-----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, AwLmpAKxY5ePoPDLSd8LPpaafVxLeenRvH9H2A6LDMbUhl5tEZ2IxKh165aw94xo BBbd/RiAlUdQGKG0M3HfHw== 0000912057-97-007213.txt : 19970228 0000912057-97-007213.hdr.sgml : 19970228 ACCESSION NUMBER: 0000912057-97-007213 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19970227 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMSCO INC /MA/ CENTRAL INDEX KEY: 0000924396 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 043021770 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24520 FILM NUMBER: 97545976 BUSINESS ADDRESS: STREET 1: 40 BAYFIELD DR CITY: NORTH ANDOVER STATE: MA ZIP: 01845 BUSINESS PHONE: 5086892080 MAIL ADDRESS: STREET 1: 40 BAYFIELD DR CITY: NORTH ANDOVER STATE: MA ZIP: 01845 10QSB/A 1 10QSB/A U.S. 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 September 30, l996 Commission file number 0-24520 IMSCO TECHNOLOGIES, INC. --------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 04-3021770 -------- ---------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 40 Bayfield Drive, North Andover, Massachusetts 01845 ----------------------------------------------------- (Address of principal executive offices) (508) 689-2080 -------------- (Issuer's telephone number) IMSCO, INC. ----------- (Former name, former address and former fiscal year, if changed since last report) 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 |_|. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 3,250,000. PART I - Financial Information Item 1. Financial Statements. See pages FS-1 to FS-4. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS FOR THREE MONTHS ENDING SEPTEMBER 30, l996; COMPARED WITH SEPTEMBER 30, l995. Net losses increased from $106,025 for the three months ended September 30, l995 to $405,993 for the three months ending September 30, l996, a 283% increase. The Company had no revenues or operating income for the three months ended September 30, l995 and September 30, l996 from continuing operations. For the three months ended September 30, l995, the Company earned $2,510 in interest on its interest bearing investment account. No interest was earned for the comparable period in l996. Total general, administrative and development expenses were $108,535 for 1995 in comparison to $405,993 for l996. The increase in these costs from l995 to l996 was primarily due to increased business consultants' fees, staffing and wages and salaries for research and development being performed in l996 than incurred in l995 as the Company continues further product research, development and refinement on its Decaffamatic and other separation technologies. All research and development costs were expended currently in the year incurred, rather than capitalized. This resulted in a loss per share of $.12 for the three months ended September 30, l996 in comparison to a loss per share of $.04 for the comparable three month period in l995. At September 30, l995, the Company had total assets of $27,014, total liabilities of $22,256, and total stockholders' equity of $4,758. At September 30, l996, the Company had total assets of $47,981, an increase of 77.6% from the comparable period in l995, total liabilities of $363,769, an increase of $341,513 from l995, and a total stockholders' deficit of $315,788, in comparison to a stockholders' equity of $4,758 in the prior year. The increase in liabilities primarily results from a $300,000 loan payable to Hampton Tech Partners, LLC incurred by the Company in August 1996. The loan is due on the earlier of (a) February 19, 1997, or (b) from the proceeds of a equity or debt offering by the Company during the interim period. 2 RESULTS OF OPERATIONS FOR NINE MONTHS ENDING SEPTEMBER 30, l996; COMPARED WITH SEPTEMBER 30, l995. Net losses increased from $ 344,172 for the nine months ended September 30, l995 to $445,424 for the nine months ending September 30, 1996 a 29.4% increase. The Company had no revenues or operating income for the nine months ended September 30, l995 and September 30, l996 from continuing operations. For the nine months ended September 30, l996, the Company incurred $1,759 in interest expense on short-term financing obtained from a private lender. No interest was earned for 1996 or the comparable period in l995. Total general, administrative and development expenses were $443,665 for 1996 in comparison to $346,751 for 1995, a 27.9% increase over the prior period. The increase in these costs from l995 to l996 was primarily due to increased business consulting fees, staffing and wages and salaries for research and development being performed in l996 than incurred in l995 as the Company continues further product research, development and refinement on its Decaffamatic and electrostatic separation technologies. All research and development costs were expended currently in the year incurred, rather than capitalized. This resulted in a loss per share of $.14 for the nine months ended September 30, l996 in comparison to a loss per share of $.12 for the comparable nine month period in l995. LIQUIDITY AND CAPITAL RESOURCES The Company had a working capital deficiency as of September 30, l996 of $320,398 in comparison to a positive working capital position as of September 30, l995 of $412, which deficiency was primarily attributable to a $300,000 loan payable which matures in the next 12 months. The Company had an accumulated deficit of $2,292,786 at the period ended September 30, l996 in comparison to an accumulated deficit of $ 1,763,227 at the period ended September 30, l995. The increase in the accumulated deficit is primarily related to continuing operating costs during the development phase without any operating income. For the three months ended September 30, l996 the Company's cash requirements were satisfied primarily from the cash reserves in its operating accounts and a private placement consisting of a promissory note in the amount of $300,000 and 150,000 shares of the Company's Common Stock for par value of $.001 per share, made to the company by a private lender, Hampton Tech Partners, LLC, on August 19, 1996. The promissory note bears interest at the rate of 7% per annum and is due in full on the earlier of (a) February 19, 1997, or (b) from the proceeds of an equity or debt placement by the Company prior to that date. On September 20, 1996, the Company entered into two agreements to sell an aggregate of 3 2,272,728 shares of its common stock, par value $.001, to two purchasers, Hampton Tech Partners, LLC, a private investment fund based in Colorado, which is purchasing 1,136,364 shares, and Proxhill Marketing, Ltd., a private company based in Colorado, which is purchasing 1,136,364 shares. The sales price is $1.32 per share and gross proceeds received are $3,000,000. The proceeds will be paid $1,500,000 in cash and $1,500,000 in media credits at the Company's direction. The Company intends to use the media credits during the next 18 months to market its products. The Company does not currently possess a bank source of financing. Although the Company believes that the above financing will be adequate to cover its liquidity requirements over the next 12 months, it cannot be certain that these sources of capital will be adequate. Should insufficient funds be available from the foregoing sources, reducing the Company's present rate of expenditures which might materially adversely affect the ability of the Company to develop and produce competitive products and services and to market them effectively. The Company's ability to continue in business as a going concern depends upon its ability to generate revenues and royalties from the sale of its technology and products, which it has not done to date, to conserve liquidity by setting marketing and other priorities and reducing expenditures, to obtain bank or other sources of financing and to obtain additional funds through the placement of its common stock. The Company's ability to obtain bank financing will require significantly improved operating results over the Company's results for its past twelve months, the likelihood of which the Company very uncertain given that the Company has incurred losses during its development stage and has not had revenues from operations. The Company's long term capital expenditure requirements will depend upon numerous factors, including the progress of the Company's research and development programs, the resources that the Company devotes to the development of self-funded products, proprietary manufacturing methods and advanced technologies, the ability of the Company to obtain licensing arrangements, and the demand for its products if and when approved. In order to minimize capital expenditures for manufacturing plant and equipment, the Company intends to contract the manufacturing of its products out to third party manufacturers on an OEM basis. In this regard, the Company entered into a three year Manufacturing and Distribution Agreement with NEWCO Enterprises, Inc., of St. Charles, Missouri, on September 20, 1996 for the manufacture of several devices incorporating the Company's patented electrostatic decaffeination technology for sale to the institutional coffee maker marketplace. As part of the Agreement, NEWCO Enterprises, Inc., was granted the exclusive right to sell the decaffeination technology to the office coffee supply market in North America, and NEWCO agreed to purchase a minimum of 25,000 units in the first year, 50,000 units in the second year and 100,000 units in the third year from the Company. On September 20, 1996, the Company also entered into a Marketing Agreement with Hughes Edwards & Price, Inc. ("HEP"), of Traverse City, Michigan, wherein HEP was granted the exclusive right to market and distribute the Company's decaffeination technology and products to the institutional coffee brewer marketplace, excluding 4 office coffee supply, in North America for a period of three years. HEP agreed to sell or purchase from the Company the following minimums of decafffeination products: $3,000,000 in the first year, $5,000,000 in the second year and $7,000,000 in the third year of the agreement. Sales are anticipated to commence under the agreement in first quarter of 1997, and accordingly should contribute to the Company's liquidity and cash flow at that time. The Company has not previously manufactured or produced products for commercial sale. Although the Company believes that NEWCO Enterprises, Inc., has substantial experience in the manufacture and sale of coffee making products to the institutional coffee supply market, and Hughes Edwards & Price, Inc., has significant experience in marketing products to the institutional coffee maker market, because the Company's decaffeination technology is newly developed, there can be no assuance that NEWCO Enterprises, Inc., will be able to timely manufacture products incorporating the Company's technology or that once manufactured, the market will accept and need the decaffeination technology. With respect to its PLASMA PURE technology, the Company may rely internal cash flow from product sales in other areas, on research grants, and third-party licensees to fund the advanced portions of its development costs, obtain regulatory approvals, manufacture and market the Company's products. In the event the Company decided to self-fund product development, obtain regulatory approvals, manufacture and market its products on its own behalf, it would require significant additional funds. No assurance can be given that such funds would be available on terms satisfactory to the Company, it at all. The Company believes that its existing cash and cash equivalents, together with the net proceeds from its recent private placement and anticipated cash flow from operations will be sufficient to meet its operating expenses and capital expenditures requirements for at least the next 12 months. However, there can be no assurance that the Company will have sufficient capital resources to be able to continue as a going concern. PART II - Other Information Not Applicable. 5 INDEX TO FINANCIAL STATEMENTS Balance Sheet at September 30, l995 (unaudited) and September 30, l996 (unaudited).......................... F-1 Statement of Income (Loss) for the nine months ended September 30, l995 and l996 (unaudited).................... F-2 Statement of Cash Flows for the nine months ended September 30, 1995 and 1996 (unaudited).................... F-3 Statement of Stockholders' Equity (Deficit) for the nine months ended September 30, 1995 and 1996 (unaudited).................... F-4 6 IMSCO TECHNOLOGIES, INC. a development stage enterprise BALANCE SHEET at September 30, 1996 and September 30, 1995 September 30, September 30, 1996 1995 ------------ ------------- ASSETS CURRENT ASSETS Cash and equivalents 43,371 $ 22,668 ----------- ----------- TOTAL CURRENT ASSETS 43,371 22,668 FIXED ASSETS - Note 1 Property and equipment 76,672 76,772 Leasehold Improvements 4,900 4,900 Accumulated Depreciation (78,246) (78,246) ----------- ----------- NET FIXED ASSETS 3,326 3,426 ----------- ----------- ORGANIZATION COSTS net of amortization 100 100 DEPOSITS 1,184 390 DUE FROM OFFICERS 0 530 ----------- ----------- TOTAL ASSETS $ 47,981 $ 27,014 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 42,440 $ 16,603 Loan from Officer 5,570 0 Loan Payable - FCI 300,000 0 Accrued Expenses 8,372 0 Accrued Payroll Taxes 7,387 5,653 ----------- ----------- TOTAL CURRENT LIABILITIES 363,769 22,256 STOCKHOLDERS' EQUITY (DEFICIT) Common Stock - authorized 15,000,000 shares at $.001 par value; 3,249,839 and 2,975,496 shares issued and outstanding at September 30, 1996 and 1995 respectively 3,250 2,976 Additional paid-in capital 1,973,748 1,765,009 Deficit Accumulated: Development Stage (1,671,878) (1,124,349) Prior Period Adjustment (See note) (17,970) Discontinued Operations (620,908) (620,908) TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (315,788) 4,758 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 47,981 $ 27,014 =========== =========== The following notes are an integral part of these statements. FS-1 IMSCO TECHNOLOGIES, INC. a development stage enterprise STATEMENT OF OPERATIONS for the Nine Months Ended September 30, 1996 and 1995 and Cumulative Amounts from July 9, 1992 (inception of the current development stage) to September 30, 1996 Cumulative amounts from current 1996 1995 development stage ---- ---- ----------------- DEVELOPMENT EXPENSES $ 28,416 $ 23,795 $ 171,440 SALARIES AND WAGES 16,875 75,000 220,637 OFFICER SALARIES 10,625 103,200 282,319 PAYROLL TAXES 2,104 19,031 47,368 OUTSIDE LABOR 0 0 120,350 PROFESSIONAL SERVICES 52,174 80,272 277,236 CONSULTING EXPENSES 262,900 0 262,900 RENT 10,838 11,476 68,367 INSURANCE 11,036 9,607 43,530 TRAVEL AND BUSINESS MEETINGS 22,093 15,486 53,413 AUTO EXPENSE 4,282 2,460 24,858 TELEPHONE AND UTILITIES 5,170 3,330 29,668 OFFICE EXPENSES 7,569 3,094 21,909 EQUIPMENT RENTAL 0 0 3,462 CONTRIBUTIONS 375 0 410 CORPORATE FEES 9,211 0 43,321 --------- ------- --------- TOTAL GENERAL, ADMINISTRATIVE AND DEVELOPMENT EXPENSE $ 443,665 346,751 1,671,186 --------- ------- --------- OTHER INCOME (EXPENSE): DIVIDEND AND INTEREST INCOME 0 3,035 3,070 INTEREST EXPENSE (1,759) 0 (3,306) LOSS BEFORE INCOME TAXES (445,424) (343,716) (1,671,422) PROVISION FOR INCOME TAX 0 456 (456) NET LOSS FROM DEVELOPMENT (445,424) (344,172) (1,671,878) --------- ------- --------- LOSS FROM DISCONTINUED OPERATIONS (Note 1) NET LOSS (445,424) (344,172) (1,671,878) ========= ======= ========= LOSS PER SHARE (Note 1) $ (.14) $ (.12) $ (.51) The accompanying notes are an integral part of these statements. FS-2 IMSCO TECHNOLOGIES, INC. a development stage enterprise STATEMENT OF OPERATIONS for the Three Months Ended September 30, 1996 and 1995 and Cumulative Amounts from July 9, 1992 (inception of the current development stage) to September 30, 1996 Cumulative amounts from current 1996 1995 development stage ---- ---- ----------------- DEVELOPMENT EXPENSES $ 18,197 $ 444 $ 171,440 SALARIES AND WAGES 16,875 25,000 220,637 OFFICER SALARIES 10,625 30,000 282,319 PAYROLL TAXES 2,104 8,585 47,368 OUTSIDE LABOR 0 0 120,350 PROFESSIONAL SERVICES 49,674 26,391 277,236 CONSULTING EXPENSES 262,900 0 262,900 RENT 3,613 4,251 68,367 INSURANCE 4,208 2,775 43,530 TRAVEL AND BUSINESS MEETINGS 19,081 9,072 53,413 AUTO EXPENSES 3,599 949 24,858 TELEPHONE & UTILITIES 2,200 827 29,668 OFFICE EXPENSES 5,468 241 21,909 EQUIPMENT RENTAL 0 0 3,462 CONTRIBUTIONS 0 0 410 CORPORATE FEES 7,450 0 43,321 --------- ------- --------- TOTAL GENERAL, ADMINISTRATIVE AND DEVELOPMENT EXPENSE $ 405,993 108,535 1,671,186 --------- ------- --------- OTHER INCOME (EXPENSE): DIVIDEND AND INTEREST INCOME 0 2,510 3,070 INTEREST EXPENSE 0 0 (3,306) LOSS BEFORE INCOME TAXES (405,993) (106,025) (1,671,422) PROVISION FOR INCOME TAX 0 456 (456) NET LOSS FROM DEVELOPMENT (405,993) (106,481) (1,671,878) --------- ------- --------- LOSS FROM DISCONTINUED OPERATIONS (Note 1) NET LOSS (405,993) (106,481) (1,671,878) ========= ======= ========= LOSS PER SHARE (Note 1) $ (.12) $ (.04) $ (.51) The accompanying notes are an integral part of these statements. FS-2a IMSCO TECHNOLOGIES, INC. a development stage enterprise STATEMENT OF CASHFLOWS for the Nine Months Ended September 30, 1996 and 1995 and Cumulative Amounts from July 9, 1992 (inception of the current development state)
Cumulative amounts from current 1996 1995 development stage ---- ---- ----------------- Cash flows from operating activities: Cash received from dividends and interest $ 3,185 $ 3,070 Cash received from customers 57,004 Cash received from research and testing 8,187 Cash received from unemployment taxes 170 Cash received from travel reimbursements and other rebates 250 938 Cash paid to suppliers and employees ($304,833) (283,163) (1,348,935) --------- -------- ---------- Net cash provided by operating activities (304,833) (279,728) (1,279,566) Cash flows from investing activities: Prepaid research testing (7,734) Purchase of Fixed Assets (2,548) ---------- Net cash provided by investing activities 0 0 (10,282) Cash flows from financing activities: Cash flow for non-deductible expenses (1,386) Cash flow from financing 300,000 300,000 Interim loan financing from officer 9,570 94,570 Proceeds from issuance of common stock 30,000 140,500 952,756 --------- -------- ---------- Net cash provided by financing activities 339,570 139,114 1,347,326 Net Increase in cash and cash equivalents 34,737 (140,614) 57,478 Cash and cash equivalents at beginning of year 8,634 163,282 (14,107) Cash and cash equivalents at end of year $ 43,371 $ 22,668 $ 43,371 ========= ======== ========== RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVI TIES Net Loss ($445,424) ($344,172) ($1,878,128) Decrease in Due from Officers 530 (120) Depreciation and Amortization (4,000) (1,387) Stock issued to retire debt/services 150,000 100,885 579,733 Increase (Decrease) in Accounts Payable (10,487) (28,901) (22,011) Increase (Decrease) in Accrued Payroll Taxes 5,342 (7,790) 7,386 Increase (Decrease) in Accrued Expenses 8,372 Decrease (Increase) in Deposits (794) 150 3,491 Decrease in Accounts Receivable 2,998 Decrease in Inventory and Assets 100 20,100 Total adjustments 140,591 64,444 598,562 Net cash provided by operating activities ($304,833) ($279,728) ($1,279,566)
The accompanying notes are an integral part of these statements. FS-3 IMSCO TECHNOLOGIES, INC. a development stage enterprise Statement of Stockholders' Equity (Deficit) for the Year Ended December 31, 1995 and the Nine Months Ended September 30, 1996
Additional Total Common Paid-in Accumulated Stockholders' Stock Capital Deficit Equity (Deficit) ----- ------- ------- ---------------- Balance at December 31, 1994 $2,751 $ 1,525,235 ($1,441,276) ($ 86,710) Issuance of 82,444 shares of $.001 par value for $1.25 per share 83 102,417 102,500 Issuance of shares of $.001 par value for $1.25 per share 14 17,986 18,000 Issuance of shares of $.001 par value for contract services performed 119 106,894 107,013 Issuance of shares of $.001 par value for $1.55 per share 11 16,989 17,000 Issuance of shares of $.001 par value for $1.50 per share 17 24,483 24,500 Loss from development for the year ended December 31, 1995 (406,086) (406,086 ------ ----------- ----------- --------- Balance at December 31, 1995 2,995 1,794,004 (1,847,362) (50,363) ====== =========== =========== ========= Issuance of DPI Additional Paid in Capital for $2.00 per share $ 20,000 $ 20,000 Loss from development for the period January 1 through March 31, 1996 (23,599) (23,599) Balance at March 31, 1996 2,995 1,814,004 (1,870,961) (53,962) Issuance of shares of $.001 par value for $2.00 per share 5 9,995 10,000 Loss from development for the period April 1 through June 30, 1996 (15,833) (15,833) Balance at June 30, 1996 $3,000 $ 1,823,999 ($1,886,794) (59,795) Issuance of shares of $.001 par value 150 (150) Issuance of shares of $.001 par value for $1.50 per share for service rendered - E. Abramson 100 149,900 150,000 Loss from development for the period July 1 through September 30, 1996 (405,993) (405,993) Balance at September 30, 1996 $3,250 $ 1,973,749 ($2,292,787) ($315,788)
The accompanying notes are an integral part of these statements. FS-4 IMSCO TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION: As of July 9, 1996, an agreement of merger was made and entered into by and among Imsco Technologies, Inc., a Delaware corporation and Imsco Technologies, Inc., a Massachusetts corporation. Imsco Technologies, Inc. is currently a development state enterprise which has developed a core technology that achieves molecular separation with innovative applications of electrostatics. Until July 7, 1992, Imsco Technologies, Inc. was engaged in the sale of an automated luminometer and an accompanying reagent system that measures raw material for microbiological contamination. The Company discontinued operations and liquidated the remaining inventory of reagents on April 16, 1993. Due to a lack of demand for the technology developed, the Company changed its focus and began applying its engineering and medical talents to the development of a separation system. No revenue has been received from current products to date. The technology developed has two prototypes. Tests of the Company's decaffeination technology have successfully removed caffeine from coffee. In addition, the Plasma Pure has been tested and can remove viruses from plasma. There are 15,000,000 shares of common stock authorized, of which 3,249,839 are issued and outstanding at September 30, 1996. The Company's subsidiaries, Decaf Products, Inc. (DPI) and BioElectric Separation and Testing, Inc.; (BEST) (the subsidiaries) were formed in 1995. DPI was formed to market a unique proprietary technology to decaffeinate coffee. BEST was founded to create systems to improve human therapy, by developing new diagnostics and improved methods for production and use of drugs, biologics, and extacorporeal devices. As of September 30, 1996 the subsidiaries had minimal activity, did not own any assets and are not liable for any liabilities. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its subsidiaries Decaf Products, Inc. (DPI) and BioElectirc Separation and Testing, Inc., (BEST). All significant intercompany accounts and transactions have been eliminated in consolidation. FS-5 IMSCO TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Significant additions or improvements extending asset lives are capitalized; normal maintenance and repair costs are expended as incurred. Depreciation is provided on the straight-line method over the estimated useful lives of the assets ranging form five to ten years. No depreciation expense was charged to development stage operations for the nine months ended September 30, 1996. CASH EQUIVALENTS: The Company considers all highly liquid investments with an original maturity of less than three months to be cash equivalents. LOSS PER COMMON SHARES: Loss per common shares is based on the weighted average number of common shares and common equivalent shares outstanding during the nine months ended September 30, 1996. ESTIMATES: Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. INTERIM FINANCIAL STATEMENTS (UNAUDITED): The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 2. LEASES: In 1993, the Company entered into an operating lease for office space which expires in August, 1996. Rental expense for the operating lease was $7,225 for the nine months ended September 30, 1996. Under the terms of the lease the Company is responsible for 15% of operating expense and maintenance costs of the leased property, including 15% of any increase in real estate taxes. The Company is responsible for all utilities. FS-6 IMSCO TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 2. LEASES: (CONTINUED) Minimum future lease payments under noncancelable operating leases as of September 30, 1996 are as follows: Year ending December 31: 1996 $2,409 ------ ------ 3. FEDERAL AND STATE INCOME TAXES: The Company has tax net operating loss carryforwards of approximately $1,886,794 at September 30, 1996. The deferred tax benefit of any losses is completely reserved for. As of September 30, 1996, the Company had net operating loss carryforwards for federal income tax purposes which expire as follows: 2000 $ 4,183 2001 181,179 2002 233,280 2003 8,127 2004 70,849 Thereafter 1,269,382 --------- $1,847,000 --------- --------- As of March 31, 1996, the Company had net operating loss carryforwards for state income tax purposes which expire as follows: 1996 732 1997 259,185 1998 40,823 1999 513,691 2000 $1,220,061 --------- --------- State excise tax expense amounted as to $456 for the year ended December 31, 1995. FS-7 IMSCO TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 4. RELATED PARTY TRANSACTIONS: During the year ended December 31, 1994, advances were made to a corporate officer. No terms of repayment have been established concerning this advance. As of September 30, 1996, amounts due from an officer were $0. In April 1994, the Company entered in to a "best efforts" placement letter agreement with D.H. Vermogensverwaltungs-und Beteiligungsgesellschaft mbH, a German investment company ("DH"), for 500,000 shares of common stock at a minimum of $.90 per share. This placement letter agreement was amended on August 29, 1994. DH also arranged the placement of another 80,000 shares of Common Stock as a supplement to the Regulation S placement. Mr. Dirk Hagee, a director of IMSCO, is the managing director and majority shareholder of DH. Upon closing of the offering, the Company paid DH a commission of $52,200 which is at the rate of ten percent (10%) of all moneys raised in that offering and also granted to DH warrants to 116,000 shares of common stock of the Company. These warrants are exercisable for up to five years after issuance at the same price paid by purchasers of the placement. Additionally, the placement agreement provides that upon completion of the placement, DH shall have the right to designate two directors of a five member board of directors of the Company for a period of three years. DPI is headed by Mr. James Yurak, a Director of the Company who was granted on September 30, 1995, 5% of the outstanding shares of DPI and performance based escrowed stock for up to the 15% additional shares of DPI for nominal par value. Under the arrangement, 5% of the escrowed stock will be released if the sales of DPI reach $10 million in a fiscal year, 5% will be released if the sales of DPI reach $20 million in a fiscal year and 5% will be released after one year of service to DPI. 5. DURING THE NINE MONTHS ENDED SEPTEMBER 30, 1996, THE COMPANY CHARGED $10,218 TO RESEARCH AND DEVELOPMENT EXPENSE. FS-8 IMSCO TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 6. NONMONETARY TRANSACTIONS: During the year ended December 31, 1995, the Company issued common stock for services rendered based upon the fair market value of services received. The following summarizes the capital stock issued in lieu of cash for services rendered: Description of Shares Common Paid in Charged Service Issued Stock Capital To Expense -------------- ------ ------ ------- ---------- Research 22,000 $22 $21,978 $22,000 Accounting & Auditing 74,790 $75 $60,971 $61,046 Other Professional 9,510 $10 $11,004 $11,014 In addition, the Company issued 12,923 shares in payment of a prior obligation valued at $12,953. The Company entered into an agreement for $300,000 in temporary financing with Hampton Tech Partners, LLC. The effective interest rate is 10%. In exchange, the Company issued 150,000 shares of common stock at par value to the lenders. 7. STOCK OPTION PLAN: A stock option plan has been established for the benefit of employees, as well as other individuals, such as outside directors, who provide necessary services to the Company. Non-employees and part-time employees may receive only non-qualified stock options. The maximum number of shares of common stock for which options may be granted under the plan is 1,500,000 shares. On August 13, 1996, 100,000 shares of common stock were issued under the plan and options to acquire 100,000 shares of common stock exercisable at a price of $1.50 per share for a period of five years were issued to Edmund Abramson, a business consultant for the company for services rendered pursuant to his Consulting Agreement with the Company. FS-9 IMSCO TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 8. COMMITMENTS: The Company entered an agreement with the University of Massachusetts to provide certain services in connection with the testing and development of materials for use in a decaffeinator device for the period November 1, 1994 through December 31, 1994. During the year ended December 31, 1995, the University of Massachusetts continued to provide research services to the Company for which it received 10,000 shares of common stock. 9. GOING CONCERN: As shown in the accompanying financial statements, the Company incurred a net loss of $39,432 during the nine months ended September 30, 1996, and as of that date, the Company's current liabilities exceeded its current assets by $63,611 and its total liabilities exceeded its total assets by $59,795. Those factors, as well as the uncertain conditions that the Company faces regarding sources of financing, create an uncertainty about the Company's ability to continue as a going concern. Management of the Company has developed a business plan to finance the Company through licensing of its technology and individual patent rights to its subsidiaries. The plan calls for the subsidiaries to seek partners for manufacturing and marketing. The subsidiaries will also seek financing through a public offering. The ability of the Company to continue as a going concern is depended on the plan's success. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 10. DEVELOPMENT STAGE ENTERPRISE: On July 7, 1992, the Company discontinued regular operations relating to the sale of an automated luminometer. On July 22, 1992, the Company and the General Hospital Corporation, doing business as Massachusetts General Hospital, entered a research agreement for $45,100, to perform the research and evaluation using the Company's electro-static filter. As defined by the Financial Accounting Standards board Statement No. 7, the Company is now a development stage enterprise and it has been devoting substantially all of its efforts to developing, engineering and obtaining patents for new technologies relating to separation technologies for the medical and consumer product Sectors. The Company applied for United States Patents covering its decaffeination and Plasma Pure separation technologies in 1993. With a prototype, marketing of the product began in December, 1993. Although no income has been received, letters of interest and royalty agreement negotiations have begun. The cumulative deficit during the development stage is $1,265,886 for the period July 7, 1992 through September 30, 1996. FS-10 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. February 27, l997 IMSCO Technologies, Inc. By: Sol L Berg ---------------------------------------- Sol L. Berg President (Principal Executive, Financial Officer and Principal Accounting Officer) EX-27 2 EXHIBIT 27
5 9-MOS DEC-31-1995 SEP-30-1996 43,371 0 0 0 0 0 81,572 (78,246) 47,981 363,769 0 0 0 3,250 (319,038) 47,981 0 0 0 0 443,665 0 1,759 (445,424) 0 (445,424) 0 0 0 (445,424) (.14) 0
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