10-Q 1 a10qsb093003.txt IMMECOR CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 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 September 30, 2002. Transitional Small Business Disclosure Format Yes [ ] No [X] IMMECOR CORPORATION INDEX TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1. Balance sheets at September 30, 2002 (unaudited) and June 30, 2002 Statements of operations (unaudited) for the three months ended September 30, 2001 and 2002 Statements of cash flows (unaudited) for the three months ended September 30, 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 September 30, June 30, 2002 2002 (unaudited) Current assets: Cash $ 720,109 $ 482,855 Accounts receivable, net of allowance for doubtful accounts of $22,000 and $22,000 465,956 740,887 Inventories, net of inventory reserve of $288,710 and $288,914 1,483,123 1,676,993 Notes receivable - current 25,854 26,448 Deposits 41,976 41,976 Total current assets 2,737,018 2,969,159 Property and equipment, net 327,750 358,665 Notes receivable 129,057 55,191 Total assets $ 3,193,825 $ 3,383,015 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $ 206,765 $ 388,627 Note payable - 34,250 Accounts payable 414,685 368,146 Accrued bonuses 113,244 113,244 Accrued liabilities 160,644 199,258 Income taxes payable - 40,524 Total current liabilities 895,338 1,144,049 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 2,009,632 1,950,111 Total stockholders' equity 2,298,487 2,238,966 Total liabilities and stockholders' equity $ 3,193,825 $ 3,383,015
IMMECOR CORPORATION Statements of Operations
For the three months ended September 30, 2002 2001 (unaudited) Net sales $ 2,553,747 $ 2,261,970 Cost of sales 1,820,760 1,392,431 Gross profit 732,987 869,539 Operating expenses: Sales and marketing 63,142 28,844 Research and development 102,297 177,733 General and administrative 454,689 615,128 Operating income 112,859 47,834 Other income (expense): Other income (expense) 27 (21,629) Interest income 3,450 6,125 Interest expense (9,311) (178,201) Income (loss) before income taxes 107,025 (145,871) Income tax provision (benefit) 47,504 (18,266) Net income (loss) $ 59,521 $ (127, 605) Net income (loss) per share - basic and diluted $ 0.01 $ (0.02) Weighted average shares outstanding - basic and diluted 5,806,128 5,806,128
IMMECOR CORPORATION Statements of Cash Flows
For the three months ended September 30, 2002 2001 (unaudited) Cash flows from operating activities: Net income (loss) $ 59,521 $ (127,605) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 30,915 24,992 Deferred income taxes - 126,800 Reserve for inventories (204) 50,000 Cash effect of changes in operating assets and liabilities: Accounts receivable 274,931 147,985 Inventories 194,074 681,774 Prepaid expenses - (125,412) Accounts payable 46,539 (854,714) Accrued bonuses and liabilities (38,614) (74,400) Income taxes payable (40,524) (851,833) Net cash provided by (used in) operating activities 526,638 (1,002,413) Cash flows from investing activities: Proceeds from notes receivable 7,291 1,650 Issuance of notes receivable (80,563) - Net cash (used in) provided by investing activities (73,272) 1,650 Cash flows from financing activities: Net borrowings (repayments) from line of credit (181,862) 139,984 Borrowings from note payable - 455,186 Repayments on note payable (34,250) (76,005) Net cash (used in) provided by financing activities (216,112) 519,165 Net change in cash 237,254 (481,598) Cash, beginning of period 482,855 498,636 Cash, end of period $ 720,109 $ 17,038
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 September 30, 2002, and for the six months ended June 30, 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. 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 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 76% and 87% of total sales for the three months ended September 30, 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 September 30, 2001 is approximately $586,000 of inventory write-downs related to obsolete, slow-moving or non-saleable inventory. For the three months ended September 30, 2002, the Company did not make any significant adjustments to its inventory reserves. 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, and a personal guarantee by one of the Company's stockholder. The available borrowing base on the line of credit as of September 30, 2002 was approximately $140,280. Note 6: Income Taxes The effective income tax rates for the three months ended September 30, 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 7: Change in Fiscal Year The Company changed its fiscal year end from December 31, to June 30, effective July 1, 2002. Accordingly, the Company is presenting quarterly unaudited financial statements and accompanying notes for the quarters ended September 30, 2002 and 2001 on this Form 10Q-SB. Note 8: Related Party Transactions Included in the Companys notes receivable at September 30, 2002 and June 30, 2002, are amounts due from stockholder-employees of approximately $83,000 and $22,000, respectively. Also included in accrued bonuses and accrued liabilities are deferred bonus and salaries due to stockholder-employees of approximately $157,000 and $198,000 at September 30, 2002 and June 30, 2002, respectively. Note 9: Recent Accounting Pronouncements In June 2001, the FASB issued Statement of Financial Accounting Standards (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 transition period beginning January 1, 2002. The Company's adoption of SFAS No. 142 had no effect on the Companys results of operations or financial position. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal Of Long-Lived Assets, which establishes one accounting model to be used for long-lived assets to be disposed of by sale, whether previously used or newly acquired. SFAS No. 144 is effective for the Company's transition period beginning January 1, 2002. The Companys adoption of SFAS No. 144 had no 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 September 30, 2002 and 2001 Net Sales Net sales increased by $291,777 or 13% from $2,261,970 for the three months ended September 30, 2001 to $2,553,747 for the three months ended September 30, 2002. The increase in sales is primarily due to new customers that have diversified the customer base. The Company does acknowledge that a continued downturn in the economic conditions and a continued weak demand for technology related products may have an adverse effect on the Company's financial results. Gross Profit Gross profits decreased $136,552 or 16% from $869,539 for the three months ended September 30, 2001 to $732,987 for the three months ended September 30, 2002. As a percentage of net sales, gross profits decreased from 38% for the three months ended September 30, 2001 to 29% for the three months ended September 30, 2002. The decrease in gross profit as a percentage of net sales can be attributed to new customer sales that carry a lower profit margin. 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. Operating Expenses Sales and marketing expenses increased $34,298 from $28,844 for the three months ended September 30, 2001 to $63,142 for the three months ended September 30, 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 $75,436 from $177,733 for the three months ended September 30, 2001 to $102,297 for three months ended September 30, 2002. The decrease is due to lesser demand for new products due to current economic conditions and variations in the Company's normal development cycle for new products. 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 $160,439 from $615,128 for the three months ended September 30, 2001 to $454,689 for the three months ended September 30, 2002. The decrease is primarily due to a nonrecurring tax penalty in 2001 and other reductions in controllable variable expenses. Income Taxes Pre-tax income for the three months ended September 30, 2002, resulted in a tax provision of $47,504. Tax provisions and benefits are based upon management's estimate of the Company's expected annualized effective tax rates. Liquidity and Capital Resources On September 30, 2002 and June 30, 2002, the Company had net working capital of $1,841,680 and $1,825,110 respectively. The increase in working capital of $16,570 from June 30, 2002 to September 30, 2002 was primarily due to the increase in cash and decrease in the line of credit balance and taxes payable. The Company had net cash provided in operating activities of $526,638 for the three months ended September 30, 2002 compared to net cash used in operating activities of $1,002,413 for the three months ended September 30, 2001. The $1,529,051 increase is primarily due to lower payments on accounts payable, accrued bonuses and liabilities, income taxes payable and a net income during the three months ended September 30, 2002, versus a net loss during the three months ended September 30, 2001. The Company had net cash used in investing activities of $73,272 for the three months ended September 30, 2002 compared to net cash provided by investing activities of $1,650 for the three months ended September 30, 2001. The $74,922 decrease relates primarily to the issuance of new notes receivable to certain stockholder-employees. The Company had net cash used in financing activities of $216,112 for the three months ended September 30, 2002 compared to net cash provided by financing activities of $519,165 for the three months ended September 30, 2001. The $735,277 decrease is due to payments on the line of credit and note payable with no new borrowings on note payable. Our liquidity is affected by many factors, some of which are based on the normal ongoing 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 the fiscal year ending June 30, 2003. PART II. OTHER INFORMATION Item 1. Legal Proceedings There were no legal proceedings pending against the Company during the period ended September 30, 2002. In October 2002, the Company received a lawsuit from R.G. Technical for approximately $63,000, stating that R.G. Technical had a contractual agreement with Immecor for services performed on behalf of Genex, a vendor to Immecor. The Company disputes the lawsuit and believes that there is not a basis for the current lawsuit, or that Immecor had a contractual obligation to R.G. Technical. Immecor 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. Item 2. Changes in Securities There were no changes in rights of securities holders during the period ended September 30, 2002. Item 3. Defaults upon Senior Securities There were no defaults upon senior securities during the period ended September 30, 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 September 30, 2002. Item 5. Other Information There were no major contracts signed during the period ended September 30, 2002. Item 6. Exhibits and Reports on Form 8-K There were no exhibits or Form 8-K filed during the period ended September 30, 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. 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. I, Heinot H. Hintereder, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Immecor Corporation; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; Date: December 13, 2002 By: /s/ Heinot H. Hintereder ------------------------------ Heinot H. Hintereder Chief Executive Officer 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. I, William L. Lindgren, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Immecor Corporation; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; Date: December 13, 2002 By: /s/ William L. Lindgren ---------------------------- William L. Lindgren Chief Financial Officer