<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 0-16343
OIS OPTICAL IMAGING SYSTEMS, INC.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-2544320
---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
47050 Five Mile Road Northville, Michigan 48167
---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 454-5560
----------------
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 X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of May 12, 1997:
Common Stock, $0.01 par value 97,467,096
- ----------------------------- ----------------
Class Number of shares
<PAGE> 2
PART I - FINANCIAL INFORMATION
Financial Statements
OIS OPTICAL IMAGING SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
-------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Display $ 3,661,333 $ 3,457,846 $ 6,427,972 $ 5,693,365
Engineering 255,328 1,310,328 1,777,581 3,233,715
Sensor 64,130 17,668 182,738 66,486
----------- ----------- ------------ ------------
TOTAL REVENUES 3,980,791 4,785,842 8,388,291 8,993,566
COST OF SALES
Display 10,645,680 3,132,291 22,992,660 9,224,245
Engineering 710,005 3,620,457 5,663,645 8,964,760
Sensor 182,000 30,095 710,923 161,306
----------- ----------- ------------ ------------
TOTAL COST OF SALES 11,537,685 6,782,843 29,367,228 18,350,311
GROSS MARGIN (7,556,894) (1,997,001) (20,978,937) (9,356,745)
OPERATING EXPENSES
Internal research and development 500,224 439,187 1,615,663 1,355,427
Selling, general and administrative 1,316,553 1,302,967 4,301,373 3,829,143
----------- ----------- ------------ ------------
TOTAL OPERATING EXPENSES 1,816,777 1,742,154 5,917,036 5,184,570
OPERATING LOSS (9,373,671) (3,739,155) (26,895,973) (14,541,315)
OTHER INCOME AND (EXPENSE)
Interest expense (923,582) (642,299) (3,102,876) (1,363,288)
Interest income 11,692 10,806 14,141 29,799
Licensing and royalties 251,056 60,686 377,428 102,382
Insurance proceeds (Note E) -- 803,624 -- 803,624
Other 38,304 6,100 306,982 7,277
----------- ----------- ------------ ------------
TOTAL OTHER INCOME AND
(EXPENSE) (622,530) 238,917 (2,404,325) (420,206)
LOSS BEFORE INCOME TAX BENEFIT (9,996,201) (3,500,238) (29,300,298) (14,961,521)
Income Tax Benefit 3,501,690 -- 6,356,038 --
----------- ----------- ------------ ------------
NET LOSS $(6,494,511) $(3,500,238) $(22,944,260) $(14,961,521)
Preferred stock dividends 1,321,922 568,767 3,072,926 1,271,506
----------- ----------- ------------ ------------
NET LOSS AVAILABLE TO COMMON
SHAREHOLDERS $(7,816,433) $(4,069,005) $(26,017,186) $(16,233,027)
=========== =========== ============ ============
NET LOSS PER COMMON SHARE $(.08) $(.04) $(.27) $(.17)
===== ===== ===== =====
</TABLE>
See notes to financial statements
-2-
<PAGE> 3
OIS OPTICAL IMAGING SYSTEMS, INC.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,010,818 $ 516
Accounts receivable
(Net of reserve for doubtful accounts of $60,000) 3,709,812 3,232,486
Receivable from U.S. Government -- 131,705
Inventories 9,852,482 5,847,250
Insurance receivable -- 6,085,263
Income Tax Receivable from Affiliate 4,356,038 --
Prepaid expenses and other current assets 1,064,761 485,251
------------- ------------
TOTAL CURRENT ASSETS 20,993,911 15,782,471
PROPERTY AND EQUIPMENT
Land 3,000,000 3,000,000
Building 32,232,265 32,232,265
Machinery and other equipment 35,652,752 28,670,855
Construction in process 46,277 129,074
------------- ------------
TOTAL PROPERTY AND EQUIPMENT 70,931,294 64,032,194
Less accumulated depreciation (14,022,731) (9,300,731)
------------- ------------
NET TOTAL PROPERTY AND EQUIPMENT 56,908,563 54,731,463
TOTAL ASSETS $ 77,902,474 $70,513,934
============= ============
</TABLE>
See notes to financial statements.
-3-
<PAGE> 4
OIS OPTICAL IMAGING SYSTEMS, INC.
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Current installments on capital lease obligation -- $ 125,454
Subordinated note payable to affiliate -- 2,000,000
Current installment on long-term debt $ 6,750,000 3,000,000
Accounts payable 2,449,879 5,599,266
Accrued interest 1,060,701 951,103
Deferred revenue 113,456 236,845
Other accrued liabilities 1,469,019 437,562
------------- ------------
TOTAL CURRENT LIABILITIES 11,843,055 12,350,230
LONG-TERM DEBT 45,750,000 48,000,000
LOCAL GOVERNMENT SUBSIDY 2,925,000 3,000,000
------------- ------------
TOTAL LIABILITIES 60,518,055 63,350,230
STOCKHOLDERS' EQUITY
Preferred Stock, par value $0.01 per share:
Series A, 8% cumulative, non-convertible
and non-voting
Authorized - 50,000 shares
Issued and outstanding 35,000 shares at June 30, 1996 -- 350
Series B, 8% cumulative, non-convertible
Authorized - 100,000 shares
Issued and outstanding - 70,637 shares at March 31, 1997 706
Common Stock, par value $0.01 per share:
Authorized - 125,000,000 shares
Issued and outstanding - 97,467,096 shares
at March 31, 1997 and 97,137,140 at June 30, 1996 974,671 971,038
Additional paid-in capital 138,579,323 105,457,517
Accumulated deficit (120,999,686) (98,055,426)
Deferred compensation (1,170,595) (1,209,775)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 17,384,419 7,163,704
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 77,902,474 $ 70,513,934
============= ============
</TABLE>
See notes to financial statements.
-4-
<PAGE> 5
OIS OPTICAL IMAGING SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
MARCH 31,
1997 1996
------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(22,944,260) $(14,961,521)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 4,647,000 2,503,200
Deferred compensation expense 447,789 233,388
Impact on cash flows from changes in assets and
liabilities:
Accounts receivable 1,383,604 (4,141,312)
Prepaid expenses and other assets (579,510) (142,526)
Inventory (4,005,232) (1,278,523)
Accounts payable and accrued expenses (2,008,332) (2,141,775)
Deferred revenues (123,389) 257,503
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (23,182,330) (19,671,566)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,899,100) (6,536,145)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (6,899,100) (6,536,145)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long term debt (125,454) (90,869)
Net proceeds (repayments) from issuance of debt and
notes (500,000) 3,500,000
Net proceeds from issuance of common stock 201,186 196,674
Net proceeds from issuance of preferred stock 32,516,000 22,500,000
------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 32,091,732 26,105,805
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,010,302 (101,906)
NET CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 516 830,081
------------ ------------
NET CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 2,010,818 $ 728,175
============ ============
</TABLE>
See notes to financial statements.
-5-
<PAGE> 6
OIS OPTICAL IMAGING SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
MARCH 31,
1997 1996
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
<S> <C> <C>
Cash paid for interest $2,993,278 $1,006,114
</TABLE>
Cash equivalents:
Cash equivalents consist of investments in short-term, highly-liquid securities
having a maturity of three months or less, made as a part of OIS' cash
management activity.
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF NONCASH
TRANSACTIONS:
NINE MONTHS ENDED
---------------------
MARCH 31,
1997 1996
--------- ----------
<S> <C> <C>
Common stock issued in exchange for
deferred compensation, net of terminations $754,800 $1,404,540
Deferred compensation adjustment to market 346,191 --
</TABLE>
See statements of cash flows.
-6-
<PAGE> 7
OIS OPTICAL IMAGING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - Financial Statement Presentation
The condensed financial statements included herein have been prepared by OIS
Optical Imaging Systems, Inc. ("the Company") without audit pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's latest annual report on Form 10-K.
There have been no significant changes in such information since the date of
such financial statements except as noted below.
In the opinion of the Company, the accompanying unaudited condensed financial
statements include all adjustments, consisting only of normal recurring items,
required to present fairly its financial position as of March 31, 1997, the
results of operations for the three months and nine months ended March 31, 1997
and 1996 and cash flows for the nine months ended March 31, 1997 and 1996.
NOTE B - Net Loss Per Share
Net loss per share is based on the weighted average number of shares of Common
Stock outstanding during the periods. The weighted average number of shares
used in the computation for the three months ended March 31, 1997 and 1996 was
97,369,785 and 97,016,730, respectively. The weighted average number of shares
used in the computation for the nine months ended March 31, 1997 and 1996 was
97,213,153 and 96,819,833, respectively.
NOTE C - Reclassifications
Certain amounts in the prior year financial statements have been reclassified
to conform with the current financial presentation.
NOTE D - Related Party Transactions
On October 29, 1996 the Company's Board of Directors created and authorized for
issuance 100,000 shares of Series B Cumulative Preferred Stock, par value $.01,
with an original issuance price of $1,000 per share. The Series B Preferred
Stock bears a cumulative dividend rate of 8% for the first three years and a
floating rate, subject to a 16.5% cap, thereafter. Each share of Series B
Preferred Stock entitles the holder to 350 votes on each and every matter
submitted to a vote of the Company's shareholders. The Series B Preferred
Stock is non-convertible.
-7-
<PAGE> 8
On October 30, 1996, the Company exchanged the 35,000 shares of Series A
Preferred Stock held by Guardian Industries Corp. ("Guardian") and all
dividends in arrears for 38,137 shares of Series B Preferred Stock. Guardian
and William Davidson contributed common stock of the Company and other property
to GD Investments Corp. ("GDIC"), a Guardian affiliate. On October 31, 1996
the Company sold 21,000 shares of Series B Preferred Stock to GDIC at a price
of $1,000 per share. OIS used the proceeds to retire its subordinated note
payable (Bridge Loan) and all accrued interest to Guardian, which amounted to
approximately $18.9 million.
As a result of these transactions, the Company is eligible to be a member of
Guardian's affiliated tax group ("Affiliated Group"). This allows the
Company's tax losses, credits and/or income generated after October 31, 1996 to
be included in the single consolidated federal income tax return filed by the
Affiliated Group. Guardian and the Company entered into a Tax Sharing
Agreement dated November 1, 1996 pursuant to which the Company will receive or
make tax sharing payments based on the amount by which the federal income tax
liability of the Affiliated Group is reduced or increased by inclusion of the
Company in the Affiliated Group. As of March 31, 1997, the Company had
received $2 million and recorded an estimated receivable from Guardian of
$4,356,038 in accordance with the Tax Sharing Agreement. During April 1997,
the Company received an additional $3 million in accordance with the Tax
Sharing Agreement.
During the nine months ending March 31, 1997, the Company sold an additional
11,500 shares of Series B Preferred Stock to GDIC for a total of $11.5 million.
OIS used the proceeds to fund ongoing operations.
NOTE E - Insurance Proceeds
During the quarter ended March 31, 1996, the Company received $803,624 that
represented the business interruption portion of the insurance claim related to
the fire that occurred on March 1, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATION
Summary
The operating results for the first nine months of fiscal 1997 reflect a
continuation of operating losses. Although the Company's volume of production
has steadily increased during the first nine months of fiscal 1997, higher
production and sales volumes and increased efficiencies will be required before
financial results can improve. As a result of high scrap rates during the
period, costs continue to be disproportionately high compared to revenues.
(see Cost of Sales.) Contributing to the increased costs are substantially
higher depreciation expense associated with the plant being placed in service
and higher interest costs associated with the Company's debt.
-8-
<PAGE> 9
The Company's ability to improve its financial performance will depend on
whether the Company is able to reduce scrap and achieve higher volumes of
production and sales. While management is optimistic about the Company's
ability to efficiently manufacture higher volumes of saleable product, the
manufacturing ramp-up is a complex process which, given the Company's lengthy
production cycles, is expected to be ongoing throughout the fiscal year.
Three months and nine months ended March 31, 1997 and 1996
Revenue
Total revenue for the first nine months of fiscal 1997 of $8,388,291 was 7%
lower than total revenue for the same period in the preceding fiscal year of
$8,993,566. Total revenue for the third quarter of fiscal 1997 of $3,980,781
was 17% lower than total revenue of $4,785,842 for the same period in the
preceding fiscal year. Although total revenue for the first nine months of
fiscal 1997 was slightly lower when compared to the same period in the
preceding fiscal year, as expected revenue from customer funded engineering
activity decreased while revenue from the sale of displays and sensors
increased.
Revenues from the sale of displays and sensors for the first nine months and
third quarter of fiscal 1997 of $6,610,710 and $3,725,463 was 15% and 7%
higher, respectively, when compared to $5,759,851 and $3,475,514 for the same
period in the preceding fiscal year. The rate of increase in display sales
would have been higher but for a non-recurring recovery of $2.3 million of
costs under the F-22 program during the third quarter in the previous fiscal
year. This recovery of costs was part of a contract completion and not a
trend. Management expects a significant increase in display revenue for fiscal
year 1997 when compared to fiscal year 1996. Revenue from customer-funded
engineering for the first nine months and third quarter of fiscal 1997 of
$1,777,581 and $255,328 was 45% and 81% lower, respectively, when compared to
$3,233,715 and $1,310,328 for the same periods in the preceding fiscal year.
Although display revenue increased during the first nine months and third
quarter of fiscal 1997, the rate of growth was constrained by low production
volumes. Significant additional display revenue will be necessary if the
Company is to achieve profitability. Until the plant ramp-up is completed and
the Company achieves greater plant utilization, display revenue growth will
continue to be constrained. If the plant ramp-up continues as expected,
revenues from the sale of displays will continue to increase during fiscal 1997
as existing orders for the Company's products are satisfied. However, current
orders for the Company's products will not support the production and sales
volumes required to achieve profitability. Therefore, the Company is working
hard to expand the markets for display, sensor and other products and
capitalize on the unique manufacturing capabilities of the plant. Areas of
potential opportunity in the future are medical imaging sensors and the
fabrication of microelectronics-on-glass for special applications.
-9-
<PAGE> 10
Cost of Sales
Cost of sales for the first nine months and third quarter of fiscal 1997 of
$29,367,228 and $11,537,685 was 60% and 70% higher, respectively, than cost of
sales when compared to $18,350,311 and $6,782,843 for the same periods in the
preceding fiscal year. Furthermore, the cost of sales as a percentage of
revenue increased for the first nine months and third quarter of fiscal 1997 to
350% and 290%, respectively, from 204% and 142% when compared to the same
periods in fiscal 1996.
Direct labor and material for the first nine months and third quarter of fiscal
1997 increased approximately $5.4 million and $3 million, respectively, when
compared to the same periods in fiscal 1996. Increased activity of the plant
ramp-up have resulted in significantly higher direct material and labor costs.
The increase is attributable to significant amounts of raw materials which were
used to verify process controls and increase production volume. Although
yields have improved slightly during the period, production activity has
increased substantially thereby increasing the amount of displays which were
scrapped.
The increase in overhead costs for the first nine months of fiscal 1997 is
attributable in large part to an increase of approximately $2.1 million in
depreciation expense when compared to the same period during fiscal 1996. The
increase is attributable to the facility and related process equipment being
placed in service prior to the first nine months of fiscal 1996. The Company
also incurred approximately $3.4 million in increased costs in the areas of
repair and maintenance, utilities, contractor labor, manufacturing supplies,
tooling and property taxes during the first nine months of fiscal 1997 due to
the completion of the Northville facility and related ramp-up of the
manufacturing process.
Reducing costs of sales to an acceptable level depends on the Company's ability
to improve efficiencies and reduce scrap in order to increase production
volumes of saleable units. As the Company's manufacturing process becomes more
efficient, direct labor and material costs will decrease on a per unit basis.
A substantial amount of the Company's overhead costs are largely fixed and, as
a result, management does not expect a significant increase or decrease in the
total overhead costs as production volumes increase. However, until the
Company is able to produce more saleable product, overhead costs will continue
to be a large component of cost of sales on both a per unit and percentage of
revenue basis.
Other Costs
The Company's internal research and development costs for the first nine months
and third quarter of fiscal 1997 of $1,615,663 and $500,224 were 19% and 14%
higher, respectively, than $1,355,427 and $439,187 which was incurred in the
same periods during fiscal 1996. The Company continues to invest resources in
order to increase and improve its line of products. Management considers it
imperative to maintain a strong research and development program. Internal
research and development spending for fiscal 1997 is expected to increase
slightly from fiscal 1996.
-10-
<PAGE> 11
The Company's Selling, General and Administrative costs for the first nine
months and third quarter of fiscal 1997 of $4,301,373 and $1,316,553 were 12%
and 1% higher when compared to $3,829,143 and $1,302,967 for the same periods
in fiscal 1996. The increase is in large part attributable to an increase in
the area of employee recruitment and relocation and franchise taxes.
Management does not expect its Selling, General and Administrative costs to
increase significantly during fiscal 1997.
Interest expense during the first nine months and third quarter of fiscal 1997
increased by $1,739,588 and $281,283 when compared to the same periods in
fiscal 1996 due to the new plant being placed into service during the first
nine months in fiscal 1996. Therefore, a proportionate amount of the interest
incurred on the debt to finance construction of the Northville facility is no
longer being capitalized as part of the cost of the Northville facility. The
Company also incurred additional interest on higher debt levels to finance
ongoing operations when compared to fiscal 1996. Interest expense is expected
to continue to increase until operations generate enough profits to begin
retiring the outstanding debt.
Other income during the first nine months and third quarter of fiscal 1997
decreased by $244,531 and $580,164 when compared to the same periods in fiscal
1996. This decrease is attributed to $803,624 received during the third
quarter of fiscal 1996 from the interruption of business caused by the fire at
the Northville facility in March 1995. The decrease was offset in part by
increases in Royalty income during the third quarter of fiscal 1997.
Other differences between the first nine months and third quarter of fiscal
year 1997 and 1996 are not discussed because management believes they result
principally from differences in timing of revenue and expenses, and not from
any known trends.
Liquidity and Capital Resources
LIQUIDITY
The Company's cash or cash equivalents were $2,010,818 at March 31, 1997. The
Company is attempting to manage its cash to minimize borrowings under its
various financing instruments.
OPERATING ACTIVITIES
During the first nine months of fiscal 1997, the Company incurred a net loss of
$22,944,620. Inventory increased approximately $4 million as the Company
increased levels of raw materials and spare equipment parts to sustain the
increase in manufacturing activity. Accounts receivable decreased by a net
amount of $1.4 million due to the receipt from the insurance of approximately $6
million of expenses incurred in connection with the March 1995 fire. This
decrease was partially offset by a $4.4 million increase in amounts due the
Company under its Tax sharing agreement with Guardian Industries Corp.
("Guardian"). Accounts payable and other accrued expenses decreased
approximately $2 million due to the timing of payment of invoices.
Furthermore, the
-11-
<PAGE> 12
Company incurred approximately $4.6 million in depreciation expense which
contributed to the net loss but had no effect on cash.
INVESTING ACTIVITIES
During the first nine months of fiscal 1997, the Company spent approximately
$6.9 million for production equipment and manufacturing improvements.
FINANCING ACTIVITIES
During the first nine months of fiscal 1997, the Company received $32.5 million
from the sale of preferred stock to GD Investments Corp. ("GDIC"), a Guardian
affiliate. (see Capital Resources.)
CAPITAL RESOURCES
On October 29, 1996, the Company's Board of Directors created and authorized
for issuance 100,000 shares of Series B Preferred Stock, par value $.01, with
an original issuance price of $1,000 per share. The Series B Preferred Stock
bears a dividend rate of 8% for the first three years and a floating rate,
subject to a 16.5% cap, thereafter. Each share of Series B Preferred Stock
entitles the holder to 350 votes per share on each and every matter submitted
to a vote of the Company's shareholders. The Series B Preferred Stock is
non-convertible.
On October 30, 1996, the Company exchanged the 35,000 shares of Series A
Preferred Stock held by Guardian and all dividends in arrears for 38,137 shares
of Series B Preferred Stock. Guardian and William Davidson contributed common
stock of the Company and other property to GDIC. On October 31, 1996, the
Company sold 21,000 shares of Series B Preferred Stock to GDIC at a price of
$1,000 per share. OIS used the proceeds to retire its subordinated note
payable and all accrued interest to Guardian, which amounted to approximately
$18.9 million.
As a result of the above transaction, the Company is eligible to be a member of
Guardian's affiliated tax group ("Affiliated Group"). This allows the
Company's tax losses, credits and/or income generated after October 31, 1996 to
be included in the single consolidated federal tax return by the Affiliated
group. Guardian and the Company entered into a Tax Sharing Agreement dated
November 1, 1996 pursuant to which the Company will receive or make tax sharing
payments based on the amount by which the federal income tax liability of the
Affiliated Group is reduced or increased by inclusion of the Company in the
Affiliated Group. As of March 31, 1997, the Company had received $2 million
and recorded an estimated receivable from Guardian of $4,356,038, of which $3
million was received during April 1997, in accordance with the Tax Sharing
Agreement.
During the third quarter of fiscal 1997 the Company sold 8,500 shares of Series
B Preferred Stock to GDIC at a price of $1,000 per share. Management expects
that additional capital resources will be needed to support the Company's
operations before the end of the current fiscal year. The Company has no
agreement with any parties with respect to financing any such additional
capital, and no parties, including Guardian, have any obligation to provide
financing
-12-
<PAGE> 13
to the Company. At this time, Guardian has not indicated any intention to
discontinue funding the Company. If Guardian were to discontinue funding the
Company or offer funding to the Company on terms that were not satisfactory to
the Company's disinterested directors, then the Company would have to seek
alternative sources of funding. There is no assurance that such alternative
sources of funding would be available. The Company's Board of Directors has
authorized the issuance of an additional 7,500 shares of Series B Preferred
Stock (on the same terms as that previously issued) to facilitate additional
equity investments by Guardian and their affiliates.
The Company had entered into an agreement with Wayne County for the purchase of
approximately 80 acres of land adjacent to the Company's existing facility for
a conditional purchase price of $800,000 (the "Purchase Agreement"). Due to
the time involved in having the site re-zoned to allow for the Company's
intended use, the Purchase Agreement expired. At this time, management of the
Company has determined that the Company should not appropriate the financial
resources to revive the Purchase Agreement in order to acquire and develop the
site in accordance with the Purchase Agreement. However, Guardian is pursuing
acquisition of the site from Wayne County on substantially the same terms as
the Purchase Agreement. In addition, Guardian has indicated that if Guardian
successfully acquires the site and, within five years, the Company presents an
acceptable plan to develop a new manufacturing facility on the site, and is
capable of financing such a plan, Guardian would be willing to sell the site to
the Company on substantially the same terms as the Purchase Agreement.
-13-
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
- ------- ---------------------------------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------
A. EXHIBITS
Exhibit 27. Financial Data Schedule (EDGAR version only)
B. REPORTS ON FORM 8-K
None.
-14-
<PAGE> 15
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.
OIS Optical Imaging Systems, Inc.
(Registrant)
Date: May 14, 1997 By: /s/ Rex Tapp
----------------------------------
Rex Tapp
President and Chief Executive
Officer
Date: May 14, 1997 By: /s/ Charles C. Wilson
----------------------------------
Executive Vice President
(Principal Financial and
Accounting Officer
-15-
<PAGE> 16
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 2,010,818
<SECURITIES> 0
<RECEIVABLES> 3,769,812
<ALLOWANCES> 60,000
<INVENTORY> 9,852,482
<CURRENT-ASSETS> 20,993,911
<PP&E> 70,931,294
<DEPRECIATION> (14,022,731)
<TOTAL-ASSETS> 77,902,474
<CURRENT-LIABILITIES> 11,843,055
<BONDS> 0
0
707
<COMMON> 974,671
<OTHER-SE> 16,409,041
<TOTAL-LIABILITY-AND-EQUITY> 77,902,474
<SALES> 3,725,463
<TOTAL-REVENUES> 3,980,791
<CGS> 10,827,680
<TOTAL-COSTS> 2,526,782
<OTHER-EXPENSES> 622,530
<LOSS-PROVISION> 60,000
<INTEREST-EXPENSE> 932,582
<INCOME-PRETAX> (9,996,201)
<INCOME-TAX> (3,501,690)
<INCOME-CONTINUING> (6,494,511)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,494,511)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
