1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission file number: 0-12646
ANGSTROM TECHNOLOGIES, INC.
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(Name of small business issuer in its charter)
Delaware 31-1065353
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1895 Airport Exchange Boulevard, Erlanger, Kentucky 41018
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(Address of principal executive offices, including zip code)
(606) 282-0020
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(Issuer's telephone number)
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
--- ---
As of January 31, 2000, 23,794,598 shares of common stock, no par value per
share, were outstanding.
Transitional Small Business Disclosure Format: Yes No X
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INDEX
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PART I. Financial Information Page No.
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Item 1. Financial Statements
Balance Sheets 2-3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6-8
Item 2. Management's discussion and Analysis
of Financial Condition and Results of
Operations 9-10
PART II. Other Information
------------------
Item 6. Exhibits 11
SIGNATURES 12
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Angstrom Technologies, Inc.
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Balance Sheets
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APRIL 30, OCT. 31,
2000 1999
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(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash and cash equivalents $ 389,437 $ 456,857
Short-term investments 526,061 511,346
Accounts receivable (no allowance necessary) 205,839 59,287
Inventories:
Finished goods 106,511 108,628
Work in process 9,108 6,097
Raw materials and parts 695,799 650,086
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811,418 764,811
Prepaid expenses 15,244 13,981
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Total current assets 1,947,999 1,806,282
Furniture and equipment, at cost 183,063 178,722
Less: accumulated depreciation 168,089 162,864
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Net furniture and equipment 14,974 15,858
Patents, less accumulated amortization of $30,248 148,192 141,310
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Total assets $2,111,165 $1,963,450
========== ==========
NOTE: The balance sheet at October 31, 1999 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
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Angstrom Technologies, Inc.
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Balance Sheets (continued)
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APRIL 30, OCT. 31,
2000 1999
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(UNAUDITED) (NOTE)
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable $ 30,522 $ 20,636
Accrued liabilities 65,293 52,847
Customer deposits -- 27,535
Long-term debt due within one year -- 5,911
----------- -----------
Total current liabilities 95,815 106,929
Capital:
Preferred stock, $.01 par value; 5,000,000 shares
authorized, 1,266,120 issued and outstanding
(liquidation preference of $2.00 per share) 2,082,398 2,082,398
Common stock, $.01 par value; 45,000,000
shares authorized, 23,794,598 shares issued
and outstanding 237,946 237,946
Additional paid in capital 5,110,165 5,110,165
Accumulated deficit (5,415,159) (5,573,988)
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Net capital 2,015,350 1,856,521
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Total liabilities and capital $ 2,111,165 $ 1,963,450
=========== ===========
NOTE: The balance sheet at October 31, 1999 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
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Angstrom Technologies, Inc.
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Statements of Operations
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(Unaudited)
-----------
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- ---------------------------------
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net sales $ 434,201 $ 153,903 $ 725,443 $ 568,597
Cost of sales 104,762 87,517 205,664 209,911
------------ ------------ ------------ ------------
Gross profit 329,439 66,386 519,779 358,686
Selling, general and
administrative expenses 127,807 95,771 246,185 219,814
Research and development
expense 73,700 51,969 135,200 96,608
Interest expense -- 852 89 1,944
Interest income (2,437) (11,362) (5,808) (22,026)
Dividend income (7,562) -- (14,716) --
------------ ------------ ------------ ------------
191,508 137,230 360,950 296,340
------------ ------------ ------------ ------------
Net income (loss) 137,931 (70,844) 158,829 62,346
Less dividend requirement
on preferred stock (50,645) (50,381) (101,290) (102,150)
------------ ------------ ------------ ------------
Net income (loss) applicable
to common stock $ 87,286 $ (121,225) $ 57,539 $ (39,804)
Net income (loss) per
common share $ -- $ -- $ -- $ --
============ ============ ============ ============
Weight average number
of shares outstanding 23,794,598 23,292,651 23,794,598 23,310,869
============ ============ ============ ============
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Angstrom Technologies, Inc.
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Statements of Cash Flows
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(Unaudited)
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THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ------------------------------
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
OPERATING ACTIVITIES 2000 1999 2000 1999
----------- ----------- ----------- -----------
Net income (loss) $ 137,931 $ (70,844) $ 158,829 $ 62,346
Adjustment to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization 5,491 11,591 9,903 22,854
Changes in operating assets
and liabilities:
Accounts receivable (22,607) 1,433 (146,552) 140,630
Inventory (22,119) (27,167) (46,607) (26,897)
Prepaid expenses 5,431 10,001 (1,263) 7,325
Accounts payable (4,212) 16,406 9,886 13,004
Accrued liabilities 6,877 (3,631) 12,446 (24,518)
Customer deposits -- -- (27,535) --
----------- ----------- ----------- -----------
Net cash (used in) provided by
operating activities 106,792 (62,211) (30,893) 194,744
INVESTING ACTIVITIES
Purchases of furniture and equipment (3,788) (1,601) (4,341) (2,633)
Changes in short-term investments (7,561) -- (14,715) --
Capitalization of patents (2,259) (7,805) (11,560) (8,759)
----------- ----------- ----------- -----------
Net cash used in investing activities (13,608) (9,406) (30,616) (11,392)
FINANCING ACTIVITIES
Principal repayments of long-term debt -- (8,148) (5,911) (16,056)
----------- ----------- ----------- -----------
Net cash used in financing activities -- (8,148) (5,911) (16,056)
----------- ----------- ----------- -----------
Net increase (decrease) in cash 93,184 (79,765) (67,420) 167,296
Cash and cash equivalents at
beginning of period 296,253 1,056,329 456,857 809,268
----------- ----------- ----------- -----------
Cash and cash equivalents at
end of period $ 389,437 $ 976,564 $ 389,437 $ 976,564
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest $ -- $ 852 $ 89 $ 1,944
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ANGSTROM TECHNOLOGIES, INC.
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NOTES TO FINANCIAL STATEMENTS
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(UNAUDITED)
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Note 1 The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the six month period ended April 30, 2000 is not necessarily
indicative of the results that may be expected for the year ended
October 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended October 31, 1999.
Note 2 In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement No. 128, "Earnings per Share." Statement No. 128
replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share exclude any dilutive
effects of stock options and convertible securities. Diluted earnings
per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to Statement
No. 128 requirements.
Note 3 The preferred stock issued December 22, 1993 provided for an annual
cumulative dividend to be paid on November 1st each year. Management
has determined that available funds would be more prudently utilized in
its ongoing research and development efforts and as a result no accrual
or payment of dividend will be made until such time as sufficient cash
flows are generated from operations. Management intends to hold the
dividend payable as of October 31, 1999 ($1,126,772) and 1998
($924,193), in arrears. No dividend was accrued for the years ended
October 31, 1999 and 1998. The amount that would have been accrued at
October 31, 1999 and 1998, if a dividend had been recorded, would have
been $202,579 and $207,077, respectively ($.16 per preferred stock
share outstanding at November 1, 1999 and 1998). No dividend has been
accrued for the six month period ended April 30, 2000. The amount that
would have been accrued at April 30, 2000 and 1999, if a dividend had
been recorded, would have been $101,290 and $102,150 respectively.
Note 4 On December 3, 1993, the shareholders of the Company approved an
amendment to the Company's certificate of incorporation increasing the
authorized number of shares of common stock to 45,000,000 from
25,000,000, increasing the authorized number of preferred stock to
5,000,000 from 2,000,000 and reducing the par value of the preferred
stock to $.01 per share from $10.00 per share.
On December 22, 1993, the Company completed the issuance of 1,725,000
units of its securities through a public offering, resulting in net
proceeds of $2,838,454 after offering expenses. Each unit consists of
one share of the redeemable convertible preferred stock and one Class A
redeemable common stock purchase warrant. Each share of preferred stock
is convertible into four shares of the Company's common stock. The
Class A purchase warrant expired on December 12, 1998. There were no
preferred stock conversions for the six months ended April 30, 2000.
The preferred stock has a liquidation preference of $2.00 per share, an
aggregate of $2,532,240.
Note 5 Patents included in the other assets section of the balance sheet are
certain costs associated with patents, which are capitalized and
amortized over the shorter of their statutory lives or their estimated
useful lives using the straight-line method. The Company periodically
evaluates the recoverability of these assets in accordance with
Statement of Financial Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of (SFAS #121)."
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
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ANGSTROM TECHNOLOGIES, INC.
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NOTES TO FINANCIAL STATEMENTS
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(UNAUDITED)
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Note 6 The computation of basic and diluted earnings (loss) per share is shown
below:
THREE MONTHS ENDED SIX MONTHS ENDED
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APRIL 30, APRIL 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Numerator:
Net income (loss) $ 137,931 $ (70,844) $ 158,829 $ 62,346
Preferred stock dividend requirement (50,645) (50,381) (101,290) (102,150)
------------ ------------ ------------ ------------
Numerator for basic earnings per
share - net income
(loss) applicable to common stock 87,286 (121,225) 57,539 (39,804)
Effect of dilutive securities - preferred
stock dividends and adjustments
resulting from assumed conversion -- -- -- --
------------ ------------ ------------ ------------
Numerator for diluted earnings per
share - net income (loss) applicable to
common stock after assumed conversion $ 87,286 $ (121,225) $ 57,539 $ (39,804)
============ ============ ============ ============
Denominator:
Denominator for basic earnings per
share - weighted average shares
outstanding 23,794,598 23,292,651 23,794,598 23,310,869
Effect of dilutive securities:
Convertible preferred stock
Assumed issuance of stock under stock
option plans based on treasury
stock method 1,059,193 -- 1,059,193
------------ ------------ ------------ ------------
Denominator for diluted earnings per share -
weighted average shares outstanding and
impact of dilutive securities 23,794,598 24,351,844 23,794,598 24,370,062
============ ============ ============ ============
Basic earnings (loss) per share $ 0.00 $ (0.01) $ 0.00 $ (0.00)
============ ============ ============ ============
Fully diluted earnings (loss) per common share $ 0.00 $ (0.00) $ 0.00 $ (0.00)
============ ============ ============ ============
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ANGSTROM TECHNOLOGIES, INC.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
(UNAUDITED)
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Note 6 (continued)
Securities that could potentially dilute basic earnings per share in
the future that were not included in the computation of diluted
earnings per share above because to do so would have been antidulitive
are as follows: convertible preferred stock (5,064,480 and 5,107,520
shares at April 30, 2000 and 1999, respectively) .
Note 7 Earnings per common share are calculated based upon a weighted
average of shares outstanding after giving effect to the preferred
dividend requirements.
Note 8 The tax effects of the net operating loss carryforwards and temporary
differences that give rise to deferred income tax assets and a
corresponding valuation allowance at April 30, 2000 and October 31,
1999 are presented below:
April 30, October 31,
2000 1999
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Deferred tax assets:
Net operating loss 1,257,100 1,315,700
Other, net 12,100 11,200
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Total deferred tax assets 1,269,200 1,326,900
Less: valuation allowance (1,269,200) (1,326,900)
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Net Deferred Tax Assets $ -- $ --
=========== ===========
The company entered fiscal 2000 with cumulative net operating loss
carryforwards of approximately $3,300,000 for federal income tax
purposes, which expire in the years 2000 to 2019.
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SPECIAL CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" may constitute
forward- looking statements for purposes of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. The words "expect," "estimate," "anticipate,"
"predict," "may," "should," "plan," and similar expressions are intended to
identify forward-looking statements. All written or oral forward-looking
statements attributable to the Company are expressly qualified as set forth
herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter-to-quarter revenue has improved from $291,242 to $434,201 representing
an increase of 49.1%. Comparing performance to the same period a year ago, we
saw an increase of $280,298 in revenue or 183.4% improvement. The Company has
also reported a net income of $137,931 versus a net loss of $70,844 for the
quarter ended in April 30, 1999. This is the second consecutive quarter that the
Company has shown a net profit. The financial results were accomplished under
the full impact of across the board major price reduction in all of our products
that have become effective on October 1, 1999. Although the revenue increase was
aided by a surge in the Postal project business, we believe the Company has
turned the critical corner.
Comparing to a year ago, the first six months performance showed an increase in
revenue of $156,846 or 27.6% and improvement in net income of $96,483 or 154.8%
before dividend. We saw improvements in all market segments and were very
pleased to see the Postal project business, although it was rather irregular and
unpredictable.
Gross margin also improved due to favorable mix of products shipped. We continue
to contain our administrative and discretional expenses while increasing our
spending in product promotion and R&D. Our cash, cash equivalent and short-term
investment positions remained steady at $915,498 and Account Receivable has been
strong at $205,839. Inventory situation was under control although we still face
excessive chemical inventory exposure due to the loss of a major customer last
year.
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As indicated in Note 3 to these financial statements, no preferred dividend has
been accrued for the first two quarters of fiscal 2000 since management has
determined to conserve available funds and maintain the Company's liquidity in
light of its needs to continue development and marketing expenditures. With good
liquidity and steady revenue stream, we do not anticipate a need to seek outside
financial sources and expect to operate at least through October 31, 2000, the
end of the current fiscal year with the existing funds at hand. We do plan on
investing heavily in the coming quarters in new product introduction and
promotion.
We continue to increase our R&D activities by preparing to commercialize the
MoneyChecker(TM) product line. We have been very pleased by the initial
responses from potential customers and expect to begin shipping to beta sites in
the coming Quarter. We have also successfully developed a true mobile UV scanner
that operates with a single 9V battery. We plan on demonstrating them to
potential customers in the coming Quarters. The GlowHard(TM) products received a
resounding reception in the last National Flooring Show in April. We have been
encouraged by the prospects of our new products although there is no guarantee
that we would be successful commercially in the end.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
None were filed in this quarter.
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.
ANGSTROM TECHNOLOGIES, INC.
By: /s/ Louis Liang
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Louis Liang, Interim Chief Executive
Officer
By: /s/ William Ryan
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William Ryan, Interim Chief Financial
Officer
Dated: May 26, 2000
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