10QSB 1 a10qsb123102.txt IMMECOR CORPORATION 12-31-02 SECOND QTR 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, 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 December 31, 2002. Transitional Small Business Disclosure Format Yes [ ] No [X] IMMECOR CORPORATION INDEX TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1. Balance sheets at December 31, 2002 (unaudited) and June 30, 2002 Statements of operations (unaudited) for the three and six months ended December 31, 2001 and 2002 Statements of cash flows (unaudited) for the six months ended December 31, 2001 and 2002 Notes to condensed financial statements (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 1. Legal proceedings Item 2. Changes in securities Item 3. Defaults upon senior securities Item 4. Submission of matters to a vote of security holders Item 5. Other information Item 6. Exhibits and Reports on Form 8-K FORWARD LOOKING STATEMENTS Immecor Corporation (the "Company") cautions readers that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements that may be deemed to have been made in this Form 10-QSB or that are otherwise made by or on behalf of the Company. For this purpose, any statements contained in the Form 10-QSB that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "expect", "believe", "anticipate", "intend", "could", "estimate", or "continue" or the negative other variations thereof or comparable terminology are intended to identify forward-looking statements. Factors that may affect the Company's results include, but are not limited to, the Company's limited history of profitability, its dependence on a limited number of customers and key personnel its possible need for additional financing and its dependence on certain industries. The Company is also subject to other risks detailed herein or detailed from time to time in the Company's filings with the Securities and Exchange Commission. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those anticipated events. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of these assumptions could prove inaccurate, including, but not limited to, statements as to our future operating results and business plans. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. IMMECOR CORPORATION Balance Sheets ASSETS
December 31, June 30, 2002 2002 (unaudited) Current assets: Cash ............................................................................ $ 620,283 $ 482,855 Accounts receivable, net of allowance for doubtful accounts of $22,000 and $22,000 ................................................. 433,268 740,887 Inventories, net of inventory reserve of $220,812 and $288,914 .................. 1,431,960 1,676,993 Notes receivable - current ...................................................... 16,763 26,448 Deposits ........................................................................ 51,976 41,976 Total current assets ....................................................... 2,554,250 2,969,159 Property and equipment, net ..................................................... 296,835 358,665 Notes receivable ................................................................ 138,341 55,191 Total assets ............................................................... $2,989,426 $3,383,015 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit .................................................................. $ 302,558 $ 388,627 Note payable .................................................................... -- 34,250 Accounts payable ................................................................ 187,935 368,146 Accrued bonuses ................................................................. 73,251 113,244 Accrued liabilities ............................................................. 164,781 199,258 Taxes payable ................................................................... 1,557 40,524 Total current liabilities .................................................. 730,082 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 ............................................................... 1,970,489 1,950,111 Total stockholders equity ................................................. 2,259,344 2,238,966 Total liabilities and stockholders equity ................................. $2,989,426 $3,383,015
IMMECOR CORPORATION Statements of Operations
For the three months For the six months ended December 31, ended December 31, 2002 2001 2002 2001 (unaudited) (unaudited) Net sales ....................... $ 1,833,292 $ 2,258,761 $ 4,387,039 $ 4,520,737 Cost of sales ................... 1,410,250 2,711,231 3,231,010 4,103,662 Gross profit ............... 423,042 (452,464) 1,156,029 417,075 Operating expenses: Sales and marketing ........ 62,938 38,716 126,080 65,560 Research and development ... 371 20,425 102,668 298,188 General and administrative . 318,012 12,354 772,701 527,452 Operating income ........... 41,721 (521,959) 154,580 (474,125) Other income (expense): Other income (expense) ..... (49) (3,665) (22) (25,271) Interest income ............ 2,460 1,029 5,910 7,154 Interest expense ........... (10,931) (8,979) (20,242) (187,179) Income (loss) before income taxes 33,201 (533,549) 140,226 (679,421) Income tax provision (benefit) .. (70,720) 25,491 (118,224) (7,224) Net income (loss) .......... $ (37,519) $ (508,058) $ 22,002 $ (686,645) Net income (loss) per share - basic and diluted ........ $ (0.006) $ (0.09) $ (0.003) $ (0.12) Weighted average shares outstanding - basic and diluted . 5,806,128 5,806,128 5,806,128 5,806,128
IMMECOR CORPORATION Statements of Cash Flows
For the six months ended December 31, 2002 2001 unaudited) Cash flows from operating activities: Net income (loss) .............................................. $ 20,002 $ (686,645) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization ............................. 61,830 35,719 Deferred income taxes ..................................... -- 172,500 Reserve for inventories ................................... 68,102 199,386 Cash effect of changes in operating assets and liabilities: Accounts receivable ....................................... 307,619 78,966 Income tax recoverable .................................... -- (380,297) Inventories ............................................... 176,931 1,451,977 Prepaid expenses .......................................... (10,000) 14,520 Accounts payable .......................................... (180,211) 406,385 Accrued bonuses and liabilities ........................... (74,470) (229,618) Income taxes payable ...................................... (38,967) (1,300,535) Net cash provided by (used in) operating activities ...... 330,836 (237,642) Cash flows from investing activities: Proceeds from notes receivable ................................. 12,677 48,369 Issuance of notes receivable ................................... (86,142) (50,369) Net cash (used in) provided by investing activities ...... (73,465) (2,000) Cash flows from financing activities: Net borrowings (repayments) from line of credit ................ (86,069) 142,737 Borrowings from note payable ................................... -- -- Repayments on note payable ..................................... (34,250) (371,307) Net cash (used in) provided by financing activities ...... (120,319) (228,570) Net change in cash ....................................... 137,052 (468,212) Cash, beginning of period ........................................... 482,855 498,636 Cash, end of period ................................................. $ 619,907 $ 30,424
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 December 31, 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 74% and 95% of total sales for the three months ended December 31, 2002 and 2001, respectively. The Company sales personnel are attempting 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 For the three months ended December 31, 2002, the Company adjusted inventory reserves by $68,102, no further adjustments were made to inventory. Note 5: Line of Credit The Company has a $1,500,000 line of credit, which expires December 20, 2003. 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 the Company's majority stockholder. The available borrowing base on the line of credit as of December 31, 2002 was $302,558. Note 6: Income Taxes The effective income tax rates for the three months ended December 31, 2002 and 2001 are based on the federal statutory income tax rate, increased for the effect of state income taxes, and decreased by the effect of graduated rates, nondeductible expenses and other permanent differences. Note 7: Related Party Transactions Included in the Company's notes receivable at December 31, 2002 and June 30, 2002, are amounts due from stockholder-employees of approximately $83,000 and $21,000, respectively. Also included in accrued bonuses and accrued liabilities are deferred bonus and salaries due to stockholder-employees of approximately $167,000 and $198,000 at December 31, 2002 and June 30, 2002, respectively. Note 8: 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 Company's results of operations or financial position. In August 2001, the FASB issued SFAS No.144, Accounting for the Impairment or Disposal Of Long-Lived Assets, which establishes one accounting model to be used for long-lived assets to be disposed of by sale, whether previously used or newly acquired. SFAS No.144 is effective for the Company's transition period beginning January 1, 2002. The Company's 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 SIX MONTHS AND Three Months ended December 31, 2002 and 2001 Net Sales Net sales decreased by $725,469 or 32% from $2,258,761 for the three months ended December 31, 2001 to $1,833,292 for the three months ended December 31, 2002. Net sales decreased $133,698 or 3% from $4,520,737 for the six months ended December 31, 2001 to $4,387,039 for the six months ended December 31, 2002. The decrease in sales is due to a weaker economy and a weak demand for technology related products. The Company does acknowledge that a continued downturn in the economic conditions and a continued weak demand for technology related products could have an adverse effect on the Company's financial results. Gross Profit Gross profits increased $875,506 or 193% from $(452,464) for the three months ended December 31, 2001 to $423,042 for the three months ended December 31, 2002. As a percentage of net sales, gross profits increased from (20)% for the three months ended December 31, 2001 to 23% for the three months ended December 31, 2002. Gross profits increased $738,954 or 177% from $417,075 for the six months ended December 31, 2001 to $1,156,029 for the six months ended December 31, 2002. As a percentage of net sales, gross profits increased from 9% for the six months ended December 31, 2001 to 26% for the six months ended December 31, 2002. The increase in gross profit as a percentage of net sales can be attributed to new customer sales, new product sales that carry a higher profit margin and the change in the fiscal year end period. 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 future gross profits in upcoming quarters. Operating Expenses Sales and marketing expenses increased $24,222 from $38,716 for the three months ended December 31, 2001 to $62,938 for the three months ended December 31, 2002. Sales and marketing expenses increased $60,520 from $65,560 for the six months ended December 31, 2001 to $126,080 for the six months ended December 31, 2002. The increase in expenses are due to costs associated with the expansion of our sales staff, marketing materials and website improvements in order to expand our customer base. Research and development expense decreased $20,054 from $20,425 for the three months ended December 31, 2002 to $371 for three months ended December 31, 2002. Research and development expenses decreased $195,520 from $298,188 for the six months ended December 31, 2001 to $102,668 for the six months ended December 31, 2002. The decrease is primarily due cyclical nature of the Company's development cycle for new products. The Company expenses all of research and development costs as they are incurred. 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 increased $305,658 from $12,354 for the three months ended December 31, 2001 to $318,012 for the three months ended December 31, 2002. General and administrative expenses increased $245,249 from $527,452 for the six months ended December 31, 2001 to $772,701 for the six months ended December 31, 2002. The increase is due to the change in fiscal year end and expenses associated with the change of the fiscal year end. Liquidity and Capital Resources On December 31, 2002 and June 30, 2002, the Company had net working capital of $1,824,168 and $1,825,110 respectively. The decrease in working capital of $942 from June 30, 2002 to December 31, 2002 was primarily due a reduction in current assets. The Company had net cash provided in operating activities of $330,836 for the six months ended December 31, 2002 compared to net cash used in operating activities of $(237,642) for the six months ended December 31, 2001. The $568,478 increase is primarily due to lower payments on accounts payable, accrued bonuses and liabilities, income taxes payable and a net income during the six months ended December 31, 2002, versus a net loss during the six months ended December 31, 2001. The Company had net cash used in investing activities of $(73,465) for the six months ended December 31, 2002 compared to net cash used in investing activities of $(2,000) for the six months ended December 31, 2001. The $71,465 increase relates primarily to the issuance of new notes receivable to certain stockholder-employees. The Company had net cash used in financing activities of $(120,319) for the six months ended December 31, 2002 compared to net cash used in financing activities of $(228,570) for the six months ended December 31, 2001. The $108,251 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 technology equipment and medical 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 six 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 December 31, 2002. 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 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 December 31, 2002. Item 3. Defaults upon Senior Securities There were no defaults upon senior securities during the period ended December 31, 2002. Item 4. Submission of Matters to a Vote of Security-Holders There were no matters submitted to the vote of securities holders during the period ended December 31, 2002. Item 5. Other Information There were no major contracts signed during the period ended December 31, 2002. Item 6. Exhibits and Reports on Form 8-K There were no exhibits or Form 8-K filed during the period ended December 31, 2002. SIGNATURES In accordance with the requirements of the Securities and Exchange Commission the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 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: February 18, 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: February 18, 2002 By: /s/ William L. Lindgren --------------------------- William L. Lindgren Chief Financial Officer