FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: July 31, 1995
Commission File Number: 2-90422-C
Infinite Graphics Incorporated
(Exact Name of Registrant as Specified in Its Charter)
Minnesota 41-0956693
(State of Jurisdiction) (IRS Employer Identification)
4611 East Lake Street, Minneapolis, Minnesota 55406
(Address of Principal Executive Officer)
(Zip Code)
612-721-6283
(Registrant's Telephone Number, Including Area Code)
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 and 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 X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
2,350,575 common shares as of September 14, 1995
Total number of pages: 8
Exhibit index on page: 8
JULY, 1995
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFINITE GRAPHICS INCORPORATED
BALANCE SHEETS (UNAUDITED)
ASSETS JULY 31, 1995 APRIL 30, 1995
CURRENT ASSETS:
CASH $ 0 $ 0
ACCOUNTS RECEIVABLE, LESS ALLOW-
ANCE FOR DOUBTFULL ACCOUNTS $ 853,883 $ 793,241
INVENTORIES $ 119,334 $ 134,914
PREPAID EXPENSES $ 102,336 $ 12,310
OTHER CURRENT ASSETS $ 6,333 $ 21,760
TOTAL CURRENT ASSETS $ 1,081,886 $ 962,225
PROPERTY, PLANT, AND EQUIPMENT AT
COST, LESS ACCUMULATED DEPRECIATION $ 708,928 $ 753,273
CAPITALIZED SOFTWARE COSTS $ 1,107,992 $ 1,105,305
OTHER ASSETS $ 24,209 $ 23,800
INVESTMENT IN JOINT VENTURE $ 122,275 $ 112,388
$ 3,045,290 $ 2,956,991
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
REVOLVING CREDIT AGREEMENT $ 210,002 $ 258,940
TRADE ACCOUNTS PAYABLE $ 476,154 $ 384,396
ACCRUED SALARIES, WAGES, VACATIONS
AND EMPLOYEE WITHHOLDINGS $ 257,443 $ 206,755
OTHER ACCRUED EXPENSES $ 426,476 $ 402,607
DEFERRED REVENUE $ 175,725 $ 239,572
CURRENT MATURITIES OF LONG-TERM DEBT $ 148,534 $ 157,054
CURRENT PORTION CAPITALIZED LEASE $ 32,570 $ 32,261
TOTAL CURRENT LIABILITIES $ 1,726,904 $ 1,681,585
LONG-TERM DEBT, LESS CURRENT MATURITIES $ 217,250 $ 241,811
CAPITALIZED LEASE OBLIGATIONS $ 34,626 $ 38,553
STOCKHOLDERS' EQUITY:
COMMON STOCK, NO PAR VALUE; AUTHORIZED
10,000,000 SHARES, ISSUED AND OUTSTANDING
2,350,575 $ 4,096,947 $ 4,096,947
RETAINED EARNINGS (DEFICIT) ($3,030,437) ($3,101,905)
$ 1,066,510 $ 995,042
$ 3,045,290 $ 2,956,991
SEE NOTES TO FINANCIAL STATEMENTS
JULY 1995
INFINITE GRAGHICS INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTH PERIOD
ENDED JULY 31,
1995 1994
REVENUES:
NET SALES $ 1,229,917 $ 970,436
OTHER INCOME $ 10,000 $ 10,450
$ 1,239,917 $ 980,886
COSTS AND EXPENSES:
COST OF PRODUCTS SOLD $ 619,638 $ 584,725
SELLING $ 217,978 $ 234,280
GENERAL AND ADMINISTRATIVE $ 222,664 $ 190,839
RESEARCH AND DEVELOPMENT COSTS $ 90,462 $ 65,688
INTEREST $ 26,594 $ 12,403
$ 1,177,336 $ 1,087,935
EARNINGS (LOSS) BEFORE INCOME TAXES
AND INVESTMENT INCOME $ 62,581 ($ 107,049)
INVESTMENT INCOME FROM NH
OPERATIONS $ 9,887 $ 17,805
INCOME TAXES ($ 1,000) ($ 1,000)
NET EARNINGS (LOSS) $ 71,467 ($ 90,244)
NET EARNINGS (LOSS) PER
COMMON SHARE $ 0.03 ($ 0.04)
COMMON SHARES OUTSTANDING 2,731,831 2,270,575
SEE NOTES TO FINANCIAL STATEMENTS
JULY 1995
INFINITE GRAGHICS INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTH PERIOD
ENDED JULY 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
NET EARNINIGS (LOSS) $ 71,468 ($ 90,244)
ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO NET
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION $ 205,927 $ 186,603
EQUITY INCOME OF JOINT VENTURE ($ 9,887)
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE (NET) ($ 60,642) $ 175,135
INVENTORIES $ 15,580 $ 15,194
PREPAID EXPENSES ($ 90,026) ($ 82,366)
OTHER ASSETS $ 15,018 $ 10,315
UNEARNED INCOME ($ 63,847) $ 39,967
CURRENT LIABILITIES $ 166,315 $ 100,642
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 249,906 $ 355,246
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR CAPITALIZED SOFTWARE ($157,287) ($199,211)
OTHER CAPITAL EXPENDITURES ($ 6,982) ($176,535)
NET CASH USED BY INVESTING ACTIVITIES ($164,269) ($375,746)
CASH FLOWS FROM FINANCING ACTIVITIES:
DECREASE IN OPERATING LINE OF CREDIT ($ 48,938) ($ 15,237)
PAYMENTS ON LONG-TERM DEBT ($ 36,699) ($ 62,841)
NET CASH USED BY FINANCING ACTIVITIES ($ 85,637) ($ 78,078)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 0 ($ 98,578)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 0 $ 112,248
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 0 $ 13,670
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
NOTE A:
The Balance Sheet as of July 31, 1995 and the Statements of Operations for
the three month periods ended July 31, 1995 and 1994 and Statements of Cash
Flows for the three months ended July 31, 1995 and 1994 have been prepared by
the Company without audit. In the opinion of management, these statements
reflect all adjustments, consisting of only normal accruals and adjustments,
necessary for the fair statement of the periods presented. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. It
is suggested that these financial statements be read in conjunction with the
financial statements and notes included in the Company's April 30, 1995 annual
report to shareholders.
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Operations for the three months ended July 31, 1995 resulted in sales of
$1,229,917 compared to $970,436 for the same period last year. Systems sales
accounted for $486,271 of total sales compared to System sales of $435,145 for
the same period a year ago. Engineering Services sales accounted for $743,646
compared to Engineering Services sales of $535,291 for the same period last
year. Net profit for the three months ended July 31, 1995 was $71,468 compared
to a net loss of $90,244 for the same period last year. The sales increased
through the efforts of the changed marketing strategy.
Sales increased 27 percent from the same quarter last year. This increase
in sales consisted of Systems Division sales increasing 12 percent for the
quarter and Engineering Services sales increasing 39 percent for the quarter.
Infinite Graphics gross margin was 50 percent for the three months compared to
40 percent for the same period last year. Gross margins increased because a
large percentage of the Company's costs are fixed and as sales increase or
decrease the gross margin follows the trend.
IGI needs to maintain this level of sales activity to remain a viable
competitor in the precision graphics market. Sales continue to be the critical
factor in determining short term profit.
In total, general, administrative and selling expenses have increased due
to general expense increases. Selling expenses decreased 7 percent due to a
reduction in sales personnel and expenses. General and administrative expenses
increased 17 percent from an increase in travel and bonus program. Research and
development expenses increased 38 percent as the Company enhances existing and
develops new products. Interest expense has decreased because overall interest
bearing debt increased during the past nine months.
Equity in income of joint venture decreased by approximately $8,000 during
the three months ended July 31, 1995 when compared to the same period in 1994.
The decrease is primarily due to a decrease in sales during the three months
ended July 31, 1995 compared to the same period in 1994.
Company's cash flow from operations for the three months ended July 31,
1995 was $250,000 and primarily consisted of depreciation, amortization and
deferral of certain current liabilities in addition to the net profit. The
Company reduced the credit line and long term debt by $86,000 and $78,000 during
the three months ended July 31, 1995 and 1994, respectively. The combination of
the credit line, trade payables and accrued expenses as a total has increased 9
percent since fiscal year end 1995. Cash used in investing activities totaled
approximately $164,000 and $376,000 for the three months ended July 31, 1995 and
1994, respectively. The funds provided from operating activities were used to
reduce short term borrowing, purchase equipment and facility improvements, and
develop software, which was capitalized.
The Company does not presently have an agreement in place to provide for
additional working capital needs. To expand its operations into any new
ventures, the Company will require new capital. If the Company does not achieve
its operations plan and additional financing is not obtained, it will restrict
planned business growth and business restructuring may be needed.
PART 2 - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
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.
Infinite Graphics Incorporated
by /s/ Clifford F. Stritch, Jr.
Clifford F. Stritch, Jr.
Chief Executive Officer and
by /s/ Lee J. Miller
Lee J. Miller
Chief Financial Officer
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