10QSB 1 a10qsb093003.txt 10QSB093003 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, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from __________ to: _________ Commission File Number: 333-06966 IMMECOR CORPORATION (Name of small business issuer in its charter) California 68-0324628 (State or jurisdiction of incorporation (I.R.S. Employer Identification No.) or Organization) 3636 North Laughlin Rd. Bldg 150 Santa Rosa California, 95403-1027 (Address of principal executive offices) (707) 636-2550 (Issuer's Telephone Number) Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, Without Par Value Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] (APPLICABLE ONLY TO CORPORATE ISSUERS) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 5,806,128 shares of common stock as of September 30, 2003. 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, 2003 (unaudited) and June 30, 2003 Statements of operations (unaudited) for the three months ended September 30, 2002 and 2003 Statements of cash flows (unaudited) for the three months ended September 30, 2002 and 2003 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. The accompanying notes are an integral part of these financial statements. IMMECOR CORPORATION Balance Sheets ASSETS
September 30, June 30, 2003 2003 (unaudited) Cash $ 629,228 $ 493,057 Accounts receivable, net of allowance for doubtful accounts of $12,945 and $22,000 757,814 785,029 Inventories, net of inventory reserve of $10,000 and $80,811 1,592,124 1,458,828 Notes receivable - current 3,046 29,116 Prepaid expenses 184,715 158,096 Federal income tax receivable 73,353 73,353 Deferred Tax Asset 29,012 29,012 Total current assets 3,269,292 3,026,491 Property and equipment, net 207,618 236,372 Notes receivable 200,300 124,998 Total assets $ 3,677,210 $ 3,387,861 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $ 423,357 $ 351,064 Accounts payable 627,283 453,894 Accrued liabilities 109,757 101,298 Deferred taxes ___ 105,094 96,027 Total current liabilities 1,265,491 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 2,122,864 2,096,723 Total stockholders' equity 2,411,719 2,285,578 Total liabilities and stockholders' equity $ 3,677,210 $ 3,387,861
IMMECOR CORPORATION Statements of Operations
For the three months ended September 30, 2003 2002 (unaudited) Net sales $ 2,414,080 $ 2,553,747 Cost of sales 1,628,668 1,820,760 Gross profit 785,412 732,987 Operating expenses: Sales and marketing 26,186 63,142 Research and development 201,373 102,297 General and administrative 501,328 454,689 Operating income 56,525 112,859 Other income (expense): Other income (expense) 1,983 27 Interest income 1,192 3,450 Interest expense (17,716) (9,311) Income (loss) before income taxes 41,984 107,025 Income tax provision (benefit) 15,843 47,504 Net income (loss) $ 26,141 $ 59,521 Net income (loss) per share - basic and diluted $ .01 $ .01 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, 2003 2002 (unaudited) Cash flows from operating activities: Net income (loss) $ 26,141 $ 59,521 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 28,754 30,915 Deferred income taxes 9,067 - Reserve for inventories 70,811 (204) Cash effect of changes in operating assets and liabilities: Accounts receivable 27,215 274,931 Inventories (204,107) 194,074 Prepaid expenses (26,619) Accounts payable 173,389 46,539 Accrued bonuses and liabilities 1,683 (38,614) Income taxes payable 6,776 (40,524) Net cash provided by (used in) operating activities 113,110 526,638 Cash flows from investing activities: Proceeds from notes receivable 26,070 7,291 Issuance of notes receivable (75,302) (80,563) Net cash (used in) provided by investing activities (49,232) (73,272) Cash flows from financing activities: Net borrowings (repayments) from line of credit 72,293 (181,862) Borrowings from note payable -- - Repayments on note payable -- (34,250) Net cash (used in) provided by financing activities 72,293 (216,112) Net change in cash 136,171 237,254 Cash, beginning of period 493,057 482,855 Cash, end of period $ 629,228 $ 720,109
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 September 30, 2003, and the twelve months ended June 30, 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. 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 68% and 76% of total sales for the three months ended September 30, 2003 and 2002, respectively. The Company is continuing to expand its marketing efforts to further diversify its customer base. 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 Inventories are stated at the lower of cost or market with cost determined on the first-in, first-out method. The Company reviews the levels of its inventories in light of current and forecasted demands to identify and provide reserves for obsolete, slow-moving and non-saleable inventory. During the three months ended for September 30, 2003 and twelve months ended June 30, 2003, the Company reserves of approximately $10,000 and $80,811, respectively. Note 5: Line of Credit The Company has a $1,000,000 line of credit, which expires May 13, 2004. 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 September 30, 2003 was approximately $49,000. Note 6: Income Taxes The effective income tax rates for the three months ended September 30, 2003 and 2002 are based on the federal statutory income tax rate, increased for the effect of state income taxes, and decreased by the effect of graduated rates, nondeductible expenses and other permanent differences. Note 7: Related Party Transactions Included in the Company's notes receivable at September 30, 2003 and June 30, 2003, are amounts due from stockholder-employees of approximately $93,926 and $96,700, respectively. Deferred salaries due to stockholder-employees are approximately $92,103 and $58,744 at September 30, 2003 and June 30, 2003, respectively. Note 9: Recent Accounting Pronouncements In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No.46, "Consolidation of Variable Interest Entities" ("FIN No.46"). FIN No.46 applies to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds an interest that it acquired before February 1, 2003. The Company currently has no interests in variable interest entities, and therefore does not expect adoption of FIN No.46 to have an impact on its consolidated financial statements. In April 2003, the FASB issued Statement of Financial Accounting Standards ("SFAS") No.149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". The SFAS No.149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No.133, "Accounting for Derivative Instruments and Hedging Activities". Subject to certain exception, this statement is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003 and all provisions of this statement should be applied prospectively. The Company does not have any derivative instruments outstanding and the adoption of SFAS No.149 will have no impact on the Company's consolidated financial statements. In May 2003, the FASB issued SFAS No.150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". The SFAS No.150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity and requires that those instruments be classified as liabilities in statements of financial position. In addition to its requirements for the classification and measurement of financial instruments in its scope, SFAS No.150 also requires disclosures about alternative ways of settling the instruments and the capital structure of entities, all of whose shares are mandatorily redeemable. Most of the guidance in SFAS No.150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not have financial instruments outstanding and the adoption of SFAS No.150 will have no impact on the Company's consolidated financial statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS FOR THE Three Months ended September 30, 2003 and 2002 Net Sales Net sales decreased by $139,667 or 5.4% from $2,553,747 for the three months ended September 30, 2002 to $2,414,080 for the three months ended September 30, 2003. The decrease in sales is primarily due the slowdown in the economy and the decrease in corporate capital expenditures. 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 $52,425 or 7% from $732,987 for the three months ended September 30, 2002 to $785,412 for the three months ended September 30, 2003. As a percentage of net sales, gross profits increased from 29% for the three months ended September 30, 2002 to 32% for the three months ended September 30, 2003. The increase in gross profit as a percentage of net sales can be attributed to repairs of older systems and sales of new products that carry a higher 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 decreased $36,956 from $63,142 for the three months ended September 30, 2002 to $26,186 for the three months ended September 30, 2003. The decrease in expenses was due to the change in accounting treatment of draws for sales compensation. The Company now books all draws as prepaid expenses until the draws are earned. Research and development expense increased $99,076 from $102,297 for the three months ended September 30, 2002 to $201,373 for three months ended September 30, 2003. The increase is due to new customers and their requirements for technology products. The Company expenses all 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 increased $46,639 from $454,689 for the three months ended September 30, 2002 to $501,328 for the three months ended September 30, 2003. The increase is primarily due to an increase in workman's compensation, liability insurance and outside professional services for 2003. The Company will continue to monitor expenses throughout 2003. Income Taxes Tax provisions and benefits are based upon management's estimate of the Company's expected annualized effective tax rates. Liquidity and Capital Resources On June 30, 2003 and September 30, 2003, the Company had net working capital of $1,979,984 and $2,003,801 respectively. The increase in working capital of $23,817 was primarily due to an increase in prepaid expenses and inventory. The Company had net cash provided in operating activities of $113,110 for the three months ended September 30, 2003 compared to net cash provided by operating activities of $526,638 for the three months ended September 30, 2002. The $413,528 decrease is primarily due to increase in inventory, increase in prepaid expenses, and increase in accounts payables during the three months ended September 30, 2003, versus the three months ended September 30, 2002. The Company had net cash used in investing activities of $(49,232) for the three months ended September 30, 2003 compared to net cash used in investing activities of $(73,272)for the three months ended September 30, 2002. The $24,040 decrease relates primarily to the issuance of new notes receivable to employees. The Company had net cash provided by financing activities of $72,293 for the three months ended September 30, 2003 compared to net used in financing activities of $(216,112) for the three months ended September 30, 2002. The $288,405 increase is due to an increase credit line usage, trade debt and a reduction in notes 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, 2004. PART II. OTHER INFORMATION Item 1. Legal Proceedings In October 2002, the Company received a lawsuit from R.G. Technical for approximately $63,000, stating that the R.G. Technical had a contractual agreement with Immecor for services performed on behalf of Genex, a vendor to Immecor. The Company received a non-binding arbitration award in its favor, but is requesting that the lawsuit be dismissed and if the lawsuit is not dismissed, the Company will proceed with full legal action against R.G. Technical for malicious prosecution. On January 2003 the Company received a lawsuit from a former employee seeking damages relating to a sex and pregnancy discrimination complaint. The Company disputes the lawsuit and believes that there is no basis for the lawsuit, and that the Company is requesting the matter to be dismissed. Immecor is also seeking legal action against the former employee for malicious prosecution and employment fraud. Item 2. Changes in Securities There were no changes in rights of securities holders during the period ended September 30, 2003 Item 3. Defaults upon Senior Securities There were no defaults upon senior securities during the period ended September 30, 2003 Item 4. Submission of Matters to a Vote of Security-Holders There were no matters submitted to the vote of securities holders during the period ended September 30, 2003. Item 5. Other Information There were no major contracts signed during the period ended September 30, 2003 Item 6. Exhibits and Reports on Form 8-K There were no exhibits or Form 8-K filed during the period ended September 30, 2003 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, 2003 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, 2003 By: /s/ William L. Lindgren ------------------------------------------- William L. Lindgren Chief Financial Officer