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 December 31, 2003
[ ] 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 (I.R.S. Employer Identification No.)
or 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: 5,806,528 shares of common stock as
of December 31, 2003.
Transitional Small Business Disclosure Format Yes [ ] No [X]
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INDEX
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Balance sheets at December 31, 2003 (unaudited) and June 30, 2002
Statements of operations for the three and six months ended December
31, 2003 and 2002 (unaudited) Statements of cash flows for the six
months ended December 31, 2003 and 2002 (unaudited) 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.
IMMECOR CORPORATION
Balance Sheets
ASSETS
<Table>
<Caption>
December 31, June 30,
2003 2002
(unaudited)
Current assets:
Cash $ 473,297 $ 493,057
Accounts receivable
(less allowance for doubtful accounts of $12,945 and $22,000) 1,293,911 785,029
Inventories 1,921,968 1,458,828
Notes receivable - current 5,695 29,116
Prepaid and other assets 486,357 158,096
Recoverable taxes 7,946 73,353
Deferred tax asset -- 29,012
-------------- ---------------
Total current assets 4,189,174 3,026,491
Equipment and improvements, net 181,694 236,372
Notes receivable 85,879 124,998
-------------- ---------------
Total assets $ 4,456,747 $ 3,387,861
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 701,576 $ 351,064
Accounts payable 822,776 453,894
Accrued liabilities 202,432 101,298
Deferred income taxes 105,094 96,027
------- ------
Total current liabilities 1,831,878 1,002,283
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 2,336,014 2,096,723
-------------- ---------------
Total stockholders' equity 2,624,869 2,285,578
-------------- ---------------
Total liabilities and stockholders' equity $ 4,456,747 $ 3,387,861
============== ===============
</Table>
IMMECOR CORPORATION
Statements of Operations
<Table>
<Caption>
For the three months For the six months
ended December 31, ended December 31,
2003 2002 2003 2002
---------------------------- -----------------------------
(unaudited) (unaudited)
Net sales $ 2,191,955 $ 1,833,292 $ 4,606,035 $ 4,387,039
Cost of sales 1,269,017 1,410,250 2,897,685 3,231,010
------------- ----------- ------------- --------------
Gross profit 922,938 423,042 1,708,350 1,156,029
Sales and marketing 21,054 62,938 47,240 126,080
Research and development 61,165 371 262,538 102,668
General and administrative 596,661 318,012 1,097,989 772,701
------------- ----------- ------------- --------------
Operating income (loss) 244,058 41,721 300,583 154,580
Other (income) expense
Interest expense (21,314) (10,931) (39,030) (20,242)
Interest income 1,497 2,460 2,689 5,910
Other (income) expense (7,309) (49) (9,292) (22)
------------- ----------- ------------- --------------
(Loss) income before income taxes 216,932 33,201 254,950 140,226
------------- ----------- ------------- --------------
Income tax expense (benefit) 3,782 (70,720) 15,659 (118,224)
------------- ----------- ------------- --------------
Net (loss) income $ 213,150 $ (37,519) $ 239,291 $ 22,002
============ ========== ============ =============
Net (loss) income per share -
basic and diluted $ 0.037 $(0.006) $0.041 $0.004
====== ======== ====== ======
Weighted average shares used in
computing net income (loss) per
share, basic and diluted 5,806,428 5,806,128 5,806,428 5,806,128
========= ========= ========= =========
</Table>
IMMECOR CORPORATION
Statements of Cash Flows
<Table>
<Caption>
For the six months
ended December 31,
2003 2002
-----------------------------
(unaudited)
Cash flows from operating activities:
Net (loss) income $ 239,291 20,002
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 54,678 61,830
Deferred income taxes 38,079 -
Reserve for inventories -- 68,102
Changes in operating assets and liabilities:
Accounts receivable (508,882) 307,619
Inventories (463,140) 176,931
Prepaid and other assets (328,261) (10,000)
Accounts payable 368,882 (180,211)
Accrued liabilities 101,134 (74,470)
Income taxes recoverable 65,407 --
Income taxes payable -- (38,967)
-------------- --------------
Net cash (used in) provided by operating activities (432,812) 330,836
-------------- --------------
Cash flows from investing activities:
Purchase of property and equipment -- --
Purchase of certificate of deposit -- --
Proceeds from notes receivable 62,540 12,677
Increase in notes receivable -- (86,142)
-------------- --------------
Net cash provided by (used in) investing activities 62,540 (73,465)
-------------- --------------
Cash flows from financing activities:
Net borrowings (repayments) from line of credit 350,512 (86,069)
Borrowings from note payable -- --
Repayments on note payable -- (34,250)
-------------- --------------
Net cash provided by (used in) financing activities 350,512 (120,319)
-------------- --------------
Net change in cash (19,760) 137,052
Cash balance, beginning of period 493,057 482,855
-------------- --------------
Cash balance, end of period $ 473,297 $ 619,907
============== ==============
</Table>
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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 June 30, 2002 as filed with the
Securities and Exchange Commission.
The unaudited financial statements presented herein as of and for the three and
six months ended December 31, 2003 and December 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 June 30, 2002 is
derived from the audited financial statements included in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 2002.
Net Income (Loss) Per Share
Basic earnings (loss) per share amounts is 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 68% and 74% of total sales in the nine months ended
December 31, 2003 and 2002, respectively. The Company is attempting to expand
its customer base to lessen the effect of having one major customer.
Note 3: Line of Credit
The Company has a $1,000,000 line of credit, which expires May 20, 2004.
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 shareholder. The available borrowing base on the line of credit as of
December 31, 2003 was approximately $48,424.
Note 4: Income Taxes
The effective income tax rates for the nine months ended December 31, 2003 and
2002 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 timing differences.
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Note 5: Recent Accounting Pronouncements
We have made no changes in our methods of application of our critical accounting
policies from the information provided in our Annual Report on Form 10-K for the
year ended June 30, 2003.
RESULTS OF OPERATIONS FOR THE Three and SIX Months ended DECEMBER 31, 2003 and
2002
Net Sales
Net sales increased by $358,663 or 19.6% from $1,833,292 for the three months
ended December 31, 2002 to $2,191,955 for the three months ended December 31,
2003 and net sales increased by $218,996 or 5% from $4,387,039 for the six
months ended December 31, 2002 to $4,606,035 for the six months ended December
31, 2003 respectively. The increase in sales is primarily due to an increased
customer base and increase demand for technology related products.
Gross Profit
Gross profits increased from $423,042 for the three months ended December 31,
2002 to $922,938 for the three months ended December 31, 2003. As a percentage
of net sales, gross profits increased from 23% for the three months ended
December 31, 2002 to 42% for the three months ended December 31, 2003. The
increase in gross margin as a percentage of net sales was primarily due to sales
of higher margin products to new customers.
Gross profits increased from $423,042 for the three months ended December 31,
2002 to $922,938 for the three months ended December 31, 2003. Gross profits
increased from $1,156,029 for the six months ended December 31, 2002 to
$1,708,350 for the six months ended December 31, 2003. As a percentage of net
sales, gross profits increased from 23% for the three months ended December 31,
2002 to 42% for the three months ended December 31, 2003. As a percentage of net
sales, gross profits increased from 26% for the six months ended December 31,
2002 to 37% for the six months ended December 31, 2003. The increase in gross
margin as a percentage of net sales was primarily due to sales of higher margin
products to new customers.
The Company acknowledges that pricing pressures due to the competitive market,
changes in sales volume, and changes in customer demand, may adversely impact
our gross margins in upcoming quarters.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $236,765 from $380,950
for the three months ended December 31, 2002 to $617,715 for the three months
ended December 31, 2003. The increase in expenses is primarily due to one time
expenditures for legal fees and new personnel.
Selling, general and administrative expenses increased $246,448 from $898,781
for the six months ended December 31, 2002 to $1,145,229 for the six months
ended December 31, 2003. The increase is primarily due to a one time legal fees
and hiring of new personnel.
Research and development expense for the three months ended December 31, 2002
and December 31, 2003 was $371 and $61,165 respectively. Research and
development expense for the six months ended December 31, 2002 and December 31,
2003 was $102,668 and $262,538 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.
<Page>
Income Taxes
Tax provisions and benefits are based upon management's estimate of the
Company's expected annualized effective tax rates.
Liquidity and Capital Resources
On December 31, 2002 and 2003 the Company had net working capital of $2,024,208
and $2,357,296 respectively. The increase in working capital from 2002 to 2003
was primarily due to increased cash on hand, increased receivables and prepaid
expenses for the six months ended December 31, 2003 as compared to the prior
period.
The Company had net cash used in operating activities of $(432,812) for the six
months ended December 31, 2003 compared to net cash provided by operating
activities of $330,836 for the six months ended December 31, 2002. The $763,648
difference is primarily due to increased accounts receivable, increased
inventory, and an increase in prepaid expenses for the period.
The Company had net cash provided by investing activities of $62,540 for the six
months ended December 31, 2003 compared to net cash used in investing activities
of $(73,465) for the six months ended December 31, 2002. The $136,006 difference
relates primarily to proceeds from notes receivable during the six months ended
December 31, 2003.
The Company had net cash provided by financing activities of $350,512 for the
six months ended December 31, 2003 compared to net cash used in financing
activities of $(120,319) for the six months ended December 31, 2002. The
$470,831 difference relates primarily to an increase in borrowings on line of
credit and trade accounts, for the six months ended December 31, 2003 as
compared to the prior period.
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.
<Page>
ITEM 3. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's financials are
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to the Company's management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure based closely on the definition of "disclosure controls and
procedures" in Rule 13a-14(c). The Company's disclosure controls and procedures
are designed to provide a reasonable level of assurance of reaching the
Company's desired disclosure control objectives.
In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
The Company's certifying officer has concluded that the Company's disclosure
controls and procedures are effective in reaching that level of assurance.
As of the end of the period being reported upon, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
In October 2002, the Company received a lawsuit from R.G. Technical for
approximately $63,000, stating that the R.G. Technical had a contractual
agreement with Immecor for services performed on behalf of Genex, a vendor to
Immecor. The Company received a non-binding arbitration award in its favor, but
is requesting that the lawsuit be dismissed and if the lawsuit is not dismissed,
the Company will proceed with full legal action against R.G. Technical for
malicious prosecution.
On January 2003 the Company received a lawsuit from a former employee seeking
damages relating to a sex and pregnancy discrimination complaint. The Company
disputes the lawsuit and believes that there is no basis for the lawsuit, and
that the Company is requesting the matter to be dismissed. Immecor is also
seeking legal action against the former employee for malicious prosecution and
employment fraud.
There were no other legal proceedings pending against the Company during the
period ending December 31, 2003.
Item 2. Changes in Securities
There were no changes in rights of securities holders during the period ending
December 31, 2003.
Item 3. Defaults upon Senior Securities
There were no defaults upon senior securities during the period ending December
31, 2003.
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 December 31, 2003.
Item 5. Other Information
There were no major contracts signed during the period ending December 31, 2003.
Item 6. Exhibits and Reports on Form 8-K
There were no exhibits or Form 8-K filed during the period ended December 31,
2003.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act and Certification
Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as
amended, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CERTIFICATION
I, Wil Lindgren, certify that:
1. I have reviewed this report on Form 10-QSB of Immecor Corporation.
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the small business issuer as of, and for, the periods
presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the small business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures; and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuers auditors and the
audit committee of small business issuer's board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small
business issuer's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: December 13, 2003
By: /s/ Wil Lindgren
----------------------
Wil Lindgren
Chief Financial Officer
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CERTIFICATION
I, Heinot Hintereder, certify that:
1. I have reviewed this report on Form 10-QSB of Immecor Corporation.
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the small business issuer as of, and for, the periods
presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the small business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures; and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
6. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuers auditors and the
audit committee of small business issuer's board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small
business issuer's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: December 13, 2003 By: /s/ Heinot H. Hintereder
------------------------------
Heinot H. Hintereder
Chief Executive Officer
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