-----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, U834q/1rwATv/tWJQEYQjMXP/vktJI73VvmnWUXHZl+T097bRDpZx3DbxFB5lT2Q ldWNFNftIW4lWKg/3wLWqQ== 0000897101-98-000694.txt : 19980703 0000897101-98-000694.hdr.sgml : 19980703 ACCESSION NUMBER: 0000897101-98-000694 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980702 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: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21394 FILM NUMBER: 98660233 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 STREET 2: SUITE 170 CITY: EDNA STATE: MN ZIP: 55439 10QSB 1 FORM 10-QSB - -------------------------------------------------------------------------------- U.S. Securities and Exchange Commission Washington, D.C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission File Number: 0-21394 DEVELOPED TECHNOLOGY RESOURCE, INC. (Exact name of issuer as specified in its charter) 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 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___ As of June 26, 1998, there were 805,820 shares of the issuer's Common Stock, $0.01 par value per share, outstanding. DEVELOPED TECHNOLOGY RESOURCE, INC. INDEX FOR THE QUARTER ENDED APRIL 30, 1998 PAGE NO. -------- PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED UNAUDITED FINANCIAL STATEMENTS Condensed Balance Sheets 3 Condensed Statements of Operations 4 Condensed Statements of Cash Flows 5 Notes to Condensed Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13 SIGNATURES 15 ITEM 1. CONDENSED UNAUDITED FINANCIAL STATEMENTS DEVELOPED TECHNOLOGY RESOURCE, INC. CONDENSED BALANCE SHEETS ASSETS APRIL 30, OCTOBER 31, 1998 1997 ---------- ---------- (Unaudited) Current Assets: Cash and cash equivalents $ 196,444 $ 311,441 Inventory 16,294 Receivables: Trade, net 67,150 97,939 Sale of discontinued operations 480,000 440,000 FoodMaster International L.L.C. (FMI) 161,396 579,582 Other 714 714 Note receivable 623,875 -- Prepaid and other current assets 128,790 46,046 ---------- ---------- Total current assets 1,674,663 1,475,722 Furniture and Equipment, net 48,560 45,466 Investment in FMI 895,477 788,785 Receivable from Sale of Discontinued Operations -- 40,000 ---------- ---------- $2,618,700 $2,349,973 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 108,735 $ 100,269 Accrued liabilities 111,936 124,838 Deferred gain short-term 467,065 426,590 ---------- ---------- Total current liabilities 687,736 651,697 Non-current Deferred Gain 37,224 80,675 Commitments and Contingencies -- -- Shareholders' Equity: Common stock 8,058 7,908 Additional paid-in capital 5,341,648 5,319,298 Accumulated deficit (3,455,966) (3,709,605) ---------- ---------- Total shareholders' equity 1,893,740 1,617,601 ---------- ---------- $2,618,700 $2,349,973 ========== ========== See accompanying notes to the financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED APRIL 30, SIX MONTHS ENDED APRIL 30, 1998 1997 1998 1997 ----------- ------------ ---------- ------------ (As Restated (As Restated See Note 4) See Note 4) Revenues: Sales $ 71,318 $ 861,417 $ 418,162 $ 2,193,103 Management fees from FMI joint venture 293,472 199,111 581,435 199,111 Commissions and other income 1,306 39,943 2,976 49,620 ----------- ----------- ----------- ----------- 366,096 1,100,471 1,002,573 2,441,834 ----------- ----------- ----------- ----------- Cost and Expenses: Cost of sales 59,350 222,402 333,712 1,179,078 Selling, general and administrative 337,214 381,264 646,682 840,042 ----------- ----------- ----------- ----------- 396,564 603,666 980,394 2,019,120 ----------- ----------- ----------- ----------- Operating (Loss) Income (30,468) 496,805 22,179 422,714 Other Income: Interest income, net 82,504 1,650 124,767 8,357 Equity in earnings of FMI joint venture 62,305 15,663 106,693 15,663 ----------- ----------- ----------- ----------- Income before Minority Interest 114,341 514,118 253,639 446,734 Minority Interest in Earnings of FoodMaster -- (59,939) -- (93,553) ----------- ----------- ----------- ----------- Net Income $ 114,341 $ 454,179 $ 253,639 $ 353,181 =========== =========== =========== =========== Net Income per Common Share: Basic $ 0.14 $ 0.57 $ 0.32 $ 0.44 ============ =========== =========== =========== Diluted $ 0.10 $ 0.52 $ 0.23 $ 0.42 ============ =========== =========== ===========
See accompanying notes to the financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. CONDENSED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED APRIL 30, 1998 AND 1997 (UNAUDITED)
1998 1997 ------------ ------------ (As Restated See Note 4) OPERATING ACTIVITIES: Net Income $ 253,639 $ 353,181 Adjustments to Reconcile Net Income to Cash Provided/(Used) by Operating Activities: Depreciation 10,268 23,531 Provision for doubtful accounts -- (24,683) Loss on sale of furniture and equipment 688 3,865 Minority interest in earnings of joint venture -- 93,553 Equity in earnings of FMI joint venture (106,692) (15,662) Changes in Operating Assets and Liabilities, net of transfers to joint venture: Receivables (93,086) (109,859) Receivable from FMI joint venture 418,186 (396,579) Inventories (16,294) (226,517) Prepaid and other current assets (82,744) 24,493 Accounts payable and accrued liabilities (4,436) 125,800 Deferred gains (2,976) (65,958) Customer deposits -- (11,370) --------- --------- Net cash provided/(used) by operating activities 376,553 (226,205) --------- --------- INVESTING ACTIVITIES: Proceeds from Sale of Furniture and Equipment 1,400 70,736 Purchases of Furniture and Equipment (15,450) (260,877) Notes Receivable (500,000) -- Advances to Joint Venture -- (46,145) Deferred Acquisition Costs -- 35,616 --------- --------- Net cash used by investing activities (514,050) (200,670) --------- --------- FINANCING ACTIVITIES: Principal Payments on Note Payable -- (8,900) Proceeds from Exercise of Stock Options 22,500 -- --------- --------- Net cash provided/(used) by financing activities 22,500 (8,900) --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (114,997) (435,775) CASH AND CASH EQUIVALENTS, Beginning of Period 311,441 635,609 --------- --------- CASH AND CASH EQUIVALENTS, End of Period $ 196,444 $ 199,834 ========= =========
See accompanying notes to the financial statements. DEVELOPED TECHNOLOGY RESOURCE, INC. NOTES TO FINANCIAL STATEMENTS 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 FoodMaster International L.L.C. (FMI), its joint venture 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. In fiscal 1998 and 1997, DTR also sold equipment to various customers throughout the fSU. During fiscal 1998, DTR's 100% owned subsidiary, SXD, Inc., distributed X-ray tubes under an exclusive arrangement with a Russian manufacturer and held ownership interests in the coatings technology business of Phygen, Inc. and the cancer detection business of Armed. These operations were formerly operated by DTR in fiscal 1997. Basis of Presentation The interim financial statements of Developed Technology Resource, Inc. (DTR) are unaudited, but in the opinion of management, reflect all necessary adjustments for a fair presentation of the financial position, as well as, the results of operations and cash flows for the periods presented. From November 1996 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. 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, 1997 as filed with the Securities and Exchange Commission. Segment Reporting In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 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 of SFAS 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. 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, DTR had paid $171,774 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 April 30, 1998, API contributed $5.533 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 $581,435 and $199,111 for the six months ended April 30, 1998 and 1997, respectively, in accordance with its management agreement with FMI which began March 3, 1997. Summarized financial information from the unaudited financial statements of FMI carried on the equity basis is as follows:
April 30, 1998 ---------------- Current assets $ 7,308,870 Total assets 14,551,446 Noncurrent liabilities 1,343,431 Shareholders' equity 9,130,799 DTR's share of FMI's equity 3,652,320 DTR's carrying value of FMI's equity 895,477 Six Months Ended April 30, 1998 ---------------- Sales $ 8,371,548 Gross profit 1,282,853 Net loss (6,090) DTR's share of FMI's loss before adjustment of DTR's excess of net equity over carrying value of the investment (2,436) DTR's share of equity in earnings of FMI joint venture after adjustment 106,693
4. RESTATEMENT The Company has restated its financial statements for the three and six months ended April 30,1997 to properly account for the transfer of DTR's FoodMaster operations to the FMI joint venture which occurred in March 1997. The effects of these adjustments on the financial statements for the three and six month periods ended April 30, 1997 are as follows: STATEMENT OF OPERATIONS DATA:
Three Months Ended April 30, Six Months Ended April 30, ---------------------------- ---------------------------- 1997 1997 1997 1997 ----------- ----------- ----------- ----------- As previously As Restated As previously As Restated reported reported Revenues $ 1,027,536 $ 1,100,471 $ 2,368,899 $ 2,441,834 Cost of sales 547,795 222,402 1,504,471 1,179,078 Selling, general & administrative 311,455 381,264 726,225 840,042 ----------- ----------- ----------- ----------- Operating income 168,286 496,805 138,203 422,714 Interest income, net 6,531 1,650 13,238 8,357 Equity in earnings(loss) of FMI (36,712) 15,663 (36,712) 15,663 Minority interest in earnings of FoodMaster (36,789) (59,939) (70,403) (93,553) Income taxes (31,492) -- (75,500) -- ----------- ----------- ----------- ----------- Net income(loss) $ 69,824 $ 454,179 $ (31,174) $ 353,181 =========== =========== =========== =========== Net income(loss) per share - basic $ 0.08 $ 0.57 $ (0.04) $ 0.44 =========== =========== =========== =========== Net income(loss) per share - diluted $ 0.07 $ 0.52 $ (0.04) $ 0.42 =========== =========== =========== ===========
April 30, 1997 -------------------------- BALANCE SHEET DATA: As Previously Reported As Restated ----------- ----------- A/R from FoodMaster International L.L.C. (FMI) $ 403,724 $ 396,579 Advance payments to suppliers 23,172 -- Prepaid and other current assets 40,030 62,123 Furniture and equipment, net 31,883 31,747 Investment in FMI 407,060 741,797 Accounts payable 48,626 59,486 Accrued liabilities 184,002 70,527 Deferred revenues 625,086 669,724 Shareholders' equity 876,012 1,260,366 5. STOCK ACTIVITY 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 of 15,000 shares of common stock to the two current outside directors at an exercise price of $1.50 per share, which was equal to the market price on the grant date. As of April 30, 1998, 15,000 of the 30,000 issued options were exercised. 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. 6. NET INCOME PER COMMON SHARE Effective November 1, 1997, DTR adopted Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE. Under this new standard, basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share includes the dilutive effect of shares which would be issued upon the exercise of outstanding stock options and warrants, reduced by the number of shares which are assumed to be purchased by the Company from the resulting proceeds at the average market price during the period.
Three months ended April 30, Six months ended April 30, -------------------------- -------------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Numerator: Net income $ 114,341 $ 454,179 $ 253,639 $ 353,181 ========== ========== ========== ========== Denominator: Weighted average shares-basic earnings 805,820 790,820 800,350 801,203 Dilutive effect of stock options/warrants 332,727 88,764 316,627 36,435 ---------- ---------- ---------- ---------- Weighted average shares-diluted earnings 1,138,547 879,584 1,116,977 837,638 ========== ========== ========== ========== Net income per share - Basic $ 0.14 $ 0.57 $ 0.32 $ 0.44 ========== ========== ========== ========== Net income per share - Diluted $ 0.10 $ 0.52 $ 0.23 $ 0.42 ========== ========== ========== ==========
Options and warrants to purchase 50,000 and 78,501 shares of common stock as of April 30, 1998 and 1997, respectively, were not included in the computation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares and, therefore, their inclusion would be antidilutive. 7. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Non-cash operating and investing activities: In the first quarter of fiscal 1997, the Company redeemed 48,190 shares of common stock in exchange for the satisfaction of a $29,035 account receivable owed by a former employee. On March 2, 1997, 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. 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 six months ended April 30, 1997. Supplemental cash flow information: For the six months ended April 30, 1998 1997 ---------------------------------- -------- -------- Cash paid for: Interest $ 256 $ -- Taxes $ -- $ -- ITEM 2. 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-QSB, 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 April 30, 1998, API contributed $5.533 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. In November 1997, DTR's Board of Directors voted to establish a wholly-owned subsidiary company called SXD, Inc. with an investment of $800,000 in 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. RESULTS OF OPERATIONS REVENUES The Company generated total revenues of $366,096 and $1,002,573 during the three and six months ended April 30, 1998, respectively, compared to $1,100,471 and $2,441,834 during the three and six months ended April 30, 1997, respectively. This 59% and 67% respective decrease in revenues from fiscal periods in 1997 to 1998 is the result of the change from the consolidated method of reporting joint venture operating results to the equity method as discussed above. The decrease in revenues was offset by management fee income of $293,472 and $581,435 for the three and six month periods in fiscal 1998. During fiscal 1997, this fee did not begin until March 3, 1997. Therefore, the fee from March 3,1997 to April 30, 1997 was $199,111. Sales for the three months ended April 30, 1998 and 1997 totaled $71,318 and $861,417, respectively. Sales for the six months ended April 30, 1998 and 1997 totaled $418,162 and $2,193,103, respectively. Sales resulted from three areas within DTR - dairy operations of FoodMaster (until March 2, 1997), equipment sales, and x-ray tube sales. Since March 3, 1997, the dairy operations of FoodMaster are no longer reported on a consolidated basis with DTR due to the transfer of FoodMaster to FMI. The dairy operations of FoodMaster 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 from November 1996 through February 1997 were $1,774,870 or 80.9% of DTR's total sales for the first six months of fiscal 1997. Sales commissions on food packaging equipment were $2,618 (3.7%) of total sales in the second quarter ended April 30, 1998. There were $318,125 of equipment sales in the second quarter of fiscal 1997. Total equipment sales for the first six months of fiscal 1998 and fiscal 1997 were $282,262 and $317,203, respectively. Sales of equipment occur sporadically throughout the year. Thus, in fiscal 1998, equipment sales occurred in the first quarter and not the second quarter, and in fiscal 1997, sales did not occur until the second quarter. Sales of x-ray tubes by SXD, Inc., DTR's 100% owned subsidiary, increased to $135,900 in the first six months of fiscal 1998 from $101,030 in the first six months of fiscal 1997. The 35% increase occurred due to an increase in the quantity of orders from repeat customers during fiscal 1998. COST OF SALES Cost of sales for the three and six months ended April 30, 1998 was $59,350 and $333,712, respectively. For the three and six months ended April 30, 1997, cost of sales was $222,402 and $1,179,078. The 72% decrease in cost of sales between the six months ended April 30, 1998 and 1997 is the result of the change in accounting methods discussed above. Cost of sales reflects the cost of manufacturing the dairy products of FoodMaster for the first four months of fiscal 1997, the cost of purchasing food packaging equipment and x-ray tubes. There is no cost of sales reflected for FoodMaster in fiscal 1998. FoodMaster cost of sales was $871,937 or 49.1% of FoodMaster sales for the six months ended April 30, 1997. Cost of sales on equipment sales was $216,762 resulting in a gross profit of $65,500 or 23.2% for the first six months of fiscal 1998 compared to $219,211 resulting in a gross profit of $97,992 or 30.9% in the first six months of fiscal 1997. During fiscal 1998, the Company spent more on sales commissions, thus reducing their overall gross profit. X-ray tubes cost of sales were $116,950 and $87,930 in the first six months of fiscal 1998 and 1997, respectively. Gross profit remained consistent with a 13% to 14% margin received on sales. Management does not expect these trends to change significantly. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses for the three months ended April 30, 1998 and 1997 were $337,214 and $381,264, respectively. Selling, general and administrative expenses for the six months ended April 30, 1998 and 1997 were $646,682 and $840,042, respectively. During the first six months of fiscal 1997, FoodMaster operations comprised $488,516 of the $840,042 SG&A expenses. Therefore, the Company's other SG&A expenses excluding the FoodMaster operations was $351,526. The $295,156 increase in SG&A expenses excluding FoodMaster operations is the result of DTR hiring additional employees and consultants and increasing their travel to manage the dairy operations of FMI. However, these costs are offset by the management fees billed to FMI as discussed above under REVENUES. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES DTR increased its cash provided by operating activities to $376,553 in the first six months of fiscal 1998 compared to cash used of $226,205 in the first six months of fiscal 1997. This large swing between cash usage and cash provided occurred because a majority of the operating expenses were paid in accordance with the management agreement between DTR and FMI during all six months of fiscal 1998. In addition, the first six months of fiscal 1998 do not reflect FoodMaster's operations which significantly affected the use of cash during the first four months of fiscal 1997. INVESTING ACTIVITIES In the first quarter of fiscal 1998, DTR's 100% owned subsidiary, SXD, Inc. used $500,000 of its excess cash to invest in a note receivable from an unaffiliated private company. In the first six months of fiscal 1997, DTR purchased $260,877 of equipment largely for its FoodMaster operations. Most of the proceeds of $70,736 resulted from the sale of equipment owned by DTR. FINANCING ACTIVITIES In the first quarter of fiscal 1998, 15,000 options to purchase DTR's Common Stock were exercised for a purchase price of $1.50 per share. DTR's FoodMaster operations obtained $70,910 in bank financing during fiscal 1996 and began to make principal payments on this note in the first quarter of fiscal 1997. FoodMaster made total principal payments of $8,900 on its bank note payable during the period from November 1996 to February 1997, before the operations were transferred to FMI. Based on current projections, the Company believes there will be sufficient working capital and liquidity to fund its current operations through fiscal 1998. Management is continually looking for new sources of funding to finance the expansion for its subsidiaries FMI and SXD. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Shareholders meeting on April 14, 1998. The shareholders voted by a majority vote to re-elect the current board of directors (Peter L. Hauser, John P. Hupp and Roger W. Schnobrich) and to retain the services of Deloitte & Touche LLP as the Company's independent auditors. No other matters were submitted to a vote of the shareholders during the second quarter of fiscal 1998. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The following new Exhibits are filed as part of this Form 10-QSB: (a) List of Exhibits 27.1 Financial Data Schedule (April 30, 1998) 27.2 Financial Data Schedule (April 30, 1997 restated) (b) Reports on Form 8-K There no reports on Form 8-K filed during the quarter ended April 30, 1998. EXHIBIT INDEX The following Exhibits are filed as part of this Form 10-QSB: No. EXHIBIT DESCRIPTION 27.1 Financial Data Schedule (April 30, 1998) 27.2 Financial Data Schedule (April 30, 1997 restated) 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: June 30, 1998 By /s/ John P. Hupp -------------------------------------------------- Name: John P. Hupp Title: President Date: June 30, 1998 By /s/ LeAnn H. Davis Name: LeAnn H. Davis, CPA Title: Chief Financial Officer (Principal Financial & Accounting Officer) EX-27.1 2 FINANCIAL DATA SCHEDULE
5 3-MOS 6-MOS OCT-31-1998 OCT-31-1998 APR-30-1998 APR-30-1998 196,444 196,444 0 0 1,343,643 1,343,643 10,508 10,508 16,294 16,294 1,674,663 1,676,663 158,352 158,352 109,792 109,792 2,618,700 2,618,700 687,736 687,736 0 0 0 0 0 0 8,058 8,058 1,885,682 1,885,682 2,618,700 2,618,700 71,318 418,162 366,096 1,002,573 59,350 333,712 396,564 980,394 (62,305) (106,693) 0 0 (82,504) (124,767) 0 0 0 0 114,341 253,639 0 0 0 0 0 0 114,341 253,639 0.14 0.32 0.10 0.23
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 3-MOS 6-MOS OCT-31-1997 OCT-31-1997 APR-30-1997 APR-30-1997 199,834 199,834 0 0 988,425 988,425 210,317 210,317 0 0 1,040,065 1,040,065 168,378 168,378 136,631 136,631 2,093,609 2,093,609 505,226 505,226 0 0 0 0 0 0 7,908 7,908 1,252,458 1,252,458 2,093,609 2,093,609 861,417 2,193,103 1,100,471 2,441,834 222,402 1,179,078 603,666 2,019,120 44,276 77,890 0 0 (1,650) (8,357) 454,179 353,181 0 0 454,170 352,181 0 0 0 0 0 0 454,179 353,181 0.57 0.44 0.52 0.42
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