and 1996, respectively. 7. STOCK OPTIONS AND WARRANTS Under the Company's 1992 Stock Option Plan (the Plan), the Board of Directors may grant qualified or nonqualified options for up to 66,667 shares of common stock to employees and non-employees. Options granted to employees generally vest over a three to five year period. Certain options granted to employees contain provisions whereby vesting is accelerated in the event the employee is terminated without cause as defined in the option agreements. Options granted to non-employees, including directors and consultants, vest one year after the date of grant and are exercisable for three years from the date of grant. Effective September 30, 1996, the Plan was amended to increase the shares available for granting to 600,000 shares. In March 1994, the shareholders ratified the 1993 Outside Directors Stock Option Plan. Under the terms of this plan, the Company reserved 83,333 shares of common stock for issuance to outside directors as compensation for their services as board members. Options for 1,667 shares are issued to the directors each year upon their election at the annual shareholders meeting. The options vest after one year. The Company applies APB Opinion 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations in accounting for the above employee plans. Under the provisions of APB Opinion 25, if options are granted or extended at exercise prices less than fair market value, compensation expense is recorded for the difference between the grant price and the fair market value at the date of the grant. SFAS No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION, requires the Company to provide pro- forma information regarding net income (loss) and per share amounts as if compensation cost for the Company's stock options had been determined in accordance with the fair value based method prescribed by SFAS No. 123. The Company estimates the fair value of each stock option at the grant date by using a Black-Scholes option-pricing model with the following assumptions used for grants in 1997: no dividend yield, volatility from 102.6% to 120.8%, risk-free interest rates of 6%, and expected lives ranging from 18 months to 10 years. Assumptions used in the fiscal 1996 option-pricing models are as follows: no dividend yield, volatility from 103.6% to 132.9%, risk-free interest rates of 6%, and expected lives ranging from 18 months to 10 years. Had compensation costs been determined based on the fair value of options at their grant dates in accordance with SFAS No. 123, the Company's net income would have decreased by $98,567 in fiscal 1997 and the Company's net loss would have increased by $462,634 in fiscal 1996. The effect on net income (loss) per share is $0.08 and $0.55 per share for fiscal 1997 and 1996, respectively. The following table summarizes the information about the Company's warrant and stock option activity for the years ended October 31, 1997 and 1996:
1992 Stock Option Plan Outside Weighted- ---------------------- Directors Average Employee Stock Option Exercise Warrants Options Plan Total Price/Share -------- -------- -------- ------ Balance, October 31, 1995 46,667 41,444 6,667 94,778 $ 12.34 Granted -- 500,972 3,334 504,306 $ 1.22 ------ ------- ------ ------- Balance, October 31, 1996 46,667 542,416 10,001 599,084 $ 2.90 Cancelled/expired/ or surrendered (18,334) (17,416) (3,333) (39,083) $ 11.84 Granted -- 85,000 3,334 88,334 $ 1.23 ------ ------- ------ ------- Balance, October 31, 1997 28,333 610,000 10,002 648,335 $ 2.22 ====== ======= ====== ======= Exercisable, October 31, 1997 28,333 125,000 6,668 160,001 $ 5.28 ====== ======= ====== =======
The following table summarizes information about the Company's stock plans at October 31, 1997:
Options Outstanding Options Exercisable ------------------- ------------------- Weighted- Weighted- Weighted- Number Average Average Number Average Range of Outstanding Remaining Exercise Exercisable Exercise Exercise Price at 10/31/97 Life (years) Price at 10/31/97 Price -------------- ----------- ------------ ----- ----------- ----- $1.19 to $3.00 608,335 4.61 $1.27 120,001 $1.47 $6.75 5,001 .36 6.75 5,001 6.75 $15.00 to $22.50 34,999 .28 18.14 34,999 18.14 ------------- -------------- 648,335 160,001 ============= ==============
8. ECONOMIC DEPENDENCE For the fiscal year ended October 31, 1997 and 1996, the Company had two customers which comprised 100% of its x-ray tube sales of $264,030 and $243,860, respectively. In addition, the Company had one supplier for these x-ray tubes. Purchases from this supplier totaled $228,445 and $202,460 in fiscal 1997 and 1996, respectively. 9. INCOME TAXES The Company utilizes the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards (FAS) No. 109, Accounting for Income Taxes. FAS No. 109 requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Deferred income tax assets and liabilities as of October 31, were as follows: 1997 1996 ------------ ---------- Deferred tax asset $ 1,256,400 $ 1,542,700 Deferred tax liabilities (6,500) (6,500) Valuation allowance (1,249,900) (1,536,200) ------------ ---------- -- -- ============ ========== Deferred income tax assets and liabilities consist primarily of NOL's and the allowance for doubtful accounts, and differences between the financial and tax basis of furniture and equipment, respectively. At October 31, 1997, the Company had a net operating loss (NOL) carryforwards of approximately $3,354,000 for income tax purposes. The NOL carryforwards expire in years 2007 through 2011 if not previously utilized. Utilization of the available NOL carryforward may be limited due to future significant changes in ownership under Internal Revenue Codes Section 382. These potential future tax benefits are not recognized in the financial statements since realization is not currently supportable. The Company intends to permanently reinvest the earnings of FMI. Therefore, no U.S. deferred income taxes are provided on these earnings. 10. STOCK REDEMPTION In the first quarter of fiscal 1997, 48,190 shares of common stock were redeemed in exchange for the satisfaction of a $29,035 account receivable owed by a former employee. 11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Non-cash operating and investing activities: The Company contributed $626,917 in net assets of its FoodMaster joint venture to FoodMaster International L.L.C. (FMI) for its 40% interest as discussed in Note 3. In addition, the Company redeemed 48,190 shares of common stock in exchange for the satisfaction of a $29,035 account receivable as discussed in Note 10. Finally, the Company increased the deferred gain and a corresponding receivable from the sale of discontinued operations by $40,000 for additional interest due to DTR as discussed in Note 5. In fiscal 1996, DTR contributed $364,450 in inventory and equipment to its FoodMaster joint venture. In addition, the Company recorded a note receivable of $765,000 for the sale of its aviation security business as discussed in Note 5 of which $15,934 was related to the transfer of equipment and $621,707 was offset by an increase in deferred gain. The non-cash effects of these transactions have been removed from the appropriate categories in the operating and investing section of the Company's Statements of Cash Flows for the year ended October 31, 1997 and 1996. Supplemental cash flow information: 1997 1996 ----------------------------------- ----------- ---------- Cash paid for: Interest -- 6,600 Taxes -- 91,376 12. SUBSEQUENT EVENTS On November 6, 1997, the Board of Directors adopted the 1997 Outside Directors Stock Option Plan, superseding the 1993 Outside Directors Stock Option Plan. In exchange for the surrender of all stock options previously granted to the outside directors, the Board granted stock options for 15,000 shares of common stock at an exercise price of $1.50 per share to the current outside directors. As of November 6, 1997, 13,750 of the 15,000 options were vested. The remaining 1,250 were vested by December 31, 1997. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On December 23, 1997, Developed Technology Resource, Inc. dismissed Lurie, Besikof, Lapidus & Co., LLP, the principal accountant previously engaged to audit the registrant's financial statements for the fiscal year ended October 31, 1996, as its independent accountant. The registrant's financial statements for the fiscal year ended October 31, 1995 were audited by another independent accountant and a Form 8-K was filed in accordance with such dismissal on April 23, 1996. Lurie, Besikof, Lapidus & Co., LLP's reports on the financial statements for the fiscal year ended October 31, 1996 do not contain an adverse opinion or disclaimer of opinion, and was not modified as to uncertainty, audit scope, or accounting principles. In connection with the audit for the fiscal year ended October 31, 1996 and through December 23, 1997, there have been no disagreements with Lurie, Besikof, Lapidus & Co., LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Lurie, Besikof, Lapidus & Co., LLP would have caused them to make reference thereto in their report on the financial statements for such period. The decision to change accountants has been approved by the Board of Directors of the registrant. On December 23, 1997 Deloitte & Touche LLP was appointed as the registrant's new independent accountant to audit the registrant's financial statements. During the past fiscal year and through December 23, 1997, the registrant has not, prior to engaging the new accountant, consulted the new accountant regarding the application of accounting principles to a specific or contemplated transaction or regarding the type of audit opinion that might be rendered on the registrant's financial statements. PART III ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The information required by Item 9 is incorporated herein by reference to the section entitled "Principal Shareholders and Ownership of Management" in the Company's proxy statement for its 1997 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company's fiscal year ended October 31, 1997. ITEM 10. EXECUTIVE COMPENSATION The information required by Item 10 is incorporated herein by reference to the section entitled "Compensation of Directors and Executive Officers" in the Company's proxy statement for its 1997 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company's fiscal year ended October 31, 1997. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in Item 11 is incorporated herein by reference to the section entitled "Principal Shareholders and Ownership of Management" in the Company's proxy statement for its 1997 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company's fiscal year ended October 31, 1997. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 12 is incorporated herein by reference to the section entitled "Certain Transactions" in the Company's proxy statement for its 1997 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company's fiscal year ended October 31, 1997. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K The following exhibits are submitted herewith: 3.1 Articles of Incorporation of the Company(1) 3.2 Certificate of Amendment of Articles of Incorporation of the Company(1) 3.3 Bylaws of the Company(1) 3.4 Certificate of Amendment of Articles of Incorporation of the Company, changing registered office address(1) 3.5 Certificate of Amendment of Articles of Incorporation of the Company as filed on Form 8-A/A dated November 30, 1995(5) 4.1 Form of stock certificate representing Common Stock, $.01 par value per share, of the Company, as filed on Form 8-A/A dated November 30, 1995 and issued by Company after 1 for 3 reverse split effective 12/12/95(5) 4.2 Form of Subscription Agreement and Investment Representations in connection with private placement of 300,000 shares of Common Stock(1) 10.1 Asset Sale Agreement between Company and a corporation to be organized by Oleg Yermakov selling the Company's security equipment distribution business and certain assets to Oleg Yermakov, contingent on certain future events(6) 10.2 Exclusive Distributor Agreement dated October, 1995 between Company and SECTOR 6, Security Division of N.V. COMAUTO S.A.(6) 10.4 1992 Stock Option Plan(1) 10.5 Form of Stock Option Agreement(1) 10.6 Technology Agreement effective May 1, 1992 between the Company and Fluxatron Systems International, Inc.(1) 10.7 Consulting Agreement effective May 1, 1992 between Atarius U.S., Inc. and the Company, attaching the separate employment agreements, as amended, between Atarius U.S., Inc. and Anatoli Z. Kvaktounov and Oleg Yermakov(1) 10.8 Five-Year Common Stock Purchase Warrant granted to Peter L. Hauser IRA, #310200-9, Equity IRA Company on May 26, 1992, for the purchase of 27,500 shares of Common Stock of the Company at an exercise price of $2.00 per share, with certain demand and piggyback registration rights(1) 10.9 Five-Year Common Stock Purchase Warrant granted to Equity Securities P.S.T. for the Benefit of Nathan Newman on May 26, 1992, for the purchase of 27,500 shares of Common Stock of the Company at an exercise price of $2.00 per share, with certain demand and piggyback registration rights(1) 10.10 Replacement Promissory Note dated January 11, 1993 from Robert L. Porter to the Company in the principal amount of $10,000(1) 10.11 Replacement Promissory Note dated January 11, 1993 from Erich C. Steinbergs to the Company in the principal amount of $10,000(1) 10.12 Form of Assignment of Financial Advisory Agreement from the Company to FAI Limited Partnership, effective January 31, 1993(1) 10.13 Exclusive Distributor Agreement dated June 1, 1992 between EG&G Astrophysics Research Corporation and the Company(1) 10.14 Nonexclusive Distributor Agreement dated June 1, 1992 between EG&G Astrophysics Research Corporation and the Company, as amended(1) 10.15 Developed Technology Resource, Inc. 1993 Outside Directors Stock Option Plan(2) 10.16 Application - Foundation Agreement on Establishment of Closed Joint Stock Company "ICP Int." among the Company, the Institute of Chemical Physics of the Russian Academy of Sciences and A.M. Shapiro, and English text of ICP Charter and Agreement(1) 10.20 Partnership Agreement dated January 16, 1992 among the Company, Armen P. Sarvazyan and Stanislav Yemelyanov concerning the formation of Medical Biophysics International, as amended by Partnership Agreement Amendment dated August 20, 1992(1) 10.21 Letter of Understanding dated June 18, 1992 between the Company and Armen P. Sarvazyan concerning Medical Biophysics International, and May 22, 1992 letter from the Company to Dr. Armen P. Sarvazyan, Ph.D.(1) 10.22 Assignment of rights to Intracavity Ultrasonic Device for Elasticity Imaging from Armen P. Sarvazyan, Stanislav Emelianov and Andrei R. Skovoroda to Medical Biophysics International(1) 10.23 Assignment of rights to Method and Apparatus for Elasticity Imaging from Armen P. Sarvazyan and Stanislav Emelianov to Medical Biophysics International(1) 10.24 Assignment of rights to Method and Device for Mechanical Tomography of Tissue from Armen P. Sarvazyan to Medial Biophysics International(1) 10.26 Agreement between the Board of the Designers of Kazakhstan and the Company(1) 10.27 Office Lease dated October 1, 1993 between the Company (Lessee) and Minnesota Master Limited Partnership (Lessor)(2) 10.28 Registration of DTR Moscow office as Registered Office #105(1) 10.29 Amendment No. 2 to lease for office space between Developed Technology Resource, Inc. and Cargill, Incorporated dated August 15, 1994(3) 10.32 Memorandum from A. Shapiro to the Company concerning the transfer of technologies or exclusive license to ICP-INT(1) 10.38 Consulting Agreement dated March 31, 1993 between the Company and Donald V. Murray(1) 10.39 Confidentiality Agreement and Letter of Understanding between the Company and NordicTrack(1) 10.42 Form of Underwriter's Warrants dated April 23, 1993 between the Company and Equity Securities Trading Co., Inc.(2) 10.43 Form of Directors and Officers Indemnification Agreement issued to each of the Company's officers and directors on October 15, 1993 by action of the Board of Directors(2) 10.44 Developed Technology Resource, Inc. 1997 Outside Directors Stock Option Plan(7) 10.45 Amendment to Asset Sale Agreement (Exhibit 10.1) (7) 11.1 Statement of computation of per share earnings (7) 21.1 Subsidiaries of the Company(2) 23.1 Consent of Deloitte & Touche LLP(7) 23.2 Consent of Lurie, Besikof, Lapidus & Co., LLP (7) 27 Financial Data Schedule (7) - -------------------------------------------------------------------------------- (1) Incorporated by reference to the same exhibit number included in the Company's registration statement on Form SB-2, as Amended, filed with the Commission as file number 33-58626C. (2) Incorporated by reference to the same exhibit number included in the Company's Annual Report on Form 10-KSB filed with the Commission for the fiscal year ended October 31, 1993. (3) Incorporated by reference to the same exhibit number included in the Company's Annual Report on Form 10-KSB filed with the Commission for the fiscal year ended October 31, 1994. (4) Incorporated by reference to the same exhibit number included in the Company's Quarterly Report on Form 10-QSB for the second fiscal quarter ended April 30, 1995. (5) Incorporated by reference to the same exhibit included in the Company's Form 8-A/A filed with the Commission on December 12, 1995. (6) Incorporated by reference to the same exhibit number included in the Company's Annual Report on Form 10-KSB filed with the Commission for the fiscal year ended October 31, 1995. . (7) Filed herewith. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEVELOPED TECHNOLOGY RESOURCE, INC. Date: March 20, 1998 By /s/ John P. Hupp Name: John P. Hupp Title: President Date: March 20, 1998 By /s/ LeAnn H. Davis, CPA Name: LeAnn H. Davis, CPA Title: Chief Financial Officer (Principal Financial & Accounting Officer) EX-10.44 2 STOCK OPTION PLAN EXHIBIT 10.44 DEVELOPED TECHNOLOGY RESOURCE, INC. 1997 OUTSIDE DIRECTORS STOCK OPTION PLAN I. PURPOSE OF PLAN 1.1 The purpose of the Developed Technology Resource, Inc. 1997 Outside Directors Stock Option Plan (the "Plan") is to provide a means whereby Developed Technology Resource, Inc. (the "Company") may grant options to purchase common stock of the Company to those members of the Company's Board of Directors who are not employees of the Company or any of its subsidiaries ("Eligible Directors"). Options granted under the Plan are not intended to and do not qualify as incentive stock options as described in Section 422A of the Internal Revenue Code. II. NUMBER OF SHARES AVAILABLE UNDER THE PLAN 2.1 Options will be granted by the Company at the times described below, to Eligible Directors to purchase an aggregate of up to 100,000 shares of common stock ($.01 par value) of the Company and 100,000 shares shall be reserved for options granted under the Plan (subject to adjustment as provided in Section 4.9 below). The shares issued upon exercise of options granted under the Plan may be authorized and unissued shares or reacquired shares held by the Company. If any option granted under the Plan shall terminate, expire or with the consent of the optionee, be canceled as to any shares, new options may thereafter be granted covering such shares without affecting the amount of the option reserve noted above. III. ADMINISTRATION 3.1 The Plan shall be administered by a Committee consisting of the Chief Executive Officer and Chief Financial Officer of the Company who are not eligible to participate in the Plan (the "Committee"). Committee members shall have no discretion concerning the grant of options, the price at which options are to be granted or times at which options may be exercised. The Committee may interpret the Plan, amend and rescind any rules and regulations necessary or appropriate for the administration of the Plan and make other determinations and take such other action as it deems necessary or advisable. No such action will affect the rights of Eligible Directors who have been granted options prior to such action. Any interpretation or other action made or taken by the Committee shall be final, binding and conclusive. IV. TERMS AND CONDITIONS 4.1 Time of Grant and Form. Each option granted under the Plan shall be evidenced by an option agreement which shall be subject to the terms and conditions of the Plan, including, without limitation, the following: (a) Existing options previously issued from the company's 1993 Outside Directors Stock Option Plan shall be rescinded. As a replacement for such rescinded options, each existing Eligible Director shall receive a grant of options for the purchase of 15,000 shares of common stock of the Company, as of the date this Plan is adopted by the Board of Directors at a price of $1.50 per share. Of these options, 13,750 shall vest immediately and 1,250 shall vest on December 31, 1997. (b) Each Eligible Director who is initially appointed or elected to the Board of Directors of the Company shall receive a grant for the purchase of shares of the Company's common stock in an amount to be determined by the Board of Directors, with the director who is to be granted the options not voting, on the effective date of the initial appointment or election as Director, which shall vest as follows: 25 per cent on the date of such election or appointment; 25 per cent on June 30; 25 per cent on September 30; and 25 per cent on December 31 of the year in which such election or appointment occurs. (c) Effective January 1, 1998, each Eligible Director shall receive a grant of options for the purchase of shares of common stock of the Company in an amount to be determined by the Board of Directors, with the director who is to be granted the options not voting, on each successive anniversary date, if reelected or reappointed to the Board of Directors, which shall vest as follows: 25 per cent on the date of each re-election or reappointment; 25 per cent on June 30; 25 per cent on September 30; and 25 per cent on December 31 of the year in which such re-election or reappointment occurs. The foregoing respective dates of grant are referred to herein as the "Grant Date." Notwithstanding the foregoing, if on the scheduled Grant Date, the Chief Executive Officer or General Counsel of the Company determines, in their sole discretion, that the Company is in possession of material, undisclosed information that would prevent the Company from issuing securities, then the grant of options to Eligible Directors pursuant to this Section 4.1 will be suspended until the third day after public dissemination of such information. The Chief Executive Officer or General Counsel may only suspend the grant; the amount and other terms of the grant will remain as set forth in the Plan, with the exercise price of the option to be determined in accordance with the Plan on the date the option is finally granted. 4.2. Exercisability. Subject to Sections 4.6 and 4.9 below, each option agreement shall provide that the option will become first exercisable on the first day following the first anniversary of Grant Date. 4.3 Option Period. Subject to Sections 4.6 and 4.9 below, each option agreement shall provide that the option shall expire at the end of five (5) years from the date granted or upon dissolution of the Company, if earlier. 4.4 Option Price. Except as otherwise provided in Section 4.1, the exercise price per share for options granted under the Plan shall be the mean between the bid and asked prices of the common stock of the Company on the Grant Date or in the case of Eligible Directors granted options during the Plan Year, the mean between the bid and asked prices of the common stock of the Company on the date the option is granted. As used herein, the term the bid and asked prices shall mean the bid and asked prices of the Company's common stock as reported on the National Association of Securities Dealers Automated Quotation system or applicable securities exchange. 4.5 Payment of Option Price. The purchase price of the shares as to which an option shall be exercised shall be paid in cash, certified check, bank draft or money order made payable to the Company, or with shares of common stock of the Company at the time of exercise (valued based on the closing price on the date of exercise), unless the tender of shares as payment violates federal or state securities laws. 4.6 Exercise in the Event of Death or Ceasing to be a Board Member. Each option agreement shall be subject to the following: (a) Except as otherwise provided in Section 4.6(b), if an optionee ceases to be a director of the Company or dies, the options which are then vested may be exercised for one year after the date of death or the date the optionee ceases to be a director of the Company. (b) If an optionee ceases to be a director of the Company because of removal for cause, all vested options, held by the removed Director, regardless of issue date, shall become void immediately as of the time the optionee ceases to be a director of the Company. Options that are not exercisable (not vested) as of the date of death of an optionee or as of the date that an optionee ceases to be a director of the Company shall immediately lapse on that date. 4.7 Non-Transferability. No option granted under the Plan shall be transferable other than by will or by the laws of descent and distribution. During the lifetime of the optionee, an option shall be exercisable only by such optionee. 4.8 Investment Representation. Each option agreement shall contain an agreement that upon demand by the Board the optionee shall deliver to the Board at the time of exercise of an option a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an option and prior to the expiration of the option period shall be a condition precedent to the right of the optionee or to such other person to purchase any shares. 4.9 Adjustments. In the event that the outstanding shares of the common stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares or dividends payable in capital stock, appropriate adjustment shall be made in the number and kind of shares as to which options may be granted under the Plan and as to which outstanding options or portions thereof then unexercised shall be exercisable, so that the proportionate interest of the participant shall be maintained as before the occurrence of such event; such adjustment in outstanding options shall be made without change in the total price applicable to the unexercised portion of such options and with a corresponding adjustment in the option price per share. If the Company is a party to a merger, consolidation, reorganization or similar corporate transaction and if, as a result of that transaction, its shares of common stock are exchanged for (a) other securities of the Company or (b) securities of another corporation which has assumed the outstanding options under the Plan or has substituted for such options its own options, then each holder of options under the Plan shall be entitled (subject to the conditions stated herein or in such substituted options, if any), in respect of that person's options, to purchase that amount of such other securities of the Company or of such other corporation as is sufficient to ensure that the value of that person's options immediately before the corporate transaction is equivalent to the value of such options immediately after the transaction, taking into account the option price of the option before such transaction, the fair market value per share of the common stock immediately before such transaction and the fair market value immediately after the transaction, of the securities then subject to that option (or to the option substituted for that option, if any). Upon the happening of any such corporate transaction, the class and aggregate number of shares subject to the Plan which have been heretofore or may be hereafter granted under the Plan shall be appropriately adjusted to reflect the events specified in this Section 4.9. 4.10 Expiration Date. This plan shall terminate on granting of all shares allowed hereunder, or on such earlier date determined by the Board. Any termination shall not affect any options then outstanding under the Plan. No options may be granted after termination. 4.11 Shareholder Rights. No Optionee shall have any rights as a shareholder with respect to any shares subject to his or her option prior to the date of issuance to the optionee of a certificate or certificates for such shares. V. COMPLIANCE WITH OTHER LAWS AND REGULATIONS 5.1 The Plan, the option agreement and exercise of options thereunder and the obligation of the Company to sell and deliver shares under such option shall be subject to all applicable federal and state laws, rules and regulations and to such approval by any government or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for shares of common stock prior to (a) the listing of any such shares on any stock exchange on which the common stock may be listed; and (b) the completion of any registration or qualification of such shares under any federal or state law, or any ruling or regulation of any governmental body which the Company shall in its sole discretion determine necessary or advisable. VI. AMENDMENT AND TERMINATION 6.1 The Board may from time to time amend, suspend or discontinue the Plan provided, subject to the provisions of Section 4.9 above, no action of the Board may permit the granting of any option at the option price less than the price determined in accordance with the terms of this Plan; adjust or change the Grant Date determined under Section 4.1 above; or shorten the period provided for in Section 4.3 above. However, the Plan may not be amended more than once every six months other than to comply with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. Without the written consent of an optionee, no amendment or suspension of the Plan shall alter or impair any option previously granted to him or her under the Plan. The Board may, subject to limitations in the Plan, modify, extend or renew outstanding options granted under the Plan, or accept the surrender of outstanding options to the extent unexercised. VII. EFFECTIVE DATE 7.1 The Plan shall be effective November 1, 1997. VIII. PLAN YEAR 8.1 The Plan year shall be the same as the Company's fiscal year. IX. NAME OF PLAN 9.1 The Plan shall be known as the Developed Technology Resource, Inc. 1997 Outside Directors Stock Option Plan. EX-10.45 3 ASSET SALE AGREEMENT EXHIBIT 10.45 AMENDMENT TO ASSET SALE AGREEMENT This Amendment to Asset Sale Agreement is entered into effective as of August 20, 1997 by and between Gate Technologies Ltd., a United Kingdom corporation ("Buyer"), Developed Technology Resource, Inc., a Minnesota corporation ("Seller") and Oleg Yermakov ("Guarantor"). WHEREAS, Seller and Buyer entered into an Asset Sale Agreement effective December 31, 1995 and a portion of the payment relating to such sale has been paid; and WHEREAS, the Seller, Buyer and Guarantor wish to set forth the revised terms of payment and guarantee relating to such agreement. NOW, therefore, it is agreed as follows: 1. Schedule 2.2 is amended in its entirety according to the Amended Schedule 2.2 attached hereto as Exhibit A. 2. As consideration for the amendment of the agreement: A. Buyer agrees that no payment shall be made other than normal and regular expenses including wages, bonuses and operating expenses comparable to those indicated in the attached Exhibit B, it being the intent hereof that no distribution should be made to third parties or employees other than the routine operating expenses of the company prior to the full and complete payment of the obligation of Buyer set forth in the Amended Schedule 2.2. B. Guarantor, as a majority shareholder in the corporation to induce Seller to amend the Asset Sale Agreement as provided herein, will execute the guarantee agreement attached hereto as Exhibit C. Other than as amended herein, the Asset Sale Agreement entered into on December 31, 1995 is hereby confirmed and ratified in all respects. GATE TECHNOLOGIES LTD. DEVELOPED TECHNOLOGY RESOURCE, INC. By_________________________ By________________________________ Oleg Yermakov John P. Hupp AMENDED SCHEDULE 2.2 Date Amount of Payment February 1, 1998 $ 220,000 September 1, 1998 220,000 January 1, 1999 40,000 --------------- TOTAL: $ 480,000 =============== Any payments not received on the date specified shall bear interest from such date until the date paid at the rate of 12% per annum. EXHIBIT A GUARANTY In consideration of the entry into an Amendment to Asset Sale Agreement ("Agreement") effective August 20, 1997, by Developed Technology Resources, Inc., a Minnesota corporation (the "Seller") Gate Technologies Ltd., a United Kingdom corporation (the "Buyer"), the undersigned, Oleg Yermakov ("Guarantor") hereby guarantees to the Seller the full and prompt payment when due, of the amount owing to Seller in the Amended Agreement as follows: The balance of the fixed payments of $480,000 as provided in Schedule 2.2 of the Amended Agreement. Guarantor shall reimburse the Seller for all costs and expenses, including reasonable attorneys fees, incurred by or on behalf of the Seller in enforcing the obligations of Guarantor hereunder. Guarantor waives all notices and consents which may be otherwise necessary, whether by statute, rule of law or otherwise, to preserve the Seller's rights and remedies against the Guarantor hereunder. This is a continuing guaranty of the payment of the Obligations of Buyer to the Seller and shall continue to be in force until all obligations of Buyer to the Seller are paid in full. Any dispute or claim arising out of or relating to this Guaranty or the validity, interpretation, enforceability or breach of this Guaranty, which is not settled by agreement between the parties, will be settled by binding arbitration in London, England, in accordance with the rules of the London Court of Arbitration then in effect, and judgment upon any award rendered in such arbitration may be entered in any court having competent jurisdiction. The prevailing party in such arbitration, in addition to all other relief provided, shall be entitled to an award against the losing party of its costs and expenses, including reasonable attorney's fees, incurred in such arbitration, and the losing party shall also bear all fees and expenses of arbitration. In the event that there is no party that has prevailed on substantially all issues, such legal expenses and expenses of arbitration shall be allocated between the parties as the arbitrator deems appropriate. This Guaranty shall be construed as to both validity and performance and governed by and enforced in accordance with the laws of the State of Minnesota, without giving effect to the choice of law principles. IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed on the 20th day of August, 1997. _______________________ Oleg Yermakov EXHIBIT C EX-11 4 COMPUTATION OF PER SHARE EARNINGS DEVELOPED TECHNOLOGY RESOURCE, INC. EXHIBIT 11 -- STATEMENT REGARDING COMPUTATION OF PER-SHARE EARNINGS YEARS ENDED OCTOBER 31, 1997 AND 1996 1997 1996 ----------- ----------- Primary: Average shares outstanding 795,969 839,010 Shares assumed exercised from exercise of stock options 648,335 -- Shares assumed to be repurchased with proceeds from exercise (subject to 20 percent limit) (159,194) -- ----------- ----------- Total 1,285,110 839,010 =========== =========== Net income (loss) $ 710,416 $ (157,149) Assumed interest revenue from purchase of government securities 72,639 -- ----------- ----------- Adjusted net income (loss) $ 783,055 $ (157,149) =========== =========== Per-share amount $ 0.61 $ (0.19) =========== =========== Fully Diluted: Average shares outstanding 795,969 839,010 Shares assumed exercised from exercise of stock options 648,335 -- Shares assumed to be repurchased with proceeds from exercise (subject to 20 percent limit) (159,194) -- ----------- ----------- Total 1,285,110 839,010 =========== =========== Net income (loss) $ 710,416 $ (157,149) Assumed interest revenue from purchase of government securities 67,415 -- ----------- ----------- Adjusted net income (loss) $ 777,831 $ (157,149) =========== =========== Per-share amount $ 0.61 $ (0.19) =========== =========== NOTE: As the stock options assumed to be repurchased exceeds 20% of the shares already outstanding, the treasury stock method has been modified, as required, to assume the repurchase of up to 20% of the stock outstanding with the excess invested in government securities. EX-23.1 5 INDEPENDENT AUDITORS' CONSENT Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement No. 33-6867 of Developed Technology Resource, Inc. on Form S-8 of our report dated March 20, 1998, appearing in the Annual Report of Form 10-KSB for the year ended October 31, 1997. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota March 20, 1998 EX-23.2 6 INDEPENDENT AUDITOR'S CONSENT Exhibit 23.2 INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference in Registration Statement No. 33-6867 of DEVELOPED TECHNOLOGY RESOURCE, INC. on Form S-8 of our report dated January 2, 1997, appearing in this Annual Report on Form 10-KSB of DEVELOPED TECHNOLOGY RESOURCE, INC. for the year ended October 31, 1997. /s/ LURIE, BESIKOF, LAPIDUS & CO., LLP Minneapolis, Minnesota March 20, 1998 EX-27 7 FINANCIAL DATA SCHEDULE
5 12-MOS OCT-31-1997 OCT-31-1997 311,441 0 1,128,743 (10,508) 0 1,475,722 177,456 (131,990) 2,349,973 651,697 0 0 0 7,908 1,609,693 2,349,973 2,467,790 3,310,043 1,398,449 2,780,783 18,844 0 0 510,416 0 510,416 200,000 0 0 710,416 .61 .61
-----END PRIVACY-ENHANCED MESSAGE-----