PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
Commission File Number 33-19584
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 23-258270
----------------------- -----------------------
(State of Incorporation) (IRS Employer
Identification No.)
6626 Topper Parkway
San Antonio, Texas 78233 210-654-1212
---------------------------------------- ---------------------------
(Address of principal executive offices) (Registrant's telephone No.)
Securities registered pursuant to Sections 12(b) of the Act: NONE
Securities registered pursuant to Sections 12(g) of the Act: NONE
Common Stock, $0.001 Par Value Electronic Bulletin Board
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities and 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 .
------- ------
As of March 31, 1996, 5,544,269 Common Shares were outstanding, and the
aggregate market value of such shares held by non-affiliates was approximately
$3,528,367.<PAGE>
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INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION Page
Item 1: Financial Statements (Unaudited)
Consolidated Statement of Financial Position at
March 31, 1996 and December 31, 1995. 3
Consolidated Statement of Operations for Three Months
Ended March 31, 1996 and March 31, 1995. 4
Consolidated Statement of Changes in Stockholders' Equity
for Three Months Ended March 31, 1996 and March 31, 1995. 5
Consolidated Statement of Cash Flows for Three Months
Ended March 31, 1996 and March 31, 1995. 6
Notes to Consolidated Financial Statements at March 31, 1996. 7
Item 2: Management's Discussion and Analysis of 8
Financial Condition and Results of Operations.
PART II. OTHER INFORMATION 11
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.<PAGE>
PAGE 3
<TABLE>
<CAPTION>
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL
AND SUBSIDIARIES POSITION AT MARCH 31, 1996
(UNAUDITED) AND DECEMBER 31, 1995.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
MARCH 31, DECEMBER 31,
1996 1995
------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $171,896 $158,616
Accounts receivable, net of allowance for doubtful
accounts of $805 and $31,060 respectively. 86,419 31,514
Inventories 432,274 58,994
Prepaid expenses and other current assets 37,173 43,951
------------- ------------
Total Current Assets 727,762 293,075
------------- ------------
OTHER ASSETS:
Property and equipment, net of accumulated depreciation 104,426 104,628
Patent rights and related technology,
net of accumulated amortization 1,260,785 1,295,718
Goodwill, net of accumulated amortization 589,189 605,340
------------- ------------
Total Other Assets 1,954,400 2,005,686
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TOTAL ASSETS $2,682,162 $2,298,761
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans from officers $147,447 $69,105
Note Payable $100,000 $100,000
Accounts payable and accrued expenses 340,299 518,234
Deferred revenue 516,248 61,148
Capital lease obligation 8,224 8,837
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Total Current Liabilities 1,112,218 757,324
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LONG TERM LIABILITIES:
Capital lease obligations, net of current portion 1,697
------------- ------------
TOTAL LIABILITIES 1,112,218 759,021
------------- ------------
STOCKHOLDERS' EQUITY:
Common Stock - $0.001 par value, 200,000,000
shares authorized, 5,544,269 and 5,371,234
shares issued at March 31, 1996 and
December 31, 1995, respectively 5,544 5,371
Additional paid-in capital 3,889,925 3,717,063
Amount due from shareholders (7,500) (7,500)
Accumulated Deficit (2,318,025) (2,175,194)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 1,569,944 1,539,740
------------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,682,162 $2,298,761
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
PAGE 4
<TABLE>
<CAPTION>
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
AND SUBSIDIARIES FOR THE THREE MONTH PERIODS ENDED
UNAUDITED MARCH 31, 1996 AND MARCH 31, 1995.
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
MARCH 31, MARCH 31,
1996 1995
------------- ------------
REVENUE:
Product Sales $108,113 $1,308,887
Services 65,453 0
------------- ------------
Total Revenue 173,566 1,308,887
COST OF REVENUE:
Product Sales 81,444 1,127,590
Services 14,866 0
------------- ------------
Total Cost of Revenue 96,310 1,127,590
Gross Margin 77,256 181,297
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OPERATING EXPENSES:
Sales and Marketing 53,424 0
General and Administrative 133,786 333,640
Research and Development 34,220 0
------------- ------------
Total Operating Expense 221,430 333,640
Operating Loss (144,174) (152,343)
OTHER INCOME (EXPENSE):
Interest and Other Income 3,283 1,233
Interest Expense (1,366) 0
Other (574) 0
------------- ------------
Total Other Income (Expense) 1,343 1,233
NET LOSS ($142,831) ($151,110)
============= ============
NET ( LOSS) PER SHARE ($0.03) ($0.03)
============= ============
WEIGHTED AVERAGE NUMBER OF SHARES 5,485,323 4,020,167
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
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<TABLE>
<CAPTION>
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN
AND SUBSIDIARIES STOCKHOLDERS' EQUITY FOR THE THREE MONTH PERIODS
(UNAUDITED) ENDED MARCH 31, 1995 AND MARCH 31, 1996.
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONAL AMOUNTS
COMMON STOCK PAID-IN DUE FROM ACCUMULATED
STOCK AMOUNT CAPITAL STOCKHOLDERS (DEFICIT) TOTAL
---------- ---------- ----------- ------------ ------------ ------------
Balances At January 1, 1995 3,682,234 $3,681 $1,849,753 ($1,086,245) 767,189
Issuance of Common Stock For Accounts Payable 83,500 $84 $83,416 83,500
Issuance of Common Stock For Acquisition 487,500 $487 $487,013 487,500
Net (Loss) For The Three Month Period
Ended March 31, 1995 (151,110) (151,110)
---------- ---------- ----------- ------------ ------------ ------------
Balances At March 31, 1995 4,253,234 $4,252 $2,420,182 ($1,237,355) $1,187,079
========== ========== =========== ============ ============ ============
Balances At January 1, 1996 5,371,234 $5,371 $3,717,063 ($7,500) ($2,175,194) 1,539,740
Issuance of Common Stock For Accounts Payable 173,035 $173 $172,862 173,035
Net (Loss) For The Three Month Period
Ended March 31, 1996 (142,831) (142,831)
---------- ---------- ----------- ------------ ------------ ------------
Balances At March 31, 1996 5,544,269 5,544 3,889,925 ($7,500) ($2,318,025) 1,569,944
========== ========== =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
PAGE 6
<TABLE>
<CAPTION>
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
AND SUBSIDIARIES FOR THREE MONTH PERIODS ENDED
UNAUDITED MARCH 31, 1996 AND MARCH 31, 1995.
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
MARCH 31, MARCH 31,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) ($142,832) ($151,110)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 56,577 3,029
Provision for doubtful accounts 805
Changes in assets and liabilities:
Trade accounts receivable (55,710) (212,506)
Inventories (373,280)
Prepaid expenses and other assets 6,778
Accounts payable and accrued expenses 355,507 210,754
------------- ------------
Net Cash Provided (Used) By Operating Activities (152,155) (149,833)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Work-in-Process, Machine (32,778)
Capital expenditures (5,291)
------------- ------------
Net Cash Provided (Used) By Investing Activities (5,291) (32,778)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Received From Stock Subscription 140,000
Proceeds from issuance of common stock 173,035
Payments on capital lease (2,310)
Advance From Officers 56,851
------------- ------------
Net Cash Provided From Financing Activities 170,725 196,851
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 13,279 14,240
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 158,617 26
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CASH AND EQUIVALENTS AT END OF PERIOD $171,896 $14,266
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION:
Cash Paid during The Period For:
Interest $1,366 $3,044
============= ============
Common Stock Issued For Acquisition Of Subsidiaries $487,500
============= ============
Equipment Acquired Through Capital Leases $18,586
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
PAGE 7
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION Notes to Consolidated
AND SUBSIDIARIES Financial Statements at
(Unaudited) March 31, 1996
- -------------------------------------------------------------------------------
The condensed consolidated financial statements of International Cryogenic
Systems Corporation included herein have been prepared without audit, pursuant
to the rules and regulations of the securities and exchange commission.
Although, certain information normally included in financial statements prepared
in accordance with generally accepted accounting principles has been condensed
or omitted, International Cryogenic Systems Corporation believes that the
disclosures are adequate to make the information presented not misleading. The
condensed consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in International Cryogenic
Systems Corporation's annual report on Form 10-K for the fiscal year ended
December 31, 1995.
The condensed consolidated financial statements included herein reflect all
normal recurring adjustments that, in the opinion of the management, are
necessary for a fair presentation. The results for the interim periods are not
necessarily indicative of trends or of results to be expected for a full year.
The accompanying notes are an integral part of these financial statements.<PAGE>
PAGE 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Changes In Registrant's Certifying Accountant - ICSC has contracted with
Coopers & Lybrand, a major international professional services firm, as the new
Company auditors effective for the 1995 fiscal year audit. The Company believes
that because of the increased financial activities, and management's desire to
produce a credible growth company, the Company warrants the need of an
independent auditor with the stature of Coopers & Lybrand.
RealCold Acquisitions - On January 30, l995, the Board of Directors approved
(retroactive to January l, l995) the acquisitions of Technicold Services, Inc.,
RealCold Maintenance Systems, Inc. and Jordan Vessel Corporation. The company
acquired l00% of the stock of these three companies in exchange for 487,500
shares of its common stock. The three companies will be supported and operated
under RealCold Systems, Inc., a new wholly owned subsidiary of ICSC. RealCold
Systems, Inc. will manufacture and support all related products, including
packaged refrigeration systems for ICSC's cryogenic freezing systems and custom
commercial sales, ammonia recovery and recycling systems, and non-chemical water
treating systems. RealCold Systems will also offer automated block ice systems.
Technicold Services, Inc. offers consulting engineering services including
process safety management compliance and ammonia refrigeration system design.
Technicold Services also provides operation, maintenance and safety seminars for
ammonia refrigeration technicians and supervisors. Jordan Vessel Corporation
offers industrial refrigeration system components such as liquid recirculating
packages and refrigeration system vessels of all types. RealCold Maintenance
Systems, Inc. offers unique innovative refrigeration products; Ammonia Recovery
and Recycle Systems and Evaporative Condenser Water Conditioning Systems.
Nauticon Acquisition - On August 4, 1995, the Board of Directors approved the
acquisition of 100% of Nauticon, Ltd. in a stock exchange for 900,000 shares of
common stock and 300,000 options of ICSC common stock. Nauticon will operate as
a wholly owned subsidiary in concert with ICSC's other subsidiaries, each
concentrating in unique, proprietary products for the food freezing,
refrigeration and cooling fields.
Nauticon, is an Austin, Texas based manufacturer of innovative evaporative heat
exchangers. Nauticon line of products represent five years of development. An
unique patented concept couples modern plastics with high efficiency copper
tubing to give very high efficiency, low operating costs and minimal
maintenance. These evaporative heat exchangers are self cleaning in most
applications thus eliminating chemical cleaning. These outstanding features
cannot be found in competitive products. Nauticon evaporative heat exchangers
serve the residential, commercial HVAC sector and the commercial refrigeration
industry. They have many applications, varying from traditional commercial
refrigeration to HVAC to industrial cooling. Customers vary from supermarkets to
ice rinks to walk-in coolers for refrigeration systems. HVAC applications are in
smaller commercial buildings, for traditional air conditioning systems to highly
efficient heat pumps. Industrial uses span plastic molding and extrusion to
conventional cooling of process water to cooling of cutting oils.<PAGE>
PAGE 9
Wittemann & RealCold - RealCold Systems Inc. and The Wittemann Company signed a
Joint Cooperative Agreement for the manufacture and marketing of merchant carbon
dioxide plants and refrigeration products. Wittemann is the world's leading
manufacturer of carbon dioxide systems and refrigeration accessories employed by
brewers and other fermentation processors. Wittemann has carbon dioxide systems
operating in almost every country in the world. The cooperative agreement
combines the technical expertise and experience of RealCold with the worldwide
marketing of Wittemann. George Briley, President of RealCold Systems with 46
years experience, is a renown expert in the innovative design and building of
merchant carbon dioxide systems. The RealCold technical and engineering staff
will provide the engineering design and manufacturing for innovative
refrigeration products and the merchant carbon dioxide plants. This industry
combination of technology, sales and manufacturing experience is unsurpassed and
should provide an effective and cost efficient entry for this worldwide market.
This venture has proved to be very successful for all related companies. Since
the cooperative agreement was initiated there are twelve orders booked for CO2
plants and refrigeration systems through the first quarter of 1996.
Results of Operations
First Quarter 1996 - Revenue in the first quarter was $173,566. Because of new
accounting procedures implemented for the 1995 end of year audit and continued
into 1996, the Company will only record revenue on the financial statement of
operations and not the combined sales and revenue as was previously posted for
the respected quarters during 1995. Management believes that delivers of the
sales order backlog beginning the second quarter 1996 should enhance revenues
throughout 1996. Operating loss for the first quarter was ($144,174), ($0.03)
per share, as compared to a loss of ($152,343), ($0.03) per share for the
comparable period last year. Total assets increased to over $2.6M and the
Company's net equity increased to over $1.5M for the first quarter 1996. There
was a total of 5,544,269 common shares outstanding as of March 31, 1996.
Sales Backlog - Sale order backlog as of March 31, 1996 was approximately $3.8
million which is scheduled for delivery throughout 1996.
During the first three months of operation RealCold Systems continued to make
significant progress submitting over fifty proposals todate for refrigeration
systems and CO2 plants while supporting the engineering and manufacturing
operations and producing systems for delivery overseas. As the RealCold
manufacturing facility continues to improve its operations and additional
product is manufactured in house, profit margins should improve. New
administration office procedures have been implemented and have improved order
processing, receivables and payables, and customer relations resulting in
reduced administration costs. Management believes the Company will continue to
improve profit margins and income as these operating functions improve and as
sales increase during the next year.
Nauticon, as a new ICSC operating subsidiary, continues to see favorable results
from its operations. Nauticon initiated their sales and marketing program during
the fourth quarter 1995 and has been successful promoting their evaporative
condenser system at the Food Marketing Exhibition and the ARI - ASHRAE
Exhibition in Chicago and Atlanta. They have hosted a number of interested
visitors, (both from the United States and foreign countries), who represent
very significant markets for their products. Primary sales targets will be the
large refrigeration manufactures that could produce and distribute product under
their own private label. Besides marketing direct through agents in the U S,
other market outlets will be through distributors world wide. Company executives
representing Nauticon and executives from a major manufacturer of refrigeration
equipment have recently exchanged facility visits. The major manufacturer<PAGE>
PAGE 10
expressed a very strong interest in pursuing a joint manufacturing and marketing
program with Nauticon. Management also believes that there are many
opportunities for licensing the Nauticon technology to major manufactures in the
U S and foreign countries.
The Company has successfully raised sufficient capital to fund the business
operations, and is confident that additional funds can be raised when and if
necessary. To support the Company's growth and goals, ICSC is continually
seeking other related acquisitions and joint venture partners. The Company
believes that its working capital and funds generated from outside investors
will be sufficient to support its operations and growth plans for the near
future. The Company has established a relationship with a finance company for a
leasing program; leasing total turn key systems including products, services,
maintenance and supplies as one monthly fixed cost to the customer.
The Company is currently live on the INTERNET, a world wide information network.
The real time system will provide anyone, investor or customer, Company news
releases, financial data and product information. A new on-line proposal writing
system and sales tool, which will produce text, drawings, color pictures and
video, is currently being developed for the INTERNET that should enhance sales
world wide for all Company products. A remote sales rep will be able to prepare
a sales proposal with the customer in a real time environment producing text,
drawings, color pictures and video. Access the ICSC home page on the INTERNET by
addressing http://www.ucsc.com/icsc.
Financial Summary
March 31, 1996 March 31, 1995
-------------- --------------
Total Assets $2,682,162 $1,686,599
Total Liabilities $1,112,218 $499,520
Total Equity $1,569,944 $1,187,079
Sales Orders $3,765,289 $1,308,887
Sales Revenue $173,566
Net Earnings (Loss) ($144,174) ($151,110)
Earnings (Loss) Per Share ($0.03) ($0.03)
Shares Outstanding 5,544,269 4,253,234
NOTE: Sales and Revenue were recorded as one amount for the first quarter 1995.<PAGE>
PAGE 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information.
None.
Item 6 Exhibits and Reports on Form 8-K.
Exhibit (27) FINANCIAL DATA SCHEDULE<PAGE>
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INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION
FORM 10-Q
March 31, 1996
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.
Date: May 13, 1996
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION
/s/Francis Simola
- --------------------------------
Francis L. Simola
Chairman and President
(Chief Executive Officer)<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 171896
<SECURITIES> 0
<RECEIVABLES> 86419
<ALLOWANCES> 0
<INVENTORY> 432274
<CURRENT-ASSETS> 727762
<PP&E> 104426
<DEPRECIATION> 0
<TOTAL-ASSETS> 1954400
<CURRENT-LIABILITIES> 1112218
<BONDS> 0
0
0
<COMMON> 5544
<OTHER-SE> 1569944
<TOTAL-LIABILITY-AND-EQUITY> 2682162
<SALES> 108113
<TOTAL-REVENUES> 173566
<CGS> 81444
<TOTAL-COSTS> 96310
<OTHER-EXPENSES> 221430
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (142831)
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</TABLE>
