<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______.
Commission File Number: 0-11586
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-0350710
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
810 LOMBARD STREET
PHILADELPHIA, PENNSYLVANIA 19147
(Address of principal executive offices) (Zip Code)
(215) 923-6850
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: NONE.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Indicate by check mark whether the registrant (1) has filed 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 such
shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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. [ ]
The company is unable to give an aggregate market value of the
Registrant's Common Stock due to the inactivity of the stock.
Indicate the number of shares outstanding of each of the issuers shares
of common stock, as of the latest practicable date: As of December 31st
1997, there were outstanding 12,760,140 shares of the Registrant's
Common Stock, $.005 par value.
Documents Incorporated by Reference: None
<PAGE> 2
PART I
ITEM 1. BUSINESS
General Development of Business.
At December 31, 1997, International Management & Research Corporation
("IMRC") through its wholly owned subsidiary IMRC Holdings Inc. (IMRCH)
owned 110,138,930 shares or 35.76% of Biosonics, Inc. common stock. As
of December 31, 1996, IMRCH owned 38.26% of Biosonics, Inc. common
stock. At December 31, 1995 and 1994, IMRC owned in excess of 50% of
Biosonics common stock, accordingly, Biosonics' financial statements
were included in the consolidated financial statements of IMRC. After
Biosonics, in 1996, increased its authorized shares and issued new
shares to numerous individuals, primarily in exchange for debt, and from
the conversion of preferred stock, IMRCH's ownership of common stock of
Biosonics decreased to less than 50%. Accordingly IMRC is no longer
able to consolidate with Biosonics' financial statements. Currently,
IMRC's only business is the ownership of the stock of Biosonics through
IMRCH. IMRC may pursue the acquisition of operating companies.
However, IMRC has an agreement with Biosonics in which Biosonics has the
right of first refusal for any proposal in the health care industry.
IMRC has not actively traded in the last several months. IMRC, when
traded, is over-the-counter on the NASD Bulletin Board.
Employees
As of December 31, 1997, the Company had one employee. Its only
employee is Jack Paller, its current president. If circumstances
warrant, IMRC may engage additional employees to help manage its
activities.
ITEM 2. PROPERTIES.
The Company's principal place of business is 810 Lombard Street,
Philadelphia, PA and the quarterly rent is $446, which is currently
being accrued as an expense.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
<PAGE> 3
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
<TABLE>
<CAPTION>
HIGH BID LOW BID
<S> <C> <C>
1997
First Quarter $ .01 $ .01
Second Quarter .125 .01
Third Quarter .125 .03125
Fourth Quarter .12 .04
1996
First Quarter .18 .035
Second Quarter .22 .0625
Third Quarter .17 .02
Fourth Quarter .04 .01
</TABLE>
The quotations set forth above were derived from National Quotation
Bureau LLC and reflect inter-dealer prices without mark-up, mark-down or
commissions, and may not necessarily represent actual transactions on
the OTC Bulletin Board. Currently there is no current active trading
market of the Company's stock. As of December 31, 1997, there were
approximately 1,303 record holders of the Company's Common Stock. The
Company has not, since its inception, declared any dividends.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997(1) 1996(1) 1995(1) 1994(1) 1993(1)
STATEMENT OF LOSS DATA:
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 0 $ 0 $ 62,506 $ 21,939 $ 30,578
Net expenses of development
stage subsidiary $ 0 $ 0 $526,689 $411,521 $322,879
NET LOSS ($83,124) ($ 52) ($456,835) ($485,718) ($401,958)
LOSS PER COMMON SHARE ($.01) ($.00) ($.03) ($.04) ($.03)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
BALANCE SHEET DATA: 1997(1) 1996(1) 1995(1) 1994(1) 1993(1)
<S> <C> <C> <C> <C> <C>
Working Capital (Deficit) ($ 449,949)($ 336,825)($3,076,655)($2,759,158)($2,278,275)
Total Assets $ 105,727 $ 106,588 $ 242,514 $ 329,549 $ 147,903
Total Liabilities $ 555,676 $ 473,413 $3,285,727 $3,066,409 $2,399,045
Shareholders' Deficit ($ 449,949)($ 366,825)($3,043,213)($2,736,860)($2,251,142)
</TABLE>
- -------------
(1) Years ended December 31, 1993 through December 31, 1995 include the
accounts of
Biosonics, Inc., of which IMRC through its wholy-owned subsidiary IMRCH owned
in excess
of 50% of Biosonics' common stock. Financial information for the year ended
December 31, 1996 and 1997 do not include Biosonics, Inc. financial statements.
<PAGE> 4
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Liquidity and Capital Resources
During 1997, Dr. Brenman who previously owned more than 5% of IMRC
Common Stock, divested himself in a private transaction to various
individuals, none of which own an aggregate of 5% of IMRC Common Stock.
During 1996, IMRCH converted its series B preferred stock of Biosonics
Inc. into 7,000,000 shares of common stock of Biosonics Inc. Also,
IMRCH transferred 550,000 shares of Biosonics' common stock held by it
to two outside consultants for certain advertising and public relations
services provided to Biosonics.
During 1993 and 1994, IMRC borrowed an aggregate of $335,000, $120,000
of which was pursuant to loans that were convertible into Biosonics
common stock owned by IMRCH, at $.01 and $.02 per share. With respect
to $215,000 of the loans, IMRCH agreed to issue to the lenders 3,000,000
shares of Biosonics common stock owned by IMRCH. These shares were
issued by IMRCH in 1996. In addition, during 1994, IMRCH raised
$190,161 through the sale of Biosonics common stock owned by IMRCH at a
range of $.02 to $.05 per share. In 1996, Biosonics assumed the
obligations of the IMRC loans totaling $335,000. In addition, Biosonics
assumed IMRC's obligation in connection with the $190,161 raised by IMRC
for the sale of Biosonics stock. Biosonics also assumed $68,207 in
loans and accrued interest owed to family members of the Company's
president by IMRC. These obligations were then settled by Biosonics
through the conversion of these liabilities into 15,368,820 shares of
Biosonics common stock.
The Company is a holding company. Aside from payment of salary to an
officer of the Company and certain overhead expenses, substantially all
of the consolidated results of operations in 1995 and 1994 relate to the
operations of Biosonics. As previously noted, the Company's 1997 and
1996 financial statements do not include the accounts of Biosonics. As
a holding company, the Company does not have any substantial assets
other than it's investment in the common stock of Biosonics, Inc. with
a market value of approximately $6.6 million at December 31, 1997.
In recent years, the Company has acted as the receiving and disbursement
agent for all cash receipts and disbursements for Biosonics. The
resulting receivable or payable, as the case may be, is reflected in the
Company's balance sheets and cash flow statements as advance to or from
affiliates. The Company expects to continue this arrangement through
1998.
Results of Operations
In 1997, IMRC had no operating activities except for certain services
provided in connection with IMRCH's holdings of Biosonics' common stock.
<PAGE> 5
The Company believes there will be no significant adverse impact from
inflation and changing prices on the Company's operations.
During 1996, IMRCH transferred certain shares of Biosonics common stock
holdings which resulted in a gain of $85,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of International Management & Research
Corporation are set forth in this report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information about the sole director and
officer of IMRC.
Jack Paller, age 69, has been President, Treasurer and a director of
IMRC since its inception in 1971. Currently, Mr. Paller also serves as
President and a director of IMRC Holdings, Inc. and serves as President,
Chief Executive Officer, and a director of Biosonics, Inc.
Directors of IMRC hold office for the ensuing year and until their
respective successors have been duly elected and qualified.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires IMRC's
officers and directors, and persons who own more than ten percent (10%)
of IMRC's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Such persons are
required to furnish IMRC with copies of all Section 16(a) forms they
file.
IMRC notes that IMRC Holdings, Inc. may have been required to file, and
has not filed, Forms 4 reporting certain of the transactions in IMRC's
Common Stock.
ITEM 11. EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME & PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)
<S> <C> <C> <C>
Jack Paller, President, Chairman 97 $ 42,000(1) --
and Chief Executive Officer 96 42,000(1) --
95 42,000(1) --
- ------------
<PAGE> 6
(1) Mr. Paller, the Company's sole director and executive officer, has
deferred the receipt of all of his salary every year from the year ended
December 31, 1990 through December 31, 1997, and Mr. Paller did not
receive or defer any other benefits or compensation for serving as an
executive officer of IMRC during those years. In his capacity as an
executive officer of Biosonics, Mr. Paller deferred his salary from
Biosonics for the years ended December 31, 1989 through 1997, including
$103,000 of deferred salary per year for the years ended December 31,
1995, 1996 and 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table lists the number of shares of IMRC Common Stock
beneficially owned by all persons known to IMRC to be beneficial owners
of more than 5% of IMRC Common Stock and by the sole director and
officer of IMRC and the percentage of all outstanding shares held by
such person:
Name of Beneficial Owner No. of Shares Percentage
Jack Paller (1) 5,131,660 40.2 %
- ------
(1) Mr. Paller's address is 260 New York Drive, Fort Washington,
Pennsylvania 19034
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
All of the shares of common stock of Biosonics' owned by IMRCH and Jack
Paller are subject to a securities restriction agreement which prevents
any sales by them of the Common Stock of Biosonics at less than $.05 per
share.
During 1996, IMRC converted its series B preferred stock of Biosonics
Inc. into 7,000,000 shares of common stock of Biosonics Inc. Also IMRC
transferred 550,000 shares of Biosonics' Common Stock held by it to two
outside consultants for certain advertising and public relations
services provided to Biosonics.
During the period of 1992 through 1994 IMRC borrowed $352,661 from
approximately 25 individuals. These loans were convertible into common
stock of Biosonics owned by IMRCH. The total number of shares issuable
upon conversion of all the loans was 15,368,820 shares of Biosonics
common stock. The proceeds of the loans were lent to Biosonics to use
for working capital, and none of the individuals making the loans were
officers or affiliates of the Company. In 1996 Biosonics and IMRC
entered into an agreement pursuant to which Biosonics would assume
responsibility for the repayment of all the money under these loans and
the issuance of the stock upon conversion of the loans in exchange for
the transfer by IMRCH to Biosonics of 15,368,820 shares of common stock
owned by it and canceling the indebtedness owed to IMRC by Biosonics.
<PAGE> 7
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON
FORM 8-K.
(A) Financial Statements & Exhibits
</TABLE>
<TABLE>
<CAPTION>
1. Financial Statements Page
<S> <C>
Auditors' Report F-1
Balance Sheets at December 31, 1996 and 1997 F-2
Statements of Operations for Each of the
Three Years in the Period Ended
December 31, 1997 F-4
Statements of Minority Interest and Changes
in Shareholders' Equity (Deficiency) for
each of the Three Years in the Period
ended December 31, 1997 F-6
Statements of Cash Flows for each of the
Three Years in the Period ended December
31, 1997 F-7
Notes to Financial Statements F-9
</TABLE>
2. All schedules have been omitted because they are not
applicable or the required information is show in the
consolidated financial statements or notes therein.
3. Exhibits
*3.1 Articles of Incorporation (Exhibit to Registrant's
Registration Statement on Form 10 ["Form 10"]).
*3.5 By-laws of Registrant, as amended. (Exhibit to
Registrant's Form 10)
*10.1 Agreement between Registrant and Biosonics with respect
to opportunities in the field of medical technology.
(Exhibit to Biosonics, Inc. Registration Statement on Form
S-1 (File No. 2-27024) [the "Form S-1"]
*10.7 Securities Restriction Agreement dated September 30, 1987
between Registrant and Biosonics, Jack and Sarah Paller, and
Henry S. Brenman. (Exhibit to 1987 Form 10-K).
27. Financial Data Schedule
(B) Reports on 8-k
The Registrant did not file any reports on Form 8-K during the
quarter ended December 31, 1997.
- --------
* Incorporated by reference.
<PAGE> 8
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant had duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL MANAGEMENT &
RESEARCH CORPORATION
BY: /S/JACK PALLER PRESIDENT
Date: 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
BY: /S/JACK PALLER
Jack Paller, President, Chairman
(Principal Executive Officer),
Treasurer (Principal Financial
Officer and Principal Accounting
Officer) and Director
Date: 1998
<PAGE> 9
INTERNATIONAL MANAGEMENT & RESEARCH
CORPORATION
* * *
December 1997, 1996 and 1995
<PAGE> 10
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
CONTENTS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
Page number
<S> <C>
Auditors' Report F-l & F-2
Consolidated Financial Statements:
Balance Sheets at December 31, 1997 and 1996 F-3
Statements of Operations for Each of the
Three Years in the Period Ended
December 31, 1997 F-4 & F-5
Statements of Minority Interest and Changes
In Shareholders' Deficiency F-6
Statements of Cash Flows for Each of the
Three Years in the Period Ended
December 31, 1997 F-7 & F-8
Notes to Consolidated Financial Statements F-9 through F-17
</TABLE>
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
Board of Directors
International Management & Research Corporation
We have audited the accompanying consolidated balance sheets of International
Management & Research Corporation as of December 31, 1997 and 1996, and the
related consolidated statements of operations, minority interest and changes
in shareholders'deficiency, and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
International Management & Research Corporation as of December 31, 1997 and
1996, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the financial statements, certain errors resulting
from the Company's development stage subsidiary not recording stock options
issued in 1995 were subsequently discovered by management. Accordingly, the
Company has restated its 1995 financial statements to conform with generally
accepted accounting principles.
/s/ Morris J. Cohen & Co., P.C.
MORRIS J. COHEN & CO., P.C.
Philadelphia, Pennsylvania
February 24, 1998
F-2
<PAGE> 12
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION
ASSETS
1997 1996
---------- ----------
<S> <C> <C>
Current assets
Cash $ 5,837 $ 7,138
Note receivable 37,000 37,000
Advances to affiliate 62,450 62,450
Other receivable 440
---------- ----------
Total assets $ 105,727 $ 106,588
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Accrued payroll and rent, officer $ 378,744 $ 334,960
Accounts payable and accrued expenses 60,326 60,326
Due to affiliate 116,606 78,127
--------- ---------
Total current liabilities 555,676 473,413
---------- ---------
Commitments and contingencies (Note 6)
Shareholders' deficiency
Common stock, $.005 par value,
50,000,000 shares authorized,
12,760,140 shares issued and
outstanding 63,801 63,801
Capital in excess of par value 1,072,812 1,072,812
Accumulated deficit ( 1,586,562) ( 1,503,438)
------------ ----------
( 449,949) ( 366,825)
Total liabilities and ------------ ----------
shareholders' deficiency $ 105,727 $ 106,588
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 13
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
General and administrative expenses $84,654 $100,157
--------- --------
Other income
Gain on sale of securities 85,000
Interest income 1,530 15,105
--------- --------
1,530 100,105
--------- --------
Net loss ($83,124) ($ 52)
========= =========
Loss per common share outstanding ($.01) ($.00)
======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 14
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (RESTATED)
Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Revenue
Sale of medical devices $ 62,506
Direct expenses
Cost of sales, medical devices 41,980
------------
Gross profit 20,526
------------
Other expenses
Expenses of development stage
subsidiary
Research and development costs 20,117
Professional fees 54,697
Other development stage
expenses 539,625
------------
Total expenses of development
stage subsidiary 614,439
General and administrative
expenses 113,842
------------
Total other expenses 728,281
------------
Investment and other income 13,652
------------
Loss before minority interest ( 694,103)
Minority interest in loss of
subsidiary 193,252
------------
Net loss ($500,851)
============
Loss per common share outstanding ($.04)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 15
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF MINORITY INTEREST AND
CHANGES IN SHAREHOLDERS' DEFICIENCY (RESTATED)
<TABLE>
<CAPTION>
Minority
Interest
<S> <C>
Balance at December 31, 1994 $ -0-
Issuance of preferred stock of
consolidated subsidiary 149,518
Stock options granted by
consolidated subsidiary 43,734
Net loss, year ended December 31, 1995 ( 193,252)
Balance at December 31, 1995
Adjustment for change in reporting entity(1)
Net loss, year ended December 31, 1996
Balance at December 31, 1996
Net loss, year ended December 31, 1997
Balance at December 31, 1997 $ -0-
</TABLE>
(1) The Company's ownership interest in Biosonics, Inc. was more than 50% until
September 1996. Accordingly, the accounts of Biosonics, Inc. were included in
the Company's consolidated financial statements through December 31, 1995,
however, they were not included in the Company's consolidated financial
statements in 1997 and 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE> 16
<TABLE>
<CAPTION>
Shareholders' Deficiency
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit Total
<S> <C> <C> <C> <C>
12,760,140 $63,801 $7,481,565 ($10,282,226) ($2,736,860)
150,482 150,482
44,016 44,016
( 500,851) ( 500,851)
12,760,140 63,801 7,676,063 ( 10,783,077) ( 3,043,213)
( 6,603,251) 9,279,691 2,676,440
( 52) ( 52)
12,760,140 63,801 1,072,812 ( 1,503,438) ( 366,825)
( 83,124) ( 83,124)
12,760,140 $63,801 $1,072,812 ($ 1,586,562) ($ 449,949)
</TABLE>
F-6
<PAGE> 17
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net loss ($83,124) ($ 52)
--------- ----------
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Changes in operating assets and
liabilities
Prepaid expenses and other
current assets ( 440) 4,968
Accrued payroll and rent, officer 43,784 48,994
Accounts payable and accrued
expenses 5,210
--------- ---------
43,344 53,962
--------- ---------
Net cash provided by (used in)
operating activities ( 39,780) 53,910
--------- ---------
Cash flows from investing activities
Increase in notes receivable 60,085
Advances from affiliate 38,479 40,248
--------- ---------
Net cash provided by investing
activities 38,479 100,333
--------- ---------
Cash flows from financing activities
Principal payments of note payable ( 231,100)
--------- ---------
Net cash used in financing activities ( 231,000)
--------- ---------
Decrease in cash ( 1,301) ( 76,757)
Cash, beginning 7,138 83,895
--------- ----------
Cash, ending $ 5,837 $ 7,138
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 18
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (RESTATED)
Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities
Net loss ($500,851)
----------
Adjustments to reconcile net loss to net
cash used in operating activities
Minority interest ( 193,252)
Depreciation and amortization 20,117
Common stock options issued by
subsidiary for services 87,750
Changes in operating assets and
liabilities
Accounts receivable ( 16,543)
Inventories 15,603
Prepaid expenses and other
current assets 8,901
Accounts payable and accrued expenses 197,718
---------
120,294
---------
Net cash used in operating activities ( 380,557)
---------
Cash flows from investing activities
Capital expenditures ( 31,261)
----------
Net cash used in investing activities ( 31,261)
----------
Cash flows from financing activities
Proceeds from issuance of notes payable 20,000
Increase in payments received for
unissued debentures and securities 1,600
Proceeds from issuance of subsidiary
preferred stock 300,000
----------
Net cash provided by financing activities 321,600
----------
Decrease in cash ( 90,218)
Cash, beginning 174,374
----------
Cash, ending $ 84,156
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 19
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 1997, 1996 and 1995
1. Nature of business and significant accounting policies
Business
International Management & Research Corporation (IMRC)(the Company) is a holding
Company with investments in Biosonics, Inc., a development stage corporation
involved in medical research.
Summary of significant accounting policies
Consolidation policy
At December 31, 1997 and 1996, IMRC, through its wholly-owned subsidiary - IMRC
Holdings, Inc., (IMRCH), owned 110,138,930 shares or 35.76% and 38.26%
respectively, of the common stock of Biosonics, Inc. Accordingly, for 1997 and
1996, the Company's investment is being accounted for using the equity method
(cost of $-0-, market value of approximately $6.6 million and $5.5 million at
December 31, 1997 and 1996 respectively). At December 31, 1995, IMRC owned more
than 50% of the common stock of Biosonics, Inc. and, accordingly, Biosonics,
Inc.'s financial statements are included in the 1995 consolidated financial
statements of IMRC. All intercompany balances and transactions have been
eliminated.
Stock ownership
The Company's president owns approximately 40% of the common stock of the
Company and 4% of the common stock of Biosonics, Inc.
Accounting estimates
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.
F-9
<PAGE> 20
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
1. Nature of business and significant accounting policies
(Continued)
Cash transactions
During 1997, 1996 and 1995 IMRC acted as the disbursing and receiving agent
for all
cash disbursements and receipts for Biosonics, Inc.
Loss per share
Loss per share was calculated based on the weighted average shares outstanding
of 12,760,140 for each of the years in the three-year period ended December 31,
1997.
Deferred income taxes
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax bases of the Company's assets and
liabilities.
Reclassifications
The 1996 and 1995 financial statements have been reclassified to conform with
the 1997 presentation.
2. Restatement of financial statements
The Company has restated its financial statements for the year ended December
31, 1995. This was necessary because the Company's development stage subsidiary
had granted stock options to non-employees in 1995 in exchange for various
services provided to the Company. The value of these options and the related
services received were not previously reflected in the Company's 1995 financial
statements.
F-10
<PAGE> 21
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
2. Restatement of financial statements (Continued)
The effect on the Company's financial statements as originally reported is as
follows:
<TABLE>
<CAPTION>
As reported As restated
<S> <C> <C>
Other development
stage expenses $451,875 $539,625
Net loss ( 456,835) ( 500,851)
Loss per common shares ($.03) ($.04)
</TABLE>
3. Advance to affiliate and due to affiliate
At December 31, 1997 and 1996, advance to affiliate and due to affiliate
represent unsecured, non-interest bearing advances, to and from Biosonics, Inc.
4. Shareholders' equity
The Company is subject to a securities restriction agreement with the
Pennsylvania Securities Commission which provides that it will not sell any of
its shares of Biosonics, Inc.'s common stock for less than $.05 per share. This
restriction also applies to certain controlling shareholders of Biosonics, Inc.
5. Income taxes
The Company and its wholly-owned subsidiary file a consolidated federal tax
return.
The Company has available at December 31, 1997, unused operating loss carry-
forwards which may provide future tax benefits expiring as follows:
<TABLE>
<CAPTION>
Year of Expiration Carryforwards
<S> <C>
2007 $ 3,000
2008 12,000
2009 19,000
2010 40,000
2011 34,000
---------
$108,000
</TABLE>
F-11
<PAGE> 22
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
5. Income taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax assets
at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net operating loss carryforwards $45,000 $25,000
Less valuation allowance 45,000 25,000
Net deferred tax asset $ -0- $ -0-
</TABLE>
SFAS No. 109 requires that the Company record a valuation allowance when it is
"more likely than not that some portion or all of the deferred tax assets will
not be realized." It further states that "forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years." As the ultimate utilization of net operating
loss carryforwards and tax credits depends on the Company's ability to generate
sufficient taxable income in the future, the losses in recent years make it
appropriate to record a valuation allowance.
6. Commitments and contingencies
Leases
The Company leases its office from an officer of the Company under a month-to-
month operating lease with lease payments aggregating $1,784 annually. Accrued
but unpaid rents related to this lease of $28,744 and $26,960 at December 31,
1997 and 1996, respectively, are included in accrued expenses.
Rent expense was $1,784, $1,784 and $35,645 for the years ended December 1997,
1996 and 1995, respectively.
F-12
<PAGE> 23
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
6. Commitments and contingencies (Continued)
Legal matters
Convertible debenture offering
In 1989 Biosonics, Inc. raised $207,000 through a public offering of its
11-1/2% convertible debentures. The Company terminated the offering prior to
completion. Debentures were not returned to the investors with the exception
of $4,000. Biosonics did offer investors the right to convert amounts paid for
the unissued debentures into the Company's common stock and $16,000 of said
amount was converted into 1,180,000 shares of common stock.
Unissued securities
During 1993 and 1994, IMRC borrowed an aggregate of $335,000, $120,000 of
which was pursuant to loans that were convertible into Biosonics common stock
owned by IMRCH, at $.01 and $.02 per share. With respect to $215,000 of the
loans, IMRCH agreed to issue to the lenders 3,000,000 shares of Biosonics common
stock owned by IMRCH. These shares were issued by IMRCH in 1996. In addition,
during 1994, IMRCH raised $190,161 through the sale of Biosonics common stock
owned by IMRCH at a range of $.02 to $.05 per share. In 1996, Biosonics
assumed the obligations of the IMRC loans totaling $335,000. In addition,
Biosonics assumed IMRC's obligation in connection with the $190,161 raised by
IMRC for the sale of Biosonics stock. Biosonics also assumed $68,207 in
loans and accrued interest owed to family members of the Company's president
by IMRC. These obligations were then settled by Biosonics through the con-
version of these liabilities into 15,368,820 shares of Biosonics common stock.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires officers,
directors and entities owning more than ten percent of a company's common stock
to file reports of changes in ownership with the SEC and to provide the company
with copies of such forms.
IMRCH may have been required to file and has not filed required forms
reporting the transactions relating to Biosonics common stock described above.
F-13
<PAGE> 24
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
6. Commitments and contingencies (Continued)
Other matters
IMRC has an agreement with Biosonics, Inc. in which Biosonics has the right of
first refusal on any proposal for acquisitions in the health care industry.
7. Supplemental disclosure of cash flow information
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Cash paid for
Interest $1,314 $61,869 $25,070
</TABLE>
Supplemental schedule of noncash financing activities
In 1996, the Company forgave notes and accrued interest receivable from
Biosonics, Inc. totaling $379,968 in exchange for Biosonics, Inc. assuming
liabilities of the Company.
8. Interest expense
Interest expense for the years ended December 1997, 1996, and 1995 was $1,314,
$46,153, and $99,490, respectively.
9. Transactions in stock of Biosonics, Inc.
During 1996, IMRCH converted its Series B preferred stock of Biosonics, Inc.
into 7,000,000 shares of common stock of Biosonics, Inc. Also, IMRCH recorded a
gain of $85,000 on the transfer of 550,000 shares of its Biosonics common stock
to consultants who had provided services to Biosonics, Inc.
F-14
<PAGE> 25
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
9. Transactions in stock of Biosonics, Inc. (Continued)
During 1993 and 1994, IMRC borrowed an aggregate of $335,000, $120,000 of
which was pursuant to loans that were convertible into Biosonics common stock
owned by IMRCH, at $.01 and $.02 per share. With respect to $215,000 of the
loans, IMRCH agreed to issue to the lenders 3,000,000 shares of Biosonics common
stock owned by IMRCH. These shares were issued by IMRCH in 1996. In addition,
during 1994, IMRCH raised $190,161 through the sale of Biosonics common stock
owned by IMRCH at a range of $.02 to $.05 per share. In 1996, Biosonics assumed
the obligations of the IMRC loans totaling $335,000. In addition, Biosonics
assumed IMRC's obligation in connection with the $190,161 raised by IMRC for
the sale of Biosonics stock. Biosonics also assumed $68,207 in loans and
accrued interest owed to family members of the Company's president by IMRC.
These obligations were then settled by Biosonics through the conversion of these
liabilities into 15,368,820 shares of Biosonics common stock.
In February 1995, the Company's development stage subsidiary granted to non-
employees common stock options for 10,000,000 shares, exercisable at $.01 per
share. These options were issued in exchange for various services performed on
the Company's behalf. Transfer of the shares, issued upon the exercise of the
options, will be restricted subject to registration requirements of the
Securities Act of 1933 or an exemption from such requirements such as Rule 144
of the SEC. The fair value of these options was estimated on the grant dates
using the Black-Scholes option-pricing model with the following assumptions
used:
<TABLE>
<CAPTION>
<S> <C>
Dividend yield 0%
Expected volatility 138%
Risk-free interest rate 6%
Expected life 2-4 years
Discount for lack of marketability 35%
Estimated fair value $87,750
</TABLE>
The estimated fair value of these options is included in other development stage
expenses in the accompanying financial statements.
F-15
<PAGE> 26
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
10. Segment information
As discussed in Note 1, in 1995, the Company operated principally in one
business segment in the United States, medical research. Identifiable
information is as follows:
<TABLE>
<CAPTION>
Medical Other
Research Corporate Activities
1995 1995
---------- -----------------
<S> <C> <C>
Revenues $ 62,506
Net loss before
minority interest ($609,485) ($ 84,618)
Total assets $133,650 $108,864
Depreciation and
amortization $ 20,117
Capital expenditures $ 31,261
</TABLE>
11. Investment in Biosonics, Inc.
Summarized financial information for this affiliate in 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Earnings data
Net sales $ 26,763 $ 40,774
Gross profit 4,124 10,566
Net loss ( 866,454) ( 777,397)
Balance sheet data
Current assets $ 132,872 $ 150,749
Noncurrent assets 22,251 23,438
Current liabilities 2,456,138 2,300,776
Shareholders' deficiency ( 2,301,015) ( 2,126,589)
</TABLE>
F-16
<PAGE> 27
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
11. Investment in Biosonics, Inc. (Continued)
Summarized financial data for the Company for 1995 restated to retroactively
reflect the use of the equity method for this subsidiary, is as follows:
<TABLE>
<CAPTION>
Earnings data for 1995
<S> <C>
Net sales $ -0-
Net loss ( 84,618)
Balance sheet data for 1995
Current assets $590,487
Noncurrent assets -0-
Current liabilities 957,260
Shareholders' deficiency ( 366,773)
</TABLE>
12. Quarterly results (Unaudited)
<TABLE>
<CAPTION>
Net
Gross Net Loss
Profit Income Per
Sales (Loss) (Loss) Share
-------- --------- --------- -------
<S> <C> <C> <C> <C>
1997 - 1st Quarter ($ 15,167) ($.00)
2nd Quarter ( 46,047) ( .01)
3rd Quarter ( 18,497) ( .00)
4th Quarter ( 3,413) ( .00)
---------- ------
Total ($ 83 124) ($.01)
1996 - 1st Quarter ($ 17,998) ($.00)
2nd Quarter ( 13,285) ( .00)
3rd Quarter 44,231 .00
4th Quarter ( 13,000) ( .00)
--------- ------
Total ($ 52) ($.00)
1995 - 1st Quarter $10,595 $ 3,618 ($237,227) ($.02)
2nd Quarter 11,931 3,833 ( 147,352) ( .01)
3rd Quarter 23,190 5,168 ( 60,128) ( .01)
4th Quarter 16,790 7,907 ( 56,144) ( .00)
------- ------- ---------- ------
Total $62,506 $20,526 ($500,851) ($.04)
F-17
<PAGE> 28
INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
12. Quarterly results (Unaudited) (Continued)
The following is a reconciliation of 1995 quarterly results (unaudited) as
originally reported in the Company's 1995 Form 10-Q filing, adjusted for the
issuance of stock options by Biosonics, Inc. which was not previously reported.
</TABLE>
<TABLE>
<CAPTION>
Originally As
Reported Adjustment Adjusted
<S> <C> <C> <C>
1995-1st Quarter
Net loss ($193,211) ($44,014) ($237,227)
Net loss
per share ($.01) ($.01) ($.02)
</TABLE>
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000740892
<NAME> INTERNATIONAL MANAGEMENT & RESEARCH CORPORATION
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 5,837
<SECURITIES> 0
<RECEIVABLES> 37,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 105,727
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 105,727
<CURRENT-LIABILITIES> 555,676
<BONDS> 0
0
0
<COMMON> 63,801
<OTHER-SE> (449,949)
<TOTAL-LIABILITY-AND-EQUITY> 105,727
<SALES> 0
<TOTAL-REVENUES> 1,530
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 84,654
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (83,124)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,124)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
