SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to ______________
Commission file number 0-3207
Barringer Technologies Inc.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 84-0720473
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
IDENTIFICATION INCORPORATION NUMBER)
OR ORGANIZATION)
219 South Street, New Providence, New Jersey 07974
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(908) 665-8200
(ISSUER'S TELEPHONE NUMBER)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF
CHANGED SINCE LAST REPORT)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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:
Common stock, $0.01 par value - outstanding as of November 6, 1996 -
3,542,974 shares
Transitional Small Business Disclosure Format (check one):
Yes ; No X
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX
Part I Financial Information
Item 1. Financial Statements
- Consolidated Balance Sheets as of September 30, 1996
(unaudited) and December 31, 1995;
- Consolidated Statements of Operations (unaudited) for the three
months and nine months ended September 30, 1996 and 1995;
- Consolidated Statements of Cash Flows (unaudited) for the three
months and nine months ended September 30, 1996 and 1995;
- Notes to Consolidated Financial Statements;
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Signatures
Exhibits
<PAGE>
Item 1. Financial Statements.
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, Dec. 31,
1996 1995
(unaudited)
Current assets:
Cash $ 198,000 $ 43,000
Trade receivables, less
allowances of $61,000 and $41,000 2,036,000 1,533,000
Inventories 2,296,000 1,621,000
Prepaid expenses and other 361,000 250,000
Investment in Labco (notes 4 and 7(B)) 451,000 -
Deferred tax asset 385,000 225,000
---------- ----------
Total current assets 5,727,000 3,672,000
Property and equipment 525,000 586,000
Investment in unconsolidated
subsidiary (note 4) - 334,000
Other assets 124,000 143,000
---------- ----------
Total assets $6,376,000 $4,735,000
========== ==========
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY September 30, Dec. 31,
1996 1995
(unaudited)
Current liabilities:
Bank indebtedness and other notes $860,000 $ 744,000
Accounts payable 952,000 1,278,000
Accrued liabilities 662,000 723,000
Accrued payroll and related taxes 324,000 257,000
Convertible subordinated
debenture (note 6) 1,000,000 -
Current portion of long term
debt (note 6) - 300,000
----------- ----------
Total current liabilities 3,798,000 3,302,000
Other non-current liabilities 116,000 108,000
----------- -----------
Total liabilities 3,914,000 3,410,000
----------- -----------
Stockholders' equity (note 7(B):
Preferred stock, $2.00 par value,
4,000,000 shares authorized,
270,000 shares designated class
A convertible preferred stock,
65,000 and 83,000 shares
outstanding, less discount of
$57,000 and $64,000, respectively 80,000 101,000
730,000 shares designated
class B convertible preferred
stock, 208,000 and 258,000
shares outstanding, respectively 415,000 515,000
Common stock, $.01 par value,
7,000,000 shares authorized,
3,511,000 and 3,479,000 shares
outstanding, respectively 35,000 35,000
Additional paid-in capital 17,833,000 17,685,000
Accumulated deficit (15,458,000) (16,542,000)
Foreign currency translation (430,000) (456,000)
--------------- ----------------
2,475,000 1,338,000
Less: common stock in treasury
at cost, 31,000 shares (13,000) (13,000)
--------------- ----------------
Total stockholders' equity 2,462,000 1,325,000
--------------- ----------------
Total liabilities and equity $6,376,000 $4,735,000
============== ================
See notes to consolidated financial statements.
<PAGE>
<TABLE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30. September 30,
---------------------------- -----------------------------
1996 1995 1996 1995
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues from operations $ 2,340 $ 1,434 $ 7,352 $ 4,544
Cost of sales 1,002 952 3,648 2,844
------------- -------------- ------------ -------------
Gross profit 1,338 482 3,704 1,700
------------- -------------- ------------ -------------
Operating expenses:
Selling, general and administrative 919 656 2,560 1,956
Unfunded research and development 34 29 91 133
------------- -------------- ------------ -------------
953 685 2,651 2,089
------------- -------------- ------------ -------------
Operating income (loss) 385 -203 1,053 (389)
------------- -------------- ------------ -------------
Other income (expense):
Interest (56) (64) (186) (186)
Equity in earnings of Labco 97 - 117 -
Other, net (8) (35) (1) (83)
----------- ------------ ------------- -------------
33 (99) (70) (269)
----------- ------------ ------------- -----------
Income (loss) before income taxes 418 (302) 983 (658)
Income tax (benefit) (note 2 ) (125) - (125) -
----------- ------------ ------------- -----------
Income (loss) from continuing operations 543 (302) 1,108 (658)
Income from operation held for sale (note 4) - 139 - 194
----------- ------------ ------------- ----------
Net income (loss) 543 (163) 1,108 (464)
Preferred stock dividend requirements (11) (16) (35) (67)
----------- ------------ ------------- -----------
Net income (loss) attributable to common
stockholders $ 532 $ (179) $ 1,073 $ (531)
=========== ============ =========== ============
Primary per share data (note 3):
Income (loss) continuing operations $ 0.13 $ (0.09) $ 0.28 $ (0.23)
Income from operation held for sale - 0.04 - 0.06
------------- ------------ ----------- ------------
Net income (loss) per share $ 0.13 $ (0.05) $ 0.28 $ (0.17)
============= ============ =========== ============
Fully diluted per share data (note 3):
Income (loss) continuing operations $ 0.12 $ (0.09) $ 0.26 $ (0.23)
Income from operation held for sale - 0.04 - 0.06
------------- ------------ ----------- -----------
Net income (loss) per share $ 0.12 $ (0.05) $ 0.26 $ (0.17)
============= ============ =========== ===========
Weighted average common and common
equivalent shares outstanding:
Primary 4,164 3,412 3,898 3,209
============= ============= ========== ===========
Fully diluted 4,619 3,412 4,391 3,209
============= ============= =========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
<CAPTION>
Three Months Ended September Nine Months Ended
30, September 30,
------------------------------ ----------------------------
OPERATING ACTIVITIES 1996 1995 1996 1995
--------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net Income (loss) $543 $(163) $1,108 $(464)
Items not affecting cash:
Depreciation and amortization 90 81 165 390
(Income) from operation held for sale - (139) - (194)
Equity in (earnings) of Labco (97) - (117) -
Deferred income tax benefit (160) - (160) -
Other 19 24 37 73
Decrease (increase) in non-cash working capital
balances (526) 399 (1,609) (264)
--------------- -------------- -------------- -------------
Cash provided by (used in) operating (131) 202 (576) (459)
activities
--------------- -------------- -------------- -------------
INVESTING ACTIVITIES
Purchase of equipment and other (38) (128) (85) (390)
Increase in investment in operation held for sale
21 55 - (78)
--------------- -------------- -------------- -------------
Cash (used in) investing activities (17) (73) (85) (468)
--------------- -------------- -------------- -------------
FINANCING ACTIVITIES
Proceeds on sale of securities and other 1,000 - 1,000 905
Repayment of 12 1/2% debentures (300) - (300) -
Increase (reduction) in bank debt and other (371) (304) 116 (94)
--------------- -------------- -------------- -------------
Cash provided by (used in)
financing activities 329 (304) 816 811
--------------- -------------- -------------- -------------
Increase (decrease) in cash 181 (175) 155 (116)
Cash at beginning of period 17 326 43 267
--------------- -------------- -------------- -------------
Cash at end of period $198 $151 $198 $151
=============== ============== ============== =============
CHANGES IN COMPONENTS OF NON-CASH WORKING CAPITAL BALANCES:
Receivables $622 $ 83 $(503) $(674)
Inventory (644) 90 (675) 371
Other current assets (85) (114) (111) (122)
Accounts payable and accrued expenses (419) 340 (320) 161
--------------- -------------- -------------- -------------
Decrease (increase) in non-cash working capital
balances $(526) $399 $ (1,609) $(264)
=============== ============== ============== =============
Cash paid during the period for interest $ 52 $ 53 $ 159 $ 203
=============== ============== ============== =============
Cash paid during the period for income taxes $ 14 $ 0 $ 14 $ 0
=============== ============== ============== =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the consolidated financial position of the
Company as of September 30, 1996 and the results of its operations and its cash
flows for the three months and nine months ended September 30, 1996 and 1995,
respectively. The accounting policies followed by the Company are set forth in
the Notes to Consolidated Financial Statements in the audited consolidated
financial statements of Barringer Technologies Inc. and Subsidiaries included in
its Annual Report on Form 10-K for the year ended December 31, 1995. This report
should be read in conjunction therewith. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
the full year.
2. As a result of the Company's history of losses, a valuation allowance has
been provided for all U.S. deferred tax assets and for substantially all of the
Canadian deferred tax assets. The net deferred tax asset relates to the
Company's Canadian subsidiary ("BRL"), which has available tax credits and loss
carryforwards. BRL has a history of profitability, despite the consolidated
losses of the Company. Based on this history and estimated 1996 earnings, which
includes earnings from certain contracts, as well as available tax planning
strategies, management considers realization of the unreserved deferred tax
asset more likely than not. In the three-month and nine-month periods ended
September 30, 1996 the Company had a net tax benefit of $125,000, composed of
current Canadian provincial taxes of $35,000, offset by a $160,000 reduction in
the deferred tax valuation allowance as a result of changes in management's
estimates of the utilization of the Canadian tax loss carryforwards caused
primarily by improved operating results of BRL. Management anticipates that
further deferred tax benefits will be recognized in the fourth quarter
3. Income (loss) per share is computed by dividing net income (loss), less
preferred stock dividend requirements, by the weighted average number of common
and common equivalent shares outstanding during the period. Common equivalent
shares consist of the dilutive effect, if any, of unissued shares under options
and warrants, computed using the treasury stock method (using the average stock
prices for primary basis and the higher of average or period end stock prices
for fully-diluted basis). Fully diluted income per share is computed assuming
the conversion of convertible preferred stock and subordinated debentures at the
beginning of the period or the date of issuance, whichever is later.
4. The Company maintained a 26% interest in Barringer Laboratories, Inc.
("Labco") at September 30, 1996 and accounts for this investment under the
equity method of accounting. See note 7 (A).
<PAGE>
The following is the condensed results of operations and condensed
balance sheet for Labco (in $000's).
<TABLE>
Condensed Results of Operations
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
------------------------- -------------------------
<S> <C> <C> <C> <C>
Revenues 1,992 1,867 5,081 4,956
Costs and expenses (1,617) (1,572) (4,631) (4,543)
Minority interest - (156) - (219)
----------- ------- --------- --------
Income from operation held for sale - 139 - 194
======= ========
Net income 375 450
=========== =========
Equity in earnings of Labco 97 117
=========== =========
</TABLE>
Condensed Balance Sheet
September 30, 1996
(In $000's)
Current assets 1,772
Property and equipment 437
Other assets 56
--------
Total assets 2,265
========
Current liabilities 685
Long-term debt 112
Equity 1,468
--------
Total liabilities and equity 2,265
========
5. The Company's Agreement with the Toronto-Dominion Bank ("Bank") contains
certain covenants which BRL must meet. At September 30, 1996, BRL was in
compliance will all such covenants. However, BRL has periodically failed to meet
various of the covenants, but the Bank has continued to provide funding in
accordance with past practices. If BRL continues to periodically fail to comply
with the terms of the BRL facility (the "Facility"), management believes the
Bank will continue to provide funding in accordance with past practices,
however, the Company cannot predict what actions, if any, the Bank may take or
as to the timing thereof. The Company intends to repay this indebtedness out
of the proceeds of its proposed public offering (see note 7(B)) ("Public
Offering") and to terminate the Facility.
6. On July 10, 1996, the Company completed the sale of $1,000,000 of its 6%
Convertible Subordinated Debentures due 1997, in a private transaction to
private investors including members of management. These Debentures are due July
9, 1997 and are convertible into shares of the Company's Common Stock at the
rate of $2.75 per share (363,636 shares of common stock reserved at September
30, 1996) and mature on the earlier of (i) 30 days after the completion of an
underwritten public offering or a private placement of the Company of its equity
securities pursuant to which the Company receives net proceeds in an aggregate
amount in excess of $5,000,000, or (ii) July 9, 1997. Interest is payable
semi-annually. A portion of the proceeds of the sale of these debentures
was used to repay the 12 1/2% Subordinated Convertible Debentures due July
1996.
<PAGE>
7. Subsequent Events:
(A) In October 1996, the Company and Labco entered into a Termination
Agreement ("Termination Agreement") pursuant to which Labco agreed to waive its
right of first refusal and to terminate the restrictions on the transfer of the
Company's remaining Labco shares. The Company agreed that, for a period of three
months from the date of the Termination Agreement, it would sell such shares at
a price of at least $1.6875 per share ("Target Price") in a distribution in
which it would not knowingly sell more than 75,000 shares to any one purchaser
or group of related purchasers. Under the Termination Agreement, for such
three-month period, the Company must sell its Labco shares as provided above if
it receives an offer to acquire such shares at a price per share at least equal
to the Target Price. The restrictions described above also apply to any shares
of Labco common stock issuable to the Company upon the exercise of certain
warrants held by the Company. Labco has registered the Company's Labco shares
for resale pursuant to the Securities Act to facilitate such sales. In the
Termination Agreement, the Company and Labco agreed to surrender to Labco 88,260
Labco shares previously retained by Labco. As of November 11, 1996, the Company
had sold 280,000 shares of Labco common stock pursuant to the Termination
Agreement.
(B) On November 11, 1996, the Company agreed to sell, through an
underwriting syndicate led by Janney Montgomery Scott Inc., 1,250,000 shares of
its common stock at an initial public offering price of $8.563 per share and
1,250,000 warrants at an initial public offering price of $.05 per warrant. Each
warrant is exercisable for one-quarter of a share of common stock at an exercise
price of $9.847 per share (subject to adjustment in certain circumstances) for
three years (subject to earlier redemption in certain circumstances). In
addition, the underwriters were granted a 30 day overallotment option to acquire
an additional 187,500 shares of common stock and 187,500 warrants. The net
proceeds of the Public Offering are expected to be approximately $9,200,000
($10,700,000 if the underwriters' over-allotment option is fully exercised) and
will be used to fund product development, to repay certain indebtedness, to
expand the Company's manufacturing and assembling capabilities and for working
capital and general corporate purposes. At the closing of the Public Offering,
the Company will grant to Janney Montgomery Scott Inc. warrants, exercisable
commencing one year after the closing, to acquire 125,000 shares of common stock
prior to November 12, 2001, at an exercise price of $10.276 per share (subject
to adjustment in certain circumstances) and 125,000 warrants, prior to November
12, 1999, at an exercise price of $.06 per warrant. The Public Offering is
expected to close on November 15, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter Ended September 30, 1996 Compared To Quarter Ended September 30, 1995
Revenues from operations of the Company consist of (a) net sales of its
IONSCAN(R) drug and explosives detection equipment, related accessories and
consumable supplies, maintenance, training and billable repairs; (b) net sales
of other instruments; and (c)revenues derived from funded research and
development grants and contracts. Revenues from operations increased by
$906,000, or 63.2%, in the three months ended September 30, 1996 compared to the
same period in 1995. Net sales of the IONSCAN(R) and related products increased
by approximately $916,000, or 72.4%, in the three months ended September 30,
1996 compared to the same period in 1995, due to an increase of 94.4% in the
number of units sold. The increase in IONSCAN(R) sales was due to increased
sales of the Model 400 which was introduced in the first quarter of 1995. Net
sales of other instruments decreased by approximately $10,000, or 13.5%, in
the three months ended September 30, 1996 compared to the same period in 1995
principally due to the completion of the Company's heavy water analyzer contract
in June 1996. The markets for heavy water analyzers and other instruments
are limited, and therefore management cannot predict whether the Company will
receive any future orders. Revenues derived from funded research and development
increased by approximately $20,000, or 27.4%, in the three months ended
September 30, 1996 compared to the same period in 1995. The increased revenues
are attributable to increased work performed under certain of the Company's
contracts.
Gross profit as a percentage of sales for the three months ended
September 30, 1996 increased to 57.2% from 33.6% from the same period last year.
The improvement was primarily attributable to higher margins on international
sales, coupled with larger, more efficient production runs of the IONSCAN and
related products and, to a lesser extent, to slightly improved gross profit
from funded research and development activities.
Selling, general and administrative expenses, consisting primarily of
salaries and related fringe benefits, occupancy costs, professional fees and
travel expenses, increased by approximately $263,000, or 40.1%, for the three
months ended September 30, 1996 as compared to the same period in 1995. In the
1995 period the Company recognized an expense decrease of $74,000 attributable
to a negotiated reduction in professional fees and $120,000 of additional
pension expense reduction recognized on the termination of the Company's
Canadian Pension Plan as of December 31, 1993. Excluding these items, selling,
general and administrative expenses in the 1996 period increased by $69,000. As
a percentage of revenues, selling, general and administrative expenses decreased
to 39.3% for the three-month period ended September 30, 1996 from 45.7% for the
same period in 1995. The decrease as a percentage of revenues was primarily
attributable to spreading costs over increased revenues. Selling expenses
increased by $96,000, or 19.2%, for the three-month period ended September 30,
1996 compared to the same period in 1995 primarily as a result of increased
selling activities, particulary in Europe.
For the three-month period ended September 30, 1996, unfunded research and
<PAGE>
development expenses, consisting primarily of salaries and company costs for
product and application development applied to IONSCAN(R) technology, increased
by $5,000, or 17.2%, compared to the same period in 1995. The level of
unfunded research and development engaged in by the Company at any time is
primarily a function of the resources, both financial and personnel, that are
available at the time.
Interest expense decreased by approximately $8,000, or 12.5%, in the
three-month period ended September 30, 1996 compared to the same period in 1995.
The decrease resulted from a slightly lower level of borrowings during the 1996
period.
Equity in earnings of Labco represents the Company's share of the
earnings and losses of Labco, in which the Company had a twenty-six percent
ownership interest as of September 30, 1996. Prior to December 31, 1995, the
Company had a controlling interest in Labco, but since the first quarter of
1995, the Company has presented Labco as an operation held for sale.
Fluctuations in earnings and losses are dependent upon the performance of Labco.
The Company's share of Labco's net income for the three-month period ended
September 30, 1996 was $97,000, as compared to $139,000 for the same period in
1995 (where it is shown under the caption "Income from operation held for
sale"). As of November 11, 1996, the Company had sold 280,000 of its Labco
shares. See Note 7 of notes to financial statements for additional information.
Other expense, net of income was $8,000 for the three-month period
ended September 30, 1996 as compared to $35,000 in the same period last year.
The decrease was due to various miscellaneous income items including gains
recognized during the period on trading securities held for pension funding
purposes.
In the three-month period ended September 30, 1996, the Company had a
net tax benefit of $125,000, composed of current Canadian provincial taxes of
$35,000, offset by a $160,000 reduction in the deferred tax valuation allowance
as a result of changes in management's estimates of the utilization of the
Canadian tax loss carryforwards caused primarily by improved operating results
of BRL. Management anticipates that further deferred tax benefits will be
recognized in the fourth quarter.
Nine Months Ended September 30, 1996 Compared To Nine Months Ended September 30,
1995
Revenues from operations of the Company consist of (a) net sales of its
IONSCAN(R) drug and explosives detection equipment, related accessories and
consumable supplies, maintenance, training and billable repairs; (b) net sales
of other instruments; and (c)revenues derived from funded research and
development grants and contracts. Revenues from operations increased by
$2,808,000, or 61.8%, in the nine months ended September 30, 1996 compared to
the same period in 1995. Net sales of the IONSCAN(R)and related products
increased by approximately $2,592,000, or 75.4%, in the nine months ended
September 30, 1996 compared to the same period in 1995, due to an increase
of 108% in the number of units sold. The increase in IONSCAN(R) sales was due
to increased sales of the Model 400 which was introduced in the first quarter
of 1995. Net sales of other instruments increased by approximately $336,000,
or 113%, in the nine months ended September 30, 1996 compared to the same period
in 1995,
<PAGE>
principally due to work performed on a heavy water analyzer contract, which
was awarded to the Company in mid-1995 and completed in the first half of 1996.
In addition, net sales benefitted from the sale of several other instruments.
The markets for heavy water analyzers and other instruments are limited,
and therefore management cannot predict whether the Company will receive any
future orders. Revenues derived from funded research and development decreased
by approximately $125,000, or 16.5%, in the nine months ended September 30,
1996 compared to the same period in 1995. The reduced revenues were attributable
to the Company's contract with the Emergencies Science Division, Environment
Canada to design and build an airborne laser-fluorosensor system, a substantial
portion of which was completed in 1995.
Gross profit as a percentage of sales for the nine months ended
September 30, 1996 increased to 50.4% from 37.4% in the same period last year.
The improvement was primarily attributable to higher margins on international
sales, coupled with larger, more efficient production runs of the IONSCAN(R)
and related products and, to a lesser extent, to slightly improved gross profit
from funded research and development activities. The sale at higher than
expected prices of several Model 350 units during the first six months of
1996, the carrying value of which had been reduced in 1995, also contributed
to the improvement.
Selling, general and administrative expenses, consisting primarily of
salaries and related fringe benefits, occupancy costs, professional fees and
travel expenses, increased by approximately $604,000, or 30.9%, for the nine
months ended September 30, 1996 as compared to the same period in 1995. In the
1995 period the Company recognized an expense decrease of $226,000 attributable
to a negotiated reduction in professional fees and $120,000 of additional
expense reduction recognized on the termination of the Company's Canadian
Pension Plan as of December 31, 1993. Excluding these items, selling, general
and administrative expenses in the 1996 period increased by $258,000. As a
percentage of revenues, selling, general and administrative expenses decreased
to 34.8% for the first nine months of 1996 from 43.0% for the same period in
1995. The decrease as a percentage of revenues was primarily attributable to
spreading costs over increased revenues. Selling expenses increased by $350,000,
or 28.0%, for the nine-month period ended September 30, 1996 compared to the
same period in 1995 primarily as a result of increased selling activities,
particularly in Europe.
For the nine months ended September 30, 1996, unfunded research and
development expenses, consisting primarily of salaries and related benefits and
occupancy costs for product and application development applied to IONSCAN(R)
technology, decreased by approximately $42,000, or 31.6%, compared to the same
period in 1995. The level of unfunded research and development engaged in by the
Company at any time is primarily a function of the resources, both financial and
personnel, that are available at the time.
Equity in earnings of Labco represents the Company's share of the
earnings and losses of Labco, in which the Company had a 26% ownership interest
as of September 30, 1996. Prior to December 31, 1995, the Company had a
controlling interest in Labco, but since the first quarter of 1995, the Company
has presented Labco as an operation held for sale. Fluctuations in earnings and
losses are dependent upon the performance of Labco. The Company's share of
Labco's net income for the nine-month period ended September 30, 1996 was
<PAGE>
$117,000, as compared to $194,000 for the same period in 1995 (where it is shown
under the caption "Income from operation held for sale"). As of November 11,
1996, the Company has sold 280,000 of its Labco shares. See Note 7 of notes to
financial statements for additional information.
Other expense, net of income was $1,000 for the nine-month period ended
September 30, 1996 as compared to $83,000 in the same period last year. The
decrease was due to a smaller foreign exchange loss and gains recognized during
the period on trading securities held for pension funding purposes.
In the nine-month period ended September 30, 1996, the Company had a net
tax benefit of $125,000, composed of current Canadian provincial taxes of
$35,000, offset by a $160,000 reduction in the deferred tax valuation allowance
as a result of changes in management's estimates of the utilization of the
Canadian tax loss carryforwards caused primarily by improved operating results
of BRL. Management anticipates that further
deferred tax benefits will be recognized in the fourth quarter.
Capital Resources and Liquidity
The Company sustained net losses of $2,565,000 and $827,000 for the
years ended December 31, 1994 and 1995, respectively, and had an accumulated
deficit of $15,458,000 at September 30, 1996. Although the Company generated net
income of $1,108,000 for the nine months ended September 30, 1996, the Company
did not generate net cash flow from operations during such period as a result of
the Company's need for working capital to support higher levels of accounts
receivable and inventory. The Company's history of losses and its failure to
generate positive operating cash flow have resulted in significant cash
shortages from time to time. The Company's cash constraints were exacerbated
during 1995 in connection with the introduction of the Company's Model 400
IONSCAN(R), as customers chose to wait for Model 400s to become available rather
than purchase existing Model 350s.
The Company has used the net proceeds of private sales of securities to
fund a portion of its cash flow needs. During 1995, the Company generated net
proceeds of $888,000 from such sales. In July 1996, the Company issued 6%
Convertible Subordinated Debentures (Debentures), resulting in net proceeds to
the Company of approximately $1,000,000. The Company used $300,000 of the net
proceeds from the sale of the Debentures to repay the 12 1/2% Convertible
Subordinated Debentures which matured on July 15, 1996. The remaining net
proceeds were added to working capital. The Company intends to use a portion of
the net proceeds of its Public Offering (see note 7(B) of notes to consolidated
financial statements) to repay the Debentures, if required, and to support
its working capital needs. The Company believes that the net proceeds of the
Public Offering will be sufficient to fund its working capital requirements for
at least the next twelve months.
In 1995, the Company also financed its working capital requirements in
part through the sale of a portion of its investment in Labco. In October 1996,
the Company entered into an arrangement whereby it intends to sell its remaining
interest in Labco. As of November 11, 1996, the Company had sold 280,000 of its
Labco shares. See Note 7 of notes to financial statements for additional
information.
<PAGE>
The Company funds a portion of BRL's operation through the Facility
and a second facility with the Ontario Development Corporation, which are used
to support Canadian export production, sales and related receivables financing.
At September 30, 1996, BRL's outstanding borrowings under these facilities were
$860,000 and $600,000 remained available for future borrowings thereunder, to
the extent qualifying collateral is available to support such additional
borrowings. From time to time BRL's borrowings under the Facility have
exceeded the limits set forth therein. In addition, from time to time BRL has
not been in compliance with one or more of the financial covenants contained
therein. At September 30, 1996, BRL was in compliance with all the financial
covenants contained therein. Upon completion of the Public Offering, the Company
intends to repay the facilities and to seek a new working capital facility
to support its operations, although no assurance can be given that the Company
will obtain a facility or as to the terms thereof.
The Company's capital expenditures for the nine months ended September
30, 1996 were approximately $85,000. Such expenditures related primarily to
support of the production of the IONSCAN(R). The Company anticipates that total
capital expenditures will be approximately $100,000 for the year ended December
31, 1996. The Company intends to use approximately $300,000 of the net proceeds
of the Public Offering for expansion of the Company's manufacturing and
assembling capabilities.
The Company has substantial tax loss and research and development tax
credit carryforwards to offset future tax liabilities both in Canada and the
United States. However, the Company has utilized all of its Canadian Provincial
tax loss and research and development tax credit carryforwards during the
quarter ended September 30, 1996.
Inflation
Inflation was not a material factor in either the sales or the
operating expenses of the Company during the periods presented herein.
Disclosure Regarding Forward Looking Statements
Certain information in this Form 10-QSB contains forward looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
21E of the Securities Exchange Act of 1934. Such statements include, but are not
limited to, the Company's opportunities to increase sales through, among other
things, the development of new applications and markets for its IONSCAN(R)
equipment and technology; exposure to fluctuations in foreign currencies and
periodic liquidity and capital requirements and the completion of the Public
Offering. Forward looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, could differ materially from those set forth in or contemplated by
the forward looking statements herein. Important factors that could contribute
to such differences include, the effect of economic and market conditions on the
Company, changes in economics or market conditions that could affect the timing
and completion of the Publc Offering, the impact of both foreign and domestic
governmental budgeting decisions and the timing thereof, the ability of the
Company to successfully develop and market current products and new product
applications and the ability of the Company to comply with the covenants of its
loan agreements as well as certain other risks described elsewhere herein.
Subsequent written and oral forward looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph and elsewhere in this
Form 10-QSB.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1A The Company's Certificate of Incorporation, as amended(1)
3.2A By-laws of the Company(2)
11 Earnings Per Share(3)
27.1 Financial Data Schedule(3)
(b) Reports on Form 8-K
None
- ----------------------
(1) Incorporated by reference to the identically numbered Exhibit to the
Registrant's Registration Statement on Form S-1, File No. 33-031626.
(2) Incorporated by reference to the identically numbered Exhibit to the
Registrant's Registration Statement on Form S-1, File No. 33-43094.
(3) Incorporated by reference to the identically numbered Exhibit to the
Registrant's Registration Statement on Form SB-2, File No. 333-13703.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
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.
BARRINGER TECHNOLOGIES INC.
(Registrant)
/S/ STANLEY S. BINDER
______________________
Stanley S. Binder
President,
/S/ RICHARD S. ROSENFELD
__________________________
Richard S. Rosenfeld, Chief
Financial Officer
(Principal Accounting Officer)
Date: November 14, 1996
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO EXHIBITS
Exhibit Number
11 Earnings Per Share (1)
27.1 Financial Data Schedule (1)
(1) Incorporated by reference to the identically numbered Exhibit to the
Company's Registration Statement on Form SB-2, File No. 333-13703.
