-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RvTys2XCIwbgxvAcQsLld9Ne27SOt9AMJ4fyw2V/zZEDDPjas9wou/G2I7SkbJYq OHvTG/fD2AIpCNwZhyr2vQ== 0000950135-98-001012.txt : 19980218 0000950135-98-001012.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950135-98-001012 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19980217 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL IMAGING CORP CENTRAL INDEX KEY: 0000799514 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 050396504 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-15520 FILM NUMBER: 98540367 BUSINESS ADDRESS: STREET 1: ONE LOWELL RESEARCH CENTER STREET 2: 847 ROGERS STREET CITY: LOWELL STATE: MA ZIP: 01852 BUSINESS PHONE: (978) 937-5400 MAIL ADDRESS: STREET 1: ONE LOWELL RESEARCH CENTER STREET 2: 847 ROGERS STREET CITY: LOWELL STATE: MA ZIP: 01852 FORMER COMPANY: FORMER CONFORMED NAME: ORBIS INC DATE OF NAME CHANGE: 19920703 10-K405/A 1 INDUSTRIAL IMAGING CORPORATION AMENDMENT TO 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ================================================================================ FORM 10-K/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 COMMISSION FILE NUMBER 0-15520 INDUSTRIAL IMAGING CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 05-0396504 ---------------------------- ---------------- (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 847 Rogers Street, Lowell, Massachusetts 01852 --------------------------------------------------- (Address of principal executive offices) (Zip code) (978) 937-5400 ---------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Class -------------- Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 60 days. Yes No X --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- The issuer's revenue for the fiscal year ending March 31, 1997 was $1,823,576. The aggregate market value of the voting stock held by non-affiliates of the Issuer, based upon the average of the bid and ask prices of the Common Stock as reported by the OTC Bulletin Board on January 21, 1998 was approximately $11,570,000 for the Common Stock. As of January 21, 1998, 10,890,201 shares of Common Stock, $.01 par value per share, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: None 2 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The Company's Report of Independent Accountants, as amended solely to include the Accountants' signature, is filed herewith, together with the Financial Statements and notes thereto, which have not been amended. SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INDUSTRIAL IMAGING CORPORATION Date: February 13, 1998 By: /s/ Bryan M. Gleason ---------------------------------- Bryan M. Gleason Chief Financial Officer, Vice President and Treasurer 3 REPORT OF INDEPENDENT ACCOUNTANTS To The Board of Directors and Shareholders of Industrial Imaging Corporation: We have audited the accompanying balance sheets of Industrial Imaging Corporation as of March 31, 1997 and March 31, 1996 and the related statements of operations and shareholders' equity (deficit) and cash flows for the year ended March 31, 1997, the period from October 1, 1995 to March 31, 1996 and the years ended September 30, 1995 and 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Industrial Imaging Corporation at March 31, 1997 and March 31, 1996, and the results of its operations and its cash flows for the year ended March 31, 1997, the period from October 1, 1995 to March 31, 1996 and the years ended September 30, 1995 and 1994 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the financial statements, the Company has suffered recurring losses from operations and has a net working capital deficiency and stockholders' deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ COOPERS & LYBRAND, L.L.P. Boston, Massachusetts January 16, 1998 F-1 4 INDUSTRIAL IMAGING CORPORATION BALANCE SHEETS
March 31, March 31, 1997 1996 ----------- ----------- ASSETS Current assets: Cash ................................................................................... $ 62,103 $ 10,011 Accounts receivable, net of allowance for doubtful accounts of $31,000 and $20,000 at March 31, 1997 and 1996, respectively (Notes C and D) ..................... 493,778 92,586 Inventory (Notes--and E) ............................................................... 1,877,979 682,886 Prepaid expenses ....................................................................... 53,398 22,076 ----------- ----------- Total current assets ................................................................. 2,487,258 807,559 Property and equipment, net (Notes C and F) .............................................. 34,256 32,870 Patents, net (Notes C and G) ............................................................. 61,979 168,229 Other assets ............................................................................. 10,786 10,786 ----------- ----------- Total assets ......................................................................... 2,594,279 $ 1,019,444 =========== =========== LIABILITIES AND SHAREHOLDERs' DEFICIT Current liabilities: Notes payable (Notes J and K) .......................................................... 480,404 495,174 Accounts payable ....................................................................... 2,497,890 281,094 Deferred revenue (Notes C and H) ....................................................... 242,938 667,387 Accrued expenses (Note I) .............................................................. 957,953 930,334 ----------- ----------- Total current liabilities ............................................................ 4,179,185 2,373,989 Notes payable B long-term portion (Notes J and K) ........................................ 450,000 -- ----------- ----------- Total liabilities .................................................................... 4,629,185 2,373,989 Commitments and contingencies (Note H) Shareholders' deficit (Notes J, K, L, and O): Common stock, par value $.01 per share, authorized 8,700,000 shares, 5,867,498 and 3,537,037 shares issued and outstanding at March 31, 1997, and March 31, 1996, respectively ..................................................... 58,675 35,370 Series A Preferred Stock, par value $.01 per share, authorized 1,000,000 shares, 0 and 633,200 shares issued and outstanding at March 31, 1997, and March 31, 1996, respectively ......................................................... -- 6,332 Series B Preferred Stock, par value $.01 per share, authorized 300,000 shares, 0 shares issued and outstanding at March 31, 1997 and March 31, 1996, respectively ..... -- -- Additional paid-in capital ............................................................. 5,872,588 4,675,368 Accumulated deficit .................................................................... (7,966,169) (6,071,615) ----------- ----------- Total shareholders' deficit ........................................................ (2,034,906) (1,354,545) ----------- ----------- Total liabilities and shareholders' deficit ...................................... $ 2,594,279 $ 1,019,444 =========== ===========
The accompanying notes are an integral part of the financial statements. F-2 5 INDUSTRIAL IMAGING CORPORATION STATEMENTS OF OPERATIONS
12 MONTHS 6 MONTHS 12 MONTHS 12 MONTHS ENDED ENDED ENDED ENDED MARCH 31, 1997 MARCH 31, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 -------------- -------------- ------------------ ------------------ Revenues (Note C): Product ..................................... $ 1,525,625 $ 419,782 $ 986,660 $ 936,783 Service ..................................... 297,951 160,584 238,363 373,365 ----------- ----------- ----------- ----------- 1,823,576 580,366 1,225,023 1,310,148 ----------- ----------- ----------- ----------- Cost of revenues: Product ..................................... 1,341,919 450,746 730,180 783,213 Service ..................................... 268,068 100,703 412,402 413,852 ----------- ----------- ----------- ----------- 1,609,987 551,449 1,142,582 1,197,065 ----------- ----------- ----------- ----------- Gross profit .................................. 213,589 28,917 82,441 113,083 ----------- ----------- ----------- ----------- Operating expenses: Research and development (Notes C and H) .... 440,207 427,778 505,147 468,075 Sales and marketing ......................... 361,392 125,370 218,704 370,859 General and administrative .................. 857,948 541,285 814,094 680,824 Merger Expenses (Note R) .................... 179,787 ----------- ----------- ----------- ----------- Total operating expenses .................. 1,839,334 1,094,433 1,537,945 1,519,758 ----------- ----------- ----------- ----------- Loss from operations .......................... (1,625,745) (1,065,516) (1,455,504) (1,406,675) Other income (expense): Interest expense (Notes D and J) ............ (89,257) (94,305) (126,189) (83,311) Other, net (Note Q) ......................... (179,552) -- 6,567 (16,577) ----------- ----------- ----------- ----------- Other income (expense), net ............... (268,809) (94,305) (119,622) (99,888) Loss before income taxes .................. (1,894,554) (1,159,821) (1,575,126) (1,506,563) Provision for income taxes (Notes C and M) .... -- -- -- -- ----------- ----------- ----------- ----------- Net loss ...................................... $(1,894,554) $(1,159,821) $(1,575,126) $(1,506,563) =========== =========== =========== =========== Net loss per share ............................ $ (.44) $ (.55) $ (1.05) $ (1.45) =========== =========== =========== =========== Weighted Average common outstanding ........... 4,257,727 2,105,823 1,507,099 1,039,025 =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-3 6 INDUSTRIAL IMAGING CORPORATION STATEMENTS OF CASH FLOWS
12 MONTHS 6 MONTHS 12 MONTHS 12 MONTHS ENDED ENDED ENDED ENDED MARCH 31, 1997 MARCH 31, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 -------------- -------------- ------------------ ------------------ Cash flows from operating activities: Net loss ............................................ $(1,894,554) $(1,159,821) $(1,575,126) $(1,506,563) Adjustments to reconcile net loss to net cash used in operating activities: Loss on disposal of fixed assets ................ -- -- -- 5,554 Depreciation .................................... 22,217 17,310 34,612 33,290 Compensation relating to stock options .......... 26,400 -- -- -- Shares issued in conjunction with bridge loan ... 171,297 -- -- -- Amortization .................................... 106,250 53,125 106,250 106,250 Provision for doubtful accounts ................. -- -- (14,707) 9,704 Changes in assets and liabilities: Accounts receivable ............................. (401,192) (38,058) 201,843 (193,219) Inventory ....................................... (1,195,093) 111,935 (302,483) 70,493 Prepaid expenses ................................ (31,322) (16,961) 5,686 (1,384) Other assets .................................... -- -- (310) (1,076) Accounts payable ................................ 2,216,796 (18,279) 113,506 78,350 Deferred revenue ................................ (424,449) (12,338) 364,072 45,538 Accrued expenses ................................ 27,619 400,552 291,431 183,832 ----------- ----------- ----------- ----------- Net cash used in operating activities ........... (1,376,031) (662,535) (775,226) (1,169,231) ----------- ----------- ----------- ----------- Cash flows from investing activities: Capital expenditures ................................ (23,603) -- -- (14,996) Proceeds from sale of fixed assets .................. -- -- -- 1,307 ----------- ----------- ----------- ----------- Net cash used in investing activities ............... (23,603) -- -- (13,689) ----------- ----------- ----------- ----------- Cash flows from financing activities: Proceeds from issuance of nonconvertible debt ....... 719,000 260,702 381,444 648,001 Principal payments on nonconvertible debt ........... (283,770) (153,584) -- (31,389) Proceeds from issuance of convertible debt .......... 200,000 -- -- -- Proceeds from issuance of stock (net) ............... 816,496 559,210 400,000 518,000 ----------- ----------- ----------- ----------- Net cash provided from financing activities ....... 1,451,726 666,328 781,444 1,134,612 ----------- ----------- ----------- ----------- Net increase (decrease) in cash ................... 52,092 3,793 6,218 (48,308) Cash, beginning of period ............................. 10,011 6,218 -- 48,308 Cash, end of period ................................... $ 62,103 $ 10,011 $ 6,218 $ -- =========== =========== =========== =========== Supplemental cash flows information: Cash paid during the period for interest............. $ 45,092 $ 6,963 $ 49,500 $ 47,200 Noncash items: Debt and accrued interest converted to equity during the period.............................. 200,000 1,270,637 Forgiveness of debt/contributed capital......... 100,000
The accompanying notes are an integral part of the financial statements. F-4 7 INDUSTRIAL IMAGING CORPORATION STATEMENT OF SHAREHOLDERs' DEFICIT
Series A Convertible Preferred Stock Common Stock Additional Total --------------------- ------------------ Paid-In Accumulated Shareholders' Shares Amount Shares Amount Capital Deficit Equity ------ ------ ------ ------ ------- ------- ------ Balance at September 30, 1993 ........ 397,200 $ 3,972 753,200 $ 7,532 $1,857,719 $(1,830,105) $ 39,118 Issuance of Series A convertible preferred stock and common stock for cash, October 1993 ............. 200,000 2,000 200,000 2,000 96,000 100,000 Issuance of Series A convertible preferred stock and common stock for cash, October 1993 ............. 20,000 200 20,000 200 9,600 10,000 Issuance of Series A convertible preferred stock and common stock for cash, November 1993 .......... 16,000 160 16,000 160 7,680 8,000 Issuance of common stock for cash, July 1994 .......................... 288,600 2,886 397,114 400,000 Net loss ............................. (1,506,563) (1,506,563) ------- ------- --------- ------- ---------- ----------- ----------- Balance at September 30, 1994 ........ 633,200 6,332 1,277,800 12,778 2,368,113 (3,336,668) (949,445) Issuance of common stock for cash, December 1994 .................... 288,600 2,886 397,114 400,000 Net loss ............................. (1,575,126) (1,575,126) ------- ------- --------- ------- ---------- ----------- ----------- Balance at September 30, 1995 ........ 633,200 6,332 1,566,400 15,664 2,765,227 (4,911,794) (2,124,571) Issuance of common stock for debt and interest conversion .............. 1,270,637 12,706 1,257,931 1,270,637 Issuance of common stock for cash, net of issuance costs of $140,790 .... 700,000 7,000 552,210 559,210 Issuance of warrants in exchange for forgiveness of debt .............. 100,000 100,000 Net loss ............................. (1,159,821) (1,159,821) ------- ------- --------- ------- ---------- ----------- ----------- Balance at March 31, 1996 ............ 633,200 $ 6,332 3,537,037 $35,370 $4,675,368 $(6,071,615) $(1,354,545) Issuance of common stock for cash, net of issuance costs of $32,964 ..... 830,000 8,300 788,736 797,036 Exercise of warrants for cash ........ 230,000 2,300 227,700 230,000 Shares issued in conjunction with bridge loans ....................... 112,370 1,124 170,173 171,297 Compensation expense relating to stock options ...................... 26,400 26,400 Recapitalization of Orbis, Inc. ...... 524,891 5,249 (15,789) (10,540) Conversion of preferred shares to common stock ....................... (633,200) (6,332) 633,200 6,332 -- Net loss ............................. (1,894,554) (1,894,554) ------- ------- --------- ------- ---------- ----------- ----------- -- -- $5,867,498 $58,675 $5,872,588 $(7,966,169) $(2,034,906) ======== ======= ========== ======= ========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-5 8 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS A. ORGANIZATION AND DESCRIPTION OF BUSINESS Nature of Business Triple I Corporation (the "Company" or "Triple I"), a Delaware corporation, was organized as a successor to AOI Systems, Inc., whose assets and technologies it purchased in October 1992, for the purpose of manufacturing and selling optical inspection systems in the printed circuit board industry. The Company operates under the trade name of AOI International and has manufacturing operations based in Lowell, Massachusetts with customers located in the United States, Europe, and Asia. Exchange On November 16, 1995, the Board of Directors of the Company approved a transaction with Orbis, Inc. ("Orbis"), a publicly held corporation, whose only activity had been expenses during the fiscal year relating to filing fees and minimal overhead costs. Orbis has had no significant revenue for the last four fiscal years. On December 5, 1996, the Orbis stockholders approved the transaction between Triple I and Orbis, whereby the stockholders of Triple I exchanged 100% of the outstanding Common Stock of Triple I for 90% of the outstanding common stock of Orbis (the "Exchange"). On February 1, 1997, the Exchange was completed as the Company obtained approval from 100% of its shareholders. The Exchange will be accounted for as a capital stock transaction and will be treated as a recapitalization of Triple I with Triple I as the acquiror (reverse acquisition). The costs of the Exchange will be charged to other expense and no goodwill will be recorded. In connection with the Exchange, Orbis reincorporated from a Rhode Island corporation to a Delaware corporation and changed its name to Industrial Imaging Corporation via a merger of Orbis into Industrial Imaging Corporation. As a result, Triple I became a wholly owned subsidiary of Industrial Imaging Corporation. Change in Year-End In anticipation of the Exchange, the Company changed its year-end from a twelve-month period ending September 30 to a twelve-month period ending March 31. The financial statements include presentation of the transition period beginning October 1, 1995 and ending on March 31, 1996. F-6 9 B. MANAGEMENT's FINANCING AND CAPITAL FORMATION PLANS Since its inception, the Company has suffered recurring losses from operations resulting in a net shareholders' deficit at March 31, 1997 and has been unable to pay certain debt obligations. The remedies available to the debt holders include immediate demand of payment and foreclosure. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The ultimate success of the Company is dependent upon its ability to continue to raise financing and significantly increase contract revenue or product sales. However, the Company's capital requirements may change depending upon numerous factors, including the demand for the Company's product. In November 1997, the Company raised $3 million in a private equity transaction. Management believes that with this additional capital, it will have adequate funds to aggressively pursue market penetration. In view of the Company's current financial condition, the Company plans to continue to aggressively manage its working capital and expenses while pursuing product sales opportunities as well as strategic or other business relationships. C. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Inventories Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis. Property And Equipment Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the lesser of the estimated useful lives of the assets, 3 to 5 years, or lease term. Maintenance and repair costs are expensed as incurred; renewals and betterments are capitalized. Upon the sale or retirement of fixed assets, the accounts are relieved of the cost and the related accumulated depreciation with any resulting gain or loss included in income. Patents Purchased patents are valued at cost and amortized on a straight-line basis over five years. Revenue Recognition F-7 10 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Sales of inspection systems and evaluation units are recorded when customer acceptance requirements are met. Revenue from service maintenance contracts is deferred and is recognized over the term of the contract, generally one year. Revenue from government grants is recognized when specific contract requirements have been met and no significant contingencies remain under the contract. The Company generally requires payment from customers in U.S. dollars as part of its normal payment terms. Fluctuations in foreign exchange rates to date have not had a material effect on the Company's financial statements. Income taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires the use of an asset and liability approach for financial accounting and reporting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amount and the tax bases of assets and liabilities using the current statutory tax rates. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. Net Loss Per Common Share Net loss per common share is computed based upon the weighted average number of common shares and common equivalent shares (using the treasury method) outstanding after certain adjustments described below. Common equivalent shares are not included in the per-share calculations where the effect of their inclusion would be antidilutive. Research And Development Expenditures for research, development and engineering of products and manufacturing processes are expensed as incurred. Cost reimbursement under collaborative research agreements are recorded as offsets to research and development expenses. Use Of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. F-8 11 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Accounting Pronouncements In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128. "Earning Per Share" which is effective for fiscal years ending after December 31, 1997, including interim periods. Earlier adoption is not permitted. However, the statement permits disclosure of pro forma earnings per share amounts computed under SFAS 128 in the notes to the financial statements in periods prior to adoption. The statement requires restatement of all prior period earnings per share data presented after the effective date. SFAS 128 specifies the computation, presentation and disclosure requirements for earnings per share and is substantially similar to the standards recently issued by the International Accounting Standards Committee entitled International Accounting Standards, Earnings Per Share. The Company will adopt SFAS 128 in fiscal 1998 and has not yet determined its impact. In June 1997, the FASB issued two additional statements. SFAS 130, "Reporting Comprehensive Income" and SFAS 131, "Disclosures About Segments of an Enterprise and Related Information" are both effective for years beginning after December 15, 1997. Adoption of these standards are not expected to impact the financial results of the Company. Concentrations of Credit Risk A significant portion of the Company's sales are to customers whose principal activities relate to the printed circuit board industry, included a heavy concentration of sales to customers in foreign countries. (See note P). Although the Company generally requires advance deposits or letters of credit from customers, the Company sometimes extends credit to its foreign customers and collection may be more difficult in the event of a default. D. ACCOUNTS RECEIVABLE In the normal course of business, the Company extends credit terms on a customer-by-customer basis based on its evaluation of collectibility exposure. Management's estimates of losses in this area are recorded through an evaluation of the adequacy of the allowance for doubtful accounts. The risk of loss from any concentrations of credit risk with respect to trade receivables is mitigated by management's evaluation and provision, the policy of securing larger dollar sales with substantial deposits at order and ship dates, and the incentive for customers to maintain their credit standing in order to receive ongoing technical service. During the year ended March 31, 1997 and the six months ended March 31, 1996, accounts receivable in the amounts of $347,500 and $261,400, respectively, were factored, without recourse, to a related party. Specific invoices were sold under individual purchase and F-9 12 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) sale agreements. The Company receives a portion of the value of a receivable at the date of the sale. Subsequent receipts of sold receivables are forwarded in full to the factor. Interest is calculated at Prime + 4% over the time the money owed the factor is outstanding. The transaction is completed when the Company receives the remaining balance of the receivable, net of interest charges, from the factor. Interest on these contracts totaled $21,257, $16,201, $7,642 and $3,415 during the year ended March 31, 1997, the six months ended March 31, 1996, and the years ended September 30, 1995 and 1994, respectively. E. INVENTORIES Inventories consist of the following:
MARCH 31, MARCH 31, 1997 1996 ---------- -------- Raw materials............... $ 949,895 $356,805 Work in process............. 596,277 28,049 Finished goods.............. 331,807 298,032 ---------- -------- $1,877,979 $682,886 ========== ========
F. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
MARCH 31, MARCH 31, 1997 1996 -------- -------- Machinery and equipment .......................... $ 55,613 $ 55,613 Computer equipment, including $10,001 in capital leases in 1997 and 1996 respectively .......... 61,837 38,234 Computer software ................................ 14,949 14,949 Furniture and fixtures ........................... 24,837 24,837 -------- -------- 157,236 133,633 Less: accumulated depreciation and amortization .. 122,980 100,763 -------- -------- $ 34,256 $ 32,870 ======== ========
Depreciation expense for the year ended March 31, 1997, six months ended March 31, 1996, and the years ended September 30, 1995 and 1994, was $22,217, $17,310, $34,612 and $33,290, respectively. G. INTANGIBLE ASSETS F-10 13 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The Company holds several patents that were purchased. These patents are stated at the acquisition cost of $531,250 and are amortized using the straight-line method over 5 years. Amortization expense was $106,250, $53,125, $106,250, and $106,250 for the year ended March 31, 1997, the six months ended March 31, 1996, and the years ended September 30, 1995, and 1994, respectively. The Company periodically reviews the propriety of carrying amounts of its intangible assets as well as the amortization periods to determine whether current events and circumstances warrant adjustment to the carrying value or estimates useful lives. At each balance sheet date, management evaluates whether there has been a permanent impairment in the value of goodwill by assessing the carrying value of goodwill against anticipated future cash flows from related operating activities. Factors which management considers in performing this assessment include current operating results, trends, and prospects and, in addition, demand, competition and other economic factors. H. COMMITMENTS AND CONTINGENCIES The Company is obligated under a lease agreement for an office and manufacturing facility in Lowell, Massachusetts, expiring on November 30, 1998. Under the terms of the lease, the Company must pay base rent of $9,970 per month plus the Company's pro rata share of certain costs paid by the landlord. Total rent expense was $133,639, $66,084, $93,233, and $76,179 for the year ended March 31, 1997, the six months ended March 31, 1996, and the years ended September 30, 1995 and 1994, respectively. The amount of future minimum lease payments under the operating lease is as follows:
1998............................................... 119,638 1999............................................... 79,760 -------- Total minimum lease payments....................... $199,398 ========
On August 1, 1994 the Company entered into a cooperative agreement with the U.S. Department of Energy Advanced Research Project Agency ("ARPA") to research optics. The Company is finalizing its obligation under the contract. As of March 31, 1997, the Company had incurred $320,000 in project expenses and had received $320,000 in matching funds from ARPA which have been recorded as cost reimbursement against research and development expense to the extent of costs incurred. On November 28, 1994 the Company entered into an eight-year license and collaboration agreement with Polaroid Corporation ("Polaroid") to promote the development, marketing, and sales in the field of printed circuit board production, and to collaborate in the fields of Automatic Inspection and PCB PhotoTool generation. F-11 14 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Under the Polaroid Agreement, the Company is required to meet certain sales and performance milestones to maintain the Company's exclusivity concerning the technology. The Company and Polaroid are in the process of resolving a dispute regarding exclusivity. Management believes that the ultimate resolution of this dispute will not have a material effect on the Company's financial statements. In March 1996, the Company entered into a purchase agreement with Centennial Technologies, Inc. ("Centennial") whereby Centennial had agreed to purchase components and materials up to $3 million on behalf of the Company and resell them to the Company. The Company has agreed to pay Centennial upon full payment from the Company's customers as systems are sold. The agreement is effective until June 30, 1997 and purchases must be specifically authorized by Centennial. As of March 31, 1996, Centennial had authorized purchases for the first $750,000. In accordance with the agreement, the Company incurred a one time non-refundable fee of $200,000, which is included in General and Administrative expenses for the six months ended March 31, 1996. In May 1997, the Company and Centennial agreed to terminate the purchase agreement. The Company liquidated amounts owed to Centennial under the agreement by paying approximately $132,000 in cash and agreeing to issue 600,000 shares of common stock to payoff the remaining balance of approximately $1.2 million. I. ACCRUED EXPENSES Accrued expenses consist of the following:
MARCH 31, MARCH 31, 1997 1996 -------- -------- Accrued vacation ................... $106,343 $ 88,999 Accrued professional fees .......... 131,546 161,803 Accrued payroll and related expenses 356,890 297,317 Accrued warranty ................... 115,885 79,611 Accrued Centennial fee ............. -- 200,000 Accrued interest and other ......... 247,289 102,604 -------- -------- $957,953 $930,334 ======== ========
J. DEBT The following is a summary of the Company's debt obligations:
MARCH 31, MARCH 31, 1997 1996 Collateralized demand note with assignee for the benefit of creditors for the former AOI Systems, Inc., due January 30, 1995. The note was renegotiated in July 1994 to require interest only payments at a rate of 8.0%, due monthly....... $130,000 $130,000 Uncollateralized subordinated note with a related party, principal due December 31, 1996, interest rate of 8.4%, interest only payments due quarterly................ 50,000 50,000
F-12 15 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Uncollateralized note with a related party, principal due October 23, 1996, interest rate of 10% payable at maturity................................................. 100,000 100,000 Uncollateralized note with a related party, principal due October 23, 1996, interest rate of 8.4% payable at maturity................................................ 100,000 100,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 15,000 25,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 15,000 15,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 5,000 5,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. -- 10,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 50,000 50,000 Uncollateralized note with a related party, principal due January 15, 1999, interest rate of 10% payable at maturity................................................. 150,000 Uncollateralized note with a related party, principal due January 21, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 25,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 25,000 Uncollateralized note with a related party, principal due February 11, 1999, interest rate of 10% payable at maturity........................................ 50,000 Uncollateralized note, principal due in nine monthly payments of $3,467 plus interest at 8.1%................................................................ 13,866 5,702 Capital lease obligations............................................................ 1,538 4,472 -------- -------- 930,404 495,174 Less amounts due within one year..................................................... 480,404 495,174 -------- -------- $450,000 $ -- ======== ========
In February 1996, the Company and various debt holders entered into an agreement to convert $1,270,637 in unpaid debt and interest into 1,270,637 shares of the Company's common stock and warrants to purchase 150,000 shares of common stock at $1.00 per share through February 6, 1999. In addition, the Company and certain debt holders agreed to extend the maturity on $200,000 in notes until October 23, 1996, however, a portion of this debt is still outstanding. F-13 16 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) In May 1996, the Company issued a note to a related party for $200,000, bearing interest of 10% per annum, due May 1997. In June 1996, the related party converted this $200,000 unpaid debt into 200,000 shares of common stock, and purchased 250,000 shares of common stock at $1.00 per share. In August 1996, the Company issued a note to a related party for $100,000 bearing interest of 12.25% per annum, due September 1996. This note was repaid in January 1997 plus accrued interest. In November 1996, the Company issued a note to a related party for $130,000 bearing interest of 12.25% per annum, due 90 days from the date of issuance. This note was repaid in January 1996 plus accrued interest. In December 1996, the Company issued a note to a related party for $150,000 due in December 1999, bearing interest of 10% per annum. In January 1997, a shareholder of the Company converted a loan in the amount of $150,000 to a subordinated note which bears interest at 10% per annum and is payable in January 1999. The Company issued 44,100 shares of common stock to the noteholder in conjunction with this transaction. The common stock was recorded in equity at $1.00 per share or a total of $44,100 which the Company deemed to be fair market value with the offset to other expense. Payment of this note is accelerated in the event the Company raises a certain amount of equity financing. In addition, a shareholder of the Company loaned the Company $50,000 in January 1997. The Company issued a subordinated promissory note which bears interest at 10% per annum and is due in two years. Payment of this note is accelerated in the event the Company raises a certain amount of equity financing. In addition, the Company issued 14,700 shares of common stock to the noteholder in conjunction with this transaction. The common stock was recorded in equity at $1.00 per share or a total of $14,700 which the Company deemed to be fair market value with the offset to other expense. In January 1997, the Company through Schneider Securities, Inc. (the "Placement Agent"), commenced the 1997 bridge financing through the sale of 5 units, each of which consists of a $50,000 subordinated promissory note bearing interest at an annual rate of 10% and 10,714 shares of the Company's common stock. The promissory notes are due two years after issue and payment is accelerated in the event the Company raises a certain amount of equity financing. In February 1997, the Company raised $250,000 through the sale of 5 units and issued 53,570 shares of common stock. The common stock was recorded in equity at $2.10 per share or a total of $112,497 which the Company deemed to be fair market value, based upon the recent exchange, with the offset to other expense. The above debt instruments contain numerous covenants and remedies upon default including immediate demand of payment and foreclosure. As of March 31, 1997, the Company had not repaid various borrowings that had become due and therefore is in default. In addition, the collateralized note is secured by all assets of the Company. F-14 17 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) K. SHAREHOLDERS' EQUITY The Company's Board of Directors approved a 20-for-1 stock split of the common and preferred stock in February 1996. Accordingly, share information for all periods has been adjusted to reflect the split. Through Schneider Securities, Inc. (the "Placement Agent"), the Company raised $559,210 (net of issuance costs of $140,790) from February 1996 through March 1996. In April 1996, the Company raised $147,036 (net of issuance costs of $32,964) for the Private Placement (the "Private Placement"). The Company also issued warrants as part of the Private Placement, which were issued with an exercise price equal to the price of the common stock issued during the Private Placement. In accordance with the Private Placement, the Company issued to the Placement Agent warrants for the purchase of 88,000 shares of common stock exercisable on April 27, 1997 at an exercise price of $1.20 per share. In addition, the Company issued warrants to purchase 44,000 shares of the Company's common stock at an exercise price of $1.20 per share, to legal counsel in conjunction with the Private Placement. The Company accounts for the warrants at fair value. At the date of issuance, the value of the warrants was not material. In June 1996, a related party purchased 200,000 shares of common stock at $1.00 per share. In January 1997, a shareholder exercised warrants to purchase 230,000 shares of common stock at $1.00 per share. As of March 31, 1997, the Company had not repaid various borrowings that had become due and therefore was in default. In February 1996, the Company and various debt holders entered into an agreement to convert $1,270,637 of unpaid debt and interest into 1,270,637 shares of the Company's common stock. In addition, one debt holder agreed to exchange $100,000 of debt for warrants to purchase 150,000 shares of the Company's common stock at $1.00 per share through February 6, 1999. The Company has 5,867,498 and 3,537,037 shares of voting common stock issued and outstanding at March 31, 1997 and March 31, 1996, respectively. Holders of common stock are entitled to receive dividends only when declared by, and at the discretion of, the Board of Directors. An aggregate of 800,000 shares of voting common stock are reserved as follows: 200,000 shares for options under the 1992 Stock Option Plan; and 600,000 share for options under the 1995 Stock Option Plan. The Company has authorized 1,000,000 shares of preferred stock, with a par value of $.01 per share. At March 31, 1997 and March 31, 1996, 0 and 633,000 shares were issued and outstanding. In February, 1997, 633,000 preferred shares were converted to common shares on a one for one basis. The holders of the shares of preferred stock vote in certain circumstances and receive dividends in parity with holders of the common stock. Dividends are noncumulative for the Series A stock, while annual dividends are cumulative for the Series B Stock at 10% of the F-15 18 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) redemption value of $1.39. The Series A and Series B Stock are convertible at the option of the holder into shares of the Company's common stock at a conversion rate using a conversion price that will be adjusted in certain instances such as dilutive issuances of equity securities, as defined. At March 31, 1996 and September 30, 1995, the per share conversion rate for the Series A Stock was $4.80 divided by the initial conversion price of $4.80, or one for one. At March 31, 1996 and September 30, 1995, the per share conversion rate for the Series B Stock was $1.39 divided by the initial conversion price of $1.39, also one for one. Upon liquidation, dissolution or winding up of the Company, holders of the Series A and Series B Stock, in parity with one another, are entitled to receive, prior and in preference to the holders of shares of stock ranking junior to the Series A and Series B stock, an amount equal to $4.80 and $1.39 per share, respectively. In addition, Series B stockholders are entitled to any accrued dividends at the date of liquidation. As of March 31, 1997 and March 31, 1996, no Series B stock was outstanding and no dividends were declared or accrued by the Company. In November 1997, an outside investor executed a Securities Purchase Agreement to invest $3 million in the Company by purchasing 3,000,000 shares of the Company's common stock at $1.00 per share. In accordance with the agreement, the Company also issued warrants to purchase 1,000,000 shares of common stock at $1.00 per share through November 12, 2002, and issued warrants to purchase 1,000,000 shares of common stock at $2.00 per share through November 12, 2002. The investor was granted demand registration rights starting six months from the closing date for both the common shares purchased and the warrants granted. In addition, the investor holds a seat on the board of directors. The agreement contains certain covenants which restrict future activities of the company including mergers or acquisitions, borrowings, issuance of securities, payment of dividends, granting a security interest in company assets, and the purchase or sale of assets. The investment has been funded and closing and issuance costs (including commissions) amounted to approximately $250,000. L. STOCK WARRANTS The Company has issued stock warrants as part of certain debt and equity transactions and accounts for warrants when issued at fair value. At date of issuance the value of these warrants was not material. The following summarizes the warrant issuances for the three classes of stock authorized by the Company. F-16 19 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Common Stock Warrants In December 1993 the Company issued to an officer, who personally guaranteed corporate indebtedness, warrants to purchase 500,000 shares of common stock at $.50 per share through December 22, 1998. Also in December 1993 the Company issued in connection with debt, warrants to purchase 20,000 shares of common stock at $.20 per share through December 22, 2003. In August 1994 the Company issued to several directors and stockholders, warrants to purchase 160,000 and 180,340 shares of common stock at $1.25 and $1.39 per share, respectively, through August 22, 2004 and August 22, 2002, respectively. In October 1994, the Company issued in connection with debt, warrants to purchase 72,140 shares of common stock at $1.39 per share through October 5, 2002. In December 1994, in connection with certain equity financing, the Company issued warrants to purchase 72,160 shares of common stock at $1.39 per share through December 15, 2002. In June 1995, the Company issued in connection with debt, warrants to purchase 203,480 shares of common stock at $1.39 per share through April 6, 2003. In October 1995, in connection with debt, the Company issued warrants to purchase 250,000 shares of common stock at $1.00 per share through October 1998. The Company, in February 1996, also issued warrants to purchase 150,000 shares of common stock at $1.00 per share through February 1999, in conjunction with the debt conversion and forgiveness of debt. In November 1997, the Company offered a 50% discount of the exercise price to all warrantholders of the Company's common stock for a specified period of time, which has expired. Warrantholders exercised warrants to purchase 1,187,406 shares of common stock at prices from $.25 per share to $.60 per share. The Company received $252,145 in cash, and received a promissory note from an officer of the Company for $125,000, interest and principal is payable in four years, and accrues interest at an rate of 8.5% per annum. The stock purchased is pledged as collateral against the note. In addition, a director of the Company cancelled a promissory note due from the Company for $100,000 in exchange for the exercise of warrants at a total exercise price of $98,480. The balance of the note payable plus accrued interest were paid to the noteholder in cash. The Company also repaid a $15,000 note payable to a director plus accrued interest. The impact of these transactions will result in the Company taking a charge in Fiscal 1998. Series B Preferred Stock Warrants In 1994 the Company issued warrants for the purchase of 180,380 and 20,000 shares of Series B Preferred Stock at $1.39 per share through August 22, 2004 and December 22, 2003, respectively. In September 1994 the Company issued warrants for the purchase of 16,000 shares of Series B Preferred Stock at $1.39 per share through September 15, 2004. All of these warrants were converted to common stock warrants in February 1997. F-17 20 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) M. INCOME TAXES At March 31, 1997, the Company had net operating loss ("NOL") carryforwards of approximately $6,800,000 for federal and Massachusetts income tax purposes. These carryforwards expire through 2012. In addition, the Company had Research and Experimentation ("R&E") credit carryforwards of approximately $60,000 and $25,000 for federal and Massachusetts income tax purposes, respectively. Utilization of these NOL and R&E credit carryforwards may be limited pursuant to the provisions of Section 382 of the Internal Revenue Code. The components of the deferred tax assets and liabilities are as follows (dollars in thousands):
MARCH 31, MARCH 31, 1997 1996 ------- ------- Deferred Tax Assets/(Liabilities): Accrued expenses and other ....... $ 451 $ 280 Patents .......................... 133 104 R&E credits ...................... $ 451 $ 280 NOL carryforwards ................ 2,762 2,202 ------- ------- Total deferred tax asset ......... 3,431 2,671 Valuation allowance .............. (3,431) (2,671) ------- ------- Net deferred tax asset ........... -- -- ======= =======
Due to the uncertainty surrounding the realization of the deferred tax assets in future income tax returns, the Company has recorded a full valuation allowance against its otherwise recognizable deferred tax assets. N. EMPLOYEE BENEFIT PLAN Effective October 26, 1992, the Company implemented a deferred compensation plan (the "Plan") under Section 401(k) of the Internal Revenue Code. Under the Plan, employees are permitted to contribute, subject to certain limitations. The Company's contribution to the Plan is discretionary and the Company has not contributed to the Plan since its inception. O. EMPLOYEE STOCK OPTION PLAN During 1993, the Company adopted, subject to shareholder approval, a stock award and incentive plan which permits the issuance of options or stock appreciation rights (SARs) to selected employees and independent contractors of the Company. The plan reserves 200,000 shares of common stock for grant and provides that the term of each award be determined by the Board of Directors charged with administering the plan. F-18 21 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Under the terms of the plan, options granted may be either nonqualified or incentive stock options and the exercise price, determined by the Board of Directors, may not be less than the fair market value of a share on the date of grant. SARs and limited SARs granted in tandem with an option shall be exercisable only to the extent the underlying option is exercisable and the grant price shall be equal to the exercise price of the underlying option. All options granted in 1993 and 1994 had an exercise price of $.20 per share. 42,140 options were granted in October of 1992 to employees who transferred to Triple I from AOI Systems; these options were immediately exercisable. All other options granted during 1993 and 1994 vest over a five-year period. In September 1995, the Company granted to certain employees, 34,060 options with an exercise price of $1.00 per share, vesting over a five-year period. Also during September 1995, the Company granted to an officer of the Company, 40,000 options with an exercise price of $1.00 per share, vesting over a two-year period. In May 1996 and January 1997 the Company granted 100,000 options and 50,000 options respectively, at $1.00 per share to officers of the Company. Also, in November 1996, 130,600 options were granted to employees at $1.00 per share. During the year ended March 31, 1997, the Company, in connection with certain stock option grants, recognized $26,400 in compensation expense, due to extending the exercise period which resulted in a remeasurement date. Details of stock options are as follows:
WEIGHTED AVERAGE SHARES EXERCISE PRICE ------ -------------- Year ended September 30, 1993 Granted ......................... 62,940 $ .20 Exercised ....................... 0 Canceled ........................ 0 ------- ----- Outstanding at end of year ...... 62,940 .20 ------- ----- Exercisable at end of year ...... 42,140 .20 ======= ===== Year ended September 30, 1994 Granted ......................... 63,000 .20 Exercised ....................... 0 Canceled ........................ 1,600 .20 ------- ----- Outstanding at end of year ...... 124,340 .20 ------- ----- Exercisable at end of year ...... 45,700 .20 ======= ===== Year ended September 30, 1995 Granted ......................... 74,060 1.00 Exercised ....................... 0 Canceled ........................ 0 ------- ----- Outstanding at end of year ...... 198,400 .50 ------- ----- Exercisable at end of year ...... 62,220 .20 ======= =====
F-19 22 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Six months ended March 31, 1996 Granted ......................... 0 Exercised ....................... 0 Canceled ........................ 2,000 1.00 ------- ----- Outstanding at end of year ...... 196,400 .49 ------- ----- Exercisable at end of year ...... 71,940 $ .20 ======= ===== Year ended March 31, 1997 Granted ......................... 280,600 1.00 Exercised ....................... 0 Canceled ........................ 0 ------- ----- Outstanding at end of year ...... 477,000 .79 ------- ----- Exercisable at end of year ...... 114,872 .38 ======= =====
In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123"). SFAS 123 is effective for periods beginning after December 15, 1995, and requires that companies either recognize compensation expense for grants of stock, stock options, and other equity instruments based on fair value, or provide pro forma disclosure of net income and earnings per share in the notes to the financial statements. The company adopted the disclosure provisions of SFAS 123 for the year ended March 31, 1997 and has applied APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates as calculated in accordance with SFAS 123, the Company's net income and earnings per share for the years ended March 31, 1997 and March 31, 1996 would have been reduced to the pro forma amounts indicated below:
March 31, 1997 March 31, 1996 --------------------------- ----------------------------- Loss Per Loss Per Net Income Share Net Income Share ---------- ----- ---------- ----- As reported $(1,894,554) $ (.44) $(1,159,821) $ (.55) Pro Forma $(1,916,682) $ (.45) $(1,164,526) $ (.55)
The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future F-20 23 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) amounts. SFAS 123 does not apply to awards prior to Fiscal 1996 and additional awards in the future years are anticipated. The fair value of each stock option is estimated on the date of grant using the Minimum Value option-pricing model with the following assumptions: an expected life of six years, no dividends, and risk free interest rates of 6.2% and 6.1% for the years ended March 31, 1997 and March 31, 1996, respectively. The fair value of options granted in the year ended March 31, 1997 and the six months ended March 31, 1996 was $280,600 and $0. The following table summarizes information about stock options at March 31, 1997:
Options Outstanding Options Exercisable ------------------------------------------------ ------------------------------- Range of Weighted Average Average Number Contractual Weighted Average Number Weighted Exercise Prices Outstanding Life Exercise Price Exercisable Exercise Price - --------------- ----------- ---- -------------- ----------- -------------- $0.20 124,140 6.20 $0.20 88,460 $0.20 $1.00 302,860 9.17 $1.00 26,412 $1.00 $4.00 50,000 9.77 $4.00 0 ------- $0.20-4.00 477,000 8.46 $1.11 114,872 $0.38 ======= =======
P. SIGNIFICANT CUSTOMERS AND DOMESTIC AND EXPORT SALES Significant Customers Sales to significant customers were as follows:
YEAR ENDED SIGNIFICANT PERCENTAGE OF MARCH 31, 1997 CUSTOMERS AMOUNT REVENUES -------------- --------- ------ -------- 1997......................... Customer A $515,272 28% 1997......................... Customer B 460,000 25% 1997......................... Customer C 274,781 15% 1997......................... Customer D 227,230 12%
FOR THE SIX MONTHS ENDED SIGNIFICANT PERCENTAGE OF MARCH 31, 1996 CUSTOMERS AMOUNT REVENUES -------------- --------- ------ -------- 1996........................ Customer A $226,059 39% 1996........................ Customer B 180,000 31%
F-21 24 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED SIGNIFICANT PERCENTAGE OF SEPTEMBER 30, 1995 CUSTOMERS AMOUNT REVENUES ------------------ --------- ------ -------- 1995........................ Customer A $225,000 18% 1995........................ Customer B 209,248 17% 1995........................ Customer C 197,000 16% 1995........................ Customer D 178,066 15% 1994........................ Customer A 341,052 26% 1994........................ Customer B 291,572 22% 1994........................ Customer C 198,000 15% 1994........................ Customer D 150,000 12%
Domestic and Export Sales Domestic and export sales as a percentage of revenues were as follows:
YEAR ENDED MARCH 31, 1997 ------------------------- AMOUNT % --------- --------- Domestic............................... $ 377,835 20% Europe................................. 990,808 54% Asia 484,933 26% ---------------
SIX MONTHS ENDED MARCH 31, 1996 ------------------------- AMOUNT % --------- --------- Domestic............................... $ 37,328 6% Europe................................. 532,112 92% Asia 10,926 2% ---------------
YEAR ENDED SEPTEMBER 30, 1995 ------------------------- AMOUNT % --------- --------- Domestic............................... $ 114,701 9% Europe................................. 1,095,642 90% Asia 14,680 1% ---------------
F-22 25 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED SEPTEMBER 30, 1994 ------------------------- AMOUNT % --------- --------- Domestic............................... $500,545 38% Europe................................. 664,965 51% Asia 144,638 11%
Q. OTHER EXPENSE Included in other expense is $171,297, which represents the cost of shares of the Company's common stock issued in conjunction with loans made to the Company in January and February, 1997. (See Note J). R. MERGER EXPENSES The costs of the Exchange with Orbis, consisting of legal costs, printing costs, and accounting costs amounted to $179,787, and have been included in operating expenses. (See Note A). F-23 -----END PRIVACY-ENHANCED MESSAGE-----