U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C.
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
[ ] 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 001-12189
IMAGE GUIDED TECHNOLOGIES, INC.
-------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1139082
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5710-B FLATIRON PARKWAY, BOULDER, COLORADO 80301
------------------------------------------------
(Address of principal executive offices)
(303) 447-0248
--------------
(Registrant's telephone number, including area code)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
The number of shares outstanding of the registrant's common stock as of May 14,
1999 was 3,787,980.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
IMAGE GUIDED TECHNOLOGIES
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
Part I Financial Information Page
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Item 1. Balance Sheets as of March 31, 1999 and December 31, 1998 3
Statements of Operations for the three months ended
March 31, 1999 and 1998 4
Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 8
Part II Other Information and Signatures 12
2
IMAGE GUIDED TECHNOLOGIES, INC.
BALANCE SHEETS
March 31, December 31,
1999 1998
----------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 52,000 $ 23,000
Accounts receivable, net of allowance for doubtful
accounts of $83,000 and $76,000, respectively 1,822,000 1,710,000
Inventories, net 919,000 921,000
Investment--Discontinued operations -- 1,437,000
Other current assets 207,000 174,000
----------------- -----------------
Total current assets 3,000,000 4,265,000
Property and equipment, net of accumulated depreciation of
$648,000 and $602,000, respectively 644,000 650,000
Goodwill, net of accumulated amortization of $38,000 and
$31,000, respectively 543,000 550,000
Investment--Discontinued operations -- 5,184,000
Other assets 221,000 222,000
----------------- -----------------
Total assets 4,408,000 10,871,000
----------------- -----------------
----------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,172,000 860,000
Accrued liabilities 377,000 403,000
Line of credit 587,000 2,524,000
Current portion of capital lease obligations 37,000 1,332,000
Current portion of notes payable 500,000 2,986,000
----------------- -----------------
Total current liabilities 2,673,000 8,105,000
Capital lease obligations 29,000 38,000
----------------- -----------------
Total liabilities 2,702,000 8,143,000
----------------- -----------------
Shareholders' equity:
Common stock, no par value, 10,000,000 shares
authorized; 3,705,222 shares issued and outstanding 10,456,000 10,456,000
Accumulated deficit (8,750,000) (7,728,000)
----------------- -----------------
Total shareholders' equity 1,706,000 2,728,000
----------------- -----------------
Total liabilities and shareholders' equity $ 4,408,000 $ 10,871,000
----------------- -----------------
----------------- -----------------
The accompanying notes are an integral part of these balance sheets.
3
IMAGE GUIDED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
(Unaudited)
1999 1998
-------------------- --------------------
Revenue $ 1,854,000 $ 1,720,000
Cost of goods sold 1,031,000 1,056,000
-------------------- --------------------
Gross profit 823,000 664,000
-------------------- --------------------
Operating expenses:
Research and development 345,000 379,000
Selling and marketing 307,000 208,000
General and administrative 531,000 316,000
-------------------- --------------------
Total operating expenses 1,183,000 903,000
-------------------- --------------------
Operating income (loss) (360,000) (239,000)
Other income (expense) (2,000) (38,000)
-------------------- --------------------
Income (loss) from continuing operations before taxes (362,000) (277,000)
Income taxes -- --
Discontinued operations:
Income (loss) from discontinued operations 30,000 (49,000)
Loss on disposal (690,000) --
-------------------- --------------------
Net income (loss) $ (1,022,000) $ (326,000)
-------------------- --------------------
-------------------- --------------------
Earnings (loss) per share (basic and diluted):
Continuing operations $ (0.10) $ (0.08)
-------------------- --------------------
-------------------- --------------------
Discontinued operations $ (0.18) $ (0.01)
-------------------- --------------------
-------------------- --------------------
Net income $ (0.28) $ (0.09)
-------------------- --------------------
-------------------- --------------------
Weighted average common shares outstanding (basic and diluted) 3,705,222 3,693,822
-------------------- --------------------
-------------------- --------------------
The accompanying notes are an integral part of these financial statements.
4
IMAGE GUIDED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
(Unaudited)
1999 1998
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,022,000) $ (326,000)
Net loss from discontinued operations (660,000) (49,000)
----------------- -----------------
Income (loss) from continuing operations (362,000) (277,000)
Adjustments to reconcile net loss from continuing operations
to net cash used in continuing operating activities:
Depreciation and amortization 53,000 88,000
Loss on disposition of assets -- (388,000)
Provision for inventory obsolescence -- (7,000)
Provision for doubtful accounts 7,000 12,000
Changes in operating assets and liabilities:
Accounts receivable (119,000) 202,000
Inventories 2,000 (50,000)
Other current assets (33,000) 184,000
Accounts payable 312,000 125,000
Accrued liabilities (26,000) 83,000
----------------- -----------------
Net cash used in continuing operating activities (166,000) (28,000)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment 40,000 --
Proceeds from sale of net assets 5,869,000 --
----------------- -----------------
Net cash provided by investing activities 5,909,000 --
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Pay off of revolving loan (1,924,000) --
Pay off of capital lease obligations (1,304,000) (110,000)
Pay off of notes payable (2,486,000) (223,000)
----------------- -----------------
Net cash used in investing activities $ (5,714,000) $ (333,000)
----------------- -----------------
Net increase (decrease) in cash and cash equivalents 29,000 (361,000)
CASH AND CASH EQUIVALENTS, beginning of period 23,000 1,216,000
----------------- -----------------
CASH AND CASH EQUIVALENTS, end of period $ 52,000 $ 855,000
----------------- -----------------
----------------- -----------------
Supplemental Cash Flow Disclosures:
Interest paid $ 153,000 $ 182,000
Warrants issued in connection with debt -- 119,000
The accompanying notes are an integral part of these financial statements.
5
IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
Note 1--Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Springfield Surgical Instruments, Inc.
(Springfield), f/k/a Brimfield Precision, Inc. The consolidated financial
statements have been adjusted and restated to reflect the results of operations
and net assets of the general instrument and implant business units of
Springfield as discontinued operations for the three months ended March 31, 1999
and 1998. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. The
financial statements reflect all adjustments which, in the opinion of
management, are necessary to present fairly the financial position of the
Company as of March 31, 1999 and its results of operations and cash flows for
the three month period then ended. The unaudited financial statements should be
read with the complete financial statements and footnotes thereto included in
the Company's Form 10-KSB for the year ended December 31, 1998 previously filed
with the Securities and Exchange Commission.
Note 2--Sale of Springfield Surgical Instruments, Inc. Assets
On March 30, 1999, Springfield sold substantially all the assets of its general
surgical instruments, orthopedic implants and orthopedic instrumentation
business located at Brimfield, Massachusetts. The sales price was $6,000,000 in
cash plus assumption of certain trade payables and accrued liabilities, subject
to adjustment for changes for the period from June 30, 1998 through closing.
The final purchase price is not expected to be finalized until June 1999.
The funds received from the net asset sale were used to pay off amounts
outstanding under equipment leases and the Company's term loan with BankBoston
and to pay down the Company's revolving loan with BankBoston.
Note 3--Line of Credit
On April 9, 1999, BankBoston assigned its loan to Silicon Valley Financial
Services ("Silicon"), a division of Silicon Valley Bank. After the assignment,
Silicon and the Company amended and restated the loan to provide for a loan
facility under which Silicon would purchase certain of the Company's
receivables, initially at the rates of 90% and decreasing to 80% of the face
amount of the receivables by July 1, 1999. The total amount of receivables
purchased at any time cannot exceed $1,500,000. Under the facility, the Company
will repurchase from Silicon any uncollected receivables which are over 90 days
old from the date of the invoice. Silicon has no obligation to purchase any
receivable under the facility. As of May 14, 1999, the balance of the Company's
accounts receivable that had been purchased by Silicon was approximately
$837,000. The funds were used to pay off the BankBoston line of credit and to
fund operations.
Note 4 - Segment Information
The Company has two business segments--optical localizers and surgical
instruments. The optical localizer segment typically sells a system which
consists of the following: a number of light-emitting diodes ("LED's") used as
markers mounted on a pointer device or surgical instrument, a relative position
dynamic reference device
6
connected to a patient or industrial part, a multi-camera array for detecting
the X, Y and Z positions of the LED's, a proprietary microprocessor-based
control system and a proprietary software package. The surgical instrument
segment sells stainless steel surgical instruments used for minimally
invasive surgery and other surgical procedures.
The Company does not have any intersegment revenue and evaluates segment
performance based upon revenue and gross profit. The segment gross profit equals
consolidated gross profit. The Company does not allocate research and product
development costs, selling, general and administrative expenses, other income
and expense or income taxes to the two segments. The revenue and gross profit by
segment is as follows.
1999 1998
----------------- -----------------
Revenue: Optical localizers $ 1,480,000 $ 1,017,000
Surgical instruments 374,000 703,000
----------------- -----------------
Total revenue $ 1,854,000 $ 1,720,000
----------------- -----------------
----------------- -----------------
Gross profit: Optical localizers $ 800,000 $ 454,000
Surgical instruments 23,000 210,000
----------------- -----------------
Total gross profit $ 823,000 $ 664,000
----------------- -----------------
----------------- -----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998
REVENUE. Revenue increased $134,000 or 7.8% from $1,720,000 in the first quarter
1998 to $1,854,000 in the first quarter 1999. The increase is due to optical
localizer business from new customers, increased sales of the Company's wireless
systems and an increase in sales in the industrial market, offset by a decrease
in surgical instruments sales due to the loss of a major customer.
COST OF GOODS SOLD AND GROSS MARGIN. The Company's gross margin increased from
38.6% in the first quarter 1998 to 44.4% in the first quarter 1999. This
increase is due to higher optical localizer margins due to a more favorable
product mix offset by a decrease in surgical instruments margins.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses decreased
$34,000 or 9% from $379,000 in the first quarter 1998 to $345,000 in the first
quarter 1999. The net decrease is due to a reduction in engineering personnel in
the third quarter of 1998 offset by an increase in quality assurance expenses in
the first quarter of 1999 related to the Company's obtaining of ISO 9001
certification in the second quarter.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased $99,000
or 47.6% from $208,000 in the first quarter 1998 to $307,000 in the first
quarter 1999. This increase is due to two additional sales personnel in 1999
plus increased expenses related to trade shows.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $208,000 or 65.8% from $316,000 in the first quarter 1998 to $524,000
in the first quarter 1999. This increase is due to several
7
factors: severance costs in the first quarter of 1999 for a former officer,
and increases in legal fees and travel costs.
OTHER INCOME (EXPENSE). Other income (expense) decreased $36,000 in the first
quarter 1999 compared to the first quarter 1998. Of the total $153,000 interest
expense during the first quarter 1999, $30,000 is related to debt from
continuing operations. The decrease is due to an increase in other income.
DISCONTINUED OPERATIONS. Income (loss) from discontinued operations represents
the results of operations of the general surgical instruments, orthopedic
implants and orthopedic instrumentation business which the Company sold in March
1999. The loss on disposal of assets represents an additional loss recognized in
the first quarter of 1999 due to a change in the estimated sale price primarily
due to the valuation of net assets sold and the costs associated with finalizing
the sale.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently in default under its $500,000 12% subordinated
promissory note payable to Cruttenden Roth, Inc. While interest has been paid to
date, the Company owes the $500,000 principal amount in full. The note is
subordinated to the Company's bank debt and the holders of the note are not
permitted under the terms of the subordination agreement with the bank to sue
upon or collect, nor to make demand for, nor to exercise any rights or remedies
to enforce, the note, so long as any bank obligation remains outstanding.
As of May 24, 1999, approximately $464,000 of the Company's outstanding
accounts receivable had been purchased by Silicon. The Company expects to
incur operating losses for the months of April and May and has exceeded its
agreed upon terms for payment with several creditors. The Company is pursuing
various alternatives to raise cash to fund its operating losses, pay down
its obligations to its suppliers and for other corporate purposes.
FORWARD-LOOKING STATEMENTS
The Company may, in discussions of its future plans, objectives and expected
performance in periodic reports filed by the Company with the Securities and
Exchange Commission (or documents incorporated by reference therein) and in
written and oral presentations made by the Company, include projections or other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 or Section 21E of the Securities Exchange Act of 1934, as amended.
Such projections and forward-looking statements are based on assumptions which
the Company believes are reasonable, but are by their nature inherently
uncertain. In all cases, there can be no assurance that such assumptions will
prove correct or that projected events will occur, and actual results could
differ materially from those projected. Some of the important factors that could
cause actual results to differ from any such projections or other
forward-looking statements follow.
LOSS DURING 1998 AND 1999; POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The
Company lost $1,352,000 from continuing operations in 1998 and $362,000 in the
first quarter 1999. There can be no assurance the Company will generate
sufficient revenue to attain profitability. In addition, because the Company
generally ships its products on the basis of purchase orders, operating results
in any quarter are highly dependent on orders booked and shipped in that quarter
and, accordingly, may fluctuate materially from quarter to quarter. The
Company's operating expense levels are based on the Company's internal forecasts
of future demand and not on firm customer orders. Failure by the Company to
achieve these internal forecasts could result in expense levels which are
inconsistent with actual revenues. Moreover, the Company's results may also be
affected by fluctuating demand for the Company's products, declines in the
average selling prices for its products, by changes in product mix sold, by
increases in the costs of the components and subassemblies acquired by the
Company from vendors, and by availability of such component and subassemblies
from vendors.
BANK DEBT. The Company is currently borrowing money from Silicon Valley
Financial Services, a division of Silicon Valley Bank through an arrangement by
which it sells its outstanding accounts receivable to Silicon. The arrangement
is expensive and Silicon has no obligation to purchase any receivable. While the
Company hopes to be able to obtain a more favorable banking arrangement, there
can be no assurance that it will be successful.
8
NEED FOR ADDITIONAL CAPITAL. The Company will need additional capital to satisfy
its obligations to Cruttenden Roth, Inc. and to meet its other capital
requirements. There can be no assurance that such capital will be available on
reasonable terms, or at all.
DEPENDENCE ON FEW CUSTOMERS. The Company realizes a majority of its revenues by
sales to relatively few customers. None of these customers has entered into any
long term minimum purchase agreements with the Company. The loss of, or
substantial diminution of purchases from the Company by, any of these customers
could have a material adverse effect on the Company.
TECHNOLOGICAL CHANGE IN THE MEDICAL INDUSTRY AND IN THE COMPANY'S PRODUCT. There
can be no assurance that the Company's competitors will not succeed in
developing or marketing products or technologies that are more effective and/or
less costly and which render the Company's products obsolete or non-competitive.
In addition, new technologies and procedures could be developed for medical and
other industries that replace or reduce the value of the Company's products. The
Company's success will depend in part on its ability to respond quickly to
technological changes through the development and improvement of its products.
The Company believes that a substantial amount of capital will be required to be
allocated to such activities in the future.
PROPERTY RIGHTS. The Company does not have any patents which directly cover its
FlashPoint or Pixsys optical localizers. The Company primarily relies on a
combination of trade secret and copyright laws, together with nondisclosure
agreements to protect its know-how and proprietary rights. There can be no
assurance that such measures will provide adequate protection for the Company's
intellectual property rights, that disputes with respect to ownership of its
intellectual property rights will not arise, that the Company's trade secrets or
proprietary technology will not otherwise become known or be independently
developed by competitors or that the Company can otherwise meaningfully protect
its intellectual property rights. Furthermore, there can be no assurance that
others will not develop similar products or software, duplicate the Company's
products or software or that third parties will not assert intellectual property
infringement claims against the Company. Moreover, there can be no assurance
that any patent owned by, or issued to, the Company will not be invalidated,
circumvented or challenged, or that the rights granted thereunder will provide
meaningful competitive advantages to the Company.
A patent granted to St. Louis University, and subsequently licensed to a company
acquired by Sofamor Danek, one of the Company's major customers, covers, in
general, a particular technique for determining the position of a surgical probe
within a patient's body on a historical image of that body. Sofamar Danek has
recently sued BrainLab GmbH for infringement of this patent. The Company's
documents have been subpoenaed and Waldean Schulz, Vice President-Technology of
the Company, has had his deposition taken in connection with such lawsuits. The
Company is not in a position to evaluate what effect this lawsuit, or any
further lawsuits, will have on its customers or whether it will become a
defendant in any lawsuit involving this patent or any of the Company's patents.
Litigation may be necessary to protect the Company's intellectual property
rights and trade secrets, to determine the validity and scope of the proprietary
rights of others or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources,
regardless of the outcome of the litigation. If any claims are asserted against
the Company, the Company may be required to obtain a license under a third
party's intellectual property rights. However, such a license may not be
available on reasonable terms or at all.
COMPETITION BY EXISTING COMPETITORS AND POTENTIAL NEW ENTRANTS INTO THE
MARKETPLACE. Companies with substantially greater financial, technical,
marketing, manufacturing and human resources, as well as name recognition, than
the Company may enter markets currently serviced by the Company. Additionally,
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements and to devote substantially greater
resources to the development, marketing and sale of their products than the
Company. The Company's customers may develop their own products to be able to
differentiate their product or for other reasons. Furthermore, such competitors
may develop technologies and/or products other than that currently offered by
the Company that are more effective or economical.
9
REGULATION BY THE FDA. Noncompliance with applicable requirements of FDA can
result in, among other things, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for medical
devices, withdrawal of marketing approvals and criminal prosecution. The FDA
also has the authority to request repair, replacement or refund of the cost of
any medical device. In addition, international sales of medical devices are
subject to foreign regulatory requirements, which vary from country to country.
RISK OF PRODUCT LIABILITY CLAIMS. The Company faces an inherent business risk of
exposure to product liability claims in the event that the use of its products
is alleged to have resulted in adverse effects. To date, no product liability
claims have been asserted against the Company. The Company maintains a product
liability and commercial general liability insurance policy with coverage of
$1,000,000 per occurrence and an annual aggregate maximum coverage of $2,000,000
($1,000,000 for lawsuits outside the United States, Canada and Puerto Rico). The
Company's product liability and general liability policy is provided on an
occurrence basis and is subject to annual renewal. There can be no assurance
that liability claims will not exceed the coverage limits of such policy or that
such insurance will continue to be available on commercially reasonable terms or
at all. If the Company does not or cannot maintain sufficient liability
insurance, its ability to market its products could be significantly impaired.
COMPANY'S DEPENDENCE ON KEY MANAGEMENT AND TECHNICAL PERSONNEL AND ITS ABILITY
TO ATTRACT NEW PERSONNEL. The Company's success depends in significant part on
the continued contribution of certain key management and technical personnel.
The loss of services of any of these individuals could have a material adverse
effect on the Company. The Company's growth and profitability also depend on its
ability to attract and retain other management and technical personnel.
CLAIM BY DANIEL HANNIFY. The Company and Springfield have recently received a
notice of claim pursuant to the December 1, 1997 Employment Agreement between
Brimfield Precision, Inc. and Daniel T. Hannify. Mr. Hannify is claiming that
he is entitled to payment of $200,000 per year plus benefits for two years
and eight months.
YEAR 2000 ISSUES. Pursuant to the Company's readiness programs, all major
categories of information technology systems and non-information technology
systems (i.e., equipment with embedded microprocessors) in use by the Company,
including manufacturing, sales, financial and human resources, are being
inventoried and assessed. In addition, plans are being developed for the
required systems modifications or replacements. With respect to its information
technology systems, the Company has completed the entire assessment phase and
has complete 90% of the remediation phase as of March 31, 1999. The Company
plans to complete the final 10% of the remediation phase for its information
technology by June 30, 1999. With respect to its non-information technology
systems, the Company has completed approximately 85% of the assessment phase and
has yet to begin the remediation phase. The remainder of the assessment for
non-technology systems will be complete by May 31, 1999 and remediation will be
complete by June 30, 1999. Selected areas, both internal and external, will be
tested to assure the integrity of the Company's remediation programs. The
testing is expected to be completed by June 30, 1999. The company plans to have
all internal mission-critical information technology and non-information
technology systems Year 2000 compliant by June 30, 1999.
The Company is in the process of communicating with its major customers,
suppliers and financial institutions to assess the potential impact on the
Company's operations if those third parties fail to become Year 2000 compliant
in a timely manner. A formal survey of major customers and suppliers began in
April 1999. Risk assessment, readiness evaluation, action plans and contingency
plans related to the Company's significant customers and suppliers are expected
to be completed by June 30, 1999. The Company's key financial institutions have
been surveyed and it is the Company's understanding that they are or will be
Year 2000 compliant on or before December 31, 1999.
The costs incurred to date related to its Year 2000 activities have not been
material to the Company, and, based upon current estimates, the Company does not
believe that the total cost of its Year 2000 readiness programs will have a
material adverse impact on the Company's result of operations or financial
condition.
10
The Company's readiness programs will also include the development of
contingency plans to protect its business and operations from Year 2000-related
interruptions. These plans should be complete by June 30, 1999 and, by way of
examples, will include back-up procedures, identification of alternate
suppliers, where possible, and increases in safety inventory levels. There can
be no assurances, however, that any of the Company's contingency plans will be
sufficient to handle all problems or issues which may arise.
The Company believes that it is taking reasonable steps to identify and address
those matters that could cause serious interruptions in its business and
operations due to Year 2000 issues. However, delays in the implementation of new
systems, a failure to fully identify all Year 2000 dependencies in the Company's
systems and in the systems of its suppliers, customers and financial
institutions, a failure of such third parties to adequately address their
respective Year 2000 issues, or a failure of a contingency plan could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and the time-frame in which the Company plans to
complete Year 2000 modifications are based upon management's best estimate.
These estimates were derived from internal assessments and assumptions of future
events. These estimates may be adversely affected by the continued availability
of personnel and system resources, and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, there can by no
guarantee that any estimates, or other forward-looking statements will be
achieved, and actual results could differ significantly from those contemplated.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
The Company is currently in default under its $500,000 12% subordinated
promissory note payable to Cruttenden Roth, Inc. See "Liquidity and
Capital Resources."
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Title
----------- -----
2.35 Stock Option Agreement for Paul L. Ray
2.36 Employment Agreement dated December 1, 1997 between
Brimfield Precision, Inc. and Daniel T. Hannify
27 Financial Data Schedule
(b) Reports on Form 8-K
Filed January 8, 1999--The Company issued two press releases
announcing (1) that its stock would be quoted on the OTC Bulletin
Board, (2) the execution of an agreement to sell certain assets of
Brimfield Precision, Inc., its wholly-owned subsidiary and (3) the
hiring of a new chief financial officer as of January 1, 1999.
Filed March 29, 1999--The Company announced that its chief
financial officer had resigned effective March 12, 1999, and that
William O'Connor, the Company's Chief Operating Officer, has been
appointed Treasurer effective March 29, 1999.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Image Guided Technologies, Inc.
/s/ Paul L. Ray Date: May 24, 1999
- -------------------------------------
Paul L. Ray
President, Chief Executive Officer and
Chief Financial Officer
13