U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the fiscal year
ended December 31, 1996
Commission File Number: 0-3207
Barringer Technologies Inc.
(Name of small business issuer in its charter)
Delaware 84-0720473
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
219 South Street, Murray Hill, NJ 07974
(Address, Including Zip Code, of Principal Executive Offices)
(908) 665-8200
(Issuer's Telephone Number)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
Common Stock Purchase Warrants
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenue for its most recent fiscal year. $10,923,000.
The aggregate market value of voting stock held by nonaffiliates computed by
reference to the price at which the stock was sold, or the average bid and asked
price of such stock, is $37,001,000 as of March 14, 1997.
State the number of shares of each of the issuer's classes of common stock,
outstanding as of the latest practicable date.
Outstanding as of March 14, 1997
Common Stock, $.01 par value 5,396,602
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III (other than the required information regarding
executive officers) is hereby incorporated by reference to the registrant's
definitive proxy statement for its 1997 Annual Meeting of Stockholders, which
will be filed with the Commission no later than 120 days after December 31,
1996.
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TABLE OF CONTENTS
Page
PART I
Item 1. Business...................................................... 3
Item 2. Properties.................................................... 10
Item 3. Legal Proceedings............................................. 10
Item 4. Submission of Matters to a Vote of Security Holders........... 10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.......10
Item 6. Management's Discussion and Analysis...........................11
Item 7. Financial Statements and Supplemental Data.....................15
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................15
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section of 16(a) of the
Exchange Act..................................................15
Item 10. Executive Compensation........................................16
Item 11. Security Ownership of Certain Beneficial Owners
and Management................................................16
Item 12. Certain Relationships and Related Transactions................16
Item 13. Exhibits and Reports on Form 8-K..............................17
<PAGE>
PART I
Item 1. Business
Disclosure Regarding Forward Looking Statements
This Form 10- KSB (including, but not limited to, the information provided
herein in response to Item 1 and Item 6 of Form 10-KSB) 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 Barringer Technologies Inc. (The "Company"),
the anticipated growth in the demand for the Company's products, the Company's
opportunities to increase sales through, among other things, the development of
new applications, markets for and extensions of its IONSCAN(R) products, the
development of new IONSCAN(R) products, the probability of the Company's success
in the sales of its IONSCAN(R) products, governmental regulations and directives
changing security requirements, 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
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 reference is hereby
made thereto for additional information with respect to the matters referenced
above.
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 set forth above and contained elsewhere in
this Form 10-KSB.
(a) General
The Company was incorporated under the laws of the State of Delaware on
September 7, 1967.
The Company is principally engaged in the design, development, manufacture
and sale of analytical instruments used for the high sensitivity detection of
trace amounts of plastic and other explosives and illegal narcotics. The
Company's principal product, the IONSCAN(R), is a portable, desk-top instrument
that utilizes a proprietary implementation of ion mobility spectrometry ("IMS")
technology to determine the presence or absence of targeted compounds in a
sample. The IONSCAN(R) can detect targeted substances in amounts smaller than
one-billionth of a gram in approximately six seconds.
The Company's customers are primarily governmental, security and law
enforcement agencies throughout the world, including the Federal Bureau of
Investigation (the "FBI"), the Drug Enforcement Agency (the "DEA"), the General
Services Administration (the "GSA"), the United States, French, and Canadian
customs services and various airports worldwide. Because of its high
sensitivity, the IONSCAN(R) is used both in lieu of and in conjunction with
other detection technologies, such as X-ray, computer aided tomography
("CATSCAN"), quadropole resonance and nuclear magnetic resonance imaging. As of
December 31, 1996, the Company had sold over 350 IONSCAN(R)s, and the Company
believes that, in terms of units sold, it is the world's leading supplier of
trace particle detection instruments.
IONSCAN(R)s have been sold for explosives detection applications primarily
outside the United States and for drug interdiction and detection deployment
both within the United States and elsewhere. For example, the IONSCAN(R) is used
in foreign airports, on trains and at the Eurotunnel to check for explosives and
by the United States Coast Guard to check ships and cargo in U.S. territorial
waters for illegal narcotics.
The Company believes that the security-related market for the IONSCAN(R) is
growing as a result of governmental actions, particularly in the United States,
which reflect heightened public safety concerns in the wake of an increasing
number of terrorist acts. Recently, Congress appropriated $144,000,000 for the
purchase of enhanced explosives detection equipment for use at certain airports
in the United States, and the Company believes that a portion of such
appropriation will be utilized
<PAGE>
for the acquisition of trace particle detection equipment. Governmental agencies
in the United States, including the GSA and the Federal Aviation Administration
"(FAA"), have accelerated their evaluation or use of enhanced methods to
increase security measures currently employed in United States airports, other
transportation centers and in public buildings.
The Company also believes that the market for the IONSCAN(R) for use in
drug applications will increase as a result of recently reported increases in
domestic drug usage, particularly among teenagers. Various governmental
agencies, including the DEA, have purchased IONSCAN(R)s for use in their efforts
to diminish drug trafficking. Prisons and private entities, including public
utilities and drug rehabilitation clinics, also have purchased IONSCAN(R)s to
detect the presence of drugs.
The Company believes that new markets for the IONSCAN(R) can be developed
in other areas, such as security screening of individuals and process control
and quality assurance in certain industrial applications. In addition, when
coupled with certain other existing technologies, such as gas chromatography,
the IONSCAN(R) can be adapted to other uses, including environmental, biological
and chemical testing. Further, the Company intends to expand the potential uses
of the IONSCAN(R) technology by developing a hand held detector.
In addition to the IONSCAN(R), the Company manufactures specialty
instruments and engages in contract research and development activities for
industrial companies and various governmental agencies. For the years ended
December 31, 1996, 1995 and 1994, approximately 25%, 14% and 11.7%,
respectively, of the Company's consolidated revenues were derived from these
other activities.
Market Overview
Explosives Detection
Since the 1970s, metal detection equipment, imaging techniques and visual
inspection have been employed throughout the world to detect the presence of
weapons. Passengers boarding airplanes pass through metal detectors while
carry-on baggage is scanned by security personnel utilizing X-ray equipment or
is searched by hand. Similar security measures are used in a variety of public
buildings, including courts, where security concerns are particularly high.
The persistent occurrence of terrorist bombings has demonstrated that
currently deployed security measures are inadequate, particularly for the
detection of explosives. While existing screening installations are effective to
detect metallic weapons and other metal objects, they are not always effective
for detecting explosives. In addition, advanced detection equipment has not been
uniformly deployed because of concerns relating to its efficacy, cost and
reliability.
In the aviation security market the need for deployment of more
sophisticated explosives detection systems has been recognized for some time. In
the aftermath of the bombing of Pan Am flight 103 over Scotland in 1988, the
Aviation Security Improvement Act of 1990 (the "Safety Act") was enacted. The
Safety Act directed the FAA to establish a research and development program
related to the development and implementation of explosives detection technology
and procedures to counteract terrorism against civilian aircraft. The Safety Act
directed the FAA to develop certification protocols for explosives detection
equipment and authorized the FAA Administrator to require the use of certified
equipment commencing thirty-six months after enactment.
In response to the requirements of the Safety Act, the FAA began funding
research and development of enhanced explosives detection technology. During the
past five years, the FAA has spent approximately $150,000,000 on such
activities. In addition, the FAA adopted a certification protocol regarding the
use of imaging detection systems for use on checked baggage. The imaging
protocol focuses on (i) the explosive substances to be detected, (ii) the
probability of detection, by explosive, (iii) the quantity of explosive that
must be detected, and (iv) the number of bags processed per hour. In addition
the protocol specifies a maximum acceptable false alarm rate by explosive. To
date, only one imaging system has met the requirements of the protocol. The FAA
has not mandated the deployment of such certified imaging equipment, in part,
because of its cost (approximately $2 million per screening station). Concern
also has been raised about its selectivity because its false alarm rate in
airport testing has been much higher than the protocol results had indicated.
A number of recent events, including the destruction of TWA flight 800 over
Long Island and the bombing at the 1996 Olympics in Atlanta, have refocused
attention on the need to deploy enhanced explosives detection equipment. In
response to the crash of TWA flight 800, the FAA issued a classified security
directive to all airlines subject to FAA regulation. Although the directive is
not publicly available, the Company believes that the directive mandated
enhanced security checks for all baggage checked-in through certain airports
using one of three techniques: manual searching, deployment of certified
<PAGE>
imaging equipment and use of trace particle detection equipment. The Company
believes that airlines are using manual searching techniques to comply with the
FAA directive and have not deployed enhanced explosives detection equipment
primarily because of the cost of such equipment which, under existing FAA
regulations, must be borne by the airlines.
On international flights, the FAA has mandated that airlines subject to FAA
regulation comply with the International Civil Aviation Organization's
International Standards and Recommended Practices Safeguarding International
Civil Aviation Against Acts of Unlawful Interference ("Annex 17"). Annex 17
contains generalized recommendations regarding bag matching, the screening of
checked bags and the taking of "appropriate actions" to determine if carry-on
baggage contains explosives. For all international flights, the FAA requires
airlines to use bag matching, to X-ray all carry-on and checked baggage and to
confirm that electronic devices such as cellular telephones, tape recorders and
laptop computers are operational. For certain international flights, the FAA has
mandated more stringent security measures. The Company believes that the FAA
directive augments these procedures in certain respects.
Annex 17 is implemented in a variety of ways outside the United States. In
the United Kingdom, for instance, certain airports have implemented a tiered
approach to baggage screening that utilizes trace particle detection equipment
to resolve potential security concerns. See "Explosives Applications." Certain
member countries have adopted different security protocols relying on manual
searching or other techniques and many have taken no actions to implement Annex
17.
As a result of the crash of TWA flight 800, the Gore Commission was formed
to examine the security measures currently in place in United States airports
and to make recommendations to the President with respect thereto. The Gore
Commission's initial report made a number of general recommendations regarding
the enhancement of airport security. These recommendations included, among other
things, that the government bear the initial cost of enhanced security
equipment, through ticket surcharges or other methods, that approximately
$160,000,000 be appropriated initially for the purchase of enhanced explosives
detection equipment at major airports, that approximately $50,000,000 be spent
in fiscal 1997 on research and development activities and that cooperation and
sharing of information among agencies be increased.
Partially in response to the Gore Commission's initial report, the
administration asked Congress to appropriate $1.1 billion to fund anti-terrorism
activities. In October 1996, Congress appropriated all the funds recommended by
the administration for fiscal 1997, including $144,000,000 for the purchase of
enhanced explosives detection equipment. A published report indicates that the
administration plans to use a portion of that appropriation to purchase 489
trace detection instruments in fiscal 1997. The Company believes that these
instruments will be used to augment screening of carry-on baggage and to resolve
false alarms reported by imaging equipment. Published reports estimate the total
cost of implementing enhanced explosives detection equipment at the 75 busiest
domestic airports will be upwards of $6 billion and will take ten years to
complete.
The Company believes that the aviation security market for the IONSCAN(R)
will expand significantly as a result of the actions of Congress and the Gore
Commission. While a substantial amount of the initial $144,000,000 appropriated
for the purchase of enhanced explosives detection equipment in fiscal 1997 will
be used to purchase equipment utilizing other technologies, such as CATSCAN,
enhanced X-ray, quadropole resonance and other imaging techniques, the Company
believes that, as indicated above, a significant number of trace particle
detection instruments, including IONSCAN(R)s, will be purchased. In addition,
the appropriation approved by Congress covers only a limited number of United
States airports. The Company believes that additional appropriations will be
required to deploy enhanced explosives detection equipment at all major airports
in the United States. However, there can be no assurance that funding for the
purchase of such equipment will be continued in subsequent fiscal years or as to
the level thereof. In addition, there can be no assurance as to the amount that
will ultimately be spent on the purchase of trace particle detection equipment
or as to the number of IONSCAN(R)s that will actually be purchased or that the
IONSCAN(R) will meet any certification or other requirements that may be adopted
in connection therewith.
Other explosives detection markets for the IONSCAN(R) have been similarly
affected by increased terrorist activity. For instance, as a result of the World
Trade Center bombing in 1990 and the 1995 bombing in Oklahoma City, the Company
has sold IONSCAN(R)s to customers, including the World Trade Center and the GSA,
for facilities protection applications.
Drug Interdiction
The Company believes that concerns regarding the increasing usage of
narcotics will result in substantial growth in the market for IONSCAN(R)s used
in drug detection and interdiction efforts. According to the Office of National
Drug Control Policy, use of certain illegal narcotics significantly increased
during the past five years. Recent surveys have also indicated
<PAGE>
that the use of illegal narcotics by teenagers has reached a record level. X-ray
scanning, random searches and the use of canines have not resulted in sufficient
progress in programs to suppress illegal drug trafficking. Accordingly, customs
and law enforcement agencies, particularly in the United States, have
increasingly turned to more sophisticated detection equipment, including the
IONSCAN(R), to assist in their interdiction and detection efforts. The United
States Coast Guard and customs services throughout the world have purchased
IONSCAN(R)s for use in their drug interdiction efforts. Prisons throughout the
United States and around the world also are increasingly using sophisticated
equipment, such as the IONSCAN(R), to reduce drug use. Various prisons in the
United States, as well as in Canada and Mexico, have purchased IONSCAN(R)s to
test visitors, packages, cell blocks and vehicles for illegal narcotics. The
Company believes that the successful integration of the IONSCAN(R) in drug
interdiction and detection activities by the United States Coast Guard, as well
as by the various customs services and correctional facilities described above,
will result in additional purchases of the IONSCAN(R) for drug interdiction
purposes.
As a result of increased drug usage and a heightened public awareness
regarding criminal activity generally, governmental agencies have increased
their spending on drug interdiction efforts. In addition, in connection with the
implementation of United States foreign policy, grants have been provided to
foreign countries, particularly in Latin America, for use in drug interdiction
efforts. The Company believes that as a result of the increased governmental
focus on drug prevention and the increased budgetary allocations for drug
intervention programs, the drug detection market for the IONSCAN(R) will
continue to grow.
Strategy
The Company's objective is to strengthen its position as the leading
supplier of trace particle detection equipment by (i) further penetrating
existing markets for the IONSCAN(R) through aggressive pursuit of additional
sales from new and existing customers, (ii) expanding the uses of the
IONSCAN(R), particularly for security screening of individuals and for process
control and quality assurance in certain industrial applications, and (iii)
extending the capabilities and the potential uses of the IONSCAN(R) for
environmental, biological and chemical testing by, among other things, combining
the IMS technology used by the IONSCAN(R) with other existing technologies, such
as gas chromatography, and by developing a hand-held detector utilizing the
IONSCAN(R) technology.
Explosives Applications
Aviation Security
IONSCAN(R)s are currently used in explosives detection applications in the
aviation security market primarily outside the United States. In most cases, the
IONSCAN(R) is used to resolve concerns regarding checked or carry-on baggage
that may contain explosives. For instance, certain foreign airports have
implemented a three-tiered security procedure for checked baggage. All checked
bags are screened by an X-ray machine to identify those bags that may contain
explosive materials. Bags identified through that process are then subjected to
a second level of testing, generally using a more sensitive imaging system, such
as enhanced X-ray or CATSCAN. Bags that are not cleared at this second level are
either manually searched or tested using trace particle detection instruments
such as the IONSCAN(R). A number of IONSCAN(R)s have been purchased for this
purpose.
IONSCAN(R)s also are used to augment screening of carry-on baggage. The
carry-on bags of individuals meeting certain passenger profiles are searched
manually (including using bomb sniffing canines), screened by imaging equipment
or scanned using trace particle detection equipment, such as the IONSCAN(R).
Although the IONSCAN(R) was approved in 1992 by the FAA for screening electronic
items, there has been only limited use of it for such purpose.
Although most airports use manual searching to resolve concerns about
checked baggage and to provide enhanced security of certain carry-on baggage,
the Company believes that as a result of recent governmental initiatives,
governmental regulators will require deployment of more sophisticated equipment,
such as the IONSCAN(R). Currently, IONSCAN(R)s are used in 15 airports
throughout the world in explosives detection applications.
Other Transportation Security
IONSCAN(R)s also are employed in explosives detection applications in other
segments of the transportation industry. In Europe, IONSCAN(R)s are in use at
the Eurotunnel, which connects England and France, to scan vehicles and freight
for explosive materials. In addition, IONSCAN(R)s are used by British Rail and
train systems operating in the Eurotunnel to test
<PAGE>
for explosive materials. The Company believes that this market will experience
substantial growth as governmental authorities increasingly recognize that
terrorist acts, such as the poison gas incidents in Tokyo in 1995, may involve
other forms of public transportation, such as railroads and subways.
Building Security and Forensics
IONSCAN(R)s are deployed at numerous facilities around the world, such as
large electric utilities and landmark buildings, that are perceived as
potentially likely targets for terrorist attacks. For instance, IONSCAN(R)s
currently are in use at the World Trade Center in New York as a result of the
bombing there in 1993. In addition, the Company recently sold several
IONSCAN(R)s to the GSA, which is responsible for the maintenance and security of
U.S. government buildings. In the wake of incidents such as the 1995 Oklahoma
City bombing and the bombing in Atlanta during the 1996 Summer Olympics, the
Company believes that this market will experience significant growth as the need
for physical security measures at public facilities increases. The Company
believes that the IONSCAN(R) is particularly well suited for this application
because of its fast scanning time, its high throughput and its low cost compared
to other available detection technologies.
Customers, such as the FBI, the New York City Police Department, military
forces and other investigative agencies in Europe and the Middle East use the
IONSCAN(R) for forensic purposes to test debris for traces of explosives and
other chemicals following the occurrence of a bombing or explosion. For example,
IONSCAN(R)s were used to test debris from the crash of TWA flight 800 and at the
site of the 1995 Oklahoma City bombing.
Drug Applications
Drug Interdiction
As a result of the increased usage of illegal drugs, governmental agencies
in the United States and around the world are refining their drug interdiction
techniques. Metal detectors, X-ray equipment, random manual searching and the
use of canines have not resulted in sufficient progress in programs to suppress
illegal drug trafficking, and governmental agencies have been increasingly
utilizing more sophisticated detection equipment, including the IONSCAN(R), to
supplement their drug interdiction efforts. Currently, law enforcement agencies
around the world, including the FBI, the DEA, customs officials in the United
States and eight other countries, the U.S. and Japanese Coast Guards, police
departments in 10 states and five foreign countries and a number of federal and
foreign prisons use the IONSCAN(R) for this purpose. IONSCAN(R)s also are in use
in drug interdiction efforts in 16 airports throughout the world.
The Company expects that this market will continue to grow as a result of
continuing drug trafficking, increased governmental attention in this area and
increased budgets for anti-drug activities. The Company believes that it will be
well-positioned to take advantage of the expected growth in this market because
of its large installed base, the breadth of its customers and the field
performance of the IONSCAN(R) to date.
Drug Detection
The increased usage of illegal narcotics also is driving sales of
IONSCAN(R)s to other entities for drug detection applications. For instance,
several large public utilities have purchased IONSCAN(R)s to test their
facilities, vehicles and employees for the presence of illegal narcotics. In
addition, various prisons in the United States, as well as in Canada and Mexico,
have purchased IONSCAN(R)s to test visitors and packages entering prisons, cell
blocks and vehicles for illegal narcotics. Drug rehabilitation centers also have
purchased IONSCAN(R)s to supplement their testing procedures for patients. The
Company believes that this market segment will experience additional growth as
other large utilities, prisons and drug rehabilitation centers seek to
supplement their current drug detection efforts.
Sales and Marketing
The Company sells its products through a direct sales and support force of
16 persons located at its headquarters in New Jersey and at its offices in
Toronto, London and Paris. The Company intends to open a sales and service
facility in Asia during 1997. In addition, the Company has a network of
independent sales representatives located throughout Europe, the Middle East,
Africa, Asia, South America and Australia. The Company also has entered into
sales representative agreements with Mitsubishi Heavy Industries for
distribution of the IONSCAN(R) in Japan. The Company's sales and marketing
efforts typically involve extensive customer visits, demonstrations and field
testing. Sales prospects generally are targeted by the Company or its
independent sales representatives, although the Company also responds to
requests for proposals.
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Typically, the Company sells its IONSCAN(R) instruments for prices between
$50,000 and $95,000 per unit, depending principally on the configuration of the
unit and the purchaser's location. Once a sale is consummated, the Company
provides training at a customer's location to teach operators how to use the
IONSCAN(R). The Company generally provides a one-year parts and labor warranty
on its IONSCAN(R) instruments, although from time to time, the Company has
entered into service contracts which include extended warranties. To date, the
Company's warranty claims experience has not been material.
The Company does not actively market its other specialty instruments or its
contract research and development services. However, from time to time, the
Company responds to appropriate requests for proposals for non-IONSCAN(R)
instruments and such services. Although sales of such instruments and such
services have been material to the Company's historic results from time to time,
as a result of the expected increase in sales of the IONSCAN(R), the Company
does not expect that such sales will materially affect its results of operations
in future periods.
During 1996, the European Passenger Services Ltd accounted for
approximately 11% of consolidated revenues of the Company. During 1995, no
customer accounted for more than 10% of the consolidated revenues of the
Company. During 1994, one customer accounted for approximately 22% of
consolidated revenues.
Backlog
Although the Company's sales cycle is relatively long due to governmental
budgetary and procurement policies, once orders are placed customers typically
seek immediate delivery. Accordingly, for competitive purposes, the Company
follows the practice of manufacturing to a sales forecast. As a result, the
Company does not have a material backlog of orders for its instruments. The
Company anticipates that all of its instrument backlog at December 31, 1996 will
be shipped prior to December 31, 1997.
Because the Company's funded research and development activities are
undertaken pursuant to contracts which typically run for one or more fiscal
periods, from time to time, the Company has a backlog relating to research and
development activities to be performed in future periods. Such backlog was not
material at December 31, 1996. See "Management's Discussion and Analysis."
Manufacturing and Assembly
The Company manufactures and assembles IONSCAN(R)s primarily at its
facility in Toronto, Canada, and has expanded its capabilities to manufacture
and assemble IONSCAN(R)s at its facility in Murray Hill, New Jersey.
Although many of the basic components of the IONSCAN(R), such as
chipboards, resistors, capacitors, liquid crystal displays and other similar
components, are readily available from a number of sources, the Company
typically purchases such components from single suppliers. A limited number of
components and sub-assemblies are manufactured for the Company, pursuant to the
Company's proprietary specifications, but the Company does not believe it is
dependent on any single source for these items. To date, the Company has not
experienced any difficulty in obtaining any components or sub-assemblies.
Competition
The Company competes with other entities, a number of which have
significantly greater financial, marketing and other resources than the Company.
Principal competitive factors include selectivity (the ability of an instrument
to identify the presence of a particular substance), sensitivity (the ability of
an instrument to detect small amounts of a particular substance), false alarm
rate, price, marketing, ease of use and speed of analysis. The Company believes
that it competes effectively with respect to each of these factors.
The Company competes for governmental expenditures with equipment
manufacturers utilizing other types of detection technologies, including
CATSCANs, enhanced X-ray and quadropole resonance, as well as with manufacturers
of other IMS equipment and manufacturers using other trace particle detection
technologies, such as gas chromatography and chemoluminescence. Because trace
particle detection equipment is used in certain instances to verify detection
results obtained by other enhanced detection systems, the IONSCAN(R) and other
trace particle detection equipment are used in conjunction with systems
utilizing imaging technologies. As a result of recent governmental initiatives,
the Company anticipates that additional technologies, including improved IMS
technologies, will be developed and that new competitors will enter the
Company's markets.
<PAGE>
The Company also competes with the present use by various law enforcement
agencies of canines to locate the presence of explosives or drugs. Although
canines have a highly developed sense of smell and are able to follow a trail,
the Company believes that its IONSCAN(R) instruments are more effective and cost
efficient than canines, because they can operate 24 hours a day, have greater
selectivity than canines and can identify the composition of the substance
detected.
Government Regulation
Although the Company's business is not subject to significant government
regulation, government regulation plays a large role in determining the demand
for the IONSCAN(R). In the United States and most foreign countries, the
aviation industry is highly regulated and authorities, such as the FAA in the
United States, have the ability to recommend or mandate use of enhanced
explosives detection equipment.
The FAA has adopted a certification protocol regarding the use of imaging
detection systems for use on checked baggage. The FAA is currently developing a
certification protocol for trace particle detection equipment, which the Company
believes will be finalized in the second quarter of 1997. Once the protocol is
adopted, the Company believes that only instruments meeting the FAA
certification requirements will be approved for use by airlines subject to FAA
regulation. Although the final protocol has yet to be adopted, based on early
versions of the testing criteria, as well as discussions with representatives of
the FAA, the Company believes that the IONSCAN(R) will meet the FAA's
certification requirements, although no assurance can be given. The FAA has
approved the IONSCAN(R) for screening of electronic carry-on items, such as
cellular telephones, tape recorders and laptop computers. In addition, the FAA
recently issued a classified security directive that the Company believes
authorizes the use of certain trace particle detection equipment, including the
IONSCAN(R), on carry-on baggage.
Product Development
The Company's product development expenses totaled $230,000, $354,000, and
$531,000, for the years ended December 31, 1996, 1995 and 1994, respectively.
These amounts primarily relate to the development and enhancement of the
Company's IONSCAN(R) instruments. All of these amounts were funded by the
Company.
In addition to further performance enhancements, the Company intends to
combine the IONSCAN(R) with other existing technologies, such as gas
chromatography, to enable the IONSCAN(R) to detect compounds contained in more
difficult sampling media, such as soil. The Company believes that the modified
IONSCAN(R) would be able to break down a complex matrix of chemicals to separate
out the background material and permit testing for the targeted substance on
site instead of shipment of a sample to an offsite laboratory for analysis. As a
result, the modified IONSCAN(R) could be utilized to field test for the presence
of microscopic organisms and other environmentally sensitive materials.
Patents, Trademarks and Proprietary Rights
The Company holds, through BRL, an aggregate of 10 patents throughout the
world related to equipment, systems and techniques. While such patents may be
regarded as having substantial value, the Company's current business is not
deemed to be materially dependent upon either the aggregate of such patents or
any one of them individually. The Company relies primarily on unpatented
proprietary know-how in building the IONSCAN(R) which it protects through the
use of nondisclosure agreements and other methods. However, the basic technology
used in the IONSCAN(R) is not proprietary to the Company and the same
functionality contained in the IONSCAN(R) could be duplicated by the Company's
competitors without violating the Company's patents.
The Company's initial development of the IONSCAN(R) was funded in part by
Transport Canada and Revenue Canada. Pursuant to an agreement with the Canadian
government, the Company has received a worldwide, perpetual license to certain
unpatented technology developed from such work and pays Revenue Canada a royalty
equal to 1% of sales of all IONSCAN(R) units. This licensing arrangement remains
exclusive until March 31, 1999. The Company has entered into an agreement with
Revenue Canada, pursuant to which the Company has the right to renew such
exclusive arrangement on a year by year basis for up to ten additional years at
which time Revenue Canada would have the right to license the technology to
third parties. Revenue Canada has retained the right to use the technology and
to produce products incorporating such technology although, to date, Revenue
Canada has not attempted to do so.
The Company believes that the IONSCAN(R) registered trademark has gained
recognition in the markets for the Company's products and is a valuable
trademark.
<PAGE>
Employees
As of December 31, 1996, the Company had 70 full-time and 9 part-time
employees of whom 35 were engaged in manufacturing, 18 were engaged in research
and development activities (16 of whom have advanced degrees, including 6
doctorates) and 26 were engaged in sales, service and general administration.
None of the Company's employees are represented by any union, and the Company
considers its relationships with its employees to be satisfactory.
(b) Financial Information about Foreign and Domestic Operations and Export
Sales.
For information with respect to financial information about foreign and
domestic operations and export sales, reference is made to the information set
forth in Note 12 to the Consolidated Financial Statements of the Company
included herein, and see Item 6. "Management's Discussion and Analysis or Plan
of Operation."
Item 2. Properties.
The Company does not own any real property and currently conducts it
operations at the following leased premises.
<TABLE>
<S> <C> <C> <C> <C>
Square Annual Lease
Footage Lease Expiration Type
219 South Street, 4,910 $78,000 March 1998 Corporate headquarters,
Murray Hill, NJ 07974 sales, service and assembly
1730 Aimco Boulevard 28,380 $76,000* September 2005 Research, manufacturing
Mississauga, Ontario, and assembly, sales,
Canada L4W 1V1 service and
administration
Aeroport De Paris, Roissytech 1,060 $21,000 February 1998 Sales and service
BP10614-1 Rue Du Cercle
95724, Roissy C.D.G., France
Manor Royal 1,560 $16,000 February 1998 Sales and service
Crawley, West Sussex
England RH10 2QU
- -------------------------------------
* Increases to $115,000 on September 1, 2000
</TABLE>
Item 3. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1996.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The following table sets forth certain information regarding the price of
the Common Stock for each quarter in the two-year period ended December 31,
1996. Since November 12, 1996, the Common Stock has been quoted on the NASDAQ
Stock Market National Market System under the symbol BARR. Prior thereto, the
Common Stock was traded on the NASDAQ interdealer quotation system (SmallCap
listing). The following table sets forth the high and low sales price per share
of Common Stock for the periods subsequent to November 12, 1996 as reported by
NASDAQ and, prior thereto, the high and low bid quotations per share of Common
Stock as reported by NASDAQ, adjusted to reflect the one-for-four reverse stock
split effected September 25, 1995. The bid and asked prices included herein
reflect inter-dealer prices, without retail markup, markdown or commission, and
may not necessarily represent actual transactions.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Stock
High Low
1995
First Quarter................... $6.88 1.25
Second Quarter.................. 5.00 2.00
Third Quarter................... 4.25 2.25
Fourth Quarter.................. 3.25 .50
1996
First Quarter................... $0.56 $0.31
Second Quarter.................. 4.19 0.44
Third Quarter................... 13.88 2.88
Fourth Quarter.................. 10.63 6.63
</TABLE>
On March 14, 1997, the last reported sale price of the Common Stock was
$9.75 per share. On March 14, 1997, there were approximately 890 holders of
record of the Common Stock
DIVIDEND POLICY
Since inception, the Company has not paid cash dividends on its Common
Stock. The Company currently intends to retain future earnings to support its
growth strategy and does not anticipate paying dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, results of operations, current and
anticipated cash needs and plans for expansion. The Company is prohibited from
paying cash dividends on the Common Stock unless full cumulative dividends have
been paid or set aside for payment on the Company's Class A Convertible
Preferred Stock and Class B Convertible Preferred Stock at an annual rate of
$.16 per share, which dividends, at the option of the Company, are payable in
cash or shares of Common Stock. The Company's ability to pay dividends on its
Common Stock may be further limited in the future by other legal or contractual
restrictions placed on the Company and on the ability of its subsidiaries to
provide cash to the Company.
RECENT SALES OF UNREGISTERED SECURITIES
In July 1996, the Company completed the sale of $1,000,000 of its 6%
Convertible Subordinated Debentures due 1997, ("Debentures"), in a private
transaction to institutional and private investors and members of management for
an aggregate purchase price of $1,000,000. This transaction was completed
without registration under the Securities Act of the Debentures or the shares of
Common Stock into which such Debentures are convertible in reliance upon
exemptions provided by Section 4(2) of the Securities Act. There were no
underwriters for this issuance. The Common Stock issuable upon conversion of the
Debentures was subsequently registered pursuant to the Company's Registration
Statement on Form S-3 (File No. 333-11629).
The Debentures were converted into shares of Common Stock by December 31, 1996.
Item 6. Management's Discussion and Analysis
The following discussion and analysis should be read in conjunction with,
and is qualified in its entirety by, the Company's Consolidated Financial
Statements, including the Notes thereto, appearing elsewhere in this Form
10-KSB. Historical results are not necessarily indicative of trends in operating
results for any future period. Through December 31, 1995 the Company reported
two segments for financial statement purposes: (i) specialty instruments and
(ii) funded research and development. Because of the rapid growth in sales of
IONSCAN(R)s through 1996, the funded research and development segment is no
longer significant to the Company's consolidated revenues. Accordingly, the
Company has ceased reporting segment information.
Overview
Since 1990, the Company has principally been engaged in the design,
development, manufacture and sale of the IONSCAN(R). The Company sells
IONSCAN(R)s in two primary markets, explosives detection and drug interdiction.
The Company sold its first IONSCAN(R) in 1990 and had sold over 350 units as of
December 31, 1996. Historically, the Company sold a majority of its units for
drug interdiction applications. However, during 1996, the Company's sales have
been divided almost evenly between the explosives detection market and the drug
interdiction market. Management expects that the explosives detection market
will account for an increasingly significant portion of the Company's future
growth.
<PAGE>
The Company sells IONSCAN(R)s for between $50,000 and $95,000 per unit,
depending principally on the configuration of the unit and the purchaser's
location. While substantially all of the Company's revenues are denominated in
U.S. dollars, the Company operates in several foreign countries, including
Canada, the United Kingdom and France, and in certain instances, the Company
sells the IONSCAN(R) in other denominations, particularly British pounds and
French francs. In addition, the Company conducts operations in Canada and, as a
result, certain of the Company's costs are incurred in Canadian dollars. To
date, the Company has not experienced significant losses as a result of foreign
currency fluctuations. The Company currently does not regularly hedge its
foreign currency exposure but will enter into hedging arrangements from time to
time when management deems appropriate.
The Company manufactures to a rolling quarterly sales forecast in order to
have inventory available to meet anticipated demand promptly and, accordingly,
does not have a significant backlog. Management's sales forecast is determined
by an analysis of a number of factors, including, among other things, the needs
of its customers, the availability of budgeted funds, the status of equipment
demonstrations, the status of any required approvals and the complexity of
specific customer's procurement processes. The Company also considers the effect
of competition in obtaining an order. There can be no assurance that the Company
will receive orders for all of the units to be produced and, if such orders are
not received, the Company's liquidity and results of operations could be
materially and adversely affected. The Company believes that its existing
manufacturing facilities, which the Company intends to supplement through the
use of a portion of the proceeds from its recently completed public offering,
will be sufficient for the anticipated growth in orders for the IONSCAN(R) in
the foreseeable future.
Approximately 68.6%, 72.1% and 62.6 % of the Company's revenues for the
years ended December 31, 1996, 1995 and 1994, respectively, were derived from
non-United States sources. Approximately 25%, 30% and 11.8% of revenues in 1996,
1995 and 1994, were derived from customers in Canada.
The Company recognizes revenues from the sale of IONSCAN(R)s upon shipment.
Accordingly, changes in delivery dates for relatively few IONSCAN(R)s from one
quarter to another may have a significant impact on the Company's quarterly
results.
Pursuant to the terms of a Stock Purchase Agreement, dated December 8, 1995
("Agreement"), by and 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, resulting in a gain of $93,000. The purchase price
consisted of $300,000 in cash, cancellation of all amounts owed by the Company
to Labco pursuant to certain intercompany agreements (aggregating $452,000) and
cancellation of $57,000 in accounts receivable due to Labco. After giving effect
to the sale of the Labco shares, the Company continued to own 432,475 shares of
Labco stock representing a 26% ownership interest.
In October 1996, the Company and Labco entered into a Termination Agreement
(the "Termination Agreement") pursuant to which, among other things, the Company
agreed that, for a period of three months from the date of the Termination
Agreement, it would sell its remaining shares in Labco at a price of at least
$1.6875 per share (the "Target Price"). During 1996, the Company sold all of its
remaining shares and warrants in Labco and recognized a gain on such sales of
$123,000. In addition to the gain on the sale of its Labco investment, the
Company recorded $117,000 of income representing its proportionate share of
Labco's net income for 1996.
As of December 13, 1996, the Company had sold all of its shares of Labco
common stock and warrants and, pursuant to the terms of the Termination
Agreement, Messrs. Binder and Harte have resigned their respective positions
with Labco. The Company no longer has any interest in Labco.
On November 15, 1996, the Company sold, through an underwriting syndicate,
1,250,000 shares of its common stock at an initial public offering price of
$8.563 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). On December 12, 1996, the underwriting syndicate had exercised
its option to purchase an additional 187,500 shares of the Company's common
stock at an initial public offering price of $8.563 and an additional 187,500
warrants at an initial public offering price of $.05 per warrant. The aggregate
net proceeds of the offering were approximately $10,401,000. The net proceeds
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.
<PAGE>
The following table presents certain income statement items expressed as a
percentage of total revenue for the years ended December 31, 1994, 1995, and
1996. Percentage of Total Revenue
<TABLE>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Statement of operations data:(1)
Revenues from operations.................... 100.0 100.0 100.0
Cost of revenues............................ 49.1 56.5 74.4
Gross profit................................ 50.9 43.5 25.6
Selling, general and administrative expenses 34.2 51.9 60.8
Product development........................... 2.1 5.6 9.6
Operating income (loss)....................... 14.6 (13.9) (44.8)
Other income (expense), net................. 0.6 (4.6) (1.6)
Income tax (provision) benefit ............. 3.6 - (1.4)
Income (loss) from continuing operations...... 18.9 (18.5) (47.8)
Income from operation held for sale........... - 5.5 1.2
Net income (loss)............................. 18.9 (13.0) (46.5)
Preferred stock dividends................... (0.4) (1.3) (2.0)
Net income (loss) attributable 18.5 (14.3) (48.5)
to common stockholders...................
(1) Columns may not foot due to rounding.
</TABLE>
1996 Compared to 1995
Revenues from operations increased by $4,549,000, or 71.4% in 1996, as
compared to 1995. Net sales of the IONSCAN(R) and related products increased by
approximately $4,911,000, or 93.5%, due to an increase of 134% 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 $223,000, or 41.6%, in 1996 as compared
to 1995, 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 $349,000, or 33.2%, in 1996 as compared to 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 year ended December 31, 1996
increased to 50.9% from 43.5% in 1995. 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. 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
attributed to the improvement.
Selling, general and administrative expenses increased by approximately
$429,000, or 13%, in 1996, as compared to 1995. In the 1995 period, the Company
recognized an expense decrease of $337,000 attributable to a negotiated
reduction in professional fees and $147,000 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 decreased by $55,000 or 1.7%. As a percentage of
revenues, selling, general and administrative expenses decreased to 34.2% in
1996 from 51.9% in 1995. The decrease as a percentage of revenues was primarily
attributable to spreading costs over increased revenues. Selling expenses
increased by $108,000, or 4.6%, in 1996 as compared to 1995 primarily as a
result of increased sales commissions on units sold in the fourth quarter of
1996.
Product development expenses decreased by approximately $124,000, or 35%, in
1996 as compared to 1995. The level of product 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. Management expects product
development expenses to increase significantly in
<PAGE>
1997
Equity in earnings of Labco represents the Company's share of Labco's
operating results, in which the Company had a non-controlling 26% ownership
during most of 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. The Company's share of Labco's
net income for 1996 was $117,000, as compared to $258,000 for the same period in
1995 (where it is shown as Income from operations under the caption "Operation
held for sale").
In 1996, the Company earned investment income of $72,000.
Other expense, net of income was $12,000 in 1996, as compared to $52,000 in
1995. In 1996, the Company recognized $44,000 of gains recognized on trading
securities held for Canadian pension funding purposes, partially offset by
miscellaneous expenses, primarily $43,000 of foreign exchange losses realized in
1996. In 1995, the Company had realized foreign exchange losses of $79,000.
For the year ended December 31, 1996, the Company had a net tax benefit of
$391,000 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.
1995 Compared to 1994
Sales of all instruments increased by $34,000, or 0.1%, in 1995 as compared
to 1994. Sales of IONSCAN(R) instruments and related products decreased by
approximately $80,000, or 1.6%. The decrease was due, in part, to the lower
selling price of the new Model 400 IONSCAN(R), which was introduced in the first
quarter of 1995. This reduction in selling price, coupled with other
improvements of the new model, resulted in approximately 36.6% more unit sales.
Sales of instruments other than IONSCAN(R) products increased in 1995 by
approximately $114,000, or 33%, principally due to the award in 1995 of the
contract to build four heavy water analyzers for use at a nuclear facility in
Asia, which was completed in mid-1996. The introduction of the Model 400
resulted in reduced sales of the Model 350. As a result, the Company reduced the
carrying value of the Model 350s remaining in inventory.
Revenues of the research and development business increased by
approximately $754,000, or 253.0%, in 1995 as compared to 1994. The improved
sales are attributable to work performed in 1995 under the Company's contract
with the Emergencies Science Division, Environment Canada to design and build an
airborne laser-fluorosensor system.
The Company introduced and made a limited distribution of DrugAlert(TM) in
1995. Sales of such product were not significant.
Gross profit as a percentage of sales for the year ended December 31, 1995
increased to 43.5% from 25.6% in 1994. The gross profit as a percentage of sales
for the research and development business decreased to 5.1% in 1995 from 12.1%
in 1994. The decrease was due to lower margins on the 1995 contracts. The gross
profit as a percentage of sales for the instruments business increased to 53.1%
in 1995 from 26.4% in 1994. The 1995 gross profit was impacted by the write down
of the carrying value of the Model 350 inventory which aggregated approximately
$442,000, approximately $155,000 of which related to excess spare parts
inventory and the balance to finished goods. In 1994, the Company took a
$792,000 charge against its Model 350 inventory. The consumer products business
had negative gross profit in 1995 due primarily to the expensing of tooling,
software and other development costs.
Selling, general and administrative expenses in 1995 decreased by
approximately $47,000, or 1.4%, over 1994. As a percentage of revenues, selling,
general and administrative expenses decreased to 51.9% for 1995 from 60.8% in
1994. The decrease as a percentage of revenues was primarily attributable to
such costs being spread over a higher revenue base. Selling expenses increased
by $759,000, or 48.3%, in 1995. The increase was primarily attributable to the
expenses associated with the Company's Paris, France and London, England offices
being open for a full year and marketing expenses associated with the
DrugAlert(TM) product. General and administrative expenses decreased by
approximately $806,000 in 1995, or 45.3%, over 1994. This reduction was
attributable primarily to the recovery of $147,000 relating to the 1993
conversion of the Canadian pension plan from a defined benefit plan to a money
purchase plan, a reduction in accounts payable of $226,000 relating to a
settlement of professional fees and the effect of staff and expense reductions
implemented in late 1994.
<PAGE>
Product development in 1995 decreased by approximately $177,000, or 33.3%,
over 1994. The 1994 level was attributable to the completion of the development
of the Company's new Model 400.
Interest expense increased by approximately $38,000 in 1995, or 18.8%, over
1994 levels. The increase is the result of higher levels of borrowing, at higher
interest rates.
Other expense, net of income, in 1995, was approximately $52,000 as
compared to other income, net of expense, in 1994 of approximately $113,000. The
difference of $165,000 was attributable primarily to the changes in exchange
rates which generated a gain of $135,000 in 1994 compared to a loss of $79,000
in 1995.
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 $14,522,000 at December 31, 1996. Although the Company generated net income
of $2,059,000 for the year ended December 31, 1996, the Company used $1,447,000
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. The
Company's history of losses and its failure to generate positive operating cash
flow had 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.
However, as a result of the net proceeds of approximately $10,400,000 from the
Company's November 1996 public offering and the Company's improved
profitability, management believes that the Company will have sufficient cash to
fund its working capital requirements and to execute its growth plans through
1998.
During 1996, the Company sold the remaining portion of its investment in
Labco and realized net proceeds of $574,000. The proceeds were added to working
capital.
The Company's capital expenditures relating to its continuing operations
were $491,000, $359,000 and $124,000 for the years ended December 31, 1994, 1995
and 1996, respectively. Such expenditures related primarily to the support of
the production of the IONSCAN(R). During 1995, a portion of such expenditures
related to the opening of the Company's foreign sales offices. Approximately
$75,000 of the 1995 expenditures were for development of the DrugAlert product,
further development of which has been suspended. The Company anticipates that
total capital expenditures will be approximately $500,000 for the year ended
December 31, 1997.
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.
Item 7. Financial Statements and Supplementary Data.
Financial statements and supplementary financial information are contained
on pages 20 through 42.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
Not applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
with Section 16(a) of the Exchange Act .
The Company hereby incorporates by reference the applicable information
from its definitive proxy statement for its 1997 Annual Meeting of Stockholders,
except for certain information relating to the Company's executive officers
which is provided below.
<PAGE>
The following table sets forth certain information as of February 1, 1997
concerning each of the Company's executive officers.
<TABLE>
<S> <C> <C>
Executive Officer Age Position with the Company and Affiliates
Stanley S. Binder 55 Chairman of the Board, President and Chief Executive Officer of the Company
John H. Davies 61 Director and Executive Vice President of the Company; President and Chief Executive
Officer of Barringer Research Limited ("BRL")
Richard S. Rosenfeld 50 Vice President - Finance, Chief Financial Officer, Treasurer and Assistant Secretary of
the Company
Kenneth S. Wood 44 Vice President and Secretary of the Company; President of Barringer Instruments Inc.
Ludo Daubner 53 Vice President of BRL
David Martinak 36 Vice President - Sales of BRL
</TABLE>
Mr. Stanley S. Binder has been the President and Chief Executive Officer of
the Company since 1991. In July 1989, Mr. Binder joined the Company and has
since held the following offices with the Company: President from 1989 to the
present date, Chief Operating Officer from 1989 to June 1990, Chief Financial
Officer from 1989 until July 1993, and Chief Executive Officer from July 1990 to
the present date. Mr. Binder is chairman of the New Jersey Counsel of the
American Electronics Association and a member of the Board of Directors of the
American Electronics Association.
Mr. John H. Davies has been an Executive Vice President of the Company
since 1992 and the President and Chief Executive Officer of BRL since August
1989.
Mr. Richard S. Rosenfeld, a certified public accountant, has been Vice
President-Finance and Chief Financial Officer of the Company since July 1993. He
has been the Treasurer and Assistant Secretary of the Company since January
1992, and was a consultant to the Company from July 1991 to December 1991.
Mr. Kenneth S. Wood has been a Vice President of the Company and the
President of Barringer Instruments Inc. ("BII") since January 1992 and the
Secretary of the Company since March 1993. He was Vice President of Operations
for BII from April 1990 to January 1992.
Mr. Ludo Daubner joined BRL in 1974 and has been Vice President -
Operations of BRL since January 1989 and was General Manager of BRL since 1981.
Mr. David Martinak joined BRL in 1979 and has been a Vice President of
Sales for BRL since April 1996. Prior thereto, Mr. Martinak held a number of
positions with BRL, including Sales and Marketing Manager from December 1988
until 1996.
Item 10. Executive Compensation.
The Company hereby incorporates by reference the applicable information from
its definitive proxy statement for its 1997 Annual Meeting of Stockholders.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The Company hereby incorporates by reference the applicable information from
its definitive proxy statement for its 1997 Annual Meeting of Stockholders.
Item 12. Certain Relationships and Related Transactions.
The Company hereby incorporates by reference the applicable information from
its definitive proxy statement for its 1997 Annual Meeting of Stockholders.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 The Company's Certificate of Incorporation, as amended (previously
filed as Exhibit 3.1A to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 (File No.
0-3207) and incorporated herein by reference).
3.2 By-laws of the Company (previously filed as Exhibit 3.2A to the
Company's Annual report on Form 10-K/A-2 for the fiscal year ended
December 31, 1994 (File No. 0-3207) and incorporated herein by
reference).
10.1 Employment Agreement, dated as of July 10, 1989, between the Company
and Stanley S. Binder (previously filed as Exhibit 10.15 to the
Company's Registration Statement on Form S-1 (File No.
33-3162) and incorporated herein by reference).
10.2 Employment Agreement, dated November 1, 1996, between the Company and
Richard S. Rosenfeld (previously filed as Exhibit 10.2 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703)
and incorporated herein by reference).
10.3 Employment Agreement, dated November 1, 1996, between the Company and
Kenneth S. Wood (previously filed as Exhibit 10.3 to the Company's
Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).
10.4 Consulting Agreement, dated as of January 1, 1991, between the
Company and John J. Harte (previously filed as Exhibit 10.4 to the
Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).
10.5 Form of 1995 nonqualified stock option agreement (previously
filed as Exhibit 10.6 to the Company's Registration Statement on Form
SB-2 (File No. 333-13703) and incorporated herein by reference).
10.6 Form of 1996 nonqualified stock option agreement (previously filed as
Exhibit 10.7 to the Company's Registration Statement on Form SB-2
(File No. 333-13703) and incorporated herein by reference).
10.7 Description of 1991 Warrant Plan (previously filed as Exhibit 10.8 to
the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).
10.8 Description of Exercise Plan (previously filed as Exhibit 10.9 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703)
and incorporated herein by reference).
10.9 License Agreement, dated February 27, 1989, between Canadian Patents
and Development Limited -- Societe Canadienne Des Brevets Et
D'Exploitation Limite and Barringer Instruments Limited (the "License
Agreement"), Supplement #1, dated March 4, 1991, Assignment of
License Agreement, dated January 2, 1992, to Her Majesty the Queen in
Right of Canada, as Represented By the Minister of National Revenue
and Supplemental Letter Agreement, dated October 7, 1996 (previously
filed as Exhibit 10.10 to the Company's Registration Statement on
Form SB-2 (File No. 333-13703) and incorporated herein by reference).
10.10 Termination Agreement dated October 7, 1996, between the Company
and Barringer Laboratories Inc. (previously filed as Exhibit 10.11
to the Company's Registration Statement on Form SB-2 (File No. 333-
13703) and incorporated herein by reference).
10.11 Lease, dated as of February 17, 1993, between the Company and Murray
Hill Associates (previously filed as Exhibit 10.17 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.12 Lease, dated as of July 27, 1995, between Barringer Research Limited
and Lehndorff Management Limited (previously filed as Exhibit 10.18
to the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).
<PAGE>
11.1 Computation of Earnings Per Share
21.1 List of the Company's Subsidiaries (previously filed as Exhibit 21 to
the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).
23.1 Consent of Independent Certified Public Accountants
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
Item 5. Other Events:-
October 7, 1996 - Termination agreement between the Company and
Barringer Laboratories Inc.
October 23, 1996 - Announcement of the Company's results of operations
for the three-month and six-month periods ended
September 30, 1996.
November 12, 1996 - Announcement by the Company that it had agreed to
sell shares of its common stock and common stock
purchase warrants in an underwritten public
offering.
December 13, 1996 - Announcement of the exercise of the over-allotment
option in connection with the Company's underwritten
public offering.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BARRINGER TECHNOLOGIES INC.
By: /s/ Stanley S. Binder
____________________________
Stanley S. Binder, President
and Chief Executive Officer
Dated: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Stanley S. Binder President, Chief March 26, 1997
_____________________________
Stanley S. Binder Executive Officer
and Director
/s/ John D. Abernathy Director March 26, 1997
_____________________________
John D. Abernathy
/s/ Richard D. Condon Director March 26, 1997
_____________________________
Richard D. Condon
/s/ John H. Davies Director March 26, 1997
_____________________________
John H. Davies
/s/ John J. Harte Director March 26, 1997
_____________________________
John J. Harte
/s/ James C. McGrath Director March 26, 1997
_____________________________
James C. McGrath
/s/ Richard S. Rosenfeld Vice President-Finance, Chief March 26, 1997
_____________________________
Richard S. Rosenfeld Financial Officer and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
</TABLE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants .................... 21
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994..................................... 22
Consolidated Balance Sheets - December 31, 1996 and 1995............... 24
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994............................... 26
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994..................................... 27
Notes to Consolidated Financial Statements............................. 28
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts....................... 42
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Barringer Technologies Inc.
New Providence, New Jersey
We have audited the accompanying consolidated balance sheets of Barringer
Technologies Inc. as of December 31, 1996 and 1995 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. We have also audited the
schedule listed in the accompanying index. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Barringer
Technologies Inc. at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
/S/ BDO SEIDMAN, LLP
_______________________
BDO Seidman, LLP
Woodbridge, New Jersey
February 12, 1997
<PAGE>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1994
-------------------- -------------------- --------------------
Revenues from operations $ 10,923,000 $ 6,374,000 $ 5,514,000
Cost of revenues 5,363,000 3,601,000 4,100,000
-------------------- -------------------- --------------------
Gross profit 5,560,000 2,773,000 1,414,000
Operating expenses:
Selling, general and administrative 3,734,000 3,305,000 3,352,000
Product development 230,000 354,000 531,000
-------------------- -------------------- --------------------
3,964,000 3,659,000 3,883,000
-------------------- -------------------- --------------------
Operating income (loss) 1,596,000 (886,000) (2,469,000)
Other income, (expense):
Interest expense (228,000) (240,000) (202,000)
Equity in earnings of Labco (note 2) 117,000 - -
Gain on sale of investment in Labco (note 2) 123,000 - -
Investment income 72,000 - -
Other, net (12,000) (52,000) 113,000
-------------------- -------------------- --------------------
72,000 (292,000) (89,000)
-------------------- -------------------- --------------------
Income (loss) before income tax provision (benefit) 1,668,000 (1,178,000) (2,558,000)
Income tax provision (benefit) (note 8) (391,000) - 75,000
-------------------- -------------------- --------------------
Income (loss) from continuing operations 2,059,000 (1,178,000) (2,633,000)
Operation held for sale (note 2):
Income from operations - 258,000 68,000
Gain on sale of a portion of investment - 93,000 -
-------------------- -------------------- --------------------
0 351,000 68,000
-------------------- -------------------- --------------------
Net income (loss) 2,059,000 (827,000) (2,565,000)
Preferred stock dividends (39,000) (82,000) (108,000)
-------------------- -------------------- --------------------
Net income (loss) attributable to common stockholders $ 2,020,000 $ (909,000) $ (2,673,000)
==================== ==================== ====================
Continued on next page
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1994
------------------ ------------------ ------------------
Primary Earnings (Loss) Per Share Data (Note 1):
Continuing operations $ 0.48 $ (0.39) $ (0.97)
Operation held for sale:
Income from operations - 0.08 0.02
Gain on sale of a portion of investment in Labco - 0.03 -
------------------ ------------------ ------------------
Net income (loss) per share $ 0.48 $ (0.28) $ (0.95)
================== ================== ==================
Fully Diluted Earnings (Loss) Per Share Data (Note 1):
Continuing operations $ 0.44 $ (0.39) $ (0.97)
Operation held for sale:
Income from operations - 0.08 0.02
Gain on sale of a portion of investment in Labco - 0.03 -
------------------ ------------------ ------------------
Net income (loss) per share $ 0.44 $ (0.28) $ (0.95)
================== ================== ==================
Weighted average common and common equivalent shares
outstanding
Primary 4,221,000 3,283,000 2,827,000
Fully diluted 4,607,000 3,283,000 2,827,000
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
ASSETS DECEMBER 31,
---------------------------------------------
1996 1995
---- ----
Current Assets:
<S> <C> <C>
Cash and cash equivalents (note 5) $ 5,276,000 $ 43,000
Marketable securities 4,328,000 -
Receivables, less allowances of $63,000 and $41,000 (note 5) 3,521,000 1,533,000
Inventories (Note 3) 2,270,000 1,621,000
Prepaid expenses and other 498,000 250,000
Deferred tax assets (note 8) 731,000 225,000
----------------------- ---------------------
Total current assets 16,624,000 3,672,000
Machinery and equipment, net (note 4) 595,000 586,000
Investment in unconsolidated subsidiary (note 2) - 334,000
Other 104,000 143,000
----------------------- ---------------------
$ 17,323,000 $ 4,735,000
======================= =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY DECEMBER 31,
--------------------------------------------
1996 1995
---- ----
Current Liabilities:
<S> <C> <C>
Bank indebtedness and other notes (note 5) $ 174,000 $ 744,000
Accounts payable 1,009,000 1,278,000
Accrued liabilities 648,000 723,000
Accrued payroll and related taxes 522,000 257,000
Current portion of long-term debt (note 6a) - 300,000
-------------------- -----------------
Total current liabilities 2,353,000 3,302,000
Other non-current liabilities (note 6b) 117,000 108,000
Commitments (notes 9 and 10)
Stockholders' equity (note 7):
Preferred Stock, $2.00 par value, 4,000,000 shares authorized: 270,000
shares designated class A convertible preferred stock, 60,165 and 82,497
shares outstanding, less discount of $64,000 and
$47,000, respectively 74,000 101,000
730,000 shares designated class B convertible preferred stock,
122,500 and 258,000 shares outstanding, respectively 245,000 515,000
Common stock, $0.01 par value, 7,000,000 shares authorized,
5,357,000 and 3,479,000 shares outstanding, respectively 54,000 35,000
Additional paid-in capital 29,430,000 17,685,000
Accumulated deficit (14,522,000) (16,542,000)
Cumulative foreign currency translation adjustment (415,000) (456,000)
-------------------- --------------------
14,866,000 1,338,000
Less: common stock in treasury, at cost, 31,000 shares (13,000) (13,000)
-------------------- --------------------
Total stockholders' equity 14,853,000 1,325,000
-------------------- --------------------
$ 17,323,000 $ 4,735,000
==================== ====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Preferred Class A Class B
Common stock stock pfd stk pfd stk
------------ ----------- --------- ----------
Total Paid in Accum Foreign Treas
equity shrs am't shrs am't shrs am't shrs am't capital deficit Transl stock
--------- ------ ---- ---- ---- ---- ---- ---- ---- --------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1994 $ 3,646 2,762 $ 28 445 $ 555 83 $101 318 $635 $ 15,683 $(12,960) $ (391) $ (5)
Exercise of stock options/warrants 168 72 1 167
Issuance of common stock pursuant
to settlement of 1993 litigation 70 12 78 (8)
1994 dividend on preferred stock 0 26 108 (108)
Net loss (2,565) (2,565)
Translation adjustment (133) (133)
--------- ------- ----- ------ ---- --- ----- ---- ----- ------ --------- ----- -----
Balance - December 31, 1994 1,186 2,872 29 445 555 83 101 318 635 16,036 (15,633) (524) (13)
Sale of units in private
placement, net 888 383 4 884
Conversion of preferred stock 0 159 2 (445) (555) (60) (120) 673
Change in warrant exercise
price in payment of debt 10 10
1995 dividend on preferred stock 0 65 82 (82)
Net loss (827) (827)
Translation adjustment 68 68
---------- -------- ----- ----- --- --- ----- ---- ----- ------ -------- -------- -------
Balance - December 31, 1995 1,325 3,479 35 0 0 83 101 258 515 17,685 (16,542) (456) (13)
Sale of securities, net of
expense ($741) 10,401 1,437 14 10,387
Conversion of preferred stock 0 55 1 (23) (27) (135) (270) 296
Exercise of stock options and warrants 42 15 42
Conversion of debentures 1,000 364 4 996
Preferred stock dividends (15) 7 24 (39)
Net income 2,059 2,059
Translation adjustment 41 41
--------- ------- ------- ----- --- --- ----- ---- ----- ------- ----------- ------ -------
Balance - December 31, 1996 $ 14,853 5,357 $ 54 0 $0 60 $ 74 123 $ 245 $29,430* $(14,522) $ 415) (13)
========= ====== ======= ===== === === ===== ==== ===== ======= =========== ====== ======
* At December 31, 1996 and 1995, net of notes receivable of $274 from the sale
of stock.
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
---------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Income (loss) $ 2,059,000 $ (827,000) $ (2,565,000)
Items not affecting cash:
Depreceiation and amortization 115,000 362,000 711,000
Inventory write-down and receivable reserves 22,000 656,000 1,210,000
Minority interest - - (76,000)
Income from and gain on sale of investment in Labco (240,000) (351,000) -
Pension recovery - (147,000) -
Deferred tax (benefit) expense (506,000) - 75,000
Prepaid pension cost - (78,000) 132,000
Other 50,000 71,000 235,000
(Increase) decrease in non-cash working capital balances (2,947,000) (397,000) 206,000
-------------- ---------------- ----------------
Cash (used in) operating activities (1,447,000) (711,000) (72,000)
-------------- ---------------- ----------------
Investing Activities:
Purchase of machinery and equipment (124,000) (358,000) (847,000)
Escrowed cash on sale of Canadian subsidiary - - 225,000
Investment in marketable securities (4,328,000) - -
Proceeds on sale of investment in Labco 574,000 300,000 -
------------- ---------------- -----------------
Cash used in investing activities (3,878,000) (58,000) (622,000)
Financing Activities
Proceeds on issuance of Convertible Subordinated Debentures 1,000,000 - -
Reduction in long-term debt (300,000) - (184,000)
Increase (decrease) in bank debt and other (570,000) (412,000) 488,000
Proceeds on issuance of equity securities 10,443,000 888,000 171,000
Rent inducement - 108,000 -
Payment of dividends on preferred stock (15,000) - -
------------- --------------- ----------------
Cash provided by financing activities 10,558,000 584,000 475,000
------------- --------------- ----------------
Increase (decrease) in cash 5,233,000 (185,000) (219,000)
Cash - beginning of year 43,000 267,000 486,000
Less cash held for sale - (39,000) -
-------------- --------------- -----------------
Cash and cash equivalents - end of year $ 5,276,000 $ 43,000 $ 267,000
============== =============== ================
Changes in components of non-cash working capital
balances related to operations:
Receivables $ (2,010,000) $ 38,000 $ 1,249,000
Inventories (649,000) (281,000) (987,000)
Other current assets (248,000) 60,000 (58,000)
Other assets 39,000 (12,000) -
Accounts payable and accrued liabilities (79,000) (202,000) 2,000
------------- --------------- ----------------
Decrease (increase) in operating assets net of operating
liabilities arising from cash transactions $ (2,947,000) $ (397,000) $ 206,000
=============== ============== ================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements comprise the accounts of the
Company and its continuing subsidiary companies. All intercompany transactions
have been eliminated.
Principles of Translation
Assets and liabilities of the Company's foreign subsidiaries are translated by
using year-end exchange rates and statement of operation items are translated at
average exchange rates for the year. Translation adjustments are accumulated in
a separate component of stockholders' equity.
Inventories
Materials and supplies are carried at the lower of average cost or replacement
cost. Finished goods and work-in process are carried at the lower of average
cost or net realizable value.
Property and Equipment
Property and equipment are carried at cost. Depreciation of owned equipment is
computed on a straight-line basis over the estimated useful lives of the related
assets, generally from three to ten years. Leasehold improvements are amortized
over the term of the related lease, generally from five to ten years, which
approximates the useful lives of these improvements. Equipment under capital
leases is amortized on a straight-line basis over the term of the lease,
generally four to ten years, which approximates the estimated useful lives of
the leased equipment.
Per Share Data
Net income (loss) per share is computed by dividing net income (loss), 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 (loss) 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.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid investments with an original maturity of three months or less to be cash
equivalents.
Revenue Recognition
The Company recognizes revenue on the percentage of completion method for its
research and development contracts with progress measured based on the ratio of
costs incurred to the total estimated cost, and generally, when product is
shipped for all other sales. Where the Company receives contracts for the design
and construction of specialty instruments that require long manufacturing times,
the Company will also recognize revenue on the percentage of completion method
similar to its recognition method in the research and development business.
For the years ended December 31, 1996, 1995 and 1994, the Company had recognized
revenues of $49,000, $264,000 and $17,000 respectively, on jobs in process and
had incurred related costs of $25,000, $183,000 and $10,000 respectively, of
which $0, $210,000 and $5,000 respectively, were billed to customers.
<PAGE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Financial Instruments and Credit Risk Concentration
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of trade accounts receivable. Concentrations of
credit risk with respect to such receivables are limited to primarily
governmental agencies. Marketable securities consist of investments in US
government and agency obligations.
Long-Lived Assets
Long-lived assets, such as property and equipment, are evaluated for impairment
when events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through the estimated undiscounted future cash
flows from the use of these assets. If and when any such impairment exists, the
related assets will be written down to fair value. This policy is in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of", which
the Company has adopted effective for the year ended December 31, 1996. No
write-downs have been necessary through December 31, 1996 as a result of the
adoption of FAS 121.
Stock-Based Compensation
The Company has adopted the disclosure only provisions of SFAS 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), but applies Accounting Principle
Board Opinion No. 25 in accounting and measuring compensation expense related to
stock option plans. There was no compensation expense related to the issuance of
stock options for the years ended December 31, 1996, 1995 and 1994 (see note 7
for pro-forma disclosure required by SFAS 123).
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents, marketable securities, accounts receivable, accounts payable,
accrued liabilities and notes payable approximate fair value because of the
immediate or short-term maturity of these financial instruments. The Company has
the ability and intent to hold all marketable securities through maturity dates.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Many of the Company's
estimates and assumptions used in the financial statements relate to the
Company's products, which are subject to technology and market changes. It is
reasonably possible that changes may occur in the near term that would affect
management's estimates with respect to inventories and equipment.
2. Operation Held For Sale
During the first quarter of 1995, the Company started to actively seek a
purchaser for its then 47% interest in Barringer Laboratories, Inc ("Labco").
Accordingly, the financial statements had been reclassified, where appropriate,
to reflect Labco as an operation held for sale.
Pursuant to the terms of a Stock Purchase Agreement, dated December 8, 1995
("Agreement"), by and 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, resulting in a gain of $93,000. The purchase price
consisted of $300,000 in cash, cancellation of all amounts owed by the Company
to Labco pursuant to certain intercompany agreements (aggregating $452,000) and
cancellation of $57,000 in accounts receivable due to Labco. After giving effect
to the sale of the Labco shares, the Company continued to own 432,475 shares of
Labco stock representing a 26% ownership interest.
<PAGE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
In October 1996, the Company and Labco entered into a Termination Agreement (the
"Termination Agreement") pursuant to which, among other things, the Company
agreed that, for a period of three months from the date of the Termination
Agreement, it would sell its remaining shares in Labco at a price of at least
$1.6875 per share (the "Target Price"). During 1996, the Company sold all of its
remaining shares and warrants in Labco and recognized a gain on such sales of
$123,000. In addition to the gain on the sale of its Labco investment, the
Company recorded $117,000 of income representing its proportionate share of
Labco's net income for 1996.
3. Inventories
At December 31, 1996 and 1995, the Company had parts, subassemblies and work in
process of $1,483,000 and $1,010,000, and finished goods of $787,000 and
$611,000, respectively.
4. Machinery and Equipment
The major categories of machinery and equipment are as follows:
December 31,
--------------------------------
1996 1995
---- ----
Owned:
Office equipment $ 395,000 $ 350,000
Machinery and equipment 1,857,000 1,687,000
Leasehold improvement 64,000 64,000
----------- --------------
2,316,000 2,101,000
Accumulated depreciation (1,721,000) (1,515,000)
------------ ---------------
Totals $ 595,000 $ 586,000
=========== ===============
5. Bank Indebtedness and Other Notes Payable
The Company's Canadian subsidiary, Barringer Research Ltd. ("BRL"), has a
financing arrangement with the Ontario Development Corporation ("ODC") for a
$730,000 export line of credit. BRL may borrow up to $730,000 on a formula basis
of 90% of export accounts receivable plus 70% of the value of export purchase
orders (subject to $220,000 sub-limit). The rate of interest is adjusted
quarterly and was 10% at December 31, 1996 and outstanding borrowings totaled
$150,000. The ODC has informed the Company that this facility will no longer be
available due to the phasing out of the ODC by the Canadian government. In
January 1997, the Company paid all amounts owed to the ODC and the facility was
terminated.
BRL's line of credit arrangement with the Toronto-Dominion Bank ("Bank") was
terminated by BRL in December 1996 upon the payment of all amounts due to the
Bank. During December 1996, the Company placed in an interest bearing account
$280,000 in order to secure a performance bond that was previously issued by the
Bank. At December 31, 1996, this deposit was restricted. On February 12, 1997,
the bond was canceled and the deposit released.
6. Current Portion of Long-term Debt and Other Non-current Liabilities
(a) Current portion of long-term debt at December 31, 1995, consisted of amounts
due on the 12 1/2% Convertible Subordinated Debentures which were repaid on July
15, 1996 with a portion of the net proceeds from the sale of $1,000,000 of 6%
Convertible Subordinated Debentures due 1997. See note 7.
(b) Other non-current liabilities represent rents payable on the Company's
Canadian facility.
<PAGE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. Stockholders' Equity
Public Offering
On November 12, 1996, the Company completed the sale of 1,250,000 shares
("Shares") of common stock and 1,250,000 Common Stock Purchase Warrants
("Warrants") in a public underwriting. On December 12, 1996, the underwriters
exercised their over-allotment option and acquired an additional 187,500 Shares
and 187,500 Warrants. The aggregate net proceeds to the Company, after all
expenses of the offering, was approximately $10,401,000.
Private Offerings
On May 9, 1995, the Company completed the private placement of its securities to
two institutional investors. The private placement consisted of 125 units priced
at $6,000 each for an aggregate sales price of $750,000. Each unit ("Unit")
consisted of 2,500 shares of the Company's common stock and a five year warrant
to purchase 2,500 shares of the Company's common stock at $1.96 per share. In
addition, in order to induce the institutional investors to enter into this
transaction, an additional three year warrant to acquire 37,500 shares of the
Company's common stock at $1.96 per share was issued.
On June 30, 1995, the Company completed an additional private placement in which
it sold an additional 28 Units, including 22 Units to 17 members of senior
management and the Company's Board of Directors, for proceeds aggregating
$168,000.
This private placement did not include the additional three year warrant.
On July 10, 1996, the Company completed the sale of $1,000,000 of its 6%
Convertible Subordinated Debentures, ("Debentures") due 1997, in a private
transaction to private investors including members of management. These
debentures are convertible into shares of the Company's Common Stock at the rate
of $2.75 per share and mature on the earlier of (i) 30 days after the completion
of an underwritten public offering or a private placement by 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 net proceeds of the sale of these
debentures were used to repay the 12 1/2% Subordinated Convertible Debentures
due 1996. All of the Debentures were converted into 363,628 shares of common
stock in December 1996, as a result of the public offering.
Due from Officers/Shareholders
In connection with the exercise of options to acquire 190,000 shares of the
Company's Common Stock, two officers of the Company signed full recourse
interest bearing (no interest the first year, prime rate thereafter) unsecured
promissory demand notes aggregating $274,000 that was available to them under
the Company's stock option purchase program. Under that program the Company has
arranged for a market-maker in the Company's Common Stock, to coordinate the
orderly sale in the open market of a portion of the Common Stock to be received
by the employees upon the exercise of their options in an amount sufficient to
repay the loan and related interest. As of December 31, 1996, the notes were
still outstanding.
<PAGE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Common Stock Outstanding or Reserved for Issuance
The following table sets forth the number of shares of Common Stock outstanding
as of December 31, 1996 as well as the number of shares of Common Stock that
would be outstanding in the event that all of the options and warrants are
exercised and all Series of Convertible Preferred Stock and Debentures are
converted into Common Stock.
<TABLE>
<CAPTION>
Exercise, Common stock
conversion or outstanding or
option price reserved for issuance
<S> <C> <C>
Common stock 5,357,852
Class A convertible preferred stock 0.361745 21,764
Class B convertible preferred stock 0.355839 43,590
Stock options (i) $1.00 to $14.00 461,000
Private placement warrants (ii) $1.96 412,499
Public warrants (iii) $9.847 359,375
Underwriter's warrants (iii) $10.276 125,000
Underlying warrants (iii) $9.847 31,250
Other warrants (iv) $4.82 to $12.46 55,000
-------------- -----------
Total 6,867,330
===========
</TABLE>
All outstanding warrants expire between January 23, 1997 and April 25, 2001.
(i) Stock Compensation Plans
From time to time, the Company has granted non-qualified options to various
employees and Directors. The Company applies APB Opinion 25, "Accounting for
Stock Issued to Employees", and related Interpretations in accounting for the
plans. Under APB Opinion 25, because the exercise price of the Company's stock
options issued to employees and directors equals the market price of the
underlying stock on the date of grant, no compensation is recognized.
FASB Statement 123, "Accounting for Stock-Based Compensation", requires the
Company to provide pro-forma information regarding net income (loss) and
earnings (loss) per share as if compensation cost for the Company's stock option
plans had been determined in accordance with the fair value based method
prescribed in FASB Statement 123. The Company estimates the fair value of each
stock option at the grant date by using the Black-Scholes option-price model
with the following weighted average assumptions used for grants in 1995 and
1996, respectively: no dividend yield; expected volatility of 30%; risk-free
interest rates of 7.11% and expected lives of 5 years for the options.
Under the accounting provisions of FASB Statement 123, the Company's net income
(loss), primary earnings (loss) per share and fully diluted earnings (loss) per
share would have been reduced (increased) to pro-forma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
Net income (loss):
<S> <C> <C>
As reported $ 2,059,000 $ (827,000)
Pro-forma $ 1,986,000 $ (884,000)
</TABLE>
<PAGE>
<TABLE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
<CAPTION>
<S> <C> <C>
1996 1995
--------------------- ---------------------
Primary earnings (loss) per share from continuing operations:
As reported $ 0.48 $ (0.39)
Pro-forma $ 0.47 $ (0.40)
Fully diluted earnings (loss) per share from continuing operations:
As reported $ 0.44 $ (0.39)
Pro-forma $ 0.43 $ (0.40)
</TABLE>
A summary of the status of the Company's outstanding options as of December 31,
1995 and 1996 and changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------ -------------- -------------- -------------
Outstanding - beginning of year
58,750 $ 12.38 240,125 $ 4.54
Granted 181,375 2.00 253,000 1.00
Exercised 0 (1,250) 2.00
Forfeited 0 (30,875) 10.66
- ------------
------------ ------------
Outstanding - end of year 240,125 4.54 461,000 2.19
============ ============
Options exercisable - year-end 126,800 6.38 164,200 3.49
Fair value of options granted
during the year $ 0.70 $ 0.40
============ ============
</TABLE>
The options issued in 1996 expire on April 25, 2001 and are exercisable as to
25% of the optioned shares immediately, 50% after the first year, 75% after the
second year and 100% after the third year. The options issued in 1995 expire on
March 10, 2000 and are exercisable as to 40% of the optioned shares after the
first year, 60% after the second year, 80% after the third year and 100% after
the fourth year.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following table summarizes information about stock options outstanding at
December 31, 1996.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
Number Outstanding Weighted-Average Exercise Number Exercisable Exercise
Exercise at December 31, Remaining Price at December 31, 1996 Price
Prices 1996 Contractual Life
- ----------- ---------------------- ------------------------ ---------------- ------------------------- --------------
$ 1.00 253,000 4.3 years $ 1.00 63,250 $ 1.00
2.00 175,500 3.2 years $ 2.00 70,200 2.00
12.00 23,750 0.1 years $ 12.00 23,750 12.00
14.00 8,750 1.2 years $ 14.00 7,000 14.00
------------------------ -------------------------
$ 1.00 to
$ 14.00 461,000 3.6 years $ 2.19 164,200 $ 3.49
======================== =========================
</TABLE>
(ii) Private Placement Warrants - In connection with the Company's private
placement (see above) warrants to purchase 420,000 shares of the Company's
common stock at $1.96 per share were sold to a group of private investors and
senior management. The warrants expire between May 9, 1998 and June 29, 2000.
(iii) Public Warrants - The public warrants (see above) are exercisable for
three years and entitle the registered holder to purchase one-quarter of a share
of Common Stock at an exercise price of $9.847 per share. The Warrant exercise
price and the number of shares issuable upon exercise of the Warrants are
subject to adjustment under certain circumstances. The Company may redeem
outstanding Warrants commencing six months from November 12, 1996 on not less
than 30 days notice at a price of $0.25 per Warrant (subject to adjustment under
certain circumstances) if the closing bid price of the Common Stock averages in
excess of 200% of the exercise price for a period of 30 days' ending within 15
days of the redemption notice date.
In connection with the underwritten public offering, the underwriter received a
warrant ("Underwriter's Warrant") to purchase from the Company 125,000 shares of
Common Stock at an exercise price of $10.276 per share ("Exercise Price") and
125,000 Warrants ("Underlying Warrant") at an exercise price of $0.06 per
Warrant. Each Underlying Warrant entitles the holder to purchase one-quarter of
a share of Common Stock at an exercise price of $9.847 per share. The
Underwriter's Warrants are exercisable with respect to the Common Stock for a
period of four years commencing from November 12, 1997 and with respect to the
Underlying Warrants for a period of two years commencing from November 12, 1997.
These warrants contain certain registration rights.
(iv) Other warrants - In September 1994, the Company issued warrants to purchase
6,250 shares of the Company's common stock at $5.25 per share to the Ontario
Development Corporation in connection with their increase in the export
financing facility available to the Company's Canadian subsidiary, from $365,000
to $730,000) See Note 5 for additional information.
On December 31, 1991, the Board of Directors adopted the 1991 Directors Warrant
Plan ("Plan"). Pursuant to the Plan, each non-employee director will be sold a
five-year warrant to purchase 3,750 shares of Common Stock at an exercise price
to be determined by the Board at the time of such sale, but shall not be less
than the current market price for such shares at the time of issuance of the
warrant. During 1996, 3,750 warrants expired. During 1995, no warrants were
issued under the Plan. During 1994, warrants to purchase 3,750 shares were
issued to a Director at $9.64 per share, subject to adjustment.
On April 7, 1995, the Company issued warrants to purchase 6,250 shares of the
Company's common stock at $4.00 per share to Barringer Laboratories in
connection with their extending an intercompany obligation, which has
subsequently been paid.
The warrant was exercised in 1996.
The other warrants expire between March 1, 1997 and January 12, 1999.
Increase in Authorized Shares
<PAGE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
At the reconvened 1995 Annual Meeting of Stockholders, the Company's
stockholders approved an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of capital stock of the Company from
7,000,000 to 12,000,000, comprised of 7,000,000 shares of Common Stock,
1,000,000 shares of Convertible Preferred Stock, par value $1.25 per share and
4,000,000 shares of Preferred Stock, par value $2.00 per share. The stockholders
also approved a one for four reverse stock split of the Company's common stock.
8. Income Taxes
The provision (benefit) for income taxes related to continuing operations are as
follows:
1996 1995 1994
---- ---- ----
Current Tax Expense:
U.S. - -
Foreign (primarily Canadian) $ 115,000 - -
----------- -------- ----------
Total Current 115,000 0 0
----------- -------- ----------
Deferred Tax Expense:
U.S. 574,000 - -
Foreign (primarily Canadian) 90,000 - -
----------- -------- ----------
Total Deferred 664,000 0 -
----------- -------- ----------
Change in valuation allowance:
U.S. (726,000) - -
Foreign (primarily Canadian) (444,000) - 75,000
------------ -------- ----------
Total Change (1,170,000) 0 75,000
----------- -------- ----------
Total income tax provision
(benefit) $ (391,000) $ 0 $ 75,000
=========== ========= ===========
Deferred tax assets are comprised of the following temporary differences and
carryforwards at December 31:
<PAGE>
<TABLE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Nondeductible allowances against trade receivables $ 24,000 $ 15,000
Nondeductible inventory reserves 106,000 90,000
Nondeductible expense accruals 72,000 50,000
Machinery and equipment 787,000 706,000
Tax benefit of Canadian operating loss and
investment credit carry forwards 217,000 401,000
Tax benefit of U.S. operating loss carry forwards 4,019,000 4,621,000
Other 35,000 41,000
----------- ------------
Gross deferred tax assets 5,260,000 5,924,000
Deferred tax assets valuation allowance (4,529,000) (5,699,000)
----------- ------------
Net deferred tax assets $ 731,000 $ 225,000
=========== ============
</TABLE>
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. At December 31, 1995, the net deferred tax asset related to the
Company's Canadian subsidiary, which had available tax credits and loss
carryforwards. The Canadian subsidiary has a history of profitability, despite
the consolidated losses of the Company. At December 31, 1996, the net deferred
tax asset of $731,000, including approximately $525,000 and $206,000, related to
the Company's Canadian and U.S. operations, respectively. 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 is
considered more likely than not.
The Company's income tax provision (benefit) differed from the amount of income
tax determined by applying the applicable statutory U.S. federal income tax rate
to pretax income from continuing operations as a result of the following:
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income taxes (benefit) computed
at the U.S. statutory rate $ 567,000 $ (280,000) $ (821,000)
Income not subject to U.S. tax, net (112,000) (126,000) (154,000)
U.S. losses and expenses for
which no tax benefit has been
recognized 25,000 398,000 943,000
Utilization of U.S. net operating
losses (340,000) - -
Change in net deferred tax assets (506,000) - 75,000
Other (25,000) 8,000 32,000
------------ ------------- -------------
Provision (benefit) for income
taxes $ (391,000) $ 0 $ 75,000
============= ============== ============
</TABLE>
At December 31, 1996, the Company has net operating loss carry forwards of
approximately $10,500,000 and $5,000,000
<PAGE>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
for federal and state income tax purposes, respectively, which expire in varying
amounts through 2011. Canadian research and development investment tax credits
of approximately $217,000 will expire in varying amounts through 2006.
9. Commitments
The Company rents facilities, automobiles and equipment under various operating
leases. Rental expenses under such leases amounted to $325,000, $280,000, and
$191,000 for 1996, 1995 and 1994, respectively.
At December 31, 1996, the aggregate minimum commitments pursuant to
operating leases are as follows:
Year ending December 31,
1997 $ 298,000
1998 203,000
1999 149,000
2000 98,000
2001 and thereafter 543,000
10. Pension Plan
The Company's Canadian subsidiary's defined benefit pension plan, which covered
its Canadian employees, was terminated at December 31, 1993. At the same time,
it established a money purchase plan that is structured after the 401(k) salary
deferral plan available to all U.S. employees and as such, does not establish
any corporate obligation other than a discretionary matching formula to employee
contributions. As a result of the termination, the Company recognized a gain of
$206,000, representing the excess of the Plan's projected benefit obligation
over the accumulated benefit obligation, in 1993 and recognized an additional
gain in 1995 of $172,000, representing the excess of the Plan's assets over the
cost of providing the annuities to the participants for the value of their
termination benefits. This excess was placed into a money purchase contract and
used by the Company to provide for its matching contributions under the new
arrangement. This amount is being carried as a deferred pension expense asset on
the consolidated balance sheet.
The Company maintains a 401(k) salary deferral plan instituted for all U.S.
employees with more than one year of service. As a money purchase plan, it does
not establish any Company liability other than a matching formula to employee
contributions. The aggregate cost of the plan for 1996, 1995, and 1994 was
$20,000, $15,700, and $16,000.
11. Supplemental Disclosures of Cash Flow Information
The Company made cash payments for interest of $246,000, $189,000, and $239,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
Additionally, income taxes of $3,500, $0, and $190,000 were paid for the years
ended December 31, 1996, 1995 and 1994, respectively.
In the three years ended December 31, 1996, the Company issued Preferred Stock
dividends in the amount $108,000, $82,000, and $24,000 in the form of 25,291,
65,417, and 7,949 shares of common stock, respectively.
In December 1996, the entire $1,000,000 of the Company's 6% Convertible
Subordinated Debentures were converted into 363,628 shares of the Company's
common stock.
12. Information Concerning the Company's Principal Activities
A summary of the Company's continuing operations by geographic area for the
years ended December 31, is as follows:
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Revenues from operations:
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
United States $ 4,122,000 $ 1,867,000 $ 1,862,000
Canada 7,887,000 5,110,000 5,593,000
Europe 2,577,000 1,599,000 -
Eliminations (3,663,000) (2,202,000) (1,941,000)
--------------- -------------- ---------------
Totals $ 10,923,000 $ 6,374,000 $ 5,514,000
=============== =============== ===============
Income (loss) from continuing operations:
United States $ 1,152,000 $ (1,548,000) $ (2,653,000)
Canada 869,000 270,000 20,000
Europe 38,000 100,000 -
---------------- -------------- --------------
$ 2,059,000 $ (1,178,000) $ (2,633,000)
================ ============== ===============
Identifiable assets:
United States $ 16,650,000 $ 4,253,000 $ 6,400,000
Canada 7,750,000 6,248,000 4,422,000
Europe 1,256,000 696,000 -
Eliminations (8,333,000) (6,462,000) (4,030,000)
---------------- -------------- -------------
Totals $ 17,323,000 $ 4,735,000 $ 6,792,000
=============== ============== ==============
</TABLE>
Export sales, including sales from Canada to other countries, comprised 53.0% of
total revenues and were made primarily to Western Europe, Asia and Central and
South America.
A summary of the Company's continuing operations by principal activity for the
years ended December 31, 1995 and 1994 is as shown below (in $000's): Starting
in 1996 no segment, other than the Instruments segment, was material to the
Company's consolidated operations and accordingly, segment reporting is no
longer required.
<TABLE>
Total Elimination Res & Dev Instruments Corp & other
1995:
<S> <C> <C> <C> <C>
Revenues from operations $ 6,374 $ 1,052 $ 5,250 $ 72
============ =========== =========== ============
Operating income (loss) $ (886) $ (311) $ 268 $ (843)
============ =========== ============
Interest expense and other (292)
------------
Loss before income taxes $ (1,178)
============
Depreciation and amortization $ 362 $ 45 $ 314 $ 3
============ =========== =========== ============
Capital expenditures $ 359 $ 10 $ 349 -
============ =========== =========== ============
Identifiable assets $ 4,735 $ (6,462) $ 275 $ 7,589 $ 3,333
============ =============== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Total Elimination Res & Dev Instruments Corp & other
1994:
<S> <C> <C> <C> <C> <C>
Revenues from operations $ 5,514 $ 298 $ 5,216 -
============ =============== =============== ===============
Operating income (loss) $ (2,469) $ (208) $ (1,075) $ (1,186)
=============== =============== ===============
Interest expense and other (89)
------------
Loss before income taxes $ (2,558)
============
Depreciation and amortization $ 320 $ 8 $ 280 $ 32
============ =========== ============ ==============
Capital expenditures $ (491) - $ (491) -
============ =========== ============= ==============
Identifiable assets $ 5,003 $ (4,030) $ 302 $ 5,486 $ 3,245
=============== =========== ============ ==============
Identifiable assets - held for sale 1,789
------------
Identifiable assets - per balance sheet $ 6,792
============
</TABLE>
13. Sales to Major Customers
During 1996, the European Passenger Services Ltd accounted for approximately 11%
of consolidated revenues of the Company. During 1995, no customer accounted for
more than 10% of the consolidated revenues of the Company. During 1994, one
customer accounted for approximately 22% of consolidated revenues.
14. Fourth Quarter Adjustments
During the fourth quarter of 1996, the Company recorded a deferred tax benefit
related to a decrease in the deferred tax asset valuation allowances of
$266,000. During the fourth quarter of 1995, the Company recorded adjustments
for estimated losses on inventories and receivables of approximately $450,000
and $200,000, respectively. During the fourth quarter of 1994, the Company
recorded adjustments for estimated losses on inventories and receivables of
approximately $800,000 and $515,000, respectively.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31,
SCHEDULE II
Balance - Balance -
beginning of end of
period Addition Deduction Recovery period
------------------- ----------------- ------------- ------------- --------------
Allowance for doubtful accounts
and sales allowances:
<S> <C> <C> <C> <C> <C>
1996 41,000 52,000 30,000 63,000
1995 539,000 221,000 719,000 41,000
1994 25,000 526,000 17,000 5,000 539,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.1
BARRINGER TECHNOLOGIES INC.
EARNINGS PER SHARE
(in thousands except per share amounts)
PRIMARY PER SHARE FULLY-DILUTED PER SHARE
------------------------------------------------ ------------------------------------------
Three months ended Year-ended December Three months ended Year-ended December
December 31, 31, December 31, 31,
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations $ 951 $ (520) $ 2,059 $ (1,178) $ 951 $ (520) $ 2,059 $ (1,178)
Income (loss) from operation
held for sale - 157 - 351 - 157 - 351
Preferred dividend requirements (4) (15) (39) (82) (4) (15) (39) (82)
Interest adjustment (1) - - - - 13 - 27 -
---------- ----------- --------- --------- ------ ------ -------- --------
$ 947 $ (378) $ 2,020 $ (909) $ 960 $ (378) $ 2,047 $ (909)
========== =========== ========== ========== ====== ======== ======== =========
Weighted average shares outstanding 4,299 3,415 3,695 3,283 4,299 3,415 3,694 3,283
Assumed exercise of outstanding
options and warrants 884 n/a 841 n/a 884 n/a 884 n/a
Assumed conversion of preferred
stock and convertible
subordinated debentures n/a n/a n/a n/a 390 n/a 228 n/a
Assumed repurchase (treasury
stock method) (197) n/a (315) n/a (197) n/a (199) n/a
--------- ----------- ---------- ---------- ------ -------- -------- --------
Revised share basis 4,986 3,415 4,221 3,283 5,376 3,415 4,607 3,283
========= =========== ========== ========== ====== ======== ======== ========
Earnings per share:
Continuing operations $ 0.19 $ (0.16) $ 0.48 $ (0.39) $ 0.18 $ (0.16) $ 0.44 $ (0.39)
Income from operations
held for sale - 0.05 - 0.11 - 0.05 - 0.11
--------- ----------- ---------- ----------- ------ ------- ------ ----------
Net income (loss) per share $ 0.19 $ (0.11) $ 0.48 $ (0.28) $ 0.18 $ (0.11) $ 0.44 $ (0.28)
========= =========== ========== ========== ====== ======== ======= =========
</TABLE>
1) Add back of interest on the 6% Convertible Subordinated Debentures assumed to
be converted as of July 10, 1996, the date of issuance of such debentures.
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
Murray Hill, New Jersey
We hereby consent to the incorporation by reference in Registration Nos.
33-78888 and 333-11629 of Barringer Technologies Inc. on Forms S-3 of our report
dated February 12, 1997, relating to the consolidated financial statements and
schedule of Barringer Technologies Inc. appearing in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
/s/BDO Seidman, LLP
_______________________________
BDO SEIDMAN, LLP
Woodbridge, New Jersey
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 5,276
<SECURITIES> 4,328
<RECEIVABLES> 3,584
<ALLOWANCES> 63
<INVENTORY> 2,270
<CURRENT-ASSETS> 16,624
<PP&E> 2,316
<DEPRECIATION> 1,721
<TOTAL-ASSETS> 17,323
<CURRENT-LIABILITIES> 2,353
<BONDS> 0
0
319
<COMMON> 54
<OTHER-SE> 14,480
<TOTAL-LIABILITY-AND-EQUITY> 17,323
<SALES> 10,923
<TOTAL-REVENUES> 10,923
<CGS> 5,363
<TOTAL-COSTS> 5,363
<OTHER-EXPENSES> 3,964
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228
<INCOME-PRETAX> 1,668
<INCOME-TAX> (391)
<INCOME-CONTINUING> 2,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,059
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.44
</TABLE>
