UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________ to: _________
Commission File Number: 333-06966
IMMECOR CORPORATION
(Name of small business issuer in its charter)
California
68-0324628
(State or jurisdiction of incorporation or
(I.R.S. Employer Identification No.)
Organization)
100 Professional Center Drive, Rohnert Park, California 94928-2137
(Address of principal executive offices)
(707) 585-3036
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Without Par Value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.Yes [X] No [ ]
Check if there is no disclosure of delinquent filers contained in this form in
response to item 405 of Regulation S-B, 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 the Form 10-KSB or any
amanedment to this Form 10-KSB. [X]
State Issuer's revenues for its most recent fiscal year: $ 5,360,090.
The aggregate market value of the issuer's Common Stock, without par
value, held by non-affiliates of December 31, 1997, was $ 1,686,300. This amount
is based upon the offering price of $ 5.25 per share since there is currently no
public market for the Company's Common Stock as described in PART II, ITEM 5.
As of December 31, 1997, there were 2,421,000 shares of the issuer's
Common Stock, without par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
-1-
<PAGE>
IMMECOR CORPORATION
INDEX
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters
Item 6. Management's Discussion and Analysis or Plan of
Operation
Item 7. Financial Statements
Item 8. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons;
Compliance with Section 16 (a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
FORWARD LOOKING STATEMENTS
Immecor Corporation (the "Company") cautions readers that certain
important factors may affect the Company's actual results and could cause such
results to differ materially from any forward-looking statements that may be
deemed to have been made in this Form 10-KSB or that are otherwise made by or on
behalf of the Company. For this purpose, any statement contained in the Form
10-KSB that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "expect", "believe", "anticipate", "intend", "could",
"estimate", or "continue" or the negative other variations thereof or comparable
terminology are intended to identify forward-looking statements. Factors that
may affect the Company's results include, but are not limited to, the Company's
limited history of profitability, its dependence on a limited number of
customers and key personnel, its possible need for additional financing and its
dependence on certain industries. The Company is also subject to other risks
detailed herein or detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company designs and assembles specialized computer systems used in
semiconductor manufacturing processes in addition to personal computers
customized to specifications by business and individual users. The necessary
components are purchased from domestic and foreign manufacturers and
distributors. The Company markets the finished product through its own sales
force.
The Company's initial direct public offering filed with the Securities
and Exchange Commission on Form SB-2 became effective on November 18, 1997.
California approved the filing effective December 19, 1997. The price per share
has been set at $5.25 per share and the Company will receive $3,937,500 assuming
that all 750,000 shares are sold. There is no minimum number of shares that have
to be sold. No shares of this offering had been issued as of December 31, 1997.
The Company expects to use the net proceeds to (i) increase assembly capacity,
(ii) increase demonstration equipment and wholesale inventory, (iii) develop new
products, and (iv) for working capital and general corporate purposes. None of
the net proceeds of this offering will be used to pay existing debt as the
Company is virtually debt-free.
-2-
<PAGE>
The Company was incorporated in the State of California on January 14,
1994. The Company's corporate offices are located at 100~105 Professional Center
Drive, Rohnert Park, California 94928-2137. The Company's telephone number is
(707) 585-3036. The Company's facsimile number is (707) 585-6838. The Company's
email address is [email protected], and the Company's world wide web home page
is http//www.immecor.com.
EMPLOYEES
As of December 31, 1997, the Company had eleven full time and 4 part time
emplyees. The Company hires part time employees for non-technical jobs.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate headquarters are located at 100~105
Professional Center Drive, Western Business Park, Rohnert Park, California,
where the Company maintains 6,000 square feet of office, showroom and assembly
space.
ITEM 3. LEGAL PROCEEDINGS
The Company filed a lawsuit against three shareholders who were
formerly officers and directors of the Company seeking rescission of the
issuance of 500,000 shares of common in the acquisition of Advanced Network
Communications, Inc. in 1994. In addition, the Companmy is seeking the return of
funds it believes were embezzled and taken through fraud during 1994 by the
three defendants. The Company and its legal counsel are rigorously pressing this
litigation but the case has not been set for trial. It is unlikely that the
trial will commence before the end of 1998 and there is no assurance of the
outcome of the litigation. Although the Company is the Plaintiff and does not
incur the risk of an adverse judgment, the litigation costs of the action may be
material to any individual interim period or fiscal year and may be material to
the outstanding share balance. See also "Note 6 of Financial Statements".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company filed a Registration Statement on Form SB-2 for the sale of
750,000 shares of common stock. The Registration Statement was declared
effective November 18, 1997. Qualification by coordination in the State of
California was declared effective December 19, 1997. Qualifications in other
states are pending. The price per share has been set by the Company at $5.25
without retail markups, mark-downs or commissions. The securities are sold
directly to the public. There are no broker/dealer agreements in effect
regarding this offering.
The Company commenced selling of its securities in the State of
California December 26, 1997. No shares had been issued as of December 31, 1997.
The stock transfer agent and registrar for the Company's common stock
is U.S. Stock Transfer Corporation located at 1745 Gardena Avenue, Glendale,
California 91204-2991.
There is currently no public market for the Company's Common Stock and
there is no assurance that a public market will develop.
The Company expects to list its common stock on various exchanges as
soon as it can meet the numerical requirements imposed upon new listings by
these stock exchanges.
HOLDERS
As of December 31, 1997 there were approximately 33 holders of record
of the Common Stock.
DIVIDENDS
The Board of Directors does not currently contemplate the payment of
cash dividends. Any decisions as to the payment
-3-
<PAGE>
of cash dividends on the Common Stock will depend on the Company's ability to
generate earnings, its need for capital, its overall financial condition and
such other factors as the Board of Directors deems relevant.
SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the Company's financial statements and the notes thereto included in Part
II, item 7 of this report.
RESULTS OF OPERATIONS
FISCAL 1997 AS COMPARED TO FISCAL 1996
Net sales increased by $1,768,708 or 49% from $3,591,382 in 1996 to
$5,360,090 in 1997. Sales to major customers who accounted for over 10% of the
Company's sales increased by $2,187,697 from $1,417,168 in 1996 to $3,600,865 in
1997. Sales to these corporate customers for high-end specialty computers have
continued to increase steadily since the Company has been able to meet strict
shipping deadlines and to maintain high quality control standards. Firm orders
on the books of the Company for the first two quarters of 1998 indicate that
this trend will continue. Nevertheless, the loss of any one of these major
customers would have a material adverse effect on the Company's financial
position and results of operation.
Gross profit increased, as a percentage of net sales, from 13% in 1996
to 24% in 1997 primarily because of higher gross profit margins realized for
high-end specialty computers sold to major customers.
Selling, general and administrative expenses increased as a percentage
of net sales from 12% in 1996 to 15% in 1997. The increase in expenses as a
percentage of net sales was due to hiring of additional employees and increased
compensation levels for employees offset by increased sales volume..
Net profit before income taxes increased from $71,581or 2% as a
percentage of net sales in 1996 to $466,040 or 9% as a percentage of net sales
in 1997.
Net income per share on 2,421,000 shares outstanding increased from 2
cents in 1996 to 12 cents in 1997.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENTS OF CASH FLOWS
The Company had net cash provided by operating activities of $5,235 in
1996 compared to $268,441 in 1997. The net increase relates primarily to
increased profitability. The increase in cash used by investing activities from
1996 to 1997 relates to higher purchases of equipment. The Company had net cash
provided by financing activities of $64,688 in 1996 compared with net cash used
by financing activities of $117,180 in 1997. The net change relates primarily to
significant repayments of notes payable and shareholder advances in 1997 and
higher offering costs in 1997.
LINE OF CREDIT
The Company's line of credit with WestAmerica Bank currently permits
borrowing of up to 80% of eligible accounts receivable to a maximum of $250,000
and is secured by a security interest in all accounts receivable, inventory and
equipment. The line of credit is also personally guaranteed by the Company's
major shareholder. Interest is 4.0% over prime rate (12.50% at December 31,
1997) with a maturity date of May 31, 1998. The line of credit had a zero
balance as of December 31, 1997.
NET OPERATING LOSS CARRYFORWARDS
The Company had federal net operating losses for income purposes of
approximately $63,900 at December 31, 1996 which were used to offset taxable
federal income in 1997. In addition, the Company had state net operating losses
for income purposes of approximately $44,900 at December 31, 1996 which were
used to offset taxable state income in 1997. See Note 9 of Financial Statements.
-4-
<PAGE>
TEM 7. FINANCIAL STATEMENTS
The following Financial Statements are filed as part of this report:
Independent Auditor's Report F-1
Balance Sheets - December 31, 1996 and 1997 F-2
Statements of Income for the years ended F-3
December 31, 1996 and 1997
Statements of Cash Flows for the years ended
December 31, 1996 and 1997 F-4
Statements of Shareholder Equity for the years ended F-5
December 31, 1996 and 1997
Notes to Financial Statements F-6 to F12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
MANAGEMENT
The following table sets forth the names of all directors and officers of the
Company and the position held held by them:
Name Age Position
Heinot H. Hintereder 66 President & CEO, Director
Jason C. Lai 30 Vice President, Sales &
Marketing, Director
Keith W. Racuya 52 Secretary, Director
Richard C. Thiede 60 Treasurer, Director
Nhon K. Tran 34 Vice President,Engineering,
Director
Heinot H. Hintereder is cofounder of the Company. Was the Founder and
served as President and CEO of Immecor Corporation of Delaware until its
acquisition by the Company. Served 5 years as Manager of the Financial &
Corporate Support Unit, Fireman's Fund Insurance Companies until retirement in
1992. For 25 years held various other managerial and supervisory positions at
Firemans Fund. President, Founder, and CEO of Biblionics Corporation, a software
development company. Founder, Partner, and General Manager of W. Koehler K.G., a
German trading company. In all, Mr. Hintereder has 35 years experience in large
business systems design, selection of computer equipment and system
configuration. Mr. Hintereder was educated in Germany and holds the German
equivalent of a Masters degree in Business Administration.
Jason C. Lai is cofounder of the Company. Served as Vice President
Sales & Marketing of Immecor Corporation of Delaware until its acquisition by
the Company in 1994. Before joining the Company Mr. Lai served 3 years as Sales
and Marketing Executive for
-5-
<PAGE>
Comrex Systemation from 1991 to 1993. Before 1991 Mr. Lai was an independent
distributor for Apple computers. Mr. Lai has 10 years experience in the computer
business.
Keith W. Racuya is a local businessman for the last 4 years. Mr. Racuya
previously served as large scale computer equipment planner for Fireman's Fund
Insurance Companies until retirement in 1994 after 30 years of service, all in
computer related capacities.
Richard C. Thiede served as executive in the Systems Department of
Firemans Fund Insurance Companies where he was responsible for the development
and implementation of several large corporate computer systems. He also served
as Director of M.I.S. Administration for the same company from which he retired
in 1991 after 25 years of service. Mr. Thiede was director of finance and
administration for the Sea Ranch Association for 4 years and in 1995 became an
independent computer consultant. Mr. Thiede combines 30 years of experience in
the field of computer system design and computer financing. Mr. Thiede holds a
B.S. degree in Finance from Lehigh University.
Nhon K. Tran is a major investor in the Company. Before joining the
Company in July of 1995 as Vice President, Engineering, Mr. Tran served 10 years
with Parker Hannifin Corporation in the field of computer driven robotic motion
control products, five years of which he served as Associate Engineer for new
product development. Mr. Tran received part of his education in Vietnam.
Directors of the Company hold their offices until the next annual
meeting of the Company's stockholders and until their successors have been duly
elected and qualified or their earlier resignation, removal from office or
death.
Officers of the Company serve at the pleasure of the Board of Directors
and until the first meeting of the Board following the next annual meeting of
the Company's stockholders and until their successors have been chosen and
qualified.
ITEM 10. EXECUTIVE COMPENSATION
The Company's Summary Compensation Table is set forth below. As in
previous years the Company had no Option/SAR Grants, Aggregated Option/SAR
Grants Exercises or Fiscal Year End Option/SAR's for the year ended December 31,
1997, nor were there any long-term incentive plan awards, or stock options or
stock appreciation rights. The Company's compensation to non-employee directors
consists of a fee of $100 per meeting of the Board of Directors.
SUMMARY COMPENSATION TABLE
For the Year ended December 31, 1997
<TABLE>
<CAPTION>
Name and Compensation Compensation All Other
Principal Position Paid Deferred(1) Compensation
<S> <C> <C> <C>
Heinot H. Hintereder, Chief Executive Officer $ 82,666 $ 50,000 None
Jason C. Lai, Vice President, Sales & Marketing $160,048 $ 14,093 None
Nhon K. Tran, Vice President, Engineering $107,618 None None
<FN>
Note 1: All deferred compensation was accrued in the financial statements as of
December 31, 1997.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
On April 16, 1997, the Company entered into a one (1) year employment
agreement with Jason C. Lai ("Lai") the Company's Vice President of sales and
marketing. The agreement is renewable for successive one year terms with the
consent of both parties. The Company may terminate the agreement for cause at
any time and Lai may terminate the agreement at any time by giving written
notice to the Company. For a period of one year after its expiration or its
termination by the Company for cause, the agreement prohibits Lai from selling
any products then being marketed by the Company to its three major customers.
This provision may not be enforceable in whole or in part, subject to California
court determination. As consideration for performance of specified duties, the
Company payS Lai a base annual salary of $100,000 and, in months in which gross
sales exceed $250,000, a monthly cash bonus ranging from 0.5% to 1.5% of the
Company's gross sales.
-6-
<PAGE>
INDEMNIFICATION AGREEMENTS
The Company has entered into or will enter into an indemnification
agreement with its directors and executive officers. Each indemnification
agreement provides or will provide that the Company will indemnify such person
against certain liabilities (including settlements) and legal action, procedding
or investigation (other than actions brought by or in the name of the Company)
to which he or she is, or is threatened to be, made a party by reason of his or
her status as a director, officer or agent of the Company, provided that such
director, executive officer or agent acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interest of the
Company and, with respect to any criminal proceedings, had no reasonable cause
to believe his or her conduct was unlawful. With respect to any action brought
by or in the right of the Company, a director, executive officer or agent will
also be indemnified, to the extent not prohibited by applicable law, against
expenses and amounts paid in settlement, and certain liabilities if so
determined by a court of competent jurisdiction, actually and reasonably
incurred by him or her in connection with such action if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interest of the Company. Insofar as indemnification for liabilities
arising under the federal securities laws may be permitted, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore, unenforcable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 1997 the number of
shares of Common Stock owned of record or beneficially owned by each of the
Company's officers, directors, and stockholders owning at least 5% of the
Company's issued and outstanding shares of Common Stock, by all of the Company's
officers and directors as a group, and the percentage of the total outstanding
shares represented by such shares.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Approximate
Beneficial Owner Owned Percent of Class
<S> <C> <C>
Mr. Jason C. Lai 337,500 13.94
5625 Mireille Drive
San Jose, CA 95118
Heinot H. Hintereder 887,300 36.65
131 Keppel Way
Cotati, CA 94931
Nhon K. Tran 375,000 15.49
7235 Cadiz Court
Rohnert Park, CA 94928
James Chu * 166,666 6.88
Address
Unknown
Fred Pao * 166,667 6.88
Address
Unknown
Grace Lee * 166,667 6.88
Address
Unknown
All officers and directors 1,599,800 66.08
as a group
<FN>
* The issuance of these shares may be rescinded subject to the outcome of a
pending law suit as described in PART I, ITEM 3.
</FN>
</TABLE>
-7-
<PAGE>
COMPLIANCE WITH SECTION 16 (A) OF THE 1934 ACT
Section 16 (a) of the 1934 Act requires the Company's executive
officers, directors and holders of more than 10% of the Company's Common Stock,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Such persons are required to furnish the Company with
copies of all Section 16 (a) forms they file.
Based solely on oral or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that, with respect to 1997, its executive officers, directors and greater than
10% beneficial owners complied with all such filing requirements.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since its inception, from time to time, certain executive officers,
directors and shareholders have provided short-term funds to the Company in
order to finance medium to large purchases of computer components. All of these
funds have been repaid by the Company as noted in Notes to Financial Statements.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. All schedules have been omitted, as the information is inapplicable or
the information is presented in the Financial stetements or Notes thereto.
B. No reports on Form 8-K were required to be filed in the last quarter of
1997.
-8-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IMMECOR CORPRATION
Date: April 3, 1997 By: /s/ Heinot H. Hintereder
-----------------------
Heinot H. Hintereder
President and Chief Executive Officer
Date: April 3, 1997 By: /s/ Richard C. Thiede
-----------------------
Richard C. Thiede
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registration Statement was signed by the
following persons in the capacities and on the dates stated.
SIGNATURE DATE
/s/ Heinot H. Hintereder
_____________________________________ April 3, 1997
Heinot H. Hintereder, Director
/s/ Richard C. Thiede
_____________________________________ April 3, 1997
Richard C. Thiede
/s/ Jason C. Lai
_____________________________________ April 3, 1997
Jason C. Lai, Director
/s/ Keith W. Racuya
_____________________________________ April 3, 1997
Keith W. Racuya, Director
/s/ Nhon K. Tran
_____________________________________ April 3, 1997
Nhon K. Tran, Director
-9-
<PAGE>
L.V. DORN II
CERTIFIED PUBLIC ACCOUNTANT
530 N. HARRISON STREET
FORT BRAGG, CALIFORNIA 95437
TEL: (707) 964-0866
FAX: (707)964-7163
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
of Immecor Corporation
I have audited the accompanying balance sheets of Immecor Corporation (the
Company) as of December 31, 1996 and 1997, and the related statements of income,
cash flows and shareholders' equity for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements present fairly, in all material
respects, the financial position of Immecor Corporation as of December 31, 1996
and 1997, and the results of its operations and its cash flows for the years
ended December 31, 1996 and 1997, in conformity with generally accepted
accounting principles.
L. V. Dorn II
March 12, 1997
<PAGE>
Immecor Corporation
Balance Sheets
<TABLE>
<CAPTION>
Year ended
December 31,
1996 1997
ASSETS
Current assets:
<S> <C> <C>
Cash $ 54,677 $ 164,125
Accounts receivable (net of allowance for doubtful
accounts of $ 10,000, $ 10,478) 380,357 520,426
Inventories (Note 2) 129,421 343,158
Notes receivable 5,765 -
Prepaid expenses and other current assets 4,550 9,231
Deferred income taxes 14,83 7,743
----- -----
Total current assets 589,604 1,044,683
Equipment and improvements, net (Note 3) 41,960 54,955
Offering costs (Note 10) 16,238 -
------
Total assets $ 647,802 $ 1,099,638
---------- -----------
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, due within one year (Note 4) $ 29,606 $ 3,800
Accounts payable 254,374 321,391
Accrued liabilities 30,671 122,191
Advances from shareholders (Note 5) 61,579 643
Customer deposits 2,794 1,362
Stock escrow liability (Note 10) - 4,563
Income taxes - 131,725
-------
Total current liabilities 379,024 585,675
Long-term liabilities:
Notes payable, due after one year (Note 4) - 12,659
Deferred income taxes - 11,484
------
Total long-term liabilities - 24,143
------
Total liabilities 379,024 609,818
Commitments and Contingencies (Note 6)
Shareholders' equity:
Common stock, no par value, 50,000,000 shares authorized;
2,421,000 shares issued and outstanding (Note 10) 320,500 256,602
Preferred stock, no par value, 20,000,000 shares authorized;
no shares issued and outstanding - -
Retained earnings (deficit) ( 51,722) 233,218
- ------ -------
Total shareholders' equity 268,778 489,820
------- -------
Total liabilities and shareholders' equity $ 647,802 $ 1,099,638
------------- --------------
</TABLE>
See accompanying notes to financial statements
-11-
<PAGE>
Immecor Corporation
Statements of Income
<TABLE>
<CAPTION>
Year ended
December 31,
1996 1997
<S> <C> <C>
Net sales (Note 7) $ 3,591,382 $ 5,360,090
Cost of sales 3,137,320 4,096,793
--------- ---------
Gross profit 454,062 1,263,297
Operating costs and expenses:
Selling, general and
administrative expenses 435,253 785,138
Depreciation 9,408 13,572
Flood insurance proceeds (Note 8) (65,244) -
-------
Total operating costs and expenses 379,417 798,710
------- -------
Operating income 74,645 464,587
Interest income 722 3,994
Interest expense (3,786) (2,541)
------ ------
Income (loss) before income taxes 71,581 466,040
Income taxes (Note 9) 18,800 181,100
- ------ -------
Net income (loss) $ 52,781 $ 284,940
----------- ------------
Net income (loss) per share $ .022 $ .118
------------ -----------
Weighted average shares outstanding 2,421,000 2,421,000
--------- ---------
</TABLE>
See accompanying notes to financial statements
-12-
<PAGE>
Immecor Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended
December 31,
1996 1997
Operating Activities:
<S> <C> <C>
Net income (loss) $ 52,781 $ 284,940
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 9,408 13,572
Provision for losses on accounts receivable - 10,000
Deferred income taxes 18,000 18,575
Disposal of equipment 2,761 15,246
Changes in:
Accounts and notes receivable (69,641) (144,304)
Inventories 13,246 (213,737)
Income taxes 4,266 131,725
Prepaid expenses and all other (1,500) (4,681)
Accounts payable (42,074) 67,017
Accrued liabilities and customer deposits 17,988 90,088
------ ------
Net cash provided by operating activities 5,235 268,441
----- -------
Investing Activities:
Purchase of equipment (21,604) (41,813)
Other - -
Net cash used by investing activities (21,604) (41,813)
------- -------
Financing Activities:
Proceeds from sale of common stock (Note 10) - 4,563
Additions to notes payable 29,606 17,314
Offering costs (16,238) (47,660)
Principal payments on notes payable - (30,461)
Shareholder advances 51,320 (60,936)
------ -------
Net cash (used) provided by financing activities 64,688 (117,180)
------ --------
Increase (decrease) in cash 48,319 109,448
Cash balance, beginning of period 6,358 54,677
----- ------
Cash balance, end of period $ 54,677 $ 164,125
------------- --------------
Supplemental Disclosure of Cash flow Information:
Cash paid during the year for:
Interest $ 2,086 $ 4,241
------------- ---------------
Income taxes $ 800 $ 30,800
------------- ---------------
</TABLE>
See accompanying notes to financial statements
-13-
<PAGE>
Immecor Corporation
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Number of Retained
Outstanding Common Earnings
Shares Stock (Deficit) Total
<S> <C> <C> <C> <C>
Balance, December 31, 1995 2,421,000 $ 320,500 $ (104,503) $ 215,997
Year ended December 31, 1996:
Net income - 52,781 52,781
------ ------
Balance, December 31, 1996 2,421,000 320,500 (51,722) 268,778
Year ended December 31, 1997:
Offering costs (Note 10) ( 63,898) - (63,898)
Net income - 284,940 284,940
------- -------
Balance, December 31, 1997 2,421,000 $ 256,602 $ 233,218 $ 489,820
--- ---- --------- ------------- ------------ -----------
</TABLE>
See accompanying notes to financial statements
-14-
<PAGE>
IMMECOR CORPORATION
Notes to Financial Statements
Years ended December 31, 1996 and 1997
Note 1: Summary of Significant Accounting Policies
Basis of presentation: Immecor Corporation has prepared the financial statements
on an accrual basis of accounting and in accordance with generally accepted
accounting principles. The financial statements and notes thereto are the
responsibility of the Company's management. During 1996 the Company had a
division which operated under the name of Computer 2000. During the second
quarter of 1997 the division's operations were merged with Immecor Corporation
and it no longer operated as a separate division. Its results of operations for
1996 and 1997 and financial position as of December 31, 1996 and 1997 are
included in the accompanying financial statements.
Description of business: The Company designs and assembles specialized computer
systems used in semiconductor manufacturing processes in addition to personal
computers customized to specifications by business and individual users. The
necessary components are purchased from domestic and foreign manufacturers and
distributors. The Company markets the finished product through its own sales
force.
Inventories: Inventories are stated at the lower of cost (first-in, first-out)
or market.
Equipment and improvements: Equipment and improvements are carried at cost less
accumulated depreciation. Depreciation is provided on the straight-line method
over estimated useful lives generally ranging from five to seven years.
Expenditures for major renewals that extend useful lives of equipment and
improvements are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred.
For income tax purposes, depreciation is computed using the accelerated
depreciation methods.
Advertising: The Company expenses costs of advertising the first time the
advertising takes place.
Income taxes: The Company has adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Accordingly, the Company
computes income taxes using the asset and liability method, under which deferred
income taxes are provided for temporary differences between the financial basis
of the Company's assets and liabilities.
Earnings per share: Earnings per share amounts are based on the weighted average
number of common stock shares outstanding during the periods adjusted
retroactively to reflect a one for five reverse stock split approved by the
Company's Board of Directors on May 14, 1997. There were no common stock
equivalents to be considered.
<TABLE>
<CAPTION>
Note 2: Inventories December 31,
Inventories consist of the following: 1996 1997
<S> <C> <C>
Purchased parts $ 104,124 $ 263,570
Finished systems 25,297 79,588
------ ------
</TABLE>
<TABLE>
<CAPTION>
Note 3: Equipment and Improvements December 31,
Equipment and improvements consist of the following: 1996 1997
<S> <C> <C>
Equipment and furniture $ 49,497 $ 51,742
Transportation equipment 12,243 24,814
------ ------
61,740 76,556
Less accumulated depreciation 19,780 21,601
------ ------
$ 41,960 $ 54,955
------------- ----------
</TABLE>
<TABLE>
<CAPTION>
Note 4: Notes Payable December 31,
Notes payable consist of the following: 1996 1997
Notes payable to Jerry Liu with interest at
<S> <C> <C>
12% due in January 1997 $ 15,000 $ -
Note payable to Thu Tran with interest at
18% due on demand 14,606 -
Line of credit with Westamerica with interest at
4.0% over prime rate (12.50% at
December 31, 1997) with a maturity
date of May 31, 1998. Additional terms of
the line of credit are described below - -
Note payable to GMAC, secured by transportation equipment, payable in
monthly installments of $443 including interest
of 10.50% through September 2001 - 16,459
------
29,606 16,459
Total notes payable due
after one year 29,606 3,800
------ -----
due after one year $ - $ 12,659
--------- ----------
</TABLE>
-15-
<PAGE>
IMMECOR CORPORATION
Notes to Financial Statements, continued
Years ended December 31, 1996 and 1997
Note 4: Notes Payable, continued
The Company received approval on July 9, 1997 for a $250,000 line of credit to
finance short term working capital needs. Advances under the line of credit
cannot exceed 80% of eligible accounts receivable and is secured by a security
interest in all accounts receivable, inventory and equipment. The line of credit
is also personally guaranteed by the Company's major shareholder.
Maturities of long-term debt are as follows for the years ended
December 31,
1998 $ 3,600
1999 4,188
2000 4,650
2001 3,821
------
$ 6,459
Note 5: Advances from Shareholders
The Company receives advances from some of the corporate officers who are also
major shareholders to meet working capital requirements. These advances are
generally repaid within 30 to 60 days.
Note 6: Commitments and Contingencies
Long-Term Lease The Company leases its corporate headquarters under a
non-cancelable operating lease which expires in January 2001. The Company is
also obligated to pay to the lessor its pro-rata share of utilities for the
building on a monthly basis.
Minimum future rental payments under the lease agreement as of December 31, 1997
are as follows:
1998 $ 56,578
1999 58,652
2000 60,998
2001 5,100
--------
$ 181,328
Rental expense under the above lease was $37,983 in 1996 and $53,533 in 1997.
Litigation:
The Company filed a lawsuit against three former shareholders who were formerly
officers and directors of the Company seeking rescission of the issuance of
500,000 shares of the Company's common stock in the acquisition of Advanced
Network Communications, Inc. in 1994. In addition, the Company is seeking the
return of funds it believes were embezzled and taken through fraud during 1994
by the three defendants. The Company and its legal counsel are rigorously
pressing this litigation but the case has not been set for trial. It is unlikely
that the trial will commence before the end of 1998 and there is no assurance of
the outcome of the litigation. All legal expenses relating to this case have not
been significant to date and have been expenses as incurred as reflected in the
accompanying financial statements.
Note 7: Sales to Major Customers
A material part of the Company's business is dependent upon sales to major
customers, the loss of which would have a material adverse effect on the
Company's financial position and results of operations. Two customers
individually accounted for over 10% of the Company's 1996 sales. Two customers
individually accounted for over 38% of total sales in 1996. One customer
individually accounted for over 10% of the Company's 1997 sales. Sales to this
customer aggregated over 67% of total sales in 1997. The Company is attempting
to expand its customer base to lessen the effect of having major customers.
Note 8: Insurance Proceeds
On February 4, 1996, the Company incurred major rain damage to its corporate
offices and production facilities due to leaks in the roof which caused an
interruption of its operations. The loss was covered by insurance as follows:
<TABLE>
<S> <C>
Inventory replacement $ 77,392
Business interruption 38,821
Equipment replacement 6,550
Miscellaneous cost reimbursement 24,383
----------
147,896
Less deductible 250
------------
Proceeds from insurance company 146,896
Amounts allocated to inventory, equipment and repairs 81,652
---------
Insurance proceeds per statement of income $ 65,244
---------
</TABLE>
-16-
<PAGE>
IMMECOR CORPORATION
Notes to Financial Statements, continued
Years ended December 31, 1996 and 1997
Note 9: Income Taxes
A reconciliation of the statutory federal income tax rate with the Company's
effective tax rate is as follows for the periods ending:
<TABLE>
<CAPTION>
December 31,
1996 1997
<S> <C> <C>
Statutory rate for income from $100,000 to $335,000 39.0% 39.0%
Reduction due to income under $100,000 and over $335,000 (20.7) (5.0)
State income taxes, net of federal income tax benefit 7.7 5.8
--- ---
Nondeductible costs 1.0 .1
--- --
Other (.7) (1.0)
Effective tax rate
26.3% 38.9%
---- ----
</TABLE>
The provision (credit) for income taxes consists of the following for the years
ended:
<TABLE>
<CAPTION>
December 31,
1996 1997
Currently payable:
<S> <C> <C>
Federal $ - $ 125,540
State 800 36,985
Deferred liability (benefit) $ 18,000 $ 18,575
---------- -----------
</TABLE>
Deferred income taxes (benefits) reflect the tax effect of temporary differences
between the amounts of assets and liabilities for financial reporting and
amounts as measured for tax purposes. The tax effect of temporary differences
and carryforwards that cause significant portions of deferred tax assets and
liabilities are as follows for the years ended:
<TABLE>
<CAPTION>
December 31,
1996 1997
<S> <C> <C>
Depreciation $ (255) $ (9,119)
Inventory, accounts receivable, allowances and prepaids 18,375 -
Tax loss carryforward - 23,966
Other, net (120) 3,728
---- -----
$ 18,000 $ 18,575
-------- --------
</TABLE>
The Company had federal net operating losses for income purposes of
approximately $63,900 at December 31, 1996 which were used to offset taxable
federal income in 1997. In addition, the Company had state net operating losses
for income purposes of approximately $44,900 at December 31, 1996 which were
used to offset taxable state income in 1997.
Note 10: Stock Offering
The Company's initial direct public offering filed with the Security and
Exchange Commission became effective November 18, 1997. California approved the
filing effective December 19, 1997. The price per share of common stock has been
set at $5.25 and the Company will receive $3,937,500 assuming that all 750,000
shares are sold. There is no minimum number of shares that have to be sold.
The Company received $4,563 from this offering after the offering became
effective and these funds were placed in a separate bank account. The shares of
common stock had not been issued by the transfer agent at year end so this
amount has been shown as a liability at December 31, 1997 and not as common
stock issued.
Offering cost which had been classified as an asset at December 31, 1996 and
offering costs incurred in 1997 were recorded as a reduction of common stock
once the offering became effective.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001039962
<NAME> IMMECOR CORPORATION
<MULTIPLIER> 1
<CURRENCY> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-1-1997 JAN-1-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 54677 164125
<SECURITIES> 0 0
<RECEIVABLES> 390357 530904
<ALLOWANCES> 10000 10478
<INVENTORY> 129421 343158
<CURRENT-ASSETS> 589604 1044683
<PP&E> 61740 76556
<DEPRECIATION> 19780 21601
<TOTAL-ASSETS> 647802 1099638
<CURRENT-LIABILITIES> 379024 609818
<BONDS> 0 0
0 0
0 0
<COMMON> 320500 256602
<OTHER-SE> (51722) 233218
<TOTAL-LIABILITY-AND-EQUITY> 647802 1099638
<SALES> 3591382 5360090
<TOTAL-REVENUES> 3591382 5360090
<CGS> 3137320 4096793
<TOTAL-COSTS> 3581981 4895503
<OTHER-EXPENSES> (65244) 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3786 2541
<INCOME-PRETAX> 71581 466040
<INCOME-TAX> 18800 181100
<INCOME-CONTINUING> 52781 284940
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 52781 284940
<EPS-PRIMARY> .022 .118
<EPS-DILUTED> .022 .118
</TABLE>
