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 March 31, 2002
[ ] 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 March 31, 2002.
Transitional Small Business Disclosure Format Yes [ ] No [X]
IMMECOR CORPORATION
INDEX
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Balance sheets at March 31, 2002 (unaudited) and December 31, 2001
Statements of operations (unaudited) for the three months ended March
31, 2001 and 2002 Statements of cash flows (unaudited) for the three
months ended March 31, 2001 and 2002 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 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
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. Such risks, uncertainties and changes in condition,
significance, value and effect could cause our actual results to differ
materially from those anticipated events. Although we believe that the
assumptions underlying the forward-looking statements are reasonable,any of
these assumptions could prove inaccurate, including, but not limited to,
statements as to our future operating results and business plans. We disclaim
any intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
IMMECOR CORPORATION
Balance Sheets
ASSETS
March 31, December 31,
2002 2001
(unaudited)
Current assets:
Cash $ 20,578 $ 30,424
Accounts receivable, net of allowance for doubtful
accounts of $22,000 and $22,000 426,611 430,624
Inventories, net of inventory reserve of $439,830 and $488,300 1,490,669 1,833,132
Notes receivable - current 26,330 48,127
Prepaid expenses 41,857 27,101
Income taxes recoverable 359,727 380,297
Total current assets 2,365,772 2,749,705
Equipment and improvements, net 374,563 404,613
Notes receivable 73,541 50,369
Total assets $ 2,813,876 $ 3,204,687
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 282,530 $ 179,478
Note payable 70,186 85,186
Accounts payable 223,115 911,666
Accrued bonuses 166,073 166,073
Accrued liabilities 206,346 56,128
Total current liabilities 948,250 1,398,531
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 1,576,771 1,517,301
Total stockholders' equity 1,865,626 1,806,156
Total liabilities and stockholders' equity $ 2,813,876 $ 3,204,687
IMMECOR CORPORATION
Statements of Operations
For the three months
ended March 31,
2002 2001
(unaudited)
Net sales $ 1,777,548 $ 2,873,554
Cost of sales 992,317 1,941,638
Gross profit 785,231 931,916
Operating expenses:
Sales and marketing 63,599 41,148
Research and development 38,070 112,364
General and administrative 593,246 644,974
Operating income 90,316 133,430
Other income (expense):
Other income 188 12,050
Interest income 2,359 3,561
Interest expense (12,823) (31,423)
Income before income taxes 80,040 117,618
Income tax provision (benefit) 20,570 (94,250)
Net income $ 59,470 $ 211,868
Net income per share -
basic and diluted $0.01 $0.04
Weighted average shares
outstanding - basic and diluted 5,806,128 5,806,128
IMMECOR CORPORATION
Statements of Cash Flows
For the three months
ended March 31,
2002 2001
(unaudited)
Cash flows from operating activities:
Net income $ 59,470 211,868
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 30,050 28,794
Deferred income taxes - 51,600
Reserve for inventories 48,470 -
Cash effect of changes in operating assets and liabilities:
Accounts receivable 4,013 2,316,904
Inventories 293,993 (1,765,767)
Prepaid expenses (14,756) 56,237
Accounts payable (688,551) (1,501,450)
Accrued bonuses and liabilities 150,218 (926,146)
Income taxes recoverable/payable 20,570 (151,571)
Net cash used in operating activities (96,523) (1,679,532)
Cash flows from investing activities:
Acquisition of property and equipment - (59,247)
Proceeds from disposal of equipment - 12,000
Proceeds from notes receivable 8,625 93,319
Increase in notes receivable (10,000) -
Net cash (used in) provided by investing activities (1,375) 46,072
Cash flows from financing activities:
Net borrowings (repayments) from line of credit 103,052 310,305
Repayments on note payable (15,000) (36,581)
Net cash provided by financing activities 88,052 273,724
Net change in cash (9,846) (1,359,736)
Cash and cash equivalents, beginning of period 30,424 2,077,040
Cash and cash equivalents, end of period $ 20,578 $ 717,304
Noncash investing and financing activities:
Conversion of accounts payable to note payable $ -- $ 590,488
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, 2001 as filed with the
Securities and Exchange Commission.
The unaudited financial statements presented herein as of March 31, 2002, and
for the three months ended March 31, 2001 and March 31, 2002 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, 2001 is derived from the audited financial statements included in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001.
Basic and Diluted Net Income Per Share
Basic earnings per share amounts are computed using the weighted average number
of common stock shares outstanding in each period. There are no potentially
dilutive securities.
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 81% and 84% of total sales for the three months ended
March 31, 2002 and 2001, respectively. The Company has hired additional sales
personnel in an attempt to expand its customer base to lessen the effect of
having one major customer.
Note 3: Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
Note 4: Inventories
Included in cost of sales for the three months ended March 31, 2002 and 2001 is
approximately $48,000 and $0, respectively, of inventory reserve related to
obsolete, slow-moving inventory.
Note 5: Line of Credit
The Company has a $1,500,000 line of credit, which expires December 20, 2002.
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
March 31, 2002 was approximately $21,000.
Note 6: 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 was paid in full in April 2002.
Note 7: Income Taxes
The effective income tax rates for the three months ended March 31, 2002 and
2001 are based on the federal statutory income tax rate, increased for the
effect of state income taxes, and decreased by the effect of graduated rates,
nondeductible expenses and other permanent differences.
Note 6: Recent Accounting Pronouncements
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 is effective for the Company's fiscal year beginning January
1, 2002. The Company's adoption of SFAS No. 142 did not have a material effect
on the Company's 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 is effective for
the Company's fiscal year beginning January 1, 2002. The Company's adoption of
SFAS No. 144 did not have a material effect on the Company's results of
operations or financial position.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS FOR THE Three Months ended March 31, 2002 and 2001
Net Sales
Net sales decreased by $1,096,006 or 38% from $2,873,554 for the three months
ended March 31, 2001 to $1,777,548 for the three months ended March 31, 2002
respectively.
The decline in sales is primarily due to the general economic slowdown and
continued weak demand for technology related products in the markets in which
the Company operates. As a result, the Company's customers postponed orders
scheduled for the first quarter of 2002 due to the weakened economy and lower
capital spending.
Gross Profit
Gross profits decreased $146,685 or 16% from $931,916 for the three months ended
March 31, 2001 to $785,231 for the three months ended March 31, 2002. As a
percentage of net sales, gross profits increased from 32% for the three months
ended March 31, 2001 to 44% for the three months ended March 31, 2002.
The increase in gross profit as a percentage of net sales can be attributed to
the Company's new product line released during 2001. These new products carry a
higher profit margin in comparison to the Company's matured product line. 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
Sales and marketing expenses increased $22,451 from $41,148 for the three months
ended March 31, 2001 to $63,599 for the three months ended March 31, 2002. The
increase in expenses is due to costs associated with the expansion of our sales
staff in order to expand our customer base and to better serve and meet our
customer needs.
Research and development expense decreased $74,294 from $112,364 for the three
months ended March 31, 2002 to $63,599 for three months ended March 31, 2001.
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.
General and administrative expenses decreased $51,728 from $644,974 for the
three months ended March 31, 2000 to $593,246 for the three months ended March
31, 2002. The decrease is primarily due to the Company controlling expenses.
Income Taxes
Pre-tax income for the three months ended March 31, 2002, resulted in a tax
provision of $20,570. Pre-tax income for the three months ended March 31, 2001,
resulted in a tax benefit of $(94,250). Tax provisions and benefits are based
upon management's estimate of the Company's expected annualized effective tax
rates.
Liquidity and Capital Resources
On March 31, 2002 and 2001 the Company had net working capital of $1,438,092 and
$1,351,174 respectively. The increase in working capital of $86,916 from 2001 to
2002 was primarily due to lower accounts payable offset by lower inventories.
The Company had net cash used in operating activities of $(96,523) for the three
months ended March 31, 2002 compared to net cash used in operating activities of
$(1,679,532) for the three months ended March 31, 2001. The $1,583,009
difference is primarily due to lower reductions in accounts payable, a decrease
in inventory, accrued liabilities and taxes payable, and offset by lower net
income.
The Company had net cash used in investing activities of $(1,375) for the three
months ended March 31, 2002 compared to net cash provided by investing
activities of $46,072 for the three months ended March 31, 2001. The $47,447
difference relates primarily to lower proceeds from notes receivable and
issuance of a new note during the three months ended March 31, 2002.
The Company had net cash provided by financing activities of $88,052 for the
three months ended March 31, 2002 compared to net cash provided by financing
activities of $273,724 for the three months ended March 31, 2001. The $185,672
difference relates primarily to a decrease in borrowings under the line of
credit in comparison to the prior period.
Our liquidity is affected by many factors, some of which are based on the normal
ngoing operations of the business, and others of which relate to the
uncertainties in the semiconductor equipment and medical diagnostic equipment
industries. 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 nine months of 2002.
The Company's management has initiated an aggressive cost-reduction program
during the first and second quarters of fiscal 2002 to reduce all non-essential
R&D and marketing expenditures. Additionally, the Company also placed tight
controls for new inventory purchases as management plans to aggressively market,
and in some instances discount, select inventory items and products to improve
turnover. More importantly, the Company also believes that based on revised
forecasts from its major customers, it will be able to sell its newly developed
products at higher gross profit margins in fiscal 2002. Management shall also
seek new ventures and/or acquisitions that will enhance our position in our
markets and that have potential to increase revenue and profitability.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
There were no legal proceedings pending against the Company during the period
ended March 31, 2002.
Item 2. Changes in Securities
There were no changes in rights of securities holders during the period ended
March 31, 2002.
Item 3. Defaults upon Senior Securities
There were no defaults upon senior securities during the period ended March 31,
2002.
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 ended
March 31, 2002.
Item 5. Other Information
There were no major contracts signed during the period ended March 31, 2002.
Item 6. Exhibits and Reports on Form 8-K
There were no exhibits or Form 8-K filed during the period ended March 31, 2002.
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: May 9, 2002 By: /s/ Wil. L. Lindgren
-----------------------
Wil L. Lindgren
Chief Financial Officer
Date: May 9, 2002 By: /s/ Heinot H. Hintereder
-----------------------
Heinot H. Hintereder
President & Chief Executive Officer