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, 1997. [ ] 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 Identification No.) incorporation or organization) 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 1,615,170 ----------------------------- -------------------- (Title of Class) (Shares Outstanding) Part I - Financial Information Item 1: Financial Statements TECHNOLOGY 80 INC. CONDENSED BALANCE SHEETS (UNAUDITED) ASSETS November 30, August 31, 1997 1997 ---------- ---------- CURRENT ASSETS Cash and cash equivalents $ 331,673 $ 284,261 Short-term investments 5,000 64,402 Accounts receivable (less allowance for doubtful accounts: Nov. 30 - $12,000; Aug. 31 - $12,000) 702,247 882,224 Inventories 1,149,690 1,177,452 Deferred taxes 44,000 44,000 Other current assets 24,197 24,383 ---------- ---------- TOTAL CURRENT ASSETS 2,256,807 2,476,722 ---------- ---------- PROPERTY AND EQUIPMENT Furniture and equipment 501,171 473,934 Leasehold improvements 23,060 23,060 ---------- ---------- 524,231 496,994 Less accumulated depreciation 397,065 395,830 ---------- ---------- 127,166 101,164 ---------- ---------- OTHER ASSETS Investments 3,394,598 3,284,214 Deferred taxes 261,800 147,000 ---------- ---------- 3,656,398 3,431,214 ---------- ---------- TOTAL ASSETS $6,040,371 $6,009,100 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 67,512 $ 95,117 Accrued payroll and payroll taxes 156,130 464,659 Accrued income taxes 92,100 36,990 Payable to investment company 693,814 285,392 Accrued liabilities - other 11,634 182,054 ---------- ---------- TOTAL CURRENT LIABILITIES 1,021,190 1,064,212 ---------- ---------- STOCKHOLDERS' EQUITY Common stock, $0.01 par value (authorized - 5,000,000 shares; issued and outstanding - Nov. 30, 1,615,170, Aug. 31, 1,605,045 shares) 16,152 16,051 Paid-in capital 3,420,152 3,408,160 Other - loans (162,263) (162,263) Unrealized loss on available-for-sale securities (413,141) (265,933) Retained earnings 2,158,281 1,948,873 ---------- ---------- 5,019,181 4,944,888 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,040,371 $6,009,100 ========== ========== See notes to condensed financial statements. TECHNOLOGY 80 INC. CONDENSED STATEMENTS OF INCOME (UNAUDITED) Three months ended November 30, 1997 1996 ---------- -------- REVENUES $1,323,597 $993,880 COST OF GOODS SOLD 540,247 387,535 ---------- -------- GROSS PROFIT 783,350 606,345 ---------- -------- OPERATING EXPENSES General and administrative 149,699 128,701 Research and development 176,894 153,984 Selling 202,889 152,236 ---------- -------- TOTAL OPERATING EXPENSES 529,482 434,921 ---------- -------- INCOME FROM OPERATIONS 253,868 171,424 OTHER INCOME 59,540 117,393 ---------- -------- INCOME BEFORE INCOME TAXES 313,408 288,817 PROVISION FOR INCOME TAXES 104,000 93,000 ---------- -------- NET INCOME $ 209,408 $195,817 ========== ======== EARNINGS PER SHARE $0.12 $0.11 ===== ===== See notes to condensed financial statements. TECHNOLOGY 80 INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended November 30, 1997 1996 -------- -------- OPERATING ACTIVITIES Net income $209,408 $195,817 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 9,333 7,679 Deferred taxes 9,700 8,375 Gain on sale of fixed asset (500) - Gain on sale of investments (33,211) (80,619) Changes in operating assets and liabilities: Accounts receivable 179,977 (39,625) Inventories 27,762 (29,842) Other current assets 186 3,951 Accounts payable (27,605) 15,169 Accrued income taxes 55,110 (122,137) Accrued liabilities (70,527) (154,965) -------- -------- NET CASH PROVIDED(USED) BY OPERATING ACTIVITIES 359,633 (196,197) -------- -------- INVESTING ACTIVITIES Proceeds from sale of equipment 500 - Purchase of property and equipment (35,336) (13,269) Proceeds from sales and maturities of investments 382,133 742,727 Purchase of investments (671,612) (347,340) -------- -------- NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (324,315) 382,118 -------- -------- FINANCING ACTIVITIES Proceeds from exercise of stock options 12,094 - -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 12,094 - -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 47,412 185,921 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 284,261 419,136 -------- -------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $331,673 $605,057 ======== ======== See notes to condensed financial statements. TECHNOLOGY 80 INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) November 30, 1997 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, 1997 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 1997 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 and common equivalent shares outstanding of 1,743,717 for the quarter ended November 30, 1997 and 1,718,898 for the quarter ended November 30, 1996. Common stock equivalents include the dilutive effect of the incremental shares issuable upon the exercise of stock options. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 differs from current accounting guidance in that earnings per share is classified as basic earnings per share and diluted earnings per share, compared with primary earnings per share and fully diluted earnings per share. Basic earnings per share differs from primary earnings per share in that it includes only the weighted average common shares outstanding and does not include any dilutive securities in the calculation. Diluted earnings per share under SFAS 128 differs in certain calculations from fully diluted earnings per share under the existing standards. Adoption of SFAS No. 128 is required for interim and annual periods ending after December 15, 1997. Had the company applied SFAS No. 128 as of November 30 1997, and 1996, basic and diluted earnings per share would have been as follows: 1997 1996 ----- ----- Basic $0.13 $0.12 Diluted $0.12 $0.11 Item 2: Management's Discussion and Analysis Results of Operations - --------------------- Revenues for the first quarter ended November 30, 1997 increased 33% over the same period the preceding year. The revenue increase was due to an increase in sales volume. Gross profit percentages for the three months ended November 30, 1997 was 59% compared to 61% for the three months ended November 30, 1996. Operating expenses as a percentage of sales was 40% and 44% for the three months ended November 30, 1997 and 1996, respectively. Other income decreased $57,853 for the quarter ended November 30, 1997 from the same period the preceding year. The decrease was due to less investment sales compared to the same period the prior year. Net income was $209,408 and $195,817 for the quarter ended November 30, 1997 and November 30, 1996 respectively. This represents a 7% increase. Liquidity and Capital Resources - ------------------------------- Registrant's balance sheet shows a strong capital position. Operations provided $359,633 in cash. Cash and cash equivalents increased $47,412 since August 31, 1997. Investing activity used $324,315 in cash. Proceeds from the exercise of stock options provided for $12,094 in cash. Registrant expects that there will be sufficient capital to fund its operations during fiscal year 1998. Registrant has no long-term 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 (following signature page) 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 14, 1998 /s/ Duane Markus, President, CEO - ------------------------------- -------------------------------- (Date) Duane Markus, President, CEO