UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] 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 [
]
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 1,935,376 shares of common
stock as of September 30, 1999.
Transitional Small Business Disclosure Format Yes [ ] No [X]
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IMMECOR CORPORATION
INDEX
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Balance sheets at September 30, 1998 and 1999
Statements of income for the nine months ended
September 30, 1998 and 1999 Statements of cash flows
for the nine months ended September 30, 1998 and 1999
Statements of shareholders' equity for the nine
months ended September 30, 1998 and 1999
Item 2. Management's Discussion and Analysis or Plan of
Operation
PART II
OTHER INFORMATION
Item 1. Legal proceedings
Item 2. Changes in securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
Item 5 Other information
Item 6. 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-QSB or that are otherwise made by or on
behalf of the Company. For this purpose, any statement contained in the Form
10-QSB 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. FINANCIAL INFORMATION
Page
The following Financial Statements are filed as part of this report:
Balance Sheets 3
Statements of Income 4
Statements of Cash Flows 5
Statements of Shareholder Equity 6
Notes to Financial Statements 7
<PAGE>
IMMECOR CORPORATION
Balance Sheets
Period ended September 30,
(unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1999
---- ----
CURRENT ASSETS
Cash $ 231,274 $ (232,341)
Accounts receivables (net of allowance for doubtful accounts of
$10,478 in 1998 and 18,750 in 1999 ) (Note 2) 456,382 1,063,952
Inventories (Note 3) 381,319 996,123
Notes receivable - 136,565
Prepaid and other assets 11,856 18,923
Deferred income taxes 18,737 18,737
-------- ----------
Total current assets 1,099,568 2,001,959
Equipment and improvements. net (Note 4) 45,535 131,443
------ -------
Total Assets $ 1,145,103 $ 2,133,402
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, due within one year (Note 7) $ 4,115 $ 144,453
Accounts payable 233,635 854,003
Accrued liabilities 22,257 3,084
Advances from shareholders (Note 6) 643 75,103
Customer deposits 3,912 -
Employee benefits - 7,602
Taxes payable 160,662 193,154
---------- --------
Total current liabilities 425,224 1,277,399
LONG-TERM LIABILITIES
Note payable, due after one year (Note 5) 9,559 9,680
Deferred income taxes 10,454 10,454
-------- ---------
Total long-term liabilities 20,013 20,134
-------- ---------
Total liabilities $ 445,237 $ 1,297,533
------------ ------------
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, 1998: 2,428,226; 1999: 1,935,376 (Note 10) 292,196 284,872
Retained earnings 407,670 550,998
------------- ------------
Total shareholders' equity 699,866 835,869
-------------------------
Total liabilities and shareholders' equity $ 1,145,103 $ 2,133,402
---------------------------------
The accompanying notes are an integral part of these financial statements
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IMMECOR CORPORATION
Statement of Income
Period ended September 30,
(unaudited)
1998 1999
------------ ---------
Net sales $ 3,593,334 $ 6,809,709
Cost of sales 2,660,905 5,586,316
------------- -------------
Gross profit 932,429 1,223,393
Operating costs and expenses
Selling, general and administrative expenses 614,544 882,915
Depreciation and amortization 11,692 -
--------- ---------
Total operating costs and expenses 626,236 882,915
Operating income 306,193 340,428
Interest income 1,538 549
Other income - (6,854)
Interest expense (13,279) (20,510)
----------- ---------
Income (loss) before income taxes 294,452 313,663
Income taxes 120,000 7,810
---------- ----------
Net income (loss) $ 174,452 $ 305,853
-------------------------------
Net income per share - basic and diluted $ 0.072 $ 0.158
Weighted average shares outstanding - basic and diluted 2,428,226 1,935,376
The accompanying notes are an integral part of these financial statements
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IMMECOR CORPORATION
Statement of Cashflows
Period ended September 30,
(unaudited)
1998 1999
----------- ----------
Increase(decrease) from cash
Cash from operations:
Net income (loss) $ 174,452 $ 305,853
Reconciliation of net income (loss) to net
cash used by operating activities:
Depreciation and amortization 11,692 -
Changes in current assets and liabilities (142,945) 136,003
Net cash provided (used) by operating activities 41,175 441,856
Cash flows from investing activities:
Additions to property and equipment (31,897) (7,501)
Net cash provided (used) by investing activities (31,897) (7,501)
Cash flows from financing activities:
Proceeds from common stock 70,911 -
Increase in loan payable (39,880) 140,459
Repayments on capital lease - 10,212
Net cash provided (used) by financing activities (48,644) 150,671
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period 164,125 37,307
Cash and cash equivalents at end of period $ 231,274 $ (232,341)
----------- -------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,279 $ 20,510
</TABLE>
The accompanying notes are an integral part of these financial statements
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IMMECOR CORPORATION
Statement of Shareholders' Equity
Period ended September 30,
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Retained
Outstanding Common Earnings
Shares Stock (Deficit) Total
Balance-December 31, 1998 2,435,376 $ 288,855 $ 278,838 $ 567,693
Nine months ended
September 30, 1999 (unaudited)
Litigation settlement
returned shares (Note 10) (500,000)
Offering costs (3,983) (3,983)
Adjustments to net income (49,315) (49,315)
Net income - - 321,475 321,475
---------- --------- ------------- -----------
Balance-September 30, 1999 1,935,376 $ 284,872 $ 550,998 $ 835,870
---------- ----------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
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IMMECOR CORPORATION
NOTES TO THE INTERIM UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies
Basis of Presentation
The financial statements included in this Form 10-QSB have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
pursuant to such rules and regulations, although management believes the
disclosures are adequate to make the information presented not misleading. The
results of operations for any interim period are not necessarily indicative of
results for a full year. These statements should be read in conjunction with the
financial statements and related notes included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998.
The financial statements presented herein as of September 30, 1999,
reflect, in the opinion of management, all material adjustments consisting only
of normal recurring adjustments necessary for a fair presentation of the
financial position, results of operations and cash flow for the interim periods.
Earnings per share amounts are based on the weighted average number of
common stock shares outstanding in each period.
Note 2: Receivables consist of the following as of September 30:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1999
----------- ----------
Accounts receivable $ 476,860 $ 1,082,702
Less allowance for doubtful accounts 20,478 18,750
----------- ------------
$ 465,895 $ 1,063,952
Note 3: Inventory
Inventories consist of the following as of September :
1998 1999
---------- -----------
Purchased parts $ 285,989 $ 747,092
Finished systems 95,330 249,031
----------- -----------
$ 381,319 $ 996,123
Note 4: Equipment and Improvements
Equipment and improvements consist of the following as of September 30:
1998 1999
--------- -----------
Equipment and Furniture $ 54,013 $ 100,526
Transportation equipment 29,813 68,649
----------- -----------
83,826 169,175
Less accumulated depreciation 33,293 39,045
----------- ----------
$ 50,534 $ 130,130
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IMMECOR CORPORATION
NOTES TO THE INTERIM UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 5: Note Payable
Note payable consists of the following as of September 30:
1998 1999
-----------------------
Note payable, collaterized by vehicle, payable in
monthly installments of $443 including interest of
10.5% through September 2001 $ 13,674 $ 9,680
Less amount due in one year 4115 1,329
---------- -----------
$ 9,559 $ 8,351
</TABLE>
Note 6: Stockholder Advances
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 90 days.
Note 7: Line of Credit
The Company has a $500,000 line of credit which expires May 31, 2000. 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. The advance outstanding on the line of credit as of September
30, 1999 was $144,453.
Note 8: Commitments
The Company leases two premises under two noncancelable operating leases.
Operating lease one expires in January 2001, and operating lease two expires in
April 2002. The Company is obligated to pay its pro-rate share of utilities for
the building on a monthly basis. For lease two the Company is obligated to pay
its own utilities and has set up an account with the local utility company.
Minimum future rental payments under the lease agreements as of September 30,
1999 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Year ending
December 31, Lease One Lease Two
City of Rohnert Park City of Santa Clara
1999 $ 58,836 $ 26,208
2000 60,998 27,216
2001 5,100 28,224
-------------- -----------------
$ 124,934 $ 81,648
</TABLE>
Rental expenses under the above lease(s) were $49,292 and $39,389 for the nine
months ended September 30, 1998 and 1999, respectively.
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IMMECOR CORPORATION
NOTES TO THE INTERIM UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 8: 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 67% and 76% of total sales in 1999 and 1998 respectively. The Company is
attempting to hire more sales staff and expand its customer base to lessen the
effect of having major customers.
Note 9: Income Taxes
The provision for income taxes consists of the following for the nine months
ended September 30, 1999:
1998 1999
---------------------
Currently payable:
Federal $ 133,062 $ 116,157
State 27,600 19,468
Deferred taxes 10,454 10,454
-------------------------
$ 171,116 $ 146,079
Note 10: Reduction of Number of Shares of Common Stock outstanding
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. The litigation was settled in the Company's favor
effective August 31, 1999, resulting in the return of 500,000 shares of Common
Stock to the Treasury of the Company, reducing the number of outstanding shares
of Common Stock from 2,435,376 to 1,935,376.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition and Results of Operations:
The following table sets forth, as a percentage of sales, certain items included
in the Company's financial statements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years Ended Nine months Ended
December 31, September 30,
-1997 -1998- -1998- -1999-
------- --------- --------- --------
Statements of Income Data:
Net sales......................................... 100.00% 100.00% 100.00% 100.00%
Cost of sales .................................. 76.43 78.12 74.05 82.03
Gross profit ..................................... 23.57 21.88 25.94 17.96
Depreciation and amortization .................... 0.25 0.38 0 .03 00.00
Selling, general and administrative expenses ..... 14.90 20.14 17.10 12.96
Total operating costs and expenses ............... 15.15 20.52 17.42 12.96
Operating income (loss) .......................... 8.67 1.73 8.52 4.99
Interest income (loss) ........................... 0.07 0.05 0.04 0.00
Interest expense.................................. (0.05) (0.12) 0.36 0.30
Income (loss) before income taxes................. 8.69 1.67 8.19 4.60
Income Tax ...................................... 3.37 0.67 3.33 0.11
Net income (loss) ................................ 5.32 1.00 4.84 4.49
</TABLE>
Net Sales
Net sales increased by $3,216,375 or 89.50 % from $3,593,334 for the nine months
ended September 30, 1998 (the "1998 period") to $6,809,709 for the nine months
ended September 30, 1999 ("the 1999 period").
The net sales increase resulted primarily from an increase in sales staff and
and increased demand from major customers responsible for the majority of the
Company's sales. Orders on the books of the Company indicate that this trend
will continue during the fourth quarter of 1999. Nevertheless, the loss of a
major customers would have a material adverse effect on the Company's financial
position and results of operations.
Gross Profit
As a percentage of net sales, gross profits increased from 25.9% in the 1998
period to 31.20% in the 1999 period. This increase was
related to higher margins realized on high-end customized speciaty computers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased as a percentage of net
sales from 17.10 % in the 1998 period to 12.96 % in the 1999 period. The
decrease in expenses as a percentage of net sales was primarily due to the
increase in revenue.
Liquidity and Capital Resources
On September 30, 1998 and September 30, 1999 the Company had net working capital
of $719,879 and $856,003, respectively. The $136,124 increase in working capital
from 1998 to 1999 was primarily due to an increase in accounts receivables,
inventory and equipment.
The Company had net cash provided by operating activities of $41,175 in the 1998
period compared to net cash provided by operating activities of $441,856 in the
1999 period. The $400,681 difference relates primarily to an increase in
revenues and higher margins for customized specialty computers for the nine
month period in 1999.
The Company had negative net cash used by financing activities of $48,644 in the
1998 period compared to positive net cash provided by financing activities of
$150,671 in the 1999 period. The $199,315 difference relates primarily to
financing of new products and higher inventory levels for the new products.
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<PAGE>
Dates following December 31, 1999 and beyond ( the "Year 2000 Problem")
Many existing computer systems and applications, and other devices, use only two
digits to identify a year in the date field, without considering the impact of
the upcoming change in the century. Such systems and applications could fail or
create erroneous results unless corrected. The Company relies on its internal
financial systems and external systems of business enterprises such as
customers, suppliers, creditors, and financial organizations both domestically
and globally, directly and indirectly for accurate exchange of data. The Company
has evaluated such systems and believes the cost of addressing the Y2K Problem
will not have a material adverse affect on the result of operations or financial
position of the Company. However, even though the internal systems of the
Company are not materially affected by the Y2K Problem the Company could be
affected through disruption in the operation of the enterprises with which the
Company interacts.
PART II.
OTHER INFORMATION
Item 1. 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. The litigation was settled effective August 31,
1999, resulting in the return of 500,000 shares of Common Stock to the Treasury
of the Company, reducing the number of outstanding shares of Common Stock from
2,435,376 to 1,935,376.
Item 2. Changes in Securities
There were no changes in rights of securities holders.
Item 3. Defaults upon Senior Securities There were no defaults upon senior
securities.
Item 4. Submission of Matters to a Vote of Security-Holders
The following matters were submitted to the vote of security holders. The
corresponding Proxy Statement was filed August 26, 1999
pursuant to Section 14 (A) of the Security Exchange Act of 1934, and is
incorporated by reference:
a. Election of Directors;
b. Three for One Common Stock Split;
c. 2000 Employee Non-Qualified Stock Option Plan; and
d. Such other business as may properly come before the meeting.
Item 5. Other Information
There were no major contracts signed during the period.
Item 6. Exhibits and Reports on Form 8-K
No exhibits and reports were filed on Form 8-K during this period.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Commission
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMMECOR CORPRATION
Date: October 10, 1999 By: /s/ Wil. L. Lindgren
-----------------------
Wil L. Lindgren
Chief Financial Officer
Date: October 10, 1999 By: /s/ Heinot H. Hintereder
-----------------------
Heinot H. Hintereder
President & CEO
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<PAGE>
LEGEND IMMECOR CORPORATION
MULTIPLIER 1
CURRENCY 1
TABLE
S C C
PERIOD-TYPE YEAR YEAR
FISCAL-YEAR-END DEC-31-1998 DEC-31-1999
PERIOD-START JAN-1-1998 JAN-1-1999
PERIOD-END SEP-30-1998 SEP-30-1999
EXCHANGE-RATE 1 1
CASH 231274 -232341
SECURITIES 0 0
RECEIVABLES 476860 1082702
ALLOWANCES 20478 18750
INVENTORY 381319 996123
CURRENT-ASSETS 1099568 2133402
PP&E 78828 57,391
DEPRECIATION 33293 0
TOTAL-ASSETS 1145103 2133402
CURRENT-LIABILITIES 425224 1277399
BONDS 0 0
PREFERRED-MANDATORY 0 0
PREFERRED 0 0
COMMON 292196 284872
OTHER-SE 407670 550998
TOTAL-LIABILITY-AND-EQUITY 1145103 2133402
SALES 3593334 6809709
TOTAL-REVENUES 3593334 6809709 CGS
2660905 5586316
TOTAL-COSTS 3287141 6469231
OTHER-EXPENSES 0 0
LOSS-PROVISION 0 0
INTEREST-EXPENSE 13279 20510
INCOME-PRETAX 294452 313663
INCOME-TAX 120000 7810
INCOME-CONTINUING 174452 305853
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET-INCOME 174452 305853
EPS-PRIMARY .072 .158
EPS-DILUTED .072 .158
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