<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the period ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File Number: 0-26182
INTERNATIONAL IMAGING, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3469649
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Eseco Road, Cushing, Oklahoma 74023
(Address of principal executive offices) (Zip Code)
(918) 225-1266
(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 No X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 8, 1996, 4,733,416
shares of common stock.
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INTERNATIONAL IMAGING, INC.
TABLE OF CONTENTS
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PAGE NO.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Consolidated Condensed Statements of
Operations 5
Consolidated Condensed Statements of
Cash Flows 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,1996 March 31, 1996
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 9,986 $ 12,790
Short-term investments 7,736 18,191
Accounts receivable - net 655,146 489,820
Inventories 1,511,040 1,608,226
Other current assets 128,987 19,203
---------- ----------
Total current assets 2,312,895 2,148,230
PROPERTY AND EQUIPMENT:
Building 663,868 663,848
Furniture, fixtures and equipment 520,701 520,701
Land 12,560 12,560
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Total property and equipment, at cost 1,197,129 1,197,109
Less-Accumulated depreciation 674,358 651,335
---------- ----------
Net property and equipment 522,771 545,774
OTHER ASSETS:
Intangible and other assets 24,940 11,324
---------- ----------
Total assets $2,860,606 $2,705,328
========== ==========
</TABLE>
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,1996 March 31, 1996
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(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 745,160 $ 667,751
Accrued expenses 209,511 165,228
Deferred compensation 20,000 20,000
Short-term debt 205,030 205,030
Current portion of long term debt -- 27,471
----------- -----------
Total current liabilities 1,179,701 1,085,480
NONCURRENT LIABILITIES:
Long-term debt, net of current portion 1,025,073 1,032,512
Deferred compensation 51,952 60,112
----------- -----------
Total noncurrent liabilities 1,077,025 1,092,624
STOCKHOLDERS' EQUITY:
Common stock 5,680 5,680
Additional paid in capital 2,615,540 2,615,540
Accumulated deficit (2,017,340) (2,093,996)
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Total stockholders' equity $ 603,880 $ 527,224
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Total liabilities and stockholders' equity $2,860,606 $ 2,705,328
=========== ===========
</TABLE>
See Notes to consolidated condensed financial statements.
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended
------------------
June 30
-------
1996 1995
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SALES $ 1,079,980 $ 1,045,015
COST OF SALES 629,833 675,237
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GROSS PROFIT 450,147 369,778
OPERATING EXPENSES 356,789 281,343
----------- -----------
OPERATING PROFIT 93,358 88,435
OTHER INCOME (EXPENSES)
Interest income 418 3,174
Interest expense (18,948) (14,161)
Other income (expense), net 1,840 (43,805)
----------- -----------
Total other income (expenses) (16,690) (54,792)
INCOME BEFORE INCOME TAXES 76,668 33,643
INCOME TAXES -- --
----------- -----------
NET INCOME (LOSS) $ 76,668 $ 33,643
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE: $ 0.02 $ 0.01
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,733,416 4,712,193
=========== ===========
</TABLE>
See Notes to consolidated condensed financial statements.
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended
June 30
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 76,668 $ 33,643
Adjustments to reconcile net income(loss) to net cash from operating
activities
Depreciation and amortization 23,024 11,424
Gain on sale of property & investments 67 (4,602)
Deferred compensation (8,160) (5,001)
Changes in current assets and liabilities -
Decrease (increase) in accounts receivable - net (165,326) (152,603)
Decrease (increase) in inventories 97,186 65,181
Decrease (increase) in other assets (109,784) (17,021)
Increase (decrease) in accounts payable (80,071) (44,409)
Increase (decrease) in accrued liabilities (3,267) (9,238)
Other (13,718) (2,275)
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NET CASH USED BY OPERATING ACTIVITIES (183,381) (124,901)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment -- 7,100
Purchase of short term investments 10,455 --
Capital expenditures -- (12,597)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES 10,455 (5,497)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- 87,500
Proceeds from long-term debt 181,000 35,000
Reduction of long-term debt (10,878) (16,173)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 170,122 106,327
--------- ---------
NET INCREASE (DECREASE) IN CASH (2,804) (24,071)
CASH, beginning of period 12,790 51,648
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CASH, end of period $ 9,986 $ 27,577
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The consolidated condensed financial statements included herein have been
prepared by International Imaging, Inc. (the "Company"), and subsidiaries,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission and, in the opinion of management, include all adjustments,
consisting only of normal recurring accruals, necessary to present fairly the
resulting operations for the indicated periods. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these consolidated condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-KSB.
2. COMMON STOCK AND OPTIONS:
During the three months ended June 30, 1996, no shares were exercised under the
Company's stock option plan.
3. INCOME TAXES:
The income tax expense from continuing operations for the quarter ended June 30,
1996, varied from the statutory federal income tax rate primarily due to
adjustments of a valuation allowance related to the realizability of net
operating loss carryforwards. The Company's net tax operating loss carryforwards
expire at specific future dates and utilization of certain carryforwards is
limited to specific amounts each year. Due to past performance and the
expiration dates, the ultimate realization of such tax benefits is uncertain.
The Company has established a valuation allowance against these carryforward
benefits and will recognize the benefits only as reassessment demonstrates they
are realizable. Realization is primarily dependent upon future earnings.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In December 1995, the Company reorganized its marketing operations and
changed its method of distribution from dealers with protected territories to
field marketing representatives. The decision was made because sales by the
dealer network had been declining for several quarters and the dealers were not
carrying the inventory the Company felt was appropriate for maximum market
penetration. The nine field representatives with whom the Company has entered
into contracts are experienced in the photographic and x-ray fields and it is
anticipated they will produce greater sales than were forthcoming under the
dealer system.
A. CONSOLIDATED RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 VS. THREE MONTHS ENDED JUNE 30, 1995
Sales increased from $1,045,015 for the quarter ended June 30, 1995 to
$1,079,980 for the quarter ended June 30, 1996, a 3.3% increase. Because of the
change in distribution, i.e. direct sales rather than through dealers, realized
prices were higher in the current fiscal year than in prior years. The cost of
sales as a percentage of sales decreased from 64.6% in the quarter ended June
30, 1995 to 58.3% for the same period in 1996.
Operating expenses were $281,343 for the quarter ended June 30, 1995
compared to $356,789 for the same period in 1996. Operating expenses increased
to 33% of sales for the three months ended June 30, 1996 compared to 26.9% of
sales for the three months ended June 30, 1995. This increase in operating
expense reflects the fact that the Company is now paying commissions to field
sales representatives, rather than giving discounts to dealers.
B. LIQUIDITY AND CAPITAL RESOURCES
The working capital position as of June 30, 1996 improved by $70,444
compared to working capital at March 31, 1996. Increased receivables allowed the
Company to draw on its bank line to reduce accounts payable. Net working capital
has increased compared to March 31, 1996 as a result of increased profits and
decreased inventory. The working capital ratio was approximately two to one at
June 30, 1996.
The ability of the Company to continue to expand its operations through
the expansion of existing facilities or the acquisition of new facilities or
businesses may require additional funding beyond the Company's current working
capital. Such additional funding may come from public or private financial
sources, bank financing or a combination thereof. However, there are no
assurances that any such additional funds may be obtained.
Net cash used in operating activities was $183,381 for the three months
ended June 30, 1996, as compared to $124,901 used by operations for the same
period in 1995. The change was due primarily to the changes in accounts payable
resulting from the increased sales activity and an increase in prepaid expenses.
The Company's liquidity may be adversely affected by three market
factors. First, liquidity would be adversely affected if the Company were not
able to pass along to its customers any increases in the cost of importing
equipment should exchange rates deteriorate. Second, the introduction of a
product by a competitor company would negatively impact the profit margins of
the Company. Third, liquidity would be impacted negatively if the Company were
not able to effectively contain its internal costs.
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TRENDS
The Company anticipates that by mid-1997 nearly one-half of its sales
volume will consist of processors imported from Germany. These machines are
priced in U.S. dollars, but the continued weakness of the U.S. dollar relative
to the Deutsche Mark ("DM") results in higher costs to the Company. This results
because the Company absorbs all exchange rate declines below 1.50 DM to the U.S.
dollar under an agreement entered into April 1, 1995. This agreement calls for
the Company to adjust its payments to Colenta so that Colenta will not receive
less than 1.50 DM to the U.S. dollar on purchases from Colenta by the Company.
This same agreement sets a ceiling of 1.67 DM to the dollar so that if the
dollar should strengthen against the Deutsche Mark the Company will enjoy a
benefit should the exchange rate exceed 1.67 Marks. Exchange rates have been
below that level since prior to April 1, 1995. On March 31, 1996 the exchange
rate was 1.5283 DM to the U.S. dollar. The cost of this agreement has not been
material to the Company.
The Company is developing products for the Russian market that will be
marketed through Kodak A.O., Moscow. The Company anticipates increased export
demand in emerging countries such as Russia, the Pacific Rim countries, and
Latin America.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
The following reports on Form 8-K were prepared and filed during the
quarter ended June 30, 1996:
None
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Pursuant to the regulations of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL IMAGING, INC.
Date: October 31, 1996 /s/ Arthur A. Kaminshine
------------------------
Arthur A. Kaminshine, President
Date: October 31, 1996 /s/ Edward L. Handlin
---------------------
Edward L. Handlin,
Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
QUARTELY CONSOLIDATED FINANCIAL STATEMENTS OF INTERNATIONAL IMAGING, INC. FOR
THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) FORM 10-QSB FOR THE PERIOD ENDED JUNE 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,986
<SECURITIES> 7,736
<RECEIVABLES> 655,146
<ALLOWANCES> 0
<INVENTORY> 1,511,040
<CURRENT-ASSETS> 2,312,895
<PP&E> 1,197,129
<DEPRECIATION> 674,358
<TOTAL-ASSETS> 2,860,606
<CURRENT-LIABILITIES> 1,179,701
<BONDS> 1,077,025
0
0
<COMMON> 4,733,416
<OTHER-SE> 598,200
<TOTAL-LIABILITY-AND-EQUITY> 2,860,606
<SALES> 1,079,980
<TOTAL-REVENUES> 1,079,980
<CGS> 629,833
<TOTAL-COSTS> 629,833
<OTHER-EXPENSES> 356,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,948
<INCOME-PRETAX> 76,668
<INCOME-TAX> 0
<INCOME-CONTINUING> 76,668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,668
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
