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, 1996
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(g) of the Act:
Class: Common
Exchange: NASDAQ SmallCap Market
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. August 21, 1996 closing bid and ask was 6.5 and 7.75. The aggregate
market value of the voting stock held by non-affiliates of the registrant was
$7,585,474.
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 August 22, 1996: 1,545,088
<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 markets high-performance labels, label material, ribbons
and laminates, and produces preprinted bar code labels for customers who prefer
outsourcing of label printing. Although the Company sells a broad variety of
label materials, the Company focuses on high performance label materials,
designed to perform in demanding environments. Sales of such labeling supplies
accounted for 56.5%, 50.7%, and 59.9% of the Company's revenues during fiscal
years 1996, 1995 and 1994, respectively.
The Company also markets bar code label printer/applicators and bar
code label printer/laminators. The printer/applicators print bar codes and
variable alpha numeric information onto pressure sensitive labels and
automatically applies the label in a single integrated process to a product or
package. These devices are typically used to automate information transfer and
labeling processes in a real time production or distribution environment. The
printer/laminators enable rapid automated printing of bar code and variable
information on labels with a laminated surface. These labels are often used in
environments where resistance to temperatures, chemicals and weather are valued.
These labeling systems are micro-processor driven and involve
proprietary software, label applicator elements and transport, cutting and
laminating devices. The systems often include scanners, detectors and printers
supplied by unaffiliated manufactures. Equipment sales accounted for 43.5%,
49.3% and 40.1% of the Company's revenue during fiscal years 1996, 1995 and
1994, 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; 3 sales management
offices in the Metropolitan areas of Chicago, IL, Philadelphia, PA, and Santa
Rosa, CA, 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.
Patents and Trademarks
During the current fiscal year the Company received no new patents. As
of June 30, 1996, the Company owned eight patents, expiring at various dates
ranging from 2001 to 2009, and eleven trademarks, respectively. Applications for
registration of trademarks in seven foreign countries were then pending.
Applications for four patents were also pending at June 30, 1996. The Company
does not believe the proprietary protection afforded by such patents and
trademarks is of material importance to its current or future operations or
prospects.
Warranty
The Company's personnel install its products and, if necessary, train
customers' 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 businesses in industries 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 1996, sales pursuant to a
single customer (United Parcel Service) accounted for approximately 13.2% of the
Company's revenues. This customer, which also accounted for 31% of the Company's
revenues during fiscal 1995, is not presently anticipated to account for greater
than 10% of the Company's revenues for its fiscal year ending June 30, 1997. No
other customer accounted for more than 10% of the Company's revenues during
fiscal year 1996, 1995 and 1994. Export sales aggregated approximately
$1,435,000 in 1996, $1,704,000 in 1995, and $1,373,000 in 1994.
Backlog
The aggregate backlog of firm orders for the Company's products as of
June 30, 1996 was approximately $2,228,000 as compared with $2,803,000 at June
30, 1995. Approximately $1,320,000 of the current backlog is for media supplies
with scheduled shipping dates over the next 12 months. The balance of the
current backlog ($908,000) is for equipment, 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.
Research and Development
The Company conducts on-going research and development to refine,
improve and enhance its product lines. Research and development expenses were
$625,149, $643,081 and $516,990 in the fiscal years ended June 30, 1996, 1995
and 1994, respectively. The research and development expenses were primarily
attributable to the Company's efforts with respect to its specialized bar code
labeling systems and proprietary materials.
Employees
As of August 30, 1996, the Company employed 69 persons on a full time
basis, including 6 employees in administration, 16 in marketing and sales, 10 in
research and development and 37 in service and manufacturing. .
None of the Company's employees are 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 $1,435,000 in fiscal 1996,
$1,704,000 in fiscal 1995 and $1,373,000 in fiscal 1994, representing 15.7%,
16.6% and 21.0%, 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,
1996 1995 1994
Pacific Rim 57% 49% 46%
Europe 18% 24% 20%
Canada 12% 19% 30%
Others 13% 8% 4%
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 19,100 square feet in facilities
at 33 Bridge Street, Bellows Falls, Vermont, which house additional
manufacturing and storage facilities. This lease expires December 31, 2000 and
the Company has the right to extend the lease for two terms of five years each.
Annual rent through December 31, 1996 is $67,680. Rent thereafter can be
adjusted for inflation.
The Company believes that these facilities are adequate for its present
and currently contemplated future operations.
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. This case
was appealed to the Vermont Supreme Court. On November 22, 1995, the Vermont
Supreme Court reversed the lower court settlement. The Supreme Court's decision
resulted in the Company's reversal of a $215,000 reserve, the majority of which
was originally expensed in June, 1994. The effect of the reversal represents
$.08 per share in earnings.
There is no material litigation currently 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, 1996.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The Company's Common Stock is quoted on Nasdaq-SmallCap Market tier of
The Nasdaq Stock 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 TRADE LOW TRADE
First Quarter $ 5 $ 3-3/4
Second Quarter 5 4-3/4
Third Quarter 11 5
Fourth Quarter 9-1/2 8-1/2
1996
First Quarter $ 14 $ 9
Second Quarter 13 10
Third Quarter 10-3/4 7-1/2
Fourth Quarter 8-3/4 6-1/4
(b) Holders
At August 30, 1996, there were approximately 256 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,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $9,114,405 $10,272,846 $ 6,529,755 $7,120,594 $6,330,497
Earnings (Loss)
Before Income Tax $1,176,569 $ 1,196,532 $(1,099,956) $ (129,979) $ 151,777
Income Tax
Expense (Benefit) $ 457,246 $ 345,437 $ (228,598) $ (2,200) $ 50,357
Net income
(loss) $ 719,323 $ 851,095 $ (871,358) $ (127,779) $ 101,420
Net income (loss) per common share
and common share equivalents
Primary:
Net income
(loss) $ .46 $ .57 $ (.62) $ (.09) $ .07
Fully diluted:
Net income
(loss) $ .46 $ .56 $ (.62) $ (.09) $ .07
At year end:
Total Assets $5,439,085 $5,268,176 $ 3,763,499 $ 4,407,415 $ 4,116,983
Long-term debt and
capital lease
obligation $ 0 $ 0 $ 386,904 $ 21,476 $ 148,813
- ----------------
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Fiscal year ended June 30, 1996, as compared to fiscal year ended June 30, 1995.
Revenues for the fiscal year ended June 30 1996, decreased approximately
11.3% over the fiscal year ended June 30, 1995.
Revenues from Bar Code labels and printing supplies were $5,146,749 for
the fiscal year ended June 30, 1996, as compared to $5,187,457 for the year
ended June 30, 1995, a decrease of 0.8%. The sale of Bar Code labels and
printing supplies represented approximately 56.5% of total revenues for fiscal
year 1996 as compared to 50.7% of total revenues for fiscal year 1995. There was
a backlog of $1,319,601 as of June 30, 1996 for Bar Code labels and printing
supplies, as compared to $956,402 for June 30, 1995.
Revenues from the sales and service of Industrial Bar Code Equipment
were $3,967,656 for the year ended June 30, 1996, down 21.5% when compared to
$5,051,666 for the year ended June 30, 1995. Industrial Bar Code Equipment
revenues represented 43.5% of total revenues in fiscal year 1996 compared to
49.3% of total revenues in fiscal year 1995. The decrease in bar code equipment
sales in fiscal year 1996, when contrasted with fiscal year 1995, is primarily
attributable to the completion, in October, 1995, of a contract with a single
customer. When this contract is removed from the revenues, the core equipment
business increased 49.3% from $1,854,071 in fiscal year 1995, to $2,768,240 in
fiscal year 1996. The increase in the core equipment business is a direct result
of increased sales and marketing activities and efforts to expand the Company's
distribution network. Backlog as of June 30, 1996, was $908,175 for Industrial
Bar Code Equipment as contrasted with $1,846,535 (of which $1,115,752
represented orders from the above mentioned single customer) for June 30, 1995.
This represents a net increase of 24.3% in backlog for the core equipment when
the single customer is excluded.
Cost of sales remained steady, at 55.1% of revenues, not withstanding
the Company's inability to secure volume discounts on purchased parts in fiscal
1996 as it had in fiscal 1995.
Selling, general and administrative expenses represented 26.0% of sales
in fiscal year 1996 and 27.1% of sales in fiscal year 1995. These expenses for
fiscal 1996 decreased by about $411,000 over fiscal 1995 levels. However, the
majority of the decrease is attributable to the Vermont Supreme Court's ruling
in favor of the Company in a wrongful termination suit, reversing a lower
court's earlier ruling in favor of the plaintiff, in the amount of $175,000 plus
interest. The Supreme Court's decision resulted in the Company's reversal of a
$215,000 reserve, the majority of which was originally expensed in June, 1994.
The effect of the reversal represents approximately $.08 per share in earnings.
Research and Development expenses represented 6.9% of sales in fiscal
year 1996 and 6.3% of sales in fiscal year 1995, though the actual costs
decreased by about $18,000.
There was no Interest Expense for fiscal year 1996 compared to $39,603
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.
Interest Income generated during fiscal year 1996 was $48,578, compared
to $11,925 during fiscal year 1995. This interest is earned on the balance of
cash and cash equivalents and marketable investment securities.
Income before taxes was $1,176,569 in fiscal year 1996 compared to
$1,196,532 in fiscal year 1995, reflecting an 1.7% decrease, compared to the
11.3% decrease in revenues.
Income tax expense was $457,246 for fiscal year ended June 30, 1996,
compared to $345,437 in fiscal year 1995. The difference is due primarily to an
increase in the effective tax rate from 28.9% for fiscal year 1995 to 38.9% of
income for fiscal year 1996. Fiscal year 1995 income tax expense was favorably
impacted by the utilization of a loss carryforward.
At June 30, 1996 and 1995, the Company had accrued $119,954 and
$289,906, respectively, against future product warranty claims based on
experience with customer claims. Warranty expense charged to operations amounted
to a benefit of $9,546 and an expense of $215,171 for the years ended June 30,
1996 and 1995, respectively. The 1995 warranty accrual included approximately
$140,000 of additional reserve due to estimated warranty costs related to
shipments of a new product during fiscal year 1995, and fiscal year 1996
reflects a reversal of that reserve of $127,000 during fiscal year 1996 as those
units came out of warranty.
Accounts receivable at June 30, 1996 decreased 21.9% when compared to
June 30, 1995, while revenues during the 4th quarter decreased 13.9% when
compared to the 4th quarter in the prior year . The decrease in shipments in the
fourth quarter contributed to a corresponding decrease in accounts receivable.
Account receivable days (the number of days to collect the receivable) decreased
from 58 days during fiscal year 1995 to 51 days during fiscal year 1996,
reflecting a better efficiency in collections. The Company considers all of
these amounts to be collectible.
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 [for fiscal year 1995] 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% in 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. [See the Management's Discussion and Analysis for fiscal year 1996.]
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.
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 pre-tax 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.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY:
During fiscal year 1996, the Company's principal source of liquidity
was cash flow from operations. The Company had no bank borrowings as of June 30,
1996. 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, 1996. 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 and short-term debt, including current installments, had been
paid in full as of June 30, 1995. This debt was paid entirely with funds
generated from operations.
During fiscal year 1996, the Company spent $427,461 on property and
equipment, computer software and other intangible assets, which is a small
decrease over the previous year's $494,297. The cash for these expenditures was
generated from the Company's operating activities.
The Company believes that its capital expenditures for fiscal year 1997
will increase by approximately 50% over the capital expenditures for fiscal
1996.
NEW ACCOUNTING STANDARDS:
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
which the Company will be required to adopt during fiscal year 1997. The Company
does not expect that the adoption of SFAS No. 121 will have a material affect on
the Company's financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") which is effective
for the Company in fiscal 1997. As permitted under SFAS No. 123, the Company has
elected not to adopt the fair valued based method of accounting for its
stock-based compensation plans, but will continue to account for such
compensation under the provisions of APB Opinion No. 25. The Company will comply
with the disclosure requirements of SFAS No. 123 in 1997.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Stockholders and Board of Directors
IMTEC, Inc.:
We have audited the financial statements of IMTEC, Inc. as listed in the index
included herein in Part IV, Item 14. In connection with our audits of the
financial statements, we also have audited the financial statement schedule
listed in the index included herein in Part IV, Item 14. 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, 1996
and 1995, and the results of its operations and its cash flows for each of the
years in the three-year period ended June 30, 1996, 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 2, 1996
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Balance Sheets
June 30, 1996 and 1995
Assets 1996 1995
-------- ---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 806,633 285,727
Marketable investment securities (note 3) 54,671 400,000
Accounts receivable, trade, less allowance for doubtful accounts of
$93,915 in 1996 and $101,042 in 1995 (note 6) 1,281,101 1,640,008
Inventories (notes 2 and 6) 1,512,037 1,241,964
Prepaid expenses, deferred charges and other current assets 134,650 78,683
Income tax refund receivable 87,086 -
Deferred income taxes (note 7) 96,330 148,489
-------------- --------------
Total current assets 3,972,508 3,794,871
-------------- --------------
Property and equipment (notes 4 and 6) 3,569,012 3,266,232
Less accumulated depreciation and amortization 2,573,562 2,237,151
-------------- --------------
995,450 1,029,081
-------------- --------------
Other assets:
Deposits 150,481 28,205
Computer software, less accumulated amortization of $390,229 in 1996
and $317,718 in 1995 109,008 161,160
Other intangibles, less accumulated amortization of $446,975 in 1996
and $362,535 in 1995 211,638 254,859
-------------- --------------
471,127 444,224
-------------- --------------
$ 5,439,085 5,268,176
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 430,420 636,721
Income taxes payable - 4,161
Accrued liabilities:
Salaries and wages 176,276 358,750
Commissions 45,899 67,113
Other (note 5) 417,030 801,872
-------------- --------------
Total current liabilities 1,069,625 1,868,617
Long-term debt - -
Total liabilities 1,069,625 1,868,617
-------------- --------------
Stockholders' equity:
Common stock - $.01 par value; authorized 5,000,000 shares, issued
and outstanding 1996, 1,545,088; 1995, 1,470,138 15,451 14,701
Additional paid-in capital 2,449,517 2,199,689
Retained earnings 1,904,492 1,185,169
-------------- --------------
Total stockholders' equity 4,369,460 3,399,559
-------------- --------------
Commitments (notes 8 and 14)
$ 5,439,085 5,268,176
============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Statements of Operations
Years ended June 30, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales $ 9,114,405 10,272,846 6,529,755
Cost of sales 5,029,394 5,657,545 4,041,222
--------------- --------------- --------------
Gross profit 4,085,011 4,615,301 2,488,533
Selling, general, and administrative expenses 2,367,674 2,779,066 2,637,759
Research and development expense 625,149 643,081 516,990
--------------- -------------- --------------
Operating earnings (loss) 1,092,188 1,193,154 (666,216)
--------------- -------------- --------------
Other income (deductions):
Interest income 48,578 11,925 -
Gain (loss) on disposal of property and equipment
and other assets 35,803 31,056 2,378
Interest expense - (39,603) (50,732)
Loss on disposal/write-off of hot stamp assets
(note 13) - - (385,386)
--------------- -------------- --------------
84,381 3,378 (433,740)
--------------- -------------- --------------
Earnings (loss) before income taxes 1,176,569 1,196,532 (1,099,956)
Income tax expense (benefit) (note 7) 457,246 345,437 (228,598)
--------------- -------------- --------------
Net earnings (loss) $ 719,323 851,095 (871,358)
=============== ============== ==============
Earnings (loss) per common share and common share equivalents (note 12):
Primary $ .46 .57 (.62)
====== ===== =====
Fully-diluted $ .46 .56 (.62)
====== ===== =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Statements of Stockholders' Equity
Years ended June 30, 1996, 1995 and 1994
Common stock Addi-
tional
Number paid-in Retained
of shares Amount capital earnings Total
<S> <C> <C> <C> <C> <C>
Balance at 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 at 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 at June 30, 1995 1,470,138 14,701 2,199,689 1,185,169 3,399,559
Net earnings - - - 719,323 719,323
Tax benefit from exercise of
stock options - - 73,614 - 73,614
Common stock issued 74,950 750 176,214 - 176,964
------------- --------- ------------- ------------- -------------
Balance at June 30, 1996 1,545,088 $ 15,451 2,449,517 1,904,492 4,369,460
============= ========= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
IMTEC, INC.
Statements of Cash Flows
Years ended June 30, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings (loss) $ 719,323 851,095 (871,358)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment and other assets 532,744 528,069 520,973
Gain on disposal of property and equipment and
other intangible assets (35,803) (31,056) (2,378)
Loss on disposal/write-off of hot stamp assets - - 385,386
Deferred income taxes 52,159 (102,113) (46,376)
Tax benefit from exercise of stock options 73,614 84,706 -
Decrease (increase) in accounts receivable 358,907 (606,456) 242,767
(Increase) decrease in inventories (270,074) (336,209) 187,688
Decrease (increase) in marketable investment
securities 345,329 (400,000) -
(Increase) in prepaid expenses, deferred charges
and other assets (55,967) (838) (13,427)
(Increase) decrease in income tax refund
receivable (87,086) 177,602 (177,602)
(Increase) in deposits (122,276) (7,998) (9,157)
(Decrease) increase in accounts payable (206,301) 242,566 (128,639)
(Decrease) increase in income taxes payable (4,161) 4,161 (3,829)
(Decrease) increase in accrued liabilities (588,530) 695,529 262,322
------------- -------------- -------------
Net cash provided by operating activities 711,878 1,099,058 346,370
------------- -------------- -------------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 59,525 50,719 6,733
Expenditures for property and equipment, computer
software and other intangible assets (427,461) (494,297) (491,593)
------------- -------------- -------------
Net cash used in investing activities (367,936) (443,578) (484,860)
------------- -------------- -------------
Cash flows from financing activities:
Proceeds from issuance of note payable to bank - 201,847 748,750
Principal payments on note payable to bank - (351,071) (1,058,721)
Proceeds from issuance of long-term debt - - 500,000
Principal payments on long-term debt - (473,638) (155,488)
Principal payments under capital lease obligations - (6,171) (13,516)
Proceeds from issuance of common stock 176,964 255,653 76,563
------------- -------------- -------------
Net cash provided by (used in) financing
activities 176,964 (373,380) 97,588
------------- -------------- -------------
Net increase (decrease) in cash 520,906 282,100 (40,902)
Cash and cash equivalents at beginning of year 285,727 3,627 44,529
------------- -------------- -------------
Cash and cash equivalents at end of year $ 806,633 285,727 3,627
============= ============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
IMTEC, INC.
Notes to Financial Statements
June 30, 1996, 1995 and 1994
(1) Description of the Company's Business and Summary of Significant
Accounting Policies
Description of the Company's Business
IMTEC, Inc. (the "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. The Company conducts its marketing and
sales efforts primarily through its in-house sales staff, 3 sales
offices in different metropolitan areas in the United States and
throughout Canada, Latin America, Europe and the Far East through
resellers and distributors.
Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared on an
accrual basis. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(b) Revenue Recognition
Product sales, including sales under contract, are recorded when the
products are shipped or in accordance with customer agreements.
(c) 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.
(d) Marketable Investment Securities
Marketable investment securities at June 30, 1996 consist of state
bonds 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" during 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.
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
(Continued)
<PAGE>
2
IMTEC, Inc.
Notes to Financial Statements, Continued
(f) Property and Equipment
Property and equipment are carried at cost. Depreciation, including
amortization of leasehold improvements and capital lease assets,
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 betterment's are capitalized.
Deduction is made for retirements resulting from renewals or
betterment's.
(g) 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 estimated
future revenues or the straight-line method using estimated
lives of two to five years.
(h) 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.
(i) Income Taxes
The Company accounts for income taxes using the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to temporary
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. 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.
(j) Product Warranties
Estimated costs related to product warranties are recorded at the
time of the sale of the product.
(k) Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable
and accrued expenses approximate fair value because of the short
maturity of these instruments.
(2) Inventories
Inventories consist of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Finished products $ 39,299 403,512
Work in process 97,310 121,200
Raw materials and purchased components 1,375,428 1,046,906
------------- --------------
1,512,037 1,571,618
Less progress billing - (329,654)
------------- --------------
Total inventory $ 1,512,037 1,241,964
============= ==============
</TABLE>
(Continued)
<PAGE>
3
IMTEC, Inc.
Notes to Financial Statements, Continued
(3) Marketable Investment Securities
Marketable investment securities at June 30, 1996 consist of state bonds
due October 1, 1998 which are classified as trading securities. Their
amortized cost of $54,671 approximates fair value at June 30, 1996;
therefore, there are no unrealized gains or losses included in income.
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 income.
(4) Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ----------------------------
Accumulated Accumulated
depreciation depreciation Estimated
and and Useful
Cost amortization Cost amortization Lives
Machinery, equipment and
<S> <C> <C> <C> <C> <C>
tooling $ 2,766,871 2,057,233 2,595,203 1,809,061 3-10 years
Furniture and fixtures 474,807 346,297 439,638 291,892 5-7 years
Leasehold improvements 327,334 170,032 231,391 136,198 5-10 years
------------- ------------- ------------- -------------
$ 3,569,012 2,573,562 3,266,232 2,237,151
============= ============= ============= =============
</TABLE>
Depreciation and amortization expense amounted to $532,744, $528,069 and
$520,973 in 1996, 1995 and 1994, respectively. Included in
depreciation and amortization expense is amortization of computer
software cost of $72,511, $73,950 and $67,877, and amortization of
other intangibles of $84,441, $85,736, and $120,034, in 1996, 1995 and
1994, respectively.
(5) Other Accrued Liabilities
Other accrued liabilities consist of:
June 30
-----------------------
1996 1995
---- ----
Accrued warranty $ 119,954 289,906
Accrued medical 120,441 69,327
Accrued settlement costs - 207,063
Other 176,635 235,576
------------ ----------
Total $ 417,030 801,872
============ ==========
(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, 1996. The line of
credit is secured by the Company's accounts receivable, inventories,
and property and equipment. The interest rate varies from time to time
with changes in the prime interest rate.
TheCompany paid $0, $39,603, and $50,732, for interest on notes payable,
long-term debt, and capital lease obligations in the years ended June
30, 1996, 1995 and 1994, respectively.
(Continued)
<PAGE>
4
IMTEC, Inc.
Notes to Financial Statements, Continued
(7) Income Taxes
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
June 30,
---------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal - current $ 320,237 353,887 (183,129)
- deferred 40,406 (71,153) (40,553)
----------- ----------- -----------
360,643 282,734 (223,682)
----------- ----------- -----------
State - current 84,850 93,663 907
- deferred 11,753 (30,960) (5,823)
----------- ----------- -----------
96,603 62,703 (4,916)
----------- ----------- -----------
$ 457,246 345,437 (228,598)
=========== =========== ===========
</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,
1996 1995 1994
------------------------- ------------------------ ------------------------
Amount Percentage Amount Percentage Amount Percentage
<S> <C> <C> <C> <C> <C> <C>
Computed amounts $ 400,033 34.0% $ 406,821 34.0% $ (373,985) (34.0)%
State income taxes, net
of Federal income
tax effect 56,000 4.8 61,818 5.2 598 -
Change in valuation
allowance for
deferred tax assets - - (134,486) (11.2) - -
Effect of limitation on
use of net operating
loss - - - - 60,520 5.5
Effect of alternative
minimum tax - - - - 84,269 7.7
All other - net 1,213 .1 11,284 .9 - -
----------- ------ ----------- ------- ----------- -----
Income tax expense
(benefit) $ 457,246 38.9% $ 345,437 28.9% $ (228,598) (20.8)%
=========== ====== =========== ======= =========== ======
</TABLE>
The Company paid $422,720, $181,081, and $2,409 for income taxes during
1996, 1995 and 1994, respectively.
(Continued)
<PAGE>
5
IMTEC, Inc.
Notes to Financial Statements, Continued
For the year ended June 30, 1996, the deferred income tax expense of
$52,159 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, 1996
and 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $ 37,510 40,356
Inventories, principally due to reserves for
obsolescence 26,446 43,589
Vacation accrual 11,273 11,390
Warranty accrual 44,444 115,788
Property, plant and equipment, principally due to
differences in depreciation methods 7,203 -
Total gross deferred tax assets 126,876 211,123
Deferred tax liabilities:
Prepaid expenses and other assets 16,871 21,649
Other intangible assets 4,783 45
Property, plant and equipment, principally due to
differences in depreciation methods - 28,223
Other 8,892 12,717
----------- -----------
Total gross deferred tax liabilities 30,546 62,634
----------- -----------
Net deferred tax asset $ 96,330 148,489
=========== ===========
</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 during 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.
(8) Leases
(a) Capital Leases
The Company leased certain computer equipment under a long-term
lease agreement which expired in 1995. Machinery, equipment and
tooling of $153,114 had been fully depreciated as of June 30,
1995. There were no new capital leases entered into during 1996.
(b) Operating Leases
The Company leases its facilities under lease agreements expiring in
2000 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 Street plant is noncancellable. The Company also leases
office equipment under short-term, cancelable operating leases.
(Continued)
<PAGE>
6
IMTEC, Inc.
Notes to Financial Statements, Continued
Future minimum rental payments under the noncancellable operating
leases for each of the years subsequent to June 30, 1996 are as
follows:
1997 $ 121,680
1998 121,680
1999 121,680
2000 94,680
2001 33,840
-----------
$ 493,560
Rental expense under cancelable and noncancellable operating leases
amounted to $104,272, $107,241, and $117,938 during 1996, 1995
and 1994, respectively.
(9) Employee Benefit Plan
During 1993, the Company established a 401(k) savings plan. The plan
covers all employees meeting certain eligibility requirements. The
Company contributed $52,225 and $14,360 to the plan during 1996 and
1995, respectively. No contributions were made during 1994.
(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, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
June 30,
---------------------------------------
1996 1995 1994
---- ---- ----
(In shares)
<S> <C> <C> <C>
Under option 135,700 219,400 252,499
Exercisable 54,700 83,150 100,875
Exercised during the year 74,950 51,599 47,500
Granted during the year 23,000 43,500 147,500
Canceled during the year 31,750 25,000 20,000
Available for option 77,811 69,061 87,561
</TABLE>
Price per share of shares under option was $1.375 to $8.50 at June
30, 1996 and $1.336 to $8.50 at June 30, 1995 and 1994. Price
per share of options exercised was $1.375 to $3.25 in 1996,
$1.336 to $3.25 in 1995, and $1.375 to $2.50 in 1994.
(Continued)
<PAGE>
7
IMTEC, Inc.
Notes to Financial Statements, Continued
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.
Also, the Company granted an option on 25,000 shares of its common
stock to a Director on November 1, 1993. The option is
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, 1996, none of
these options have been exercised.
(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 1996, 1995 and 1994, there were sales to one customer which
accounted for 10% or more of total sales.
Export sales aggregated approximately $1,435,000, $1,704,000, and
$1,373,000 in 1996, 1995 and 1994, 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
the June 30 market price.
(Continued)
<PAGE>
8
IMTEC, Inc.
Notes to Financial Statements, Continued
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>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Common shares 1,509,533 1,386,428 1,308,390
Options 64,596 75,047 52,648
Warrants - 21,417 35,772
------------- ------------- --------------
Total for primary calculation 1,574,129 1,482,892 1,396,810
Options - 21,922 9,244
Warrants - 4,794 3,416
------------- ------------- --------------
Total for fully-diluted
calculation 1,574,129 1,509,608 1,409,470
============= ============= ==============
</TABLE>
(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, wrote off the
unamortized balance of $66,589. At June 30, 1994, the Company
determined that the license agreement, inventory, and equipment no
longer retained any value to the Company and, therefore, wrote off the
remaining unamortized balance of $385,386.
(14) Commitments
At June 30, 1996, the Company had an outstanding capital expenditure
purchase commitment of approximately $310,000. A deposit of
approximately $95,000 has been made on the purchase and has been
recorded in deposits at June 30, 1996.
(Continued)
<PAGE>
<TABLE>
<CAPTION>
Schedule II
IMTEC, INC.
Valuation and Qualifying Accounts
Years ended June 30, 1996, 1995, and 1994
Additions
Balance at Charged to
beginning costs and Charged to Additions Balance at
Description of year expenses other accounts (deductions) end of year
Allowance for doubtful accounts:
<S> <C> <C> <C> <C>
Year ended June 30, 1996 $ 101,042 6,000 - (13,127) 93,915
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
Reserve for obsolete inventory:
Year ended June 30, 1996 $ 109,134 85,358 - (127,406) 67,086
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
</TABLE>
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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, 1996.
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 8-K
(a) 1. Financial Statements :
Included in Part II, Item 8, of this report:
(a) Report of Independent Auditors
(b) Balance Sheets, June 30, 1996 and 1995.
(c) Statements of Operations for the years ended June 30,
1996, 1995 and 1994.
(d) Statements of Stockholders' Equity for the years ended
June 30, 1996, 1995 and 1994.
(e) Statements of Cash Flows for the years ended June 30,
1996, 1995 and 1994.
(f) Notes to Financial Statements.
2. Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts and
Reserves, years ended June 30, 1996, 1995 and 1994.
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) Consent of KPMG Peat Marwick LLP
(d) The Exhibits required by 601 of Regulation S-K are set
forth in (3) (a) above.
(e) The financial statement schedule required by
Regulation S-K, which is excluded from the Annual
Report to Shareholders is set forth in (2) above.
(b) Reports on Form 8-K
None
- ------------------------------
(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 , 1996
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 16, 1996
---------------------------
Ralph E. Crump
/s/ Robert W. Ham Director September 16, 1996
---------------------------
Robert W. Ham
/s/ David C. Sturdevant Director September 16, 1996
---------------------------
David C. Sturdevant
<PAGE>
EXHIBIT 23
The Board of Directors
IMTEC, Inc.
We consent the incorporation by reference in the registration statements (Nos.
33-62361 and 33-00666) on Form S-8 of IMTEC, Inc. of our report dated August
2,1996, relating to the balance sheets of IMTEC, Inc. as of June 30, 1996 and
1995, and the related statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1996, and
the schedule of valuation and qualifying accounts, which report appears in the
June 30, 1996 annual report on Form 10-K of IMTEC, Inc.
/s/KPMG Peat Marwick LLP
Albany, New York
September 26, 1996
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IMTEC, INC., EX-27, FDS FOR 10-K, JUNE 30, 1996
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<NAME> IMTEC, INC.
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