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, 1997
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 ORGANIZATION) NUMBER)
219 South Street, Murray Hill, New Jersey 07974
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(908) 665-8200
(Issuer's telephone number)
219 South Street, New Providence, New Jersey 07974
(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 April 22, 1997 -
5,437,893 shares
Transitional Small Business Disclosure Format (check one):
Yes ; No X
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX
Page No.
Part I o Financial Information
- Consolidated Balance Sheets as of March 31, 1997
(unaudited) and December 31, 1996 4
- Consolidated Statements of Income (unaudited)
for the three months ended March 31, 1997 and 1996 6
- Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 1997 and 1996 7
- Notes to Consolidated Financial Statements 8
- Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II o Other Information 13
Signatures 14
Exhibits 15
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS March 31, Dec. 31,
1997 1996
(unaudited)
Current assets:
Cash and cash equivalents $3,050,000 $5,276,000
Marketable securities 4,876,000 4,328,000
Trade receivables, less allowances of
$62,000 and $63,000 5,070,000 3,521,000
Inventories 2,650,000 2,270,000
Prepaid expenses and other 238,000 498,000
Deferred tax asset 856,000 731,000
----------- -----------
Total current assets 16,740,000 16,624,000
Property and equipment 953,000 595,000
Other assets 79,000 104,000
----------- ----------
Total assets $17,772,000 $17,323,000
=========== ===========
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY March 31, Dec. 31,
1997 1996
(unaudited)
Current liabilities:
Bank indebtedness and other notes $ - $174,000
Accounts payable 887,000 1,009,000
Accrued liabilities 523,000 648,000
Accrued payroll and related taxes 432,000 522,000
----------- ---------
Total current liabilities 1,842,000 2,353,000
Other non-current liabilities 118,000 117,000
----------- ---------
Total liabilities 1,960,000 2,470,000
----------- ---------
Shareholders' equity:
Preferred stock, $2.00 par value, 4,000,000
shares authorized:
270,000 shares designated class A convertible
preferred stock, 58,206 and 60,165 shares
outstanding less discount of $45,000 and
$47,000, respectively 71,000 74,000
730,000 shares designated class B convertible
preferred stock, 22,500 and 122,500 shares
outstanding, respectively 45,000 245,000
Common stock, $.01 par value, 7,000,000 shares
authorized, 5,433,000 and 5,357,000 shares
outstanding, respectively 54,000 54,000
Additional paid-in capital 29,821,000 29,430,000
Accumulated deficit (13,677,000) (14,522,000)
Foreign currency translation (489,000) (415,000)
------------ ------------
15,825,000 14,866,000
Less: common stock in treasury at cost, 31,000
shares (13,000) (13,000)
------------ ------------
Total shareholders' equity 15,812,000 14,853,000
------------ ------------
Total liabilities and equity $17,772,000 $17,323,000
============ ============
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1997 1996
---------- ----------
Revenues from operations $3,622,000 $2,354,000
Cost of sales 1,461,000 1,236,000
---------- ----------
2,161,000 1,118,000
---------- ----------
Operating expenses:
Selling, general and administrative 1,295,000 809,000
Product development 175,000 17,000
---------- ----------
1,470,000 826,000
---------- ----------
Operating income 691,000 292,000
---------- ----------
Other income (expense):
Interest income 97,000 -
Interest expense (2,000) (66,000)
(Loss) on unconsolidated subsidiary - (22,000)
Other, net (16,000) (15,000)
---------- ----------
79,000 (103,000)
---------- ----------
Income before income tax
provision (benefit) 770,000 189,000
Income tax provision (benefit) (note 2) (75,000) -
---------- ----------
Net income for the period 845,000 189,000
Preferred stock dividend requirements (3,000) (12,000)
---------- ----------
Net income attributable to common $842,000 $ 177,000
shareholders
========== ==========
Per share data (note 3):
Primary earnings per share $ 0.14 $ 0.05
========== ==========
Fully diluted earnings per share $ 0.14 $ 0.05
========== ==========
Weighted average common and
common equivalent shares outstanding:
Primary 6,080,000 3,479,000
========== ==========
Fully diluted 6,109,000 3,479,000
========== ==========
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1997 1996
--------- ----------
OPERATING ACTIVITIES
Net Income $845,000 $189,000
Items not affecting cash:
Depreciation/amortization 40,000 54,000
Loss from unconsolidated Investment - 22,000
Deferred tax (benefit) (125,000) -
Other (54,000) 95,000
(Increase) in non-cash working capital balances (2,005,000) (815,000)
------------ ----------
Cash (used in) operating activities (1,299,000) (455,000)
------------ ----------
INVESTING ACTIVITIES
Purchase of equipment and other (373,000) (26,000)
Purchase of marketable securities (548,000) -
------------ ----------
Cash (used in) investing activities (921,000) (26,000)
------------ ----------
FINANCING ACTIVITIES
Increase (reduction) in bank debt and
other (174,000) 487,000
Proceeds on issuance of securities 168,000 -
----------- ----------
Cash provided by (used in) financing (6,000) 487,000
activities
------------ ----------
Increase (decrease) in cash (2,226,000) 6,000
Cash at beginning of period 5,276,000 43,000
------------ ----------
Cash at end of period $3,050,000 $49,000
============ ===========
CHANGES IN COMPONENTS OF NON-CASH
WORKING CAPITAL BALANCES RELATED TO
CONTINUING OPERATIONS
Receivables $(1,548,000) $(806,000)
Inventory (380,000) (34,000)
Other current assets 260,000 (14,000)
Other assets - 27,000
Accounts payable and accrued expenses (337,000) 12,000
------------- -----------
(Increase) in non-cash working capital balances $(2,005,000) $(815,000)
============= ===========
Cash paid during the period for interest $2,000 $53,000
============= ===========
Cash paid during the period for income taxes $150,000 $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, 1997 and the results of its operations and its cash
flows for the three months ended March 31, 1997 and 1996, 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-KSB for the year ended December 31, 1996. 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
any other interim period or for the full year.
2. As a result of the Company's historical trend of losses, a valuation
allowance has been provided for a substantial portion of the U.S. and Canadian
deferred tax assets. The valuation allowance was reduced by approximately
$125,000 for the three months ended March 31, 1997, which created a deferred tax
benefit of an equivalent amount. Based on historical results and estimated 1997
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. Additional reductions to the valuation
allowance will be recorded when, in the opinion of management, the Company's
ability to generate taxable income sufficient to reduce additional amounts of
the valuation allowance is considered more likely than not.
3. Net income per share is computed by dividing net income, less preferred
stock dividends, 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 at the beginning of the period or the date of
issuance, whichever is later.
4. On February 28, 1997, the Company's Board of Directors granted options to 13
officers, directors and key employees, to acquire 135,500 shares of the
Company's common stock at $9.375 per share, which was the fair value of the
stock on the date of grant. These grants are subject to shareholder approval.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended March 31, 1997 Compared To Quarter ended March 31, 1996
The following table presents certain income statement items expressed as a
percentage of total revenue for the three month periods ended March 31, 1997 and
1996. Percentage of Total Revenue
Three months ended March 31,
1997 1996
------- -------
Statement of operations data: (1)
Revenues from operations........................ 100.0 100.0
Cost of revenues................................ 40.3 52.5
Gross profit.................................... 59.7 47.5
Selling, general and administrative expenses 35.8 34.4
Product development.............................. 4.8 0.7
Operating income ................................ 19.1 12.4
Other income (expense), net..................... 2.2 (4.4)
Income tax benefit ............................. 2.1 -
Net income ...................................... 23.4 8.0
Preferred stock dividend requirements........... (0.1) (0.5)
Net income attributable to common 23.3 7.5
stockholders.................................
(1) Columns may not foot due to rounding.
Revenues from operations increased by $1,268,000, or 53.9%, in the three
months ended March 31, 1997, as compared to the same period in 1996. Net sales
of the IONSCAN(R) and related products increased by approximately $1,763,000, or
104.4%, due to an equal percentage increase in the number of units sold during
the first quarter of 1997 as compared to the same quarter in 1996. The increase
in IONSCAN(R) sales was due to an approximate 50% increase in unit sales to the
aviation security market. Other non-IONSCAN(R) revenues decreased $495,000, or
75%, in the three months ended March 31, 1997 as compared to the same quarter in
1996 primarily due to a drop in revenues from contract research and development.
During the first quarter of 1997, the Federal Aviation Administration (FAA)
awarded the Company a $700,000 grant for the first phase of the development of
an automated luggage explosives detection system. The Company anticipates that
substantially all of the revenues under the first phase of this grant will be
recognized in 1997.
Gross profit as a percentage of sales for the three months ended March 31,
increased to 59.7% from 47.5% in the same quarter in 1996. 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.
Increased production levels have resulted in lower material costs, more
efficient direct labor costs and less overhead cost absorbed per unit produced.
Selling, general and administrative expenses increased by approximately
$486,000, or 60.1%, for the three months ended March 31, 1997, as compared to
<PAGE>
the same quarter in 1996. As a percentage of revenues, selling, general and
administrative expenses increased to 35.8% for the three months ended March 31,
1997 as compared to 34.4% for the same quarter in 1996. Selling expenses
increased by $255,000, or 49.7%, for the three months ended March 31, 1997 as
compared to the same quarter in 1996, as a result of increased sales commissions
and increased costs associated with an expanding sales effort. General and
administrative expenses increased by $231,000 for the three months ended March
31, 1997 as compared to the same quarter in 1996, primarily as a result of
increased payroll costs and other expenses associated with building the
necessary infrastructure to handle the growth of the business.
Product development expenses increased by approximately $158,000, or 929%,
for the three months ended March 31, 1997, as compared to the same quarter in
1996. The level of product development engaged in by the Company at any time
has primarily been a function of the resources, both financial and personnel,
that were available. The Company expects to devote more resources to product
development and such expenses are expected to increase significantly during the
remainder of 1997, as compared to 1996.
In the three months ended March 31, 1997, the Company earned investment
income of $97,000.
In the three months ended March 31, 1997, the Company had interest expense
of $2,000 as compared to $66,000 for the same quarter in 1996. Substantially all
of the Company's debt was repaid in late 1996 with a portion of the proceeds of
the public offering completed in late 1996.
In the three months ended March 31, 1996, the Company had income from its
investment in an unconsolidated subsidiary, which it disposed of in its entirety
in December 1996.
For the three months ended March 31, 1997, the Company had a net tax
benefit of $75,000 primarily due to a reduction in the deferred tax valuation
allowance as a result of changes in management's estimates of the utilization of
both US and Canadian tax loss carryforwards caused primarily by improved
operating results in Canada and the United States. Management anticipates that
further deferred tax benefits will be recognized in 1997.
Capital Resources and Liquidity
Although the Company generated net income of $845,000 for the three months
ended March 31, 1997, the Company used $1,299,000 of cash in operations during
such period as a result of the need for working capital to support higher levels
of accounts receivable and inventory. During the three months ended March 31,
1997, accounts receivable increased by $1,549,000 to $5,070,000. The increase
was primarily the result of the Company having provided extended payment terms
for sales made in the fourth quarter of 1996. Additionally, essentially all of
the sales for the quarter ended March 31, 1997, were transacted in March 1997.
Inventories increased by $380,000 to $2,650,000 at March 31, 1997, as a result
of increased purchases of materials in anticipation of a 50% increase in
production expected to occur in the second quarter of 1997 compared to the first
quarter of 1997. However, as a result of the net proceeds of approximately
$10,400,000 from the Company's recent public offering and the Company's improved
profitability,
<PAGE>
management believes that the Company will have sufficient cash to fund its
working capital requirements and to execute its growth plans through 1998.
The Company's capital expenditures for the three months ended March 31,
1997 aggregated approximately $373,000. Such expenditures consisted primarily of
software upgrades to various manufacturing information systems, computer
hardware modernization relating to the Company's network system and the
acquisition of additional equipment. The Company anticipates that total capital
expenditures will be approximately $200,000 for the remainder of 1997,
substantially all of which will relate to equipment.
The Company has substantial tax loss and research and development tax
credit carryforwards to offset future tax liabilities in the United States.
Inflation
Inflation was not a material factor in either the sales or the operating
expenses of the Company during the periods presented herein.
Recent Pronouncements of the Financial Accounting Standards Board
In February 1997, the Financial Accounting Standards Board issued statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (FASB 128),
which establishes standards for computing and presenting earnings per share.
FASB 128 replaces the presentation of primary earnings per share and fully
diluted earnings per share with basic earnings per share and diluted earnings
per share, respectively. Basic earnings per share excludes dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share is computed similarly to fully diluted earnings per share. The standard is
effective for financial statements for periods ending after December 15, 1997,
with earlier application not permitted.
Basic and diluted earnings per share using this standard would have been
$0.16 and $0.14, respectively for the three months ended March 31, 1997, and
$0.05 and $0.05, respectively, for the three months ended March 31, 1996.
Disclosure Regarding Forward Looking Statements
This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include, but are
not limited to, the anticipated development and growth of markets for products
of the Company, the anticipated growth in the demand for the Company's products,
the Company's opportunities to increase sales the development of new IONSCAN(R)
products, the probability of the Company's success in the sales of its
IONSCAN(R) products and liquidity and capital requirements.
Forward-looking statements are inherently subject to risks and
uncertainties, many of which can not be predicted with accuracy and some of
<PAGE>
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, but are not limited to, the development
and growth of markets for the Company's products, the Company's dependence on
and the effect of governmental regulations on demand for the Company's products,
the impact of both foreign and domestic governmental budgeting decisions and the
timing of governmental expenditures, the reliance of the Company on its
IONSCAN(R) products, and the dependence of the Company on its ability to
successfully develop and market new product applications, the effects of
competition, and the effect of general economic and market conditions, as well
as conditions prevailing in the markets for the Company's products. Certain of
the factors summarized above are described in more detail in the Company's
Registration Statement on Form SB-2 (File no. 333-13703) and the Company's 1996
Annual Report on Form 10-KSB and reference is hereby made thereto for additional
information with respect to the matters referenced above.
<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 is Incorporated
by reference to the identically numbered exhibit to the Registrant's
Registration Statement on Form S-1, File No. 33-31626.
3.2A By-laws of the Company is Incorporated by reference to the identically
numbered exhibit to the Registrant's Form 8-K, filed on December 27,
1995, file No. 0-3207.
11 Earnings per share exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<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: April 28, 1997
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO EXHIBITS
Exhibit Number
11 Earnings Per Share
27 Financial Data Schedule
EXHIBIT 11
BARRINGER TECHNOLOGIES INC AND SUBSIDIARIES
EARNING PER SHARE
PRIMARY FULLY DILUTED
----------------------------- ----------------------------
Three months ended March 31, Three months ended March 31,
----------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
Net Income $ 845,000 $ 189,000 $ 845,000 $ 189,000
Preferred dividend
requirements (3,000) (12,000) (12,000)
----------------------- -----------------------
Net income to common
stockholders
$ 842,000 $ 177,000 $ 845,000 $ 177,000
====================== ========================
Weighted average shares
outstanding
5,392,000 3,479,000 5,392,000 3,479,000
Assumed conversion of
preferred stock
n/a n/a 29,000 n/a
Assumed exercise of
outstanding options
and warrants(treasury
stock method) 688,000 n/a 688,000 n/a
---------------------- -------------------------
Revised share basis 6,080,000 3,479,000 6,109,000 3,479,000
======================= =========================
Earnings per common share $ 0.14 $ 0.05 $ 0.14 $ 0.05
====================== =========================
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