<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, 1999
-----------------------------------
( ) 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 (734) 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 21, 1999:
Common Stock, $0.01 par value 97,469,850
- -------------------------------- -----------------------------------
Class Number of Shares
<PAGE> 2
PART I - FINANCIAL INFORMATION
Financial Statements
OIS OPTICAL IMAGING SYSTEMS, INC.
STATEMENT OF CHANGES IN
NET ASSETS (LIQUIDATION BASIS)
FOR THE PERIOD FROM JUNE 30, 1998 TO MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Stockholders' deficit at June 30, 1998 (going concern
historical cost basis) $(11,339,920)
Net loss from operations for the period from July 1, 1998 to
September 18, 1998 (4,624,961)
Change in deferred compensation from July 1, 1998 to September 18, 1998 248,012
------------
Stockholders' deficit at September 18, 1998 (going concern historical
cost basis) (15,716,869)
Accrual of estimated closure costs anticipated from discontinuance of
manufacturing operations on September 18, 1998, net of tax benefit
of $1,826,000 (3,802,234)
Revision to closure cost accrual due to change in estimated liquidation
timing, net of tax benefit of $223,000 (413,000)
Recognition of local government subsidy due to discontinuance of
manufacturing operations on September 18, 1998 2,775,000
Reduction of inventory balance to liquidation basis, net of estimated
tax benefit of $521,000 (974,589)
Reduction of property and equipment to liquidation basis, net of
estimated tax benefit of $1,249,000 (2,501,000)
Reduction of accounts receivable to liquidation basis, net of estimated
tax benefit of $116,000 (214,000)
Net gain from leasing manufacturing facility, net of estimated tax
benefit of $136,000 253,000
Expenses incurred:
Interest expense, net of tax benefit of $470,000 (872,169)
Legal expense, net of tax benefit of $178,000 (330,608)
------------
Net asset deficiency at March 31, 1999 $(21,796,469)
============
</TABLE>
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<PAGE> 3
OIS OPTICAL IMAGING SYSTEMS, INC.
STATEMENT OF CHANGES IN
NET ASSETS (LIQUIDATION BASIS)
FOR THE PERIOD FROM DECEMBER 31, 1998 TO MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Net asset deficiency at December 31, 1998 $(18,167,414)
Revision to closure cost accrual due to change in estimated liquidation
timing, net of tax benefit of $223,000 (413,000)
Revision of estimated liquidation value of inventory, net of estimated
tax benefit of $141,000 (262,225)
Revision of estimated liquidation value of property and equipment, net of
estimated tax benefit of $1,249,000 (2,501,000)
Revision of estimated liquidation value of accounts receivable, net of estimated
tax benefit of $116,000 (214,000)
Net gain from leasing manufacturing facility, net of estimated tax
provision of $136,000 253,000
Expenses incurred:
Interest expense, net of tax benefit of $215,000 (398,442)
Legal expense, net of tax benefit of $50,000 (93,388)
------------
Net asset deficiency at March 31, 1999 $(21,796,469)
============
</TABLE>
-3-
<PAGE> 4
OIS OPTICAL IMAGING SYSTEMS, INC.
STATEMENTS OF OPERATIONS (GOING CONCERN BASIS)
(Unaudited)
<TABLE>
<CAPTION>
For the Period from
Three Months July 1, 1998 Nine Months
Ended through Ended
March 31, 1998 September 18, 1998 March 31, 1998
------------------- -------------------- -------------------
REVENUES
<S> <C> <C> <C>
Display revenue $ 4,534,835 $ 2,541,638 $ 14,969,835
Engineering revenue 23,059 -- 577,745
Sensor and other revenue 551,461 394,405 1,704,458
------------ ------------ ------------
TOTAL REVENUES 5,109,355 2,936,043 17,252,038
COST OF SALES
Display 8,444,414 5,936,692 28,993,402
Engineering 240,219 -- 1,467,673
Sensor and other 797,040 1,419,069 2,266,773
------------ ------------ ------------
TOTAL COST OF SALES 9,481,673 7,355,761 32,727,848
GROSS LOSS (4,372,318) (4,419,718) (15,475,810)
OPERATING EXPENSES
Internal research and development 309,517 351,491 1,037,301
Selling, general and administrative 1,558,450 1,417,780 4,826,073
------------ ------------ ------------
TOTAL OPERATING EXPENSES 1,867,967 1,769,271 5,863,374
OPERATING LOSS (6,240,285) (6,188,989) (21,339,184)
OTHER INCOME (EXPENSE)
Interest expense (1,043,554) (1,093,430) (3,312,033)
Interest income 7,259 6,158 21,093
Licensing and royalties 244,852 120,000 422,056
Other 33,400 25,300 121,660
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (758,043) (941,972) (2,747,224)
------------ ------------ ------------
Loss before income tax benefit (6,998,328) (7,130,961) (24,086,408)
Income tax benefit 2,585,000 2,506,000 8,566,000
------------ ------------ ------------
NET LOSS (4,413,328) (4,624,961) (15,520,408)
------------ ------------ ------------
Preferred stock dividends, unaccrued
and unpaid 1,588,675 1,837,721 4,561,433
------------ ------------ ------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS
$ (6,002,003) $ (6,462,682) $(20,081,841)
============ ============ ============
NET LOSS PER COMMON SHARE
(Note B) $ (.06) $ (.07) $ (.21)
============ ============ ============
</TABLE>
See notes to financial statements.
-4-
<PAGE> 5
OIS OPTICAL IMAGING SYSTEMS, INC.
STATEMENT OF NET ASSETS (LIQUIDATION BASIS)
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1999
---------------
<S> <C>
ASSETS
Cash $ 80,416
Accounts receivable 386,655
Inventory 2,072,800
Prepaid expenses 1,265,411
Property and equipment 17,221,438
Deferred income taxes 11,198,000
------------
TOTAL ASSETS 32,224,720
------------
LIABILITIES
Accounts payable 403,325
Accrued liabilities 390,462
Accrued interest 1,088,796
Accrued closure costs 1,615,000
Income taxes payable to affiliate 5,398,606
Bank debt (not revalued to liquidation value) 33,125,000
Subordinated note payable to affiliate (not revalued to
liquidation value) 12,000,000
------------
TOTAL LIABILITIES 54,021,189
------------
NET ASSET DEFICIENCY $(21,796,469)
============
</TABLE>
See notes to financial statements.
-5-
<PAGE> 6
OIS OPTICAL IMAGING SYSTEMS, INC.
BALANCE SHEET
ASSETS
(GOING CONCERN BASIS)
<TABLE>
<CAPTION>
June 30, 1998
---------------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,078,567
Accounts receivable
(Net of reserve for doubtful accounts of $60,000) 4,040,661
Inventories 9,411,086
Income tax receivable from affiliate 5,100,756
Prepaid expenses and other current assets 771,105
-----------
TOTAL CURRENT ASSETS 20,402,175
PROPERTY AND EQUIPMENT
Land 3,000,000
Building 11,100,000
Machinery and other equipment 6,900,000
-----------
TOTAL PROPERTY AND EQUIPMENT 21,000,000
Less accumulated depreciation --
TOTAL PROPERTY AND EQUIPMENT, NET 21,000,000
-----------
DEFERRED INCOME TAXES 7,000,000
-----------
TOTAL ASSETS $48,402,175
===========
</TABLE>
See notes to financial statements.
-6-
<PAGE> 7
OIS OPTICAL IMAGING SYSTEMS, INC.
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' DEFICIT
(GOING CONCERN BASIS)
<TABLE>
<CAPTION>
June 30, 1998
------------------
<S> <C>
CURRENT LIABILITIES
Subordinated note payable to affiliate $ 12,000,000
Current installment on long-term debt 42,000,000
Accounts payable 1,569,244
Accrued interest 997,129
Other accrued liabilities 375,722
-------------
TOTAL CURRENT LIABILITIES 56,942,095
LOCAL GOVERNMENT SUBSIDY 2,800,000
-------------
TOTAL LIABILITIES 59,742,095
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred Stock, par value $0.01 per share:
Series B, 8% cumulative, non-convertible and voting
Authorized - 100,000 shares
91,137 issued and outstanding
Common Stock, par value $0.01 per share: 911
Authorized - 125,000,000 shares
97,468,429 issued and outstanding 974,684
Additional paid-in capital 159,581,155
Accumulated deficit (171,458,726)
Deferred compensation (437,944)
-------------
TOTAL STOCKHOLDERS' DEFICIT (11,339,920)
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 48,402,175
=============
</TABLE>
See notes to financial statements.
-7-
<PAGE> 8
OIS OPTICAL IMAGING SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(GOING CONCERN BASIS)
(Unaudited)
<TABLE>
<CAPTION>
For the Period from
July 1, 1998
through Nine Months Ended
September 18, 1998 March 31, 1998
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,624,961) $(15,520,408)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and recognition of local government subsidy (25,000) 4,745,857
Deferred compensation expense 248,012 550,115
Impact on cash flows from changes in assets and liabilities:
Receivables 6,349,574 2,837,057
Prepaid expenses and other assets (176,722) (161,307)
Inventory 99,359 (1,850,771)
Accounts payable and accrued expenses 201,074 (777,013)
Deferred revenues -- (112,204)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 2,071,336 (10,288,674)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (214,584) (1,000,897)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (214,584) (1,000,897)
CASH FLOWS FROM FINANCIAL ACTIVITIES:
Principal payments on long term debt (2,750,000) --
Net proceeds from issuance of debt and notes -- 1,000,000
Net proceeds from issuance of common stock -- 9,545
Net proceeds from issuance of preferred stock -- 11,000,000
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (2,750,000) 12,009,545
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(893,248) 719,974
NET CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,078,567 960,042
------------ ------------
NET CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 185,319 $ 1,680,016
============ ============
</TABLE>
See notes to financial statements.
-8-
<PAGE> 9
OIS OPTICAL IMAGING SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(GOING CONCERN BASIS)
(Unaudited)
<TABLE>
<CAPTION>
For the Period from
July 1, 1998 through Nine Months Ended
September 18, 1998 March 31, 1998
------------------------ -------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $1,010,091 $2,981,038
Cash equivalents:
Cash equivalents consist of investments in short-term, highly-liquid securities
having maturity of three months or less, made as a part of OIS' cash management
activity.
SUPPLEMENTAL SCHEDULE OF NONCASH
TRANSACTIONS:
<CAPTION>
Nine Months Ended
March 31, 1998
------------------
<S> <C>
Common stock issued in exchange for deferred
compensation, net of terminations
$278,442
</TABLE>
-9-
<PAGE> 10
OIS OPTICAL IMAGING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - Financial Statements Presentation
The condensed financial statements included herein have been prepared by OIS
Optical Imaging Systems, Inc. ("OIS" or "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. On
September 18, 1998 the Company changed its basis of accounting from the going
concern historical cost basis to the liquidation basis of accounting. The
primary differences between these methods are discussed below and in Note B.
During fiscal 1998, the Company, with the encouragement and cooperation of
Guardian Industries Corp. ("Guardian"), had been exploring a full range of
strategic alternatives. Guardian, through its majority-owned subsidiary, GD
Investments Corp. ("GDIC"), is the Company's majority stockholder. In February
1998, the Company retained an investment banking firm and began seeking one or
more investors with a strategic interest in providing long term funding to the
Company. The results of this search were not successful in securing additional
financing or a buyer for the Company. In September 1998, in light of the
Company's continued operating losses and the failure of this strategic
investment process, Guardian informed the Company that it would not make any
further investments in the Company. As a result of these developments, effective
September 18, 1998, the Company ceased manufacturing operations at its
Northville facility in accordance with a plant shutdown plan approved by its
board of directors. In addition, the Company canceled substantially all of its
outstanding contracts and laid off substantially all of its employees. During
the third quarter of fiscal 1999, the Company did not conduct any manufacturing
operations in its Northville facility. A core group of employees remain at the
facility to maintain and prepare for the anticipated liquidation of the
Company's assets.
On September 28, 1998, the U.S. Department of Commerce ("Department of
Commerce") issued a directive to the Company requiring that it continue to
produce and deliver active matrix liquid crystal displays ("AMLCDs") pursuant to
certain contracts between the Company and certain of its customers which were
allegedly subject to, and rated under, the Defense Priorities and Allocations
System ("DPAS") regulations (15 C.F.R. Part 700), which regulations govern the
performance of certain contracts for the supply of goods in connection with U.S.
defense programs. In response to the directive, the Company advised the
Department of Commerce that the Company believes the Department of Commerce's
directive is not authorized by applicable law and is based on incorrect factual
premises, particularly concerning the existence of any remaining obligations
under any DPAS rated contracts. In addition, the Company believes that, given
its present financial difficulties and its reduction of employees at its
Northville manufacturing facility, compliance with the Department of Commerce's
directive would not be in the best interests of its creditors and stockholders.
As a result of discussions between the parties, the Department of Commerce and
the
-10-
<PAGE> 11
Company entered into a standstill agreement originally effective from
October 14, 1998, through November 14, 1998 ("Standstill Agreement"), which was
extended to November 18, 1998 by the mutual agreement of the parties. During the
terms of the Standstill Agreement, the Department of Commerce agreed that it
would not initiate action to enforce the directive, and the Company agreed that
it would not sell the Northville facility or certain finished goods and
work-in-process inventory without the consent of the Department of Commerce. The
Department of Commerce revoked the directive by way of a signed letter dated
March 15, 1999.
The Company is in violation of certain covenants contained in its credit
agreement with NBD Bank N.A. and Bank of America NT&SA. In addition, under the
terms of the credit agreement the lending institutions have the right to demand
repayment of amounts due based on the lending institutions' discretion as to
whether a material adverse change has occurred in the Company's business. It is
probable that the Company will be unable to meet the ongoing covenants in the
credit agreement during fiscal 1999. The Company anticipates that it would be
able to obtain waivers of these violations, if requested, and that the lending
institutions will not exercise their demand rights.
In October 1998, several of the Company's former customers initiated claims
against the Company in Michigan State court seeking damages for breach of
contract. In addition, certain of these customers sought preliminary injunctive
relief directing the Company to continue manufacturing operations. After a
hearing on October 16, 1998 concerning the preliminary injunction, the court
declined to order the Company to resume manufacturing operations or to take any
steps to complete any work-in-process, but did order the Company to deliver
certain finished goods to these former customers and to refrain from selling
certain work-in-process to third parties. The Company has complied with the
court order. In January 1999, the Company entered into agreements with the
majority of these former customers to allow them to complete certain
work-in-process related to their specific programs using the OIS facility. A
condition of these agreements is a full and general release of any claims these
former customers have or could initiate.
On November 11, 1998, the Company's Board of Directors approved a Plan of
Liquidation and Dissolution, which the Board of Directors submitted to the
stockholders of the Company for their approval at the Company's Annual Meeting
of Stockholders held on March 31, 1999. At the Annual Meeting of Stockholders,
and as more fully described elsewhere in this Form 10-Q, the Company's
stockholders approved the Plan of Liquidation. Due to existing debt and other
obligations, the Company does not believe that its common stockholders will
receive any proceeds from the liquidation.
Although Guardian will not make any additional investments in the Company, the
Company anticipates that funds received under a tax sharing agreement entered
into with Guardian and through the disposition of its assets, including its
intellectual property, will be sufficient to allow the Company to implement the
shutdown plan and pay its debts as they become due.
As a result of the contemplated liquidation discussed above, the Company changed
its method of accounting from the going concern historical cost basis to the
liquidation basis of accounting effective September 18, 1998. The going concern
historical cost basis of accounting contemplates the realization of assets and
liabilities in the ordinary course of business. The liquidation basis of
accounting requires that assets and liabilities be valued at their estimated
liquidation value. Assets and liabilities which have not been revalued to
liquidation value are disclosed as such on the face of the financial statements.
In addition, under the liquidation basis of accounting, gains and losses
-11-
<PAGE> 12
from dispositions of assets are displayed as net amounts versus gross revenue
and expenses under the going concern historical cost basis of accounting. The
primary financial statements required under the liquidation basis of accounting
are a Statement of Net Assets (Deficiency) and a Statement of Changes in Net
Assets (Deficiency).
Under the liquidation basis of accounting, the Company originally anticipated
that the going concern historical cost basis of cash and property and equipment
would be realized and therefore deemed that no adjustment to the carrying value
was necessary. Certain accounts receivable from employees, totaling
approximately $110,000, were deemed uncollectable due to the lay off of the
employees and were written off to adjust the going concern historical costs
basis of accounts receivable to liquidation value. Prepaid assets and deferred
income taxes were valued at the estimated cash liquidation value. Accordingly,
the Company wrote off approximately $90,000 in prepaid assets as a result of the
change to the liquidation basis of accounting. The Company recorded deferred
income taxes of $1,826,000 resulting from the initial accrual of closure costs
discussed below (See Note B). In addition, the Company wrote off approximately
$214,000 in construction in progress which was not expected to be completed due
to the probable liquidation of the Company. Initially, the Company anticipated
that inventory would be realized at its going concern historical cost basis.
However in the second quarter of fiscal 1999, a buyer that had expressed
interest in purchasing substantially all of the Company's assets formally
notified the Company that it no longer had the intention to purchase the
Company's assets. Accordingly, the Company reassessed the liquidation value of
all assets and determined that it is not likely that the Company could realize
the carrying value of inventory. Accordingly, the Company recorded an additional
write down of inventory to estimated liquidation value of approximately
$713,000, net of a tax benefit of approximately $380,000. In the third quarter
of fiscal 1999, a potential buyer interested in acquiring substantially all
assets of the Company notified the Company that it would no longer pursue a
transaction. Accordingly, the Company reassessed the liquidation value of all of
its assets and liabilities and determined that an additional write down of
property and equipment of approximately $2,501,000, net of estimated tax benefit
of $1,249,000, was necessary to reduce the carrying value of property and
equipment to its revised estimated liquidation value. Based on this change in
circumstances, the Company determined that an additional write down of
approximately $262,000, net of a tax benefit of approximately $141,000, was
necessary to reduce inventory to its revised estimated liquidation value. In
addition, during the third quarter of fiscal 1999, the Company reserved for
certain accounts receivable from customers which are in dispute. This write down
totaled approximately $214,000, net of estimated tax benefit of $116,000. The
Company anticipates that accounts payable, accrued liabilities, accrued interest
and income taxes payable to affiliate will be settled at their going concern
basis carrying values and accordingly they have not been adjusted based upon the
change to the liquidation basis of accounting. Bank debt and subordinated note
payable to affiliate have not been revalued to liquidation basis primarily due
to uncertainties as to when they would be settled based on the ultimate disposal
of the Company's assets. The Company's accounting policies under the liquidation
basis of accounting which differ from those under the going concern basis of
accounting are discussed in Note B.
In the opinion of the Company, the accompanying unaudited condensed financial
statements include all adjustments required to present fairly its net assets as
of March 31, 1999 (liquidation basis), changes in net assets from June 30, 1998
to March 31, 1999 (liquidation basis), changes in net assets from December 31,
1998 to March 31, 1999 (liquidation basis), the results of operations from July
1, 1998 to September 18, 1998 (going concern basis) and for the three months and
nine months
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<PAGE> 13
ended March 31, 1998 (going concern basis) and cash flows for the period from
July 1, 1998 to September 18, 1998 (going concern basis) and for the nine months
ended March 31, 1998 (going concern basis).
NOTE B - Significant Liquidation Basis of Accounting Policies
Accounts Receivable - Since the cessation of manufacturing operations on
September 18, 1998, the Company has put most customers on a cash on delivery
basis.
Accrued Closure Costs - Accrued Closure Costs represent costs to be incurred by
the Company in implementing the shutdown plan approved by the Board of Directors
and in preparing the facility for sale (see Note A). The Company has accrued all
reasonably estimatable costs directly associated with implementing the shutdown
plan and in preparing for the sale of the facility. The accrual initially
consisted primarily of employee payroll and severance costs, totaling
approximately $3,900,000 and estimated operating expenses during shutdown.
Initially, estimated operating expenses during the shutdown consist primarily of
insurance expense, totaling $286,000, utilities expenses totaling $658,000 and
other operating expenses totaling $372,000. Employee payroll and severance costs
were estimated based on known payroll and severance commitments, including
applicable fringe benefits, through approximately June 30, 1999. The Company
originally estimated that all employees would be terminated by that date based
on agreements reached with remaining employees. Operating expenses were
estimated based on historical amounts, adjusted for the reduced activity of the
Company during the liquidation period, which were expected to be incurred
through June 30, 1999 to maintain the facility as required by the Company's debt
and other agreements.
During the third quarter of fiscal 1999, the Company determined that the
liquidation of the Company's assets would require more time than initially
anticipated. Therefore, certain estimates of closure costs were revised based on
agreements reached with certain employees to maintain the facility through
December 31, 1999, at which time its anticipated that the liquidation will be
substantially complete. The Company has not accrued costs which could vary
significantly based on the timing of the proposed liquidation or are not
reasonably estimatable. The most significant of these costs are interest and
legal expenses. This accrual represents the Company's estimate of anticipated
closure costs, however, actual costs incurred could differ materially from the
estimate.
-13-
<PAGE> 14
Following is a summary of amounts utilized and provided for in accrued closure
costs during the period from September 18, 1998 to March 31, 1999 (in
thousands):
<TABLE>
<CAPTION>
REVISIONS CHARGES
ORIGINAL IN AGAINST BALANCE AT
COMPONENT ESTIMATE ESTIMATES ACCRUAL MARCH 31, 1999
--------- -------- --------- ------- --------------
<S> <C> <C> <C> <C>
Payroll and related $ 3,900 $ 222 $(3,127) $ 995
Utilities 658 214 (472)
400
Other operating expenses 372 200 (468) 104
Insurance 286 (170) 116
------- ------- ------- -------
Total $ 5,216 $ 636 $(4,237) $ 1,615
======= ======= ======= =======
</TABLE>
Professional Fees - Legal and other professional fees incurred in connection
with the shutdown, liquidation or in the prosecution or defense of any lawsuits
are expensed as incurred.
Interest Expenses - Interest costs are expensed as incurred.
Intellectual Property - The Company owns intellectual property, including
numerous patents. No value has been attributed to this intellectual property
in the accompanying statement of net assets as it is uncertain what value, if
any, will be derived from the intellectual property in liquidation. Any gains
from the sale of intellectual property are recognized as they are realized.
NOTE C - Net Loss Per Common Share
Basic net loss per common share, which equals diluted loss per share, is based
on the weighted average number of shares of OIS Common Stock outstanding during
the period. The number of shares used in the computation for the period from
July 1, 1998 to September 18, 1998 and for the three and nine months ended March
31, 1998 were 97,466,869, 97,470,563 and 97,468,830, respectively. For all
periods presented, all Common Stock equivalents are antidilutive and therefore
have not been considered in the calculation of diluted net loss per common
share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
As described below, on September 18, 1998, OIS Optical Imaging Systems,
Inc. ("OIS" or "the Company") discontinued manufacturing operations at its
Northville facility pursuant to a plan shut down approved by its board of
directors. Accordingly, OIS conducted no operations for the three month period
ended March 31, 1999.
Discontinuance of Operations
As disclosed in its public reports, OIS, with the encouragement and
cooperation of Industries Corp. ("Guardian"), had been exploring a full range of
strategic alternatives throughout fiscal 1998. Guardian, through its
majority-owned subsidiary, GD Investments Corp. ("GDIC"), is the majority
stockholder of the
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<PAGE> 15
Company. In February 1998, OIS retained an investment banking firm and began
seeking one or more investors with a strategic interest in providing long term
funding to OIS. During this process numerous companies in the avionics and
electronics industries, among others, were contacted and presented with
information about OIS. In August and September 1998, OIS and Guardian also
attempted to interest a group of OIS's key customers in acquiring control of
OIS. In September 1998, in light of the Company's continued operating losses and
the failure of this strategic investment process, Guardian informed the Company
that it would not make any further investments in the Company. As a result of
these developments, effective as of September 18, 1998, OIS ceased manufacturing
operations in its Northville facility in accordance with a plant shutdown plan
approved by its board of directors. Accordingly, the Company anticipates that it
will generate little or no future revenues, except in connection with the
liquidation of its assets.
On September 28, 1998, the U.S. Department of Commerce ("Department of
Commerce") issued a directive to the Company requiring that it continue to
produce and deliver active matrix liquid crystal displays ("AMLCDs") pursuant to
certain contracts between the Company and certain of its customers which were
allegedly subject to, and rated under, the Defense Priorities and Allocations
System ("DPAS") regulations (15 C.F.R. Part 700), which regulations govern the
performance of certain contracts for the supply of goods in connection with U.S.
defense programs. In response to the directive, the Company advised the
Department of Commerce that the Company believes the Department of Commerce's
directive is not authorized by applicable law and is based on incorrect factual
premises, particularly concerning the existence of any remaining obligations
under any DPAS rated contracts. In addition, the Company believes that, given
its present financial difficulties and its reduction of employees at its
Northville manufacturing facility, compliance with the Department of Commerce's
directive would not be in the best interests of its creditors and stockholders.
As a result of discussions between the parties, the Department of Commerce and
the Company entered into a standstill agreement originally effective from
October 14, 1998, through November 14, 1998 ("Standstill Agreement"), which was
extended to November 18, 1998 by the mutual agreement of the Parties. During the
terms of the Standstill Agreement, the Department of Commerce agreed that it
would not initiate action to enforce the directive, and the Company agreed that
it would not sell the Northville facility or certain finished goods and
work-in-process inventory without the consent of the Department of Commerce. The
Department of Commerce revoked the directive by way of a signed letter
dated March 15, 1999.
In October 1998, several of the Company's former customers initiated
claims against the Company in Michigan state court seeking damages for breach of
contract. In addition, certain of these customers sought preliminary injunctive
relief directing the Company to continue manufacturing operations. After a
hearing on October 16, 1998 concerning the preliminary injunction, the court
declined to order the Company to resume manufacturing operations or to take any
steps to complete any work-in-process but did order the Company to deliver
certain finished goods to these former customers and to refrain from selling
certain work-in-process to third parties. The Company has complied with the
court order. In January 1999, the Company entered into agreements with the
majority of these former customers to allow them to complete certain
work-in-process related to their specific programs using the OIS facility. A
condition of these agreements is a full and general release of any claims these
former customers have or could initiate.
-15-
<PAGE> 16
Plan of Liquidation
On November 11, 1998, OIS's board of directors authorized the orderly
liquidation of the Company's assets pursuant to the Company's Plan of
Liquidation and Dissolution (the "Plan"), which the board of directors submitted
to the stockholders of the Company for their approval at the Company's Annual
Meeting of Stockholders held on March 31, 1999 (the "Annual Meeting"). At the
Annual Meeting the Company's stockholders approved the Plan.
Under the Plan, OIS will sell, transfer, or otherwise dispose of all of its
property and assets, including its intellectual property and other intangible
assets, to the extent, for such consideration and upon such terms and conditions
as its board of directors deems expedient and in the best interest of OIS, its
creditors and its stockholders. Prior to making any distributions, if any, to
its stockholders, OIS will pay or make reasonable provisions to pay all of its
claims and obligations, including all contingent, conditional or unmatured
claims known to OIS. As part of the benefits granted thereto, GDIC, the holder
of the outstanding shares of the Company's Series B Cumulative Preferred Stock,
par value $.01 per share, has the right to a preferential distribution of the
assets of the Company in the event of a liquidation (the "Liquidation
Preference"). Under the Plan, in addition to paying the debts of its creditors,
the Company is obligated to distribute the Liquidation Preference to GDIC prior
to any distributions to its common stockholders.
The Company has been and will continue focusing its efforts on locating
prospective buyers primarily interested in acquiring all or substantially all of
the tangible assets of the Company. In anticipation of the possibility that it
will be unable to effect a single transaction sale, the Company has been and
will continue preparing for a liquidation involving separate multiple
transactions by identifying prospective buyers for much of the Company's
equipment and soliciting such buyers to access levels of interest. During the
third quarter of fiscal 1999, the Company determined that the liquidation of its
assets would require more time than initially anticipated. Although no timetable
has been formally established, the Company anticipates that the liquidation of
its assets will be substantially complete by December 31, 1999.
Once the liquidation of OIS's property and assets is substantially
completed, or at such earlier time as determined by its board of directors, the
officers of the Company will promptly execute and file a certification of
dissolution with the Secretary of State of the State of Delaware. Because of the
existing debt and other obligations of OIS, OIS does not believe that its common
stockholders will receive any proceeds from a liquidation.
Liquidation Basis of Accounting
As a result of the contemplated liquidation discussed above, the Company
changed its method of accounting from the going concern historical cost basis to
the liquidation basis of accounting effective September 18, 1998. The going
concern historical cost basis of accounting contemplates the realization of
assets and liabilities in the ordinary course of business. The liquidation basis
of accounting requires that assets and liabilities be valued at their estimated
liquidation value. Assets and liabilities which have not been revalued to
liquidation value are disclosed as such on the face of the financial statements.
In addition, under the liquidation basis of accounting, gains and losses from
dispositions of assets are displayed as net amounts versus gross revenue and
expenses under the going concern historical cost basis of accounting. The
primary
-16-
<PAGE> 17
financial statements required under the liquidation basis of accounting
are a Statement of Net Assets (Deficiency) and a Statement of Changes in Net
Assets (Deficiency).
Under the liquidation basis of accounting, the Company originally
anticipated that the going concern historical cost basis of cash and property
and equipment would be realized and therefore deemed that no adjustment to the
carrying value was necessary. Certain accounts receivable from employees,
totaling approximately $110,000, were deemed uncollectable due to the lay off of
the employees and were written off to adjust the going concern historical costs
basis of accounts receivable to liquidation value. Prepaid assets and deferred
income taxes were valued at the estimated cash liquidation value. Accordingly,
the Company wrote off approximately $90,000 in prepaid assets as a result of the
change to the liquidation basis of accounting. The Company recorded deferred
income taxes of $1,826,000 resulting from the accrual of closure costs discussed
below (See Note B to the Company's condensed financial statements). In addition,
the Company wrote off approximately $214,000 in construction in progress which
was not expected to be completed due to the probable liquidation of the Company.
Initially, the Company anticipated that inventory would be realized at its going
concern historical cost basis. However in the second quarter of fiscal 1999, a
buyer that had expressed interest in purchasing substantially all of the
Company's assets formally notified the Company that it no longer had the
intention to purchase the Company's assets. Accordingly, the Company reassessed
the liquidation value of all assets and determined that it is not likely that
the Company could realize the carrying value of inventory. Accordingly, the
Company recorded an additional write down of inventory to estimated liquidation
value of approximately $713,000, net of a tax benefit of approximately $380,000.
In the third quarter of fiscal 1999, a potential buyer interested in acquiring
substantially all assets of the Company, notified the Company that it would no
longer pursue a transaction. Accordingly, the Company reassessed the liquidation
value of all of its assets and liabilities and determined that an additional
write down of approximately $2,501,000, net of estimated tax benefit of
$1,249,000, was necessary to reduce the carrying value of property and equipment
to its revised estimated liquidation value. Based on this change in
circumstances, the Company determined that an additional write down of
approximately $262,000, net of a tax benefit of approximately $141,000, was
necessary to reduce inventory to its revised estimated liquidation value. In
addition, during the third quarter of fiscal 1999, the Company reserved for
certain accounts receivable from customers which are in dispute. This write down
totaled approximately $214,000, net of estimated tax benefit of $116,000. The
Company anticipates that accounts payable, accrued liabilities, accrued interest
and income taxes payable to affiliate will be settled at their going concern
basis carrying values and accordingly they have not been adjusted based upon the
change to the liquidation basis of accounting. Bank debt and subordinated note
payable to affiliate have not been revalued to liquidation basis primarily due
to uncertainties as to when they would be settled based on the ultimate disposal
of the Company's assets. The Company's accounting policies under the liquidation
basis of accounting which differ from those under the going concern basis of
accounting are discussed above in Note B to the Company's condensed financial
statements.
Accrued Closure Costs represent costs to be incurred by the Company in
implementing the shutdown plan approved by the Company's board of directors and
in preparing the facility for sale (see Note A to the Company's condensed
financial statements). The Company has accrued all reasonably estimatable costs
directly associated with implementing the shutdown plan and in preparing for the
sale of the facility. The accrual initially consisted primarily of employee
payroll and severance
-17-
<PAGE> 18
costs, totaling approximately $3,900,000 and estimated operating expenses during
shutdown. Initially, estimated operating expenses during the shutdown consist
primarily of insurance expense, totaling $286,000, utilities expenses totaling
$658,000 and other operating expenses totaling $372,000. Employee payroll and
severance costs were estimated based on known payroll and severance commitments,
including applicable fringe benefits, through approximately June 30, 1999. The
originally Company estimated that all employees would be terminated by that date
based on agreements reached with remaining employees. Operating expenses were
estimated based on historical amounts, adjusted for the reduced activity of the
Company during the liquidation period, which were expected to be incurred
through June 30, 1999 to maintain the facility as required by the Company's debt
and other agreements.
During the third quarter of fiscal 1999, the Company determined that the
liquidation of the Company's assets would require more time than initially
anticipated. Therefore, certain estimates of closure costs were revised based on
agreements reached with certain employees to maintain the facility through
December 31, 1999, at which time its anticipated that the liquidation will be
substantially complete. The Company has not accrued costs which could vary
significantly based on the timing of the proposed liquidation or are not
reasonably estimatable. The most significant of these costs are interest and
legal expenses. This accrual represents the Company's estimate of anticipated
closure costs, however, actual costs incurred could differ materially from the
estimate.
Following is a summary of amounts utilized and provided for in accrued
closure costs during the period from September 18, 1998 to March 31, 1999 (in
thousands):
<TABLE>
<CAPTION>
REVISIONS CHARGES
ORIGINAL IN AGAINST BALANCE AT
COMPONENT ESTIMATE ESTIMATES ACCRUAL MARCH 31,
--------- -------- --------- ------- ----------
1999
----
<S> <C> <C> <C> <C>
Payroll and related $ 3,900 $ 222 $(3,127) $ 995
Utilities 658 214 (472)
400
Other operating expenses 372 200 (468) 104
Insurance 286 (170) 116
------- ------- ------- -------
Total $ 5,216 $ 636 $(4,237) $ 1,615
======= ======= ======= =======
</TABLE>
Although Guardian will not make any additional investments in OIS, OIS
anticipates that funds received under a tax sharing agreement entered into with
Guardian (the "Tax Sharing Agreement") and through the disposition of its assets
will be sufficient to allow OIS to implement the shutdown plan and liquidation
and pay its debts as they become due.
Commercial Credit Facility
The Company is in violation of certain covenants contained in its credit
agreement with NBD Bank N.A. and Bank of America NT&SA. Certain of the
violations have been waived by the lending institutions but the lending
institutions have the right to demand the repayment of all amounts outstanding.
In addition, under the terms of the credit agreement the lending institutions
have the right to demand repayment of amounts due based on the lending
institutions' discretion as to whether a
-18-
<PAGE> 19
material adverse change has occurred in the Company's business. It is probable
that the Company will be unable to meet the ongoing covenants in the credit
agreement during fiscal 1999. The Company believes that it will be able to
obtain waivers of these violations as they occur and that, if so, the lending
institutions will not exercise their demand rights.
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
RESULTS OF OPERATIONS
As discussed in the summary above, the Company conducted no manufacturing
operations during the three months ended March 31, 1999, as a result of the
plant shutdown effective September 18, 1998. Accordingly, there is no comparison
of results of operations with the three months ended March 31, 1998. Following
is a summary of actions taken during the three months ended March 31, 1999 as
the Company pursued various options, discussed above, related to the
contemplated liquidation of the Company.
The Company continued to liquidate its inventories to its former customers.
In addition, the Company was informed that a potential buyer for the Company as
a whole would no longer actively pursue the purchase of the Company's assets.
Accordingly, the Company revised its estimates of the liquidation values of its
assets. This revision resulted an additional write down of property and
equipment of approximately $2.5 million, net of related tax benefit of
approximately $1.2 million and an additional write down of inventory of
approximately $0.3 million, net of tax benefit of approximately $0.1 million.
The Company also recorded a reserve for certain receivables which are disputed
totaling approximately $0.2 million, net of tax benefit of approximately $0.1
million. As a result of the changes in circumstances discussed above, the
Company revised its estimate of when the ultimate liquidation of the Company's
assets would be finalized. Based on this change, the Company revised its
estimate of closure costs and accrued an additional approximately $0.4 million,
net of tax benefit of $0.2 million.
As part of the settlement reached with certain customers, the Company
experienced a net gain of approximately $0.3 million, net of tax benefit of $0.1
million, related to the lease of the Company's manufacturing facility to these
customers.
The Company incurred approximately $0.4 million in interest expense, net of
related tax benefit of approximately $0.2 million, to service the Company's
outstanding bank debt. In addition, $0.1 million in legal expenses, net of
related tax benefit of $0.05 million, were incurred related to the shutdown and
to prosecute and defend various legal actions by and against the Company, as
discussed in the summary above.
-19-
<PAGE> 20
PERIOD FROM JULY 1, 1998 TO SEPTEMBER 18, 1998 AND THE
NINE MONTHS ENDED MARCH 31, 1998
RESULTS OF OPERATIONS
Revenues
Total revenues for the period from July 1, 1998 to September 18, 1998 (the
"1999 Operating Period") of approximately $2.9 million were 83% lower than total
revenue for the nine months ended March 31, 1998 of $17.3 million. This decrease
is attributable to the cessation of manufacturing operations in the Northville
facility on September 18, 1998.
The Company derived no revenues from engineering development agreements
during the 1999 Operating Period, a decrease of $577,745 in revenues from the
first nine months of fiscal 1998. This decrease was due to the Company's
decreased focus on engineering development agreements.
Cost of Sales
Cost of sales for the 1999 Operating Period of approximately $7.4 million
was 78% lower than the cost of sales for the first nine months of fiscal 1998 of
approximately $32.7 million. This decrease in cost of sales is primarily
attributable to the cessation of manufacturing operations in the Northville
facility on September 18, 1998.
Other Costs
The Company's operating expenses, which consist of internal research and
development and selling, general and administrative expenses, decreased
approximately 70% during the 1999 Operating Period when compared to the first
nine months of fiscal 1998. This decrease resulted principally from the
cessation of manufacturing operations in the Northville facility on September
18, 1998.
Changes in Net Asset Deficiency
The change in net asset deficiency of approximately $6.1 million was due
to: the accrual of estimated closure costs of approximately $4.2 million, net of
related tax benefit of approximately $2.0 million; the recognition of the local
government subsidy of approximately $2.8 million; a reduction of inventory to
estimated liquidation value of approximately $1.0 million, net of related tax
benefit of approximately $0.5 million; a reduction of property and equipment to
estimated liquidation value of approximately $2.5 million, net of related tax
benefit of approximately $1.2 million; a reduction of certain receivables to
estimated liquidation value of approximately $0.2 million, net of related tax
benefit of approximately $0.1 million; gains from leasing the manufacturing
facility of approximately $0.2 million net of estimated tax provision of $0.1
million; and interest and legal expenses incurred of approximately $1.2 million,
net of related tax benefit of approximately $0.6 million. The components of
accrued closure costs are discussed above in the "Summary" above under
"Liquidation Basis of Accounting".
-20-
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
On September 17, 1998 Guardian, the Company's principal source of funding,
informed OIS that, in light of the Company's continued operating losses and the
failure of the strategic investment process, Guardian would not make any further
investments in the Company to fund operations. As a result, effective September
18, 1998, OIS ceased manufacturing operations in accordance with a plant
shutdown plan approved by its board of directors. The Company's cash at March
31, 1999 were $80,416.
OIS's board of directors and stockholders have approved the orderly
liquidation of the Company's assets pursuant to the Plan. Because of its
existing debt and other obligations of OIS, OIS does not believe that its common
stockholders will receive any proceeds from liquidation. However, OIS currently
anticipates that funds received under the Tax Sharing Agreement and through the
disposition of its assets will be sufficient to allow OIS to implement the
shutdown plan and liquidation and pay its debts as they become due.
While the Company's cash had decreased at March 31, 1999, to approximately
$80,000 from approximately $1.1 million at June 30, 1998, the Company expects to
meet its obligations through collection of accounts receivable, the sale of both
finished and partially completed inventory on hand, the sale of raw materials,
supplies, fixtures, equipment and the facility, sale of the Company's
intellectual property and amounts received under the Tax Sharing Agreement.
Capital Resources
As a result of the discontinuation of its operations, the Company's sole
source of funds will be from the disposition of the assets described above.
The Company has exhausted its $52.5 million commercial credit facility with
NBD Bank N.A. and Bank of America NT&SA. In addition, on March 30, 1998, the
Company granted those banks a first priority lien and security interest in all
tangible and intangible assets of the Company, including intellectual property,
to secure repayment of the commercial credit facility. The credit agreement
governing the commercial credit facility contains a number of financial and
other covenants. The Company is not currently in compliance with all of the
covenants contained in the credit agreement. The banks have the right to demand
repayment of amounts outstanding as long as the Company has not cured the event
of default or obtained a waiver from the banks or, if in the banks' discretion,
a material adverse change has occurred with respect to the Company's business.
It is probable that the Company will not be able to meet the ongoing covenants
in its credit agreement during fiscal 1999. If the Company is unable to meet
these covenant requirements and is unable to secure a waiver from the banks, the
banks have the right to demand the immediate repayment of amounts outstanding.
On March 31, 1999, the Company made an additional principal repayment of $3.38
million which was funded through receipt of a payment from Guardian under the
Tax Sharing Agreement. The commercial credit facility matures in December 1999,
and quarterly principal installments are due as follows: $3.38 million on June
30, 1999, $3.88 million on September 30, 1999 and $25.88 million on December 31,
1999.
-21-
<PAGE> 22
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that are not based
on historical fact and are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Among other things, they
regard the Company's liquidity, financial condition, operational matters and
certain strategic initiatives and alternatives and their potential outcomes.
Words or phrases denoting the anticipated results of future events, such as
"anticipate," "believe," "estimate," "expects," "may," "not considered likely,"
"are expected to," "will continue," "project," and similar expressions that
denote uncertainty are intended to identify such forward-looking statements.
Additionally, from time to time, the Company or its representatives have made or
may make oral or written forward-looking statements. Such forward-looking
statements may be included in various filings made by the Company with the
Securities and Exchange Commission, or in press releases or oral statements made
by or with the approval of an authorized executive officer of the Company. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, such forward-looking statements:
(1) as a result of risks and uncertainties identified in the Company's publicly
filed reports; (2) as a result of risks associated with the implementation of
its manufacturing facility shutdown and the Plan described herein; (3) as a
result of factors over which the Company has no control, including the strength
of the overall avionics display market; (4) as a result of the value that
potential buyers may place on the assets of the Company; or (5) if the factors
on which the Company's conclusions are based do not conform to the Company's
expectations.
-22-
<PAGE> 23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" under Part I of this Form 10-Q.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" under Part I of this Form 10-Q
for a discussion of the Company's liquidity and capital resources.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting on March 31, 1999. The Company's
stockholders approved the Plan, elected the entire slate of nominees as
directors, ratified the appointment of Arthur Andersen LLP to serve as the
Company's independent auditors and approved a proposal to amend the Company's
Restated Certificate of Incorporation to allow for acts of the Company to be
approved by written consent of its stockholders in lieu of a special meeting of
its stockholders. In addition, the stockholders voted to reject a proposal
submitted by a stockholder at the Annual Meeting. The following tables give the
details of the votes cast for each proposal at the Annual Meeting.
Proposal 1: Plan of Liquidation and Dissolution
----------------- ------------------ ----------------------
For Against Abstain
----------------- ------------------ ----------------------
112,849,199 2,280,805 154,369
----------------- ------------------ ----------------------
Proposal 2: Election of Directors
-------------------- ---------------- --------------
For Abstain
-------------------- ---------------- --------------
DIRECTORS:
Ralph J. Gerson 125,999,420 1,363,258
-------------------- ---------------- --------------
Jeffrey A. Knight 126,009,770 1,352,908
-------------------- ---------------- --------------
C.K. Prahalad 126,038,782 1,323,896
-------------------- ---------------- --------------
Robert M. Teeter 126,034,973 1,327,705
-------------------- ---------------- --------------
Charles C. Wilson 126,002,249 1,360,429
-------------------- ---------------- --------------
Mark S. Wrighton 126,033,373 1,329,305
-------------------- ---------------- --------------
Peter Joel C. Young 126,028,070 1,334,608
-------------------- ---------------- --------------
-23-
<PAGE> 24
Proposal 3: Approval of Auditors
-------------------------- -------------- -------------- ----------
For Against Abstain
-------------------------- -------------- -------------- ----------
APPOINTMENT OF ARTHUR
ANDERSEN LLP 126,619,330 547,236 196,111
-------------------------- -------------- -------------- ----------
Proposal 4: Amendment of Restated Certificate of Incorporation
-------------------- ---------------- -------------------
For Against Abstain
-------------------- ---------------- -------------------
113,788,433 1,288,496 207,444
-------------------- ---------------- -------------------
Proposal 5: Stockholder Proposal
---------------------- -----------------
For Against
---------------------- -----------------
40,610 100,472,240
---------------------- -----------------
Item 5. Other Information
Discretionary Proxy Voting Authority/Stockholder Proposals
On May 21, 1998, the Securities and Exchange Commission adapted
an amendment to Rule 14a-4, as promulgated under the Securities
Exchange Act of 1934. The amendment to Rule 14a-4(c)(1) governs the
Company's use of its discretionary proxy voting authority with
respect to a stockholder proposal which the stockholder has not
sought to include in the Company's proxy statement. The amendment
provides that if a proponent of a proposal fails to notify the
Company at least 45 days prior to the month and day of mailing of the
prior year's proxy statement, then the management proxies will be
allowed to use their discretionary voting authority when the proposal
is raised at the meeting, without any discussion of the matter in the
proxy statement.
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.
-24-
<PAGE> 25
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 24, 1999 By: /s/ Charles C. Wilson
--------------------------------
Charles C. Wilson
President and Chief Financial Officer
(Principal Financial and
Accounting Officer)
-25-
<PAGE> 26
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF NET ASSETS (LIQUIDATION BASIS) AND THE STATEMENT OF OPERATION
(GOING CONCERN BASIS) FOR THE QUARTER ENDED MARCH 31, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 80,416
<SECURITIES> 0
<RECEIVABLES> 446,655
<ALLOWANCES> 60,000
<INVENTORY> 2,072,800
<CURRENT-ASSETS> 3,805,282
<PP&E> 17,221,438
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,224,720
<CURRENT-LIABILITIES> 54,021,189
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (21,796,469)
<TOTAL-LIABILITY-AND-EQUITY> 32,224,720
<SALES> 2,936,043
<TOTAL-REVENUES> 2,936,043
<CGS> 7,355,761
<TOTAL-COSTS> 9,125,032
<OTHER-EXPENSES> 941,972
<LOSS-PROVISION> 60,000
<INTEREST-EXPENSE> 1,093,430
<INCOME-PRETAX> (7,130,961)
<INCOME-TAX> (2,506,000)
<INCOME-CONTINUING> (4,624,961)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,624,961)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
