<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM l0-K
(Mark One)
/X/ANNUAL REPORT PURSUANT TO SECTION l3 OR l5(d) OF THE SECURITIES EXCHANGE ACT
OF l934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-12573
ASPEN IMAGING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-0724829
(State of Incorporation) (I.R.S. Employer Identification No.)
3830 Kelley Avenue, Cleveland, Ohio 44114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 881-5300
Securities registered pursuant to Section l2(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section l2(g) of the Act:
Common Stock, Par Value $.00l Per Share
(Title of class)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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. [x]
At September 25, 1995, the aggregate market value of the common shares
held by non-affiliates of the registrant (based upon the average of the bid
and asked prices of the Common Stock), was approximately
$1,832,486.
As of September 25, l995, 3,988,756 shares of Common Stock were
outstanding.
Documents Incorporated by Reference Form l0-K Reference
None
The exhibit index begins on page 33 of this Form l0-K.
1.
<PAGE> 2
PART I
ITEM 1. BUSINESS
Aspen Imaging International, Inc. (the "Company") manufactures and
distributes disposable inked cartridge and spool ribbons for impact
printing devices, toner for laser toner cartridges and laser engine
printers, and bulk toner for laser printers. Additionally, the Company
markets various other supply items including print bands and its
AspenGuideR, the definitive computer printer industry compatibility guide
which provides cross-reference information concerning ribbons, fax,
laser, copier and other related supplies.
The Company's executive offices are located at 3830 Kelley Avenue,
Cleveland, Ohio 44114, telephone (216) 881-5300, and its sales offices
are located at 1500 Cherry Street, Suite B, Louisville, Colorado 80027,
telephone (303) 666-5750.
The Company is engaged in business in one industry segment: the
manufacture and distribution of supplies for impact and non-impact
printing devices.
Most of the Company's ribbon products are manufactured by
contractors, some of which use component parts produced on molds owned by
the Company. Toner products are manufactured by the Company's Aspen
Toner manufacturing subsidiary located in Tullytown, Pennsylvania,
approximately 25 miles north of Philadelphia, and are sold as bulk toner
or in kits.
The Company's products are sold primarily through distributors who
resell the products to end-users sometimes utilizing their own labeling.
The Company markets its products in all 50 states and in over 25 foreign
countries using telemarketing, direct mail and other forms of advertising.
Because of declining sales and gross margins and the impending
expiration of the Company's bank line of credit, the Company's
independent auditor's report for the year ended June 30, 1992 included a
modification with respect to the ability of the Company to continue
operating as a going concern. The Company's Board of Directors
determined that the Company might not be able to remain independent and
began seeking a strategic partner. The Company also sought ways to
reduce expenses to become more competitive. Until November, 1991, the
Company had designed and manufactured most of its products in-house and
employed approximately 375 persons. In November, 1991, the Company
shifted production of some of its ribbon products to a Mexican contractor
and down-sized its internal production. By June 30, 1993, the Company
was producing approximately 60% of its ribbons in Mexico. In April,
1993, the Company also began importing ribbon products produced in
China. During the fiscal year ended June 30, 1994, the Company shifted
production of its ribbons from its Mexican contractor to domestic
contractors.
2.
<PAGE> 3
In July, 1993, the Company entered into a strategic alliance with
Buckeye Business Products, Inc. ("Buckeye"), now a Division of Bobbie
Brooks, Incorporated ("Brooks"), which made a cash investment in the
Company, allowing the Company to substantially eliminate its working
capital loans. Buckeye began working with the Company's management to
continue efforts already underway aimed at returning the Company to
profitability (See Item 13, Certain Relationships and Related
Transactions). These efforts resulted in the elimination of unprofitable
products (primarily organic photoconductors - OPC drums) from the
Company's product lines, the sale of unused and under-utilized assets,
the sale of the Company's building, and substantial additional reduction
in the Company's staffing requirements.
The Company continues to manufacture and distribute ribbon and toner
products, but intends to explore possible acquisitions. The Company
continues to explore the possibility of a merger, sale of assets, or
other similar transaction with its strategic partner.
The computer printer supplies industry, which includes ribbon
products, toner products, and other supply items, is intensely
competitive. The Company believes that its shift from in-house
production of ribbon products to more efficient domestic and imported
sources will allow it to remain competitive.
The Company sells most of its products under its "Aspen Ribbons" and
"AspenGuide" United States trademarks. The Company's success is not
dependent on the protection of patents, trademarks, or licensing
agreements with its distributors. While certain original equipment
manufacturers have patented certain design or functioning features of
ribbon cartridges, patents have not had a significant impact on the
ability of the Company to copy an existing ribbon cartridge.
As of June 30, 1995, the Company had 28 full-time employees.
Approximately 21.2% of the Company's sales are to customers in
foreign countries. These sales are made using letters of credit, sight
drafts, payment-in-advance or credit on account.
ITEM 2. PROPERTIES
The Company leases approximately 9,100 square feet of office space in
Louisville, Colorado and approximately 5,000 square feet of factory,
distribution and office space in Brooks' Cleveland, Ohio facility.
Aspen Toner leases approximately 12,000 square feet of
manufacturing/warehouse space in a small industrial park in Tullytown, PA.
3.
<PAGE> 4
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company
is a party or of which any of its properties is the subject and no such
proceedings are known to the Company to be contemplated by governmental
authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 10, 1995, the Company held its Annual Meeting of
Stockholders. At the Meeting, the Stockholders elected five Directors to
serve for a term commencing April 10, 1995 and continuing until the next
Annual Meeting of Stockholders or until their respective successors are
duly elected and qualified. Glenn E. Corlett, William A. Dillingham,
Harold L. Inlow, Robert H. Kanner and Stephen R. Kalette were elected to
serve as Directors of the Company for such term.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(a) Principal Market or Markets.
The Company's Common Stock is traded over-the-counter and quoted on
NASDAQ under the symbol "ARIB".
The following table sets forth the NASDAQ range for high and low bid
quotations for the Company's security, as reported by NASDAQ, for the
periods indicated. Quotations are interdealer prices which do not
include retail markups, markdowns or commissions and do not necessarily
represent actual transactions.
Quarter Ended High Low
------------------ ------- --------
September 30, 1993 $1 5/8 $1
December 31, 1993 $1 1/4 $ 7/8
March 31, 1994 $1 5/16 $1 1/16
June 30, 1994 $1 3/32 $ 3/8
September 30, 1994 $ 13/16 $ 5/8
December 31, 1994 $1 1/8 $ 5/8
March 31, 1995 $ 30/32 $ 5/8
June 30, 1995 $ 13/16 $ 11/16
(b) Holders.
There were approximately 500 stockholders of record as of
September 25, 1995.
4.
<PAGE> 5
(c) Dividends.
The Company has not paid dividends on its Common Stock in recent
years and does not anticipate paying dividends on its Common Stock in the
forseeable future. Subject to the foregoing, the payment of dividends on
Common Stock will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data with
respect to the Company and its subsidiary and is qualified in its
entirety by reference to the consolidated financial statements and notes
thereto.
(All numbers shown in 000's except share data and ratios)
Selected Statement of Operations Data
<CAPTION>
Years ended June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Revenues $ 7,270 $11,875 $13,997 $17,127 $17,620
Net (loss) income: (721) (1,768) (1,013) (1,318) 12
Net (loss) income
per Common Share $ (.17) $ (.43) $ (.32) $ (.41) $ .00
Weighted average
number of shares 4,168,104 4,159,479 3,192,356 3,192,356 3,480,210
<CAPTION>
Selected Balance Sheet Data
Years ended June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total Assets $ 7,389 $ 8,964 $11,568 $14,100 $14,858
Long-Term Debt - 852 1,367 1,350 1,854
Stockholders' Equity 6,290 7,027 7,171 8,184 9,502
Per Common Share $ 1.54 $ 1.68 $ 2.25 $ 2.56 $ 2.98
Shares Outstanding
at year end 4,075,356 4,192,356 3,192,356 3,192,356 3,192,356
</TABLE>
5.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Comparison of Fiscal Year ended June 30, 1995 with Fiscal Year ended June
30, 1994.
The Company continues to reduce its product offerings and focus on its
traditional ribbon business for impact printers, particularly ribbons for
which the Company has molds, and on its toner product lines for laser
printers. The reduction in sales and the reduction in inventory levels
from 1994 to 1995 are primarily the result of the elimination of
unprofitable products from the Company's product line and a continuing
deterioration in the sale of the Company's core products.
Because the Company no longer required its 85,000 square foot facility in
Colorado, the facility was sold during fiscal 1995 for an amount
approximating net book value and the proceeds used to retire debt. Cash
and cash equivalents, short term investments and marketable securities
increased from 1994 to 1995 primarily as the result of the sale of the
Company's facility and further reduction in inventory levels.
Receivables decreased as a result of the reduction in sales.
Gross profit decreased slightly from 21.5% for the year ended June 30,
1994 to 20.8% for the year ended June 30, 1995 primarily due to the
Company expensing of approximately $144,000 to cost of sales for
variences resulting from the underabsorption of overhead. These
variances from the Company's standard costs were the result of the
Company's efforts to reduce inventory levels to those more appropriate to
its current rate of sales and sales dropping below levels which could
fully absorb the Company's normal overhead costs. Although the Company
continues to reduce its cost of sales, underabsorbed overhead will
continue until the Company achieves sufficient sales to fully absorb
overhead.
The Company has reduced its ongoing selling, general and administrative
costs by $930,000 from 1994 to 1995 in an attempt to bring such costs in
line with the Company's current rate of sales.
Interest expense decreased in 1995 due to the elimination of debt.
In the year ended June 30, 1995 the Company recorded severence and post
employment costs resulting from the elimination of four administrative
employees, including the Company's former President, who retired in
December, 1994, but will continue to receive compensation through 1996.
6.
<PAGE> 7
Comparison of Fiscal Year ended June 30, 1994 with Fiscal Year ended
June 30, 1993.
In July, 1993, the Company sold Buckeye 1,000,000 newly issued shares
of Common Stock for $1.65 per share, aggregate $1,650,000. During the
year ended June 30, 1994, the Company made decisions to utilize its
assets in a more productive manner in an effort to return the Company to
profitability. As a result of this change in direction, the Company
eliminated unprofitable products (primarily organic photoconductors - OPC
drums) from the Company's product lines, sold unused and under-utilized
assets, entered into an agreement to sell the Company's building, and
made further reductions in the Company's staffing levels. This resulted
in an approximately $1,500,000 charge in the year ended June 30, 1994.
The Company's employee levels were reduced from approximately 150 at
June 30, 1993 to approximately 45 at June 30, 1994. The Company no
longer required its approximately 84,000 square foot facility in
Colorado, the sale of which was completed in October, 1994, reducing
occupancy costs. The Company reduced its bank debt to approximately
$1,000,000 at June 30, 1994, from approximately $2,800,000 at June 30,
1993. The Company increased its cash to approximately $1,785,000 from
approximately $110,000 at June 30, 1993. The proceeds from the sale of
the building were used to eliminate all outstanding bank debt.
Although sales were down by over $2,000,000 in the year ended
June 30, 1994 from the year ended June 30, 1993, gross profit percentage
increased from 12.5% at June 30, 1993 to 21.5% at June 30, 1994 as a
result of the foregoing factors as well as the decrease in research &
development costs brought about by the decreased need for research &
development in ribbon products.
Selling, general and administrative costs decreased by approximately
$340,000 in the year ended June 30, 1994 from the year ended June 30,
1993, as a result of lower staffing levels and decreased sales, but this
decrease was offset by the write-off of an uncollectible note receivable
of approximately $527,000 due from an insolvent unaffiliated third party.
Interest expense decreased due to lower debt levels.
7.
<PAGE> 8
Liquidity and Capital Resources.
The investment in the Company by Buckeye Business Products, Inc., a
Division of Bobbie Brooks, Incorporated ("Buckeye") in 1993 allowed the
Company to utilize its assets in a more productive manner in an effort to
return the Company to profitability.
The Company used Buckeye's investment to eliminate the Company's
working capital debt and the relationship with Buckeye allowed the
Company to sell its building, eliminate all long-term debt, and
substantially reduce staffing levels. This has resulted in a reduction
in the Company's losses and cash requirements, notwithstanding the
continuing sales deterioration that began several years ago.
On February 15, 1995, the Company announced that it would purchase,
from time to time in the open market, up to 750,000 shares of its stock.
Through September 25, 1995, the Company has repurchased 203,600 of its
shares at an aggregate purchase price of approximately $151,296.
The Company's current ratio was 5.4 to 1 at June 30, 1995 compared to
4.4 to 1 at June 30, 1994. The Company has $2,870,575 in cash and cash
equivalents and $1,514,113 in marketable securities and other short-term
investments and no debt at June 30, 1995. Accordingly, the Company
believes that its capital resources are more than sufficient to support
its current and planned levels of operations and its announced stock
repurchase.
8.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited Consolidated Financial Statements
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
June 30, 1995
9.
<PAGE> 10
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Aspen Imaging International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Aspen
Imaging International, Inc. and subsidiaries as of June 30, 1995 and 1994
and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended
June 30, 1995. Our audit also included the financial statement schedule
listed in the index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.
We conducted our audit 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 audit
provides 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 Aspen Imaging International, Inc. and subsidiaries at
June 30, 1995 and 1994, and the consolidated results of their operations
and their cash flows for each of the two years in the period ended
June 30, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
September 8, 1995
Akron, Ohio
10.
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Aspen Imaging International, Inc.
and subsidiaries for the year ended June 30, 1993. Our audit also
included the financial statement schedule for the year ended June 30,
1993, listed in the Index at 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 audit.
We conducted our audit 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 audit
provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Aspen
Imaging International, Inc. and subsidiaries for the year ended June 30,
1993 in conformity with generally accepted accounting principles. Also,
in our opinion, such financial statement schedule, when considered in
relation to the basic 1993 consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note B to the consolidated financial statements, the
Company changed its method of accounting for income taxes for fiscal 1993.
DELOITTE & TOUCHE LLP
September 24, 1993
Denver, Colorado
11.
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<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,870,575 $ 1,784,846
Short-term investments 526,213 --
Marketable securities--Note C 987,900 --
Receivables (less allowances of $25,000
and $75,000 for doubtful accounts) 747,644 1,201,544
Inventories -- Note D 725,703 1,798,115
Prepaid expenses and other current assets 44,385 21,873
----------- -----------
TOTAL CURRENT ASSETS 5,902,420 4,806,378
PROPERTY AND EQUIPMENT
Leasehold improvements 140,457 80,724
Machinery and equipment 1,091,902 1,951,718
Molds 2,994,750 3,028,555
Office equipment and vehicles 322,261 1,282,297
----------- -----------
4,549,370 6,343,294
Less accumulated depreciation
and amortization 3,218,863 4,594,799
----------- -----------
1,330,507 1,748,495
BUILDING AND LAND HELD FOR SALE -- 2,155,000
NOTES RECEIVABLE 18,800 60,209
OTHER ASSETS, NET -- Note B 137,764 194,110
----------- -----------
TOTAL ASSETS $ 7,389,491 $ 8,964,192
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
12.
<PAGE> 13
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--CONTINUED
<CAPTION>
June 30, June 30,
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 671,163 $ 696,828
Accrued salaries and payroll expenses 428,379 244,116
Current maturities of long-term debt -- 144,065
------------ ------------
TOTAL CURRENT LIABILITIES 1,099,542 1,085,009
LONG-TERM DEBT -- Note E -- 852,305
STOCKHOLDERS' EQUITY -- Note F
Preferred Stock, $.001 Par Value;
authorized, 1,000,000 shares;
no shares issued -- --
Common Stock, $.001 par value;
4,192,756 issued and 4,075,356
outstanding at June 30, 1995 and
4,192,356 shares outstanding
at June 30, 1994 4,192 4,192
Capital in excess of par value 4,807,151 4,807,151
Unrealized gains on investments
available for sale 78,809 --
Retained earnings 1,494,140 2,215,535
------------ ------------
6,384,292 7,026,878
Treasury stock at cost,
117,000 shares at June 30, 1995 (94,343) --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 6,289,949 7,026,878
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 7,389,491 $ 8,964,192
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
13.
<PAGE> 14
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended June 30,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE
Net sales $ 7,018,498 $ 11,742,366 $ 13,969,839
Other 251,485 132,528 27,448
------------ ------------- -------------
7,269,983 11,874,894 13,997,287
COST AND EXPENSES:
Cost of products sold 5,558,588 9,220,426 12,223,605
Selling, general and
administrative 2,010,427 2,940,078 2,755,447
Interest 16,535 116,703 270,554
Restructuring costs -- -- 365,000
Severance post-employment costs
from the elimination of
administrative personnel 533,576 -- --
Charge related to elimination
of products and product lines -- 1,505,607 --
8,119,126 13,782,814 15,614,606
------------- ------------- -------------
LOSS BEFORE INCOME TAX BENEFIT (849,143) (1,907,920) (1,617,319)
INCOME TAX BENEFIT -- Note G (127,748) (140,000) (604,000)
------------- ------------- -------------
NET LOSS $ (721,395) $ (1,767,920) $ (1,013,319)
============= ============= =============
NET LOSS PER COMMON SHARE $ (.17) $ (0.43) $ (0.32)
============= ============= =============
WEIGHTED AVERAGE SHARES 4,168,104 4,159,479 3,192,356
============= ============= =============
<FN>
See notes to consolidated financial statements.
</TABLE>
14.
<PAGE> 15
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Year Ended June 30,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ 4,192 $ 3,187,334 $ 4,245,796
Retirement of treasury stock -- -- (1,058,462)
Sale of stock, net -- 1,624,009 --
Change from shares with no par value
to par value of $.001 per share -- (4,807,151) --
------------ ------------ ------------
BALANCE AT END OF YEAR 4,192 4,192 3,187,334
------------ ------------ ------------
CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of year 4,807,151 -- --
Change from shares with no par value
to par value of $.001 per share -- 4,807,151 --
------------ ------------ ------------
BALANCE AT END OF YEAR 4,807,151 4,807,151 --
------------ ------------ ------------
TREASURY STOCK
Balance at beginning of year -- -- (1,058,462)
Purchase of treasury stock (94,343) -- --
Retirement of treasury stock -- -- 1,058,462
------------ ------------ ------------
BALANCE AT END OF YEAR (94,343) -- --
------------ ------------ ------------
RETAINED EARNINGS
Balance at beginning of year 2,215,535 3,983,455 4,996,774
Net loss (721,395) (1,767,920) (1,013,319)
------------ ------------ ------------
BALANCE AT END OF YEAR 1,494,140 2,215,535 3,983,455
------------ ------------ ------------
UNREALIZED GAINS ON INVESTMENTS
AVAILABLE FOR SALE 78,809 -- --
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 6,289,949 $ 7,026,878 $ 7,170,789
============ ============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
15.
<PAGE> 16
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended June 30,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (721,395) $(1,767,920) $(1,013,319)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 593,992 684,388 1,087,526
Provision for doubtful accounts 86,240 65,000 71,000
(Gain) loss on disposal of assets (40,488) (60,112) 17,295
Deferred income tax benefit -- (140,000) (604,000)
Charge related to elimination
of products and product lines -- 1,505,607 --
Changes in assets and liabilities:
Receivables 367,660 252,718 139,675
Inventories 1,072,412 1,078,861 915,343
Prepaid expenses and other current assets (22,512) 139,879 24,760
Accounts payable and accrued expenses (25,666) (256,491) (317,989)
Accrued salaries and payroll expenses 184,263 (235,250) 53,685
Refundable income tax -- -- 388,707
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,494,506 1,266,680 762,683
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property,
plant and equipment 2,259,101 141,373 20,230
Additions to property, plant and equipment (187,955) (86,473) (181,186)
Change in notes receivable 41,409 546,259 (8,807)
Purchase of investments (1,435,304) -- --
Change in other assets 4,685 18,683 27,332
NET CASH PROVIDED BY ------------ ----------- ------------
(USED IN) INVESTING ACTIVITIES 681,936 619,842 (142,431)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit agreement -- (981,806) (759,694)
Sale of common stock, net -- 1,624,009 --
Purchase of Treasury Stock (94,343) -- --
Proceeds from long-term debt -- -- 337,734
Payment of long-term debt (996,370) (854,176) (336,376)
------------ ------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (1,090,713) (211,973) (758,336)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 1,085,729 1,674,549 (138,084)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,784,846 110,297 248,381
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,870,575 $ 1,784,846 $ 110,297
SUPPLEMENTAL INFORMATION:
Interest Paid $ 16,535 $ 113,265 $ 309,483
Taxes Paid $ -- $ -- $ --
<FN>
See notes to consolidated financial statements.
</TABLE>
16.
<PAGE> 17
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE A--ORGANIZATION AND STRATEGIC ALLIANCE WITH BUCKEYE
Aspen Imaging International, Inc. (the "Company") manufactures and markets
imaging supplies for impact and non-impact printing devices. The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries, Aspen Toner Corp., a manufacturer of laser toner, and Aspen
Ribbons International, Inc., an interest-charge Domestic International Sales
Corporation ("DISC"). All material intercompany accounts and transactions
have been eliminated.
During the last several years, increased competition in the Company's
primary product lines, ribbons and laser toner, and lack of new product
opportunities led to the decline in sales and gross margins. The Company had
also unsuccessfully attempted to enter several new markets with computer
printer-related product lines. In an effort to reduce expenses to become more
competitive, the Company shifted production of some of its ribbon product to a
Mexican contractor and down-sized its internal production. The Company also
began importing ribbon products from China.
In July, 1993, the Company entered into a strategic alliance with Buckeye
Business Products, Inc., a Division of Bobbie Brooks, Incorporated ("Buckeye")
a manufacturer and distributor of computer data processing supplies. Buckeye
purchased 1,000,000 newly-issued shares of the Company's common stock at $1.65
per share (aggregate $1,650,000), allowing the Company to substantially
eliminate its working capital loans.
The Company's management began working with Buckeye's to continue efforts
already underway aimed at returning the Company to profitability. The Company
shifted production of its ribbons from its Mexican contractor to Buckeye,
eliminated unprofitable products from the Company's product lines, sold unused
and under-utilized assets, entered into an agreement to sell the Company's
building, and further reduced its staffing levels. As a result of these
items, the Company recorded a charge in the year ended June 30, 1994 of
$1,505,000 (approximately $1,355,000 related to the write-down of assets to
net realizable value and approximately $150,000 related to severance). In
addition, in the year ended June 30, 1994, the Company wrote off approximately
$527,000 related to a note receivable from an insolvent third party. The
Company had advanced amounts to this party for the development of a new
product line which the Company had intended to sell.
On February 24, 1994, the Company changed its state of incorporation from
Colorado to Delaware and changed its common stock from one without par value
to one with a par value of $.001 per share.
In the year ended June 30, 1995, the Company recorded severance and post
employment costs of $533,576 resulting from the elimination of administrative
personnel.
17.
<PAGE> 18
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--ORGANIZATION AND STRATEGIC ALLIANCE WITH BUCKEYE--CONTINUED
The Company continues to explore the possibility of a merger, sale of
assets, or other similar transaction with its strategic partner.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
For purposes of cash flows, the Company considers all highly liquid
instruments purchased with a maturity of three months or less to be cash
equivalents.
The Company grants credit to its customers generally in the form of
short-term trade accounts receivable. The credit worthiness of customers
is evaluated prior to the shipment of inventory, and management believes
there is no significant concentration of credit risk.
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets which
range from 3 to 10 years.
Other assets include $123,871 and $170,300 at June 30, 1995 and 1994,
respectively, of formulas for the production of toner, net of accumulated
amortization of $201,129 and $154,700, respectively. Formulas are
amortized using the straight-line method over seven years.
The Company recognizes sales when product is shipped.
The Company adopted Statement of Accounting Standards No. 109
"Accounting for Income Taxes" (SFAS No. 109) effective July 1, 1992. At
the date of adoption of SFAS No. 109, there was no material effect on the
results of operations.
Loss per common share is computed on the weighted average number of
shares outstanding during the respective years. The effect of outstanding
options was antidilutive to the weighted average shares calculation for
1995, 1994 and 1993.
Certain prior amounts have been reclassified to conform with the
current year presentation.
18.
<PAGE> 19
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C--MARKETABLE SECURITIES
The following is a summary of marketable securities available for sale
at June 30, 1995:
Gross Estimated
Unrealized Fair
Cost Gains Value
--------- ----------- ---------
Equity securities $ 499,488 $ 16,412 $ 515,900
Foreign government securities 409,603 62,397 472,000
--------- ----------- ---------
$ 909,091 $ 78,809 $ 987,900
========= =========== =========
The cost and estimated fair value of debt securities at June 30, 1995,
by estimated maturity, are shown below. Expected maturities will differ
from contractual maturities because the issuers of the securities may have
the right to prepay obligations without prepayment penalties.
Estimated
Fair
Cost Value
--------- ---------
Due after five years $ 409,603 $ 472,000
Equity securities 499,488 515,900
--------- ---------
$ 909,091 $ 987,900
========= =========
NOTE D--INVENTORIES
June 30,
1995 1994
----------- -----------
Raw materials and
component parts $ 324,703 $ 737,282
Finished goods, including
goods purchased for resale 401,000 1,060,833
----------- -----------
$ 725,703 $ 1,798,115
=========== ===========
Because of the nature of the manufacturing process, work in process is
not significant.
19.
<PAGE> 20
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E--LONG-TERM DEBT
Long-term debt at June 30, 1994 consisted entirely of Industrial
Development Revenue Bonds ("IDRB"). The Company financed its original
manufacturing facility in 1984 and its expansion in 1986 through two IDRBs
issued by the City of Lafayette. The 1984 IDRB, $1,250,000 original
principal, bearing interest at 10% and maturing in 1999, and the 1986 IDRB,
$600,000 original principal, bearing interest at 104.5% of prime and
maturing in 2001, were both discharged upon the sale of the building on
October 3, 1994. The proceeds of the sale of the building were used to
retire all outstanding debt.
20.
<PAGE> 21
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F--STOCKHOLDERS' EQUITY
The Company has three stock option plans. Under an incentive plan
adopted in 1984, there were 10,000 shares of common stock reserved for
exercise at June 30, 1995. Under a non-qualified plan adopted in 1985,
there were 37,500 shares of common stock reserved for exercise at June 30,
1995. Under a non-qualified plan adopted in 1988, there were 145,400
shares of common stock reserved for exercise at June 30, 1995.
Additionally, in the year ended June 30, 1994, an option to purchase
200,000 shares at $1.65 was granted to the President in connection with an
employment agreement.
Under the terms of all plans, options are granted at a price not less
than the fair market value of the Company's common stock at the date of
grant. Options outstanding under the 1988 plan are exercisable at a rate
of one-twelfth per quarter over three years, beginning at date of grant.
Stock option activity under the plans is summarized as follows:
Number of Option Price
Shares Per Share
---------- --------------
Outstanding at July 1, 1992 810,105 $1.38 - $2.27
Granted 35,000 1.38
Cancelled/forfeited/expired (75,335) 1.38 - 2.06
---------- -------------
Outstanding at July 1, 1993 769,770 $1.38 - $2.27
Granted 410,000 1.38 - 2.06
Cancelled/forfeited/expired (307,470) 1.38 - 2.27
---------- -------------
Outstanding at June 30, 1994 872,300 $1.38 - $2.27
Granted 0 0
Cancelled/forfeited/expired (479,400) $1.38 - $2.27
---------- -------------
Outstanding at June 30, 1995 392,900 $1.38 - $2.06
========== =============
All of the options outstanding at June 30, 1995 are currently
exercisable and no additional options may be granted under the 1984, 1985
or 1988 plans.
21.
<PAGE> 22
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G--INCOME TAXES
The Company adopted SFAS No. 109 effective July 1, 1992. SFAS No. 109
is an asset and liability approach that, among other provisions, requires
the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the
Company's financial statements and tax returns. In estimating future tax
consequences, SFAS No. 109 generally considers all expected future events
other than enactments or changes in the tax law or rules.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities, for
financial reporting purposes, and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets and
liabilities as of June 30 are as follows:
Federal Deferred Taxes
1995 1994
----------- -----------
Deferred tax assets:
Net operating loss carryforwards
and credits $ 653,600 $1,037,500
Difference between book and tax
assets -- 206,000
Inventory and accounts receivable
reserves 59,300 71,500
Nondeductable accruals 332,300 45,600
----------- -----------
Total deferred tax assets 1,045,200 1,360,600
Deferred tax liabilities:
Tax over book depreciation 313,800 695,600
Deferral of DISC income 88,100 166,000
Other 13,000 9,900
----------- -----------
Total deferred tax liabilities 414,900 871,500
----------- -----------
Net deferred tax assets 630,300 489,100
Valuation allowance for deferred
tax assets (630,300) (489,100)
----------- -----------
Net deferred taxes $ -- $ --
=========== ===========
22.
<PAGE> 23
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G--INCOME TAXES--CONTINUED
State & Local Deferred Taxes
1995 1994
----------- -----------
Deferred tax assets:
Net operating loss carryforwards
and credits $ 111,200 $ 55,800
Difference between book and tax
assets -- 20,000
Inventory and accounts receivable
reserves 5,800 6,900
Nondeductable accruals 32,300 4,400
----------- -----------
Total deferred tax assets 149,300 87,100
Deferred tax liabilities:
Tax over book depreciation 30,500 67,500
Deferral of DISC income 8,600 16,100
Other 1,300 1,000
----------- -----------
Total deferred tax liabilities 40,400 84,600
----------- -----------
Net deferred tax assets 108,900 2,500
Valuation allowance for deferred
tax assets (108,900) (2,500)
----------- -----------
Net deferred taxes $ -- $ --
=========== ===========
Management does not believe that the realization of these future tax
benefits for net operating loss carryforwards, investment tax credit
carryforwards, and alternative minimum tax credit carryforwards is "more
likely than not" and therefore the Company has provided a valuation allowance
equal to the net deferred tax assets.
At June 30, 1995, the Company had available, net operating loss
carryforwards of approximately $1,773,000 for Federal income tax purposes.
Utilization by the Company is subject to limitations based upon the Company's
future income. The loss carryforwards, if not used, will expire as follows:
$1,472,000 in 2008, and $301,000 in 2009.
23.
<PAGE> 24
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G--INCOME TAXES--CONTINUED
The income tax provision (benefit) is as follows:
Liability Method Deferred Method
1995 1994 1993
----------- ----------- ---------------
Income taxes currently
payable (refundable):
Federal $ (127,748) $ -- $ --
State -- -- --
----------- ----------- ---------------
$ (127,748) $ -- $ --
Deferred income taxes -- (140,000) (604,000)
----------- ----------- ---------------
Total income tax (benefit) $ (127,748) $ (140,000) $ (604,000)
=========== =========== ===============
The provision for income taxes varies from the statutory federal income
tax rate as follows:
Year Ended June 30,
1995 1994 1993
------- ------- -------
Expected federal income tax
(benefit) rate (34.0)% (34.0)% (34.0)%
State taxes, net of federal
tax benefit (3.3) (3.3) (3.3)
Net losses without tax benefit 22.3 30.0 --
------- ------- -------
(15.0)% (7.3)% (37.3)%
======= ======= =======
NOTE H--COMMITMENTS AND OTHER
Future minimum payments for operating leases as of June 30, 1995 are
approximately $70,570 due during 1996. The Company entered into an
operating lease for its new corporate offices during August, 1994. Future
minimum payments for that lease during fiscal 1996 are approximately
$70,570, and during fiscal 1997 are approximately $11,762.
Rent expense on operating leases for the years ended June 30, 1995,
1994 and 1993 was approximately $98,243, $104,500 and $181,900,
respectively.
Revenues from export sales were approximately $1,490,491, $1,512,600
and $1,326,600 for the years ended June 30, 1995, 1994 and 1993,
respectively.
24.
<PAGE> 25
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I--RELATED PARTY TRANSACTIONS
As described above, on July 12, 1993, the Company sold 1,000,000 newly
issued shares of its common stock to Buckeye for $1.65 per share
(aggregate, $1,650,000). In addition, the President of the Company also
sold all 732,388 shares of his stock in the Company to Buckeye for $1.65
per share (aggregate, $1,208,440). These transactions gave Buckeye an
interest of approximately 41% in the Company which has increased to
approximately 43% as the result of the repurchase of stock by the Company.
During the fiscal years ended June 30, 1995 and 1994, the Company used
Buckeye as a contractor, purchased ribbons and other supply products from
Buckeye for resale to its customers, and utilized Buckeye and affiliated
personnel to perform shipping, administrative, and other functions. The
amount of these charges billed to the Company during the fiscal years ended
June 30, 1995 and 1994 approximated $1,365,000 and $1,139,000,
respectively. In addition, effective January 1, 1995, the Company rented
warehouse, manufacturing and office space from Buckeye for $18,000 per
year. At June 30, 1995, the Company had a related payable to Buckeye and
its affiliates of approximately $160,000.
During the fiscal years ended June 30, 1995 and 1994, the Company sold
plastics and certain ribbon and toner products to Buckeye. The plastics,
ribbons and toner products billed to Buckeye by the Company during the
fiscal years ended June 30, 1995 and 1994 approximated $151,600 and
$211,200, respectively. At June 30, 1995, the Company had a related
receivable from Buckeye of approximately $32,100.
25.
<PAGE> 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 17, 1994, the Company advised its certifying accountant,
Deloitte & Touche of Denver, Colorado, that the Company would be changing
its certifying accountant.
The report of Deloitte & Touche for the year ended June 30, 1992
discussed the uncertainty arising from the Company's declining sales and
gross margins and impending expiration of its bank line of credit and
expressed substantial doubt about the Company's ability to continue as a
going concern for a reasonable period of time. Other than such
modification, the reports of Deloitte & Touche on the Financial
Statements of the Company for the past two years had not contained any
adverse opinion or disclaimer of opinion nor had such reports been
qualified or modified as to uncertainty, audit scope, or accounting
principles. During the years ended June 30, 1992 and June 30, 1993 and
the interim period of the year ended June 30, 1994 prior to their
dismissal, there had been no disagreements with Deloitte & Touche on any
matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of Deloitte & Touche, would have caused it to make reference
to such items in connection with any of its reports.
On February 17, 1994, the Company appointed Ernst & Young as its
certifying accountants to audit the Company's financial statements. The
Company had not consulted with Ernst & Young on any matter during the
Company's two most recent fiscal years or any subsequent interim period
prior to its appointment. The Board of Directors of the Company had
unanimously approved the change of auditors from Deloitte & Touche to
Ernst & Young.
Deloitte & Touche has been furnished with a copy of this 10-K Report
and previously furnished its letter, addressed to the Commission and
attached as an exhibit to the Company's 8-K Report dated February 17,
1994, to the effect that Deloitte & Touche agreed with the statements
made by the Company herein and therein.
26.
<PAGE> 27
<TABLE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name and age of all directors of
the Company:
<CAPTION>
All positions Period served
and offices held as Director
Name Age with the Company of the Company
- --------------------- --- -------------------------- ---------------
<S> <C> <C> <C>
Robert H. Kanner 47 Chairman, Chief Executive 7/93 to Present
Officer, Chief Financial
Officer and Director
William A. Dillingham 52 President and Director 7/93 to Present
Stephen R. Kalette 45 Vice President, Secretary 7/93 to Present
and Director
Harold L. Inlow 61 Director 1/95 to Present
Glenn E. Corlett 52 Director (member of the 2/95 to Present
Audit Committee)
Messrs. Kanner, Dillingham and Kalette joined the Board in July, 1993
in connection with the transaction described in Item 13, Certain
Relationships and Related Transactions.
There is no family relationship between any director of the Company
and any other Director, nominee or executive officer of the Company.
Robert H. Kanner has served as the Company's Chairman and CEO since
July, 1993. Mr. Kanner has been an executive officer of Pubco
Corporation ("Pubco") since December, 1983 and presently serves as its
President and CEO. Mr. Kanner has also been an executive officer of
Brooks since October, 1985 and presently serves as its President and
CEO. For more than 10 years until it became a division of Brooks in
January, 1994, Mr. Kanner also served as the Chairman of Buckeye. Pubco
owns approximately 91% of Brooks and has real estate interests. In
addition to its ownership of Buckeye and its interest in the Company,
Brooks owns 85% of Allied Construction Products,Inc. which manufactures
and distributes specialty products for the construction, mining and
utility industries. Mr. Kanner is also a director of Riser Foods, Inc.,
a grocery wholesaler and retailer, and CleveTrust Realty Investors, which
invests in real estate.
William A. Dillingham served as Executive Vice President of the
Company beginning in July, 1993 and was named President in February,
1995. Mr. Dillingham has been an executive officer of Buckeye for over
10 years and presently serves as its President and Chief Operating
Officer.
27.
<PAGE> 28
Stephen R. Kalette was named the Vice President/Administration,
Assistant Secretary and General Counsel of the Company in July, 1993 and
was named secretary in October, 1994. Mr. Kalette has been an executive
officer and a director of Buckeye and Pubco for more than 10 years and an
executive officer and director of Brooks since 1985. He presently serves
as Vice President/Administration, General Counsel and Secretary of each
of these companies.
Harold L. Inlow was President of the former retail subsidiary of
Brooks and Pubco for more than five years through its closure in
December, 1994. He was appointed by the Company's Board to fill one of
the seats formerly held by Harry Fekkes and Peter C. Williams.
Glenn E. Corlett is the Executive Vice President and Chief Operating
Officer of N.W. Ayer, Incorporated, an advertising agency he joined in
May, 1990, as Chief Financial Officer. Prior to joining N.W. Ayer, Mr.
Corlett, a Certified Public Accountant, spent 20 years with the
accounting firm of Price Waterhouse. He was appointed to the Company's
Board to fill one of the seats formerly held by Harry Fekkes and Peter C.
Williams.
The Company's executive officers hold office until the next annual
meeting of directors, or until their successors are duly elected and
qualified. Other than as set forth in Item 13, Certain Relationships and
Related Transactions, there are no arrangements known to the Company
between any director or executive officer and any other person pursuant
to which any of the above-named executive officers or directors was
selected as an officer or director of the Company.
During the fiscal year ended June 30, 1995, the Board of Directors
held five meetings and took action by unanimous written consent on two
other occasions. Each member of the Board of Directors attended all of
such meetings.
28.
<PAGE> 29
</TABLE>
<TABLE>
ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information regarding the executive
compensation for Peter C. Williams. No other executive officer received
compensation in excess of $100,000 for the fiscal year ended June 30,
1995:
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Restricted Options
Name and Principal Other Annual Stock SARs LTIP All Other
Position Year Salary* Bonus Compensation** Awards (Number) Payouts Compensation
- ------------------ ---- -------- ----- -------------- ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter C. Williams 1993 $149,413 -0- $18,477 -0- 120,100 -0- -0-
President 1994 $200,000 -0- $15,498 -0- 200,000 -0- -0-
1995 $200,000 -0- $ 8,774 -0- -0- -0- -0-
<FN>
* Mr. Williams resigned as an officer and Director of the Company in
December, 1994, but remained an employee until December 31, 1994. In
accordance with his employment agreement, Mr. Williams continues to
receive severence at a rate of $200,000 per year through December 31,
1996. Therefore, one half of the amount reflected in the table represents
salary and one half represents severence compensation.
** The amount listed in the table consists of the value of automobile
allowance, health insurance (above the level of insurance provided for all
other employees of the Company) and other perquisites provided to Mr.
Williams. The automobile allowance for Mr. Williams represented 51%, 58%
and 49% of such other compensation during the fiscal years ended June 30,
1995, June 30, 1994 and June 30, 1993, respectively, and health insurance
benefits represented 35%, 36%, and 49% of such other compensation for the
fiscal years ended June 30, 1995, June 30, 1994 and June 30, 1993,
respectively.
</TABLE>
Employment Agreements.
In connection with the sale of stock on July 12, 1993 (See Item 13,
Certain Relationships and Related Transactions), the Company entered into an
employment agreement with Peter C. Williams, the Company's President. The
initial term of the agreement was through June 30, 1996, subject to automatic
extensions of one year each unless terminated by either party at least 90 days
prior to the beginning of such an extension. The employment agreement
provided for a base salary of $200,000 per year. Mr. Williams was also
eligible for bonus compensation and was entitled to receive other benefits
generally available to executives of the Company. Mr. Williams resigned his
employment with the Company effective
December 31, 1994, and, in accordance with the severence provision of his
employment agreement, continues to receive his base salary until
December 31, 1996.
29.
<PAGE> 30
As part of his employment agreement, Mr. Williams received an option,
expiring in 1998, to purchase up to 200,000 shares of the Company's
Common Stock at an exercise price of $1.65 per share. These options
include certain non-dilution provisions as defined in the agreement.
The Company also entered into a two year employment agreement with
Florine N. Nath, the Company's Chief Financial Officer, Vice President,
Secretary and Treasurer effective July 1, 1993, the term of which was
extended to 27 months. Ms. Nath is paid a salary of $80,000 for full
time services during the first year of the agreement and $40,000 per
annum for part time services during the remaining term of the agreement.
Ms. Nath is also entitled to benefits generally available to other
executives of the Company.
Compensation of Directors.
Glenn E. Corlett, the Company's independent Director, receives a fee
of $1,250 per month for acting as a Company Director. No other Director
is compensated by the Company for acting as a Director.
30.
<PAGE> 31
<TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 25, 1995 (i) the
number of shares of the Company's Common Stock owned, directly or
indirectly, by each director of the Company and by all directors and
executive officers as a group, and (ii) the number of shares of the
Company's Common Stock held by each person who was known by the Company
to beneficially own more than 5% of the Company's Common Stock:
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent
of Beneficial Owner Ownership(1) of Class
- --------------------------------------- ----------------- --------
<S> <C> <C>
Buckeye Business Products, Inc., Div. 1,732,388 43.4%
of Bobbie Brooks, Incorporated
3830 Kelley Avenue, Cleveland, OH 44114
Robert H. Kanner 0(2) 0%
3830 Kelley Avenue, Cleveland, OH 44114
Glenn E. Corlett 0 0%
825 Eighth Avenue, New York, NY 10019
William A. Dillingham 1,000 Less
3830 Kelley Avenue, Cleveland, OH 44114 than 1%
Harold L. Inlow 0 0%
3830 Kelley Avenue, Cleveland, OH 44114
Stephen R. Kalette 0 0%
3830 Kelley Avenue, Cleveland, OH 44114
All Directors and Executive 1,733,388(2) 43.5%
Officers as a Group (5 persons)
Peter C. Williams 200,000(3) 4.8%
6134 Songbird Circle, Boulder, CO 80303
Hillson Partners Limited Partnership 473,500(4) 11.9%
1835 University Blvd., Ste. 200
Hyattsville, MD 20783
<FN>
(1) Each person has sole voting and investment power with respect to the
shares shown, except as noted.
(2) Mr. Kanner is the Chairman and Chief Executive Officer of Brooks and,
indirectly, its controlling stockholder and may be deemed to be the
beneficial owner of the shares owned by Brooks.
(3) Shares which may be acquired within 60 days under stock options.
(4) As reported to the Company by the Stockholder.
</TABLE>
31.
<PAGE> 32
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 12, 1993, the Company issued 1,000,000 shares of the
Company's authorized, but unissued, Common Stock to Buckeye in exchange
for $1,650,000 in cash ($1.65 per share). By a separate agreement,
Buckeye also acquired 732,388 shares of the Company's Common Stock owned
by Peter C. Williams, the Company's then President, a director and a
principal stockholder. Mr. Williams received $1,208,440 in cash ($1.65
per share) from Buckeye for his shares. The source of cash for these
transactions was from the working capital of Buckeye and from a loan to
Buckeye from Robert H. Kanner, the Chairman and Chief Executive Officer
of Buckeye and its then sole stockholder.
During the fiscal years ended June 30, 1995 and 1994, the Company
used Buckeye as a contractor, purchased ribbons and other supply products
from Buckeye for resale to its customers, and utilized Buckeye and
affiliated personnel to perform shipping, administrative, and other
functions. The amount of these charges billed to the Company during the
fiscal years ended June 30, 1995 and 1994 approximated $1,365,000 and
$1,139,000, respectively. In addition, effective January 1, 1995, the
Company rented warehouse, manufacturing and office space from Buckeye for
$18,000 per year. At June 30, 1995, the Company had a related payable to
Buckeye and its affiliates of approximately $160,000.
During the fiscal years ended June 30, 1995 and 1994, the Company
sold plastics and certain ribbon and toner products to Buckeye. The
plastics, ribbons and toner products billed to Buckeye by the Company
during the fiscal years ended June 30, 1995 and 1994 approximated
$151,600 and $211,200, respectively. At June 30, 1995, the Company had a
related receivable from Buckeye of approximately $32,100.
32.
<PAGE> 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K.
(a) 1. List of Consolidated Financial Statements
Page
Independent Auditors' Reports . . . . . . . . . . . . 10
Consolidated Balance Sheets at
June 30, 1995 and 1994. . . . . . . . . . . . . . . . 12
Consolidated Statements of Operations
for the years ended June 30, 1995, 1994 and 1993. . . 14
Consolidated Statements of Stockholders'
Equity for the three years ended June 30, 1995,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . 15
Consolidated Statements of Cash Flows
for the three years ended June 30, 1995,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . 16
Notes to Consolidated Financial Statements. . . . . . 17
2. List of Consolidated Financial Statement Schedules
Schedule VIII - Valuation and Qualifying
Accounts. . . . . . . . . . . . . . . . . . . . . . . S-1
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.
33.
<PAGE> 34
3. List of Exhibits
Exhibit
No. Description Page
- ------- ---------------------------------------------- ----
3.1 Certificate of Incorporation of the Company(1) --
3.2 Bylaws, as Amended, of the Company(1) --
10.11 Employment Agreement with Peter C. Williams,
President of the Company(2) --
10.12 Stock Purchase Agreement Between the Company
and Buckeye(3) --
10.13 Stock Purchase Agreement Between Buckeye and
Peter C. Williams(3) --
22 Subsidiaries of the Company(4) --
- -------------------
(1) Filed with the Company's report on Form 10-K for the year ended
June 30, 1994 and incorporated herein by reference.
(2) Filed with the Company's July 19, 1993 Registration Statement
No. 33-66198 on Form S-8 and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's report on Form 8-K dated
June 29, 1993 and incorporated herein by reference.
(4) Filed with the Company's report on Form 10-K for the year ended
June 30, 1991 and incorporated herein by reference.
(b) Report on Form 8-K Filed During Fourth Quarter
None.
34.
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities
Exchange Act of l934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ASPEN IMAGING INTERNATIONAL, INC.
Dated: September 28, 1995 By: /s/ Robert H. Kanner
---------------------------------
Robert H. Kanner, Chairman
Pursuant to the requirements of the Securities Exchange Act of l934,
this report has been signed below by the following persons on behalf of
the Registrant, on the date indicated above:
/s/ Robert H. Kanner
------------------------------------
Robert H. Kanner, Chairman,
Chief Executive Officer and Director
/s/ Glenn E. Corlett
-----------------------------------
Glenn E. Corlett, Director
/s/ William A. Dillingham
-----------------------------------
William A. Dillingham
President and Director
/s/ Harold L. Inlow
-----------------------------------
Harold L. Inlow, Director
/s/ Stephen R. Kalette
-----------------------------------
Stephen R. Kalette
VP-Administration, Secretary
and Director
35.
<PAGE> S-1
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
- ----------------------- ---------- ------------- ------------- -----------
Balance at Additions Balance at
Beginning Charged to: End of
Description of Period Costs/Expenses Deductions Period
- ----------------------- ---------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
June 30, 1995
Allowance for
doubtful accounts $ 75,000 $ 86,240 $(136,240)(A) $ 25,000
June 30, 1994
Allowance for
doubtful accounts $ 109,078 $ 65,000 $ (99,078)(A) $ 75,000
June 30, 1993
Allowance for
doubtful accounts $ 136,085 $ 71,000 $ (98,007)(A) $ 109,078
<FN>
(A) Bad debt write-offs
</TABLE>
S-1.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995, AND CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,396,788
<SECURITIES> 987,900
<RECEIVABLES> 772,644
<ALLOWANCES> 25,000
<INVENTORY> 725,703
<CURRENT-ASSETS> 5,902,420
<PP&E> 4,549,370
<DEPRECIATION> 3,218,863
<TOTAL-ASSETS> 7,389,491
<CURRENT-LIABILITIES> 1,099,542
<BONDS> 0
<COMMON> 4,192
0
0
<OTHER-SE> 6,285,757
<TOTAL-LIABILITY-AND-EQUITY> 7,389,491
<SALES> 7,018,498
<TOTAL-REVENUES> 7,269,983
<CGS> 5,558,588
<TOTAL-COSTS> 5,558,588
<OTHER-EXPENSES> 533,576
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,535
<INCOME-PRETAX> (849,143)
<INCOME-TAX> (127,748)
<INCOME-CONTINUING> (721,395)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (721,395)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
