-----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, CwBELj6aEpbIQR5Slzg5ZREYG3OerjCuBA2xemGFsKPM1WFcp+X1hF+53xoDhqSY vbZDGn/RCuOSjyEjU+xiyw== 0000950135-98-004758.txt : 19980817 0000950135-98-004758.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950135-98-004758 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-15520 FILM NUMBER: 98687996 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 10QSB 1 FORM 10-QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ================================================================================ FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 COMMISSION FILE NUMBER 0-15520 INDUSTRIAL IMAGING CORPORATION - -------------------------------------------------------------------------------- (Exact name of small business issuer 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 - -------------------------------------------------------------------------------- (Issuer's telephone number, including area code) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X --- --- As of June 30, 1998, the Company had outstanding 10,890,201 shares of Common Stock, $.01 par value per share. Transitional Small Business Disclosure Format (check one) Yes No X --- --- 1 2 INDUSTRIAL IMAGING CORPORATION INDEX PART 1 - FINANCIAL INFORMATION PAGE NUMBER ------------ Item 1. Financial Statements Balance Sheets at June 30, 1998 and March 31, 1998 3 Statements of Operations for the three months ended June 30, 1998 and 1997 4 Statements of Cash Flows for the three months ended June 30, 1998 and 1997 5 Notes to Financial Statements 6 Item 2. Managements's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 1. Legal proceedings 9 Item 2. Changes in Securities 9 Item 3. Default upon Senior Securities 9 Item 4. Submission of Matters to a vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 2 3 INDUSTRIAL IMAGING CORPORATION BALANCE SHEETS
JUNE 30, MARCH 31, 1998 1998 ------------ ----------- ASSETS (UNAUDITED) Current assets: Cash.................................................................................... $ 227,805 $ 671,195 Accounts receivable, net of allowance for doubtful accounts of $31,000 at June 30, 1998 and March 31, 1998, respectively............................................. 587,827 214,450 Inventory (Note B).................................................................. 1,987,908 1,995,194 Prepaid expenses.................................................................... 34,961 75,282 ----------- ----------- Total current assets.............................................................. 2,838,501 2,956,121 Property and equipment, net............................................................. 56,478 59,150 Other assets............................................................................ 44,418 7,600 ----------- ----------- Total assets...................................................................... 2,939,397 $ 3,022,871 =========== =========== LIABILITIES AND SHAREHOLDERS' (DEFICIT) Current liabilities: Notes payable....................................................................... 713,402 715,334 Accounts payable.................................................................... 790,963 599,795 Deferred revenue.................................................................... 511,237 342,705 Accrued expenses.................................................................... 828,338 834,212 ----------- ----------- Total current liabilities......................................................... 2,843,940 2,492,036 Notes payable -- long-term portion...................................................... 135,000 152,217 ----------- ----------- Total liabilities................................................................. 2,978,940 2,644,253 Commitments and contingencies Shareholders' deficit (Note C): Common stock, par value $.01 per share, authorized 20,000,000 shares, 10,890,201 shares issued and outstanding at June 30, 1998 and March 31, 1998 ................................................................... 108,902 108,902 Series A Preferred Stock, par value $.01 per share, authorized 1,000,000 shares, 0 shares issued and outstanding at June 30, 1998 and March 31, 1998, -- -- respectively...................................................................... Series B Preferred Stock, par value $.01 per share, authorized 300,000 shares, 0 shares issued and outstanding at June 30, 1998 and March 31, 1998, respectively -- -- Additional paid-in capital.......................................................... 10,794,439 10,794,439 Accumulated deficit................................................................. (10,817,884) (10,399,723) Note receivable..................................................................... (125,000) (125,000) ----------- ------------ Total shareholders' deficit....................................................... (39,543) 378,618 ----------- ----------- Total liabilities and shareholders' deficit..................................... $ 2,939,397 $ 3,022,871 =========== ===========
The accompanying notes are an integral part of the financial statements. 3 4 INDUSTRIAL IMAGING CORPORATION STATEMENTS OF OPERATIONS
THREE MONTHS ENDED ------------------ JUNE 30, 1998 JUNE 30, 1997 ------------- ------------- Revenues: Product............................................... $1,026,660 $ 601,685 Service............................................... 110,871 105,086 ---------- ---------- 1,137,531 594,619 ---------- ---------- Cost of revenues: Product............................................... 790,319 645,873 Service............................................... 71,252 58,204 ---------- ---------- 861,571 704,077 ---------- ---------- Gross profit.............................................. 275,960 2,694 ---------- ---------- Operating expenses: Research and development.............................. 242,644 113,449 Sales and marketing................................... 200,607 96,256 General and administrative............................ 226,933 209,795 ---------- ---------- Total operating expenses.......................... 670,184 419,500 ---------- ---------- Loss from operations...................................... (394,224) (416,806) Other income (expense): Interest expense...................................... (30,656) (47,986) Other, net............................................ 6,719 7,158 ---------- ---------- Other income (expense), net....................... (23,937) (40,828) Loss before income taxes.......................... (418,161) (457,634) Provision for income taxes................................ -- -- ---------- ---------- Net loss.................................................. $ (418,161) $ (457,634) ========== ========== Net loss per common and common equivalents................ $ (.04) $ (.07) ========== ========== Weighted average common shares outstanding................ 10,890,201 6,236,736 ========== ==========
The accompanying notes are an integral part of the financial statements. 4 5 INDUSTRIAL IMAGING CORPORATION STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED ------------------ JUNE 30, 1998 JUNE 30, 1997 ------------- ------------- Cash flows from operating activities: Net loss......................................................... $ (418,161) $ (457,634) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation................................................. 6,472 37,881 Amortization................................................. --- 26,562 Changes in assets and liabilities: Accounts receivable........................................ (373,377) 263,505 Inventory.................................................. 7,286 147,729 Prepaid expenses........................................... 40,321 30,921 Other assets .............................................. (36,818) -- Accounts payable........................................... 191,178 (97,051) Deferred revenue........................................... 168,532 (27,515) Accrued expenses........................................... (5,874) (21,125) ---------- --------- Net cash used in operating activities........................ (420,441) (130,727) ---------- --------- Cash flows from investing activities: Capital expenditures............................................. (3,800) ----------- Net cash used in investing activities............................ (3,800) ----------- Cash flows from financing activities: Principal payments on nonconvertible debt........................ (19,149) (15,032) Proceeds from issuance of convertible debt....................... --- Proceeds from issuance of stock (net)............................ 100,014 ---------- --------- Net cash provided from financing activities.................... (19,149) 84,982 ---------- --------- Net increase (decrease) in cash................................ (443,390) (45,745) Cash, beginning of period............................................ 671,195 62,103 ---------- --------- Cash, end of period.................................................. $ 227,805 $ 16,358 ========== ========= Supplemental cash flows information: Cash paid during the period for interest......................... $ 7,974 $ 13,564 Noncash items: Debt and accrued interest converted to equity during the period..................................................... $ --- $ 1,263,663
The accompanying notes are an integral part of the financial statements. 5 6 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE A-BASIS OF PRESENTATION The financial statements of Industrial Imaging Corporation (the "Company") included herein have been prepared pursuant to the Securities and Exchange Commission for the quarterly reports on Form 10-QSB and do not include all of the information and footnote disclosure required by generally accepted accounting principles. These statements should be read in conjunction with the financial statements and notes thereto for the year ended March 31, 1998 included in the Company's Form 10-K filed with the Securities and Exchange Commission. The financial statements and notes herein are unaudited, except for the balance sheet as of March 31, 1998, but in the opinion of management include all the adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows of the Company. The results of operations for the three months ended June 30, 1998 are not necessarily indicative of the results to be achieved for any future period or for the entire year ended March 31, 1999. NOTE B-INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis. At June 30,1998 and March 31, 1998, inventories consist of the following: JUNE 30, 1998 MARCH 31, 1998 -------------- ---------------- Raw materials $ 843,726 $ 746,748 Work in process 458,487 366,320 Finished goods 685,695 882,126 ---------- ---------- $1,987,908 $1,995,194 ========== ========== NOTE C-SHAREHOLDERS' EQUITY In the last quarter of fiscal 1998, the Company adopted Statement of Financial Accounting standards No. 128, "Earnings per Share", which requires the presentation for both basic and diluted earnings per share on the face of the Statements of Operations and the restatement of all prior periods earnings per share amounts. Assumed exercise of options and warrants are not included in the calculation of diluted earnings per share since the effect would be antidilutive. Accordingly, basic and diluted net loss per share do not differ for any period presented. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL This report contains forward looking statements regarding anticipated increases in revenues, markets and other matters. These statements, in addition to statements made in conjunction with the words "anticipate", "expect", "intend", "seek", and similar expressions, are forward-looking statements. These statements involve a number of risks and uncertainties, including but not limited to, the impact of competitive products and pricing, product demand and market acceptance, new product development, availability of raw materials, fluctuations in operating results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. Industrial Imaging Corporation (the "Company") designs, manufactures and markets automated optical, vision and industrial imaging systems for inspection and identification of defects in PCBs and laser plotters for creation of PCB artwork and phototools. 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. The Company acquired Triple I as part of the Exchange, whereby the shareholders of Triple I received 90% ownership of the Company in exchange for 100% of Triple I's outstanding Common Stock (See note C). The Exchange was effective on February 1, 1997. Prior to the Exchange, Orbis had not had revenues from operations since 1992, and therefore, the impact of Orbis on the financial statements of Industrial Imaging is immaterial. RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTH PERIODS ENDING JUNE 30, 1998 ("THREE MONTHS 1998") AND 1997 ("THREE MONTHS 1997") Revenues for the Three Months 1998 were $1,137,531 as compared to $706,771 for the Three Months 1997, an increase of $430,760. Product revenues were $1,026,660 for the Three Months 1998 as compared to $601,685 for the Three Months 1997. This increase was due primarily to an increase in the volume of units sold. Service revenues increased from $105,086 to $110,871 for the Three Months 1997 and 1998, respectively, due to a slight increase in services performed. Cost of revenues for the Three Months 1998 was $861,571 as compared to $704,077 for the Three Months 1997, an increase of $157,494, resulting primarily from an increase in sales volume. As a result, gross profit increased to $275,960 for the Three Months 1998 from $2,694 for the Three Months 1997, due to the aforementioned factors. It is anticipated that gross margin will increase with increases in sales as fixed and indirect overhead costs are absorbed over more systems sales. Operating expenses increased from $419,500 to $670,184 for the Three Months 1997 and 1998, respectively. Research and development expenses increased by $129,195 from the Three Months 1997 to the Three Months 1998 due to expanding of the engineering staff and the related expenses, and additional development of the AOI-2500 series. Sales and marketing expenses were $96,256 for the Three Months 1997 as compared to $200,607 for the Three Months 1998. The increase in sales expenses was primarily due to an increase in commissions relating to higher revenue and increased commissions paid to sales representatives, staff additions, and increased costs related to trade shows. General and administrative expenses increased to $226,933 from 209,795 for the Three Months 1998 and 1997, respectively. This increase was attributable to increased legal and accounting costs, partially offset by a decrease in amortization. Interest expense was $47,986 for the Three Months 1997 as compared to $30,656 for the Three Months 1998. The decrease relates to the decreased use of factoring of accounts receivable. 7 8 Due to the aforementioned, The net loss decreased to $418,161 for the Three Months 1998 from $457,634 for the Three Months 1997. The Company did not recognize an income tax benefit 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. LIQUIDITY AND CAPITAL RESOURCES The Company has incurred operating losses since inception that continued through June 30, 1998. In addition, the financial statements of the Company for Fiscal 1994, Fiscal 1995, Six Months 1996, and Fiscal 1997 were prepared on the assumption that the Company will continue as a going concern and do not include any adjustments that would result if the Company would cease as a going concern. The report of the independent accountants contain an explanatory paragraph as to the Company's ability to continue as a going concern. Among the factors cited by the auditors as raising substantial doubt as to the Company's ability to continue as a going concern is that the Company has suffered recurring losses from operations, has a net working capital deficiency and had an accumulated deficit of $10,937,074 as of June 30, 1998. The Company's operations to date have been funded by equity investments, borrowing from banks, investors and stockholders, factoring of accounts receivable, and to a limited extent, cash flow from operations. In addition, the Company raised $3 million of new equity in November 1997. Management believes that anticipated future financings will provide the additional capital funding that the Company needs 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. In addition, the Company is currently seeking bank financing as well as additional equity investments. There can be no assurance that the Company can attract additional capital at favorable rates, if at all. In the event the Company is unable to raise additional capital, it may be required to take additional steps which could include a merger or sale of the Company, or seeking protection under bankruptcy laws. At June 30, 1998, the Company had cash of $227,805, and a working capital deficit of $5,439. During Three Months 1998, cash used in operating activities was $420,441. The Company currently has no outstanding material commitments for capital expenditures. The Company derives most of its annual revenues from a relatively small number of sales of products, systems and upgrades, with product prices ranging from $185,000 to $600,000 per system. As a result, accounts receivable will likely continue to fluctuate based on the number of systems sold in each period and the timing of the individual sales within each period. Moreover, any delay in the recognition of revenue for single products or a delay in shipment to customers, systems or upgrades would have a material adverse effect on the Company's results of operations for a given accounting period. In addition, some of the Company's net sales have been realized near the end of a quarter. Accordingly, a delay in a customer's acceptance or in a shipment scheduled to occur near the end of a particular quarter could materially adversely affect the Company's results of operations for that quarter. The accounts receivable balance increased from $214,450 at March 31, 1998, to $587,827 at June 30, 1998, due to a sale of a system at the end of the quarter. Accounts payable increased from $599,785 at March 31, 1998 to $790,963 at June 30, 1998, primarily due to an increase in the aging of accounts payable. Deferred revenue increased by $168,532 as a result of increased down payments from customers. 8 9 INFLATION To date, inflation has not had a material effect on the Company's business. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable ITEM 2. CHANGES IN SECURITIES. None ITEM 3. DEFAULT UPON SENIOR SECURITIES. Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. The following exhibit is filed herewith: EXHIBIT NO. TITLE ----------- ----- 27 Financial Data Schedule (b) Reports on Form 8-K. On June 29, 1998, a form 8K was filed reporting the appointment of BDO Seidman, L.L.P., and was reported as an exhibit to the Company's Form 10KSB. 9 10 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: AUGUST 14, 1998 By: /s/ JUAN J. AMODEI, PH.D. - -------------------------------- ------------------------------ Juan J. Amodei, Ph.D. Chairman, Chief Executive Officer, and President Date: AUGUST 14, 1998 By: /s/ BRYAN M. GLEASON - -------------------------------- ------------------------- Bryan M. Gleason Chief Financial Officer 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary information extracted from the company's 10Q for the quarter ended June 30, 1998. 1 U.S. DOLLARS 3-MOS MAR-31-1999 APR-01-1998 JUN-30-1998 1 227,805 0 587,827 0 1,987,908 2,762,311 56,478 0 2,939,397 2,843,940 0 0 0 10,903,341 (10,942,884) 2,939,397 1,137,531 1,137,531 861,571 861,571 663,465 0 30,656 (418,161) 0 (418,161) 0 0 0 (418,161) (.04) (.04)
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