<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM l0-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION l3 OR l5(d) OF THE SECURITIES
EXCHANGE ACT OF l934
For the period ended March 31, 1996
OR
/ / 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 0-12573
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
NA
(Former name, former address and former fiscal year,
if changed since last report.)
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
Number of Common Shares Outstanding as of May 13, 1996: 3,988,756
<PAGE>
ASPEN IMAGING INTERNATIONAL, INC.
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 1996 and June 30, 1995. . . . . . . . . . 3
Consolidated Statements of Operations
for the Three Months and Nine Months Ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Nine Months Ended March 31,
1996 and 1995. . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . 11
Item l. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote
of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)--Note A.
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
March 31, June 30,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,081,191 $ 2,870,575
Short-term investments -- 526,213
Marketable securities available for sale 2,171,747 987,900
Receivables (less allowances of $80,816
and $25,000 for doubtful accounts) --
Note C 438,003 747,644
Inventories -- Note B 541,368 725,703
Prepaid expenses and other current assets 60,776 44,385
----------- -----------
TOTAL CURRENT ASSETS 6,293,085 5,902,420
PROPERTY AND EQUIPMENT
Leasehold improvements 140,457 140,457
Machinery and equipment 1,091,902 1,091,902
Molds 2,994,750 2,994,750
Office equipment and vehicles 309,889 322,261
----------- -----------
4,536,998 4,549,370
Less accumulated depreciation
and amortization 3,562,634 3,218,863
----------- -----------
974,364 1,330,507
NOTES RECEIVABLE 6,050 18,800
OTHER ASSETS, NET -- Note A 99,020 137,764
----------- -----------
TOTAL ASSETS $ 7,372,519 $ 7,389,491
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
3.
<PAGE>
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--CONTINUED
<CAPTION>
March 31, June 30,
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses
-- Note C $ 659,056 $ 671,163
Accrued salaries and payroll expenses 225,837 428,379
----------- -----------
TOTAL CURRENT LIABILITIES 884,893 1,099,542
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 Par Value;
authorized, 1,000,000 shares;
no shares issued -- --
Common Stock, $.001 par value;
4,192,356 shares issued and 3,988,756
shares outstanding at March 31,
1996 and 4,192,356 shares issued and
4,075,356 shares outstanding at
June 30, 1995 4,192 4,192
Capital in excess of par value 4,807,151 4,807,151
Unrealized gains on investments
available for sale 190,394 78,809
Retained earnings 1,650,076 1,494,140
----------- -----------
6,651,813 6,384,292
Treasury stock at cost, 203,600 shares
at March 31, 1996 and 117,000
shares at June 30, 1995 (164,187) (94,343)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 6,487,626 6,289,949
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 7,372,519 $ 7,389,491
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
4.
<PAGE>
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
l996 l995 1996 1995
<S> <C> <C> <C> <C>
REVENUE
Net sales -- Note C $ 1,217,650 $ 1,704,402 $ 3,916,447 $ 5,603,703
Other 79,184 56,978 269,049 184,868
----------- ----------- ----------- -----------
1,296,834 1,761,380 4,185,496 5,788,571
COST AND EXPENSES:
Cost of products sold -- Note C 922,359 1,400,959 2,963,089 4,406,770
Selling, general and
administrative -- Note C 313,465 474,500 1,066,471 1,576,270
Interest -- 52 -- 16,535
Severance and post-employment
costs from the elimination
of administrative personnel -- 54,493 -- 533,576
----------- ----------- ----------- -----------
1,235,824 1,930,004 4,029,560 6,533,151
INCOME (LOSS) BEFORE INCOME TAXES 61,010 (168,624) 155,936 (744,580)
PROVISION FOR INCOME TAXES -- (127,748) -- (127,748)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 61,010 $ (40,876) $ 155,936 $ (616,832)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ 0.02 $ (0.01) $ 0.04 $ (0.15)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES 3,988,756 4,187,095 4,005,105 4,190,628
=========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
5.
<PAGE>
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Nine Months Ended
March 31
l996 l995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 155,936 $ (616,832)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 397,573 461,162
Provision for doubtful accounts 70,000 (53,556)
(Gain) from sale of investments (35,881) --
(Gain) on disposal of assets (4,176) (41,151)
Changes in operating assets and liabilities:
Receivables 239,641 345,689
Inventories 184,335 882,777
Prepaid expenses and other current assets (16,391) (145,557)
Accounts payable and accrued expenses (12,107) (99,177)
Accrued salaries and payroll expenses (202,542) 305,627
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 776,388 1,038,982
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 4,176 2,261,077
Additions to property and equipment (2,686) (187,965)
Change in notes receivable 12,750 30,374
Change in other assets -- 4,685
Purchase of investments (1,571,750)
Proceeds from sale of investments 1,061,582 (1,440,988)
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES (495,928) 667,183
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt -- (996,370)
Purchase of treasury stock (69,844) (18,969)
----------- -----------
NET CASH (USED IN) FINANCING ACTIVITIES (69,844) (1,015,339)
NET INCREASE IN CASH AND CASH EQUIVALENTS 210,616 690,826
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 2,870,575 1,784,846
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,081,191 $ 2,475,672
=========== ===========
SUPPLEMENTAL INFORMATION:
Interest Paid $ -- $ 16,535
=========== ===========
Taxes Paid $ -- $ --
<FN>
See notes to consolidated financial statements.
</TABLE>
6.
<PAGE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
NOTE A -- Basis Of Presentation
The accompanying consolidated condensed financial statements include the
accounts of Aspen Imaging International, Inc. (the "Company") and its
wholly-owned subsidiaries, Aspen Ribbons International, Inc., a Domestic
International Sales Corporation, and Aspen Toner Corporation, a manufacturer
of laser toner. The financial statements have been prepared without audit
and reflect, in the opinion of management, all adjustments necessary for
fair statement of the results of the Company's operations for the periods
presented. These include only normal recurring adjustments. It is
recommended that these financial statements be read in conjunction with the
Company's annual report for the year ended June 30, 1995.
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," for investments. Management determines the appropriate
classification of marketable securities at the time of purchase and
reevaluates such designation as of each balance sheet date. Marketable
securities held as available for sale are carried at fair value with any
unrealized gains or losses reported as a separate component of shareholders'
equity. Realized gains and losses on marketable securities held as
available for sale are included in other revenue. Interest and dividends on
securities classified as available for sale are included in other revenue.
Other assets include $88,991 of formulas for the production of toner, net of
$236,009 accumulated amortization.
The Company recognizes sales when product is shipped.
Certain prior amounts have been reclassified to conform with the current
year presentation.
NOTE B -- Inventories
Inventories consisted of:
March 31 June 30
1996 1995
Raw materials and component parts $ 200,251 $ 324,703
Finished goods, including goods
purchased for resale 341,117 401,000
--------- ---------
$ 541,368 $ 725,703
========= =========
7.
<PAGE>
<TABLE>
ASPEN IMAGING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
NOTE C -- CERTAIN RELATED PARTY TRANSACTIONS
Of the amounts shown in the accompanying Consolidated Statements of
Operations, the following relate to transactions (all of which were
consummated at cost) with Bobbie Brooks, Incorporated, which owns
approximately 62% of the Company's Common Stock, and its affiliates,
including its Buckeye Business Products, Inc. Division (collectively,
"Buckeye"):
<CAPTION>
Three Months Ended Nine Months Ended
March 31 December 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales
Includes product sales by the
Company to Buckeye at the
Company's cost of: $ 33,966 $ 28,044 $ 91,657 $145,791
======== ======== ======== ========
Cost of products sold
Includes product purchased from
Buckeye at Buckeye's cost of: $276,218 $255,945 $782,608 $893,547
======== ======== ======== ========
Includes personnel costs for
shipping and purchasing, and
rental for space, utilized by
the Company and provided by
Buckeye at Buckeye's cost of: $ 25,606 $ 26,854 $ 69,621 $ 86,672
======== ======== ======== ========
Selling, general and administrative
Includes personnel costs for
order entry, billing, legal
and accounting, utilized by the
Company and provided by
Buckeye at Buckeye's cost of: $ 8,881 $ 18,429 $ 51,481 $ 94,648
======== ======== ======== ========
<FN>
Of the amounts shown on the accompanying Consolidated Balance Sheets, the
following relate to the above transactions:
</TABLE>
March 31, 1996 June 30, 1995
Receivables
Includes receivables due
from Buckeye of: $ 7,466 $ 32,119
======== ========
Accounts payable and
accrued expenses
Includes accounts payable
to Buckeye of: $ 63,743 $159,983
======== ========
8.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
RESULTS OF OPERATIONS
Comparison of the Three and Nine Months Ended March 31, 1996 and 1995
As reported in the Company's Form 10-K for the year ended June 30, 1995 and
in the Company's Form 10-Q for the quarters ended September 30, 1995 and
December 31, 1995, the Company reduced its product offerings in order to
focus on its traditional ribbon business for impact printers, particularly
ribbons for which the Company has molds, and on its toner products line for
laser printers. The reduction in sales and the reduction in inventory
levels in the three and nine month periods ended March 31, 1996 from the
same periods in 1995, are primarily the result of the elimination of
unprofitable products from the Company's product line and a continuing
deterioration in the sales of the Company's core products. In addition,
inventory levels are lower at March 31, 1996 compared to March 31, 1995 by
approximately $374,000.
The Company has reduced its manufacturing overhead to be more in line with
its current rate of sales, which is predominantly responsible for the
increase in gross profit percentage for the three and nine month periods
compared to the same periods in 1995.
The Company reduced its selling, general and administrative costs by
approximately $161,000 for the three months and approximately $510,000 for
the nine months, ended March 31, 1996, compared to the same periods in 1995,
to be more in line with the Company's current rate of sales. Selling,
general and administrative costs for the three months ended March 31, 1996
also represented a decrease of approximately $36,000 from the three months
ended December 31, 1995.
There was no interest expense in the three or nine month periods ended
March 31, 1996 due to the elimination of debt.
9.
<PAGE>
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 improvement in the Company's
operating results and a reduction in the Company's 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
May 13, 1996, the Company has repurchased 203,600 of its shares at an
aggregate purchase price of $164,187.
The Company's current ratio was 7.1 to 1 at March 31, 1996 compared to 5.4
to 1 at June 30, 1995. The Company has $3,081,191 in cash and cash
equivalents and $2,171,747 in marketable securities and other short-term
investments and no long-term debt at March 31, 1996. 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.
The Company has not generated pretax income in recent years and, therefore,
the potential future tax benefits of the deferred tax assets, primarily net
operating loss carryforwards, may not be realized. Accordingly, a valuation
allowance has been provided equal to the net deferred tax assets related to
these potential future tax benefits, which totaled approximately $500,000 at
December 31, 1995. Should the Company generate pretax income in future
years, the tax benefits of the net operating loss carryforwards and other
items will be realized, which will have a positive impact on the future cash
flows, liquidity and capital resources of the Company.
New Accounting Standards
In 1995, the Financial Accounting Standards Board issued a new accounting
standard effective for 1996 that will be applicable to the Company. SFAS
No. 121-"Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of", establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used, and for long-lived
assets and certain identifiable intangibles to be disposed of. The Company
has determined the effect upon its adoption to be immaterial to results of
operations.
10.
<PAGE>
PART II - OTHER INFORMATION
Item l. LEGAL PROCEEDINGS. None
Item 2. CHANGES IN SECURITIES. None
Item 3. DEFAULTS UPON SENIOR SECURITIES. None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None
Item 5. OTHER INFORMATION.
On October 24, 1995, the Company received a proposal from Pubco
Corporation ("Pubco") pursuant to which a wholly owned subsidiary
of Pubco would purchase substantially all of the Company's
assets, the Company would be liquidated, and the Company's
stockholders would receive one share of Pubco's Common Stock for
each seven shares of the Company's Common Stock owned by them.
On April 25, 1996, the Company's Board of Directors accepted the
Pubco proposal, subject to stockholder approval, and authorized
the Company to enter into a Sale and Liquidation Agreement, which
was executed on April 26, 1996. The Company's stockholders will
consider the matters at a Special Meeting to be held on June 27,
1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Financial Data Schedule
(b) Reports on Form 8-K
None
11.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASPEN IMAGING INTERNATIONAL, INC.
/s/ Robert H. Kanner
---------------------------
Robert H. Kanner
Chairman of the Board
and Chief Financial Officer
Dated: May 14, 1996
12.
<PAGE>
EXHIBIT INDEX
Financial Data Schedule
13.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AT MARCH 31,1996 AND CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED MARCH 31,1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,081,191
<SECURITIES> 2,171,747
<RECEIVABLES> 518,819
<ALLOWANCES> 80,816
<INVENTORY> 541,368
<CURRENT-ASSETS> 6,293,085
<PP&E> 4,536,998
<DEPRECIATION> 3,562,634
<TOTAL-ASSETS> 7,372,519
<CURRENT-LIABILITIES> 884,893
<BONDS> 0
0
0
<COMMON> 4,192
<OTHER-SE> 6,483,434
<TOTAL-LIABILITY-AND-EQUITY> 7,372,519
<SALES> 3,916,447
<TOTAL-REVENUES> 4,185,496
<CGS> 2,963,089
<TOTAL-COSTS> 2,963,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 155,936
<INCOME-TAX> 0
<INCOME-CONTINUING> 155,936
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,936
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
