THIS DOCUMENT IS A COPY OF THE FORM 10-QSB FILED ON MAY 14, 1996,
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
U.S. 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
For the quarterly period ended March 31, l996
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Commission file number 0-24520
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IMSCO, INC.
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(Exact name of small business issuer as
specified in its charter)
Massachusetts 04-3021770
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
40 Bayfield Drive, North Andover, Massachusetts 01845
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(Address of principal executive offices)
(508) 689-2080
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(Issuer's telephone number)
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(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 .
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 2,994,839.
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<PAGE>
PART I - Financial Information
Item 1. Financial Statements.
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See pages FS-1 to FS-4.
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations.
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RESULTS OF OPERATIONS FOR THREE MONTHS ENDING MARCH 31, 1996; COMPARED WITH
MARCH 31, 1995.
Net losses decreased from $90,064 for the three months ending March 31,
l995 to $23,599 for the three months ending March 31, l996. The Company had no
revenues or operating income for the quarters ended March 31, l995 and March 31,
l996 from continuing operations. Total general, administrative and development
expenses were $23,599 for l996 in comparison to $90,064 for 1995. The decrease
in these costs from l995 to l996 was primarily due to more outside research and
development being performed in l996 by third parties which was offset in large
part by less salaries and wages being incurred internally by the Company in l996
as the Company continues further product research, development and refinement on
its Decaffamatic separation technology. All research and development costs were
expensed currently in the year incurred, rather than capitalized.
At March 31, l995, the Company had total assets of $59,270, total
liabilities of $40,403, and total stockholders equity of $18,867. At March 31,
l996, the Company had total assets of $7,336, a 87.6% decrease from 1995, total
liabilities of $61,297, a 51.6% increase from l995, and a total stockholders'
deficit of $53,961, instead of a stockholders' equity of $18,867 for l995.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit position as of March 31, l996 of
$58,607 in comparison to working capital as of March 31, l995 of $14,271. The
Company had an accumulated deficit of $1,491,149 for the period ended March 31,
l995 in comparison to an
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accumulated deficit of $1,870,960 for the period ended March 31, l996. The
increase in the accumulated deficit is primarily related to continuing operating
costs without any operating income.
For the three months ended March 31, l995 the Company's cash requirements
were satisfied from the cash reserves in its operating and investment accounts
and from $20,000 in cash received from the Company's subsidiary, Decaf Products,
Inc.("DPI"), relating to joint product development and administrative services
provided by the Company to DPI.
The Company does not currently possess a bank source of financing.
The Company cannot be certain that its existing sources of cash will be
adequate to meet its liquidity requirements. Therefore, the Company is
considering the following options to meet its liquidity requirements:
(a) attempting to raise additional funds through the sale of equity
securities to persons or entities who are not presently stockholders of the
Company;
(b) attempting to obtain a bank line of credit; and
(c) should insufficient funds be available from the foregoing sources,
reducing the Company's present rate of expenditures which might materially
adversely affect the ability of the Company to produce competitive products and
services and to market them effectively.
The Company's ability to continue in business as a going concern depends
upon its ability to generate licensing fees and royalties from the sale of its
technology and products, to conserve liquidity by setting marketing and other
priorities and reducing expenditures, to obtain bank financing and to obtain
additional funds through offering of its securities. The Company's ability to
obtain financing through the additional issuance of equity securities is limited
under its present capital structure because the Company currently has issued and
outstanding shares of its Common Stock that are close to the number of shares of
Common Stock authorized in its Certificate of Incorporation. For the Company to
obtain additional capital through the issuance of its equity securities, it
would therefore require an amendment to the Company's Certificate of
Incorporation to increase the authorized Common Stock, which action would
require the approval of the Company's Board of Directors and shareholders, or
alternatively a so-called "reverse" stock split, wherein the existing
shareholders and the Board of Directors would need to approve of a capital
reorganization that results in the same authorized capital but fewer shares
outstanding. For this reason, among others, the Company has begun to license
various applications of its core electrostatic separation technology to newly
formed industry focused subsidiary companies that may have capital structures
which permit them to obtain financing more readily than the Company as currently
configured. The Company's ability to obtain bank
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financing will require significantly improved operating results over the
Company's results for its past twelve months, the likelihood of which the
Company presently cannot assure. Similarly, the Company's ability to obtain
funds through an offering of its debt securities is limited by its lack of
revenue and net worth. In any event, there is no assurance that any expenditure
reductions, financings or other measures that the Company may be able to effect
will enable it to meet its working capital requirements without licensing fees
and royalties. Any such reductions of expenditures might materially adversely
affect the ability of the Company to produce competitive products and services
and to market these effectively.
The Company's long term capital expenditure requirements will depend upon
numerous factors, including the progress of the Company's research and
development programs, the resources that the Company devotes to the development
of self-funded products, proprietary manufacturing methods and advanced
technologies, the ability of the Company to obtain licensing arrangements, and
the demand for its products if and when approved.
The Company intends to rely on third-party licensees to fund the advanced
portions of its development costs, obtain regulatory approvals, manufacture and
market the Company's products. In the event the Company decided to self-fund
product development, obtain regulatory approvals, manufacture and market its
products on its own behalf, it would require significant additional funds. No
assurance can be given that such funds would be available on terms satisfactory
to the Company, if at all.
Unless the Company is able to generate revenues or obtain additional
financing in the future, the continuing losses incurred by the Company in its
development phase raise substantial doubt about the Company's ability to
continue as a going concern. The Company believes that its existing cash and
cash equivalents, together with the anticipated revenue from the DPI Licensing
Agreement will be sufficient to meet its operating expenses and capital
expenditures requirements for the year ended December 31, 1996. However, if
these payments are not received or there are unforeseen costs or expenses, there
can be no assurance that the Company would have capital resources from other
areas to be able to continue as a going concern.
PART II - Other Information
Not Applicable.
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INDEX TO FINANCIAL STATEMENTS
Balance Sheet at March 31, l995
(unaudited) and March 31, l996 (unaudited).................FS-1
Statement of Income (Loss) for the three
months ended March 31, l995 and l996 (unaudited)...........FS-2
Statement of Cash Flows for the three
months ended March 31, 1995 and 1996 (unaudited)...........FS-3
Statement of Stockholders' Equity (Deficit) for the three
months ended March 31, 1995 and 1996 (unaudited)...........FS-4
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IMSCO, INC.
a development stage enterprise
BALANCE SHEET
AT MARCH 31, 1995 and MARCH 31, 1996
March 31, March 31,
1996 1995
---- ----
ASSETS
CURRENT ASSETS
Cash and equivalents ......................... $ 2,990 54,674
Stock subscription receivable ................ 0 0
-- --
TOTAL CURRENT ASSETS ......................... 2,990 54,674
FIXED ASSETS - Note 1
Property and equipment ....................... 76,672 76,772
Leasehold Improvements ....................... 4,900 4,900
Accumulated Depreciation ..................... (78,246) (78,246)
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NET FIXED ASSETS ............................. 3,326 3,426
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ORGANIZATION COSTS net of amortization ............. 100 100
DEPOSITS ........................................... 390 540
DUE FROM OFFICERS .................................. 530 530
--- ---
TOTAL ASSETS ....................................... $ 7,336 $ 59,270
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ............................. $ 51,427 $ 33,799
Accrued Expenses ............................. 8,372
Accrued Payroll Taxes ........................ 1,498 6,604
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TOTAL CURRENT LIABILITIES .......................... 61,297 40,403
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock - authorized 3,000,000
shares at $.001 par value; 2,994,839
and 2,805,190 shares issued and
outstanding at March 31,
1996 and 1995,
respectively ............................... 2,995 2,805
Additional paid-in capital ................... 1,814,004 1,507,111
Deficit Accumulated: ......................... (1,250,052) (870,241)
Discontinued Operations ...................... (620,908) (620,908)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ............... (53,961) 18,867
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) ................................... $ 7,336 $ 59,270
========= =========
The following notes are an integral part of these statements.
FS-1
6
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<TABLE>
IMSCO, INC.
a development stage enterprise
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 AND CUMULATIVE
AMOUNTS FROM JULY 9, 1992 (inception of the current development stage)
TO MARCH 31, 1996
<CAPTION>
Cumulative amounts
from current
1996 1995 development stage
---- --------- -----------------
<S> <C> <C> <C>
DEVELOPMENT EXPENSES $ 9,566 $ 95 $ 152,591
SALARIES AND WAGES 0 25,000 203,762
OFFICER SALARIES 0 43,200 271,694
PAYROLL TAXES 0 3,366 45,264
OUTSIDE LABOR 0 0 120,350
PROFESSIONAL SERVICES 2,500 3,120 227,562
RENT 3,613 3,613 61,141
INSURANCE 3,267 2,860 35,761
TRAVEL AND BUSINESS MEETINGS 928 3,297 32,248
AUTO EXPENSE 448 1,261 21,024
TELEPHONE AND UTILITIES 1,482 1,434 25,980
OFFICE EXPENSES 619 1,160 14,961
EQUIPMENT RENTAL 0 0 3,462
CONTRIBUTIONS 375 0 410
CORPORATE FEES 802 723 34,911
--- --- ------
TOTAL GENERAL, ADMINISTRATIVE
AND DEVELOPMENT EXPENSE $ 23,599 89,129 1,251,120
------- ------ ---------
OTHER INCOME (EXPENSE):
DIVIDEND AND INTEREST INCOME 0 0 3,070
INTEREST EXPENSE 0 (935) (1,547)
LOSS BEFORE INCOME TAXES (23,599) (90,064) (1,249,597)
PROVISION FOR INCOME TAX 0 0 (456)
NET LOSS FROM DEVELOPMENT (23,599) (90,064) (1,250,052)
LOSS FROM DISCONTINUED OPERATIONS
(NOTE 1)
NET LOSS (23,599) (90,064) (1,250,052)
======= ======= ==========
LOSS PER SHARE (NOTE 1) $ (.01) $ (.03) $ (.42)
</TABLE>
The accompanying notes are an integral part of these statements
FS-2
7
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<TABLE>
IMSCO, INC.
a development stage enterprise
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
AND CUMULATIVE AMOUNTS FROM JULY 9, 1992 (inception of the current development stage)
<CAPTION>
Cumulative Amounts
from current
1996 1995 development stage
---- ---- -----------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from dividends and interest $3,070 $3,070
Cash received from customers 57,004
Cash received from research and testing 8,187
Cash received from unemployment taxes 170
Cash received from travel reimbursements
and other rebates 408 938
Cash paid to suppliers and employees ($25,645) (320,126) (1,069,747)
-----------
Net cash provided by operating activities (25,645) (316,648) (1,000,378)
Cash flows from investing activities:
Prepaid research testing (7,734)
Purchase of Fixed Assets (2,548)
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Net cash provided by investing activities 0 (10,282)
Cash flows from financing activities:
Cash flow for non-deductible expenses
Interim loan financing 85,000
Proceeds from issuance of common stock 20,000 162,000 942,756
----------- ----------- -----------
Net cash provided by financing activities 20,000 162,000 1,027,756
Net Increase in cash and cash equivalents (5,645) (154,648) 17,097
Cash and cash equivalents at beginning of year 8,634 163,282 (14,107)
Cash and cash equivalents at end of year $2,990 $8,634 $2,990
====== ====== ======
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Loss ($23,599) (406,086) ($1,250,053)
Decrease in Due from Officers (650)
Depreciation and Amortization 2,613
Stock issued to retire debt / services 107,013 223,483
Increase (Decrease) in Accounts Payable (1,500) (14,798) (13,024)
Increase (Decrease) in Accrued Payroll Taxes (546) (11,399) 1,498
Increase (Decrease) in Accrued Expenses 8,372 8,372
Decrease in Utility Deposits 150 4,285
Decrease in Accounts Receivable 2,998
Decrease in Inventory and Assets 100 20,100
--- ------
Total adjustments (2,046) 89,438 249,675
Net cash provided by operating activities ($25,645) ($316,648) ($1,000,378)
The following notes are an integral part of these statements.
FS-3
</TABLE>
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<TABLE>
IMSCO, INC.
a development stage enterprise
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
THREE MONTHS ENDED MARCH 31, 1996
<CAPTION>
Total
Stock-
Additional holders'
Common Paid-in Accumulated Equity
Stock Capital Deficit (Deficit)
------ ---------- ------------ -------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ 2,751 $ 1,525,235 ($1,441,276) ($86,710)
Issuance of 82,444 shares of $.001
par value for $1.25 per share 83 102,417 102,500
Issuance of shares of $.001 par
value for $1.25 per share 14 17,986 18,000
Issuance of shares of $.001 par
value for contract services
performed 119 106,894 107,013
Issuance of shares of $.001 par
value for $1.55 per share 11 16,989 17,000
Issuance of shares of $.001 par
value for $1.50 per share 17 24,483 24,500
Loss from development for the
year ended December 31, 1995 (406,086) (406,086)
--- ---- ----- --------- -------- --------
Balance at December 31 ,1995 2,995 1,794,004 (1,847,362) (50,363)
== ===== ===== ========= ========== =======
Issuance of DPI Additional Paid
in Capital for $2.00 per share $ 20,000 $ 20,000
Loss from development for the
period January 1 through March
31, 1996 (23,599)
Balance at March 31, 1996 2,995 1,814,004 (1,870,960) (53,961)
</TABLE>
The accompanying notes are an integral part of these statements.
FS-4
9
<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, thereunto
duly authorized.
May 13, l996 IMSCO, Inc.
/s/ Sol L. Berg
--------------------------------
Sol L. Berg
President
(Principal Financial Officer and
Principal Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,990
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,990
<PP&E> 81,572
<DEPRECIATION> 78,246
<TOTAL-ASSETS> 7,336
<CURRENT-LIABILITIES> 61,297
<BONDS> 0
0
0
<COMMON> 2,995
<OTHER-SE> (56,956)
<TOTAL-LIABILITY-AND-EQUITY> 7,336
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (23,599)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,599)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,599)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
