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 March 31, 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 or Number)
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 May 9, 1996 - 3,487,203 shares
Transitional Small Business Disclosure Format (check one):
Yes ; No X
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX
Part I Financial Information
- Consolidated Balance Sheets as of March 31, 1996
(unaudited) and December 31, 1995;
- Consolidated Statements of Income (unaudited)
for the three months ended March 31, 1996 and 1995;
- Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 1996 and 1995;
- Notes to Consolidated Financial Statements;
- Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II Other Information
Signatures
Exhibits
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS March 31, Dec. 31,
1996 1995
(unaudited)
Current assets:
Cash $ 49,000 $ 43,000
Trade receivables, less
allowances of $38,000 and $41,000 2,339,000 1,533,000
Inventories 1,655,000 1,621,000
Prepaid expenses and other 264,000 250,000
Deferred tax asset 225,000 225,000
_________ ________
Total current assets 4,532,000 3,672,000
Property and equipment 558,000 586,000
Investment in unconsolidated subsidiary (note 4) 312,000 334,000
Other assets 116,000 143,000
________ _______
Total assets $5,518,000 $4,735,000
========== ==========
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY March 31, Dec. 31,
1996 1995
(unaudited)
Current liabilities:
Bank indebtedness and other notes $1,231,000 $ 744,000
Accounts payable 1,333,000 1,278,000
Accrued liabilities 609,000 723,000
Accrued payroll and related taxes 328,000 257,000
Current portion of long term debt 300,000 300,000
________ _________
Total current liabilities 3,801,000 3,302,000
Other non-current liabilities 111,000 108,000
_________ _________
Total liabilities 3,912,000 3,410,000
_________ _________
Shareholders' equity:
Class A convertible preferred stock,
$2.00 par value, 1,000,000 shares
authorized, 83,000 shares outstanding
less discount of $64,000 101,000 101,000
Class B convertible preferred stock,
$2.00 par value, 730,000 shares
authorized, 258,000 shares outstanding 515,000 515,000
Common stock, $.01 par value,
7,000,000 shares authorized,
3,479,000 shares outstanding 35,000 35,000
Additional paid-in capital 17,685,000 17,685,000
Accumulated deficit (16,353,000) (16,542,000)
Foreign currency translation (364,000) (456,000)
_____________ ___________
1,619,000 1,338,000
Less: common stock in treasury at cost,
31,000 shares (13,000) (13,000)
__________ __________
Total shareholders' equity 1,606,000 1,325,000
__________ _________
Total liabilities and equity $ 5,518,000 $ 4,735,000
============ ============
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1996 1995
______ ____
Revenues from operations $ 2,354,000 $ 1,328,000
Cost of sales 1,236,000 967,000
_________ ___________
Gross profit 1,118,000 361,000
_________ ___________
Operating expenses:
Selling, general and administrative 809,000 629,000
Unfunded research and development 17,000 34,000
________ ________
826,000 663,000
________ ________
Operating income (loss) 292,000 (302,000)
_______ _________
Other income (expense):
Interest (66,000) (62,000)
Income (loss) on unconsolidated
subsidiary (22,000) --
Other, net (15,000) (5,000)
________ _______
(103,000) (67,000)
_________ ________
Income (loss) from continuing
operations 189,000 (369,000)
Income from operation held for sale -- 1,000
_______ _________
Net income (loss) for the
period 189,000 (368,000)
Preferred stock dividend requirements (12,000) (27,000)
________ _________
Net income (loss) attributable
to common shareholders $ 177,000 $ (395,000)
======== ==========
Per share data (note 3):
Income (loss) continuing operations $ 0.05 $ (0.14)
Income operation held for sale -- --
________ ___________
Net Income (loss) per share $ 0.05 $ (0.14)
========= ============
Weighted average shares
outstanding 3,479,000 2,872,000
========== ==========
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months Three months
ended ended
March 31, March 31,
1996 1995
______________________________________
OPERATING ACTIVITIES
Net Income (loss) $ 189,000 $(368,000)
Items not affecting cash:
Depreciation/amortization 54,000 114,000
(Income) loss from unconsolidated
Investment 22,000 (1,000)
Other 95,000 8,000
Decrease (increase) in non-cash working
capital balances (815,000) 20,000
________ ______
Cash provided by (used in)
operating activities (455,000) (227,000)
_________ _________
INVESTING ACTIVITIES
Purchase of equipment and other (26,000) (148,000)
________ _________
Cash (used in) investing
activities (26,000) (148,000)
________ _________
FINANCING ACTIVITIES
Increase (reduction) in bank debt and
other 487,000 167,000
_________ _________
Cash provided by
financing activities 487,000 167,000
_______ _______
Increase (decrease) in cash 6,000 (208,000)
Cash at beginning of period 43,000 228,000
_________ ________
Cash at end of period $49,000 $20,000
========= ========
CHANGES IN COMPONENTS OF
NON-CASH WORKING CAPITAL
BALANCES RELATED TO
CONTINUING OPERATIONS
Receivables $(806,000) (701,000)
Inventory (34,000) 96,000
Other current assets (14,000) 21,000
Other assets 27,000 29,000
Accounts payable and accrued
expenses 12,000 575,000
________ _______
Decrease (increase) in non-cash
working capital balances $(815,000) $20,000
========== ========
Cash paid during the period for interest $ 53,000 $55,000
========== ========
Cash paid during the period for income
taxes $0 $0
========== ========
See notes to consolidated financial statements.
<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 March 31, 1996 and the results of its operations and its cash
flows for the three months ended March 31, 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, which has available tax credits and loss
carryforwards. The Canadian subsidiary 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.
3. Per share data is based on the weighted average number of common shares
outstanding.
4. The Company maintains a 26% interest in Barringer Laboratories, Inc.
and accounts for this investment on the equity method.
The following is the condensed results of operations and condensed
balance sheet for Labco.
Condensed Results of Operations
For the three months ended March 31,
(in $000's)
1996 1995
Revenues 1,296 1,442
Cost of revenues 1,011 1,080
_____ _____
Gross profit 285 362
Expenses 371 359
Minority interest - 2
____ _____
Net income (loss) (86) 1
<PAGE>
Condensed Balance Sheet
As of March 31, 1996
(In $000's)
Current assets 1,209
Property and equipment 538
Other assets 50
______
Total assets 1,797
======
Current liabilities 729
Long-term debt 138
Equity 930
______
Total liabilities and equity 1,797
======
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended March 31, 1996 Compared To Quarter ended March 31, 1995
Sales of all instruments increased by $1,086,000, or 138.5% in the
first quarter of 1996 compared to the first quarter of 1995. Sales of Ionscan
instruments and related product increased by approximately $1,017,000, or
151.3%, in the first quarter of 1996 compared to the first quarter of 1995, on
increased unit sales of approximately 375%. This was due to increased sales of
the Model 400 which was introduced in the first quarter of 1995. The Model 400
having a lower selling price than its predecessor Model 350, coupled with being
smaller, lighter and containing more features, has resulted in significantly
more unit sales. In addition, the Company has been successful in adapting its
units to suit customer needs in order to increase unit sales. During this first
quarter of 1996, the Company shipped several units against the recently received
contract from European Passenger Service Ltd. which contract was for an initial
total of 11 units. The balance of the units are scheduled to be shipped during
the remainder of 1996. Sales of instruments other than Ionscan products
increased by approximately $69,000, or 61.6% in the first quarter of 1996
compared to the first quarter of 1995, principally due to the award in 1995 of
the heavy water analyzer contract, which will be completed in mid-1996. The
Company has been successful in selling some of its older Model 350 units, but
still has a significant number of units remaining in its inventory. Although
management believes that it will dispose of substantially all of its Model 350
inventory by the end of 1996, there can be no assurance that such sales will
occur as planned or the price at which such sales may occur.
Revenues of the research and development business decreased by
approximately $88,000, or 16.2% in the first quarter of 1996 compared to the
first quarter of 1995. The reduced revenues are attributable to reduced work
performed under the Company's contract with the Emergencies Science Division,
Environment Canada to design and build an airborne laser-fluorosensor system The
contract has a value of approximately Cdn. $1,967,000, with a substantial
portion of that Contract being billed in 1995.
The Company's Consumer products business, formed in March 1995, did not
achieve significant sales during the first quarter of 1996. After limited market
testing, it became apparent that a successful marketing program has to overcome
certain barriers that exist relating to the consumer's reluctance to purchase
the product. Management believes that the product has good potential and intends
to devote appropriate resources to this product, when such resources become
available. In the meantime, it is proceeding with limited distribution to
further test its packaging and other marketing strategies. The Company does not
anticipate significant sales of this product in 1996 and there can be no
assurance that markets for this product will develop or as to the timing
thereof.
Gross profit for all businesses as a percentage of sales for the
quarter ended March 31, 1996 increased to 47.5% from 27.2% in the same period
last year. The gross profit as a percentage of sales for the Instruments
business increased to 55.7% in the first quarter of 1996 from 42.9% in the first
quarter of 1995. The increase was attributable to better margins on custom sales
orders coupled with larger, more efficient production runs. The sale of several
Model 350 units, whose carrying value had been reduced in 1995, also contributed
to the improvement. The gross profit as a percentage of sales for the Research
and Development business improved to 16.0% in the quarter from 4.6% in the same
period in 1995. The improvement was due to several small contracts that carried
high gross profit margins. The Consumer Products Business did not contribute any
gross profit.
<PAGE>
Selling, general and administrative expenses increased by approximately
$180,000, or 28.6% in the first quarter of 1996 over the same period in 1995.
Selling expenses increased by $204,000, or 66.0% period to period. Approximately
half of the increase is attributable to the expenses associated with the
Company's French and United Kingdom offices being open for a full quarter, at
full staffing levels. The balance of the increase is attributable to increased
levels of sales activity in Canada and the United States and marketing expenses
associated with the DrugAlert(TM) product. It is anticipated that selling,
general and administrative expenses will remain at this higher level during the
remainder of 1996.
Unfunded research and development in the first quarter of 1996, applied
to IONSCAN(R) technology, decreased by approximately $17,000, or 50.0% from the
first quarter of 1995. The level of unfunded research and development engaged in
by the Company is primarily a function of the resources, both financial and
personnel, that are available at the time.
Interest expense increased by approximately $4,000 in the first quarter
of 1996, or 6.5% over the same period last year. The increase is the result of
higher levels of borrowing, at higher interest rates.
Other expense, net of income increased by $10,000 or 200.0% period to
period. The increase was due primarily to the changes in exchange rates which
generated an increase in such loss of $7,000 during the first quarter of 1996.
The balance of the differences relate to several different accounts of income
and expense that may not recur from year to year.
Capital Resources and Liquidity
Operating Activities
The Company incurred substantial net losses during the three years
ending December 31, 1992, primarily as a result of the Company's change in its
business strategy from airborne exploration to development of analytical
specialty instruments, especially an advanced proprietary Ion Mobility
Spectrometer called IONSCAN(R). For the year ended December 31, 1993, the
Company recorded its first year of profitability in recent history, with a
recorded net income of $595,000. The Company was unable to sustain profitability
and incurred net losses of $2,565,000 and $827,000, for the years ended December
31, 1994 and 1995, respectively. For the three months ended March 31, 1996, the
Company was able to return to profitability, recording a profit of $189,000.
However, as a result of the previous losses, the Company continues to experience
periodic severe cash shortages. The Company has cut operating expenses and
restructured its payments to suppliers to conserve cash.
The Company follows the practice of manufacturing to a sales forecast
and, as a result, may have an inventory imbalance when sales are not realized in
the same time frame as units are manufactured.
In December 1995, the Company completed a sale of a portion of its
investment in Labco. The proceeds were added to working capital. The Company
will endeavor to sell its remaining interest in Labco, subject to the conditions
contained in the Stock Purchase Agreement. See Note 4 of Notes to Financial
Statements for additional information.
<PAGE>
Financing Activities
In the past, the Company has obtained financing through the private
sale of its equity securities and from working capital lines of credit.
Both the Company and its Canadian subsidiary have substantial tax loss
and research and development tax credit carryforwards to offset future tax
liabilities.
The Company has been experiencing cash flow shortages since mid-1994.
This is the result of the need for capital to support higher levels of accounts
receivable and inventory caused primarily by uneven sales patterns during the
quarters. This situation was exacerbated by the Company's converting its
production from its Model 350 IONSCAN(R) to its newly introduced Model 400
IONSCAN(R). The Company needs additional amounts of capital in order to proceed
with product and applications development. During 1995 and for the first quarter
of 1996, the Company did not generate positive cash flow from operations. If
additional capital is required in the future in excess of cash generated by
operations, the Company presently intends to raise such additional capital
through the private placement of its equity and/or debt securities and/or the
sale of the remaining stock in its 26% ownership in Labco. However, there can be
no assurances that the Company will be able to raise the needed capital or as to
the terms or timing thereof.
On September 28, 1995, the Company entered into an Agreement with the
Toronto-Dominion Bank pursuant to which the Bank agreed that the Company's
Canadian subsidiary ("BRL") had until September 30, 1995 to come into compliance
with certain covenants specified in the Agreement. In exchange, the Company
agreed to dispose of its interest in Labco and to remit a portion of the
proceeds to BRL. In addition, the Company provided the Bank with additional
collateral to secure its advances to BRL. At September 30, 1995, BRL was in
compliance with these requirements. However, at December 31, 1995 BRL was not in
compliance with the minimum working capital requirement and at January 31, 1996
and February 29, 1996, BRL's borrowings under the line of credit exceeded the
amount available thereunder. The bank has notified BRL of such default, and
without waiving any other remedies available to it, will charge BRL an interest
rate of 21% on the excess of such allowable borrowings. At March 31, 1996,
BRL was in compliance with the terms of the facility. However, there can be no
assurances that the Company will continue in compliance with the terms of the
facility in the future. Management believes that if the Company fails to comply
with the terms of the facility, 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's 12 1/2% Convertible Subordinated Debentures
("Debentures"), in the principal amount of $300,000 come due on July 15, 1996.
Although the Company believes that it will be able to generate sufficient cash
in order to repay the Debentures when due, there can be no assurances that it
will be able to do so. If the Company has insufficient funds to repay the
Debentures, it will seek amendments, waivers, extensions, modifications and/or
other measures in order to prevent such default. However, there can be no
assurances that the Company will be successful in preventing such a default.
<PAGE>
Investment Activities
Purchases of fixed assets for the three months ended March 31, 1996,
were $26,000. The Company does not currently anticipate the need for significant
purchases of fixed assets during the remainder of 1996.
Pursuant to the terms of a Stock Purchase Agreement, dated December 8,
1995, between the Company and Labco, on December 13, 1995 the Company sold to
Labco 647,238 shares of Labco's common stock for an aggregate purchase price of
$809,000. The purchase price consisted of $300,000 in cash, cancellation of all
amounts owed by the Company to Labco pursuant to certain intercompany agreements
and cancellation of $57,000 in accounts receivable due to Labco. The proceeds
were added to working capital. The Company continues to own approximately 26% of
Labco's common stock outstanding. See note 4 of Notes to Consolidated Financial
Statements for additional information.
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
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information contained in this
Form 10-QSB includes information that is forward looking, such as the Company's
opportunities to increase sales through, among other things, the development of
new applications and markets for its Ionscan equipment and technology; its
success with its Drug Alert product line, expected levels of selling, general
and administrative expenses, exposure to fluctuations in foreign currencies
and periodic liquidity and capital requirements. The matters referred to in
forward looking statements could be affected by the risks and uncertainties
involved in the Company's business. These risks and uncertainties include, but
are not limited to, the effect of economic and market conditions, the impact of
both foreign and domestic governmental budgeting decisions and the timing
thereof, the ability of the Company to successfully develop and market 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 5. Other Information.
On May 7, 1996, the Board of Directors of the Company approved the granting
of non-qualified options covering a total of 253,000 shares of Common Stock to
certain of the Company's executive officers and other key employees and to the
Company's independent directors. The options are exercisable for up to five
years from the date of grant at an exercise price, subject to adjustment
in certain circumstances, of $1.00 per share, the fair market value of the
Common Stock on the date of grant. One quarter of the options granted vest
immediately, with the remainder vesting ratably over a three-year period. In the
event of a "change in control" of the Company, the options will become
immediately exercisable. The options are nontransferable, other than pursuant
to the laws of descent and distribution, and will terminate in certain
circumstances following termination of the recipient's employment (or, in the
case of independent directors, service as a director) or in the event of the
recipient's death or permanent disability.
The grant of the options was not approved by the shareholders and the
Company does not intend to seek shareholder approval for the grants. The terms
of each grant will be reflected in the terms of an option agreement between the
Company and each recipient of an option. The description contained herein is a
summary only, is not intended to be complete, and is qualified in its
entirety by reference to the terms of such option agreements.
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)
10.27 Stock Purchase Agreement between Barringer
Laboratories, Inc. And Barringer Technologies Inc.
Dated December 8, 1995. (3)
27 Financial Data Schedule.
---------------------------------
(1) Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1, File No. 33-31626.
(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 Form 8-K, filed on December 27, 1995, file No. 0-3207.
(b) Reports on Form 8-K
Item 5. Other Events - On February 2, 1996, the Company filed a
Form 8-K/A to include financial information not previously included
in Form 8-K filed on December 27, 1995, regarding the sale of a portion of its
stock ownership in Barringer Laboratories, Inc.
<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: May 13, 1996
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO EXHIBITS
Exhibit Number Page No.
27 Financial Data Schedule 16
<PAGE>
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616
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