SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period ended June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934
For the transition period from _____ to _____
Commission File Number 0-21816
INFINITE MACHINES CORP.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 52-1490422
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(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
923 Incline Way, Suite #9, P.O. Box 8219, Incline Village, NV 89452
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
(702) 831-4680
(Registrant's telephone number, including area code)
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 |_|
As of July 22, 1996 the Registrant had a total of 6,061,033 shares of Common
Stock, $.001 par value, outstanding.
<PAGE>
INDEX
INFINITE MACHINES CORPORATION
PART 1. FINANCIAL INFORMATION
Page
----
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 1
Consolidated Statements of Operations-Three
and Six Months Ended June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows-Six Months
Ended June 30, 1996 and 1995 3
Notes to Unaudited Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 7
PART II. OTHER INFORMATION
Items
1-6 Not Applicable 8
SIGNATURES 9
<PAGE>
INFINITE MACHINES CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $ 3,561,478 $ 24,702
Restricted funds 16,331 70,355
Accounts receivable, net of allowance 831,122 909,833
Inventories 170,076 180,546
Other current assets 64,138 134,323
----------- -----------
Total current assets 4,643,145 1,319,759
Property and equipment, net 3,585,999 3,632,648
Other Assets 186,196 195,880
Notes receivable - stockholders 179,008 214,810
Inventoried parts -- --
Net asset of subsidiary sold pursuant to 399,595 399,595
contractual obligation $ 826,953 $ 368,110
----------- -----------
Other assets, net 1,591,752 1,178,395
----------- -----------
Total other assets $ 9,820,896 $ 6,130,802
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 315,439 $ 447,371
Notes payable 682,891 786,011
Accounts payable and accrued expenses 137,459 140,409
----------- -----------
Current maturities of long-term obligations 1,135,789 1,373,791
Total current liabilities
Long term obligations 7,348,355 4,003,097
Stockholders' equity 6,130 5,490
Common stock, $.001 par value, 20,000,000
shares authorized, 6,007,223 and 5,490,189
shares issued and outstanding 9,824,663 8,779,209
Additional paid-in capital $(8,494,041) $(8,030,785)
----------- -----------
Accumulated deficit 1,336,752 753,914
----------- -----------
Total stockholders' equity $ 9,820,986 $ 6,130,802
=========== ===========
See accompanying notes to unaudited consolidated financial statements
1
<PAGE>
INFINITE MACHINES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ending June 30, Ending June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Sales $ 1,291,757 1,317,472 $ 2,594,592 2,483,011
Cost of goods sold 837,578 703,459 1,623,414 1,453,870
----------- --------- ----------- ---------
Gross profit 454,179 614,013 971,178 1,029,141
Costs and expenses
Operating expenses 21,779 49,277 55,217 84,341
Research and development -- 112,227 -- 261,084
General and administrative expenses 345,043 483,365 688,197 966,162
Selling expenses 132,310 113,269 249,384 212,498
Depreciation and amortization 151,142 177,008 305,260 342,517
----------- --------- ----------- ---------
Total costs and expenses 650,274 935,146 1,298,058 1,866,602
Operating loss 196,095 321,133 326,880 837,461
Other (income) expense
Interest and dividend income (11,895) (12,793) (11,902) (17,646)
Interest expense 84,284 63,116 173,316 115,405
Loss on sale of equipment -- 42,985 -- 43,723
Other (income) expense (41,874) (13,830) (46,038) (16,734)
----------- --------- ----------- ---------
Total other (income) expense 30,515 79,478 115,376 124,748
----------- --------- ----------- ---------
Loss before provision for income taxes 226,610 400,611 442,256 962,209
Provision for income taxes 9,338 -- 21,000 --
----------- --------- ----------- ---------
Net loss $ 235,948 400,611 $ 463,256 962,209
=========== ========= =========== =========
Per share:
Net loss per common share $ 0.04 0.08 $ 0.08 0.19
=========== ========= =========== =========
Weighted average number of common
shares outstanding 5,574,563 5,131,946 5,574,563 5,131,946
=========== ========= =========== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
2
<PAGE>
INFINITE MACHINES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, June 30,
1996 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (463,256) $ (962,209)
Ajustments to reconcile net cash used in
operating activities
Depreciation and amortization 305,260 342,517
Loss (gain) of dispositions of assets -- 43,723
Translation adjustment -- 6,556
Asset write down and allowances 9,684 --
Changes in assets and liabilities:
(Increase) decrease in assets
Accounts receivable 78,711 (97,609)
Other assets 5,292 (90,443)
Inventory and inventoried parts 46,272 --
Increase (decrease) in liabilities:
Accounts payable and accured expenses (51,261) (59,975)
----------- -----------
Net cash used in operating activities: (69,298) (817,440)
Cash flows from investing activities:
Available-for-sale securities
redemptions 751,973
Purchase of property and equipment (146,561) (537,132)
Purchase of other long term assets -- (70,507)
Cost of intangibles -- (300)
----------- -----------
Net cash provided by (used in) investing activities (146,561) 144,034
Cash flows from financing activities:
Proceeds from convertible debentures
net of expenses 3,764,000 --
Borrowings of long term debt 1,250,000 --
Net repayments of short term debt (131,932) (488,800)
Repayments of long term obligations (1,363,551) 419,878
Decrease in restricted funds, net 54,025 45,440
Net borrowings of notes payable -- 1,479,784
Proceeds from issuances of common stock 57,593 --
Proceeds from sale of common stock warrants 122,500 --
----------- -----------
Net cash provided by (used in) financing activities: 3,752,635 616,546
----------- -----------
Net increase (decrease) in cash and cash equivalents 3,536,776 (56,860)
Cash and cash equivalents - beginning of period 24,702 200,879
----------- -----------
Cash and cash equivalents - end of period $ 3,561,478 $ 144,019
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
<PAGE>
INFINITE MACHINES CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. 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. Operating results for the three and six
month periods ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. For further
information, refer to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995, which includes audited financial statements and
footnotes as of and for the years ended December 31, 1995 and 1994.
NOTE 2. - BANK FINANCING
In February 1996, the Company's subsidiary, HGG Laser Fare, Inc. finalized
certain financing agreements with a bank that provided for, among other things,
a $400,000 revolving promissory note and a $1,250,000 term promissory note. This
debt was used to refinance existing debt obligations.
NOTE 3. - CONVERTIBLE PROMISSORY NOTES
At December 31, 1995, $605,000 of 7% convertible debentures due July 2000
were outstanding. The holder may, at his or her sole option, convert all or any
part of the outstanding principal amount and accrued and unpaid interest of this
note into that number of shares of the common stock of the Company, par value
$.001, as is equal to such amount then being converted divided by 80% of the
average closing price of the Company's common stock on the ten trading days
preceding conversion. During the first six months of 1996, the Company issued
$236,000 of the debentures and $741,000 of the debentures were converted into
400,051 shares of common stock.
In June 1996, the Company completed a $4,000,000 private placement
financing through the sale of 6% convertible debentures due June 1998. The
holders may, at their sole option, during the period commencing 90 days after
the date of issuance, convert all or any part of the outstanding principal
amount and accrued and unpaid interest of these notes into that number of shares
of the common stock of the Company, par value $.001, as is equal to such amount
then being converted divided by 75% of the average closing price of the
Company's common stock on the five trading days preceding conversion.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company had been in the development stage since its formation in
October, 1986. Its primary activities, until 1994, had involved development of
rotary engines and securing funding for these efforts. In mid-1994, the Company
completed its acquisition of HGG Laser Fare, Inc., a contract laser machining,
laser applications development and consulting group. Laser Fare was acquired for
stock, however, subsequently, funds were advanced by the Parent to meet working
capital needs.
Today, the Company is primarily involved in the contract laser machining
and laser applications business and related activities. The rotary engine
development has been suspended since a market for the proposed products failed
to develop.
Laser Fare operations have been profitable and sales are growing. New
equipment purchased during 1995 and 1996 coupled with more aggressive selling
have accounted for the growth. Both new customers and increased business with
existing accounts have contributed to increased revenue in 1996.
The Laser Fare Advanced Technology Group performs technical consulting and
manages research and development programs for industrial customers. In addition
to being compensated for services performed, the Advanced Technology Group, in
some instances, obtains limited rights to technology created during these
development programs. It is expected that this new technology will provide
future opportunities for the Company. One area of concentration is in advanced
manufacturing techniques aimed at reducing the time required to bring new
products to market. This effort involves work in rapid prototyping and rapid
manufacture of tools, such as molds for injection molding. Also, in the area of
advanced manufacturing, the Company has recently entered into a licensing and
research agreement with Brown University. The Company has licensed inventions,
which will allow high speed and low cost manufacturing of products from glass.
It is anticipated that these laser driven processes will find application in
manufacture of medical equipment, compact disc production and in micro optical
and electro optical devices.
Recently, the Company announced the formation of ExpressTool, Inc., a
subsidiary entering the business of rapid tooling and part manufacturing.
ExpressTool will utilize proprietary technology stemming from an Advanced
Technology Group development program. The subsidiary will, during the balance of
1996, have modest sales of trial and demonstration items. Sales growth is
anticipated in 1997.
The Company sold $1,241,000 of Subordinated Convertible Debentures during
1995 through April 1996. The Debentures bear interest at the rate of 7% per
annum until maturity on July 21, 2000. The Debentures are convertible into
shares at a conversion price equal to 80% of the average closing bid price of
the shares on the ten trading days preceding conversion. Through June 30, 1996,
$1,141,000 of principal amount of such Debentures had been converted into
608,133 shares of common stock. In addition, the Company's majority shareholder
and others have provided funding through promissory notes issued in 1995 and
1996 totaling $907,636, of which $125,000 was converted into 66,489 shares of
common stock as of March 31, 1996.
The Company completed an additional $4,000,000 private placement financing
through the sale of Convertible Debentures in June 1996. These Debentures bear
interest at the rate of
5
<PAGE>
6% per annum until maturity on June 1, 1998. The Holders of the Debentures may,
at any time during the period commencing 45 days after the date of initial
issuance, convert up to 33 1/3% of the original principal amount; 60 days after
the date of initial issuance, convert up to 66 2/3%; at 90 days after the date
of initial issuance, convert all of the principal amount, together with the
accrued but unpaid interest thereon, into shares of common stock at a conversion
price for each share equal to 75% of the average closing bid price of the shares
on the five trading days preceding conversion.
At the present time, the Company has adequate working capital, however,
growth and expansion plans will most probably require additional working
capital. Management is presently investigating approaches to raising additional
capital, including various forms of equity and debt financing.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its product development activities through a
series of private placements of debt and equity securities and an October, 1993
public offering of common stock. Since its inception, an aggregate of
approximately $12.5 million, net of expenses, has been provided by debt and
equity offerings. As of June 30, 1996, the Company had cash and cash equivalents
totaling approximately $3,561,478 available for its working capital needs and
planned capital asset expenditures.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared To The Three Months Ended June 30,
1995
Consolidated revenues for the three months ended June 30, 1996 were
$1,291,757 and consisted soley of laser division sales. Cost of sales totaled
$837,578, and a gross profit of $454,179 was realized for the quarter.
Consolidated revenues for the three months ended June 30, 1995 were $1,317,472
and consisted of laser division sales of $1,140,272, and engineering and design
sales of $177,200. Cost of sales totaled $703,459, and a gross profit of
$614,013 was realized for the three months ended June 30, 1995.
Operating expenses for the three months ended June 30, 1996 decreased by
$27,498, or 56% from the second quarter of 1995. This decrease was a result of
the Company's costs reduction activities. Research and development expenses
decreased from $112,227 during the second quarter of 1995 to a negligible amount
for the comparable 1996 period, primarily as a result of the suspension of the
rotary engine development efforts.
General and administrative costs were $345,043 for the three months ended
June 30, 1996 as compared to $483,365 during the second quarter of 1995. The
decrease of $138,322, or 28.6% was primarily due to cost reductions. Selling
expenses were $132,310 for the quarter ended June 30, 1996, as compared to
$113,269 for the second quarter of 1995. The increase of $19,041 was a result of
increased sales efforts at the laser division.
Depreciation and amortization expense totaled $151,142 for the second
quarter of 1996, as compared to $177,008 during the second quarter of 1995.
Decreased depreciation and amortization expense of $25,866, or 14.6% from the
second quarter of 1995, resulted from the write down of engine development
assets.
6
<PAGE>
During the second quarter of 1996, interest income decreased $898 from the
comparable three months period in 1995, due to the reduction in investment
securities held. In addition, interest expense was $84,284 during the second
quarter of 1996, as compared to $63,116 during the second quarter of 1995. The
increase in interest expense of $21,168 was a result of a higher level of debt
financing activities.
The Company has a consolidated net loss, before provision for income taxes,
of $226,610 for the three months ended June 30, 1996 as compared to the net loss
of $400,611 for the three months ended June 30, 1995.
Six Months Ended June 30, 1996 Compared to The Six Months Ended June 30, 1995
Consolidated revenues for the six months ended June 30, 1996 were
$2,594,592 and consisted solely of laser division sales. Cost of sales totaled
$1,623,414, and a gross profit of $971,178 was realized for the period. For the
six months ended June 30, 1995, sales totaled $2,483,011 and consisted of laser
division sales of $2,136,611, FTD Infinite Ltd. sales of $333,900 and rotary
engine development revenue of $12,500. Consolidated cost of sales were
$1,453,870 for the first six months of 1995 and the Company realized a gross
profit of $1,029,141 for that period.
Operating expenses decreased from $84,341 during the first six months of
1995, to $55,217 for the first six months of 1996. The decrease was a result of
the company costs reductions activities. Research and development expenses
decreased from $261,084 during the first six months of 1995 to a negligible
amount for the comparable 1996 period, primarily as a result of the suspension
of the rotary engine development efforts.
Expenditures for general and administrative expense decreased to $688,197
for the six months ended June 30, 1996 from $966,162 for the first six months of
1995. The decrease of $277,965 was primarily due to cost reductions. Selling
expenses were $249,384 for the first six months of 1996, compared to $212,498
for the first six months of 1995. The increase of $36,886 was a result of
increased sales efforts at Laser Fare.
Depreciation and amortization expense totaled $305,260 for the first six
months of 1996 compared to $342,517 during the first six months of 1995.
Decreased depreciation and amortization expense of $37,257 from prior year
period resulted from the year end write down of engine development assets.
Interest expense was $173,316 and $115,405 during the six month period
ended June 30, 1996 and June 30, 1995, respectively. The increase in interest
expense of $57,911 in 1996 was due to interest expense on obligations of
acquired laser equipment and accrued interest on notes payable. Interest and
other income for the first six months of 1996 decreased by $9,372 due to the
decreased level of temporary investments and marketable debt securities held.
The Company had a consolidated net loss, before provision for income tax,
of $442,256 for the six months ending June 30, 1996, as compared to a net loss
of $962,209 during the six months ended June 30, 1995.
7
<PAGE>
PART II. - OTHER INFORMATION
Item 6:
During the quarter, the Registrant filed the following reports on Form 8K:
Date Item
---- ----
June 18, 1996 Item 5: Brown University License Agreement
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
August 13, 1996 INFINITE MACHINES CORP.
By: /s/ Clifford G. Brockmyre
-------------------------------------
Clifford G. Brockmyre, President
and Chief Operating Officer
By: /s/ Daniel T. Landi
-------------------------------------
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from 6/30/96 10-QSB and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,577,809
<SECURITIES> 0
<RECEIVABLES> 861,493
<ALLOWANCES> 30,371
<INVENTORY> 170,076
<CURRENT-ASSETS> 4,643,145
<PP&E> 4,473,142
<DEPRECIATION> 887,143
<TOTAL-ASSETS> 9,820,896
<CURRENT-LIABILITIES> 1,135,789
<BONDS> 7,348,355
0
0
<COMMON> 6,130
<OTHER-SE> 1,330,622
<TOTAL-LIABILITY-AND-EQUITY> 9,820,896
<SALES> 2,594,592
<TOTAL-REVENUES> 2,594,592
<CGS> 1,623,414
<TOTAL-COSTS> 1,298,058
<OTHER-EXPENSES> 115,376
<LOSS-PROVISION> 31,903
<INTEREST-EXPENSE> 173,316
<INCOME-PRETAX> (442,256)
<INCOME-TAX> 21,000
<INCOME-CONTINUING> (463,256)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (463,256)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
