<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ x / Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended July 31, 1995, or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-16115
AIRSENSORS, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1039211
(State of Incorporation) IRS Employer I.D. No.
16804 Gridley Place, Cerritos, CA 90703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 860-6666
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No
------ ------
Number of shares outstanding of each of the issuer's classes of
common stock, as of August 31, 1995:
5,644,870 shares of Common Stock, $.001 par value per share
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AIRSENSORS, INC.
CONSOLIDATED BALANCE SHEETS
July 31, 1995 and April 30, 1995
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ASSETS
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July 31, April 30,
1995 1995
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 49,593 $ 65,489
Accounts receivable 6,021,515 5,549,550
Less allowance for doubtful accounts 157,052 153,802
----------- -----------
Net accounts receivable 5,864,463 5,395,748
Inventories:
Raw materials and parts 4,255,148 4,720,035
Work-in-process 776,814 495,132
Finished goods 2,092,964 2,158,493
----------- -----------
Total inventories 7,124,926 7,373,660
Other current assets 596,644 791,209
----------- -----------
Total current assets 13,635,626 13,626,106
Equipment and leasehold improvements:
Dies, molds and patterns 2,628,463 2,419,448
Machinery and equipment 4,248,016 4,197,209
Office furnishings and equipment 1,988,812 1,939,757
Leasehold improvement 1,737,715 1,620,767
----------- -----------
10,603,006 10,177,181
Less accumulated depreciation and amortization 6,046,991 5,767,565
----------- -----------
Net equipment and leasehold improvements 4,556,015 4,409,616
Intangibles arising from acquisition 5,701,916 5,701,916
Less accumulated amortization 2,508,531 2,449,757
----------- -----------
Net intangibles arising from acquisition 3,193,385 3,252,159
Other assets 880,614 821,255
----------- -----------
$22,265,640 $22,109,136
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
AIRSENSORS, INC.
CONSOLIDATED BALANCE SHEETS
July 31, 1995 and April 30, 1995
(Continued)
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
July 31, April 30,
1995 1995
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(unaudited)
<S> <C> <C>
Current liabilities:
Notes payable $ 212,469 $ 406,413
Accounts payable 2,117,834 2,200,335
Accrued payroll obligations 1,299,752 1,248,957
Other accrued expenses 1,221,451 1,255,042
----------- -----------
Total current liabilities 4,851,506 5,110,747
Line of credit 900,000 1,000,000
Long-term capital lease obligation 778,996 855,446
Commitments and contingencies - -
Stockholders' equity:
1993 Series 1 Preferred Stock, $0.01 par value,
5,950 shares authorized, issued and
outstanding, $5,950,000 liquidation value 5,650,000 5,650,000
Common stock, $.001 par value, authorized
25,000,000 shares; 5,642,620 issued and
outstanding at July 31, 1995
(5,641,370 at April 30, 1995) 5,643 5,641
Additional paid-in capital relating to
common stock 28,669,317 28,660,181
Deficit (18,589,822) (19,172,879)
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Total stockholders' equity 15,735,138 15,142,943
----------- ----------
$22,265,640 $22,109,136
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</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
AIRSENSORS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended July 31, 1995 and 1994
---------
July 31, July 31,
1995 1994
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<S> <C> <C>
Revenue:
Product sales $11,796,125 $10,101,412
Contract revenue 341,271 155,416
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Net revenue 12,137,396 10,256,828
Costs and expenses:
Cost of sales 7,611,175 6,577,196
Research and development expense 1,779,777 1,287,244
Selling, general and administrative expense 1,832,240 1,605,097
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Total costs and expenses 11,223,192 9,469,537
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Operating income 914,204 787,291
Financing charges:
Interest on debt obligations 50,157 43,987
Amortization of deferred debt issuance costs 25,803 21,613
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Total financing charges 75,960 65,600
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Income before income taxes 838,244 721,691
Provision for income taxes 99,000 98,433
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Net income 739,244 623,258
Dividends on preferred stock 156,187 122,718
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Net income applicable to common stock $ 583,057 $ 500,540
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Net income per share $0.10 $0.08
=========== ===========
Number of shares used in per share computation 6,643,119 6,545,969
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</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
AIRSENSORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended July 31, 1995 and 1994
---------------
July 31, July 31,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 739,244 $ 623,258
Depreciation and amortization 441,293 357,068
Changes in working capital (125,550) (593,453)
Other, net 6,591 (7,003)
----------- -----------
Net cash provided by operating activities 1,061,578 379,870
Cash flows from investing activities:
Purchase of equipment and leasehold
improvements (425,823) (290,607)
Deferred software production costs (169,044) (9,919)
----------- -----------
Net cash (used in) investing activities (594,867) (300,526)
Cash flows from financing activities:
Net (payments) borrowings on line of credit (100,000) 1,081,960
Payments on notes payable (193,944) (151,083)
Proceeds from issuance of common stock 9,137 133,746
Payments on long-term notes - (30,000)
Payments of other long-term liabilities (41,613) (27,184)
Dividends paid on preferred stock (156,187) (122,718)
----------- -----------
Net cash (used in) provided by
financing activities (482,607) 884,721
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Net (decrease) increase in cash (15,896) 964,065
Cash and cash equivalents, beginning of year 65,489 1,104,501
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Cash, end of quarter $ 49,593 $2,068,566
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
AIRSENSORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1995 and 1994
--------------
(1) The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Certain reclassifications have
been made to the fiscal year 1995 consolidated financial statements to
conform to the fiscal year 1996 presentation. Operating results for
the three months ended July 31, 1995, are not necessarily indicative
of the results that may be expected for the year ending April 30, 1996.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Form 10-K for the year
ended April 30, 1995.
(2) The Company currently complies with the Statement of
Financial Accounting Standards No. 109 to account for income taxes.
Under this method, the Company recognized a valuation allowance to
completely offset the net deferred tax asset.
The current provision for taxes consists of federal and state
income tax and is comprised of the following for the three months ended
July 31, 1995:
<TABLE>
<S> <C>
Federal $ 307,680
Benefit of loss carryforward (307,680)
Federal alternative minimum tax 17,000
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Federal net 17,000
State 82,000
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Total income tax provision $ 99,000
===========
</TABLE>
The provision for taxes for the three months ended July 31, 1995 has
been reduced by the utilization of approximately $835,000 of federal
net operating loss carryforwards.
(3) In September 1995, the Company's revolving line of credit
agreement with Bank of America, NT&SA was amended. The revolving line
of credit of $8 million was extended for a twelve month period, ending
on August 31, 1997. The interest rate on the revolving line of credit
was reduced to the Bank of America Reference Rate (8.75% at July 31,
1995). The Offshore Rate, which the Company may elect to have all or
portions of the line of credit bear interest at, was changed from a
calculated rate to LIBOR plus 1.5%. The calculated rate at July 31,
1995 was 9% compared to the amended LIBOR based rate which would have
been 7.875% at July 31, 1995. In addition, certain financial reporting
requirements and financial covenants have been amended.
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operation
Results of Operations
---------------------
Total revenues for the three months ended July 31, 1995, increased
by approximately 18% as compared to the three months ended July 31,
1994. Product sales for the three months ended July 31, 1995,
increased by approximately 17% as compared to the same period in the
prior fiscal year. The following table sets forth the Company's
product sales by application (all dollars in thousands):
<TABLE>
<CAPTION>
Three months ended July 31,
---------------------------
1995 1994
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<S> <C> <C>
Motor vehicle products $ 3,938 $ 4,148
Forklifts and other material
handling equipment 5,951 4,043
Small portable to
large stationary engines 1,907 1,910
---------- ----------
Total product sales $ 11,796 $ 10,101
========== ==========
</TABLE>
Motor vehicle product sales for the three months ended July 31,
1995, decreased by approximately 5% as compared to the same period in
the prior fiscal year. The decrease in motor vehicle product sales was
primarily attributed to lower shipments to international markets and to
a domestic original equipment truck manufacturer. During the three
months ended July 31, 1995, sales of the Company's products for
forklifts and other material handling equipment increased by
approximately 47% as compared to the same period in the prior fiscal
year. This increase was primarily attributed to sustained demand for
new forklifts. Management believes that the demand in product sales
for fiscal year 1996 will be higher as compared to the levels realized
during fiscal year 1995.
In August 1995, the Company entered into a two year contract with
General Motors Corporation (GM) to design, manufacture and assemble
compressed natural gas fuel delivery systems for a 1997 and 1998 model
year car and truck platform in compliance with GM's specifications.
These vehicles will meet clean fuel vehicle emission standards and
applicable Federal Motor Vehicle Safety Standards. The end product
will be fully warranted and serviced at General Motors dealerships.
Production for the CNG systems are anticipated to begin with the 1997
vehicle model year. GM can exercise an option to extend the contract
an additional two years, subject to mutually agreed upon terms and
conditions. This contract is an extension of the initial contract
<PAGE>
signed with GM in July 1993, pursuant to which IMPCO engineered, tested
and validated CNG systems for certain 1994 and 1995 model year car and
truck platforms in compliance with GM s specifications. GM is not
obligated to install the system on a minimum number of vehicles.
Management anticipates that contract revenue during fiscal year 1996
will be higher than was realized during fiscal year 1995.
The Company's cost of sales for the quarter ended July 31, 1995
was higher than for the quarter ended July 31, 1994 due to an increase
in product sales during the current period. The Company's gross profit
margin on product sales for the quarter ended July 31, 1995, was
comparable to the same period last year.
Research and development ("R&D") expense for the quarter ended
July 31, 1995, increased by approximately $493,000 as compared to the
quarter ended July 31, 1994. The increase in R&D expense was primarily
for development and testing of the Company's new products, durability
testing, enhancements to products to maintain mandated emission
standards and efforts expended to obtain California s Title XIII engine
certification. Management believes the Company's future success
depends on its ability to design, develop and market new products to
meet mandated emission standards and will therefore continue to incur
significant R&D costs. Management anticipates R&D expense during
fiscal year 1996 will increase significantly as compared to fiscal year
1995 primarily as a result of development efforts for the GM contract
and the Company's new products and markets.
Selling, general and administrative (SG&A) expense for the quarter
ended July 31, 1995, increased by approximately $227,000 as compared to
the quarter ended July 31, 1994. The increase in SG&A expense was
primarily due to increased administrative costs and current product
support for sales and technical service. Management anticipates that
SG&A expense during fiscal year 1996 will increase significantly as
compared to fiscal year 1995 primarily as a result of current product
support.
Liquidity and Capital Resources
-------------------------------
During the quarter ended July 31, 1995, cash provided by
operations, excluding working capital was approximately $1,187,000, as
compared to approximately $973,000 during the quarter ended
July 31, 1994. During the quarter ended July 31, 1995, the Company had
a net use of working capital of approximately $125,000, as compared
approximately $593,000 during the quarter ended July 31, 1994. The
most significant changes in the Company's current assets and
liabilities during the quarter ended July 31, 1995 were an increase in
accounts receivable which were offset by a decrease in inventory and
other current assets. The increase in accounts receivable is primarily
attributed to increased shipments of the Company's products during the
quarter ended July 31, 1995 as compared to the quarter ended
April 30, 1995. The decrease in inventory and other current assets was
primarily due to increased product sales and a reduction of prepaid
expenses, respectively.
<PAGE>
Net cash used in investing activities for the quarter ended
July 31, 1995 was approximately $595,000. Investing activities
principally included the purchase of dies, molds and patterns,
machinery and equipment, and the incurring of software production costs
which have been capitalized. Management projects an increase in
capital expenditures during the remaining three quarters of fiscal
year 1996 as compared to the same period in fiscal year 1995, primarily
as a result of equipment enhancements and quality requirements.
Net cash used by financing activities for the quarter ended
July 31, 1995, was approximately $483,000 as compared to net cash
provided by financing activities of approximately $885,000 for the same
period last fiscal year. During the quarter ended July 31, 1994 the
Company's operating line of credit increased by approximately
$1,100,000 primarily due to increased obligations for material
purchases for compressed natural gas engine management systems.
In September 1995, IMPCO amended its revolving line of credit
agreement with Bank of America NT&SA. The term of the secured
revolving line of credit of $8 million was extended for a twelve month
period, ending on August 31, 1997. Interest on the line of credit was
reduced to the Bank of America Reference Rate (8.75% at July 31, 1995).
The Offshore Rate, which the Company may elect to have all or portions
of the line of credit bear interest at, was changed from a calculated
rate to LIBOR plus 1.5% (Offshore Rate at July 31, 1995 was 9% compared
to the amended rate of 7.875%). In addition, certain reporting
requirements and financial covenants were amended.
<PAGE>
Part II - OTHER INFORMATION
Items 1-5 Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11.1 - Computation of net income per share.
(b) Reports on Form 8-K.
No reports were filed on Form 8-K during the Company's fiscal
quarter ended July 31, 1995
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.
AirSensors, Inc.
Date: September 12, 1995 By /s/ Robert M. Stemmler
------------------------
Robert M. Stemmler
President and
Chief Executive Officer
[Principal Executive Officer]
Date: September 12, 1995 By /s/ Thomas M. Costales
------------------------
Thomas M.Costales
Chief Financial Officer
and Treasurer
[Principal Financial Officer]
<TABLE>
<CAPTION>
AIRSENSORS, INC.
COMPUTATION OF NET INCOME PER SHARE
Three months ended July 31, 1995 and 1994
---------------
1995 1994
----------- -----------
<S> <C> <C>
PRIMARY CALCULATION:
Net income $ 739,244 $ 623,259
Dividends on preferred stock (156,187) (122,719)
----------- -----------
Net income applicable to common stock 583,057 500,540
Add: Effect of treasury stock on repayment
of borrowings 74,901 43,740
----------- -----------
Net income applicable to common stock for
calculation of net income per share 658,061 544,280
Weighted average number of common shares
outstanding 5,642,620 5,589,108
Dilutive effect of outstanding stock options
and warrants (As determined by application
of the modified treasury stock method) 999,499 956,861
----------- -----------
Weighted average number of common shares, as
adjusted for calculation of net income per share 6,643,119 6,545,969
=========== ===========
Net income per share $0.10 $0.08
=========== ===========
FULLY DILUTED CALCULATION:
Net income applicable to common stock for
calculation of net income per share
before effect of treasury stock on
repayment of borrowings 583,057 500,540
Add: Effect of treasury stock on repayment
of borrowings 44,580 32,745
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Net income applicable to common stock for
calculation of net income per share 627,737 533,285
Weighted average number of common
shares outstanding 5,642,620 5,589,108
Dilutive effect of outstanding stock options
and warrants (As determined by application
of the modified treasury stock method) 999,499 956,861
----------- -----------
Weighted average number of common shares, as
adjusted for calculation of net income per share 6,643,119 6,545,969
=========== ===========
Net income per share $0.10 $0.08
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JUL-31-1995
<CASH> 49,593
<SECURITIES> 0
<RECEIVABLES> 6,021,515
<ALLOWANCES> 157,052
<INVENTORY> 7,124,926
<CURRENT-ASSETS> 13,635,626
<PP&E> 10,603,006
<DEPRECIATION> 6,046,991
<TOTAL-ASSETS> 22,265,640
<CURRENT-LIABILITIES> 4,851,506
<BONDS> 0
<COMMON> 5,643
0
5,650,000
<OTHER-SE> 10,079,495
<TOTAL-LIABILITY-AND-EQUITY> 22,265,640
<SALES> 11,796,125
<TOTAL-REVENUES> 12,137,396
<CGS> 7,611,175
<TOTAL-COSTS> 11,223,192
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,960
<INCOME-PRETAX> 838,244
<INCOME-TAX> 99,000
<INCOME-CONTINUING> 739,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 739,244
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
