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 September 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
(Issuers 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 September 30, 2001.
Transitional Small Business Disclosure Format Yes [ ] No [X]
IMMECOR CORPORATION
INDEX
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Balance sheets at September 30, 2001 (unaudited) and December 31, 2000
Statements of operations for the three and nine months ended
September 30, 2000 and 2001 (unaudited)
Statements of cash flows for the nine months ended September 30, 2000
and 2001 (unaudited)
Notes to condensed financial statements (unaudited)
Item 2. Managements 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 Companys 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 statements 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 Companys
results include, but are not limited to, the Companys 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 Companys filings with the
Securities and Exchange Commission.
The accompanying notes are an integral part of these financial statements
IMMECOR CORPORATION
Balance Sheets
ASSETS
September 30, December 31,
2001 2000
(unaudited)
Current assets:
Cash $ 17,038 $ 2,077,040
Accounts receivable
(less allowance for doubtful accounts of $22,000 and $22,000) 361,605 2,891,113
Inventories 2,752,721 2,785,692
Notes receivable - current 19,598 --
Prepaid and other assets 167,033 163,858
Deferred income taxes 67,700 167,200
Total current assets 3,385,695 8,084,903
Equipment and improvements, net 415,340 443,045
Notes receivable 75,248 198,907
Total assets $ 3,876,283 $ 8,726,855
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 176,725 $ --
Note payable 245,186 3,820
Accounts payable 246,809 2,848,247
Accrued liabilities 371,665 1,278,010
Income taxes payable 448,702 1,710,455
Total current liabilities 1,489,087 5,840,532
Deferred income taxes 22,000 19,800
Total liabilities 1,511,087 5,860,332
Stockholders Equity:
Common stock, no par value, 50,000,000 shares authorized;
5,806,128 shares issued and outstanding $ 288,855 $ 288,855
Retained earnings 2,076,341 2,577,668
Total stockholders equity 2,365,196 2,866,523
Total liabilities and stockholders' equity $ 3,876,283 $ 8,726,855
IMMECOR CORPORATION
Statements of Operations
For the three months ended For the nine months ended
September 30, September 30,
2001 2000 2001 2000
(unaudited) (unaudited)
Net sales $ 2,261,970 $ 7,394,521 $ 7,508,035 $ 19,680,581
Cost of sales 1,392,431 3,701,470 5,639,896 13,853,296
Gross profit 869,539 3,693,051 1,868,139 5,827,285
Selling, general and administrative 821,705 1,338,372 2,451,273 2,536,973
Operating income (loss) 47,834 2,354,679 (583,134) 3,290,312
Other (income) expense
Interest expense 178,201 26,694 221,428 59,345
Interest income (6,125) (2,108) (27,510) (3,500)
Other (income) expense 21,629 (22,754) (17,136) -
(Loss) income before income taxes (145,871) 2,352,847 (759,916) 3,234,467
Income tax expense (benefit) (18,266) 890,453 (258,589) 1,611,661
Net (loss) income $ (127,605) $ 1,462,394 $ (501,327) $ 1,622,806
Net (loss) income per share -
basic and diluted $(0.02) $0.25 $(0.09) $0.28
Weighted average shares used in
computing net income (loss) per
share, basic and diluted 5,806,128 5,806,128 5,806,128 5,806,128
IMMECOR CORPORATION
Statements of Cash Flows
For the nine months
ended September 30,
2001 2000
(unaudited)
Cash flows from operating activities:
Net (loss) income $ (501,327) 1,622,806
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 78,826 28,501
Deferred income taxes 101,700 1,758
Reserve for inventories 50,000 -
Changes in operating assets and liabilities:
Accounts receivable 2,529,508 (1,746,874)
Inventories (17,029) (2,444,889)
Prepaid and other assets (3,175) 49,618
Accounts payable (2,601,438) 62,659
Accrued liabilities (906,345) 2,328,932
Income taxes payable (1,261,753) 1,100,781
Net cash (used in) provided by operating activities (2,531,033) 1,003,292
Cash flows from investing activities:
Purchase of property and equipment (51,121) (48,391)
Purchase of certificate of deposit - (300,000)
Proceeds from notes receivable 104,061 -
Increase in notes receivable - (178,067)
Net cash provided by (used in) investing activities 52,940 (526,458)
Cash flows from financing activities:
Net borrowings (repayments) from line of credit 176,725 132,749
Borrowings from note payable 455,186 -
Repayments on note payable (213,820) (2,717)
Net cash provided by financing activities 418,091 130,032
Net change in cash (2,060,002) 606,866
Cash balance, beginning of period 2,077,040 57,788
Cash balance, end of period $ 17,038 $ 664,654
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 221,428 $ 59,345
Income taxes 1,611,661 285,788
IMMECOR CORPORATION
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Unaudited)
Note 1: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim financial statements included in this Form
10-QSB have been prepared by the Company in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not contain all
of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
The results of operations for any interim period are not necessarily
indicative of results for a full year. These financial 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 as filed with the Securities and Exchange Commission.
The unaudited financial statements presented herein as of and for the three
and nine months ended September 30, 2001 and September 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.
The financial data and other information disclosed in these notes to the
financial statements related to these periods are unaudited. The balance sheet
data at December 31, 2000 is derived from the audited financial statements
included in the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2000.
Net Income (Loss) Per Share
Basic earnings (loss) per share amounts are computed using the weighted
average number of common stock shares outstanding in each period. There are no
potentially dilutive securities.
Reclassifications
During the quarter ended September 30, 2001, the Company has reclassified
certain inventory write-downs of approximately $586,000 from other income and
expenses to cost of sales. The adjustment was previously recorded during the
quarter ended March 31, 2001. Such reclassifications have been presented for
the nine months ended September 30, 2001.
Note 2: 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 and cash flows. One
customer accounted for 87% and 93% of total sales for the three months ended
September 30, 2001 and 2000, respectively. One customer accounted for 83%
and 90% of total sales in the nine months ended September 30, 2001 and 2000,
respectively. The Company is attempting to expand its customer base to lessen
the effect of having one major customer.
Note 3: Inventories
Included in cost of sales for the nine months ended September 30, 2001 is
approximately $586,000 of inventory write-downs related to obsolete, slow-moving
or non-saleable inventory.
Note 4: Line of Credit
The Company has a $1,500,000 line of credit, which expires December 20, 2001.
Advances under the line of credit cannot exceed 80% of eligible accounts
receivable and is collateralized by all accounts receivable, inventory and
equipment. The line of credit is also personally guaranteed by the Company's
majority stockholder. The available borrowing base on the line of credit as
of September 30, 2001 was approximately $2,600.
Note 4: Note Payable
On January 5, 2001, the Company entered into an uncollaterallized, zero interest
bearing note agreement with a subcontractor for amounts payable for integration
work performed during 2000. The note provides for bi-weekly payments of $30,000
until the contract is paid in full in January 2002.
Note 5: Income Taxes
The effective income tax rates for the nine months ended September 30, 2001 and
2000 are based on the federal statutory income tax rate, increased for the
effect of state income taxes, and decreased by the effect of nondeductible
expenses and other temporary differences.
Note 6: Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board, (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. Adoption of SFAS
No. 133 in 2001 did not have a material effect on the Companys results of
operations or financial position.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, which
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. The use of the pooling-of-interest
method will be prohibited. Adoption of SFAS No.141 had no effect on the
Companys results of operations or financial position.
In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which changes the accounting for goodwill from an amortization method
to an impairment-only approach. Amortization of goodwill, including goodwill
recorded in past business combinations, will cease upon adoption of SFAS
No. 142. SFAS No. 142 will be effective for the Companys fiscal year beginning
January 1, 2002. The Companys adoption of SFAS No. 142 is not expected to
have a material effect on the Companys results of operations or financial
position.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal Of Long-Lived Assets, which establishes one accounting model to be
used for long-lived assets to be disposed of by sale, whether previously used
or newly acquired. SFAS No. 144 also broadens the presentation of discontinued
operations to include more disposal transactions. SFAS No. 144 will be
effective for the Companys fiscal year beginning January 1, 2002. The
Companys adoption of SFAS No. 144 is not expected to have a material
effect on the Companys results of operations or financial position.
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS FOR THE Three and Nine Months ended September 30, 2001
and 2000
Net Sales
Net sales decreased by $5,132,551 or 69% from $7,394,521 for the three months
ended September 30, 2000 to $2,261,970 for the three months ended
September 30, 2001 and net sales decreased by $12,172,546 or 62% from
$19,680,581 for the nine months ended September 30, 2000 to $7,508,035 for the
nine months ended September 30, 2001 respectively.
The decline in sales is primarily due to the lower demand for systems as a
result of the general economic slowdown and weaker demand for technology
related products. The strong economy and Y2K challenges in 2000 that
allowed the Company to capture that growth, however is not indicative to the
normal growth curve for the Company. The year 2001 revenues are in line
with managements expectations and the Company's historical trends prior to
2000.
Gross Profit
Gross profits decreased from $3,693,051 for the three months ended
September 30, 2000 to $869,539 for the three months ended September 30, 2001.
As a percentage of net sales, gross profits decreased from 50% for the three
months ended September 30, 2000 to 38% for the three months ended
September 30, 2001.
The decrease in gross profit as a percentage of net sales was primarily due to
sales of lower margin products while the company develops new products and
certain fixed costs being spread over lower revenues.
Gross profits decreased from $5,827,285 for the nine months ended
September 30, 2000 to $1,868,139 for the nine months ended September 30,
2001. As a percentage of net sales, gross profits decreased from 30% for the
nine months ended September 30, 2000 to 25% for the nine months ended for
September 30, 2001.
The decrease in gross profit as a percentage of sales was primarily due to
a discontinued inventory write-off of approximately $586,000 from canceled
orders. The Company acknowledges that pricing pressures due to the
competitive market, changes in sales volume, and changes in customer demand
due to the slow economy, may adversely impact our gross profits in upcoming
quarters.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $516,669 from
$1,338,372 for the three months ended September 30, 2000 to $821,705 for the
three months ended September 30, 2001. The decrease in expenses is primarily
due to the staff reductions and the lower related accrual for bonuses, which
is directly tied to sales.
Research and development expense for the three months ended September 30, 2001
and September 30, 2000 was approximately $178,000 and $108,000, 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. Research and development
expenses consist of payroll and related expenses for certification,
fabrication, and cost of materials for prototyping and testing units.
Selling, general and administrative expenses decreased $85,702 from
$2,536,973 for the nine months ended September 30, 2000 to $2,451,271 for
the nine months ended September 30, 2001. The decrease is primarily due to the
staff reductions.
Income Taxes
Pre-tax losses resulted in an income tax benefit for the three months ended
September 30, 2001 of $18,266 compared to an income tax expense for the three
months ended September 30, 2000 of $890,453. Tax provisions and benefits are
based upon managements estimate of the Companys expected annualized
effective tax rates.
Liquidity and Capital Resources
On September 30, 2001 and 2000 the Company had net working capital of
$1,896,608 and $2,244,371, respectively. The decrease in working capital
from 2000 to 2001 was primarily due to lower accounts receivable as a result
of lower sales for the nine months ended September 30, 2001 as compared to the
prior period and increased borrowings on the line of credit.
The Company had net cash used in operating activities of $2,532,033 for the
nine months ended September 30, 2001 compared to net cash provided by operating
activities of $1,003,292 for the nine months ended September 30, 2000.
The $3,534,325 difference is primarily due to the net loss for the nine months
ended September 30, 2001 and decreases in accounts payable and income taxes
payable.
The Company had net cash provided by investing activities of $52,940 for the
nine months ended September 30, 2001 compared to net cash used in investing
activities of $526,458 for the nine months ended September 30, 2000. The
$579,398 difference relates primarily to proceeds from notes receivable
during the nine months ended September 30, 2001 and liquidation of short-term
investments in fiscal 2000.
The Company had net cash provided by financing activities of $418,091 for
the nine months ended September 30, 2001 compared to net cash provided by
financing activities of $130,032 for the nine months ended September 30,
2000. The $288,059 difference relates primarily to an increase in
borrowings on line of credit and note payable as a result of lower sales for
the nine months ended September 30, 2001 as compared to the prior period.
At present, management believes that future cash flows from operations and its
existing institutional financing will be sufficient to fund all of the Company's
cash requirements for the remaining three months of 2001. There were no
substantial commitments for purchase orders outside the normal purchase orders
used to secure product as of September 30, 2001.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
There were no legal proceedings pending against the Company during the period
ending September 30, 2001.
Item 2. Changes in Securities
There were no changes in rights of securities holders during the period ending
September 30, 2001.
Item 3. Defaults upon Senior Securities
There were no defaults upon senior securities during the period ending
September 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 September 30, 2001.
Item 5. Other Information
There were no major contracts signed during the period ending September 30,
2001.
Item 6. Exhibits and Reports on Form 8-K
A Form 8-K was filed to change accounting firms from Grant Thornton LLP to
PricewaterhouseCoopers LLP for the period ending September 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: October 31, 2001 By: /s/ Wil. L. Lindgren
_______________________
Wil L. Lindgren
Chief Financial Officer
SS/Wil L. Lindgren
Date: October 31, 2001 By: /s/ Heinot H. Hintereder
_______________________
Heinot H. Hintereder
President & Chief Executive Officer
SS/Heinot H. Hintereder