U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____. Commission File Number 0-13870 Technology 80 Inc. (Exact name of small business issuer as specified in its charter) Minnesota 41-1373380 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 658 Mendelssohn Avenue North, Minneapolis, Minnesota 55427 (Address of principal executive offices) (Zip Code) (612) 542-9545 (Issuer's telephone number) N/A (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) 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 [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practible date. Common Stock, $0.01 par value 1,571,170 (Title of Class) (Shares Outstanding) Part I - Financial Information Item 1: Financial Statements TECHNOLOGY 80 INC. CONDENSED BALANCE SHEETS (UNAUDITED) November 30, August 31, 1996 1996 ASSETS ------------ ----------- CURRENT ASSETS Cash and cash equivalents $ 605,057 $ 419,136 Short-term investments 5,000 127,163 Accounts receivable (less allowance for doubtful accounts: Nov. 30 - $9,000; Aug. 31 - $9,000) 627,162 587,537 Inventories 986,586 956,744 Deferred taxes 32,825 38,600 Other current assets 25,118 29,069 ---------- ---------- TOTAL CURRENT ASSETS 2,281,748 2,158,249 ========== ========== PROPERTY AND EQUIPMENT Furniture and equipment 437,939 424,670 Leasehold improvements 23,060 23,060 ---------- ---------- 460,999 447,730 Less accumulated depreciation 371,459 363,780 ---------- ---------- 89,540 83,950 ---------- ---------- OTHER ASSETS Investments 2,298,788 2,580,957 Deferred taxes 113,800 74,400 ---------- ---------- 2,412,588 2,655,357 ---------- ---------- TOTAL ASSETS $4,783,876 $4,897,556 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 64,582 $ 49,413 Accrued payroll and payroll taxes 133,282 217,214 Accrued income taxes 84,000 206,137 Accrued liabilities - other 3,346 74,379 ---------- ---------- TOTAL CURRENT LIABILITIES 285,210 547,143 ---------- ---------- STOCKHOLDERS' EQUITY Common stock, $0.01 par value (authorized - 5,000,000 shares;issued and outstanding - Nov. 30, 1,571,170, Aug. 31, 1,571,170 shares) 15,712 15,712 Paid-in capital 3,383,944 3,383,944 Other - loans (162,263) (162,263) Unrealized loss on available-for-sale securities (150,090) (102,526) Retained earnings 1,411,363 1,215,546 ---------- ---------- 4,498,666 4,350,413 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,783,876 $4,897,556 ========== ========== See notes to condensed financial statements. TECHNOLOGY 80 INC. CONDENSED STATEMENTS OF INCOME (UNAUDITED) Three months ended November 30, 1996 1995 -------- -------- REVENUES $993,880 $872,071 COST OF GOODS SOLD 387,535 349,466 -------- -------- GROSS PROFIT 606,345 522,605 -------- -------- OPERATING EXPENSES General and administrative 128,701 125,919 Research and development 153,984 137,653 Selling 152,236 175,956 -------- -------- TOTAL OPERATING EXPENSES 434,921 439,528 -------- -------- INCOME FROM OPERATIONS 171,424 83,077 OTHER INCOME 117,393 42,525 -------- -------- INCOME BEFORE INCOME TAXES 288,817 125,602 PROVISION FOR INCOME TAXES 93,000 35,000 -------- -------- NET INCOME $195,817 $ 90,602 ======== ======== EARNINGS PER SHARE $0.11 $0.05 ===== ===== See notes to condensed financial statements. TECHNOLOGY 80 INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended November 30, 1996 1995 OPERATING ACTIVITIES ---------- ---------- Net income $195,817 $ 90,602 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 7,679 6,688 Deferred taxes 8,375 (59,625) Gain on sale of fixed asset - (62) Gain on sale of investments (80,619) - Changes in operating assets and liabilities: Accounts receivable (39,625) 2,905 Inventories (29,842) (30,384) Other current assets 3,951 15,753 Accounts payable 15,169 11,175 Accrued income taxes (122,137) - Accrued liabilities (154,965) (69,721) -------- -------- NET CASH USED BY OPERATING ACTIVITIES (196,197) (32,669) -------- -------- INVESTING ACTIVITIES Sale of equipment - 1,350 Purchase of property and equipment (13,269) (4,009) Proceeds from sales and maturities of investments 742,727 - Purchase of investments (347,340) (193,768) Payments on loans for stock purchases - 1,442 -------- -------- NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES 382,118 (194,985) -------- -------- FINANCING ACTIVITIES Proceeds from exercise of stock options - 1,562 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES - 1,562 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 185,921 (226,092) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 419,136 926,163 -------- -------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $605,057 $700,071 ======== ======== See notes to condensed financial statements. TECHNOLOGY 80 INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) November 30, 1996 NOTE A - FINANCIAL INFORMATION The unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission; accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The condensed balance sheet at August 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim financial statements should be read in conjunction with the financial statements and notes in the Company's 1996 Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. In the opinion of management, the financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the interim periods. NOTE B - EARNINGS PER SHARE Earnings per share is based upon the number of weighted average common shares outstanding of 1,718,898 for the quarter ended November 30, 1996 and 1,726,161 for the quarter ended November 30, 1995. Item 2: Management's Discussion and Analysis Results of Operations Revenues for the first quarter ended November 30, 1996 increased 14% over the same period the preceding year. The revenue increase was due to an increase in sales volume. Registrant's backlog is up 16% since fiscal year end August 31, 1996. The backlog is deliverable within the next twelve months or less and is cancelable. Gross profit percentages for the three months ended November 30, 1996 was 61% compared to 60% for the three months ended November 30, 1995. Operating expenses decreased $4,607 for the three months ended November 30, 1996 from the same period the prior year. Other income increased $74,868 for the quarter ended November 30, 1996 from the same period the preceding year. The increase was primarily due to increased investment income. Net income was $195,817 and $90,602 for the quarter ended November 30, 1996 and November 30, 1995 respectively. This represents a 116% increase. Liquidity and Capital Resources Registrant's balance sheet shows a strong capital position. Operations used $196,197 in cash. Cash and cash equivalents increased $185,921 since August 31, 1996. Investing activity provided for $382,118 in cash. Registrant expects that there will be sufficient capital to fund its operations during fiscal year 1996. Registrant has no debt and does not anticipate, at this time, that it will be necessary to seek any debt financing in the near future for ongoing operations, but may consider some type of financing for other purposes. Statements included in this Management's Discussion and Analysis or Plan of Operation and elsewhere in this Form 10-QSB, in future filings by the Registrant with the Securities and Exchange Commission and in the Registrant's press releases and oral statements made with the approval of authorized executive officers, if the statements are not historical or current facts, 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. Registrant wishes to caution the reader not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Part II - Other Information Item 1: Legal Proceedings None. Item 2: Changes in Securities None. Item 3: Defaults Upon Senior Securities None. Item 4: Submission of Matters to a Vote of Security Holders None. Item 5: Other Information None. Item 6: Exhibits and Reports on Form 8-K a. Exhibits Exhibit 11 -- Statement Re: Computation of Per-Share Earnings Exhibit 27 -- Financial Data Schedule b. Reports on Form 8-K None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Technology 80 Inc. ------------------ (Registrant) January 13, 1997 /s/ Duane Markus, President, CEO ---------------- -------------------------------- (Date) Duane Markus, President, CEO