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, 1998
[ ] 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: $ 4,551,593.
The aggregate market value of the issuer's Common Stock, without par
value, held by non-affiliates of December 31, 1998, was $ 1,761,774. 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, 1998, there were 2,435,376 shares of the issuer's
Common Stock, without par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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<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
was set at $5.25 per share and the Company set aside 750,000 shares to be sold.
There was no minimum number of shares that had to be sold.
The Company sold 14,376 shares of common stock raising $75,474.
However such amount was offset by $107,119 of costs related to the offering.
The offering was closed November 17, 1998
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<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 e-mail
address is [email protected], and the Company's world wide web home page is
http//www.immecor.com.
EMPLOYEES
As of December 31, 1998, the Company had fourteen (14) full time and
three (3) part time emplyees.
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 8,000 square feet of office, showroom and assembly
space.
The Company maintains 1,500 square feet of office space at 1445 Koll
Circle, Suite 103, San Jose, California 95112.
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 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 and the case has been set for trial in September of
1999. 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.
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'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
was set at $5.25 per share and the Company set aside 750,000 shares to be sold.
There was no minimum number of shares that had to be sold.
The Company sold 14,376 shares of common stock directly to the public
raising $75,474. However such amount was offset by $107,119 of costs related to
the offering. There are no broker/dealer agreements in effect regarding this
offering. The offering was closed November 17, 1998
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 plans a secondary offering of its common stock during the
remainder of 1999 through an underwriter and 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, 1998 there were approximately 94 holders of record
of the Common Stock.
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<PAGE>
DIVIDENDS
The Board of Directors does not currently contemplate the payment of
cash dividends. Any decisions as to the payment 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 1998 AS COMPARED TO FISCAL 1997
Net sales decreased by $808,497 or 15% from $5,360,090 in 1997 to
$4,551,593 in 1998. The Company experienced a decrease in sales due to a major
customer delaying receipt of firm orders to the first quarter of 1999. Sales to
this major customer 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. This customer alone accounted for
68% and 67% of total sales in 1998 and 1997 respectively. Existing and new
orders on the books of the Company for the first two quarters of 1999 indicate
that this trend will continue. Nevertheless, the loss of this major customers
would have a material adverse effect on the Company's financial position and
results of operation. Management believes that with its current marketing
strategy which includes partnering with other technology companies the Company
will be able to diversify sales.
Gross profit decreased, as a percentage of net sales, from 24% in
1997 to 22% in 1998 due to slightly higher costs of manufacturing.
Selling, general and administrative expenses increased as a percentage
of net sales from 15% in 1997 to 20% in 1998. The increase in expenses as a
percentage of net sales was due to hiring of additional employees, the addition
of assembly space, increased compensation levels for employees and by decreased
sales volume.
Income before income taxes decreased from $466,040 or 9% of net sales
in 1997 to $76,181 of 2% of net sales in 1998.
Net income per share decreased from 12 cents in 1997 to 2 cents in
1998.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENTS OF CASH FLOWS
The Company had net cash provided by operating activities of $273,647
in 1997 compared to $78,212 in 1998. The net decrease relates primarily to
accounts receivable and sales orders being carried forward to the first quarter
of 1999. The Company had net cash provided by financing activities of $12,299 in
1998 compared with net cash used by financing activities of $122,386 in 1997.
The net change relates primarily to repayments of notes and offering costs in
1998.
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 $500,000
and is collaterized 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 (11.75% at December 31,
1998) with a maturity date of May 31, 1998. The line of credit had a zero
balance as of December 31, 1998.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Page
The following Financial Statements are filed as part of this report:
Report of Independent Certified Public Accountants for 1998 10
Report of Independent Certified Public Accountant for 1997 11
Balance Sheets 12
Statements of Income 13
Statements of Shareholders' Equity 14
Statements of Cash Flows 15
Notes to Financial Statements 16-19
TEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On January 27, 1999, the Company engaged Grant Thornton LLP as the
principal accountants to audit the Company's financial statements. Prior to the
engagement of Grant Thornton, the Company did not consult with Grant Thornton
regarding the applicaton of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
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 forComrex 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.
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<PAGE>
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 years ended December
31, 1997 and 1998, 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Compensation Compensation All other
Principal Position Years Paid Deferred Compensation
Heinot H. Hintereder 1997 $ 82,666 $ 50,000 None
Chief Executive Officer 1998 $ 128,833 $ 39,167 None
Jason C. Lai 1997 $ 160,048 $ 14,093 None
Vice President 1998 $ 157,126 $ 16,259 None
Nhon K. Tran 1997 $ 107,048 None None
Vice President 1998 $ 94,000 $ 10,000 None
</TABLE>
Note 1: All deferred compensation was accrued in the financial statements as of
December 31, 1998.
EMPLOYMENT AGREEMENTS
On April 16, 1998, 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.
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<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, proceeding
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, 1998 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>
<S> <C> <C>
Name and Address Shares Beneficially Approximate
Beneficial Owner Owned Percent of Class
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
</TABLE>
* The issuance of these shares may be rescinded subject to the outcome of a
pending law suit as described in PART I, ITEM 3.
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<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 1998, 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 statements or Notes thereto.
B. No reports on Form 8-K were required to be filed in the last quarter of 1998.
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<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 15, 1999 By: /s/ Heinot H. Hintereder
-----------------------
Heinot H. Hintereder
President and Chief Executive Officer
Date: April 15, 1999 By: /s/ Wil Lindgren
-----------------------
Wil Lindgren
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 15, 1999
Heinot H. Hintereder, Director
/s/ Jason C. Lai
_____________________________________ April 15, 1999
Jason C. Lai, Director
/s/ Nhon K. Tran
_____________________________________ April 15, 1999
Nhon K. Tran, Director
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<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Immecor Corporation
We have audited the accompanying balance sheet of Immecor Corporation (the
Company) as of December 31, 1998, and the related statements of income,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 are free of material
misstatement. 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Immecor Corporation as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
By: /s/
GRANT THORNTON LLP
March 15, 1999
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<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Shareholders and Board of Directors
of Immecor Corporation
I have audited the accompanying balance sheet of Immecor Corporation (the
Company) as of December 31, 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, 1997,
and the results of its operations and its cash flows for the year ended December
31, 1997, in conformity with generally accepted accounting principles.
By: /s/
L. V. Dorn II
March 12, 1997
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<PAGE>
IMMECOR CORPORATION
Balance Sheets
December 31,
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
CURRENT ASSETS
Cash $ 207,040 $ 164,125
Accounts receivables (net of allowance for doubtful
amounts of 1998 and $10,478 in 1997) 262,078 $ 520,426
Inventories 553,387 343,158
Prepaid and other assets 15,190 9,231
Deferred tax assets 7,717 4,905
----- -----
Total current assets 1,045,412 1,041,845
--------- ---------
PROPERTY AND EQUIPMENT - net 85,107 54,955
Deferred offering cost 63,898
Total Assets $ 1,130,519 $ 1,160,698
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 413,475 $ 3 21,391
Accrued liabilities 88,422 128759
Note payable, due within one year 4,185 3,800
Income taxes 31,202 131,725
------ -------
Total current liabilities 537,284 585,675
LONG-TERM LIABILITIES
Note payable, due after one year 8,558 12,659
Deferred income taxes 16,984 8,646
------ -----
Total long-term liabilities 25542 21,305
----- ------
Total liabilities 562,828 606,980
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 20,000,000 shares authorized; no shares issued
and outstanding Common stock, no par value, 50,000,000 shares authorized; issued
and outstanding, 2,435,376 shares in 1998 and
2,421,000 shares in 1997 288,855 320,500
Retained earnings 278,838 233,218
------- -------
Total shareholders' equity 567,693 553,718
------- -------
Total liabilities and shareholders' equity $ 1,130,519 $ 1,160,698
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of these statements
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<PAGE>
IMMECOR CORPORATION
STATEMENTS OF INCOME
Year ended December 31,
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Net sales $ 4,551,593 $ 5,360,090
Cost of sales 3,555,740 4,096,793
--------- ---------
Gross profit 995,853 1,263,298
Selling, general and administrative expenses 916,660 798,710
------- -------
Operating income 79,193 464,587
Interest income 2,243 3,994
Interest expense (5,255) (2,541)
------ ------
Income before income taxes 76,181 466,040
Income taxes 30,561 181,100
------ -------
NET INCOME $ 45,620 $ 284,940
-------------- ------------
Net income per share - basic and diluted $ .02 $ .12
Weighted average shares outstanding - basic and diluted 2,427,638 2,421,000
</TABLE>
The accompanying notes are an integral part of these statements
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<PAGE>
IMMECOR CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
Years ended December 31, 1998 and 19997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Retained
Outstanding Common Earnings
Shares Stock (Accumulated
Deficit) Total
Balance - January 1, 1997 2,421,000 $ 320,500 $ (51,722) $ 268,778
Net income - - 284,940 284,940
------- ------- ------- -------
Balance - December 31, 1997 2,421,000 320,500 233,218 553,718
Sale of common stock, less
offering costs of $107,119 14,376 (31,645) - (31,645)
Net income - - 45,620 45,620
------ ------ ------- -------
Balance - December 31, 1998 2,435,376 $ 288,855 $ 278,838 $ 567,693
--------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements
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<PAGE>
IMMECOR CORPORATION
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Increase (decrease) from cash Cash flows from operating activities:
Net income $ 45,620 $ 284,940
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 17,444 13,572
Provision for losses on accounts receivable 8,271 478
Deferred income taxes 5,526 18,575
Disposal of equipment - 15,246
Change in assets and liabilities:
Accounts receivable 250,077 (134,782)
Inventories (210,229) (213,737)
Income taxes (100,523) 131,725
Prepaid and other assets 10,279 (4,681)
Accounts payable 92,084 67,017
Accrued liabilities (40,337) 95,294
------- ------
Net cash provided by operating activities
78,212 273,647
Cash flows from investing activities:
Purchase of equipmen (47,596) (41,813)
------- -------
Net cash used in investing activities (47,596) (41,813)
Cash flows from financing activities:
Proceeds from sale of common stock, less offering costs 16,015 (47,660)
Proceeds from notes payable - 17,314
Principal payments on notes payable (3,716) (30,461)
Payments on shareholders advances - (61,579)
------- -------
Net cash provided by (used in) financing activities 12,299 (122,386)
------ --------
NET INCREASE IN CASH 42,915 109,448
Cash balance - beginning of year 164,125 54,677
Cash balance - end of year $ 207,040 $ 164,125
------------- -----------
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 5,255 $ 4 ,241
Income taxes $ 120,617 $ 30,800
</TABLE>
The accompanying notes are an integral part of these statements
-15-
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 19997
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Immecor Corporation (the "Company") designs and assembles specialized computer
systems used in semiconductor manufacturing processes including personal
computer customization to specifications required 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, primarily in the United States. * Revenue Recognition
Revenue is recognized when products are shipped.
* Inventory
Inventory consists of computer hardware and purchased software. Cost is
determined using the first-in, first-out method.
* Depreciation
Depreciation is provided in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives, using the
straight-line method. Service lives range from three to ten years.
* Income Taxes
The Company follows the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets.
Additionally, deferred tax items are measured using current tax rates. A
valuation allowance is established if it is more likely than not the deferred
tax assets will be realized.
* Advertising Costs
The Company expenses costs of advertising when the advertising takes
place. The amount expensed in 1998 and 1997 was $51,918 and $42,351,
respectively.
* Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions 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 those
estimates.
* Basic and Diluted Net Loss per Share
The Company adopted SFAS No. 128, "Earnings per Share" during the year
ended December 31, 1997. Basic earnings per share is computed using the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed using the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
consist of the incremental common shares issuable upon conversion of convertible
securities (using the if-converted method) and shares issuable upon the exercise
of stock options and warrants (using the treasury stock method). Common
equivalent shares are excluded from the
computation if their effect is anti-dilutive.
* Cash and Cash Equivalents
All highly liquid instruments with an original maturity of three months
or less are considered cash equivalents.
* Fair Value of Financial Instruments
The fair value of cash and cash equivalents accounts receivable and
trade payables approximates carrying value due to the short-term nature of such
instruments. The fair value of long-term obligations approximates carrying value
based on terms available for similar instruments.
-16-
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 19997
NOTE B - INVENTORIES
Inventories consist of the following as of December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Purchased parts $ 540,867 $ 263,570
Finished systems 12,520 79,588
$ 553,387 $ 343,158
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31:
1998 1997
Equipment and furniture $ 60,703 $ 51,742
Vehicles 63,449 24,814
124,152 76,556
Less accumulated depreciation 39,045 21,601
$ 85,107 $ 54,955
NOTE D - NOTE PAYABLE
Note payable consists of the following as of December 31:
1998 1997
Note payable, collaterized by vehicle, payable in
monthly installments of $443 including interest of
10.5% through September 2001 $ 12,743 $ 16,459
Less amount due in one year 4,185 3,800
$ 8,558 $ 12,659
</TABLE>
Maturity of note payable at December 31, 1998 is as follows:
Year ending
December 31,
<TABLE>
<CAPTION>
<S> <C> <C>
1999 $ 4,185
2000 4,646
2001 3,912
$ 12,743
</TABLE>
-17-
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 19997
NOTE E - LINE OF CREDIT
The Company has a $500,000 line of credit which expires April 30, 1999. Advances
under the line of credit can not 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. There were no advances on the line of credit as of December
31, 1998.
NOTE F - COMMITMENTS
The Company leases its premises under a noncancelable operating lease, which
expires in January 2001. The Company is also obligated to pay its pro-rated
share of utilities for the building on a monthly basis.
Minimum future rental payments under the lease agreement as of December 31, 1998
are as follows:
Year ending
December 31,
<TABLE>
<CAPTION>
<S> <C> <C>
1999 $ 58,652
2000 60,998
2001 5,100
$ 124,750
</TABLE>
Rent expense was $56,578 and $53,533 for the year ended December 31, 1998 and
1997, respectively.
NOTE G - 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 operation. One customer accounted
for 68% and 67% of total sales in 1998 and 1997 respectively.
NOTE H - INCOME TAXES
The provision for income taxes consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Currently payable:
Federal $ 16,905 $ 125,540
State 8,130 36,985
Deferred taxes 5,526 18,575
$ 30,561 $ 181,100
</TABLE>
-18-
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)
Years ended December 31, 1998 and 19997
NOTE H - INCOME TAXES (continued)
A reconciliation of the statutory federal income tax rate with the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Statutory rate 34.0% 34.0%
Reduction due to income under $100,000 (8.0) -
State income taxes 7.1 7.7
Nondeductible cost 5.1 1.0
Other 1.9 (3.8)
40.1% 38.9%
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 as
of December 31, 1998 are as follows:
1998 1997
Deferred tax liability
Depreciation $ 16,984 $ 8,646
Deferred tax assets
Inventory, accounts receivable allowance $ 7,717 $ 4,905
</TABLE>
NOTE I - STOCK OFFERING
The Company's initial direct public stock offering filed with the Securities and
Exchange Commission became effective November 18, 1997. California approved the
filing effective December 19, 1997. The price per share of common stock was set
at $5.25 and the Company set aside 750,000 shares to be sold. There was no
minimum number of shares that had to be sold.
The Company sold 14,376 shares raising $75,474. However, such amount was offset
by $107,119 of costs related to the offering.
At December 31, 1997, $63,898 of costs had been measured in connection with the
offering. In the prior year financial statement these costs were offset against
equity. This amount has been restated to deferred offering costs at December 31,
1997 and offset such costs against equity in 1998 when the offering was
completed.
-19-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
LEGEND IMMECOR CORPORATION
MULTIPLIER 1
CURRENCY 1
TABLE
S C C
PERIOD-TYPE YEAR YEAR
FISCAL-YEAR-END DEC-31-1997 DEC-31-1998
PERIOD-START JAN-1-1997 JAN-1-1998
PERIOD-END DEC-31-1997 DEC-31-1998
EXCHANGE-RATE 1 1
CASH 164125 207040
SECURITIES
0 0
RECEIVABLES 530904 280827
ALLOWANCES 10478 18749
INVENTORY 343158 553387
CURRENT-ASSETS 1105743 1045612
PP&E 76556 124152
DEPRECIATION 21601 39045
TOTAL-ASSETS 1160698 1130519
CURRENT-LIABILITIES 606980 562826
BONDS 0 0
PREFERRED-MANDATORY 0 0
PREFERRED 0 0
COMMON 320500 288855
OTHER-SE 233218 278838
TOTAL-LIABILITY-AND-EQUITY 1160698 1130519
SALES 5360090 4551593
TOTAL-REVENUES 5360090 4551593
CGS 4096793 3555740
TOTAL-COSTS 4895503 4472400
OTHER-EXPENSES 0 0
LOSS-PROVISION 0 0
INTEREST-EXPENSE 2541 5255
INCOME-PRETAX 466040 76181
INCOME-TAX 181100 30561
INCOME-CONTINUING 284940 45620
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET-INCOME 284940 45620
EPS-PRIMARY .118 0.018
EPS-DILUTED .118 0.018
</TABLE>
-20-
