<PAGE> 1
- -----------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------------------
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
______________________________________________________________
Commission File No.: 0-10854
___________________________________________________________
ORS AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE I.R.S. Employer Identification
(State or other jurisdiction of No. 13-27956-75
incorporation or organization)
402 Wall Street, Princeton, New Jersey
(Address of principal executive offices)
08540 (609) 924-1667
(Zip Code) (Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value per share)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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 in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. /X/
State issuer's revenues for its most recent fiscal year: $1,232,421
As of March 1, 1997, the aggregate market value of the voting stock
held by non-affiliates of the registrant was: $66,861.
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed
by a court. Yes /X/ No
As of March 1, 1997, 8,082,443 shares of the registrants Common Stock
and 12,000,000 shares of Class A Common Stock were outstanding.
Transitional Small Business Disclosure Format: Yes No /X/
<PAGE> 2
Part I
Item 1. Description of Business
(a) State of Incorporation; Offices and Facilities
ORS Automation, Inc. ("ORS" or the "Company"), the registrant, was
incorporated under the laws of the State of Delaware in 1968 and commenced
operations in 1972. The Company's executive offices and production facilities
are located at 402 Wall Street, Princeton, New Jersey 08540.
(b) Nature of Business
The Company is primarily engaged in the production and sale of
microcomputer-based vision products for automatic identification, inspection,
control of industrial processes and visual sensing systems for use with
industrial automation equipment.
(c) Corporate Developments
On September 9, 1986 the Company filed for voluntary bankruptcy
under Chapter 11 of the U.S. Bankruptcy code in the United States Bankruptcy
Court for the District of New Jersey, Trenton, New Jersey, Case Number
86-05524 and continued to operate as Debtor in Possession. On December 31,
1986, Affiliated Manufacturers Inc., a major customer, acquired a controlling
interest in the Company. A Fourth Amended Plan of Reorganization was filed by
Affiliated Manufacturers Inc. with the Bankruptcy Court in February 1991 and
subsequently confirmed by the Court on April 8, 1991.
On September 1, 1992 a Final Decree officially closing the Chapter
11 bankruptcy case was issued by the United States Bankruptcy Court for the
District of New Jersey.
On January 17, 1997, Mr. Benson Austin, Chairman of the Board, Chief
Executive Officer and Treasurer of the Company, and Chairman of the Board,
Chief Executive Officer and principal shareholder of Affiliated Manufacturers,
Inc., passed away. Mr. Austin, held his positions with the Company since 1987.
Mr. Edward Kornstein, the President of the Company, has succeeded Mr. Austin
as Chairman of the Board, Chief Executive Officer and Treasurer. In February
1997, Mr. Walter Sherman resigned as Director and Mr. Howard Imhof was elected
to the Board of Directors.
(d) Company's Technology
ORS's area of business is machine vision technology which evolved
out of digital image processing research conducted in the past decade. With
lower costs and greatly increased speeds made possible by advances in
micro-electronics, machine vision became practical for industrial use.
ORS vision systems are specifically oriented toward the recognition
of visual patterns to determine an object's identity, position and quality.
This information is used in conjunction with computer-based automation to
control processes, machines and production quality. The principal vision
products produced by ORS are comprised of a range of proprietary software
processing algorithms, signal processors, and peripheral equipment. Where
possible, these products utilize commercially available hardware components
(e.g. television cameras, analog to digital converters, display devices and
microcomputers).
With these capabilities, ORS's products currently in production are
used to provide guidance information to automatic precision machinery.
<PAGE> 3
(e) Products
Since 1986, ORS Automation, Inc., has concentrated its resources in
refining and expanding guidance applications for screen printers used in the
manufacture of electronic circuit boards and micro-circuit printing on ceramic
substrates. The resulting units have high processing speeds with the
flexibility to make them cost-effective in the factory environment. It is
believed that the Company's technical expertise combined with its proven
industrial "solution" experience would place the Company in a strong
competitive position wherever electronic circuitry is being manufactured for
use in apparatuses, devices, or appliances. The principal product of the
Company in this area is "i-lign", which automatically and precisely positions
patterned materials for further processing such as printing, and for other
processing with various machine tools.
The Company intends to expand the market niches in which it has
demonstrated technical and marketing capability, namely alignment systems and
machine control applications. The factory-ready nature of the Company's
products will be emphasized and its experience in automation in the
electronics industry, will, to the extent possible, draw on successful
instances of real applications to provide a cost-justified return to both
equipment manufacturers and end user customers.
(f) Manufacturing
The Company assembles its vision and control products entirely from
electronics and other components purchased from nonaffiliated supply sources.
The major components of the products (cameras, display devices,
microcomputers, controls, mechanical assemblies and cabinets) are available
from various sources. To these, ORS adds its proprietary software and
interfaces.
(g) 1996 Sales & Recent Backlog
The Company sells its products principally to manufacturers of
automation equipment for the electronics industry. Sales of $1,232,421 were up
36.7% from 1995 results of $901,712. Two customers accounted for approximately
97% of the total sales for the period.
As of March 1, 1997 the Company had unfilled orders for products
totaling $514,298. This total backlog, of which approximately 78% is based on
a purchase order from one customer, is scheduled to be delivered in 1997. This
compares with the backlog of $348,784 on March 1, 1996. The increase in
backlog reflects sales of applications for the ORS technology developed in
1995 and 1996 and now coming into acceptance as well as new product offerings
based upon the library of experience ORS has built.
(h) Patents and Trademarks
The Company holds United States Patent No. 3,877,019, titled
"Photo-measuring Materials Device for Computer Storage of Photographic and
Other Materials", granted April 8, 1975; No. 3,908,078, titled "Method and
Apparatus for Digital Recognition of Objects Particularly Biological
Materials", granted September 23, 1975; No. 4,613,269, titled "Robotic
Acquisition of Objects By Means Including Histogram Techniques", granted
September 23, 1986 and No. 4,642,813, titled "Electro-Optical Quality Control
Inspection of Elements on a Product", granted February 10, 1987. Although the
registrant relies primarily on its technological know-how and expertise in the
field of machine vision, some products are nevertheless based, in part, on the
technology underlying these patents. No assurance can be given as to the
validity and scope of the protection provided by these patents.
<PAGE> 4
The Company holds and uses several registered trademarks. "ORS" is
used as a general identifying symbol in respect of its Products. "i-bot" is
used in conjunction with systems when adapted for use with industrial robots
and the related electronic grippers. "FLEXVISION" identifies a flexible image
computer. The alignment products are identified by "i-lign" and circuit board
inspection systems are identified by "i-flex". The Company has also
copyrighted critical software.
(i) Product Development
During fiscal years 1996 and 1995 the Company expended approximately
$250,000 and $242,000 respectively, on software and product development
activities. The product development in 1996 concentrated on increasing
performance of units developed in 1995 and also by adding language options to
the user interface (German, Japanese, Spanish, etc.) increasing their
potential application in the international market.
The machine control software developed originally to be integrated
with the vision function, all operating under "Windows 95", was separated and
can now be marketed as a "stand alone" control package. Sales of this
programmable machine control package represented approximately 15% of total
sales in 1996.
(j) Competition
The Company believes that there are now a substantial number of
competitors in the automatic machine vision identification, inspection and
control markets in which the Company's products compete. Recently several of
these competitors have merged to improve their market position. There are
several products now available that perform functions similar to those
performed by existing ORS products and those that the Company intends to
produce. Presently the field appears to be dominated by a few companies, the
most prominent being Cognex, Acuity, Allen-Bradley and Omron. These companies
possess financial resources and research and development staffs far greater
than those of the Company.
(k) Employees
At December 31, 1996, the Company had 9 employees. The Company also
engages consultants from time to time to provide specialized expertise in
areas in which it is uneconomical to utilize full-time employees. The Company
enjoys good relations with its employees.
Item 2. Description of Property
The Company leases 7,695 square feet of office and engineering
space at 402 Wall Street, Princeton, New Jersey 08540. The lease expired on
June 30, 1996 and was extended through January 31, 1997. At the Company's
request, the lease is extended on a month-to-month basis beginning February 1,
1997, at the base rent of $4,008 per month plus tenant's share of operating
expenses which currently amount to $1,970 per month. The Company does not
anticipate any difficulty in extending the lease if it so desires.
Item 3. Legal Proceedings
There are no known legal actions in which the Company is a party.
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE> 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
On October 15, 1986, the Company's common stock was delisted from NASDAQ
for failure to meet the minimum capital and surplus requirements of the NASD
By-Laws. Since there are no market makers for the Company's stock, trading, if
any, has been sporadic. As of December 31, 1996 there were 532 holders of
record of the Company's common stock.
The Company has neither declared nor paid any dividends on its
shares of Common Stock or Preferred Stock since its inception. Any decision as
to the future payment of dividends will depend on the earnings and financial
position of the Company and such other factors as the Board of Directors deems
relevant. The Company anticipates that it will retain earnings, if any, in
order to finance the development and expansion of its business.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following table presents selected financial data for the
Company for the Company's past two years.
For The Year Ended December 31,
<TABLE>
<CAPTION>
Results of Operations 1996 1995
- ------------------------- ---------- ---------
<S> <C> <C>
Operating Revenues $ 1,232,421 $ 901,712
Income Loss) From Operations 97,032 (41,417)
Net Income (Loss) 54,114 (16,059)
Net Income (Loss) per
Share of Common Stock 0.00 (0.00)
Financial Position at
December 31,
Total Assets $ 648,308 $ 610,229
Total Liabilities 738,950 754,985
Shareholder's Deficit (90,642) (144,756)
</TABLE>
As discussed in Note 1 to the financial statements, continuation of the
Company as a going concern and realization of its assets and liquidation of
its liabilities in the ordinary course of business are dependent upon, among
other things, the ability of the Company to maintain adequate financing and to
continue to achieve profitable continuing operations. The Company has been
existing, and will continue to, on its current cash flow only. To date the
Company has been unable to obtain any bank financing and there is no assurance
that if financing is required, it will be available to the Company.
The cost of the components for the Company's products (primarily
electronic components) has been decreasing in recent years, whereas the
capacity and capability of such items have been increasing. However, as the
Company increases its software emphasis, product development labor costs will
likely increase in the future, but the labor component included in product
costs will decrease. Therefore, the Company must increase the sales of its
products and improve margins in order to generate sufficient cash to continue
operations.
<PAGE> 6
Results of Operations
Comparing the results of operations of 1996 with 1995, sales of
$1,232,421 increased approximately 36.7% from 1995 sales of $901,712.
Approximately 85% of the sales in 1996 were related to "i-lign" products
compared with 99% of sales in 1995. One customer, Affiliated Manufacturers,
Inc., ("AMI"), which has a controlling interest in the Company, accounted for
approximately 36% of the total sales in 1996 compared with 52% of total sales
in 1995.
Administrative, Marketing and General expenses increased approximately
12.4% to $298,365 for the year ended December 31, 1996 as compared to $265,372
for the year ended December 31, 1995. This increase was primarily due to a bad
debt allowance of $18,860 and increased travel expenses to service an overseas
customer.
Software and product development expense increased 3.3% to approximately
$250,000 in 1996 compared to approximately $242,000 in 1995. The Company
expects to continue product development at the current rate, to enhance its
current products and for the development of new products.
The income from operations for the year ended December 31, 1996 was
$97,032, as compared to a loss from operations of $41,417 for the year ended
December 31, 1995. In 1996, the Company had "Other Expenses" of $42,918 as
compared to "Other Income" of $25,358, primarily due to the Company's recovery
of a bad debt of $67,451 in 1995. As a result, the Company had a net income
of $54,114 for the year ended December 31, 1996, as compared to a net
loss of $16,059 for year ended December 31, 1995.
Liquidity and Capital Resources
On May 10, 1993, August 10, 1993, November 10, 1993, February 10, 1995,
May 10, 1994 and August 10, 1994, payments totaling $45,500, $31,500, $42,000,
$63,000, $73,500 and $42,500, respectively, were due to the Internal Revenue
Service and various State taxing authorities pursuant to the bankruptcy
reorganization plan approved on April 8, 1991. On December 27, 1996, payments
totaling $45,500 were made to the Internal Revenue Service and various State
taxing authorities. As the Company required cash on hand for operating capital
and to implement new product development other payments were not made on the
due dates. These payments were deferred as permitted in the Reorganization
Plan. The Company has initial communications with the Internal Revenue Service
regarding settling its outstanding tax obligations.
In 1996, operating activities provided $163,186, investing activities
used $8,395 for the purchase of equipment, and financing activities used
$45,500 for the payment of priority tax claims, compared to cash provided by
operations of $8,018 and cash used in investing activities of $6,2376 in 1995.
As a result, the Company had a net increase in cash of $109,291 which resulted
in cash on hand at December 31, 1996 of $168,453. The increase of cash in 1996
was due largely to the efficient collection of accounts receivable and a
decrease in inventory. This increase in cash in 1996 permitted the payment of
$45,500 of priority tax claims.
Since emerging from bankruptcy proceedings in 1991, payments to the
Internal Revenue Service, State taxing authorities, unsecured creditors and
the buyout of shareholders holding less than 1,000 shares totaled $405,175,
which has made it very difficult for the Company to invest in and expand its
business.
In 1996, $40,000 of an existing 11 1/2% Convertible Debenture was
submitted for conversion into 33,680 shares of Common Stock and $45,000 of an
existing 5% Convertible Debenture was submitted for conversion into 6,003
shares of Common Stock as specified in the Plan of Reorganization confirmed on
<PAGE> 7
April 8, 1991. This resulted in an increase in outstanding shares of Common
Stock from 8,042,760 on December 31, 1995 to 8,082,443 on December 31, 1996.
The total stockholder's deficit of $144,756 in 1995 decreased
approximately 37.4% to $90,642 in 1996 as a result of the Company's net income
of $54,114 for the year ended December 31, 1995.
Item 7. Financial Statements and Supplementary Data
Financial Statements and schedules filed herewith are listed in the table
of contents to the financial statements on page F-2.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
Part III
Item 9. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Name Positions with registrant Has served as
and age as of March 1, 1997 director since
<S> <C> <C>
Edward Kornstein Chairman of the Board 1991
Chief Executive Officer
and Treasurer, 67
William Trautman Director, 57 1987
Howard W. Imhof Director, 54 1997
Patricia Newbill Secretary, 64 ----
</TABLE>
Edward Kornstein, Chairman of the Board, Chief Executive Officer,
Treasurer and Director. Mr. Kornstein has been President of the Company since
February 1987, Director since 1991, and Chairman of the Board and Treasurer
since 1997. From 1978 to 1987, he held various management positions in the
Company. Prior to Joining the Company, Mr. Kornstein was the owner of Kortron,
a consulting firm, and previously held executive and management positions with
Optel Corporation and RCA.
William E. Trautman, Director. Mr. Trautman is Senior Vice-President
of A.T. Kearney, a global management consulting firm and General Principal in
Dupont, White and Stone, a NASD broker dealer. Previously, he held senior
executive positions with several companies including Boyden Company, Moore &
Schley Securities, Seatrain Lines, Inc., XM World Trade, Litton Industries and
Ford Motor Company.
Howard W. Imhof, Director. Mr. Imhof is President, Chief Operating
Officer and Director of Affiliated Manufacturers, Inc. and was elected to the
Board of Directors in February, 1997. Previously he has served as chief
operating officer, chief executive officer, and in other international sales
and marketing management positions in the electronic materials industry
including Lanxide Electronics Corporation, and Sherritt Corporation - Aluminum
Nitride Group. Mr. Imhof is a co-founder of Heraeus Cermalloy's Electronic
<PAGE> 8
Materials Division and served for several years in a number of top management
positions.
Patricia M. Newbill, Secretary. Ms Newbill was elected Secretary of
the Company in 1997 and is currently Secretary of Affiliated Manufacturers,
Inc. Since 1987, Ms Newbill is Administrative Assistant at Affiliated
Manufacturers.
Benson M. Austin, the Chairman of the Board, Chief Executive Officer and
Treasurer of the Company during 1996, passed away on January 17, 1997. Edward
Kornstein, President of the Company has succeeded Mr. Austin as Chairman of
the Board, Chief Executive Officer and Treasurer of the Company. In February
1997, Mr. Walter Sherman resigned as Director of the Company.
Item 10. Executive Compensation
The following summary compensation table sets forth all compensation paid
by the Company during the fiscal years ended December 31, 1996, 1995 and 1994
in all capacities for the accounts of the Chief Executive Officer (CEO) and
President.
<TABLE>
<CAPTION>
Name and Principal Annual Restricted
Position Year Compensation Stock Awards
------------------- ----- ---------- ----------
<S> <C> <C> <C>
Benson M. Austin, CEO 1996 0 0
1995 0 0
1994 0 0
Edward Kornstein, President 1996 $ 68,363 0
1995 $ 83,897 0
1994 $ 83,205 0
</TABLE>
Directors do not receive any remuneration for their services as such. The
Company does not have a pension plan.
<PAGE> 9
Stock Options
Under the terms of the Reorganization Plan, all options and warrants then
outstanding were canceled. During 1995 and 1996, no options were granted.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number and percentage of the shares of
the registrant's voting stock owned as of March 1, 1997 by all persons known
to the registrant who own more than 5% of the outstanding number of such
shares, by all directors of the registrant, and by all officers and directors
of the registrant as a group. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
beneficially owned.
Common Stock
<TABLE>
<CAPTION>
Title Number of Shares Percent
of Class Name Beneficially Owned of Class
- ---------- ------- -------------------- -------
<S> <C> <C> <C>
Common Affiliated 13,076,250 (1) 65.2%
Manufacturers Inc.
U.S.Highway 22, P.O.
Box 5049 North
Branch, NJ 08876
Common Edward Kornstein 320,064 1.6%
Chairman, CEO
Director,
ORS Automation, Inc.
402 Wall Street
Princeton, NJ 08540
_________________ _______
Common All Directors and 320,064 1.6%
Officers as a group
</TABLE>
(1) Includes 1,076,250 shares of Common Stock, $0.01 par value, and 12,000,000
shares of Class A Common Stock, $0.0035 par value. The Company's Class A
Common Stock has the same rights and preferences as the Company's Common
Stock, $0.01 par value.
Series A Preferred Stock (1)
<TABLE>
<CAPTION>
Title
of Class Name Number of Shares Percent
Beneficially Owned of Class
- ----------- ----------- ------------------ ----------
<S> <C> <C> <C>
Series A Affiliated 1,000,000 100%
Preferred Manufacturers Inc.
U.S.Highway 22, P.O.
Box 5049 North
Branch, NJ 08876
</TABLE>
(1) Each share of Series A Preferred Stock, $0.01 par value, has the same
rights and preferences as the Company's Common Stock, $0.01 par value.
<PAGE> 10
Item 12. Certain Relationships and Related Transactions
Affiliated Manufacturers, Inc (AMI), a principal shareholder of the
Company, currently holds a first priority secured note from the Company. As of
December 31, 1996, the principal amounted to $166,102 and the accrued
interest, which is being calculated using simple interest on a quarterly basis
at a rate of 12% per annum, amounted to $229,216. No payments were made to AMI
in 1996 and 1995.
Sales to AMI for the years ended December 31, 1996 and 1995 were $437,912
and $467,574, respectively. The sales represent approximately 36% and 52%,
respectively, of the total sales of the Company for those years. At December
31, 1996, and December 31, 1995, accounts receivable from AMI amounted to
$155,733 and $341,098, respectively.
PART IV
Item 13. Exhibits List and Reports on Form 8-K
(a) Exhibits
See Page 11 for a List of Exhibits.
<PAGE> 11
<TABLE>
<CAPTION>
Exhibit
Method of Filing No. Exhibits
- ------------------ --------- -------------
<S> <C> <C>
Incorporated by reference 2(a) Plan of Reorganization under
to Form 8-K, dated Chapter 11 of the United
April 29, 1991. States Bankruptcy Code, dated
April 8, 1991
Incorporated by reference 2(b) Order Closing Case and Issuing
to Exhibit 2(b) to Form Final Decree Pursuant to 11
10KSB, for the year ended U.S.C. Section 350(a) and
December 31, 1992. Bankruptcy Rules 3022 and
5009, dated September 1, 1992
Incorporated by reference 3(a) Certificate of Incorporation
to Exhibit 3(a) to Form of ORS Automation, Inc. as
S-1, File No. 2-70609. amended through December 29,
1980.
Incorporated by reference 3(b) By-Laws of ORS Automation,
to Exhibit 3(b) to Form Inc.
S-1, File No. 2-70609.
Incorporated by reference 3(c) Certificate of Amendment of
to Exhibit 3 to Form 10-Q Certificate of Incorporation
for the Quarter ended of ORS Automation, Inc. filed
June 30, 1983. with the Secretary of State of
Delaware on May 27, 1983.
Incorporated by reference 3(d) Certificate of Amendment of
to Exhibit 3(d) to Form Certificate of Incorporation
10-K, for the Year ended of ORS Automation, Inc. filed
December 31, 1991. with the Secretary of State of
Delaware on May 30, 1985.
Incorporated by reference 3(e) Certificate of Designations of
to Exhibit 3(e) to Form The Preferred Stock of
10-K, for the Year ended ORS Automation, Inc. filed
December 31, 1991. with the Secretary of State
of Delaware on December 30,
1986.
Incorporated by reference 3(f) Certificate of Reorganization
to Exhibit 3(f) to Form and Amendment Pending
10-K, for the Year ended Confirmation of Plan of
December 31, 1991. Reorganization of ORS
Automation, Inc. filed with
the Secretary of State of
Delaware on December 30, 1986.
Incorporated by reference 10(a) Lease by and between ORS
to Exhibit 10(a) to Form Automation, Inc. and SLM II,
10-K, for the Year ended dated June 28, 1991.
December 31, 1991.
Incorporated by reference 10(b) Amendment "B" to Lease by and
to Exhibit 10(b) to Form between ORS Automation, Inc.
10KSB, for the year ended and SLM II dated May 22, 1992.
December 31, 1992
</TABLE>
<PAGE> 12
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
ORS AUTOMATION, INC.
(Registrant)
By: /s/ Edward Kornstein Dated: March 21, 1997
----------------------- -----------------
Edward Kornstein, Chairman, CEO
In Accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Date Position with Registrant
------------ ------------ -----------------------
<S> <C> <C>
/s/ Edward Kornstein 3/21/97 Chairman, CEO, Treasurer
(Chief Financial Officer)
-----------------------------------------------------------------------
/s/ Howard W. Imhof 3/21/97 Director
------------------------------------------------------------------------
/S/ William Trautman 3/21/97 Director
-----------------------------------------------------------------------
</TABLE>
<PAGE 13>
ORS AUTOMATION, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE> 14
ORS AUTOMATION, INC.
CONTENTS TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Independent Auditors' Report F-3
Balance Sheet F-4
December 31, 1996
Statements of Operations F-5
For the Years Ended December 31, 1996 and 1995
Statements of Changes in Stockholders' Deficit F-6
For the Years Ended December 31, 1996 and 1995
Statements of Cash Flows F-7
For the Years Ended December 31, 1996 and 1995
Notes to Financial Statements F-8 - F-14
</TABLE>
<PAGE> 15
WITHUM, SMITH & BROWN
A Professional Corporation
Certified Public Accountants & Consultants
P. O. Box 580
981 Route 22
Somerville, NJ 08876
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
ORS Automation, Inc.:
We have audited the accompanying balance sheet of ORS Automation, Inc. as
of December 31, 1996, and the related statements of operations, changes in
stockholders'deficit and cash flows for the years ending December 31, 1996
and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion of
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 provide 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 ORS Automation, Inc.
as of December 31, 1996, and the results of its operations and its cash
flows for the years ended December 31, 1996 and 1995 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As further discussed in
Note 1 to the financial statements, the Company had a net loss of $16,059
in 1995 and has not generated sufficient earnings to pay their priority
tax claims over the prescribed initial period as contempleted by the Plan
of Reorganization and has a net capital deficiency of $90,642 at December
31, 1996. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Withum, Smith & Brown
February 4, 1997
Somerville, NJ
<PAGE> 16
ORS AUTOMATION, INC.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents $ 168,453
Accounts receivable, net of allowance
for doubtful accounts of $18,860 372,087
Inventory, net 93,455
Prepaid expenses 2,870
-----------
Total Current Assets 636,865
Property and Equipment, net 11,443
TOTAL ASSETS $ 648,308
===============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 29,898
Priority tax claims payable - interest 134,157
Priority tax claims payable - principal 179,577
Note payable - related party 166,102
Accrued interest payable - related party 229,216
------------
Total Liabilities 738,950
Stockholders' Deficit:
Preferred stock 10,000
Common stock 122,824
Capital in excess of par value 24,914,163
Accumulated deficit (25,137,629)
____________
Total Stockholders' Deficit (90,642)
_____________
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 648,308
===============
</TABLE>
The Notes to Financial Statements are an integral part of these statements
<PAGE> 17
ORS AUTOMATION, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Sales $ 1,232,421 $ 901,712
Cost of Goods Sold 837,024 677,757
----------- ---------
Gross Profit 395,397 223,955
Administrative, Marketing and General
Expenses 298,365 265,372
----------- ----------
Income (Loss) From Operations 97,032 (41,417)
Other Expense (Income):
Recovery of bad debt -- (67,451)
Miscellaneous income -- (2,007)
Interest income (4,727) (2,379)
Interest expense 40,474 41,105
Depreciation and amortization 7,171 5,374
--------- ---------
Total Other Expense (Income),
net 42,918 (25,358)
---------- -----------
Income (Loss) Before Provision for Income
Taxes 54,114 (16,059)
Provision for Income Taxes -- --
Net Income (Loss) $ 54,114 $ (16,059)
============== ===============
Income (Loss) Per Share of Common Stock $ .00 $ .00
============== ================
Weighted Average Number of Common Shares
Outstanding 20,070,216 20,041,076
============= ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements
<PAGE> 18
ORS AUTOMATION, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Preferred Stock Class A Common Stock
Shares Par Value Shares Par Value
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at
Dec. 31, 1994 1,000,000 $ 10,000 12,000,000 $ 42,000
Conversion of
Debt into
Common Stock
Net Loss
Balance at ------------ -------- ---------- --------
Dec. 31, 1995 1,000,000 10,000 12,000,000 42,000
Conversion of
Debt into
Common Stock
Net Income
Balance at
Dec. 31, 1996 1,000,000 $ 10,000 12,000,000 $ 42,000
============ ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Common Stock Capital in Accumulated Total
Shares Par Value Excess of Par Deficit
Stockholders
Value
Deficit
--------- -------- ----------- -----------
- ------------
<S> <C> <C> <C> <C>
<C>
Balance at
Dec. 31, 1994 8,040,234 $ 80,403 $24,914,584 ($25,175,684)
($128,697)
Conversion of
Debt into
Common Stock 2,526 25 (25)
Net Loss (16,059)
(16,059)
Balance at ------------ -------- ---------- --------
- ------------
Dec. 31, 1995 8,042,760 80,428 24,914,559 (25,191,743)
(144,756)
Conversion of
Debt into
Common Stock 39,683 396 (396)
Net Income 54,114
54,114
Balance at
Dec. 31, 1996 8,082,443 $ 80,824 24,914,163 ($25,137,629)
($90,642)
============ ========== =========== =============
==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements
<PAGE> 19
ORS AUTOMATION, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 54,114 $
(16,059)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 7,171
5,374
Cash provided by (used in) changes in:
Accounts receivable, net 53,016
(7,885)
Inventory, net 20,286
(29,264)
Prepaid expenses (866)
(21)
Accounts payable and accrued expenses (11,009)
14,768
Priority tax claims payable-interest 20,542
21,173
Priority tax claims payable-principal 19,932
19,932
------------
- -----------
Net Cash Provided by Operating Activities 163,186
8,018
Cash Flows From Investing Activities:
Purchase of property and equipment (8,395)
(6,276)
Cash Flows From Financing Activities:
Payment of priority tax claims (45,500)
- --
------------
- ----------
Net Increase in Cash and Cash Equivalents 109,291
1,742
Cash and Cash Equivalents at the Beginning
of the Year 59,162
57,420
-----------
- ---------
Cash and Cash Equivalents at the End of
the Year $ 168,453 $
59,162
================
============
</TABLE>
Supplemental Disclosure of Cash Flow Information:
<TABLE>
<CAPTION> 1996 1995
<S> <C> <C>
Cash paid during the period for:
Interest $ -- $ --
Income taxes $ 125 $ 75
</TABLE>
Supplemental Schedule of Noncash Investing and Finance Activities:
Pursuant to the Plan of Reorganization (See Note 2), $45,000 of 5%
convertible debentures were converted into 6,003 shares of common stock and
$40,000 of 111/2% convertible debentures were converted into 33,680 shares of
common stock during the year ended December 31, 1996 and $3,000 of 11 1/2%
convertible debentures were converted into 2,526 shares of common stock during
the year ended December 31, 1995.
The Notes to Financial Statements are an integral part of these statements
<PAGE> 20
ORS AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies:
A. Nature of the Business
ORS Automation, Inc. is primarily engaged in the production and
sales of microcomputer based hardware and software vision products for
automatic control of industrial processes. The products are supplied as
sub-assemblies or add-ons to machine manufacturers throughout the world, who
then incorporate them into their equipment.
B. Basis of Representation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles which contemplate the
continuance of the Company as a going concern. As of December 31, 1996, the
Company reflects a stockholders deficit, as its total liabilities exceeds total
assets by $90,642. In addition, the Company incurred a net loss of $16,059 in
1995. Also, the Company has not generated sufficient earnings to pay its
priority tax claims over the prescribed initial period as contempleted
by the Plan of Reorganization, and has been unsuccessful in its efforts to
obtain outside financing. These factors raise substantial doubt as to whether
the Company has the ability to continue in existence. The financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence. Management
plans regarding their going concern status is to increase sales and control
costs in future years and to produce additional revenue from existing customers
and from the development of new products.
C. Cash Equivalents
Cash and cash equivalents include cash on hand and in the bank
as well as all short term securities held for the primary purpose of general
liquidity. Such securities normally mature within three months from the date of
acquisition.
D. Concentration of Credit Risk
The Company maintains it's cash and cash equivalents in bank
deposit accounts at high credit quality financial institutions. The balances,
at times, may exceed federally insured limits. As part of its cash management
process, the Company periodically reviews the relative credit standing of these
banks.
Other financial instruments which potentially subject the
Company to credit risk consist of accounts receivable. The Company's
receivables are principally from credit granted to business customers located
throughout the world. The deterioration of the financial condition of one or
both of its major customers could adversely impact the Company's operations
(See Notes 8 and 9).
E. Inventory
Inventory includes cost of materials and applicable labor and
overhead. Inventory is stated at the lower of cost or market, determined on the
moving-average cost basis.
F. Property and Equipment
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets which range from 3-8 years.
<PAGE> 21
G. Revenue Recognition
Sales of products are recorded in the period the units are
shipped. Revenues from product modification, development contracts, and
consulting fees are generally recognized during the period services are
performed.
H. Significant Risks and Uncertainties
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
As described in Notes 8 and 9, a significant portion of the
Company's sales are to two major customers. Any substantial decrease in sales
to these two customers, could have a material adverse effect on the Company's
results of operations and financial condition.
I. Income Taxes:
Deferred income tax assets and liabilities are recognized for
the differences between financial and income tax reporting basis of assets and
liabilities based on enacted tax rates and laws. The deferred income tax
provision or benefit generally reflects the net change in deferred income tax
assets and liabilities during the year. The current income tax provision
reflects the tax consequences of revenues and expenses currently taxable or
deductible on the Company's various income tax returns for the year reported.
The Company's only significant deferred tax items are net operating loss and
tax credit carryforwards.
J. Fair Value of Financial Instruments:
The carrying amounts of cash, accounts receivable, accounts
payable and accrued expenses approximate fair value because of the short
maturity of these items.
It was not practical to estimate the fair value of the priority
tax claims payable and note payable to related parties. See Notes 5 and 8,
respectively, for additional information concerning such financial instruments.
K. Effect of New Accounting Pronouncements
In March, 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 121
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." The adoption of this pronouncement did not have a material
impact on the Company's results of operations and financial condition. In
October, 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation." The Company believes that the adoption of SFAS No. 123 will
not have a material impact on the Company's results of operations or financial
conditions.
Note 2 - Plan of Reorganization:
Following a hearing in the United States Bankruptcy Court in
Trenton, New Jersey on April 8, 1991, the Fourth Amended Reorganization Plan
proposed by Affiliated Manufacturers, Inc. (AMI), the majority shareholders,
(approximately 65% of the outstanding common stock and 100% of the
outstanding preferred stock) and principal secured creditor, (due $280,709 of
which $166,102 was principal and $114,607 interest, as of April 1, 1991) was
confirmed. Under the plan, the treatment of the various claims and interests
are summarized as follows:
<PAGE> 22
A. Priority Tax Claims
Payment of tax claims, including pre-bankruptcy interest and
penalties, will be made in quarterly payments, which also incudes interest
as determined by the bankruptcy court, at variable amounts over the first
four calendar years following the first payment of $27,000 made at date of
distribution. Interest is accrued on the unpaid balance with a floating rate
ranging from 8% to 10%. The amount owed on the distribution date was
approximately $420,077 ($381,927 to the Internal Revenue Service, which
included $40,835 of pre-bankruptcy interest and penalties, and $38,150 to
various State taxing authorities). (See Note 5).
B. Debentures
The Company had two convertible subordinated debenture issues,
one for $2,000,000 bearing interest at 11 1/2 percent per annum and the other
for $727,000 with interest at 5 percent per annum. These debentures carried
various conversion and redemption rights until the confirmation of the plan of
reorganization on April 8, 1991 at which time the debentures including accrued
interest were convertible into common stock.
As of December 31, 1996, the conversion option had expired with
respect to $682,000 and $537,000 of the 11 1/2 and 5 percent convertible
debentures that had not been tendered and converted into 574,244 and 71,503
shares respectively. Accordingly, any holders of the above referenced
debentures, who had not converted their debentures into common stock by
April 8, 1996 are no longer entitled to receive any common stock distribution
in respect of their interest.
Note 3 - Inventory:
Inventory consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Materials $234,937
Finished goods 12,442
---------
Total 247,379
Less: Reserve for obsolescence 153,924
---------
Inventory, net $ 93,455
==========
</TABLE>
Note 4 - Property and Equipment:
The major classifications of property and equipment are summarized
as follows at December 31, 1996:
<TABLE>
<S> <C>
Equipment $241,015
Furniture and fixtures 71,984
----------
312,999
Less accumulated depreciation 301,556
---------
Property and Equipment, net $ 11,443
===========
</TABLE>
Depreciation expense charged to operations amounted to $7,171, and
$5,374 for years ended December 31, 1996 and 1995, respectively.
<PAGE> 23
Note 5 - Priority Tax Claims Payable:
Upon confirmation of the Plan of Reorganization on April 8, 1991,
priority tax claims amounted to $420,077. At December 31, 1996, the principal
amount due is $179,577. This amount consists of $126,092 federal payroll taxes,
$40,835 pre-bankrupcy federal interest and penalties, and $12,650 to various
state taxing authorities. Accrued interest at December 31, 1996 on the unpaid
balance is $134,157.
The Company has not generated sufficient earnings to pay their
priority tax claims over the prescribed initial period as determined by the
Plan of Reorganization. The Company has classified their priority tax claims
payable as long-term, since it is not obligated, pursuant to the Plan of
Reorganization, to repay these amounts until a sufficient level of earnings
has been achieved. However, during 1996 the Company did pay $45,500 of this
liability.
Note 6 - Preferred and Common Stock:
The preferred stock of the Company has a par value of $.01 per share
and 1,000,000 shares have been authorized to be issued. All are issued and
outstanding at December 31, 1996 and 1995, respectively. No dividends have
been declared by the Board of Directors. This preferred stock has no
liquidating preferences.
The common stock of the Company has a par value of $.01 per share,
10,000,000 shares have been authorized and 8,267,889 have been issued. As of
December 31, 1996 and 1995, 8,082,443 and 8,042,760 shares are outstanding,
respectively. The difference between issued and outstanding shares represent
shares that have been canceled pursuant to the Plan of Reorganization.
The Company also has Class A common stock, which has a par value of
$.0035 per share and 12,000,000 shares have been authorized to be issued. All
are issued and outstanding at December 31, 1996 and 1995.
Both common stock and Class A common stock have the same voting
rights.
Note 7 - Income (Loss) Per Share:
Income (Loss) per share has been computed based upon the weighted
average number of shares of the sum of both common stock and Class A common
stock outstanding during the period. In 1996 and 1995 the debentures were not
included as common stock equivalents as the effect would either be anti-dilutive
or have no effect on the reported amount of income (loss) per share.
Note 8 - Related Party Transactions:
As of December 31, 1996 and 1995, Affiliated Manufactures, Inc.
(AMI) controlled approximately 13 percent of the outstanding common stock,
100 percent of the outstanding Class A - common stock, which collectively
represents approximately 65% of the outstanding common stock, and 100 percent
of the outstanding preferred stock of the Company.
A. Note Payable
The Company currently owes AMI a note plus accrued interest.
This is a first priority secured claim. The principal amounted to $166,102 at
December 31, 1996. Accrued interest is being calculated using simple interest
at a rate of 12% per annum and amounted to $229,216 at December 31, 1996. Per
the Plan of Reorganization, no payment of this secured claim shall be made
until all other bankruptcy claims have been paid in full or there is an event
of default under the plan. Interest expense as a charge to operations in 1996
and 1995 was $19,932 per year.
<PAGE> 24
B. Sales and Accounts Receivable
Sales to AMI for the years ended December 31, 1996 and 1995 were
$437,912 and $467,574, respectively, which represent 36% and 52% of total sales.
Accounts receivable from this related party as of December 31, 1996 is $155,733.
Note 9 - Major Customer:
The following summarizes the non related party sales and the
percentage to total sales for the Company's major customer for years ended
December 31:
<TABLE>
<CAPTION>
Sales Percent
------- -------
<S> <C> <C>
1996 $ 757,407 61%
1995 $ 434,138 48%
</TABLE>
At December 31, 1996, this major customer accounts receivable
balance is approximately $216,000.
Note 10 - Income Taxes:
There was no provision for federal or state income taxes since the
Company incurred an operating loss in 1995. In 1996, the Company utilized
$23,300 of its deferred tax asset (net operating loss carryforwards) to
eliminate its provision for income taxes.
Deferred income taxes are summarized as follows at December 31,
1996:
Deferred tax asset:
Federal and state net operating loss
& tax credit carryforwards $ 7,940,000
Valuation allowance (7,940,000)
---------------
Net deferred tax asset $ 0
===============
During the year ended December 31, 1996, the Company's valuation
allowance declined by $23,300 due to the utilization of net operating loss
carryforwards. As seen in the above table, any future tax benefit which may
result from utilization of net operating loss carryforwards has been fully
reserved for.
At December 31, 1996, the Company has federal net operating loss
(NOL) carryforwards of approximately $23,000,000 and federal unused tax
credits of approximately $334,000 which are available to offset federal income
taxes. These carryforwards and credits expire between the years 1997 and 2010.
At December 31, 1996, the Company also has net operating loss
carryforwards of approximately $448,000 which are available to offset New
Jersey state income taxes. These carryforwards expire between 1997 and 2002.
Note 11 - Lease Commitments:
The Company conducts its operations in approximately 7,700 square
feet of an office building. The lease was for a one year period commencing
July 1, 1991 at approximately $53,865. The Landlord and Tenant agreed to extend
the lease for a period of four and one-half years commencing July 1, 1992 and
ending December 31, 1996. These terms were extended for one month
<PAGE> 25
through January 31, 1997. The lease was then extended on a month-to-month
basis beginning February 1, 1997. The base rent on the month to month basis is
$4,008, which does not include the tenants share of operating expenses. Rent
expense for the years, ending December 31, 1996 and 1995, including taxes,
insurance and maintenance reimbursements, amounted to $62,722 and $68,486,
respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Statements of Operations for the Year Ended December 31, 1996 and the
Balance Sheet at December 31, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 168,453
<SECURITIES> 0
<RECEIVABLES> 372,087
<ALLOWANCES> 0
<INVENTORY> 93,455
<CURRENT-ASSETS> 636,865
<PP&E> 312,999
<DEPRECIATION> 301,556
<TOTAL-ASSETS> 648,308
<CURRENT-LIABILITIES> 29,898
<BONDS> 0
0
10,000
<COMMON> 122,024
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 648,308
<SALES> 1,232,421
<TOTAL-REVENUES> 1,237,148
<CGS> 837,024
<TOTAL-COSTS> 1,135,389
<OTHER-EXPENSES> 7,171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,474
<INCOME-PRETAX> 54,114
<INCOME-TAX> 54,114
<INCOME-CONTINUING> 54,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,114
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
