UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 1995
Commission file Number: 0-12661
Exact Name of Registrant as Specified in its Charter: IMTEC, Inc.
State of Incorporation: Delaware
I. R. S. Employer Identification Number: 03-0283466
Address of Principle Executive Offices: One Imtec Lane
Bellows Falls, VT 05101
Registrant's Telephone Number: 802-463-9502
Securities registered pursuant to Section 12(b) of the Act:
Class: Common
Exchange: NASDAQ
Indicate by check mark whether the registrant (1) has filled all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorted period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ( 229.405 of the this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock sold, or the average bid and asked
prices of such stock, as of a specified date within 60 days prior to the date of
filing. $9,993,317.25
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common shares outstanding as of September 21, 1995: 1,478,888
<PAGE>
PART I
Item 1. BUSINESS
(a) General Description of Business
IMTEC, Inc. (the "Company" or "IMTEC") designs, assembles, markets and
sells high performance barcode labels, and label application and label
lamination equipment.
The Company's Hot Stamp printer business was discontinued in August
1994. Reference is made to the Company's current report on Form 8-K, dated
August 19, 1994, the contents of which are incorporated herein by reference for
further information in these regards.
The Company was incorporated in Vermont on March 17, 1982 under the
name Imaging Technologies, Inc., and was reincorporated in Delaware under its
present name on September 22, 1983. The Company's executive offices are located
at One IMTEC Lane, Bellows Falls, Vermont 05101, and its telephone number is
(802) 463-9502.
(b) Financial Information About Industry Segments
Not Applicable.
(c) Narrative Description of Business
Products and Services
The Company currently markets bar code printer/applicators, bar code
printer/laminators and label laminators. The printer/laminator, which allows for
rapid automated printing of laminated bar code labels on continuous stock, and
the printer/applicator, which prints bar codes on pressure sensitive labels and
automatically applies them in a single integrated process, are each composed of
a basic printer presently supplied by unaffiliated manufacturers, and of various
accessories, such as cutting and laminating elements, or label applicator
elements which are developed by the Company and are integrated with the printers
by utilizing proprietary software and technology. In addition, the Company
markets equipment parts and accessories. The Company also sells labels, label
materials, ink, ribbons and laminates, and produces preprinted bar code labels
for customers who prefer outsourcing of label printing or whose needs do not
justify in-house operation of bar code printers. The Company focuses on
high-performance label materials, which are designed to perform in demanding
environments.
Bar Code Printer/Applicator
IMTEC's microprocessor-based printer/applicators are designed to print
bar codes on pressure sensitive labels and thereafter automatically apply them
in a single integrated process. The printer/applicator can be programmed to
label different sized objects at random at varying distances of up to thirty two
inches from the printer or to apply labels at random to the tops of items at
varying heights.
The equipment can also be modified by the Company, at the request of a
particular customer, for use in harsh environments where conditions of excessive
humidity, lint or dust prevail. The printer/applicator also contains various
"fail safe" sensors which are designed to prevent jamming and mislabeling.
Printer/applicator sales accounted for 38.4%, 26.8% and 20.5% of the
Company's revenues during the Company's fiscal years ended June 30, 1995, 1994
and 1993, respectively.
Bar Code Printer/Laminator
IMTEC's microprocessor-based label laminator and label
printer/laminator are designed for rapid production of bar code labels or tags.
The printer encodes information on various types of labels with bar code formats
and also prints human readable text above or below the bar code. It can be
programmed to either print bar code labels at random, in identical batches or in
sequential series. All of IMTEC's bar code printers are also designed to be
operated in-house by a customer's own data entry system. The Company's printers
<PAGE>
are compatible with various brands of computers and microcomputers through
standard communications interfaces supplied by the Company or obtainable by the
customer from a number of alternative sources. If operated manually, a printer's
display panel will provide the operator with on-going information regarding
machine operation, including a count of labels being produced and a warning
against data entry errors.
The Company's printer/laminators consist of printers presently supplied
by unaffiliated manufacturers, as well as cutting and laminating elements
developed by the Company utilizing proprietary software and technology. The
integration of these features allows for the automated printing of bar code
labels on continuous stock, thereby eliminating the need for precut labels and
permitting a customer to pre select exact label size.
Printer/laminator sales accounted for approximately 3.8%, 3.6% and
13.6% of the Company's revenues during the Company's fiscal years ended June 30,
1995, 1994 and 1993, respectively.
Printer Supplies, Components and Services
IMTEC markets bar code printer components and accessories. The Company
also sells labels, label materials, ink ribbons and laminates, primarily to its
existing customers and produces bar code labels for customers. Sales of such
supplies accounted for 55.9%, 67.6% and 57.7%, of the Company's revenues during
fiscal years 1995, 1994 and 1993, respectively.
Other Products
Sales of other products and accessories accounted for approximately
1.9%, 1.4% and 5.6% of the Company's revenues during fiscal years 1995, 1994 and
1993, respectively.
Marketing and Sales
The Company's marketing efforts are directed to those industries and
businesses which have need of in-house bar coding equipment. The Company
conducts its marketing and sales efforts primarily through an in-house sales
staff of 12 full-time employees and its executive officers; 5 sales offices in
the Metropolitan areas of Chicago, IL, Philadelphia, PA, Atlanta, GA, Dallas,
TX, and Syracuse, NY, respectively, each of which employs one full- time sales
employee; and approximately 12 independent reseller organizations throughout the
United States who market other bar code products in addition to the Company's.
The Company also conducts marketing efforts and sales throughout
Canada, Latin America, Europe, and the Far East through resellers and
distributors.
The Company supplements these efforts by advertising, publishing
articles in trade and business journals, and participation at trade shows.
Manufacturing and Sources of Supply
The Company purchases substantially all of the printers that it
incorporates into its bar code printers from non-affiliated manufacturers. As
there are numerous manufacturers and distributors of printers, the Company does
not anticipate experiencing any curtailment in the availability of printers.
The Company is not materially dependent on any one supplier for its
computer software, bar code printing supplies or components used in assembling
its present or proposed products. It currently uses a number of outside
contractors to fabricate machine parts and sub-assemblies for its products but
is not currently materially dependent on any one such contractor.
<PAGE>
Patents and Trademarks
During the current fiscal year the Company was granted one patent which
relates to various attributes of its bar code printer accessories. As of June
30, 1995, the Company owned eight patents, expiring at various dates ranging
from 2001 to 2009, and ten trademarks, respectively. Applications for
registration of trademarks in nine foreign countries were then pending.
Applications for four patents were also pending at June 30, 1995. The Company
does not believe the proprietary protection afforded by such patents and
trademarks is of material import to its current or future operations or
prospects.
Warranty
The Company's personnel install its products and, if necessary, train a
customer's personnel in their operation and service. The Company's personnel
also service such products when a customer's own staff is unable to diagnose or
correct a problem. The Company currently warrants its enhanced printers for a
one year period for parts and in house labor. The Company also offers service
and warranty contracts directly to its customers as well as through third party
service groups.
Customers
The Company's primary customers are those industries and businesses that
utilize in-house bar coding equipment. The Company's customers include, but are
not limited to, the fields of electronics, automotive, distribution and
consumer's goods manufacturers. During fiscal year 1995, sales to a single
customer accounted for approximately 31% of the Company's revenues. This
customer, which also accounted for 12% of the Company's revenues during fiscal
1994, is not presently anticipated to account for greater than 10% of the
Company's revenues for its fiscal year ending June 30, 1996. No other customer
accounted for more than 10% of the Company's revenues during fiscal years 1995,
1994 and 1993. Export sales aggregated approximately $1,704,000 in 1995,
$1,373,000 in 1994, and $1,533,000 in 1993.
Backlog
The aggregate backlog of firm orders for the Company's products as of
June 30, 1995 was approximately $2,803,000 as compared with $4,026,000 on June
30, 1994. Approximately $956,000 of the current backlog is for media supplies
with scheduled shipping dates over the next 12 months. The balance of the
current backlog ($1,847,000) is for hardware, including several orders for
multiple units, with scheduled delivery over several months. The Company
anticipates that substantially all of its backlog will be filled during the
current fiscal year.
Competition
The Company competes with several other companies in the sale of its
bar code accessories, supplies and services, many of which are larger and have
greater financial resources. The Company recognizes approximately 10 direct
competitors in its field; however, the Company believes that no one competitor
is a dominant factor therein.
The Company may face potential competition with respect to its
specialized bar code labeling systems from other companies engaged in various
areas of the bar code industry which have both the technical knowledge to
develop competing systems and financial resources substantially greater than
those of the Company.
The Company believes that it presently competes based on performance,
simplicity of operation, reliability of products, and price. It expects to
compete with respect to specialized bar code labeling systems presently under
development, based upon its chemical and systems engineering capabilities.
<PAGE>
Research and Development
The Company conducts on-going research and development to refine,
improve and enhance its product line. Research and development expenses were
$643,081, $516,990 and $565,350 in the fiscal years ended June 30, 1995, 1994
and 1993, respectively. The research and development expenses in fiscal 1995
were attributable to the Company's efforts with respect to its specialized bar
code labeling systems and proprietary materials.
Employees
As of August 30, 1995, the Company employed 64 persons on a full time
basis, including 5 employees in administration, 17 in marketing and sales, 8 in
research and development and 34 in service and manufacturing. .
None of the Company's employees is represented by a labor union, and
the Company has experienced no work stoppages. The Company believes that its
employee relations are good.
(d) Financial Information about Foreign and Domestic Operations
and Export Sales
Export sales aggregated approximately $1,704,000 in fiscal 1995,
$1,373,000 in fiscal 1994 and $1,533,000 in fiscal 1993, representing 16.6%,
21.0% and 21.5%, respectively, of the Company's sales in such fiscal years. The
Company has no significant assets outside of the United States and all export
sales in such years were made to persons or entities that had no affiliation to
the Company.
Fiscal Years Ended June 30,
1995 1994 1993
Pacific Rim 49% 46% 28%
Europe 24% 20% 42%
Canada 19% 30% 25%
Others 8% 4% 5%
Item 2. PROPERTIES
The Company occupies approximately 15,000 square feet in leased
facilities and a plot of land measuring 11.59 acres on which the Company's
facilities are situated in the Rockingham Industrial Park, Bellows Falls,
Vermont, which house the Company's executive and administrative offices, and its
bar code manufacturing and shipping facilities under a lease which expires on
December 31, 1999. The Company has the right to extend the lease for an
additional five year term and to purchase the building at any time at a purchase
price equal to the then outstanding principal balance and accrued interest of a
$525,000 Vermont Industrial Development Authority Industrial Development Revenue
Bond, issued in May, 1985. Annual rent is $54,000. The lease provides that the
Company shall pay property taxes and utility charges. Sufficient land is
available to allow for future expansion.
The Company also leases approximately 15,000 square feet in facilities
at 33 Bridge Street, Bellows Falls, Vermont, which house additional
manufacturing and storage facilities. This lease expires December 31, 1995 and
the Company has the right to extend the lease for two terms of five years each.
Annual rent through December 31, 1995 is $60,000. Rent thereafter is adjusted
for inflation.
The Company believes that these facilities are adequate for its present
and currently contemplated future operations.
<PAGE>
Item 3. LEGAL PROCEEDINGS
In January, 1994, the Windham County Superior Court rendered a settlement
of $175,000 plus interest to a former employee in settlement of a wrongful
discharge lawsuit based on a termination dating back to 1991. A liability of
$207,363 has been recorded in the Company's financial statements. This case has
been appealed to the Vermont Supreme Court.
There is no other material litigation pending, or, to the Company's
knowledge, threatened against the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 1995.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
(a) Market Information
The Company's Common Stock is quoted on NASDAQ-Small Cap Market under
the symbol IMTC. The following table sets forth, for the periods indicated, the
bid price range of the Common Stock as reported by National Quotation Bureau
Incorporated. These quotations represent prices between dealers, do not include
retail markups, markdowns or commissions and do not necessarily represent actual
transactions:
1995 HIGH BID LOW BID
First Quarter $ 5 $ 3-3/4
Second Quarter 5 4-3/4
Third Quarter 11 5
Fourth Quarter 9-1/2 8-1/2
1994
First Quarter $ 2-7/8 $ 2-3/16
Second Quarter 3-7/8 2-5/8
Third Quarter 4-1/4 3-3/4
Fourth Quarter 4 3-3/4
(b) Holders
At August 30, 1995, there were approximately 278 holders of record of
the Company's Common Stock.
(c) Dividends
The Company has not paid any cash dividends since its inception and the
Board of Directors does not contemplate doing so in the near future. Any
decision as to future payment of dividends will depend on the earnings and
financial position of the Company and such other factors as the Board of
Directors deem relevant.
<PAGE>
<TABLE>
<CAPTION>
Item 6. SELECTED FINANCIAL DATA
Years Ended June 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $10,272,846 $6,529,755 $7,120,594 $6,330,497 $7,450,674
Net income
(loss) $ 851,095 $ (871,358) $ (127,779) $ 101,420 $ 370,235
Net income (loss) per common share
and common share equivalents
Primary:
Net income
(loss) $ .57 $ (.62) $ (.09) $ .07 $ .27
Fully diluted:
Net income
(loss) $ .56 $ (.62) $ (.09) $ .07 $ .27
At year end:
Total Assets $5,268,176 $3,763,499 $4,407,415 $4,116,983 $4,248,816
Long-term debt and
capital lease
obligation $ 0 $ 386,904 $ 21,476 $ 148,813 $ 487,442
- ----------------
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Fiscal year ended June 30, 1995, as compared to fiscal year ended June 30, 1994.
Revenues for the fiscal year ended June 30 1995, increased approximately
57.3% over the fiscal year ended June 30, 1994.
Revenues from the sales of Industrial Bar Code Equipment were
$5,051,666 for the year ended June 30, 1995, up 99.9% when compared to
$2,526,915 for the year ended June 30, 1994. Industrial Bar Code Equipment
revenues represented 49.3% of total revenues in fiscal year 1995 compared to
40.1% of total revenues in fiscal year 1994. The increase in bar code equipment
sales in fiscal year 1995, when contrasted with fiscal year 1994, is primarily
attributable to an increase in shipments of approximately $1,472,000 of the
Company's recently introduced high performance label applicator line to a single
customer. Other product lines showed increases of approximately 60% to 70% over
the previous year's shipments. These increases are a direct result of increased
sales and marketing activities and efforts to expand the Company's distribution
network. Backlog as of June 30, 1995, was $1,846,535 ($1,115,752 represents
orders to a single customer) for Industrial Bar Code Equipment as contrasted
with $3,540,107 ($3,390,400 represents orders to a single customer) for June 30,
1994. The decline in backlog is the result of an increase in shipping levels.
Revenues from Bar Code labels and printing supplies were $5,187,457 for
the fiscal year ended June 30, 1995, as compared to $3,873,469 for the year
ended June 30, 1994, an increase of 33.9%. The Company believes that increased
marketing efforts, proprietary materials, and the increasing cumulative quantity
of machines in the field consuming these goods has resulted in the growth of
this product line. The sale of Bar Code labels and printing supplies represented
approximately 50.7% of total revenues for fiscal year 1995 as compared to 59.9%
of total revenues for fiscal year 1994. There was a backlog of $956,402 as of
June 30, 1995, for Bar Code labels and printing supplies as compared to $486,000
for June 30, 1994.
The Company discontinued its Hot Stamp printer business in August , 1994,
resulting in a one time charge of $385,386, recorded in June, 1994. Revenues
from Hot Stamp equipment and supplies were $125,252 for the fiscal year ended
June 30, 1994. These revenues are included in the prior years numbers discussed
in the above paragraphs. (See Notes 13 and 14 to the financial statements of the
Company).
Cost of sales as a percentage of revenues decreased from 61.9% for
fiscal year 1994 to 55.1% for fiscal year 1995. This decrease is attributable to
a decrease in the cost of materials due to volume purchasing of parts and the
out-sourcing of certain assemblies. While direct labor and overhead costs
increased in actual dollars (up 13.8% and 19.5% respectively), the ratio of
these costs as a percentage of sales decreased to 4.9% and 7.5% from 6.9% and
9.9% the prior year respectively.
Selling, general and administrative expenses represented 27% of sales
in fiscal year 1995 and 40% of sales in fiscal year 1994, though the actual
costs for fiscal 1995 increased by about $141,000 over fiscal 1994 levels. The
majority of the increase is attributed to sales commission expenses, increasing
about $90,000, the result of increased shipments, and trade show expenses,
increasing approximately $85,000 as the Company introduced several new products
and attended twice as many trade shows compared to fiscal 1994. General and
Administrative expenses include approximately $23,000 in additional accrued
settlement costs occasioned by a judgment in the amount of $175,000 (plus
interest) rendered against the Company following a jury trial in a wrongful
discharge case instituted against the Company in 1991 by a former employee. The
unfavorable verdict against the Company has been appealed to the Vermont Supreme
Court.
Research and Development expenses represented 6.3% of sales in fiscal
year 1995 and 7.9% of sales in fiscal year 1994, though the actual costs
increased by about $126,000. The additional expenses are related to new product
development, including, but not limited to, the Company's recently announced
ApplyPro series of printer/applicators.
Fiscal year 1995 Interest Expense was $39,603 compared to $50,732 for
the previous fiscal year. This decrease is the result of efforts to reduce debt.
At June 30, 1995, all of the Company's long term and short term debt had been
paid in full, with funds generated through operations.
<PAGE>
Income before taxes was $1,196,532 in fiscal year 1995 compared to a
loss of ($1,099,956) in fiscal year 1994. Income tax expense was $345,437 for
fiscal year ended June 30, 1995, compared to a benefit of $228,598 in fiscal
year 1994. The difference is due primarily to an increase in revenues, resulting
in a corresponding increase in earnings for fiscal year 1995. (See Note 7 to the
financial statements.)
At June 30, 1995 and 1994, the Company had accrued $289,906 and $87,107,
respectively, against future product warranty claims based on experience with
customer claims. Warranty expense charged to income amounted to $215,171 and
$81,003 for the years ended June 30, 1995 and 1994, respectively. This increase
includes approximately $140,000 of additional reserve due to increased shipments
of new product with no warranty history. Warranty expense represented 2.1% of
sales for fiscal year 1995 compared to 1.2% of sales for fiscal year 1994.
Fiscal year ended June 30, 1994, as compared to fiscal year ended June 30, 1993.
Revenues for the fiscal year ended June 30, 1994, decreased
approximately 8.3% over the fiscal year ended June 30, 1993.
Revenues from the sales of Industrial Bar Code Equipment were
$2,526,915 for the year ended June 30, 1994, down by 19.6% when compared to
$3,143,971 for the year ended June 30, 1993. Industrial Bar Code Equipment
revenues represented 39.7% of total revenues in fiscal year 1994 compared to
44.2% of total revenues in fiscal year 1993. The decrease in bar code equipment
sales in fiscal year 1994, when contrasted with fiscal year 1993, is primarily
attributable to a significant decrease in the number of bar code
printer/laminators sold. Fewer customers are requiring the laminating process to
protect their printed labels. This is a direct result of the development of
smear resistant ribbon and label products now available from the Company and its
competitors. Backlog as of June 30, 1994, was $3,540,107 ($3,390,400 represents
a single customer order) for Industrial Bar Code Equipment as contrasted with
$945,600 for June 30, 1993.
Revenues from the sales of Bar Code Equipment to government contractors
were $2,675 for fiscal year 1994, compared to $131,075 for fiscal year 1993. Bar
Code Equipment sales in relationship to government contracts represented 1.8% of
total revenues in fiscal year 1993. The Company does not expect any further
shipments, as the related contract expired during the quarter ended December
1993. The U.S. Department of Defense Automatic Identification Technology (AIT)
contract was released during the quarter ended June 30, 1994. The Company will
supply laminating equipment to the prime contractor. The contract runs for five
years for the hardware and an additional five years for maintenance. Any orders
under government prime contracts and subcontracts are subject to change,
adjustment, or termination at the convenience of the government. Upon such an
occurrence, the contractor or subcontractor is normally entitled to
reimbursement for allowable costs and to a reasonable allowance for profit
unless the contract is terminated due to the fault of such contractor or
subcontractor. At June 30, 1993 and 1992, there was no backlog for released
orders of Bar Code Equipment pursuant to government subcontracts.
Revenues from Bar Code labels and printing supplies were $ 3,812,227
for the fiscal year ended June 30, 1994, as compared to $3,558,353 for the year
ended June 30, 1993, an increase of 7.1%. The Company believes that increased
marketing efforts, proprietary materials, and the increasing cumulative quantity
of machines in the field consuming these goods has resulted in the renewed
growth of this product line. The sale of Bar Code labels and printing supplies
represented approximately 58.4% of total revenues for fiscal year 1994 as
compared to 50.0% of total revenues for fiscal year 1993. There was a sales
backlog of $486,000 as of June 30, 1994, for Bar Code labels and printing
supplies as compared to $323,400 for June 30, 1993. This increase in backlog is
believed to be a reflection of the sales and marketing efforts mentioned above.
Revenues from Hot Stamp equipment and supplies were $125,252 for the
fiscal year ended June 30, 1994, as compared to $287,195 for the year ended June
30, 1993. These revenues represented approximately 1.9% of total revenues for
fiscal year 1994 as compared to 4.0% for fiscal year 1993. The Company believes
that this decrease in sales of its Hot Stamp equipment is the result of
technological advances achieved by competitors. The Company discontinued its Hot
<PAGE>
Stamp printer business in August , 1994, resulting in a one time charge of
$385,386. See Note 12 to the financial statements of the Company.
Cost of sales as a percentage of revenues increased from 54% for fiscal
year 1992 to 56% for fiscal year 1993, attributable to a 17 % increase in direct
labor costs. The majority of this increase is related to the printing of
specialty media products to customers' requirements.
Selling, general and administrative expenses represented 40% of sales
in fiscal year 1994 and 36% of sales in fiscal year 1993, the actual costs
increasing by about $41,000. Sales expenses decreased $257,000, the result of
decreased commission expense (down $108,000) and the combining of territories
that resulted in a reduction of $97,000 in related expenses. However, General
and Administrative expenses increased $264,000 due primarily to a reserve of
$184,017 occasioned by a judgment in a like amount rendered against the Company
following a jury trial in a wrongful discharge case instituted against the
Company in 1991 by a former employee. The unfavorable verdict against the
Company has been appealed to the Vermont Supreme Court. (See Note 4 to the
financial statements.)
Fiscal year 1994 Interest Expense was $51,000 compared to $41,000 for
the previous fiscal year. This increase is the result of a new long term note
for $500,000 acquired in December, 1993.
Loss before taxes was $1,099,956 in fiscal year 1994 compared to
$129,979 in fiscal year 1993, resulting in an income tax benefit of $228,598 for
fiscal year ended June 30, 1994, compared to $2,200 in fiscal year 1993. The
difference is due primarily to a decrease in earnings for fiscal year 1994
$482,199, the write-off of the Hot Stamp assets $385,386 and the reserve
$184,017 for the judgment discussed above. The alternative minimum tax decreased
this benefit, however, by $144,789. (See Note 6 to the financial statements.)
At June 30, 1994 and 1993, the Company had accrued $87,107 and $32,656,
respectively, against future product warranty claims based on experience with
customer claims. Warranty expense charged to income amounted to $81,003 and
$60,223 for the years ended June 30, 1994 and 1993, respectively. Warranty
expense represented 1.2% of sales for fiscal year 1994 and 1% of sales for
fiscal year 1993.
Fiscal year ended June 30, 1993, as compared to fiscal year ended June 30, 1992.
Revenues for the fiscal year ended June 30, 1993, increased
approximately 12% over the fiscal year ended June 30, 1992.
Revenues from the sales of Industrial Bar Code Equipment were
$3,143,971 for the year ended June 30, 1993, up by 38.3% when compared to
$2,272,382 for the year ended June 30, 1992. Industrial Bar Code Equipment
revenues represented 44.2% of total revenues in fiscal year 1993 compared to
35.9% of total revenues in fiscal year 1992. The increase in bar code equipment
sales in fiscal year 1993, when contrasted with fiscal year 1992, is primarily
attributable to a significant increase in the number of bar code
printer/applicators sold. Such printer applicators were of a new design that
offered the Company's customers a greater flexibility of options. Backlog as of
June 30, 1993, was $945,600 for Industrial Bar Code Equipment as contrasted with
$438,420 for June 30, 1992.
Revenues from the sales of Bar Code Equipment to government contractors
were $131,075 for fiscal year 1993 compared to $163,844 for the same period last
year . Bar Code Equipment sales in relationship to government contracts
represented 1.8% of total revenues in fiscal year 1993 compared to 2.6% of total
revenues in fiscal year 1992. This decrease is the result of a decrease in the
authorized releases for the subcontract. Any orders under government prime
contracts and subcontracts are subject to change, adjustment, or termination at
the convenience of the government. Upon such an occurrence, the contractor or
subcontractor is normally entitled to reimbursement for allowable costs and to a
reasonable allowance for profit unless the contract is terminated due to the
fault of such contractor or subcontractor. At June 30, 1993 and 1992, there was
no backlog for released orders of Bar Code Equipment pursuant to government
subcontracts.
Revenues from Bar Code labels and printing supplies were $3,558,353 for
the fiscal year ended June 30, 1993, as compared to $3,532,922 for the year
ended June 30, 1992, essentially flat with the previous year. The Company
<PAGE>
believes that increased marketing efforts, proprietary materials, and the
increasing quantity of machines in the field consuming these goods will result
in the renewed growth of this product line. The sale of Bar Code labels and
printing supplies represented approximately 50.0% of total revenues for fiscal
year 1993 as compared to 55.8% of total revenues for fiscal year 1992. There was
a sales backlog of $323,442 as of June 30, 1993, for Bar Code labels and
printing supplies as compared to $373,487 for June 30, 1992. This decrease in
backlog is believed to be a reflection of prevailing economic conditions.
Revenues from Hot Stamp equipment and supplies were $287,195 for the
fiscal year ended June 30, 1993, as compared to $361,784 for the year ended June
30, 1992. These revenues represented approximately 4.0% of total revenues for
fiscal year 1993 as compared to 5.7% for fiscal year 1992. The Company believes
that this decrease in sales of its Hot Stamp equipment is the result of current
economic conditions. There was no backlog, as of June 30, 1993, for Hot Stamp
equipment. In re-evaluating the market for its Hot Stamp equipment, the Company
determined to write-off the goodwill associated with its acquisition of the
assets, liabilities and license of Nevis Imaging Systems for the year ended June
30, 1993. Although such write-off decreased earnings by $66,589 for the fiscal
year 1993, the Company believed such goodwill no longer had any value and would
continue to depress earnings in future fiscal years if not written-off in the
most recently completed fiscal year. See Note 12 to the financial statements of
the Company.
Cost of sales as a percentage of revenues increased from 54% for fiscal
year 1992 to 56% for fiscal year 1993, attributable to a 17 % increase in direct
labor costs. The majority of this increase is related to the printing of
specialty media products to customers' requirements.
Selling, general and administrative expenses represented 36% of sales
in both fiscal years 1993 and 1992, the actual costs increasing by about
$312,000. Approximately $120,000 of such increase, primarily attributable to the
Company's institution of litigation to restrain a competitor from marketing its
product under a name which the Company believes is deceptively similar to that
of the Company, and to executive recruitment fees, are believed by the Company
to be non recurring in their nature.
Fiscal year 1993 Interest Expense was flat with the previous year, at
$41,000.
Income(loss) before taxes was ($129,979) in fiscal year 1993 compared
to $151,777 in fiscal year 1992, resulting in an income tax expense(benefit) of
($2,200) for fiscal year ended June 30, 1993, compared to $50,357 or 33% of
earnings before income taxes in fiscal year 1992. The difference is due
primarily to a decrease in earnings for fiscal year 1993. The alternative
minimum tax decreased this benefit, however, by $9,302.
At June 30, 1993 and 1992, the Company had accrued $32,656 and $39,235,
respectively, against future product warranty claims based on experience with
customer claims. Warranty expense charged to income amounted to $60,223 and
$68,645 for the years ended June 30, 1993 and 1992, respectively. Warranty
expense represented 1% of sales for both fiscal years 1993 and 1992.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY:
As of June 30, 1995, the Company's principal source of liquidity was
cash flow from operations. The Company had no bank borrowings as of June 30,
1995. The Company believes that the cash generated from operations and bank
borrowings, including borrowings available under its line of credit, will be
sufficient to meet its cash needs on both a short term (i.e., 12 months) and
long term ( i.e., at least 24 months) basis.
The Company has secured a line of credit agreement in the amount of
$700,000, all of which was available at June 30, 1995. The line of credit is
secured by the Company's accounts receivable, inventory and property and
equipment. The interest rate varies from time to time with changes in the prime
interest rate. See Note 6 in the financial statements of the Company.
Accounts receivable at June 30, 1995 increased 59% when compared to
June 30, 1994, while revenues during the 4th quarter increased 66.4% when
compared to the 4th quarter in the prior year . The increase in shipments in the
fourth quarter resulted in a corresponding increase in accounts receivable. The
percentage of accounts receivable due in 30 days of shipment increased from 45%
at June 30, 1994, to 69% at June 30, 1995. The percentage of accounts receivable
aged between 30 and 90 days decreased from 40% at June 30, 1994, to 28% at June
30, 1995. The percentage of accounts receivable due that is over 90 days has
decreased from 15% at June 30, 1994 to 3% at June 30, 1995. The Company
considers all of these amounts to be collectible.
Long-term and short-term debt, including current installments, had been
paid in full as of June 30, 1995, as compared to total debt of $473,638 at June
30, 1994. This debt was paid entirely with funds generated from operations.
During fiscal year ended June 30, 1995, the Company spent $494,297 on
property and equipment, computer software and other intangible assets, which is
a small increase over the previous year's $491,593. The cash for these
expenditures was generated from the Company's operating activities.
The Company believes that its capital expenditures for fiscal year 1996
will be approximately the same as the capital expenditures for fiscal 1995.
The effect of adopting Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" in 1994 did not have a material impact on the
Company's financial position or results of operations.
<PAGE>
IMTEC, INC.
Form 10-K
June 30, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Stockholders and Board of Directors
IMTEC, Inc.:
We have audited the financial statements of IMTEC, Inc. as listed in the
accompanying index. In connection with our audits of the financial statements,
we also have audited the financial statement schedule listed in the accompanying
index. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule 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 IMTEC, Inc. as of June 30, 1995
and 1994 and the results of its operations and its cash flows for each of the
years in the three-year period ended June 30, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.
/s/ KPMG Peat Marwick LLP
Albany, New York
August 4, 1995
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Balance Sheets
June 30, 1995 and 1994
Assets 1995 1994
---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 285,727 3,627
Marketable investment securities (note 3) 400,000 -
Accounts receivable, trade, less allowance for doubtful accounts of
$101,042 in 1995 and $59,320 in 1994 (note 6) 1,640,008 1,033,552
Inventories (notes 2 and 6) 1,241,964 905,755
Prepaid expenses, deferred charges and other assets 78,683 77,845
Income tax receivable - 177,602
Deferred income taxes (note 7) 148,489 46,376
-------------- --------------
Total current assets 3,794,871 2,244,757
-------------- --------------
Property and equipment (notes 4 and 6) 3,266,232 2,903,036
Less: accumulated depreciation and amortization 2,237,151 1,930,238
-------------- --------------
1,029,081 972,798
-------------- --------------
Other assets:
Deposits 28,205 20,207
Computer software less accumulated amortization of $317,718 in 1995
and $243,768 in 1994 161,160 210,089
Other intangibles less accumulated amortization of $362,535 in 1995
and $276,799 in 1994 (note 13) 254,859 315,648
-------------- --------------
444,224 545,944
-------------- --------------
$ 5,268,176 3,763,499
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Note payable (note 6) - 149,224
Current installments of long-term debt (note 6) - 86,734
Current installment of obligation under capital lease (note 8) - 6,171
Accounts payable 636,721 394,155
Income taxes payable 4,161 -
Accrued liabilities:
Salaries and wages 358,750 76,627
Commissions 67,113 43,149
Other (note 5) 801,872 412,430
-------------- --------------
Total current liabilities 1,868,617 1,168,490
Long-term debt, excluding current installments (note 6) - 386,904
-------------- --------------
Total liabilities 1,868,617 1,555,394
-------------- --------------
Stockholders' equity:
Common stock - $.01 par value; authorized 5,000,000 shares, issued
and outstanding 1995, 1,470,138; 1994, 1,331,664 14,701 13,317
Additional paid-in capital 2,199,689 1,860,714
Retained earnings 1,185,169 334,074
-------------- --------------
Total stockholders' equity 3,399,559 2,208,105
-------------- --------------
Commitments (note 8b)
$ 5,268,176 3,763,499
============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Statements of Operations
Years ended June 30, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $ 10,272,846 6,529,755 7,120,594
Cost of sales 5,657,545 4,041,222 3,980,283
--------------- ------------- --------------
Gross profit 4,615,301 2,488,533 3,140,311
Selling, general, and administrative expense 2,779,066 2,637,759 2,597,157
Research and development expense 643,081 516,990 565,350
--------------- ------------- --------------
Operating earnings (loss) 1,193,154 (666,216) (22,196)
--------------- ------------- --------------
Other income (deductions):
Interest expense (39,603) (50,732) (41,152)
Interest income 11,925 - -
Gain (loss) on disposal of property and equipment
and other assets 31,056 2,378 (42)
Write-off of goodwill - Nevis - - (66,589)
Loss on disposal/write-off of hot stamp assets - (385,386) -
--------------- ------------- -------------
3,378 (433,740) (107,783)
--------------- ------------- --------------
Earnings (loss) before income taxes 1,196,532 (1,099,956) (129,979)
Income tax expense (benefit) (note 7) 345,437 (228,598) (2,200)
--------------- ------------- --------------
Net earnings (loss) $ 851,095 (871,358) (127,779)
=============== ============= ==============
Earnings (loss) per common share and common
share equivalents (note 12):
Primary $ .57 (.62) (.09)
===== ===== =====
Fully diluted $ .56 (.62) (.09)
===== ===== =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Statements of Stockholders' Equity
Years ended June 30, 1995, 1994 and 1993
Common stock Addi-
tional
Number paid-in Retained
of shares Amount capital earnings Total
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1992 1,282,914 $ 12,829 1,782,920 1,333,211 3,128,960
Net loss - - - (127,779) (127,779)
Common stock issued 1,250 13 1,706 - 1,719
------------- --------- ------------- ------------- -------------
Balance, June 30, 1993 1,284,164 12,842 1,784,626 1,205,432 3,002,900
Net loss - - - (871,358) (871,358)
Common stock issued 47,500 475 76,088 - 76,563
------------- --------- ------------- ------------- -------------
Balance, June 30, 1994 1,331,664 13,317 1,860,714 334,074 2,208,105
Net earnings - - - 851,095 851,095
Tax benefit from exercise of
stock options - - 84,706 - 84,706
Common stock issued 138,474 1,384 254,269 - 255,653
------------- --------- ------------- ------------- -------------
Balance, June 30, 1995 1,470,138 $ 14,701 2,199,689 1,185,169 3,399,559
============= ========= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Statements of Cash Flows
Years ended June 30, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings (loss) $ 851,095 (871,358) (127,779)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment and other assets 528,069 520,973 498,676
(Gain) loss on disposal of property and equipment
and other intangible assets (31,056) (2,378) 42
Write-off of goodwill - Nevis - - 66,589
Loss on disposal/write-off of hot stamp assets - 385,386 -
Increase in deferred income taxes (102,113) (46,376) -
(Increase) decrease in accounts receivable (606,456) 242,767 (169,953)
(Increase) decrease in inventories (336,209) 187,688 (123,967)
(Increase) in marketable investment securities (400,000) - -
(Increase) in prepaid expenses, deferred charges
and other assets (838) (13,427) (945)
Decrease (increase) in income tax receivable 177,602 (177,602) -
(Increase) decrease in deposits (7,998) (9,157) 66,278
Increase (decrease) in accounts payable 242,566 (128,639) 117,468
Increase (decrease) in income taxes payable 4,161 (3,829) (61,071)
Increase in accrued liabilities 695,529 262,322 26,428
Tax benefit from exercise of stock options 84,706 - -
------------- -------------- -----------
Net cash provided by operating activities 1,099,058 346,370 291,766
------------- -------------- ------------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 50,719 6,733 -
Expenditures for property and equipment, computer
software and other intangible assets (494,297) (491,593) (624,983)
------------- -------------- ------------
Net cash used in investing activities (443,578) (484,860) (624,983)
------------- -------------- ------------
Cash flows from financing activities:
Proceeds from issuance of note payable to bank 201,847 748,750 752,463
Principal payments on note payable to bank (351,071) (1,058,721) (293,268)
Proceeds from issuance of long-term debt - 500,000 -
Principal payments on long-term debt (473,638) (155,488) (113,821)
Principal payments under capital lease obligations (6,171) (13,516) (11,707)
Proceeds from issuance of common stock 255,653 76,563 1,719
------------- -------------- ------------
Net cash provided by (used in) financing
activities (373,380) 97,588 335,386
------------- -------------- ------------
Net increase (decrease) in cash 282,100 (40,902) 2,169
Cash and cash equivalents at beginning of year 3,627 44,529 42,360
------------- -------------- ------------
Cash and cash equivalents at end of year $ 285,727 3,627 44,529
============= ============== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IMTEC, INC.
Notes to Financial Statements
June 30, 1995, 1994 and 1993
(1) Description of the Company's Business and Summary of Significant
Accounting Policies
Description of the Company's Business
IMTEC, Inc. ("Company") designs, manufactures and sells labeling systems.
These systems include label printer laminators, label printer
applicators, pre-printed labels and labeling supplies. IMTEC products
are designed for automated identification (bar coding) applications in
the electronics, pharmaceutical, transportation, textile, automotive
and warehousing industries.
Summary of Significant Accounting Policies
(a)Revenue Recognition
Product sales, including sales under contract, are recorded when the
products are shipped or in accordance with customer agreements.
(b)Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
as cash equivalents all highly liquid investments purchased with
a maturity of three months or less and which are readily
convertible to known amounts of cash.
(c)Marketable Investment Securities
Marketable investment securities at June 30, 1995 consist of
repurchase agreements which the Company considers as trading
securities. The Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" at June 30,
1995. Under SFAS No. 115, the Company classifies its debt and
marketable equity securities in one of three categories:
trading, available-for-sale, or held-to-maturity. Trading
securities are bought and held principally for the purpose of
selling them in the near term. Held-to-maturity securities are
those securities in which the Company has the ability and intent
to hold the security until maturity. All other securities not
included in trading or held-to-maturity are classified as
available-for-sale. Trading and available-for-sale securities
are recorded at fair value.
There were no marketable investment securities at June 30, 1994.
(d)Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
(e)Property and Equipment
Property and equipment are carried at cost. Depreciation, including
amortization of leasehold improvements and capitalized leases,
is computed using the straight-line method. When assets are
retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized in income for the period.
The cost of maintenance and repairs is charged to income as
incurred; significant renewals and betterments are capitalized.
Deduction is made for retirements resulting from renewals or
betterments.
<PAGE>
2
IMTEC, Inc
Notes to Financial Statements, Continued
(f)Computer Software
The cost of computer software to be included in the Company's
products is expensed until the technological feasibility of the
software is established. Subsequent costs are capitalized.
Capitalized computer software costs are amortized over the
greater of the ratio of current product revenue to future
revenues or the straight-line method using estimated lives of
two to five years.
(g)Other Intangibles
The cost of product documentation, organization, patents and
trademark applications and license agreements is amortized over
the estimated useful lives of the assets, which range from three
to seventeen years, using the straight-line method.
(h)Income Taxes
The Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes," as of July 1, 1993 on a prospective basis (see note 7).
Under the provisions of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
In 1993, the Company accounted for income taxes in accordance with
the provisions of Accounting Principles Board Opinion No. 11.
(i)Product Warranties
Estimated costs related to product warranty are recorded at the time
of the sale of the product.
(2) Inventories
Inventories consist of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Finished products $ 403,512 27,375
Work in process 121,200 67,360
Raw materials and purchased components 1,046,906 811,020
------------- -----------
1,571,618 905,755
Less: progress billing (329,654) -
------------- ----------
Total inventory $ 1,241,964 905,755
============= ===========
</TABLE>
Inventory cost consists of the cost of raw materials and purchased
components, supplies, manufacturing labor and manufacturing overhead.
(3) Marketable Investment Securities
Marketable investment securities at June 30, 1995 consist of trading
securities at fair value of $400,000. As the fair value of the trading
securities at June 30, 1995 approximates cost, there are no unrealized
gains or losses included in earnings.
<PAGE>
3
IMTEC, Inc.
Notes to Financial Statements, Continued
<TABLE>
<CAPTION>
(4) Property and Equipment
Property and equipment consists of the following:
1995 1994
------------------------------ ------------------
Accumulated Accumulated
depreciation depreciation
and and
Cost amortization Cost amortization Lives
<S> <C> <C> <C> <C> <C>
Machinery, equipment and
tooling $ 2,595,203 1,809,061 2,327,591 1,575,080 3-10 years
Furniture and fixtures 439,638 291,892 347,869 245,822 5-7 years
Leasehold improvements 231,391 136,198 227,576 109,336 5-10 years
------------- ------------- ------------- -------------
$ 3,266,232 2,237,151 2,903,036 1,930,238
============= ============= ============= =============
</TABLE>
Depreciation and amortization expense amounted to $528,069, $520,973, and
$498,676 in 1995, 1994 and 1993, respectively. Included in
depreciation and amortization expense is amortization of computer
software cost of $73,950, $67,877, and $51,086, and amortization of
other intangibles of $85,736, $120,034, and $125,876 in 1995, 1994 and
1993, respectively.
(5) Other Accrued Liabilities
Other accrued liabilities consist of:
June 30
--------------------------
1995 1994
---- ----
Accrued warranty $ 289,906 87,107
Accrued settlement costs 207,063 184,017
Accrued medical 69,327 64,356
Other 235,576 76,950
----------- ---------
Total $ 801,872 412,430
=========== =========
(6) Short-term and Long-term Debt
TheCompany has a secured line of credit agreement in the amount of
$700,000, all of which is available at June 30, 1995. The line of
credit is secured by the Company's accounts receivable, inventory, and
property and equipment. The interest rate varies from time to time
with changes in the prime interest rate.
Long-term debt at June 30, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
Note payable, due October 29, 1997, interest at prime plus 1.19% (8.44%
at June 30, 1994) secured by accounts receivable, inventory, and
property and equipment, payable in monthly installments of $9,485
<S> <C> <C>
plus interest. $ - 15,305
Note payable, due December 1, 2000, interest at prime plus 1.00% (8.25%
at June 30, 1994) secured by accounts receivable, inventory, and
property and equipment, payable in monthly installments of $5,952
plus interest. - 458,333
Total long-term debt - 473,638
Less current installments - (86,734)
---------- ---------
Long-term debt, excluding current installments $ - 386,904
========== =========
</TABLE>
<PAGE>
4
IMTEC, Inc.
Notes to Financial Statements, Continued
The Company paid $39,603, $50,732, and $41,152, for interest on notes
payable, long-term debt, and capital lease obligations in the years
ended June 30, 1995, 1994 and 1993, respectively.
(7) Income Taxes
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal - current $ 353,887 (183,129) (5,900)
- deferred (71,153) (40,553) (1,300)
----------- ----------- -----------
282,734 (223,682) (7,200)
----------- ----------- -----------
State - current 93,663 907 5,000
- deferred (30,960) (5,823) -
----------- ----------- ----------
62,703 (4,916) 5,000
----------- ----------- -----------
$ 345,437 (228,598) (2,200)
=========== =========== ===========
</TABLE>
Total income tax expense (benefit) differs from the amount computed by
applying the statutory Federal income tax rate of 34% to pretax income
(loss). The computed amount and the items which make total income tax
expense (benefit) vary from it, are as follows:
<TABLE>
<CAPTION>
June 30,
1995 1994 1993
------------------------- ------------------------ -----------------------
Amount Percentage Amount Percentage Amount Percentage
<S> <C> <C> <C> <C> <C> <C>
Computed amounts $ 406,821 34.0% $ (373,985) (34.0)% $ (44,193) (34.0)%
State income taxes, net
of Federal income
tax effect 61,818 5.2 598 - 3,300 2.5
Change in the
beginning-of-the-year
balance of the
valuation allowance
for deferred tax
assets allocated to
income tax expense (134,486) (11.2) - - - -
Amortization of goodwill - - - - 3,433 2.6
Write-off of goodwill - - - - 22,640 17.4
Effect of limitation on
use of net operating
loss - - 60,520 5.5 - -
Effect of alternative
minimum tax - - 84,269 7.7 9,302 7.2
All other - net 11,284 .9 - - 3,318 2.6
----------- ------ ----------- ------- -------- ------
Income tax expense
(benefit) $ 345,437 28.9% $ (228,598) (20.8)% $ (2,200) (1.7)%
=========== ======= =========== ======= ======== ======
</TABLE>
<PAGE>
5
IMTEC, Inc.
Notes to Financial Statements, Continued
The Company paid $181,081, $2,409 and $60,171 for income taxes during the
years ended June 30, 1995, 1994, and 1993, respectively.
Forthe year ended June 30, 1995, the deferred income tax benefit of
$102,113 results from the changes in temporary differences for the
year. The tax effects of temporary differences that give rise to
deferred tax assets and deferred tax liabilities as of June 30, 1995
and 1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $ 40,356 23,692
Inventories, principally due to reserves for
obsolescence 43,589 61,591
Vacation accrual 11,390 8,852
Warranty accrual 115,788 34,791
Research and development credit - 28,035
Net operating loss carryforward - 44,992
AMT credit carryforward - 52,044
Other (12,717) 659
---------- ---------
Total gross deferred tax assets 198,406 254,656
Less valuation allowance - 134,486
---------- ---------
Net deferred tax assets 198,406 120,170
---------- ---------
Deferred tax liabilities:
Property, plant and equipment, principally due to
differences in depreciation methods 28,223 37,656
Prepaid expenses and other assets 21,649 26,620
Other intangible assets 45 9,518
---------- ---------
Total gross deferred tax liabilities 49,917 73,794
---------- ---------
Net deferred tax asset $ 148,489 46,376
========== =========
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the projected
future taxable income and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the
deferred tax assets are deductible, management believes it is more
likely than not the Company will realize the benefits of these
deductible differences as provided above in the net deferred tax
assets at June 30, 1995.
Theeffect of adopting Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" in fiscal 1994 did not have a
material impact on the Company's financial position or results of
operations.
<PAGE>
6
IMTEC, Inc.
Notes to Financial Statements, Continued
At June 30, 1995, the Company has fully utilized its net operating loss
carry forwards for federal income tax purposes of $89,948 which were
available to offset future federal taxable income, if any, through
2009. In addition, the Company has also used its available alternative
minimum tax credits of $52,044 which reduced the regular federal tax
liability.
(8) Leases
(a)Capital Leases
The Company leased certain computer equipment under a long-term
lease agreement. This lease was classified as a capital lease.
Property and equipment included the following leased property under
capital leases:
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Machinery, equipment and tooling $ 153,114 150,696
Less accumulated amortization (153,114) (145,197)
----------- -----------
$ - 5,499
=========== ===========
</TABLE>
Amortization of capital lease equipment is included in depreciation
expense.
(b)Operating Leases
The Company leases its facilities under lease agreements expiring in
2000 and 1995 which are classified as operating leases. The
lease for the main building is noncancellable by the Company
except through the exercise of an option to purchase the
property for the remaining principal and interest balance on the
Vermont Industrial Revenue bond held by the lessor. The lease
for the Bridge St. plant is noncancellable. The Company also
leases office equipment under short-term, cancelable operating
leases.
Future minimum rental payments under the noncancellable operating
leases for each of the years subsequent to June 30, 1995 are as
follows:
1996 $ 84,000
1997 54,000
1998 54,000
1999 54,000
2000 27,000
2001 and thereafter -
==========
Rental expense, under cancelable and noncancellable operating leases
amounted to $107,241, $117,938, and $122,371 for the years ended
June 30, 1995, 1994, and 1993, respectively.
(9) Employee Benefit Plan
During 1993, the Company established a 401(k) savings plan. The plan
covers all employees meeting certain eligibility requirements. In
1995, the Company contributed $14,360 to the plan. No contributions
were made during 1994 and 1993.
<PAGE>
7
IMTEC, Inc.
Notes to Financial Statements, Continued
(10) Stock Options and Warrants
(a)Stock Option Plans
The Company has three plans, the 1983 Incentive Stock Option Plan
which was adopted in August 1983, the 1985 Incentive Stock
Option Plan which was adopted in November 1984 and the 1993
Stock Option Plan which was adopted on August 19, 1993. These
plans provide for granting of options on common stock to
directors, officers and key employees. The options granted are
exercisable in four annual installments beginning one year after
the date of the grant and expire five to ten years after the
date of the grant, depending on stock ownership on the grant
date.
The following is a summary of outstanding options under the 1983, 1985 and
1993 Incentive Stock Option Plans at June 30, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
June 30,
---------------------------------------
1995 1994 1993
---- ---- ----
(In shares)
<S> <C> <C> <C>
Under option 219,400 252,499 171,499
Exercisable 83,150 100,875 130,875
Exercised during the year 51,599 47,500 1,250
Granted during the year 43,500 147,500 27,500
Canceled during the year 25,000 20,000 2,500
Available for option 69,061 87,561 16,061
</TABLE>
Price per share of shares under option was $1.336 to $8.50 at June
30, 1995, 1994 and 1993. Price per share of options exercised
during 1995 was $1.336 to $3.25 and $2.50 and $1.375 in 1994 and
$1.375 in 1993.
Also, the Company granted an option on 25,000 shares of its common
stock to a Director on November 15, 1990. The option was
exercisable on November 19, 1990 and annually thereafter in
5,000 share increments through January 31, 1995 at $3.00 per
share which was the approximate market value of the shares when
the Director agreed to join the Board. During 1995 all of these
options were exercised at an option price of $3.00.
Also, the Company granted an option on 25,000 shares of its common
stock to a Director on November 1, 1993. The option was
exercisable on November 18, 1993 and annually thereafter in
5,000 share increments through January 31, 1998 at $2.75 per
share which was the market value of the shares when the Director
agreed to join the Board. As of June 30, 1995 none of these
options have been exercised.
<PAGE>
8
IMTEC, Inc.
Notes to Financial Statements, Continued
(b)Stock Warrants
On August 12, 1985, the Company sold warrants to purchase 123,750
shares of common stock for a total of $750 to three of its
directors. These warrants were originally exercisable at $4.00
per share and expired July 14, 1990. On September 28, 1988, the
Directors approved modification of the terms of the warrants to
be exercisable at $1.375 per share. During 1989, 22,500 shares
of common stock were purchased under these warrants for $30,938.
During 1990, the Directors extended the expiration date to July
14, 1991. During 1991, the Directors extended the expiration
date to July 14, 1995. No shares were purchased under these
warrants during 1994. During 1995, 61,875 shares were purchased
under these warrants at $1.375 per share.
(11) Concentration of Sales
During 1995 and 1994, there were sales to one customer which were 10% or
more of annual sales. There were no sales to one customer which were
10% or more of annual sales in 1993.
Export sales aggregated approximately $1,703,641, $1,372,709, and
$1,533,000 in 1995, 1994 and 1993, respectively.
(12) Earnings Per Common Share
Primary earnings per share were computed by dividing net earnings by the
weighted average number of shares of common stock and common stock
equivalents outstanding during the year, if dilutive. Common stock
equivalents (stock options and warrants) are assumed to be exercised
when they are issued and the proceeds used to repurchase outstanding
shares of the Company's common stock at the average market price
during the period.
Thefully-diluted computation is performed using the same method as for
the primary computation, except that proceeds from exercise of stock
options and warrants are assumed to be used to repurchase outstanding
shares of the Company's common stock at the higher of the average or
June 30 market price.
Theaverage number of common shares and common share equivalents entering
into the calculation of primary and fully-diluted earnings per share
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Common shares 1,386,428 1,308,390 1,283,089
Options 75,047 52,648 52,481
Warrants 21,417 35,772 29,497
------------- ------------- --------------
Total for primary calculation 1,482,892 1,396,810 1,365,067
Options 21,922 9,244 -
Warrants 4,794 3,416 -
------------- ------------- -------------
Total for fully-diluted
calculation 1,509,608 1,409,470 1,365,067
============= ============= ==============
</TABLE>
<PAGE>
9
IMTEC, Inc.
Notes to Financial Statements, Continued
(13) Hot Stamp Assets
On March 7, 1990, the Company acquired certain assets, liabilities, and a
ten-year exclusive worldwide license to manufacture, market and sell
the products of Nevis Imaging Systems, Inc. in a transaction accounted
for as a purchase. The assets and license agreement were acquired at a
cost of $860,245; representing cash paid of $40,000, liabilities
assumed of $360,245 and the issuance of 92,000 shares of Imtec, Inc.
common stock valued at $5.00 per share. As a result of this
transaction, the Company had recorded intangible assets of $592,500
representing the license agreement acquired and $98,598 representing
goodwill. These intangible assets were being amortized over a ten-year
period. At June 30, 1993, the Company determined that the goodwill no
longer retained any value to the Company and, therefore, had written
off the unamortized balance of $66,589. At June 30, 1994, the Company
had determined that the license agreement, inventory, and equipment no
longer retained any value to the Company and, therefore has written
off the remaining unamortized balance of $385,386.
(14) Fourth Quarter Adjustments
At June 30, 1994, the Company's Board of Directors determined that it
would discontinue the Company's hot stamp business, first initiated in
March 1991 upon the Company's acquisition of substantially all of the
assets of Nevis Imaging Systems, Inc. ("Nevis").
Such determination was predicated upon the fact that Nevis' hot stamp
technology, licensed to the Company by Nevis, was no longer
commercially viable by reason of the emergence of newer technology in
the marketplace.
Thediscontinuance of the Company's hot stamp business, which accounted
for approximately 2% and 4% of the Company's net sales in its fiscal
years ended June 30, 1994 and 1993, respectively, resulted in a charge
against 1994 earnings of $385,386, primarily attributable to the
write-off of the Company's remaining hot stamp business assets.
<PAGE>
<TABLE>
<CAPTION>
Schedule II
IMTEC, INC.
Valuation and Qualifying Accounts
Years ended June 30, 1995, 1994, and 1993
Additions
Balance at Charged to
beginning costs and Charged to Additions Balance at
Description of year expenses other accounts (deductions) end of year
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended June 30, 1995 $ 59,320 16,305 - 25,417 101,042
Year ended June 30, 1994 $ 48,000 10,000 - 1,320 59,320
Year ended June 30, 1993 $ 40,000 17,346 - (9,346) 48,000
Reserve for obsolete inventory:
Year ended June 30, 1995 $ 193,029 248,000 - (331,895) 109,134
Year ended June 30, 1994 $ 4,274 229,312 - (40,557) 193,029
Year ended June 30, 1993 $ 18,988 31,902 - (46,616) 4,274
</TABLE>
<PAGE>
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in accountants nor have there been any
disagreements on accounting and financial disclosures during the twenty-four
months prior to June 30, 1995.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for hereunder has been omitted pursuant to
Paragraph G(3) of the General Instructions (the "Instructions") inasmuch as the
Company shall file definitive proxy materials containing such information with
the Securities and Exchange Commission prior to the expiration of 120 days
following the close of the Company's fiscal year which is the subject of this
Annual Report.
Item 11. EXECUTIVE COMPENSATION
The information called for hereunder has been omitted pursuant to the
Instructions inasmuch as the Company shall file definitive proxy materials
containing such information with the Securities and Exchange Commission prior to
the expiration of 120 days following the close of the Company's fiscal year
which is the subject of this Annual Report.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for hereunder has been omitted pursuant to the
Instructions inasmuch as the Registrant shall file definitive proxy materials
containing such information with the Securities and Exchange Commission prior to
the expiration of 120 days following the close of the Company's fiscal year
which is the subject of this Annual Report.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for hereunder has been omitted pursuant to the
Instructions inasmuch as the Registrant shall file definitive proxy materials
containing such information with the Securities and Exchange Commission prior to
the expiration of 120 days following the close of the Company's fiscal year
which is the subject of this Annual Report.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
(a) 1. Financial Statements :
Included in Part II of this report:
a. Balance Sheets, June 30, 1995 and 1994.
b. Statements of Operations for the years ended
June 30, 1995, 1994 and 1993.
c. Statements of Stockholders' Equity for the years ended
June 30, 1995, 1994 and 1993.
d. Statements of Cash Flows for the years ended
June 30, 1995, 1994 and 1993.
e. Notes to Financial Statements.
2. Financial Statement Schedules.
a. Report of Independent Certified Public Accountants.
b. Years ended June 30, 1995, 1994 and 1993.
(i) Schedule II - Valuation and Qualifying Accounts and
Reserves, years ended June 30, 1995, 1994 and 1993.
All other schedules have been omitted because of the
absence of conditions requiring them or because the
required information is shown in financial statements or
the notes thereto.
3. Exhibits
(a) Certificate of Incorporation as amended (1).
(b) By-Laws, as amended (1).
(c) The Exhibits required by 601 of Regulation S-K are set
forth in (3) (a) above.
(d) The financial statement schedules required by
Regulation S-K, which are excluded from the Annual
Report to Shareholders are set forth in (2) (a) above.
(b) Reports on Form 8-K
None
Footnotes
- ------------------------------
(1) Denotes document filed as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 2-86978) and incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of 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.
IMTEC, INC.
By:__/s/ Richard L. Kalich ________
Richard L. Kalich, President
By:__/s/ George S. Norfleet III ____
George S. Norfleet III, Secretary - Treasurer
Dated: September 26, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following person in the capacities and on the
dates indicated:
Signatures Title Date
/s/ Ralph E. Crump Chairman, Director September 7, 1995
- ---------------------------
Ralph E. Crump
/s/ James R. Williams Director September 7, 1995
- ---------------------------
James R. Williams
/s/ David C. Sturdevant Director September 7, 1995
- ---------------------------
David C. Sturdevant
/s/ Robert W. Ham Director September 7, 1995
- ---------------------------
Robert W. Ham
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
IMTEC, INC., EX-27, FDS FOR 10-K, JUNE 30, 1995
</LEGEND>
<CIK> 0000730045
<NAME> IMTEC, INC.
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 285727
<SECURITIES> 400000
<RECEIVABLES> 1741050
<ALLOWANCES> 101042
<INVENTORY> 1241964
<CURRENT-ASSETS> 3794871
<PP&E> 3266232
<DEPRECIATION> 2237151
<TOTAL-ASSETS> 5268176
<CURRENT-LIABILITIES> 1868617
<BONDS> 0
<COMMON> 14701
0
0
<OTHER-SE> 2199689
<TOTAL-LIABILITY-AND-EQUITY> 5268176
<SALES> 10272846
<TOTAL-REVENUES> 10272846
<CGS> 3939002
<TOTAL-COSTS> 5657545
<OTHER-EXPENSES> 3422147
<LOSS-PROVISION> 53280
<INTEREST-EXPENSE> 39603
<INCOME-PRETAX> 1196532
<INCOME-TAX> 345437
<INCOME-CONTINUING> 851095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 851095
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.56
</TABLE>
