SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) December 30, 2004
-----------------
INTERNATIONAL IMAGING SYSTEMS, INC.
--------------------------------------------------
(Exact name of registrant as specified in Charter)
Delaware 000-25413 65-0854589
- ------------------------------- --------------------- -------------------
(State of other Jurisdiction of (Commission file no.) (IRS employer
incorporation) identification no.)
6689 N.W. 16th Terrace, Ft. Lauderdale, FL 33309
------------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (954) 978-9090
--------------
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Forward Looking Statements
This Form 8-K and other reports we file from time to time with the
Securities and Exchange Commission (collectively the "Filings") contain or may
contain forward looking statements and information that are based upon beliefs
of, and information currently available to, our management as well as estimates
and assumptions made by our management. When used in the filings the words
"anticipate", "believe", "estimate", "expect", "future", "intend", "plan" or the
negative of these terms and similar expressions as they relate to us or our
management identify forward looking statements. Such statements reflect our
current view with respect to future events and are subject to risks,
uncertainties, assumptions and other factors (including the risks contained in
the section of this report entitled "Risk Factors") relating to our industry and
our operations and results of operations. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
Although we believe that the expectations reflected in the forward
looking statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results. The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this report.
Item 1.01 Entry into a Material Definitive Agreement.
On December 30, 2004, our principal operating subsidiary, Advanced
Imaging Systems, LLC ("AIS"), entered into an Asset Purchase Agreement, dated
December 30, 2004 (the "Sale Agreement"), pursuant to which it sold to RBE &
SJC, Inc., an entity owned by one of AIS's principal suppliers, and its former
production manager ("Buyer"), substantially all of AIS's tangible and intangible
commercial printing assets for $348,345, of which $119,930 was paid in cash and
the balance by the delivery of Buyer's promissory note payable in 24 equal
monthly installments commencing February 1,2005, together with interest thereon
at the rate of 6% per annum. The note is secured by the assets sold and is
guaranteed by one of the principals of the Buyer, Richard B. Erens.
The details of the asset sale, including all information required by
Item 1.01. of this Current Report on Form 8-K (this "Report"), are set forth in
Item 2.01. "Acquisition or Disposition of Assets" below, the contents of which
are incorporated by reference herein.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The following is a summary of the Sale Agreement and is qualified in its
entirety by reference to the Sale Agreement and related documents that are filed
as exhibits to this Report.
Pursuant to the Sale Agreement, on December 30, 2004, AIS sold to the
Buyer substantially all of AIS's property and equipment, entire inventory, trade
name, customer lists, intellectual rights to AIS's printing proprietary
software, and other tangible and intangible personal property used in its
commercial printing operation. As part of the transaction, the Buyer agreed to
employ AIS's commercial printing sales and production staff and subleased AIS's
offices and production facilities. The Sale Agreement also provides that the
Buyer shall refrain from all commercial printing activities within the United
States (except for certain specified activities) for a period of 24 months and
shall not contact any of certain specified customers of AIS for a period of ten
years. Furthermore, AIS granted to the Buyer for a period of 24 months a right
of first refusal to produce any commercial printing orders within the United
States that AIS is in a position to place with the Buyer. Such right of first
refusal does not apply to fifteen specialty areas of printing specified in the
Sale Agreement. AIS retained its accounts receivable and accounts payable. The
Buyer agreed to assist AIS in the collection of such accounts receivable and to
refrain from providing services to AIS's delinquent customers.
The purchase price for the sold assets was $348,345, of which $119,903
was paid in cash and the balance was paid by a promissory note payable in 24
substantially equal installments of $5,365 each commencing February 1, 2005,
together with interest thereon at the rate 6% per annum. The note is secured by
the sold assets and is guaranteed by one of the Buyer's principals. In addition,
AIS is entitled to receive from the Buyer commission income of 10% of gross
revenues derived from future sales of goods manufactured by the Buyer for
certain accounts for periods ranging from two to ten years depending upon the
account.
In connection with the sale, AIS and the Buyer entered into a Strategic
Alliance Agreement pursuant to which for a period of 24 months if the Buyer is
unable or unwilling, for any reason, to print any commercial printing order
within the United States referred to the Buyer pursuant to the right of first
refusal provided in the Sale Agreement, the Buyer and AIS agreed to jointly
outsource the order and split the profit thereon 65% to AIS and 35% to the
Buyer.
As a result of the sale of its commercial printing assets, AIS intends
to out source all of its manufacturing needs and to focus its activities to
sales and marketing of its products.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements. None
(b) Pro Forma Financial Information (filed herewith)
(International Imaging Systems, Inc. as of 9/30/04 and for the
nine months ended 9/30/04 and the year ended 12/31/03)
(1) Pro Forma Consolidated Balance Sheet
(2) Pro Forma Condensed Consolidated Statement of Operations
(c) Exhibits.
2.1 Asset Purchase Agreement, dated December 30, 2004, by and
between Advanced Imaging Systems, LLC and RBE & SJC, Inc.
(omitting all schedules and exhibits) *
2.2 Security Agreement (Chattel Mortgage), dated December 30,
2004, among RBE &SJC, Inc., Richard B. Erens and Advanced
Imaging Systems, LLC.
2.3 Promissory Note, dated December 30, 2004, executed by RBE &
SJC, Inc., and Richard B Erens.
10.1 Strategic Alliance Agreement, dated December 30, 2004,
between Advanced Imaging Systems, Inc. and RBE & SJC, Inc.
- --------------------------------------------------------------------------------
* The Registrant will furnish all omitted schedules and exhibits to the Asset
Purchase Agreement upon the request of the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL IMAGING SYSTEMS, INC.
Date: February 3, 2005
/s/ C. LEO SMITH
-----------------------------------
C. Leo Smith
Chief Executive Officer
INTERNATIONAL IMAGING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2004
TABLE OF CONTENTS
PRO FORMA CONSOLIDATED BALANCE SHEET 1
PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS 2
NOTES TO PRO FORMA CONDENSED
FINANCIAL STATEMENTS 3-4
INTERNATIONAL IMAGING SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2004
(UNAUDITED)
ASSETS
PRO FORMA
ADJUSTMENTS
HISTORICAL ----------------------------- PRO FORMA
BALANCES DR CR BALANCES
------------ ------------ ------------ ------------
CURRENT ASSETS:
Accounts Receivable $ 394,839 $ 394,839
Inventories 107,435 (1)$ 107,435
Note Receivable - Current -- (1)$ 53,624 53,624
Net Assets of Discontinued Operations 5,749 5,749
------------ ------------
TOTAL CURRENT ASSETS 508,023 454,212
PROPERTY AND EQUIPMENT 181,998 (1) 181,998
NOTES RECEIVABLE - Non-Current -- (1) 67,362 67,362
OTHER ASSETS:
Security Deposits 3,700 3,700
------------ ------------
TOTAL ASSETS $ 693,721 $ 525,274
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Notes and Loans Payable - Current $ 426,465 (1)$ 71,000 $ 355,465
Accounts Payable 757,573 (1) 103,930 (1) 6,483 660,126
Accrued Expenses 41,521 41,521
Customer Deposits 24,918 24,918
------------ ------------
TOTAL CURRENT LIABILITIES 1,250,477 1,082,030
NOTES AND LOANS PAYABLE -
NON-CURRENT 273,420 273,420
------------ ------------
TOTAL LIABILITIES 1,523,897 1,355,450
------------ ------------
SHAREHOLDERS' DEFICIENCY:
Preferred Stock - $.001 Par Value -
1,000 Shares Authorized; -0- Shares
Issued and Outstanding
Common Stock - $.001 Par Value -
29,000,000 Shares Authorized;
6,028,700 Shares Issued and Outstanding 6,029 6,029
Additional Paid-In Capital 96,134 96,134
Accumulated Deficit (932,339) (932,339)
------------ ------------
TOTAL SHAREHOLDERS'
DEFICIENCY (830,176) (830,176)
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIENCY $ 693,721 $ 295,916 $ 295,916 $ 525,274
============ ============ ============ ============
See accompanying notes to financial statements.
-1-
INTERNATIONAL IMAGING SYSTEMS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2004
AND
YEAR ENDED DECEMBER 31, 2003
(UNAUDITED)
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------------------------------------------ --------------------------------------------------------
PROFORMA PROFORMA
ADJUSTMENTS ADJUSTMENTS
HISTORICAL ------------------------- PROFORMA HISTORICAL --------------------------- PROFORMA
BALANCES DR CR BALANCES BALANCES DR CR BALANCES
----------- ----------- --------- ----------- ----------- ----------- ----------- -----------
(3) 4,229 (3)$ 5,388
NET SALES $ 2,381,220 (2)$ 2,381,220 (4) 86,043 $ 90,272 $ 3,524,948 (2)$ 3,524,948 (4) 74,669 $ 80,057
COST OF GOODS
SOLD 1,737,636 (2)1,737,636 -- 2,783,975 (2) 2,783,975 --
----------- ----------- ----------- -----------
GROSS PROFIT 643,584 90,272 740,973 80,057
GENERAL AND
ADMINISTRATIVE
EXPENSES 973,131 (5) 359,012 614,119 1,346,834 (5) 675,544 671,290
----------- ----------- ----------- -----------
(LOSS) FROM
CONTINUING
OPERATIONS $ (329,547) $ (523,847) $ (605,861) $ 591,233
=========== =========== =========== ===========
BASIC AND DILUTED
(LOSS) FROM
CONTINUING
OPERATIONS PER
COMMON SHARE $ (.055) $ (.087) $ (.117) $ (.114)
=========== =========== =========== ===========
WEIGHTED AVERAGE
NUMBER OF BASIC
AND DILUTED
COMMON SHARES
OUTSTANDING 6,028,700 6,028,700 5,170,815 5,170,815
=========== =========== =========== ===========
See accompanying notes to financial statements.
-2-
INTERNATIONAL IMAGING SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION -
On December 30, 2004, the Registrant sold, for $348,345,
substantially all of its property and equipment, entire inventory,
trade name of the operating subsidiary ("Advanced Imaging
Systems"), customer lists, intellectual rights to the Company's
printing proprietary software, and other tangible personal property
used in its commercial printing operation, to an entity owned by
one of the Registrant's principal suppliers and the Registrant's
production manager. In addition, the buyer agreed to employ the
Registrant's commercial printing sales and production staff, sign a
two-year non-compete agreement, and to sublease the Registrant's
offices and production facilities. The seller retained its accounts
receivable and accounts payable. The buyer has agreed to assist the
Registrant in the collection of outstanding accounts receivable and
to refrain from providing services to the Registrant's delinquent
customers.
The sale resulted in a gain of $168,702. Cash, of $119,930 was
received, and the Registrant will receive monthly principal and
interest payments of $5,365 through January, 2007, pursuant to a 6%
promissory note collateralized by the sold assets and personally
guaranteed by the buyer and one of its principals.
The unaudited pro forma statements of operations of the Registrant
for the year ended December 31, 2003 and the nine months ended
September 30, 2004, give effect to the certain adjustments that are
directly attributable to the asset sale as if the transaction was
consummated as of January 1, 2003.
The unaudited pro forma condensed balance sheet as of September 30,
2004 is presented as if the asset sale had occurred on September
30, 2004.
-3-
INTERNATIONAL IMAGING SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION - (continued) -
In the opinion of the Registrant, all adjustments and/or
disclosures necessary for a fair presentation of the pro forma data
have been made. These pro forma condensed financial statements are
presented for illustrative purposes only and are not necessarily
indicative of the operating results or the financial position that
would have been achieved had the asset sale been consummated as of
the dates indicated or of the results that may be obtained in the
future.
These pro forma condensed financial statements and notes thereto
should be read in conjunction with the Registrant's consolidated
financial statements and the notes thereto as of and for the
periods ended September 30, 2004 and December 31, 2003.
NOTE B - PRO FORMA ADJUSTMENTS -
1) To record the sale of inventory and equipment for $348,345, as
of September 30, 2004. Proceeds of sale amounted to $119,930 and
were used to pay related party lenders and unsecured creditors.
A total of $79,014 was paid to the buyer in settlement of past
obligations.
2) To reverse product sales and related direct costs, as if the
transaction occurred on January 1, 2003.
3) To record interest income on note receivable from buyer.
4) To record 10% commissions earned on sales to customers specified
in the sale agreement.
5) To reverse general and administrative expenses directly
attributable to the operations. The reduction in these expenses
are expected to have a continuing impact on the Company.
-4-