UNITED STATES
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 June 30, 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: 333-06966
IMMECOR CORPORATION
(Name of small business issuer in its charter)
California 68-0324628
(State or jurisdiction of incorporation or (I.R.S. Employer Identification No.)
Organization)
3636 North Laughlin Rd. Bldg 150 Santa Rosa California, 95403-1027
-------------------------------------------------------------------
(Address of principal executive offices)
(707) 636-2550
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Without Par Value
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 [ ]
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 5,806,128 shares of common stock as
of August 14, 2001.
Transitional Small Business Disclosure Format Yes [ ] No [X]
IMMECOR CORPORATION
INDEX
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Condensed balance sheets (unaudited) at June 30, 2001 and
December 31, 2000
Condensed statements of operations (unaudited) for the three
and six months ended June 30, 2000 and 2001
Condensed statements of cash flows (unaudited) for the six months
ended June 30, 2000 and 2001
Notes to condensed financial statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II
OTHER INFORMATION
Item 1. Legal proceedings
Item 2. Changes in securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
Item 5 Other information
Item 6. Exhibits and Reports on Form 8-K
FORWARD LOOKING STATEMENTS
Immecor Corporation (the "Company") cautions readers that certain important
factors may affect the Company's actual results and could cause such results to
differ materially from any forward-looking statements that may be deemed to have
been made in this Form 10-QSB or that are otherwise made by or on behalf of the
Company. For this purpose, any statement contained in the Form 10-QSB that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may", "expect", "believe", "anticipate", "intend", "could", "estimate", or
"continue" or the negative other variations thereof or comparable terminology
are intended to identify forward-looking statements. Factors that may affect the
Company's results include, but are not limited to, the Company's limited history
of profitability, its dependence on a limited number of customers and key
personnel, its possible need for additional financing and its dependence on
certain industries. The Company is also subject to other risks detailed herein
or detailed from time to time in the Company's filings with the Securities and
Exchange Commission.
IMMECOR CORPORATION
Condensed Balance Sheets
ASSETS
June 30, December 31,
2001 2000
---- ----
(unaudited) (audited)
CURRENT ASSETS
Cash $ 498,636 $ 2,077,040
Accounts receivables, less
(allowance for doubtful amounts of $22,000) 509,590 2,891,113
Inventories 3,484,495 2,785,692
Notes receivable 96,496 198,907
Prepaid and other assets 41,621 163,858
Deferred income taxes 187,000 167,200
--------- --------
Total current assets 4,817,838 8,084,903
EQUIPMENT AND IMPROVEMENTS -net 440,332 443,045
------- -------
Total Assets $ 5,258,170 $ 8,726,855
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 36,741 $ -
Notes payable, due within one year 456,493 3,820
Accounts payable 505,281 2,848,247
Accrued liabilities 446,065 1,278,010
Other liabilities 5,754 -
Income taxes payable 1,300,535 1,710,455
--------- ---------
Total current liabilities 2,750,869 5,840,532
Deferred income taxes 14,500 19,800
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 20,000,000
shares authorized; no shares issued and outstanding
Common stock, no par value, 50,000,000 shares authorized;
issued and outstanding, 5,806,128 shares 288,855 288,855
Retained earnings 2,203,946 2,577,668
----------- ---------
Total shareholders' equity 2,492,801 2,866,523
--------- ---------
Total liabilities and shareholders' equity $ 5,258,170 $ 8,726,855
============= ===========
The accompanying notes are an integral part of these financial statements
IMMECOR CORPORATION
Condensed Statements of Operations
(unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
2000 2001 2000 2001
---- ----- ---- ----
Net sales $ 12,286,060 $ 5,246,065 $ 6,227,422 $ 2,372,511
Cost of sales 10,196,662 4,247,465 5,588,843 2,305,827
---------- --------- --------- ---------
Gross profit 2,089,398 998,600 638,579 66,684
Selling, general and administrative expenses 1,198,563 1,629,568 672,651 831,082
--------- --------- ------- -------
Operating income (Loss) 890,835 (630,968) (33,982) (764,398)
Interest expense (32,651) (43,227) (20,322) (11,804)
Interest income 1,392 21,385 1,345 18,217
Other income 22,081 38,765 22,081 26,322
------- ------- -------- --------
Income (loss) before income taxes 881,657 (614,045) (30,878) (731,663)
Income tax expense (benefit) 721,208 (240,323) 351,208 (146,073)
--------- ---------- --------- ---------
NET INCOME (Loss) $ 160,449 $ (373,722) $ (382,208) $ (585,590)
Net income (loss) per share - basic and diluted $ 0.02 $ (0.06) $ (0.07) $ (0.10)
Weighted average shares outstanding -
basic and diluted 5,806,128 5,806,128 5,806,128 5,806,128
The accompanying notes are an integral part of these financial statements
IMMECOR
Condensed Statement of Cash Flows
For six months ended June 30, 2001 and June 30, 2000
2000 2001
------ ----
Cash flows from operating activities
Net Income (loss) $ 160,449 $ (373,722)
Reconciliation of net income (loss) to net cash provided by (used) in
operating activities:
Depreciation and amortization 4,170 53,824
Deferred income taxes (91,141) (25,100)
Write off obsolete inventory 44,835 583,138
Changes in current assets and liabilities:
Accounts receivable (1,545,921) 2,381,523
Inventories (236,778) (1,281,941)
Prepaid and other assets 7,730 122,237
Accounts payable 221,931 (1,746,724)
Accrued liabilities 1,444,629 (831,945)
Income taxes payable 812,349 (409,920)
--------- -----------
Net cash provided (used in)operating activities 822,253 (1,528,630)
Cash flows from investing activities:
Purchase of property and equipment (66,534) (63,111)
Proceeds from notes receivable - 102,411
Proceeds from disposal of equipment - 12,000
---------- ----------
Net cash provided by (used in) investing activities (66,534) 51,300
Cash flows from financing activities:
Net borrowings (repayments)from line of credit (223,775) 36,741
Proceeds from notes payable 1,540 -
Principal payments on note payable - (137,815)
Advances from shareholders 93,389 -
------------ ----------
Net cash used in financing activities (128,846) (101,074)
NET CHANGE IN CASH 626,873 (1,578,404)
Cash balance - beginning of period 57,788 2,077,040
--------- ---------
Cash balance - end of period $ 684,661 $ 498,636
============ ==============
Non-cash transactions
Conversion of accounts payable to note payable $ - $ 590,488
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 32,593 $ 43,227
Income taxes $ 57,348 $ 250,000
The accompanying notes are an integral part of these financial statements
IMMECOR CORPORATION
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Unaudited)
Note 1: Summary of Significant Accounting Policies
Basis of Presentation
The financial statements included in this Form 10-QSB have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America,
have been condensed or omitted, pursuant to such rules and regulations, although
management believes the disclosures are adequate to make the information
presented not misleading. The results of operations for any interim period are
not necessarily indicative of results for a full year. These statements should
be read in conjunction with the financial statements and related notes included
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
2000.
The financial statements presented herein as of and for the three and
six months ended June 30, 2001 and June 30, 2000 reflect, in the opinion of
management, all material adjustments consisting only of normal recurring
adjustments necessary for a fair presentation of the financial position, results
of operations and cash flow for the interim periods.
Earnings (loss) per share amounts are based on the weighted average
number of common stock shares outstanding in each period. There are no
potentially dilutive securities.
Note 2: Line of Credit
The Company has a $1,500,000 line of credit, which expires December 20, 2001.
Advances under the line of credit can not exceed 80% of eligible accounts
receivable and is secured by a security interest in all accounts receivable,
inventory and equipment. The line of credit is also personally guaranteed by the
Company's majority shareholder. The advance outstanding on the line of credit as
of June 30, 2001 was $36,741.
Note 3: Sales to One Major Customer
A material part of the Company's business is dependent upon sales to major
customers, the loss of which would have a material adverse effect on the
Company's financial position and results of operation. One customer accounted
for 84% and 91% of total sales in 2000, and 2001, respectively. The Company is
attempting to expand its customer base to lessen the effect of having one major
customer.
Note 4: Note Payable
On January 5, 2001, the Company entered into a zero interest bearing note
agreement with a subcontractor to convert the amount recorded through accounts
payable for the value of integration work performed during 2000. The note was a
mutual agreement from both parties and provides for bi-weekly payments of
$30,000 until the contract is paid in full. The outstanding balance as of June
30, 2001 was $455,186.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
RESULTS OF OPERATIONS Three Months and Six Months ended June 30, 2001 and 2000
Net Sales
Net sales decreased by $(3,854,911) or (62)% from $6,227,422 for the three
months ended June 30, 2000 to $2,372,511 for the three months ended June 30,
2001 and net sales decreased by $(7,039,995) or (57)% from $12,286,060 for the
six months ended June 30, 2000 to $5,246,065 for the six months ended June 30,
2001 respectively.
The lower demand for systems was primarily due to the general economic slowdown
and weaker demand for technology related products. Revenues are derived from
sales of systems, distribution of hardware, and development of new products.
Sales of systems accounted for approximately 88% of net revenues in the second
quarter of fiscal 2000 and approximately 95% of our revenues in the second
quarter of 2001. We expect sales to remain steady through out the next quarter
as we launch prototype systems into full production by the end of the third
quarter of 2001.
Gross Profit
Gross profits decreased from $5,588,843 for the three months ended June 30, 2000
to $2,305,827 for the three months ended June 30, 2001. As a percentage of net
sales, gross profits decreased from 89.7% for the three months ended June 30,
2000 to 2.81% for the three months ended June 30, 2001.
The decrease in gross margin as a percentage of sales was primarily due to
obsolete inventory write-offs for an amount of $583,138. The inventory was
written off in the second quarter due to discontinued products and engineering
change orders from a corporate customer during the second quarter. Without the
write-off of inventory, gross profits would have been $1,581,738 or 30% for the
six months ended June 30, 2001. The Company believes it has written off all
obsolete inventories and the profit margins for next quarter will be in line
with normal operations.
Gross profits decreased from $2,089,399 for the six months ended June 30, 2000
to $998,600 for the six months ended June 30, 2001. As a percentage of net
sales, gross profits increased from 17.3% for the six months ended June 30, 2000
to 19% for the six months ended for June 30, 2001.
The increase in gross margin as a percentage of sales was primarily due to an
increased leverage of our manufacturing costs by outsourcing key components
globally while decreasing our labor costs associated with cost of goods. The
company acknowledges that pricing pressures due to the competitive market, the
liquidation of excess inventory, potentially below our costs, changes in sales
volume, and changes in customer demand due to the slow economy, may adversely
impact our gross margins in upcoming quarters.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $158,521 from $672,561
for the three months ended June 30, 2000 to $831,082 for the three months ended
June 30, 2001. As a percentage of net sales, selling, general and administrative
expenses increased from 10.8% in 2000 to 35.03% in 2001.
The increase is primarily due to revenues significantly decreasing while
expenses increased to allocate for accruals for executive and employee bonuses,
higher rents due to new location, and continuing to invest in research and
development for new products. The Company also paid higher rents than previous
periods due to the new headquarters. Research and development expenses consist
of payroll and related expenses for certification, fabrication, and cost of
materials for prototyping and testing units.
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
Research and development expenses for the three months ended June 30, 2001 and
June 30, 2000 was $112,364 and $35,080, respectively. Research and development
expenses for six months ended June 30, 2001 and June 30, 2000 was $224,895 and
$105,300, respectively. The Company expenses all of research and development
costs as they are incurred. The Company expects to continue to invest in system
design, and other research and development initiatives.
Selling, general and administrative expenses increased $431,005 from $1,198,563
for the six months ended June 30, 2000 to $1,629,568 for the six months ended
June 30, 2001. As a percentage of net sales, selling, general and administrative
expenses increased from 9.7% in 2000 to 31% in 2001.
The increase is primarily due to a decrease in sales while the company continued
to pay higher levels of rent compared to last year, increased R&D expense to
produce new products and accrued for year end executive and employee bonuses.
Liquidity and Capital Resources Continued:
On June 30, 2000 and 2001 the Company had net working capital of $455,604 and
$2,066,969 respectively. The increase in working capital from 2000 to 2001 was
primarily due to an increased level of inventory and reduction of accounts
payable.
The Company had net cash used by operating activities of $(1,528,630) for the
six months ended June 30, 2001 compared to net cash provided by operating
activities of $822,253 for the six months ended June 30, 2000. The $(2,350,883)
difference is primarily due to the changes in accounts receivable, inventory and
accounts payable due to lower sales for the six months ended June 30, 2001.
The Company had net cash provided by investing activities of $51,300 for the six
months ended June 30, 2001 compared to net cash used by investing activities of
$(66,534) for the six months ended June 30, 2000. The $(117,834) difference
relates primarily to proceeds from notes receivable.
The Company had net cash used by financing activities of $(101,074) for the six
months ended June 30, 2001 compared to net cash used by financing activities of
$(128,846) for the six months ended June 30, 2000. The $(27,772) difference
relates primarily to an increase in short-term borrowings due to a decrease in
sales for the six months ended June 30, 2001.
At present, management believes that future cash flow from operations and its
existing institutional financing will be sufficient to fund all of the Company's
cash requirements for the remaining six months. There were no substantial
commitments for purchase orders outside the normal purchase orders used to
secure product as of June 30, 2001.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings pending against the Company during the period
ending June 30, 2001.
Item 2. Changes in Securities
There were no changes in rights of securities holders during the period ending
June 30, 2001.
Item 3. Defaults upon Senior Securities
There were no defaults upon senior securities during the period ending June 30,
2001.
Item 4. Submission of Matters to a Vote of Security-Holders
There were no matters submitted to the vote of securities holders during the
period ending June 30, 2001.
Item 5. Other Information
There were no major contracts signed during the period during the period ending
June 30, 2001.
Item 6. Exhibits and Reports on Form 8-K
There were no filings of Exhibits and Reports on Form 8-K during the period
ending June 30, 2001.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Commission
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMMECOR CORPRATION
Date: August 14, 2001 By: /s/ Wil. L. Lindgren
-----------------------
Wil L. Lindgren
Chief Financial Officer
Date: August 14, 2001 By: /s/ Heinot H. Hintereder
-----------------------
Heinot H. Hintereder
President & Chief Executive Officer