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, 2004
[ ] 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: 5,806,528 shares of common
stock as of March 31, 2004.
Transitional Small Business Disclosure Format Yes [ ] No [X]
<Page>
IMMECOR CORPORATION
INDEX
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Balance sheets at March 31, 2004 (unaudited) and June 30, 2003
Statements of operations for the three and nine months ended
March 31, 2004 and 2003 (unaudited)
Statements of cash flows for the nine months ended March 31,
2004 and 2003 (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.
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IMMECOR CORPORATION
Balance Sheets
ASSETS
<Table>
<Caption>
March 31, June 30,
2004 2003
(Unaudited)
Current assets:
Cash $ 378,857 $ 493,057
Accounts receivable
(Less allowance for doubtful accounts of $12,945 and $22,000) 1,475,911 785,029
Inventories 2,143,141 1,458,828
Notes receivable - current 6,611 29,116
Prepaid and other assets 396,102 158,096
Recoverable Taxes 73,353
Deferred income taxes -- 29,012
Total current assets 4,400,622 3,026,491
Equipment and improvements, net 160,722 236,372
Notes receivable 85,215 124,998
Recoverable taxes 7,946 --
Total assets $ 4,654,505 $ 3,387,861
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 754,229 $ 351,064
Accounts payable 974,778 453,894
Accrued liabilities 214,582 101,298
Total current liabilities 1,944,589 906,256
Deferred income taxes 110,204 96,027
Total liabilities 2,054,793 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 2,311,857 2,096,723
Total stockholders' equity 2,600,712 2,285,578
Total liabilities and stockholders' equity $ 4,654,505 $ 3,387,861
</Table>
See accompanying notes to financial statements
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IMMECOR CORPORATION
Statements of Operations
<Table>
<Caption>
For the three months For the nine months
ended March 31, ended March 31,
2004 2003 2004 2003
(Unaudited) (Unaudited)
Net sales $ 3,016,486 $ 1,804,412 $ 7,622,521 $ 6,191,451
Cost of sales 2,247,321 1,232,333 5,145,006 4,463,343
Gross profit 769,165 572,079 2,477,515 1,728,108
Sales and marketing 55,870 52,124 103,110 178,204
Research and development 17,066 3,238 279,604 105,906
General and administrative 786,043 469,393 1,884,032 1,242,094
Operating income (loss) (89,814) 47,324 210,769 201,904
Other (income) expense
Interest expense 22,340 10,783 61,371 31,025
Interest (income) income (587) (2,746) (3,276) (8,656)
Other (income) expense 5,317 (242) (3,975) (220)
(Loss) income before income taxes (116,884) 39,485 156,649 179,755
Income tax expense (benefit) (42,825) 0 (58,484) 118,224
Net (loss) income $ (74,059) $ 39,485 $ 215,133 $ 61,531
Net (loss) income per share -
basic and diluted $(0.01) $0.006 $0.04 $0.01
Weighted average shares used in
computing net income (loss) per
share, basic and diluted 5,806,528 5,806,128 5,806,528 5,806,128
</Table>
See accompanying notes to financial statements
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IMMECOR CORPORATION
Statements of Cash Flows
<Table>
<Caption>
For the nine months
ended March 31,
2004 2003
(Unaudited)
Cash flows from operating activities:
Net (loss) income $ 215,133 61,531
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 81,824 92,477
Deferred income taxes 43,189 --
Reserve for inventories (10,000) --
Changes in operating assets and liabilities:
Accounts receivable (690,882) (157,172)
Income tax recoverable 65,407 --
Inventories (674,313) 82,944
Prepaid and other assets (238,006) (5,098)
Accounts payable 520,884 136,378
Accrued liabilities 113,284 (192,477)
Income taxes payable -- (39,455)
Net cash (used in) provided by operating activities (573,480) (20,871)
Cash flows from investing activities:
Purchase of property and equipment (6,174) --
Purchase of certificate of deposit - 16,705
Proceeds from notes receivable 64,310 -
Increase in notes receivable (2,022) (82,837)
Net cash provided by (used in) investing activities 56,114 (66,132)
Cash flows from financing activities:
Net borrowings (repayments) from line of credit 403,165 111,066
Borrowings from note payable -- -
Repayments on note payable -- (34,250)
Net cash provided by financing activities 403,165 76,816
Net change in cash (114,201) (10,187)
Cash balance, beginning of period 493,057 482,855
Cash balance, end of period $ 378,857 $ 472,668
</Table>
See accompanying notes to financial statements
<Page>
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, 2003 as
filed with the Securities and Exchange Commission.
The unaudited financial statements presented herein as of and for the three and
nine months ended March 31, 2004 and March 31, 2003 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,
2003 is derived from the audited financial statements included in the Company's
Annual Report on Form 10-KSB for the year ended June 30, 2003.
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
The Company has a reclassified amount of $279,261 from accounts payable to
prepaid expenses due to a research and development project where the account
was prepaid. The adjustment was previously recorded during the quarter ended
December 31, 2003. Such reclassifications have been presented for the nine
months ended March 31, 2004.
The Company also reclassified an amount of $119,255 from prepaid commissions to
salaries for sales personnel. The adjustment was recorded for the quarter end
March 31, 2004 and has been presented for the nine months ended March 31, 2004.
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 66% and 60% of total sales for the three months ended
March 31, 2004, and 2003, respectively. One customer accounted for 67% and 69%
of total sales in the nine months ended March 31, 2004 and 2003, respectively.
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 Company's majority shareholder also personally guarantees the
line of credit. The available borrowing base on the line of credit as of
March 31, 2004 was approximately $44,945.
<Page>
Note 4: Income Taxes
The effective income tax rates for the nine months ended March 31, 2004 and
2003 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 5: Recent Accounting Pronouncements
In December 2003, the FASB issued SFAS No. 132 (revised), "Employers'
Disclosures about Pensions and Other Postretirement Benefits" ("SFAS No.132R").
This standard prescribes employers' disclosures about pension plans and other
postretirement benefits plans, but does not change the measurement of
recognition of those plans. SFAS No. 132R retains and revises the disclosure
requirements contained in the original standard. It also requires additional
disclosures about the assets, obligations, cash flows, and net periodic benefit
costs of defined benefit pension plans and other postretirement benefit plans.
For public companies, SFAS No. 132R is generally effective for fiscal years
ending after December 15, 2003. The Company has adopted the provisions of this
statement and it has no material impact on our financial statement.
The Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No.("FIN") 46, "Consolidation of Variable Interest Entities" in
January 2003. This interpretation provides guidance on the identification of,
and financial reporting for, variable interest entities. Variable interest
entities are entities that lack the characteristics of a controlling financial
interest or lack sufficient equity to finance its activities without additional
subordinated financial support. FIN 46 requires a company to consolidate a
variable interest entity if that company is obligated to absorb the majority of
the entity's expected losses or entitled to receive the majority of the entity's
residual returns, or both. FIN 46 is applicable immediately to variable interest
entities created after January 31, 2003. For all variable interest entities
created prior to February 1, 2003, FIN 46 is applicable to periods beginning
after December 15, 2003. We do not have investments in variable interest
entities and do not have any variable interest entities, as defined by FIN 46;
as a result, there is no impact on our financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003. The adoption of SFAS No.
149 did not materially impact our financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
is effective for instruments entered into or modified after May 31, 2003 and is
otherwise effective for our first quarter of fiscal year 2004. The adoption of
SFAS No. 150 will not have a significant impact on our results of operations
and financial position.
Note 5: Related Party Transactions
The Company purchases custom cables and sub assembly work from a vendor that is
related to a shareholder and officer of the company. Purchases amounted to
$36,061 and $52,852 for nine months ended March 31, 2004 and 2003. Purchases
provide the Company with the ability to procure product timely and
competitively.
<Page>
RESULTS OF OPERATIONS FOR THE Three and Nine Months ended March 31, 2004 and
2003
Net Sales
Net sales increased by $1,212,074 or 67% from $1,804,412 for the three months
ended March 31, 2003 to $3,016,486 for the three months ended March 31, 2004
and net sales increased by $1,431,070 or 23% from $6,191,451 for the nine
months ended March 31, 2003 to $7,622,521 for the nine months ended March 31,
2004 respectively.
The increase in sales is primarily due to new customers and an increase in
demand for technology related products. The Company does acknowledge that
future increase in sales will depend on its ability to market to new customers
and the overall strength of the economy. The year 2004 revenues are in line
with management's expectations and the Company's historical trends
prior to 2000.
Gross Profit
Gross profits increased from $572,079 for the three months ended March 31, 2003
to $769,165 for the three months ended March 31, 2004. As a percentage of net
sales, gross profits decreased from 32% for the three months ended March 31,
2003 to 25% for the three months ended March 31, 2004.
The decrease in gross profit as a percentage of net sales was primarily due to
sales of off the shelf components and or products to new customers versus
custom build hardware during the three-month period ended March 31, 2004.
Gross profits increased from $1,728,108 for the nine months ended March 31,
2003 to $2,477,515 for the nine months ended March 31, 2004. As a percentage
of net sales, gross profits increased from 28% for the nine months ended March
31, 2003 to 33% for the nine months ended for March 31, 2004.
The increase in gross profit as a percentage of sales was primarily due to a
new generation of custom built products for new and existing customers
released in the first and second quarter of 2004. The Company acknowledges
that pricing pressures due to the competitive market, changes in sales volume,
and changes in customer demand may adversely impact gross profits in upcoming
quarters.
Selling, General and Administrative Expenses
Sales and marketing expenses increased $3,746 from $52,124 for the three months
ended March 31, 2003 to $55,870 for the three months ended March 31, 2004.
The increase in expenses is primarily due to an increase in marketing expenses
associated to visiting new customers during the three-month period ended
March 31, 2004.
Sales and marketing expenses decreased $75,094 from $178,204 for the nine
months ended March 31, 2003 to $103,110 for the nine months ended March 31,
2004. The decrease is primarily due to the accounting for prepaid commissions.
General and administrative expenses increased $316,650 from $469,393 for the
three-month period ended March 31, 2003 to $786,043 for the three-month period
ended March 31, 2004. General and administrative expenses increased $641,938
from $1,242,094 for the nine-month period ended March 31, 2003 to $1,884,032
for the nine-month period ended March 31, 2004. The increase in expenses are
primarily due to an increase in insurance costs, attorney fees,
reclassification of commissions, increase in rents and an increase in staff.
Research and development expense for the three months ended March 31, 2003 and
March 31, 2004 was approximately $3,238 and $17,066, respectively. Research
and development expense for the nine months ended March 31, 2003 and March 31,
2004 was approximately $178,204 and $103,109, 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.
Income Taxes
The Company uses the liability method in accounting for income taxes.
Deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. A valuation allowance is established to reduce deferred tax assets if
it is more likely than not that some or all of a deferred tax asset may not be
realized. Income tax benefit (provision)is comprised of the taxes receivable
(payable)for the net change during the period in deferred tax assets and
liabilities.
Liquidity and Capital Resources
On March 31, 2004 and 2003 the Company had net working capital of $2,456,033
and $2,120,235 respectively. The increase in working capital from 2003 to 2004
is primarily due to an increase in accounts receivable, inventory, and prepaid
assets.
The Company had net cash used in operating activities of $(20,871) for the nine
months ended March 31, 2003 compared to net cash used in operating activities
of $(573,479) for the nine months ended March 31, 2004. The $(554,005)
difference is primarily due to the increase in accounts receivable, prepaid
expenses, and inventory for the nine months ended March 31, 2004.
The Company had net cash used in investing activities of $(66,132) for the nine
months ended March 31, 2003 compared to net cash provided by investing
activities of $56,114 for the nine months ended March 31, 2004. The $122,246
difference relates primarily to proceeds from notes receivable during the nine
months ended March 31, 2004.
The Company had net cash provided by financing activities of $76,816 for the
nine months ended March 31, 2003 compared to net cash provided by financing
activities of $403,165 for the nine months ended March 31, 2004. The $326,349
difference relates primarily to an increase in borrowings on line of credit
as a result of extended trade terms to customers due to the slow economy for
the nine months ended March 31, 2004 as compared to the prior period.
As of March 31, 2004, the Company was in compliance with all of its covenants,
financial or otherwise. 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
2004. There were no substantial commitments for purchase orders outside the
normal purchase orders used to secure product as of March 31, 2004.
<Page>
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. A preliminary trial hearing date is
scheduled for May of 2004.
On February 19, 2004, the Company received a dismissal of all allegations by a
former employee who was seeking damages relating to a sex and pregnancy
discrimination complaint. The Company disputed the claim and won a victory
when the plaintiff dismissed all charges with prejudice.
On March 30, 2004 the Company received a lawsuit from a former employee
seeking damages relating to a wrongful termination, harassment and disability
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.
There were no other legal proceedings pending against the Company during the
period ending March 31, 2004.
Item 2. Changes in Securities
There were no changes in rights of securities holders during the period ending
March 31, 2004.
Item 3. Defaults upon Senior Securities
There were no defaults upon senior securities during the period ending
March 31, 2004.
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 March 31, 2004.
Item 5. Other Information
There were no major contracts signed during the period ending March 31, 2004.
Item 6. Exhibits and Reports on Form 8-K
There were no exhibits or Form 8-K filed during the period ended March 31, 2004.
<Page>
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: May 31, 2004
By: /s/ Wil Lindgren
-------------------------------------------
Wil Lindgren, CFO
<Page>
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
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: May 31, 2004
By: /s/ Heinot H. Hintereder
-------------------------------------------
Heinot H. Hintereder, CEO