SECURITIES AND EXCHANGE COMMISSION Washington D.C. 2054
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996 Commission File Number 2-94117-D
ECLIPSE CORPORATION
_____________
(Exact name of registrant as specified in its charter)
COLORADO
84-0867911
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 North Cascade Avenue, Suite 330, Colorado Springs, Colorado 80903
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (719) 520-1800
MICROTECH MEDICAL SYSTEMS, INC.
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) Yes X No___
of the Securities Exchange Act of 1934 during the pre-
ceding 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.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Number of shares outstanding
Class at November 14, 1996
------------------------------------- --------------------------
Common stock, $.0005 par value 73,830,900 shares
FORM 10-Q
3rd QUARTER
<PAGE>
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements *
Balance Sheets - September 30, 1996 (Unaudited) and
December 31, 1995 3
Statements of Operations - Three months ended
September 30, 1996 and 1995 and nine months ended
September 30, 1996 and 1995 (Unaudited). 4
Statement of Cash Flows - Nine months ended
September 30, 1996 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and
Analysis (Unaudited) 8
PART II - OTHER INFORMATION
Items 1 through 6. 9
SIGNATURES 10
* The accompanying financial statements are not covered by an independent
certified public accountant's report.
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
ECLIPSE CORPORATION
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1996 1995
-----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ..................... $ 21,219 $ 506,519
Marketable securities ......................... 52,012 104,065
Notes receivable - net ........................ 674,792 --
Accrued interest receivable ................... 12,875
Prepaid expenses .............................. 145,413 --
-------
Total Current Assets ....................... 906,311 610,584
LAND HELD FOR FUTURE DEVELOPMENT ................. 713,183 --
OTHER ASSETS
Note receivable ............................... 250,000
Deposit ....................................... 10,219 --
s
Deferred taxes ................................ 53,000 69,000
Assets of discontinued operations ............. 1,500 204,325
----- -------
TOTAL ASSETS ..................................... $ 1,934,213 $ 883,909
=========== ===========
LIABILITIES AND STOCKHOLDERS'EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt .......... $ 303,954 $ --
Accounts payable .............................. 101,609
Accrued liabilities ........................... 12,958 --
Current liabilities of discontinued operations 58,443 77,670
------ ------
Total current liabilities .................. 476,963 77,670
DEFERRED GAIN ON SALE OF BUSINESS ................ 168,971 --
STOCKHOLDERS'EQUITY
Common stock, 1 00,000,000 shares, $.0005 par value;
66,580,900 and 59,080,900 shares issued and
outstanding September 30, 1996 and December 31,
1995, respectively ......................... 36,403 29,540
Additional Paid in Capital .................... 1,186,450 1,010,605
Accumulated deficit ........................... 65,426 (233,906)
------ --------
Total stockholders' equity ................. 1,288,279 806,239
--------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 1,934,213 $ 883,909
=========== ==========
</TABLE>
See accompanying notes to these financial statements.
3
ECLIPSE CORPORATION
Consolidated Statements of Operations
For Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES ........................ $ 499,011 $ -- $ 499,011 $ --
COST OF GOODS SOLD ................ 412,698 -- 412,698 --
------- -------
GROSS PROFIT ..................... 86,313 -- 86,313 --
OPERATING EXPENSES ................ 294,409 -- 294,409 50,505
------- ------- ------
(LOSS) FROM CONTINUING OPERATIONS . (208,096) -- (208,096) (50,505)
OTHER INCOME (EXPENSES):
Other expenses ................. (5,466) -- (5,466) (2,002)
Gain on sale of assets ......... -- -- -- 6,000
Interest income (expense), net . 32,947 -- 32,947 16,940
Unauthorized transactions ...... 532,437 -- 532,437 --
INCOME (LOSS) BEFORE INCOME TAXES
AND DISCONTINUED OPERATIONS .... 351,822 -- 351,822 (29,567)
PROVISION FOR INCOME TAXES ........ 27,000 -- 27,000 31,000
------ ------ ------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS ..................... 324,822 -- 324,822 (60,567)
DISCONTINUED OPERATIONS, NET OF TAX -- 22,202 (25,490) 137,183
------ ------- -------
NET INCOME (LOSS) ................. $ 324,822 $ 22,202 $ 299,332 $ 76,616
============ ============ ============ ============
INCOME (LOSS) PER SHARE ........... $ 0.0046 $ 0.0003 $ 0.0042 $ 0.0011
============ ============ ============ ============
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING .................... 70,514,233 66,845,900 70,514,233 69,433,598
========== ========== ========== ==========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
ECLIPSE CORPORATION
STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30,1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ........................ $ 299,332 $ 76,616
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization ...... 4,878 4,886
Gain on sale ....................... (858) --
Unauthorized transactions .......... (532,437) --
Deferred taxes ..................... 16,000 --
Accrued interest ................... (12,875) --
Prepaid expenses ................... (155,632) --
Accounts payable ................... 101,609 --
Accrued liabilities ................ 5,273 --
Changes in assets and liabilities
related to Discontinued Operations:
Income tax payable .............. 7,685 (14,100)
Discontinued Operations ......... 201,983 (15,679)
------- -------
Net cash provided by (used in)
operating activities .............. (65,042) 51,723
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayments, former president ............. 532,437 --
Purchase notes receivable - net .......... (674,792) --
Purchase certificate of deposit .......... (50,000) --
Proceeds on sale of fixed assets ......... 251,000 --
Land for resale .......................... (713,183) --
Capital expenditures ..................... (1,998) (22,000)
------ -------
Net cash provided by (used in)
investing activities .............. (1,188,973) (22,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt, net ........ 303,954 --
Notes receivable assigned for
purchase of land .................. 230,000 --
Stock issued for purchase of land ........ 166,207 --
Stock options exercised .................. 16,501 --
Net cash provided by (used in)
financing activities .............. 716,662 --
-------
Net increase (decrease) ............... (537,353) 29,723
CASH AT BEGINNING OF PERIOD ................. 610,584 509,400
------- -------
CASH AT END OF PERIOD ....................... $ 73,231 $ 539,123
=========== ===========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
ECLIPSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL:
- ------------
ECLIPSE CORPORATION (the Company) has elected to omit substantially all
other notes to the financial statements. These interim financial statements
should be read in conjunction with the Company's annual report and report Form
10-KSB for the year ended December 31, 1995.
2. UNAUDITED INFORMATION:
- --------------------------
The information furnished herein was taken from the books and records of
the Company without audit. However, such information reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to reflect properly results of interim periods presented.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the year.
3. STOCKHOLDERS EQUITY:
- ------------------------
In February 1996 the Board of Directors granted 3,000,000 options to the
Company's two board members. The options are exercisable at $.02 per share for
five years.
4. DISCONTINUED CONTINED OPERATIONS:
- -------------------------------------
As part of the sale of common stock by Kilgore, the Company entered into an
asset purchase agreement dated June 27, 1996, pursuant to which the Company has
agreed to sell, subject to shareholder approval, its medical test kit
manufacturing operations, including all licenses, inventories, and operating
assets to Kilgore for $251,000. In payment for the assets, Kilgore will deliver
$1,000 in cash and a note for $250,000. The note will bear interest at prime
plus 1%, and will be due and payable on June 1, 2001. The note will be
collateralized by Kilgore's options and certain other collateral paper held by
Kilgore.
As the Company intends to divest itself of the medical test kit operations,
such operations and related assets and liabilities have been reflected as
discontinued operations in the accompanying financial statements. Income from
the medical test kit manufacturing operations from June 12, 1996 (effective date
of the sale), have been classified as discontinued operations. Such amount has
been immaterial through June 30, 1996. The gain from the sale will be deferred
until the note receivable is collected.
The sale of the medical test kit operations was approved by the
shareholders at the annual meeting held on October 10, 1996.
6. SUBSEQUENT EVENT:
- ---------------------
Subsequent to September 30, 1996, the Company entered into the following
the following transactions for the following purposes:
* Purchased approximately 30 platted and 25 unplatted lots from Glacier
Valley Holding Corporation for a consideration of $700,000 consisting assignment
of negotiable instruments and contracts of face value of $230,000 and issuance
of 6,250,000 shares of restricted common stock in the Company. The transaction
has been booked as of September 30, 1996, the date of the purchase contract. The
transaction was closed October 10, 1996.
* Issued 1,000,000 shares of restricted common stock to former director and
president protem Charles L. Diehl pursuant to preexisting stock option granted
December 11, 1992 by the previous Board of Directors in exchange for payment of
$1,000.00.
* The Company pursuant to shareholder approval at their October 10, 1996
meeting changed its name from Microtech Medical Systems, Inc., to Eclipse
Corporation effective November 1, 1996.
* The Company's shareholders at the October 10, 1996 annual meeting
approved the sale of the Company's medical test kit manufacturing operation to
its former president and employee, Jerry G. Kilgore under previous contract.
Under the agreement, the Company has agreed to pay certain benefits to Mr.
Kilgore of approximately $55,000.
<PAGE>
ECLIPSE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
General:
- --------
The Company's financial condition and results of operations are directly
affected by the following transactions.
The Company has agreed to sell, subject to shareholder approval, its
medical test kit manufacturing operations, including all licenses, inventories,
and fixed assets to Kilgore for a note of $250,000, plus $1,000 in cash. This
Following shareholder approval, this transaction will be closed in the 4th
quarter.
As the Company intends to divest itself of the medical test kit operations,
such operations and related assets and liabilities have been reflected as
discontinued operations in the accompanying financial statements.
The Company contracted with Glacier Valley Holding Corporation September
30, 1996 to purchase a portion of the Community at Bear Creek, a modular home
subdivision located in Colorado Springs, Colorado. The real estate under
contract consists of approximately 30 platted and 25 unplatted lots. This
transaction was closed October 10, 1996, and is reflected on the Company's
balance sheet as of September 30, 1996.
Financial Condition
- -------------------
As of September 30, 1996, the Company's working capital was approximately
$429,000, a decrease of approximately $104,000 from December 31, 1995. The
decrease is primarily attributable to the following:
* Assumption of short-term debt of $304,0000 as part of the acquisition of
the Community at Bear Creek.
* $65,000 per month for services provided by an entity owned by Control
Group commencing July 1996 under a management services contract.
* $450,000 to purchase a $500,000 mortgage note receivable due from an
unaffiliated company. This note was previously held by a public company, which
is managed by the Control Group.
* $200,000 to purchase $208,000 mortgage note receivable due from an
affiliated company.
Result of Operations:
- ---------------------
As the Company's Board of Directors has decided to sell the medical test
kit manufacturing business, the statement of operations has been restated to
reflect these operations as discontinued operations. The other remaining
operating expenses relate primarily to professional fees paid by the Company
associated with being a public entity.
Discontinued operations represent income through June 12, 1996 related to
the prior medical test kit manufacturing operations. Income after June 12, 1996,
which has not been significant, related to the medical test kit business has
been retained by Kilgore. The gain will be deferred on the sale to the medical
business to Kilgore, until cash is received on the underlying note given by
Kilgore as consideration of the purchase of the business. The note will be
secured by a Security and Pledge Agreement.
Income tax expense differs from the expected Federal income tax rate due to
recovery of the valuation allowance previously provided on deferred tax assets
related to the allowance for amounts previously due from Kilgore.
PART II -OTHER INFORMATION
- ---------------------------
Item 1 Through 5 - No response required..
Item 6 - Exhibits and reports on Form 8-K.
(a) Exhibits 27* Financial Data Schedule.
(b) Reports on Form 8-K A Form 8-K was filed August 26, 1996 regarding
management change.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECLIPSE CORPORATION
-------------------
(Registrant)
DATE: 8/16/96 BY: /s/ Kenneth M. Cahill
KENNETH M. CAHILL, PRESIDENT
DATE: 8/16/96 BY: /s/ J. Royce Renfrow
J. ROYCE RENFROW, SECRETARY
DATE: 8/16/96 BY: /s/ James A. Humpal
JAMES A. HUMPAL, TREASURER
Principal Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM MICROTECH MEDICAL
SYSTEMS, INC. UNAUDITED BALANCE SHEET AS OF
SEPTEMBER 3 1996 AND THE RELATED STATEMENT OF
INCOME FOR THE NINE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 21,219
<SECURITIES> 52,012
<RECEIVABLES> 687,667
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 906,311
<PP&E> 713,183
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,934,213
<CURRENT-LIABILITIES> 476,963
<BONDS> 0
0
0
<COMMON> 36,403
<OTHER-SE> 1,251,876
<TOTAL-LIABILITY-AND-EQUITY> 1,934,213
<SALES> 499,011
<TOTAL-REVENUES> 499,011
<CGS> 412,698
<TOTAL-COSTS> 707,107
<OTHER-EXPENSES> 5,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,492
<INCOME-PRETAX> 351,822
<INCOME-TAX> 27,000
<INCOME-CONTINUING> 324,822
<DISCONTINUED> (25,490)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 299,332
<EPS-PRIMARY> 0.0045
<EPS-DILUTED> 0.0042
</TABLE>
