<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000 Commission File No. 00019678
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INFRACOR INC.
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(Exact name of registrant as specified in its charter)
Virginia 54-1414643
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State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7400 Beaufont Springs Drive, Suite 415, Richmond, VA 23225
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(Address) (Zip Code)
Registrant's telephone number, including area code (804) 272-6600
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InfraCorps Inc.
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(Former name, former address and former fiscal year if changed since
last report)
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 the filing
requirements for the past 90 days.
Yes x No
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Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the close of the period covered by this report.
Class Number of Shares Outstanding
------------------ ---------------------------------------------
Common Stock 16,392,387
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFRACOR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2000 March 31, 2000
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ASSETS (unaudited) (audited)
------
Current assets:
Cash and cash equivalents $ 302,423 $ 449,429
Accounts receivable:
Trade (net of allowance of
$50,000 at September 30,
2000 and
March 31, 2000) 5,595,245 3,829,893
Other 22,917 24,317
Costs and estimated
earnings in excess of
billings
on uncompleted contracts 938,104 1,007,464
Notes receivable 153,057 177,952
Inventory 1,293,579 1,166,796
Prepaid expenses 61,765 62,897
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Total current assets 8,391,985 6,718,748
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Property, plant and
equipment:
Furniture and fixtures 369,236 369,236
Machinery, tools and
equipment 7,052,744 6,920,993
Vehicles 2,018,116 1,898,952
Leasehold improvements 307,663 307,663
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9,747,759 9,496,844
Less accumulated
depreciation 4,636,808 4,366,147
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Total property, plant and equipment, net 5,110,951 5,130,697
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Other assets:
Restricted cash 600,000 600,000
Notes receivable 169,205 169,205
Cash value of life insurance 23,469 23,469
Assets under contractual
arrangements (net of
valuation allowance of
$858,000) 183,051 183,051
Other assets 197,069 206,021
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Total other assets 1,147,899 1,181,746
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Total assets $14,650,835 $13,031,191
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<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, 2000 March 31, 2000
------------------ --------------
(unaudited) (audited)
<S> <C>
Current liabilities:
Bank overdraft $ 0 $ 97,322
Accounts payable 4,662,952 3,750,104
Accrued expenses and other current liabilities 206,794 372,154
Notes payable to bank - line of credit 1,550,000 1,000,000
Notes payable to affiliates 482,900 602,019
Current portion of long-term debt 867,797 867,797
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Total current liabilities 7,770,443 6,689,396
Long-term liabilities:
Long-term debt 2,405,814 1,881,900
Liabilities of business transferred under contractual
arrangements 99,940 140,339
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Total liabilities 10,276,197 8,711,635
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Stockholders' equity:
Preferred stock, no par value, authorized 5,000,000 shares:
4% cumulative Series A, $1 convertible, 2,650,000 and 1,850,000
shares outstanding at September 30, 2000 and March 31, 2000,
respectively (liquidation value of $2,650,000) 1,630,311 830,311
8% Series B, 15,241 shares outstanding at
September 30, 2000 and March 31, 2000
(liquidation value of $1,542,100) 1,542,100 1,542,100
6% Series C, 0 and 751 shares outstanding at September 30,
2000 and March 31, 2000 0 713,317
Common stock, no par value; authorized 30,000,000
shares; issued and outstanding 16,392,387 shares at
September 30, 2000 and March 31, 2000 5,933,226 5,933,226
Retained earnings (accumulated deficit) (4,730,999) (4,699,398)
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Total stockholders' equity 4,374,638 4,319,556
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Total liabilities and stockholders' equity $14,650,835 $13,031,191
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</TABLE>
<PAGE>
INFRACOR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30 September 30 September 30 September 30
2000 1999 2000 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C>
Contract Revenues $ 6,770,601 $ 5,266,816 $13,149,906 $10,200,825
Cost of goods and services 6,132,787 4,471,628 11,710,851 8,742,296
----------- ----------- ----------- -----------
Gross Profits 637,814 795,188 1,439,055 1,458,529
Selling, general and administrative expenses 559,888 683,941 1,204,729 1,267,791
----------- ----------- ----------- -----------
77,926 111,247 234,326 190,738
Interest income 12,434 6,891 22,565 17,043
Interest expense (153,832) (79,767) (279,570) (135,862)
Gain on sale of equipment (1,500) 0 0 695
Other, net 119,340 0 119,340 0
----------- ----------- ----------- -----------
Income before income taxes $ 54,368 $ 38,371 $ 96,661 $ 72,614
Provision for income taxes 0 0 0 0
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Net income $ 54,368 $ 38,371 $ 96,661 $ 72,614
=========== =========== =========== ===========
Net income per common shares:
Basic $0.00 $0.00 $ 0.01 $ 0.00
Diluted $0.00 $0.00 $ 0.01 $ 0.00
Average shares of common stock used for
above computation:
Basic 16,392,387 16,392,387 16,392,387 16,392,387
Diluted 19,156,554 18,547,172 19,124,484 18,666,929
</TABLE>
<PAGE>
INFRACOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred Preferred Preferred
Stock Stock Stock
Series A Series B Series C Common Stock
-------------------------------------------------------------- Accumulated
Amount Amount Amount Shares Amount Deficit Total
--------- ---------- --------- ---------- ---------- ----------- ----------
<S> <C>
Balances at March 31, 2000 $830,311 $1,542,100 $ 713,317 16,392,387 $5,933,226 $(4,699,398) $4,319,556
Dividends - - - - - (42,108) (42,108)
Net income - - - - - 42,293 42,293
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Balances at June 30, 2000 $830,311 $1,542,100 $ 713,317 16,392,387 $5,933,226 $(4,699,213) $4,319,741
Dividends - - - - - (86,154) (86,154)
Net income - - - - - 54,368 54,368
Issuance of Series A Preferred Stock 800,000 - - - - - 800,000
Redemption of Series C Preferred Stock - - (713,317) - - - (713,317)
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Balances at September 30, 2000 $1,630,311 $1,542,100 $ 0 16,392,387 $5,933,226 $(4,730,999) $4,374,638
==========================================================================================
</TABLE>
<PAGE>
INFRACOR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Six months ended
September 30, 2000 September 30, 1999
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(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 96,661 $ 72,614
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 270,661 269,690
Gain on disposal of equipment 0 (695)
Increase/decrease in operating assets and liabilities:
Accounts receivable (1,765,352) (428,705)
Costs and estimated earnings in excess of billings on uncompleted contracts (126,783) 158,583
Inventories 69,360 (141,096)
Prepaid expenses 1,132 (74,412)
Accounts payable 912,848 7,972
Accrued expenses and other liabilities (165,360) (357,215)
Other assets 8,952 (2,433)
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Net cash used in operating activities (697,881) (495,697)
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Cash flow from investing activities:
Purchase of property, plant and equipment (250,915) (788,022)
Notes receivable decrease 26,294 6,827
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Net cash used in investing activities (224,621) (781,195)
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</TABLE>
<PAGE>
INFRACOR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (continued)
<TABLE>
<CAPTION>
Six months ended
September 30, 2000 September 30, 1999
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(unaudited) (unaudited)
<S> <C> <C>
Cash flows from financing activities:
Bank overdraft decreases (97,322) (241,931)
Proceeds from line of credit 550,000 1,000,000
Issuance of preferred stock 800,000 100,000
Redemption of preferred stock (713,317) 0
Dividends paid (128,262) (41,682)
Principal payments on notes payable to affiliates (119,119) (160,403)
Proceeds from long-term debt 523,914 471,190
Payment on liabilities transferred under contractural
arrangements (40,399) -
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Net cash provided by financing activities 775,496 1,127,174
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Decrease in cash and cash equivalents (147,006) (149,718)
Cash and cash equivalents at beginning of year
(including restricted cash of $600,000) 1,049,429 872,259
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Cash and cash equivalents at end of period
(including restricted cash of $600,000) $ 902,423 $ 722,541
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</TABLE>
Supplemental disclosures of cash flow information and noncash investing
activities: Interest paid on notes payable, capital leases and long-term debt
was $279,570 and $135,862 for the six months ended September 30, 2000 and
September 30, 1999 respectively. Redemption of Series C preferred stock totaled
$757,975 including accrued dividends.
<PAGE>
INFRACOR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The unaudited financial statements have been prepared by the Company, 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
omitted pursuant to such SEC rules and regulations; nevertheless, the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements and the notes hereto should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended March 31, 2000. In the
opinion of the Company, all adjustments, including normal recurring adjustments
necessary to present fairly the financial position of Infracor, Inc. and its
subsidiaries as of September 30, 2000 and the results of operations and cash
flows for the quarter then ended, have been included. The results of operations
for the interim period are not necessarily indicative of the results for the
full year.
NOTE B--PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of InfraCor Inc.
(formerly InfraCorps Inc.) and its wholly-owned subsidiaries, IC Subsidiary,
Inc., ETS Analytical Services, Inc., Infracor of Virginia, Inc. and its
subsidiary Infracor of Florida, Inc. (formerly ETS Liner, Inc.), Infracor
Technology, Inc. and Infracor International, Inc. Significant intercompany
accounts and transactions have been eliminated in consolidation.
NOTE C--EARNINGS PER SHARE
Earnings per share have been computed on the basis of the weighted average
number of shares outstanding, after giving appropriate effect for common stock
issued. Stock options and warrants have been included as common stock
equivalents when they result in dilution of earnings per share.
NOTE D--CASH AND CASH EQUIVALENTS
Restricted cash of $600,000 is not included in current cash and cash equivalents
as it is restricted for a performance bond relating to the Company's contract
with China Steel Corporation (the "China Steel Contract"). Potential issues
have been brought to current management's attention regarding the budget to meet
certain of the performance specifications of the China Steel Contract and the
overall viability of the Limestone Emission Control (LEC) technology for wide-
scale commercialization. If the LEC technology does not meet contract
specifications, China Steel Corporation may seek to impose financial penalties
or attempt to recover damages or obtain other relief under the contract,
including drawing down on the $600,000 performance bond posted by the Company.
See note E of Notes to Consolidated Financial Statements for additional
information.
<PAGE>
NOTE E--CONTINGENT LIABILITIES AND OTHER MATTERS
The Company entered into a Management Agreement with Air Technologies, Inc.
("ATI"), a newly formed firm based in Roanoke, Virginia, to provide management
services with respect to the Company's China Steel Contract. ATI and CCTI
agreed to accept responsibility for any potential liabilities associated with
the China Steel Contract and to provide its best effort to have the contract
transferred from the Company to ATI. ETS Acquisition, Inc., CCTI and ATI are
owned by three former executive officers of the Company or ETS and former
members of the Company's Board of Directors.
If the LEC technology does not meet contract specifications China Steel
Corporation may seek to impose financial penalties or attempt to recover damages
or obtain other relief under the contract, including drawing down on the
$600,000 performance bond posted by the Company. See note D of Notes to
Consolidated Financial Statements for additional information.
Management believes that the existing potential liabilities under the China
Steel Contract make obtaining significant outside capital unlikely. However,
Management negotiated a line of credit from BB&T for $1,000,000 and was able to
increase the line to $1,250,000 effective March 31, 2000. The line was further
increased to $2,000,000 effective August 28, 2000. The interest rate is prime
plus one percent payable monthly. Additional equity or credit is being sought.
Management's success in this regard will, to a large extent, depend upon whether
Infracor is able to accomplish the assignment without recourse of the China
Steel contract to ATI. While negotiations with China Steel Corporation are on-
going, there can be no assurance that such negotiations will be successful. See
notes D of Notes to Consolidated Financial Statements for additional
information.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements. The risks and uncertainties that could significantly affect
the operations, performance, development and results of the Company's business
include, but are not limited to, the following: (i) changes in legislative
enforcement and direction, (ii) unusually bad or extreme weather conditions,
(iii) unanticipated delays in contract execution, (iv) project delays or changes
in project costs, (v) unanticipated changes in operating expenses and capital
expenditures, (vi) sudden loss of key personnel, (vii) abrupt changes in
competition or the political or economic climate, and (vi) abrupt changes in
market opportunities.
Results of operations
Three months and six months ended September 30, 2000 compared to three months
and six months ended September 30, 1999
Revenues for the three month period ended September 30, 2000 ("second quarter
of fiscal 2001") were $6,770,601 compared to $5,266,816 for the three month
period ended September 30, 1999 ("second quarter of fiscal 2000") resulting in a
28.6% increase in revenues. Revenues for the six month period ended September
30, 2000 ("year to date fiscal 2001") were $13,149,906 compared to $10,200,825
for the six month period ended September 30, 1999 ("year to date fiscal 2000")
resulting in a 28.9% increase in revenues. This increase reflects the increased
backlog of work being completed.
Cost of goods and services for the second quarter of fiscal 2001 were
$6,132,787 or 90.6% of sales compared to $4,471,628 or 84.9% of sales for the
second quarter of fiscal 2000. Gross profits for the second quarter of fiscal
2001 were $637,814 or 9.4% of sales as compared to $795,188 or 14.1% of sales
for the second quarter of fiscal 2000. Cost of goods and services for the year
to date fiscal 2001 were $11,710,851 or 89.1% of sales compared to $8,742,296 or
85.7% of sales for the year to date fiscal 2000. Gross profits for the year to
date fiscal 2001 were $1,439,055 or 10.9% of sales compared to $1,458,529 or
15.1% of sales for the year to date fiscal 2000. These decreases in gross
profits are due to the use of subcontractors that are required by larger
contracts which reduces net profit.
Selling, general and administrative expenses were $559,888 or 8.3% of net
sales for the second quarter of fiscal 2001 compared to $683,941 for the second
quarter of fiscal 2000 or 13% of net sales. Selling, general and administrative
<PAGE>
expenses were $1,204,729 for the year to date fiscal 2001 or 9.2% of net sales
compared to $1,267,791 or 12.4% of net sales for the year to date fiscal 2000.
The general and administrative expense continues to decrease due to cost savings
associated with the management's cost containment efforts.
Gain on sale of assets was $0 for the year to date fiscal 2001 compared to
$695 for the year to date fiscal 2000. Interest expense for the second quarter
of fiscal 2001 was $153,832 compared to $79,767 for the second quarter of fiscal
2000. Interest expense for the year to date fiscal 2001 was $279,570 compared
to $135,862 for the year to date fiscal 2000. Interest expense reflects
interest paid on notes payable and long-term debt, including credit lines and
capital leases. This increase reflects the increase in capital leases and
higher interest rates. Other income was $119,340 for the second quarter of
fiscal 2001, which reflected the collection of an insurance settlement. Net
profit for the second quarter of fiscal 2001 was $54,368 compared to $38,371 for
the second quarter of fiscal 2000. Profit for the year to date fiscal 2001 was
$96,661 compared to $72,614 for year to date fiscal 2000.
Liquidity And Capital Resources As Of September 30, 2000
In April 1999, a secured credit line of up to $1,000,000 was obtained from
BB&T. In March 2000, the line was increased to $1,250,000 and subsequently
increased to $2,000,000 effective August 28, 2000. The note that established
the line calls for a monthly interest of prime plus 1% over a three-year term.
At September 30, 2000, the balance owed under this line was $1,550,000.
Major components of cash flows used in operating activities include a decrease
in accrued expenses of $165,360 and an increase in accounts receivable of
$1,765,352 and in accounts payable of $912,848. Adjustments to net cash flows
include depreciation and amortization of $270,661. These increases reflect the
increased work and revenue billed during the quarter.
Net cash used in investing activities of $224,621 consisted mainly of purchase
of property, plant and equipment in the amount of $250,915. The net cash from
financing activities of $775,496 includes in part proceeds from line of credit
of $550,000, proceeds from long term debt of $523,914, principal payments of
$159,518 and repayment of bank overdraft of $97,322. Redemption of the series C
preferred stock was accomplished by the issuance of Series A preferred stock.
Preferred dividends include the payment of dividends to Series B and Series C
preferred stockholders. The cash and cash equivalents at September 30, 2000 was
$902,423 which includes the $600,000 of restricted cash guaranteeing the bond
for the China Steel contract.
New orders received for the second quarter of fiscal 2001 were $3,793,600
compared to $10,998,906 for the second quarter of fiscal 2000. New orders
received for the year to date fiscal 2001 are $11,285,266 compared to
$19,376,070 for year to date fiscal 2000. Backlog at September 30, 2000 was
$17,203,000 compared to $21,732,000 at September 30, 1999. New orders were held
by the municipalities during the quarter and are expected to be released in the
third quarter.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not Applicable.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None
Item 2. CHANGES IN SECURITIES.
As of September 30, 2000, the Company sold an aggregate of 800,000
shares of Series A Preferred Stock for $800,000 to a single investor
in a transaction exempt from registration in accordance with Section
4(2) of the Securities Act of 1933, as amended.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On July 31, 2000, the Company held its annual shareholders'
meeting. The matters presented and the vote counts are as follows:
1. Five individuals were nominated by management and elected by the
shareholders by the following votes:
FOR WITHHELD
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Terence R. Dellecker 13,173,273 55,000
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Coleman S. Lyttle 13,194,973 33,300
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John R. Potter 13,181,173 47,100
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James B. Quarles 13,184,573 43,700
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Navin D. Sheth 12,804,773 423,500
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2. An amendment to the Company's Articles of Incorporation changing the
Company's name from "InfraCorps Inc." to "InfraCor Inc." was approved
by the shareholders by the following votes:
FOR AGAINST ABSTAIN
--- ------- -------
13,135,198 72,950 20,125
<PAGE>
3. The approval of the Board of Directors appointment of Goodman & Company
LLP as auditors for fiscal 2001 was approved by the shareholders by the
following votes:
FOR AGAINST ABSTAIN
--- ------- -------
13,192,157 12,200 23,916
Item 5. OTHER INFORMATION.
None
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
27 Financial Data Schedule
(B) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this registrations statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
INFRACOR INC.
DATE November 17, 2000 BY: /s/ James B. Quarles
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James B. Quarles
Chairman and President
DATE November 17, 2000 BY: /s/ Warren E. Beam, Jr.
----------------- ------------------------------
Warren E. Beam, Jr.
Secretary and Controller
