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 June 30, l996
Commission file number 0-24520
IMSCO TECHNOLOGIES, INC.
(Exact name of small business issuer as
specified in its charter)
Delaware 04-3021770
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
40 Bayfield Drive, North Andover, Massachusetts 01845
(Address of principal executive offices)
(508) 689-2080
(Issuer's telephone number)
IMSCO, INC.
(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: 2,999,839.
<PAGE>
PART I - Financial Information
Item 1. Financial Statements.
See pages F-1 to F-4.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS FOR SIX MONTHS ENDING JUNE 30, l996; COMPARED WITH
JUNE 30, l995.
Net losses decreased from $237,691 for the six months ended June 30, l995
to $39,432 for the six months ending June 30, l995, an 83% deficit reduction.
The Company had no revenues or operating income for the six months ended June
30, l995 and June 30, l996 from continuing operations. For the six months ended
June 30, l996, the Company earned no interest on its interest bearing investment
account. $525 was earned for the comparable period in l995. Total general,
administrative and development expenses were $37,673 for 1996 in comparison to
$238,216 for l995. The decrease in these costs from l995 to l996 was primarily
due to decreased staffing and wages paid for research and development. The
Company incurred costs in l995 as the Company performed and completed 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. This resulted in a loss per share of $.01 for the six
months ended June 30, l996 in comparison to a loss per share of $.08 for the
comparable six month period in l995.
At June 30, l995, the Company had total assets of $58,184, total
liabilities of $25,990, and total stockholders' equity of $32,194. At June 30,
l996, the Company had total assets of $8,074, a decrease of 86% from the
comparable period in l995, total liabilities of $67,869 an increase of $41,879
from l995, and a
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<PAGE>
stockholders' deficit of $59,795, in comparison to a stockholders' equity of
$32,194 in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a positive working capital position as of June 30, l995 of
$27,598 in comparison to a working capital deficit position as of June 30, l996
of $63,611. The Company had an accumulated deficit of $1,638,776 at the period
ended June 30, l995 in comparison to an accumulated deficit of $1,886,794 at the
period ended June 30, l996. The increase in the accumulated deficit is primarily
related to continuing operating costs without any operating income.
For the three months ended June 30, l996 the Company's cash requirements
were satisfied from the cash reserves in its operating and investment accounts.
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.
3
<PAGE>
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 the placement of its common stock. The Company's
ability to obtain bank 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. 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, it at all.
The Company believes that its existing cash and cash equivalents, together
with the net proceeds from an anticipated private placement and anticipated cash
flow from operations will be sufficient to meet its operating expenses and
capital expenditures requirements for at least the next 6 months. However, if
such private placement efforts are unsuccessful, there can be no
4
<PAGE>
assurance that the Company will have sufficient capital resources to be able to
continue as a going concern.
PART II - Other Information
Not Applicable.
5
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Balance Sheet at June 30, l995
(unaudited) and June 30, l996 (unaudited)........................... F-1
Statement of Income (Loss) for the six
months ended June 30, l995 and l996 (unaudited)..................... F-2
Statement of Cash Flows for the six
months ended June 30, 1995 and 1996 (unaudited)..................... F-3
Statement of Stockholders' Equity (Deficit) for the six
months ended June 30, 1995 and 1996 (unaudited)..................... F-4
<PAGE>
IMSCO, INC.
a development stage enterprise
BALANCE SHEET
AT JUNE 30, 1996 AND JUNE 30, 1995
June 30, June 30,
1996 1995
------- --------
ASSETS
Cash and equivalents $ 4,258 $ 53,588
Stock subscription receivable 0 0
- -
TOTAL CURRENT ASSETS 4,258 53,588
FIXED ASSETS - Note 1
Property and Equipment 76,672 76,772
Leasehold Improvements 4,900 4,900
Accumulated Depreciation (78,246) (78,246)
--------- --------
NET FIXED ASSETS 3,326 3,426
--------- --------
ORGANIZATION COSTS net of amortization 100 100
DEPOSITS 390 540
DUE FROM OFFICERS 0 530
--------- --------
TOTAL ASSETS $ 8,074 $ 58,184
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 49,927 $ 22,299
Loan from Officer 9,570 0
Accrued Expenses 8,372 0
Accured Payroll Taxes 0 3,691
--------- --------
TOTAL CURRENT LIABILITIES 67,869 25,990
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock- authorized
3,000,000 shares at $.001
par value; 2,999,839 and
2,866,869 shares issued and
outstanding at June 30,
1996 and 1995 3,000 2,867
respectively
Additional paid-in capital 1,823,999 1,668,103
Deficit Accumulated:
Development Stage (1,265,886) (1,017,868)
Discontinued Operations (620,908) (620,908)
TOTAL STOCKHOLDER' EQUITY (DEFICIT) (59,795) 32,194
-------- -------
TOTAL LIABILITIES AND STOCKHOLDER'
EQUITY (DEFICIT) $ 8,074 $ 58,184
======== ========
The following notes are an integral part of these statements.
FS-1
<PAGE>
IMSCO, INC.
a development stage enterprise
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 AND CUMULATIVE
AMOUNTS FROM JULY 9, 1992 (inception of the current development stage)
TO JUNE 30, 1996
Cumulative amounts
from current
1996 1995 development stage
---- ---- -----------------
DEVELOPMENT EXPENSES $10,218 $23,351 $ 153,243
SALARIES AND WAGES 0 50,000 203,762
OFFICER SALARIES 0 73,200 271,694
PAYROLL TAXES 0 10,446 45,264
OUTSIDE LABOR 0 0 120,350
PROFESSIONAL SERVICES 2,500 53,881 227,562
RENT 7,225 7,225 64,754
INSURANCE 6,828 6,832 39,322
TRAVEL AND BUSINESS MEETINGS 3,012 6,414 34,332
AUTO EXPENSE 683 1,511 21,259
TELEPHONE AND UTILITIES 2,970 2,503 27,468
OFFICE EXPENSES 2,100 2,853 16,442
EQUIPMENT RENTAL 0 0 3,462
CONTRIBUTIONS 375 0 410
CORPORATE FEES 1,762 0 35,871
------ ------- ---------
TOTAL GENERAL, ADMINISTRATIVE
AND DEVELOPMENT EXPENSE $37,432 238,216 1,265,194
------- ------- ---------
OTHER INCOME (EXPENSE):
DIVIDEND AND INTEREST INCOME 0 525 3,070
INTEREST EXPENSE (1,759) 0 (3,306)
LOSS BEFORE INCOME TAXES (39,432) (237,691) (1,265,194)
PROVISION FOR INCOME TAX 0 0 (456)
NET LOSS FROM DEVELOPMENT (39,432) (237,691) (1,265,886)
------ ------- ---------
LOSS FROM DISCOUNTINUED OPERATIONS
(Note 1)
NET LOSS (39,432) (237,691) (1,265,886)
====== ======= =========
LOSS PER SHARE (Note 1) $(.01) $(.08) $ (.42)
The accompanying notes are an integral part of these statements.
FS-2
<PAGE>
IMSCO, INC.
a development stage enterprise
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 AND CUMULATIVE
AMOUNTS FROM JULY 9, 1992 (inception of the current development stage)
<TABLE>
<CAPTION>
Cumulative amounts
from current
1996 1995 development stage
-------- -------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from dividends and interest $ 525 $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 938
Cash paid to suppliers and employees ($43,946) (201,632) (1,088,048)
-------- ------- ---------
Net cash provided by operating activities ($43,946) (201,107) (1,018,679)
Cash flows from investing activities:
Prepaid research testing (7,734)
Purchase of Fixed Assets (2,548)
---------
Net cash provided by financing activities 0 0 (10,282)
Cash flows from financing activities:
Cash flow for non-deductible expenses (1,087)
Interim loan financing from officer 9,570 94,570
Proceeds from issuance of common stock 30,000 92,500 952,756
------ ------- ---------
Net cash provided by financing activities 39,570 91,413 1,047,326
Net Increase in cash and cash equivalents (4,376) (109,694) 18,365
Cash and cash equivalents at beginning of year 8,634 163,282 (14,107)
Cash and cash equivalents at end of year $4,258 $53,588 $4,258
====== ======= =========
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Loss ($39,432) ($237,691) ($1,265,886)
Decrease in Due from officers 530 (120)
Depreciation and Amortization 2,613
Stock isued to retire debt services 69,541 223,483
Increase (Decrease) in Accounts Payable (3,000) (23,205) (14,524)
Increase (Decrease) in Accrued Payroll Taxes (2,044) (9,752) 0
Increase (Decrease) in Accrued Expenses 8,372
Decrease in Utility Deposits 4,285
Decrease in Accounts Receivable 2,998
Decrease in Inventory and Assets 20,100
-----------
Total adjustments (4,514) 36,584 247,207
Net cash provided by operating activities ($43,946) ($201,107) ($1,018,679)
</TABLE>
The following notes are an integral part of these statements.
FS-3
<PAGE>
IMSCO, INC.
a development stage enterprise
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Total
Stock
Additional holders'
Common Paid-in Acumulated 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 82,44 shares of $.001
par valued 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 par 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, 1996 (406,086) (406,086)
----- --------- --------- ------
Balance at Decembeer 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) (23,599)
Balance at March 31, 1996 2,995 1,814,004 (1,870,961) (53,962)
Issuance of shares of $.001 par
value for $2,00 5 9,995 10,000
Loss from development for the
period April 1 through June
30, 1996 (15,833) (15,833)
Balance at June 30, 1996 $3,000 $1,823,999 ($1,886,794) ($59,795)
</TABLE>
The accompanying notes are an integral part of these statements.
FS-4
<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.
August 12, l996 IMSCO, Inc.
/s/ Sol L. Berg
--------------------------------
Sol L. Berg
President
(Principal Financial Officer and
Principal Accounting Officer)
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 4,258 53,588
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,258 53,588
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 8,074 58,184
<CURRENT-LIABILITIES> 67,869 25,990
<BONDS> 0 0
0 0
0 0
<COMMON> 3,000 2,867
<OTHER-SE> (62,795) 35,061
<TOTAL-LIABILITY-AND-EQUITY> 8,074 58,184
<SALES> 0 0
<TOTAL-REVENUES> 0 525
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 37,432 238,216
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,759 0
<INCOME-PRETAX> (39,432) (237,691)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (39,432) (237,691)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (39,432) (237,691)
<EPS-PRIMARY> (.01) (.08)
<EPS-DILUTED> (.01) (.08)
</TABLE>
