UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
Quarterly Report
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1999 0-27187
ACCORD ADVANCED TECHNOLOGIES, INC.
(Name of Small Business Issuer)
Nevada 88 - 0361127
(State of Incorporation) (I.R.S. Employer Identification Number)
5002 South Ash Avenue, Tempe, Arizona 85282
(Address of Principal Executive Offices Including Zip Code)
(480) 820 1400
(Issuers Telephone Number)
INVESTMENT BOOK PUBLISHERS, INC
(Former name, former address and former fiscal year,
if changed since last report)
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 such shorter
period that the registrant was required to file such reports), and (2) has been
subject to filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares outstanding of each of the issuer's classes of common equity,
as of October 31, 1999: 39,548,638
Transitional Small Business Disclosure Format: Yes [ ] No [ ]
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements 1
Consolidated Balance Sheet at September 30, 1999 2
Consolidated Statements of Operations for the three months
and nine months ended September 30, 1999 and 1998 3
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 4
Item 2 - Management's Discussion and Analysis 5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Default 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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Statement of Information Furnished
The accompanying financial statements have been prepared in accordance with
Form 10-QSB instructions and in the opinion of management contain all
adjustments (consisting of only normal and recurring accruals) necessary to
present fairly the financial position as of September 30, 1999, and the results
of operations for the three and nine months ended Sept 30, 1999 and 1998, and
cash flows for the nine months ended September 30, 1999 and 1998. These results
have been determined on the basis of generally accepted accounting principles
and practices applied consistently with those used in the preparation of the
Company's 1998 financial statements included in Form 10-SB.
Certain information and footnote disclosure normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that the accompanying financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-SB.
1
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 297,837
Accounts receivable 756,357
Inventories 676,304
Prepaid expenses and other assets 20,519
Income tax refund receivable 6,032
----------
Total current assets 1,757,049
----------
PROPERTY, MACHINERY AND EQUIPMENT, net 1,975,644
DEFERRED INCOME TAXES 80,000
OTHER ASSETS 60,372
----------
TOTAL ASSETS $3,873,065
==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 310,704
Accrued liabilities 293,615
Accrued warranty and installation expense 261,767
Income taxes payable 69,790
Customer deposits 681,565
Note payable - current portion 245,803
----------
Total current liabilites 1,863,244
----------
NOTE PAYABLE - long-term portion 1,009,007
DEFERRED INCOME TAXES --
----------
Total liabilities 2,872,251
----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value, 3,000,000 shares
authorized, none issued
Common stock, $.0001 par value, 47,000,000 share
authorized, 39,548,638, issued and outstanding 3,955
Paid in capital 963,390
Retained earnings 33,469
----------
Total stockholders' equity 1,000,814
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,873,065
2
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1999
----------- -----------
SALES $ 2,723,454 $ 5,775,986
COST OF SALES 2,141,484 4,034,800
----------- -----------
Gross profit 581,970 1,741,186
----------- -----------
OTHER (INCOME) AND EXPENSES
General and administrative expense 273,649 802,272
Selling and marketing expense 95,231 292,198
Interest expense 26,152 74,508
Other (income) expense 479 6,564
----------- -----------
Total other expense 395,511 1,175,542
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 186,459 565,644
INCOME TAX BENEFIT (PROVISION) (74,490) (107,085)
----------- -----------
NET (LOSS) INCOME BEFORE EXTRAORDINARY ITEM 111,969 458,559
EXTRAORDINARY ITEM - DEBT FORGIVENESS INCOME
(net of income taxes of $423,000 ) -- 635,134
----------- -----------
NET INCOME (LOSS) $ 111,969 $ 1,093,693
=========== ===========
NET (LOSS) INCOME PER COMMON SHARE
Basic:
Before extraordinary item $ * $ 0.01
Extraordinary item $ -- $ 0.02
----------- -----------
Total $ * $ 0.03
=========== ===========
Diluted:
Before extraordinary item $ * $ 0.01
Extraordinary item $ -- $ 0.02
----------- -----------
Total $ * $ 0.03
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 39,548,638 39,548,638
=========== ===========
Diluted 39,600,592 39,600,592
=========== ===========
* less than $0.01
3
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------
1999
-----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,093,693
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 38,673
Deferred income taxes 460,245
Forgiveness of long-term debt (1,058,134)
Changes in assets and liabilities:
Accounts receivable (750,010)
Inventory 380,428
Other current assets (22,573)
Accounts payable (328,437)
Accrued liabilities 205,955
Income taxes payable 69,790
Accrued warranty and installation expense 261,767
Customer deposits (96,037)
-----------
Net cash provided by operating activities 255,360
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, machinery and equipment (16,015)
-----------
Net cash (used in) provided by investing activities (16,015)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt 965,000
Principal payments on capital lease obligations (995,000)
Principal payments on long-term debt (68,586)
-----------
Net cash (used in) provided by financing activities (98,586)
-----------
INCREASE IN CASH 140,759
CASH, BEGINNING OF PERIOD 157,078
-----------
CASH, END OF PERIOD $ 297,837
===========
4
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company was not filing quarterly information with the Securities and
Exchange Commission in the year ended December 31, 1998. Consequently, the
Company was not in the practice of closing its accounting records on a quarterly
basis prior to 1999.
Therefore, the results of operations for the comparative periods in 1998
are not presented.
Sales for the three months ended September 30, 1999, were $2,723,454
representing approximately 47% of the revenue for nine months ended September
30, 1999. The Company shipped a single large order for approximately $2,000,000
in the three months ended September 30, 1999.
The gross profit margin for the three months ended September 30, 1999
decreased to 21% compared to 30% for the nine months ended September 30, 1999.
The gross margin variance is due to the price of the equipment purchased for the
large order being higher. The cost of the basic tool is largest cost component
of cost of sales and the purchase price can vary depending on availability.
The Company obtained new financing that allowed it to purchase certain
assets it held under capital leases. The Company entered into agreements with
the lessors that resulted in debt pay-off less than the outstanding principal
and accrued interest on the capital leases. The Company recognized an
extraordinary gain of $635,134 after income taxes as a result of these
transactions.
The Company had a net income tax provision of $74,490 and $530,085 for the
three and nine months ended September 30, 1999 respectively. The Company had net
operating loss carry forwards recorded as net deferred income tax assets that
are utilized. In addition, the valuation allowance of $134,000 that was recorded
at December 31, 1998 was eliminated resulting in a deferred income tax benefit
for the same amount.
The Company's operations can be affected by trends in the semiconductor
manufacturing industry.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has had a working capital deficiency. The Company
had a net working capital deficit of $106,000 at September 30, 1999 as compared
to a deficiency of $248,000 at December 31, 1998. The Company has attempted to
obtain cash deposits from customers at the time purchase orders are submitted to
assist in much of the up front costs that are incurred in completing customer
5
<PAGE>
orders. The largest component of cost of sales is the cost of acquiring the
primary tool or machine. The Company has borrowed funds from certain purchase
order lenders. The Company believes that at its current operating levels it can
continue to require customer deposits and that it has several sources to obtain
financing upon obtaining a customer purchase order.
The Company has not experienced material losses on receivables from its
customers. Its customers generally are large companies with significant
resources. The Company requires final payment upon delivery, installation and
completion of testing.
The Company had net cash generated from operating activities of $255,360
for the nine months ended September 30, 1999. Cash balances are dependent upon
the timing of purchase requirements for the primary equipment needed to fill
customer orders. The Company typically does not inventory large tools until
customer orders are received. The Company has attempted to become more current
with its trade vendors during the nine months ended September 30, 1999,
resulting in a decrease in trade accounts payable of $328,437 for that period.
The Company does not believe that significant capital expenditures will be
required in order maintain its growth projections.
The Company is a defendant in a claim filed by one of its shareholders. See
Part II, Item 1. Legal Proceedings. The effect of the ultimate resolution of
this claim on liquidity and operations cannot yet be determined.
The Company is attempting to raise additional debt or equity capital to
allow it to expand the current level of operations. The Company refinanced and
restructured capital leases in the nine months ended September 30, 1999. The new
financing is for $1,000,000 payable over a ten year term.
The Company may require additional capital to continue a trend of greater
volume, which would require higher levels of inventory, accounts receivable and
higher operating expenses for marketing. There can be no assurances that the
Company will be successful in obtaining such capital.
YEAR 2000
The Company is currently updating its computer hardware and software. The
Company does not believe that it will encounter significant internal year 2000
problems. The cost of the new hardware and software is expected to be
approximately $75,000.
6
<PAGE>
The Company does not anticipate difficulties with customers or vendors
relative to the year 2000 issue. The Company's relationship with its customers
and vendors is such that it is not materially dependent upon their information
technology systems.
The Company discloses to its customers that the equipment it sells has not
been analyzed for year 2000 issues and that any year 2000 issues are matters
that should be addressed with the original equipment manufacturer.
FORWARD LOOKING INFORMATION
The issuer has and will continue to market all the prospective customers in
North America rather than relying on only those customers with whom it has
historically done business. The Company plans to increase its sales and
marketing presence through the use of its web site, more advertising and adding
more sales and technical personnel. The Company will also continue the
development of its patents.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company believes that the results of its operations in any quarterly
period may be impacted by factors such as delays in completion and the shipment
of products, difficulty in acquiring critical product components of acceptable
quality and in the required quantity, increased competition, the effect of
marketing efforts, growth rates in the Company's markets and adverse changes in
economic conditions. The Company's volume may be affected by changes in
conditions in the semiconductor industry.
"CAUTION REGARDING FORWARD LOOKING STATEMENTS"
CERTAIN STATEMENTS CONTAINED IN THIS REPORT THAT ARE NOT RELATED TO
HISTORICAL RESULTS, INCLUDING, WITHOUT LIMITATIONS, STATEMENTS REGARDING THE
COMPANY'S BUSINESS STRATEGY AND OBJECTIVES AND FUTURE FINANCIAL POSITION, ARE
FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE EXCHANGE ACT AND INVOLVE RISKS AND UNCERTANTIES.
ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS ON WHICH THESE FORWARD
LOOKING STATEMENTS ARE BASED ARE REASONABLE, THERE CAN BE NO ASSURANCE THAT SUCH
ASSUMPTIONS WILL PROVE TO BE ACCURATE AND ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM HTOSE DISCUSSED IN THE FORWARD LOOKING STATEMENTS. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE BUT ARE NOT LIMITED TO,THOSE SET FORTH
IN THE PRECEDING PARAGRAPH, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS REPORT.
ALL FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT ARE QUALIFIED IN THEIR
ENTIRETY BY THIS CAUTIONARY STATEMENT.
7
<PAGE>
PART II OTHER INFORMATION
GENERAL INFORMATION
ACCORD ADVANCED TECHNOLOGIES, INC. (AVTI) is in the business of providing
refurbishing services and engineering consulting to semiconductor manufacturers.
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC., the wholly owned subsidiary of
Accord Advanced Technologies, Inc. was formed in 1993 under the name Integrated
Semiconductor Service. It is the only operating company of Accord Advanced
Technologies, Inc. This company recognized an opportunity for full-service
re-manufacturing and support of advanced semiconductor manufacturing systems and
components.
Accord Semiconductor Equipment Group, Inc (SEG) specializes in
re-manufacturing and modifying multi-chamber systems for chemical vapor
deposition (CVD), physical vapor deposition (PVD) and Etch processes. These
precision systems are responsible for transforming individual silicon wafers
into integrated-circuit (IC) products such as computer chips. Refurbishing
provides Accord SEG's customers an equally high quality alternative to new OEM
equipment and enables the customer to immediately produce its IC products at a
reduced cost due to lower manufacturing equipment costs. The company also
provides system decommissioning, commissioning, after-sales service and supplies
parts and process technology as needed by the customer Accord SEG is unique
among equipment re-manufacturers because of its ability to custom-engineer
modifications to customers' systems. The company primarily re-manufactures the
equipment of Applied Materials, the largest original equipment manufacturer
(OEM) of semiconductor manufacturing equipment in the world. The market serviced
by the company consists of all facilities in North America (approximately 378)
manufacturing integrated circuits. The issuer has an internal marketing and
sales force as well as a highly skilled technical staff. It also has very
experienced outside sales representatives. The company utilizes trade shows,
trade journal advertising and its web site along with its technical, marketing
and sales force to distribute and market its services.
The Company's acquisition of Accord Semiconductor Equipment Group, Inc.
("Accord SEG") was effected through the exchange of common stock that resulted
in 100% of the common stock of Accord SEG being held by the Company and the
shareholders of Accord SEG owning approximately 95% of the Company.
8
<PAGE>
The issuer does not purchase raw material. It purchases parts and used
machinery from numerous sources.
Accord SEG has completed work for such well-known companies as American
Microsystems, Honeywell, Rockwell International, Integrated Solutions, Motorola,
Intel, MRC (Sony), California Micro Devices, Eastman Kodak, National
Semiconductor, Siemens Semiconductor Group, Lockheed, IDT and Texas Instruments.
In that there are numerous other prospective customers, the issuer feels that it
has been dependent on a few customers and is changing that dependency.
PATENTS
The issuers operating subsidiary has received two patents and are awaiting
a third.
The first patent was issued on April 28, 1998 (US Patent #5,744,400) for an
ion beam process that has advantages over the existing Chemical Mechanical
Planarization.
Traditional Chemical/Mechanical Planarization employs a combination of
mechanical pressure, abrasive slurry and chemical etchant to grind flat the thin
film layers of an IC. There is potential for damage to the IC if the layers are
ground too thin or if any residue from the CMP process remains. Accord's
planarization process yields greater consistency at a lower cost than does CMP.
The Company expects to complete a prototype incorporating its new technology
during 1999 or early 2000. The process is dry, slurry-free, environmentally
safe, adaptable to standard cluster deposition/etch tools and is cost effective
with rapid planarization rates.
CVD WAFER HANDLING SYSTEM
Every semiconductor processing system uses spare parts that are affected by
the gases and other materials within a process chamber. These "consumable parts"
must be replaced regularly; creating a potentially lucrative market to those
companies that can design and manufacture replacement parts. All Chemical Vapor
Deposition chambers in a multi-chamber processing tool use a handling system to
support and heat the wafer inside the chamber. Through a combination of thermal
stress and exposure to corrosive gases over time, these wafer handlers fail
during production and need to be replaced. The issuer's subsidiary has developed
and on September 1, 1998 received a patent on a wafer-handling system, or
susceptor (US Patent # 5,800,623). It incorporates distinctive metallurgy to
offer greater reliability and longer durability at a significantly reduced cost.
9
<PAGE>
ENVIROCLEAN' CHAMBER KIT
The company through its subsidiary has a patent-pending (docket #
08/730849) product known as EnviroClean(TM) chamber upgrade kit. This product
offers a solution to concerns about greenhouse gas production in the
semiconductor industry. Greenhouse gases are believed to have a detrimental
effect on the earth's atmosphere through global warming. Semiconductor
manufacturing is currently responsible for producing a significant volume of
these gases each year. Consequently, pending legislation to curtail the
production of greenhouse gases will likely require semiconductor manufacturers
in the near future to install relatively expensive abatement systems that meet
strict emission specifications.
The company's EnviroClean kit enables semiconductor manufacturers to retool
existing multi-chamber equipment less expensively. Its technology replaces
harmful greenhouse gases with relatively benign process-gas. The issuer may need
local government approval for the use of certain gases used in the testing of
the equipment re-manufactured on its premises. To date, the company has all the
approvals necessary.
The issuer is unaware of any effect existing governmental regulations has
on its business. The issuer is also unaware of any probable regulation. THE
ISSUER HAS NOT EXPENDED ANY FUNDS FOR RESEARCH AND DEVELOPMENT DURING THE PAST
TWO YEARS.
The company complies with all environmental laws. The costs to meet these
requirements were expended when the private company moved into its present
rented facility in 1994. There has been no need for further expenditures since
that time.
The issuer has fifteen (15) full time employees; three (3) contracted
employees and two (2) independent sales representative groups.
10
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
On October 20, 1999 the registrant was served with a complaint issued
through the U S District Court Southern District of New York wherein the
plaintiff GEM Management et al, allege that the registrant is; (1) indebted to
them in the amount of $372,048.65 for breach of contract in that it did not
deposit adequate shares in an escrow account; (2) for breach of contract in that
the registrant's stock had been de-listed from trading on the OTC BB; and (3)
unjust enrichment in the amount above claimed.
Management is actively taking all necessary steps to resolve these issues
which it feels are basically unfounded.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
(2) Agreement for Exchange of Stock and Plan of Reorganization
(3)
(i) Articles of Incorporation with Amendments
(ii) By-Laws
(4)
(ii) Long term loan Union Bank (SBA)
(10) Material Contracts
(i) Subscription Agreements for the Sale of Stock
Contract Between Two Directors and the Issuer
Lease on premises of issuer
Convertible Debenture Purchase Agreement
Convertible Debenture
Escrow Agreement
Warrant to Purchase Common Stock
(11) Computation per share earnings in financial statements
(21) Subsidiary
Accord SEG, Incorporated in Arizona
(27) Financial Data Schedule
(b) Reports of Form 8-K
The Company filed a Current Report on Form 8-K on September 3, 1999.
12
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Accord Advanced Technologies, Inc.
November 11, 1999 By: /s/ Travis Wilson
-------------------------------------
Travis Wilson, Director and President
By: /s/ Carl P. Ranno
-------------------------------------
Carl P. Ranno, Director and Sec/Treas.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 297,837
<SECURITIES> 0
<RECEIVABLES> 756,357
<ALLOWANCES> 0
<INVENTORY> 676,304
<CURRENT-ASSETS> 1,757,049
<PP&E> 1,975,644
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,873,065
<CURRENT-LIABILITIES> 1,863,244
<BONDS> 1,009,007
0
0
<COMMON> 3,955
<OTHER-SE> 996,859
<TOTAL-LIABILITY-AND-EQUITY> 3,873,065
<SALES> 5,775,986
<TOTAL-REVENUES> 5,775,986
<CGS> 4,034,800
<TOTAL-COSTS> 4,034,800
<OTHER-EXPENSES> 1,101,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,508
<INCOME-PRETAX> 565,644
<INCOME-TAX> (107,085)
<INCOME-CONTINUING> 458,559
<DISCONTINUED> 0
<EXTRAORDINARY> 635,134
<CHANGES> 0
<NET-INCOME> 1,093,693
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
