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 Quarterly Period Ended September 30, 1997 Commission File Number
0-12575
Arizona Instrument Corporation
(Exact name of small business issuer as specified in its charter)
Delaware 86-0410138
(State of incorporation) (I.R.S. Employer Identification No.)
4114 East Wood Street, Phoenix, Arizona 85040-1941
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (602) 470-1414
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities and 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
--- ---
As of October 31, 1997, 6,687,391 shares of Common Stock ($0.01 par value) were
outstanding.
Transitional Small Business Disclosure Format (Check One)
YES NO X
--- ---
<PAGE>
II-2
ARIZONA INSTRUMENT CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets September 30, 1997 and December
31, 1996 II-3
Consolidated Statements of Operations Three and Nine months
ended September 30, 1997 and September 30, 1996 II-4
Consolidated Statements of Cash Flows Nine months ended
September 30, 1997 and September 30, 1996 II-5
Notes to Consolidated Financial Statements II-6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations II-7
II. OTHER INFORMATION
Item 1 Legal Proceedings II-11
Item 3 Defaults upon Senior Securities II-11
Item 6 Exhibits and Reports on Form 8-K II-12
<PAGE>
II-3
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 275,345 $ 597,931
Receivables, net 2,541,760 2,917,476
Inventories 2,858,223 2,049,982
Current portion of notes receivable related party 14,765 45,501
Prepaid expenses and other current assets 158,655 550,840
------------ ------------
TOTAL CURRENT ASSETS 5,848,748 6,161,730
PROPERTY, PLANT AND EQUIPMENT, NET 1,006,877 846,458
GOODWILL, NET 1,726,953 2,209,650
COVENANT NOT TO COMPETE, NET 0 102,084
DEFERRED INCOME TAXES 1,404,599 641,437
OTHER ASSETS 781,247 1,062,805
------------ ------------
TOTAL ASSETS $ 10,768,424 $ 11,024,164
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of credit $ 1,070,000 $ 0
Accounts payable 793,323 771,679
Current portion of long-term debt and capital leases 312,424 794,268
Other accrued expenses 1,076,019 648,501
------------ ------------
TOTAL CURRENT LIABILITIES 3,251,766 2,214,448
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 163,407 378,010
SHAREHOLDERS' EQUITY
Common stock, .01 par value per share:
Authorized, 10,000,000 shares;
Issued, 6,614,687 and 6,352,563 shares 67,684 66,777
Preferred stock, $.01 par value per share:
Authorized, 1,000,000 shares
Additional paid-in capital 9,821,301 9,706,163
Deficit (2,313,283) (1,118,783)
------------ ------------
7,575,702 8,654,157
Less treasury stock, 86,165 shares at cost (222,451) (222,451)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 7,353,251 8,431,706
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,768,424 $ 11,024,164
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
II-4
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended,
---------------------------- ----------------------------
09/30/97 09/30/96 09/30/97 09/30/96
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
NET SALES $ 3,078,738 $ 2,532,028 $ 10,364,559 $ 7,928,112
COST OF GOODS SOLD 1,858,148 1,000,221 5,257,138 3,344,702
---------------------------- ----------------------------
GROSS PROFIT 1,220,590 1,531,806 5,107,421 4,583,410
---------------------------- ----------------------------
OPERATING EXPENSES
Marketing 995,716 603,004 2,806,071 1,993,025
General and administrative 1,037,252 398,084 1,972,651 1,213,748
Research and development 368,813 176,676 741,497 528,292
Amortization and depreciation 149,586 151,532 454,718 454,595
---------------------------- ----------------------------
TOTAL OPERATING EXPENSES 2,551,367 1,329,296 5,974,937 4,189,660
---------------------------- ----------------------------
OPERATING INCOME (LOSS)
FROM CONTINUING OPERATIONS (1,330,777) 202,511 (867,516) 393,750
---------------------------- ----------------------------
OTHER REVENUE (EXPENSE)
Interest income 0 0 0 0
Interest expense (46,946) (51,140) (98,184) (169,766)
Other income 3,770 30,553 8,448 1,061,842
---------------------------- ----------------------------
TOTAL OTHER REVENUE (EXPENSE) (43,176) (20,587) (89,736) 892,076
---------------------------- ----------------------------
INCOME BEFORE INCOME TAXES
FROM CONTINUING OPERATIONS (1,373,953) 181,923 (957,252) 1,285,826
INCOME TAXES (517,980) 11,000 (427,980) (405,000)
---------------------------- ----------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (855,973) 170,923 (529,272) 1,690,826
---------------------------- ----------------------------
LOSS FROM DISCONTINUED OPERATIONS (499,840) (122,098) (665,227) (105,861)
---------------------------- ----------------------------
NET INCOME (LOSS) ($1,355,812) $ 48,825 ($1,194,499) $ 1,584,966
============================ ============================
INCOME (LOSS) PER SHARE
FROM CONTINUING OPERATIONS ($0.13) $0.02 ($0.08) $0.24
============================ ============================
INCOME (LOSS) PER SHARE
FROM DISCONTINUED OPERATIONS ($0.08) ($0.02) ($0.10) ($0.02)
============================ ============================
NET INCOME (LOSS) PER SHARE ($0.20) $0.01 ($0.18) $0.23
============================ ============================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 6,626,542 6,634,679
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON STOCK EQUIVALENTS 7,008,020 6,967,740
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
II-5
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended,
--------------------------
9/30/97 9/30/96
--------------------------
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME ($1,494,499) $ 1,584,966
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 979,666 598,945
Decrease in accounts receivable 375,716 644,928
Increase in inventory (808,241) (169,047)
Decrease in prepaid expenses and other current assets 422,920 11,630
Decrease (Increase) in settlement receivable, net 0 (456,386)
Decrease (increase) in other assets 207,039 (49,100)
Decrease(Increase) in deferred income tax (463,162) (485,000)
Increase (Decrease) in accounts payable and other
accrued expenses 449,161 (425,002)
--------------------------
NET CASH USED IN OPERATING ACTIVITIES (331,401) 1,255,934
--------------------------
INVESTING ACTIVITIES
Proceeds from the sale of assets 0 34,100
Gain on the sale of assets 0 (33,375)
Purchases of capital equipment (480,785) (135,955)
--------------------------
NET CASH USED IN INVESTING ACTIVITIES (480,785) (135,230)
--------------------------
FINANCING ACTIVITIES
Net borrowing (payments) under lines of credit 1,070,000 (250,000)
Issuance of common stock pursuant to earnout 0 202,585
Issuance of common stock pursuant to stock
purchase plan 72,806 28,273
Stock issued pursuant to option exercises 43,240 34,754
Payments of long-term debt and capital leases (696,446) (970,431)
--------------------------
NET CASH USED IN FINANCING ACTIVITIES 489,600 (954,819)
--------------------------
NET DECREASE IN CASH & CASH EQUIVALENTS (322,586) 165,885
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 597,931 486,382
--------------------------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 275,345 $ 652,267
==========================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
II-6
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1997, the consolidated
statements of operations for the three-month and nine-month periods ended
September 30, 1997 and 1996, and the consolidated statements of cash flows for
the nine-month periods ended September 30, 1997 have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position at September 30, 1997 and the results of operations and cash
flows for the three-month and nine-month periods ended September 30, 1997 and
September 30, 1996 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's 1996 Report on Form 10-KSB. The results of operations for the
interim periods are not necessarily indicative of the results to be obtained for
the entire year.
The Financial Accounting Standards Board recently issued SFAS No. 130 on
"Reporting Comprehensive Income" and SFAS No. 131 on "Disclosures about Segments
of an Enterprise and Related Information." The "Reporting Comprehensive Income"
standard is effective for fiscal years beginning after December 15, 1997. This
standard changes the reporting of certain items currently reported in the common
stock equity section of the balance sheet. The "Disclosure about Segments of an
Enterprise and Related Information" standard is also effective for fiscal years
beginning after December 15, 1997. This standard requires that public companies
report certain information about operating segments in their financial
statements. It also establishes related disclosures about products and services,
geographic areas, and major customers. The Company is currently evaluating what
impact these standards will have on its financial statements.
2. INVENTORIES
Inventories consist of the following:
September 30, 1997 December 31, 1996
-------------------------------------------
Finished Goods $1,170,200 $ 680,975
Components 1,688,023 1,369,007
-------------------------------------------
$2,858,223 $2,049,982
===========================================
<PAGE>
II-7
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's annual report on Form 10KSB for the year ended
December 31, 1996. Historical results are not necessarily indicative of trends
in operating results for any future period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Nine months ended September 30, 1997 and September 30, 1996
For the nine months ended September 30, 1997, the Company had a loss from
discontinued operations, net of income tax benefit, of $665,227 which was due
primarily to expenses incurred in discontinuing the Company's tank testing
business, and to a lesser extent, the loss incurred in operating the tank
testing business over the period. The loss from discontinued operations, net of
income tax benefit, for the nine months ended September 30, 1997 was an increase
of $559,367 from the loss of $105,861, which was incurred by the Company during
the same period of 1996.
Net sales for the nine months ended September 30, 1997 were $10,364,559, an
increase of $2,436,447 or 31% from the $7,928,112 generated for the same period
of 1996. This increase was due to higher sales in the Company's Encompass and
Computrac product lines which more than offset lower sales in the Company's
Jerome product line.
Cost of goods sold for the nine months ended September 30, 1997 was $5,257,138,
an increase of $1,912,436 or 57% from the $3,344,702 incurred for the same
period of 1996. The increase in cost of goods sold was due to the additional
costs of goods associated with increased sales, a shift in product mix which
included a higher portion of lower margin products, and to expenses associated
with a product phase out. As a result, gross profit for the nine months ended
September 30, 1997 was $5,107,421 an increase of $524,011 or 11% as compared to
the $4,583,410 of gross profit achieved for the same period of 1996. The gross
profit margin for the nine months ended September 30, 1997 was 49% as compared
to the gross profit margin of 58% for the same period of 1996.
Operating expenses for the nine months ended September 30, 1997 were $5,974,937,
an increase of $1,785,277 or 43% as compared to operating expenses of $4,189,660
for the same period of 1996. Marketing expenses for the nine months ended
September 30, 1997 were $2,806,071, an increase of $813,045 or 41% as compared
to marketing expenses of $1,993,025 for the same period in 1996. Increased
marketing expenses were due to increased personnel expenses, expenses associated
with introduction of a new product, as well as a higher level of activity
required to support the Company's domestic and international sales and marketing
functions. General and administrative expenses for the nine months ended
September 30, 1997 were
<PAGE>
II-8
$1,972,651, an increase of $758,904 or 63% as compared to $1,213,748 for the
same period of 1996. The increase was due primarily to increased bad debt
expense, increased personnel related expenses, and the result of a state sales
tax audit. Research and development expenses for the nine months ended September
30, 1997 were $741,497, an increase of $213,205 or 40% compared to the $528,292
of research and development expenses incurred in the comparable period of 1996.
This increase was due primarily to expenses associated with new product
development project. Amortization and depreciation for the nine months ended
September 30, 1997 totaled $454,718, which was essentially unchanged as compared
to $454,595 for the same period in 1996. As a result of the substantial increase
in operating expenses, operating income from continuing operations for the nine
months ended September 30, 1997 fell to a loss of $867,516, a decrease of
$1,261,266 from the operating income of $393,750 earned by the Company for the
same period of 1996.
The Company incurred other expenses for the first nine months of 1997 totaling
$89,736, a decrease of $981,813 from the $892,076 in other revenue generated by
the Company for the same period of 1996. This decrease in other revenue was due
primarily to the absence of income from the settlement of litigation which
occurred in 1996, but did not recur in 1997.
As a result of these changes, income before taxes from continuing operations for
the nine months ended September 30, 1997 was a loss of $957,252, a decrease of
$2,243,079 from the $1,285,826 in income recorded for the same period of 1996.
The provision for income taxes for the nine months ended September 30, 1997 was
tax benefit of $427,980 which resulted from applying the Company's tax rate to
its pretax loss. The tax benefit increased by $22,980 when compared to the tax
benefit of $405,000 booked by the Company for the nine months ended September
30, 1996, when the Company recognized the benefits of its net operating losses
from previous years. As a result, the net loss from continuing operations for
the nine months ended September 30, 1997 was $529,272, a decrease of $2,220,098
from the $1,690,826 in net income from continuing operations generated for the
same period of 1996.
As a result, the net loss for the nine months ended September 30, 1997 was
$1,194,499, a decrease of $2,779,465 from the net income of $1,584,966 generated
by the Company for the same period of 1996.
Three months ended September 30, 1997 and September 30, 1996
For the three months ended September 30, 1997, the Company had a loss from
discontinued operations, net of income tax benefit, of $499,840 which was due
primarily to expenses incurred in discontinuing the Company's tank testing
business, and to a lesser extent, the loss incurred in operating the tank
testing business over the period. The loss from discontinued operations for the
three months ended September 30, 1997 was an increase of $377,742 from the loss
of $122,098, which was incurred by the Company during the same period of 1996.
Net sales for the three months ended September 30, 1997 were $3,078,738, an
increase of
<PAGE>
II-9
$546,710 or 22% from the $2,532,028 generated for the same period of 1996. This
increase was due to higher sales relating to the installation of Company's
Encompass systems which more than offset lower sales in the Company's Jerome
product line.
Cost of goods sold for the three months ended September 30, 1997 was $1,858,148,
an increase of $857,927 or 86% from the $1,000,221 incurred for the same period
of 1996. The increase in cost of goods sold was due primarily to expenses
associated with a product phase out and a shift in product mix which included a
higher portion of lower margin products. As a result gross profit for the three
months ended September 30, 1997 was $1,220,590 a decrease of $311,216 or 20% as
compared to the $1,531,806 of gross profit achieved for the same period of 1996.
The gross profit margin for the three months ended September 30, 1997 was 40% as
compared to the gross profit margin of 60% for the same period of 1996.
Operating expenses for the three months ended September 30, 1997 were
$2,551,367, an increase of $1,222,071 or 92% as compared to operating expenses
of $1,329,296 for the same period of 1996. Marketing expenses for the three
months ended September 30, 1997 were $995,716, an increase of $392,712 or 65% as
compared to marketing expenses of $603,004 for the same period in 1996.
Increased marketing expenses were due to increased personnel expenses, as well
as a higher level of activity required to support the Company's domestic and
international sales and marketing functions. General and administrative expenses
for the three months ended September 30, 1997 were $1,037,252, an increase of
$639,168 or 161% as compared to $398,084 for the same period of 1996. The
increase was due primarily to increased bad debt expense, increased personnel
related expenses, and the result of a state sales tax audit. Research and
development expenses for the three months ended September 30, 1997 were
$368,813, an increase of $192,137 or 109% compared to the $176,676 of research
and development expenses incurred in the comparable period of 1996. This
increase was due primarily to expenses associated with a new product development
project. Amortization and depreciation for the three months ended September 30,
1997 totaled $149,586, a decrease of $1,946 or 1% from the $151,532 in
amortization and depreciation expensed for the same period in 1996. As a result
of the substantial increases in cost of goods sold and operating expenses,
operating income from continuing operations for the three months ended September
30, 1997 fell to a loss of $1,330,777, a decrease of $1,533,288 from the
operating income of $202,511 earned by the Company for the same period of 1996.
The Company incurred other expenses for the three months ended September 30,
1997 totaling $43,176, a increase of $22,589 or 88% from the $20,587 in other
expenses incurred by the Company for the same period of 1996. This increase in
other expense was due primarily to a decrease in miscellaneous other income in
1997 as compared to 1996.
As a result of these changes, income from continuing operations before taxes for
the three months ended September 30, 1997 was a loss of $1,373,953, a decrease
of $1,555,876 from the $181,923 in income recorded for the same period of 1996.
The provision for income taxes for the three months ended September 30, 1997 was
tax benefit of $517,980 which resulted from applying the Company's tax rate to
its pretax loss. This compares to a tax expense of $11,000 incurred by the
<PAGE>
II-10
Company for the three months ended September 30, 1996. As a result, the net loss
from continuing operations for the three months ended September 30, 1997 was
$855,973, a decrease of $1,026,896 from the $170,923 in net income from
continuing operations generated for the same period of 1996.
As a result, the net loss for the three months ended September 30, 1997 was
$1,355,812, a decrease of $1,404,638 from the net income of $48,825 generated by
the Company for the same period of 1996.
The Company has historically experienced and expects to continue to experience
quarterly fluctuations, potentially in a material amount, in its operating
results. A variety of factors influence the Company's operating results in a
particular period, including economic conditions in the industries served by the
Company, regulatory developments, the timing of significant orders, shipment
delays, specific features requested by the customers, the introduction of new
products by the Company and its competitors, market acceptance of new products
and enhancements of existing products, changes in the cost of materials,
disruptions in the sources of supply, seasonal variations of spending by
customers, the timing of the Company's expenditures in anticipation of future
orders and other factors, many of which are beyond the Company's control.
Liquidity and Capital Resources
Working capital at September 30, 1997 was $2,596,982, a decrease of $1,350,300
from the working capital of $3,947,282 as of December 31, 1996. Working capital
decreased due to decreases in cash, receivables, and prepaid expenses and
increases in lines of credit and other accrued expenses which more than offset
an increase in inventory and a decrease in the current portion of long term
debt. The Company's current ratio as of September 30, 1997 decreased to 1.8 from
a current ratio of 2.8 as of December 31, 1996.
The Company currently has two lines of credit available through a bank,
collateralized by accounts receivable, inventory, and property, plant and
equipment. The amount available which under these facilities was increased in
July 1997 by $1,000,000 to an aggregate maximum commitment of $3,500,000 which
is available through March 15, 1998. At September 30, 1997, $1,070,000 had been
borrowed under these lines of credit. At September 30, 1997, the Company was in
default under certain financial covenants of its borrowing agreement with its
bank. The bank has granted the Company forbearance from compliance with these
covenants until February 15, 1998. There can be no assurance that the Company
will be able to comply with its financial covenants by this date or that any
future forbearance, if required, will be granted by the Company's bank.
The Company believes that cash generated from ongoing operations and the
borrowing arrangements described above will satisfy the anticipated cash
requirements of the Company's current operations over the next 12 months, though
there can be no assurance that this will be the case. The Company's ability to
continue funding its planned operations beyond the next 12
<PAGE>
II-11
months is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, or to obtain additional funds though equity
or debt financing, or from other sources of financing, as may be required.
This Quarterly Report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, and the Company
intends that such forward-looking statements relate to anticipated fluctuations
in quarterly results of operations, sufficiency of funds and adequacy of
borrowing arrangements.
The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions regarding economic conditions in the
industries served by the Company, regulatory developments, the timing of
significant orders, shipment delays, specific features requested by the
customers, the introduction of new products by the Company and its competitors,
market acceptance of new products and enhancements of existing products, changes
in the cost of materials, disruptions in the sources of supply, season
variations of spending by customers and the timing of the Company's expenditures
in anticipation of future orders. Assumptions relating to the foregoing involve
judgements with respect to, among other things, future economic, competitive and
market conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions underlying the
forward-looking statements, many of which are beyond the control of the Company,
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in forward-looking
information will be realized. Important factors which may cause actual results
to differ materially from those contemplated or implied by such forward-looking
statements are discussed in more detail in the Company's Form 10-KSB for the
year ended December 31, 1996, and Forms 10-QSB for the quarters ended March 31,
1997 and June 30, 1997, as well as those factors discussed elsewhere herein. In
light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
Information is incorporated by reference from the Company's Report on
Form 10-KSB for the year ended December 31, 1996.
Item 3 Defaults upon Senior Securities
At September 30, 1997, the Company was in default under certain
financial covenants of
<PAGE>
II-12
its borrowing agreement with its bank. The bank has granted the Company
forbearance from compliance with these covenants until February 15,
1998. There can be no assurance that the Company will be able to comply
with its financial covenants by this date or that any future
forbearance, if required, will be granted by the Company's bank.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
See exhibit index following the signature, page, which is
incorporated herein by this reference.
(b) There were no reports on Form 8-K for the quarter ended
September 30, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ARIZONA INSTRUMENT CORPORATION
November 9, 1997 /s/ John P. Hudnall
- ---------------- -------------------
Date John P. Hudnall, President, CEO
(Authorized officer)
November 9, 1997 /s/ George G. Hays
- ---------------- ------------------
Date George G. Hays, Vice President, CFO
(Principal financial officer)
<PAGE>
EXHIBIT INDEX
TO
ARIZONA INSTRUMENT CORPORATION
FORM 10-QSB
QUARTERLY REPORT FOR
THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
Exhibit Description
- ------- -----------
27. Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 724904
<NAME> ARIZONA INSTRUMENT CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 275,345
<SECURITIES> 0
<RECEIVABLES> 3,109,785
<ALLOWANCES> 568,024
<INVENTORY> 2,858,223
<CURRENT-ASSETS> 5,848,749
<PP&E> 3,355,977
<DEPRECIATION> 2,520,247
<TOTAL-ASSETS> 10,768,424
<CURRENT-LIABILITIES> 3,251,766
<BONDS> 163,407
67,684
0
<COMMON> 0
<OTHER-SE> 7,285,567
<TOTAL-LIABILITY-AND-EQUITY> 10,768,424
<SALES> 11,219,191
<TOTAL-REVENUES> 11,231,059
<CGS> 5,955,372
<TOTAL-COSTS> 7,093,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,962
<INCOME-PRETAX> (1,922,479)
<INCOME-TAX> (427,980)
<INCOME-CONTINUING> (529,272)
<DISCONTINUED> (665,227)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,194,499)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
