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 SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________ to: _________
Commission File Number: 333-06966
IMMECOR CORPORATION
(Name of small business issuer in its charter)
California 68-0324628
(State or jurisdiction of incorporated (I.R.S. Employer Identification No.)
Organization)
100-105 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 amendment to this Form 10-KSB. [X]
State Issuer's revenues for its most recent fiscal year: $ 10,121,025.
The aggregate market value of the issuer's Common Stock, without par
value, held by non-affiliates as of December 31, 1999, 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, 1999, there were 1,935,376 shares of the issuer's
Common Stock, without par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Filer's Proxy Statement dated September 1, 1999
Pursuant to Section 14 (A) of the Securities Exchange Act of 1934 are
incorporated by reference in Part III hereof.
<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, assembles and supplies high-performance computer
systems, software integration, and services for the real-time and
video-on-demand requirements of yield management and process monitoring systems
for the semiconductor industry. The Company's computer systems are utilized in
imaging-based semiconductor patterned wafer inspection, reticle inspection, and
in the measurement of overlay, registration and line width. The necessary
components are purchased from domestic and foreign manufacturers and
distributors. The Company markets the finished products through its own sales
force primarily in the United States.
The Company was incorporated in the State of California on January 14,
1994.
EMPLOYEES
As of December 31, 1999, the Company had seventeen (17) full time and
three (3) part time employees. The Company hires part time employees for
nontechnical jobs.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate headquarters are located at 100~105
Professional Center Drive, Western Business Park, Rohnert Park, California,
94928, where the Company maintains 10,000 square feet of office, showroom and
assembly space.
The Company maintains an additional 4,500 square feet of office and
system integration space at 1600 Wyatt Drive, Suites 11-12, Santa Clara,
California 95054
The Company's Rohnert Park telephone number is (707) 585-3036 and the
facsimile number is (707) 585-6838. The Company's Santa Clara telephone number
is 408-982-1133 and the facsimile number is 408-982-1134. The Company's e-mail
address is [email protected], and the Company's world wide web home page is
http//www.immecor.com.
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. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On October 13, 1999, the Company held a special meeting of stockholders
to vote on the election of five directors, the approval of a three for one split
of the outstanding shares of common stock of the Company, and the approval of
the 2000 Employee Incentive and Non-qualified Stock Option Plan.The Board of
Directors set a distribution date of May 1, 2000
Of the 1,935,376 shares of the Company's Common Stock entitled to vote
at the meeting, a majority constituting a quorum were present in person or were
represented by proxy at the meeting. The results of the voting were as follows:
Election of Nominated Directors
For: Against:
1,222,776 Shares 712,600 Shares
Three for One Split of Common Stock Outstanding
For: Against:
1,933,376 Shares 2,000 Shares
2000 Employee Non-Qualified Stock Option Plan
For: Against:
1,222,776 Shares 712,600 Shares
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
of common stock 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 raising $75,474. However such amount was
offset by $107,119 of costs related to the offering. The offering was closed
November 17, 1998. The securities were sold directly to the public. There are no
broker/dealer agreements in effect regarding this offering. There is currently
no public market for the Company's Common Stock and there is no assurance that a
public market will develop.
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.
The Company plans a secondary offering of its common stock during the
remainder of 2000 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.
<PAGE>
HOLDERS
As of December 31, 1999 there were approximately 91 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 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 1999 AS COMPARED TO FISCAL 1998
Net sales increased by $5,569,432 or 122% from $4,551,593 in 1998 to
$10,121,025 in 1999. Sales to 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.
Nevertheless, the loss of any one major customer would have a material adverse
effect on the Company's financial position and results of operation.
Gross profit decreased, as a percentage of net sales, from 22% in
1998 to 16% in 1999 primarily because of increased hardware costs associated
with entering new markets that require lower profit margins.
Selling, general and administrative expenses increased $622,540 or
68%, from $916,660 in 1998 to $1,622,394 in 1999. The increase is due to higher
payroll costs and other expenses associated with an increase in operations.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENTS OF CASH FLOWS
The Company had net cash used in operating activities of $(425,406) in
1999 compared to net cash provided of $78,212 in 1998. The net decrease relates
primarily to the changes in operating assets and liabilities. The cash used by
investing activities was $70,498 in 1999 compared with $47,596 in 1998.
Net cash provided by financing activities was $346,652 in 1999
compared to $12,299 in 1998. The increase was primarily due to proceeds from
notes payable.
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 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 3.5% over prime rate (11.75% at December 31,
1999) with a maturity date of April 30, 2000. The line of credit had a $350,890
balance as of December 31, 1999. Currently the Company is negotiating a larger
credit facility with Deutsche Financial for $1.5 million. The new credit line
should be completed by February 15, 2000.
YEAR 2000 COMPLIANCE
During 1999, the Company successfully completed effeorts to ensure that
its internal operating systems, as well as those of its major customers and
suppliers, were fully capable of processing so-called Year 2000 transactions.
The primary cost of the project was the reallocation of internal resources, and
therefore did not represent incremental expense to the Company. The estimated
value of internal resources allocated to Year 2000 compliance efforts in 1999
was approximately $60 thousand.
The Company did not experience any failures of its computerized systems
resulting from Year 2000 issues, nor does it have any information that indicates
any of its vendors may be unable to sell goods or services to the Company.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The following Financial Statements are filed as part of this report:
Independent Auditor's Report F-1
Balance Sheets - December 31, 1998 and 1999 F-2
Statements of Operations for the years ended December 31, 1998 and 1999 F-3
Statements of Shareholder Equity for the years ended December 31,1998
and 1999 F-4
Statements of Cash Flows for the years ended December 31, 1998 and 1999 F-5
Notes to Financial Statements F-6
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
The following table sets forth the names of all directors and officers of the
Company and the position held by them:
Name Age Position
Heinot H. Hintereder 69 President & CEO, Director
Jason C. Lai 32 Executive Vice President, Director
Nhon K. Tran 36 Vice President, Chief Technical
Officer, Director
William L. Lindgren 36 Chief Financial Officer, Director
Dr. Rodney Tognetti 61 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
Fireman's 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 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.
Nhon K. Tran is a major investor in the Company. Before joining the
Company in July of 1995 as Vice President, Chief Technical Officer, 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.
<PAGE>
William L. Lindgren is Chief Financial Officer since May of 1999.
Mr. Lindgren has 15 years experience in cash management, commercial lending,
securities sales and insurance planning. Before joining the Company,
Mr. Lindgren served as regional executive with the business banking division
for Bay View Bank. Mr. Lindgren holds an AA degree in Accounting and a BS
degree in Business Management.
Dr. Rodney Tognetti is a member of the Company's Board of Directors.
Mr. Tognetti is a retired educator, local industrial property owner and
investor in emerging companies. He is a member of the Board of Directors of
Trancas Associates.
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,
1999, 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 $250 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 (1) Compensation
Heinot H. Hintereder 1997 $ 82,666 $ 50,000 None
President & 1998 $ 128,833 $ 39,167 None
Chief Executive Officer 1999 $ 139,000 None None
Jason C. Lai 1997 $ 160,048 $ 14,093 None
Executive Vice President 1998 $ 157,126 $ 16,259 None
1999 $ 199,873 $ 93,388 None
Nhon K. Tran 1997 $ 107,048 None None
Vice President & 1998 $ 94,000 $ 10,000 None
Chief Technical Officer 1999 $ 121,582 $ 15,000 None
William L. Lindgren 1997 - - -
Chief Financial Officer 1998 - - -
1999 $ 32,413 $ 3,437 None
</TABLE>
Note 1: All deferred compensation was accrued in the financial statements as of
December 31, 1999.
EMPLOYMENT AGREEMENTS
On December 3, 1999, the Company entered into employment agreements
with 1) Heinot H. Hintereder ("Hintereder"), the Company's President and Chief
Executive Officer; 2) Jason C. Lai ("Lai"), the Company's Executive Vice
President; and 3) Nhon K. Tran ("Tran"), the Company's Chief Technical Officer.
The agreements are for fixed three year terms. The Company may terminate any of
the agreements with Hintereder, Lai, or Tran for cause at any time and
Hintereder, Lai, or Tran 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 agreements prohibit Hintereder,
Lai, or Tran 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 Hintereder, Lai, and Tran a
base annual salary of $160,000 which is fixed for the three year term and, in
years in which annual gross sales exceed $9,000,000, $10,000,000, or $12,500,000
Lai and Tran are entitled to an annual cash bonus ranging from 0.25%, 0.50% and
0.75% respectively of the Company's gross sales. Hintereder is entitled to the
same annual cash bonus in years in which the Company's annual gross sales exceed
$20,000,000, $25,000,000, or $30,000,000.
<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, unenforceable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 1999 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.
Name and Address Shares Beneficially Approximate
Beneficial Owner Owned Percent of Class
Mr. Jason C. Lai 337,500 17.44
5625 Mireille Drive
San Jose, CA 95118
Heinot H. Hintereder 887,300 45.84
131 Keppel Way
Cotati, CA 94931
Nhon K. Tran 375,000 19.38
7235 Cadiz Court
Rohnert Park, CA 94928
Dr. Rodney Tognetti 48,500 2.51
4132 Susan Lane
Penngrove, CA 94951
All officers and directors as a group 1,648,300 85.17
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 1999, its executive officers, directors and greater than
10% beneficial owners complied with all such filing requirements.
<PAGE>
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. The Company's Definitive Proxy Statement, together with Definitive Additional
Materials and Soliciting Material pursuant to sec. 240.14a-11(c) or sec.
240..14a-12, filed September 1, 1999, is incorporated by reference.
C. No reports on Form 8-K were required to be filed in the last quarter of 1999.
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 CORPORATION
Date: March 8, 2000 By: /s/ Heinot H. Hintereder
-----------------------
Heinot H. Hintereder
President and Chief Executive Officer
Date: March 8, 2000 By: /s/ William L. 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.
SIGNATURES DATE
/s/ Heinot H. Hintereder, Director March 8, 2000
/s/ Jason C. Lai, Director March 8, 2000
/s/ Nhon K. Tran, Director March 8, 2000
/s/ William L. Lindgren, Director March 8, 2000
/s/ Dr. Rodney Tognetti, Director March 8, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Immecor Corporation
We have audited the accompanying balance sheets of Immecor Corporation (a
California corporation) as of December 31, 1999 and 1998, and the related
statements of operations, shareholders' equity and cashflows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 audits 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, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON, LLP
San Francisco, California
January 21, 2000
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IMMECOR CORPORATION
DECEMBER 31, 1999 AND 1998
<PAGE>
MMECOR CORPORATION
BALANCE SHEETS
December 31
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1999
----------------------------
CURRENT ASSETS
Cash $ 207,040 $ 57,788
Accounts receivables (net of allowance for doubtful amounts of
$18,749 in 1998 and $19,500 in 1999) 262,078 989,972
Inventories (Note B) 553,387 1,159,638
Prepaid and other assets (Note F) 15,190 59,476
Deferred tax assets 7,717 13,681
---------------------------------
Total current assets 1,045,412 2,280,555
EQUIPMENT AND IMPROVEMENTS (Note C) 85,107 125,601
---------------------------------
Total Assets $ 1,130,519 $ 2,406,156
---------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit (Note E) $ - $ 350,890
Accounts payable 13,475 1,380,692
Accrued liabilities 88,422 165,214
Note payable, due within one year 4,185 5,318
Income taxes 31,202 -
------------------------------
Total current liabilities 537,284 1,902,114
LONG-TERM LIABILITIES
Note payable, due after one year 8,558 3,189
Deferred income taxes 16,984 16,536
------------------------------
Total long-term liabilities 16,536 19,725
------------------------------
Total liabilities 562,826 1,921,839
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, 1,935,376 shares in 1999 and
2,435,376 shares in 1998 (Notes I, J, and K) 288,855 288,855
Retained earnings 278,838 195,462
-----------------------------
Total shareholders' equity 567,693 484,317
-----------------------------
Total liabilities and shareholders' equity $ 1,130,519 $ 2,406,156
-------------------------------
The accompanying notes are an integral part of these statements
<PAGE>
IMMECOR CORPORATION
STATEMENTS OF OPERATIONS
Year ended December 31,
1998 1999
--------------------------
Net sales (Note G) $ 4,551,593 $10,121,025
Cost of sales 3,555,740 8,568,758
-------------------------------
Gross profit 995,853 1,552,267
Selling, general and administrative expenses 916,660 1,622,394
------------------------------
Operating income (loss) 79,193 (70,127)
Interest income 2,243 558
Interest expense (5,255) (41,379)
------------------------------
Income (loss) before income taxes (Note L) 76,181 (110,948)
Income tax ("benefit") 30,561 (27,572)
-------------------------------
NET INCOME (LOSS) $ 45,620 $ (83,376)
-------------------------------
Net income (loss) per share - basic and diluted $ .02 $ (0.04)
Weighted average shares outstanding - basic and diluted 2,435,376 1,935,376
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
IMMECOR CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Retained
Outstanding Common Earnings
Shares Stock Total
Balance-January 1, 1998 2,421,000 $ 320,500 $ 233,218 $ 553,718
Sales 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
Redemption of common stock (500,000) - - -
Net loss - - (83,376) (83,376)
-----------------------------------------------------------------
Balance - December 31, 1999 1,935,376 $ 288,855 $ 195,462 $ 484,317
-----------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
IMMECOR CORPORATION
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1999
Increase (decrease) from cash
--------------------------
Cash flows from operating activities:
Net income (loss) $ 45,620 $ (83,376)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation 17,444 30,004
Deferred income taxes 5,526 (6,412)
Change in assets and liabilities
Accounts receivable 258,348 (727,894)
Inventories (210,229) (606,251)
Income taxes (100,523) (31,202)
Prepaid and other assets 10,279 (44,286)
Accounts payable 92,084 967,219
Accrued liabilities (40,337) 76,792
-----------------------------
Net cash provided by (used in) operating activities 78,212 (425,406)
Cash flows from investing activities:
Purchase of equipment (47,596) (70,498)
Net cash
used in investing activities (47,596) (70,498)
-----------------------------
Cash flows from financing activities:
Proceeds from sale of common stock, less offering costs 16,015 -
Proceeds from notes payable - 350,890
Principal payments on notes payable (3,716) (4,238)
----------------------------
Net cash provided by financing activities 12,299 346,652
----------------------------
NET INCREASE (DECREASE) IN CASH 42,915 (149,252)
Cash balance - beginning of year 164,125 207,040
-----------------------------
Cash balance - end of year $ 207,040 $ 57,788
-----------------------------
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 5,255 $ 41,379
Income taxes $ 120,617 $ 35,638
Redemption of 500,000 shares of common stock $ - $ -
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1999
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company designs, assembles and supplies high-performance computer
systems, software integration, and services for the real-time and
video-on-demand requirements of yield management and process monitoring systems
for the semiconductor industry. The Company's computer systems are utilized in
imaging-based semiconductor patterned wafer inspection, reticle inspection, and
in the measurement of overlay, registration and line width. The necessary
components are purchased from domestic and foreign manufacturers and
distributors. The Company markets the finished products 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 to reflect the realization of deferred tax
assets.
* Advertising Costs
The Company expenses costs of advertising when the advertising takes
place. The amount expensed in 1998 and 1999 was $51,918 and $16,859,
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
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 are excluded from
the computation if their effect is anti-dilutive.
* Reclassification
Certain 1998 amounts have been reclassified to conform to the 1999
presentation.
* 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 including subordinated debt
approximates carrying value based on terms available for similar instruments.
NOTE B - INVENTORIES
<TABLE>
<CAPTION>
<S> <C> <C>
Inventories consist of the following as of December 31:
1998 1999
---------------------
Purchased parts $ 540,867 $ 904,518
Finished systems 12,520 255,120
------ -------
$ 553,387 $ 1,159,638
------------------------------
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1999
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following as of December 31:
1998 1999
-----------------------
Equipment and furniture $ 60,703 $ 126,001
Vehicles 63,449 68,649
-------------------------
124,152 194,650
Less accumulated depreciation 39,045 69,049
-------------------------
$ 85,107 $ 125,601
-------------------------------
NOTE D - NOTE PAYABLE
Note payable consists of the following as of December 31:
1998 1999
-----------------------
Note payable, collateralized by vehicle, payable in
monthly installments of $443 including interest of
10.5% through September 2001 $ 12,743 $ 8,505
Less amount due in one year 4,185 5,316
------------------------
$ 8,558 $ 3,189
-----------------------------
</TABLE>
NOTE E - LINE OF CREDIT
The Company has a $500,000 line of credit which expires April 30, 2000, with an
annual interest rate of prime (8.5% as of December 31, 1999) plus 3.5%. Advances
under the line of credit can not exceed 80% of eligible accounts receivable and
is collateralized 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 Company has $350,890 outstanding as of December 31, 1999.
Currently the Company is negotiating a larger credit facility with Deutsche
Financial for 1.5 million. The line should be completed by February 15, 2000.
NOTE F - COMMITMENTS
The Company leases its headquarters in Rohnert Park, California, under a
noncancelable operating lease, which expires in January 31, 2001, and it's
branch offices in Santa Clara, California, under a noncancelable operating
lease, which expires in April 29, 2002. The Company is also obligated to pay its
prorate share of utilities for these facilities.
Minimum future rental payments under the lease agreements as of December 31,
1999 are as follows:
Year ending December 31:
2000 $108,430
2001 56,513
2002 17,203
---------
$ 182,146
Rent expense was $56,578 and $93,587 for the years ended December 31, 1998 and
1999, respectively.
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)
Years ended December 31, 1998 and 1999
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 72% of total sales in 1998 and 1999 respectively. This customer
comprised 29% and 56% of total accounts receivable as of December 31, 1998 and
1999, respectively. The Company is actively attempting to expand its customer
base to lessen the effect of having major customers by planning to increase
sales in other markets.
NOTE H - INCOME TAXES
The provision for income taxes consists of the following for the years ended
December 31:
1998 1999
---------------------
Currently payable:
Federal $16,905 $(21,960)
State $8,130 $800
Deferred taxes $5,526 $(6,412)
--------------------------
$30,561 $(27,572)
---------------------------
A reconciliation of the statutory federal income tax rate with the Company's
effective tax rate is as follows:
1998 1999
---------------------
Statutory rate 34.0% 34.0%
Reduction due to income under $100,000 (8.0) (13.0)
State income taxes 7.1 0.5
Nondeductible cost 5.1 2.9
Other 1.9 1.4
----- ----
40.1% 25.8%
- --------- -------- -----
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
are as follows for the year ended December 31:
1998 1999
- --------------------------------------------------------------------------------
Deferred Tax Liability
Depreciation $16,984 $16,536
Deferred Tax Asset
Inventory, accounts receivable allowance $ 7,717 $13,681
--------------------------
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.
<PAGE>
IMMECOR CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)
Years ended December 31, 1998 and 1999
NOTE J - DEFINED CONTRIBUTION PLAN
The Company adopted a Simple IRA Plan in January 1998. Employees are eligible
upon employment with the Company. The Company is generally required to match
each employees' elective deferrals on a dollar for dollar basis up to 3% of
compensation. However, the Company may elect to reduce the 3% of compensation
match (but not less than 1%), as long as such election will not result in less
than a 3% match in more than 2 years of a 5 year period ending with the current
year. The Company contributed $10,100 and $19,100 in 1998 and 1999 respectively
to the plan.
Note K - VOTES BROUGHT TO SHAREHOLDERS - 1999
Common Stock
On October 13, 1999, the shareholders approved a three for one split for the
outstanding shares of common stock of the Company. The Board of Directors set a
distribution date of May 1, 2000
Incentive and Non-qualified Stock Option Plan
On October 13, 1999, the shareholders voted to approve the 2000 Incentive and
Non-qualified Stock Option Plan, (the "Plan"). Under the Plan 1,500,000 shares
of common stock of the Company have been reserved for issuance pursuant to the
Plan. The exercise price for the shares subject to the option granted under the
Plan is $1.75. Grants will commence in the second quarter of 2000. The option
price, which the Company believes is the current fair market value, will
immediately vest and have a ten year life.
Note L - RESTATEMENT
At year-end, the Company phased out it's old DOS based accounting system and
replaced it with an accounting system capable of ERP (Enterprise Resource
Planning) and MRP (Material Resource Planning). During implementation of the new
system it was noted that certain inventory adjustments were not performed
correctly during the year. Management found it necessary to reevaluate inventory
from Average Cost to FIFO (First In First Out) and to restate inventory values
for the entire year of 1999. At December 31, 1999, all amounts have been
corrected which results in a restatement to previously issued quarterly
financial information. Information relative to quarterly periods is unaudited.
If Immecor had recorded the inventory adjustment at the end of each quarter,
rather than at the year-end fiscal 1999, the quarters would have been restated
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Gross Margin Net Income Income per Share
Quarter Ended As Reported Restated As Reported Restated As Reported Restated
March 31, 1999 $413,813 $386,442 $51,932 24,561 0.02 0.01
June 30, 1999 324,405 279,214 104,277 59,086 0.04 0.02
September 30, 1999 485,175 377,032 149,644 41,501 0.10 0.02
December 31, 1999 328,874 509,579 (389,229) (208,524) (0.19) (0.08)
Fiscal Year 1999 $1,552,267 $1,552,267 ($83,376) ($83,376) (0.04) (0.04)
</TABLE>
<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 DEC-31-1998 DEC-31-1999
EXCHANGE-RATE 1 1
CASH 207040 57758
SECURITIES 0 0
RECEIVABLES 280827 1009472
ALLOWANCES 18749 19500
INVENTORY 553387 1159638
CURRENT-ASSETS 1045612 2280555
PP&E 124152 194650
DEPRECIATION 39045 69049
TOTAL-ASSETS 1130519 2406156
CURRENT-LIABILITIES 562826 1902114
BONDS 0 0
PREFERRED-MANDATORY 0 0
PREFERRED 0 0
COMMON 288855 288855
OTHER-SE 278838 195462
TOTAL-LIABILITY-AND-EQUITY 1130519 2406156
SALES 4551593 10121025
TOTAL-REVENUES 4551593 10121025
CGS 3555740 8568758
TOTAL-COSTS 4472400 10231973
OTHER-EXPENSES 0 0
LOSS-PROVISION 0 0
INTEREST-EXPENSE 5255 41379
INCOME-PRETAX 76181 (110948)
INCOME-TAX 30561 (27572)
INCOME-CONTINUING 45620 (83376)
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET-INCOME 45620 (83376)
EPS-PRIMARY .018 (.04)
EPS-DILUTED .018 (.04)
