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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 January 1, 2001
[ ] 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
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As of October 31, 2000, there were 23,794,598 shares of Common Stock and
1,266,120 shares of Preferred Stock, outstanding, respectively.
Transitional Small Business Disclosure Format: Yes No X
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INDEX
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 6-7
Item 2. Management's discussion and Analysis
of Financial Condition and Results of
Operations 8-9
PART II. Other Information
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Item 6. Exhibits 10
SIGNATURES 11
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Angstrom Technologies, Inc.
Balance Sheets
JANUARY 31, OCTOBER 31,
2001 2000
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(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash and cash equivalents $ 353,710 $ 409,248
Short-term investments 551,673 542,973
Accounts receivable 122,263 146,375
Inventories:
Finished goods 53,884 98,841
Work in process 67,055 47,587
Raw materials and parts 622,607 661,366
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743,546 807,794
Less: inventory reserve - 20,000
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743,546 787,794
Prepaid expenses 18,564 9,305
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Total current assets 1,789,756 1,895,695
Furniture and equipment, at cost 193,888 190,608
Less: accumulated depreciation 174,263 172,568
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Net furniture and equipment 19,625 18,040
Patents, less accumulated amortization of $37,419
and $27,718, respectively 153,671 152,804
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Total assets $1,963,052 $2,066,539
========== ==========
NOTE: The balance sheet at October 31, 2000 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.
Balance Sheets (continued)
JANUARY 31, OCTOBER 31,
2001 2000
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(UNAUDITED) (NOTE)
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable $ 37,906 $ 30,718
Accrued liabilities 95,804 101,460
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Total current liabilities 133,710 132,178
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 5,132,164 5,132,164
Accumulated deficit (5,623,166) (5,518,147)
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Net capital 1,829,342 1,934,361
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Total liabilities and capital $ 1,963,052 $ 2,066,539
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NOTE: The balance sheet at October 31, 2000 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.
Statements of Operations
(Unaudited)
THREE MONTHS ENDED
---------------------------------
JANUARY 31, JANUARY 31,
2001 2000
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Net sales $ 116,831 $ 291,242
Cost of sales 80,844 100,902
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Gross profit 35,987 190,340
Selling, general and administrative expenses 97,589 118,378
Research and development expense 55,375 61,500
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Operating income (loss) (116,977) 10,462
Other income (expense):
Interest expense - (89)
Interest income 3,198 3,371
Dividend income 8,700 7,154
Other income 60
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11,958 10,436
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Net income (loss) (105,019) 20,898
Less dividend requirement on preferred stock (50,645) (50,645)
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Net loss applicable to common stock $ (155,664) $ (29,747)
Net loss per common share $ (0.01) $ (0.00)
============ ============
Weight average number of shares outstanding 23,794,598 23,794,598
============ ============
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Angstrom Technologies, Inc.
Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED
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JANUARY 31, JANUARY 31,
Operating activities 2001 2000
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Net income (loss) $(105,019) $ 20,898
Adjustment to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 4,113 4,412
Changes in operating assets
and liabilities:
Accounts receivable 24,112 (123,945)
Inventory 44,248 (24,488)
Prepaid expenses (9,259) (6,694)
Accounts payable 7,188 14,098
Accrued liabilities (5,656) 5,569
Customer deposits - (27,535)
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Net cash used in operating activities (40,273) (137,685)
INVESTING ACTIVITIES
Purchases of furniture and equipment (3,280) (553)
Changes in short-term investments (8,700) (7,154)
Capitalization of patents (3,285) (9,301)
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Net cash used in investing activities (15,265) (17,008)
FINANCING ACTIVITIES
Principal repayments of long-term debt - (5,911)
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Net cash used in financing activities - (5,911)
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Net decrease in cash (55,538) (160,604)
Cash and cash equivalents at beginning of period 409,248 456,857
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Cash and cash equivalents at end of period $ 353,710 $ 296,253
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SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest $ - $ 89
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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 three month period ended January 31, 2001 is not necessarily
indicative of the results that may be expected for the year ended
October 31, 2001. 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, 2000.
Note 2 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, 2000 ($1,329,351) and 1999
($1,126,772), in arrears. No dividend was accrued for the years ended
October 31, 2000 and 1999. The amount that would have been accrued at
October 31, 2000 and 1999, if a dividend had been recorded, would have
been $202,579 each year ($.16 per preferred stock share outstanding at
November 1, 2000 and 1999). No dividend has been accrued for the three
month period ended January 31, 2001. The amount that would have been
accrued at January 31, 2000 and 1999, if a dividend had been recorded,
would have been $ 50,645 each year.
Note 3 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 three months ended January 31,
2001. The preferred stock has a liquidation preference of $2.00 per
share, an aggregate of $2,532,240.
Note 4 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)."
Note 5 Earnings per common share are calculated based upon a weighted average
of shares outstanding after giving effect to the preferred dividend
requirements.
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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
---------------------------------
JANUARY 31,
2001 2000
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Numerator:
Net income (loss) $ (105,019) $ 20,898
Preferred stock dividend requirement (50,645) (50,645)
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Numerator for basic and diluted loss per share - net loss applicable to
common stock after assumed conversion $ (155,664) $ (29,747)
============ ============
Denominator:
Denominator for basic and diluted loss per share - weighted
average shares outstanding 23,794,598 23,794,598
============ ============
Basic loss per share $ (0.01) $ (0.00)
============ ============
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 shares at January
31, 2001 and 2000 and options outstanding of 4,225,000 and 4,105,000 at
January 31, 2001 and 2000, respectively.
Note 7 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 January 31, 2001 and October 31,
2000 are presented below:
January 31, October 31,
2001 2000
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Deferred tax assets:
Net operating loss 1,167,000 1,297,800
Other, net 13,500 13,100
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Total deferred tax assets 1,180,500 1,310,900
Less: valuation allowance (1,180,500) (1,310,900)
--------------- ---------------
Net deferred tax assets $ - $ -
=============== ===============
The company entered fiscal 2001 with cumulative net operating loss
carryforwards of approximately $2,800,000 for federal income tax
purposes, which expire in the years 2001 to 2018.
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10Q: QUARTER ENDING JANUARY 31, 2001 (Draft 2)
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 Security Act of 1933 and the
Security 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Gross revenue for the Quarter was $116,831 versus $291,242 for the same Quarter
last year and it represented a decrease of 60%. Net loss before tax and dividend
was $105,019 versus a net income of $20,898 for the same quarter last year.
Gross profit margin also declined from 65.4% to 30.8% comparing to the same
quarter a year ago. Selling, general and administrative expenses were $97,589
for the first quarter versus $118,378 for the first quarter a year ago. Selling,
general and administrative expenses for the first quarter 2001 reflect lower
sales commission paid and continuing cost control efforts partially offset by
higher marketing expenditures. Research and development expenses were consistent
with the quarter a year ago. Inventory was slightly lower (8%) than the same
quarter a year ago. Cash, cash equivalent and short-term investments decreased
about 5% or $46,838 compared to the same quarter a year ago.
We anticipated lower revenue for the Quarter, as we discussed in the Annual
Report on Form 10-K for the year ended October 31, 2000, nevertheless, we were
disappointed to see the substantial decline in sales and gross margin. The main
contributing factors were the continuing absence of postal business and one of
our key customers experiencing significant slow down in its automotive business.
The higher costs for our new products from pre-high-volume production
contributed to lower gross profit margin. We continued to experience delays in
several governmental projects because of federal budget issues. We also face
significant competitions in the traditional market spaces for our products. We
do not
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expect to see significant relief in our traditional businesses in the near
future, although we anticipate an overall stronger Second Fiscal Quarter. We are
determined to continue to reduce both product costs and prices aggressively and
to provide superior customer service and application support to increase our
competitiveness in order to retain businesses with our customers and maintain
our market share.
On the positive side, the shipments of MoneyCheckers to key customers have
continued to increase and we have signed up new major customers such as Burger
King and Subway in addition to McDonalds. We have also made inroads into the
banking industry by successfully securing several smaller banks as customers. We
introduced a new MoneyChecker(TM), the International Model, which can
authenticate many foreign currencies, traveler checks, credit cards, money
orders, and many corporate checks in addition to the US currency. We have
sampled several potential customers and the responses have been very positive.
The new product will be available for delivery in April. We fully intend to
market them together with our SecurityTonerTM to the financial industry and in
several foreign countries. A specialty marketing company has been retained, in
addition to our present business partners, to assist us in these efforts.
Samples have also been provided to several other marketing companies that sell
to the financial industries.
The Luminator(TM) continues to draw substantial interest from the law
enforcement agencies and a plan has been initiated to start volume production
overseas to accommodate the anticipated demands and reduce costs. Additionally,
we expect to regain some business from a major customer that we lost in 1999 and
begin some volume shipment of our products in the Second Quarter. GlowHardTM
product line is steadily making progress to meet our sales projections. The
Stock Certificate authenticators are being shipped in quantities and we expect
this trend to continue or even increase in the near future. We believe our
direction for our business transformation is the correct one. It will, however,
take time for the new products and new markets to become contributing factors to
our bottom line as we re-invent ourselves and the new businesses evolve.
We will continue to manage our general and administrative expenses aggressively,
while substantially increasing our spending in marketing, new product
introductions and R&D, as indicated in our Annual Report on Form 10-K for the
year ended October 31, 2000. We expect to see shrinkage in our cash accounts in
the coming quarters as these activities continue. The current cash balance,
$905,383, remains strong relative to our size and expenditures. We do not
anticipate a need to seek outside financial sources in the near future and
expect to operate at least through December 31, 2001, the end of the current
calendar year, with the existing funds at hand.
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As indicated in Note 3 to these financial statements, no preferred dividend has
been accrued for the first three months of fiscal 2001 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.
The annual stockholders meeting for Fiscal 2000 is scheduled for March 26, 2001.
Meeting notice and Proxy have been mailed on February 22, 2001.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(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: March 14, 2001
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