-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NNKccxsqGx7eeZQ3IPjUqtAwpc5x/3VkTX6IQGO5FZliPb6olw+UzCsfKvuCM/15 X+OtY++MGCZYXMj5CNbbvg== 0000950147-98-000390.txt : 19980518 0000950147-98-000390.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950147-98-000390 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARIZONA INSTRUMENT CORP CENTRAL INDEX KEY: 0000724904 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 860410138 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-12575 FILM NUMBER: 98622057 BUSINESS ADDRESS: STREET 1: 4114 E WOOD ST CITY: PHOENIX STATE: AZ ZIP: 85040 BUSINESS PHONE: 6024701414 MAIL ADDRESS: STREET 1: 4114 E WOOD STREET CITY: PHOENIX STATE: AZ ZIP: 85040 FORMER COMPANY: FORMER CONFORMED NAME: QUINTEL CORP DATE OF NAME CHANGE: 19870329 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTRAC INSTRUMENTS INC DATE OF NAME CHANGE: 19840613 10QSB 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1998 Commission File Number 0-12575 Arizona Instrument Corporation (Exact name of small business issuer as specified in its charter) Delaware 86-0410138 (State or other jurisciction of incorporation (I.R.S. Employer identification or organization) number) 4114 East Wood Street, Phoenix, Arizona 85040-1941 (Address of principal executive offices) (602) 470-1414 (Issuer's telephone number) Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 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 ----- ----- As of April 27, 1998, 6,819,582 shares of Common Stock ($0.01 par value) were outstanding. ARIZONA INSTRUMENT CORPORATION TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheets March 31, 1998 and December 31, 1997 I-3 Consolidated Statements of Operations Three months ended March 31, 1998 and March 31, 1997 I-4 Consolidated Statements of Cash Flows Three months ended March 31, 1998 and March 31, 1997 I-5 Notes to Consolidated Financial Statements I-6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations I-7 II. OTHER INFORMATION Item 1 Legal Proceedings I-9 Item 6 Exhibits and Reports on Form 8-K I-10 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS ---------------------------------------------------------------------
------------------------------------- March 31, 1998 December 31, 1997 ------------------------------------- ASSETS ------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 740,958 $ 143,173 Receivables, net 3,185,204 3,990,192 Inventories 2,208,048 2,556,993 Prepaid expenses and other current assets 48,420 49,942 ------------------------------------- Total current assets 6,182,630 6,740,300 PROPERTY, PLANT AND EQUIPMENT, net 965,029 975,180 GOODWILL, net of accumulated amortization 1,633,570 1,680,261 DEFERRED INCOME TAXES 1,361,186 1,431,237 OTHER ASSETS 740,659 764,738 ------------------------------------- TOTAL ASSETS $ 10,883,074 $ 11,591,716 ===================================== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------------------------------------------------ CURRENT LIABILITIES Lines of credit $ 1,000,000 $ 1,066,000 Accounts payable 517,114 1,342,539 Current portion of long-term debt and capital lease obligations 212,063 284,801 Other accrued expenses 1,606,971 1,489,976 ------------------------------------- Total current liabilities 3,336,148 4,183,316 ------------------------------------- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - less current portions 62,568 93,444 SHAREHOLDERS' EQUITY Common stock, .01 par value per share: Authorized, 10,000,000 shares; Issued, 6,614,687 and 6,352,563 shares 68,156 66,747 Preferred stock, $.01 par value per share: Authorized, 1,000,000 shares Additional paid-in capital 9,858,366 9,826,964 Deficit (2,219,713) (2,357,304) ------------------------------------- 7,706,809 7,537,407 Less treasury stock, 86,165 shares at cost (222,451) (222,451) ------------------------------------- Total shareholders' equity 7,484,358 7,314,956 ===================================== TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,883,074 $ 11,591,716 =====================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------------------------------------ Three Months Ended ------------------ March 31, 1998 March 31, 1997 -------------- -------------- NET SALES $ 3,817,396 $ 3,219,880 COST OF GOODS SOLD 1,763,262 1,384,953 ----------- ----------- Gross margin 2,054,134 1,834,927 ----------- ----------- EXPENSES Marketing 772,746 812,091 General & administrative 618,206 512,712 Research & development 333,794 172,396 Amortization & depreciation 99,521 104,487 ----------- ----------- Total Expenses 1,824,267 1,601,686 ----------- ----------- OPERATING INCOME 229,868 233,241 ----------- ----------- OTHER REVENUE (EXPENSE) Interest income -- -- Interest expense (31,727) (24,997) Other 4,979 (4,794) ----------- ----------- Total other income (expense) (26,748) (29,791) ----------- ----------- INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS 203,120 203,450 INCOME TAXES 70,050 80,890 ----------- ----------- INCOME FROM CONTINUING OPERATIONS 133,070 122,560 LOSS FROM DISCONTINUED OPERATIONS, NET -- (41,883) ----------- ----------- NET INCOME $ 133,070 $ 80,677 =========== =========== NET INCOME PER SHARE -BASIC: $ 0.02 $ 0.02 =========== =========== FROM CONTINUING OPERATIONS NET INCOME PER SHARE - BASIC: -- (0.01) =========== =========== FROM DISCONTINUED OPERATIONS NET INCOME PER SHARE - BASIC $ 0.02 $ 0.01 =========== =========== NET INCOME PER SHARE - DILUTED: $ 0.02 $ 0.02 =========== =========== FROM CONTINUING OPERATIONS NET INCOME PER SHARE - DILUTED: -- (0.01) =========== =========== FROM DISCONTINUED OPERATIONS NET INCOME PER SHARE - DILUTED $ 0.02 $ 0.01 =========== =========== BASIC SHARES OUTSTANDING 6,715,318 6,617,129 EQUIVALENT SHARES - STOCK OPTIONS 130,000 438,022 ----------- ----------- DILUTED SHARES OUTSTANDING 6,845,318 7,055,151 =========== =========== See Notes to Consolidated Financial Statements ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------ March 31, 1998 March 31, 1997 -------------- -------------- OPERATING ACTIVITIES: Net income $ 133,070 $ 80,677 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 179,257 198,929 (Increase) decrease in receivables 804,988 (729,331) (Increase) decrease in inventories 348,945 4,227 Decrease in prepaid expenses and other current assets 4,521 290,240 (Increase) decrease in other assets 761 29,898 Decrease (Increase) in deferred income tax 70,051 0 (Decrease) increase in accounts payable and other accrued expenses (708,428) 114,035 --------- --------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 833,165 (11,325) --------- --------- INVESTING ACTIVITIES: Proceeds from the sale of assets 0 0 Gain on the sale of assets 0 0 Purchases of capital equipment (97,574) (131,306) --------- --------- NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (97,574) (131,306) --------- --------- ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) ------------------------------- March 31, 1998 March 31, 1997 -------------- -------------- FINANCING ACTIVITIES: Net borrowing (payment) under lines of credit (66,000) 150,000 Issuance of common stock pursuant to stock purchase plan 31,811 36,512 Stock issued pursuant to option exercises 0 11,960 Payments of long-term debt and capital leases (103,617) (479,485) --------- --------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (137,806) (281,014) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 597,785 (423,645) CASH AND CASH EQUIVALENTS, beginning of period 143,173 597,931 --------- --------- CASH AND CASH EQUIVALENTS end of period $ 740,958 $ 174,286 ========= ========= Supplemental cash flow information: SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS I-6 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of March 31, 1998, and the consolidated statements of operations and cash flows for the three-month periods ended March 31, 1998 and 1997 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 1998 and the results of operations and cash flows for the three-month periods ended March 31, 1998 and March 31, 1997 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1997 Report on Form 10-KSB, as amended. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for the entire year. 2. INVENTORIES Inventories consist of the following: March 31, 1998 December 31, 1997 ----------------- -------------------- Finished goods $ 397,264 $ 582,439 Components 1,810,784 1,974,554 ================= ==================== Total $ 2,208,048 $ 2,556,993 ================= ==================== 3. NEW ACCOUNTING PRONOUNCEMENTS The Company adopted Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income", in the quarter ended March 31, 1998. Comprehensive income is the same as net income for the quarter. I-7 The following discussion should be read in conjunction with, and is qualified in its entirety by, the Company's Consolidated Financial Statements and Notes thereto appearing elsewhere herein. Historical results are not necessarily indicative of trends in operating results for any future period. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The statements contained herein regarding management's anticipation of the amount of the Company's income taxes, strength of its relationships with its customers, its ability to obtain new borrowing arrangements, and its ability to satisfy cash requirements of current operations, and others, constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management's anticipation is based upon assumption regarding levels of competition, research and development results, product introduction and delivery schedules, raw material markets, the markets in which the Company operates, stability of the regulatory environment and ability to qualify for credit. Any of these assumptions could prove inaccurate, and therefore there can be no assurance that the forward-looking information will prove to be accurate. Results of Operations: Three months ended March 31, 1998 and March 31, 1997 Net sales for the three months ended March 31, 1998 increased 18.6% or $597,516 to $3,817,396 from $3,219,880 generated for the first three months of 1997. This increase was primarily due to increased installation revenues related to the Company's ENCOMPASS systems, and, to a lesser extent increased equipment sales. Cost of goods sold for the three months ended March 31, 1998 was $1,763,262, an increase of $378,309 or 27.3% from the $1,384,953 incurred for the first three months of 1997. The increase in cost of goods sold was primarily due to the costs of goods associated with increased sales, and to a change in product mix. Operating expenses for the first quarter of 1998 were $1,824,267, an increase of $222,581 or 13.9% as compared to operating expenses of $1,601,686 for the first quarter of 1997. Marketing expenses for the first quarter of 1998 were $772,746, a decrease of 4.8% or $39,345 compared to the same period in 1997. Decreased marketing expenses were due to expense reductions associated with the Company's turnaround program. General and administrative expenses for the first quarter of 1998 were $618,206, an increase of 20.6% or $105,493 as compared to expenses of $512,712 for the first quarter of 1997. This increase was due to increased bad debt and occupancy expenses which more than offset savings from the Company's turnaround program. Research and development expenses for the first quarter of 1998 were $333,794, an increase of 93.6% or $161,398 compared to the $172,396 of research and development expenses incurred in the first quarter of 1997. This increase was due to the expansion of responsibilities of the research and development group, as well as increased personnel expenses. Other expenses for the first quarter of 1998 were $26,748, a decrease of 10.2% or $3,043 from the $29,791 in other expenses incurred for the first quarter of 1997. This decrease was due primarily to an increase in other income for the first quarter of 1998, as compared to the first quarter of 1997, which more than offset an increase in interest expense. As a result of these changes from continuing operations, income before taxes for the first quarter of 1998 was $203,120, approximately equal to $203,450 recorded for the first quarter of 1997. Provision for income taxes for the first quarter of 1998 was $70,050 as compared to $80,890 for the first quarter of 1997. The Company expects its provision for income taxes to approximate the amount computed at the statutory rate for 1998. As a result, income from continuing operations for the first quarter of 1998 was $133,070, a small improvement over the income from continuing operations of $122,560 achieved for the first quarter of 1997. The Company discontinued its tank testing business in 1997. For the first quarter of 1998, the Company had no gain or loss from discontinued operations, while the loss from discontinued operations for the first quarter of 1997 was $41,883. As a result, net income for the first quarter of 1998 was $133,070 an increase of $52,392 or 64.9% from net income of $80,677 generated for the first quarter of 1997. The Company has historically experienced and expects to continue to experience quarterly fluctuations, potentially in a material amount, in its operating results. A variety of factors influence the Company's operating results in a particular period, including economic conditions in the industries served by the Company, regulatory developments, the timing of significant orders, shipment delays, specific features requested by the customers, the introduction of new products by the Company and its competitors, market acceptance of new products and enhancements of existing products, changes in the cost of materials, disruptions in the sources of supply, seasonal variations of spending by customers, the timing of the Company's expenditures in anticipation of future orders and other factors, many of which are beyond the Company's control. In addition, the Company sells a significant portion of its ENCOMPASS products to a limited number of customers. While management believes that its relationships with these customers are strong, future orders under purchase agreements with these customers are subject to change based on changing business conditions of the customers. Liquidity and Capital Resources: Working capital at March 31, 1998 was $2,846,482, an increase of $289,498, or 11.3%, from the working capital of $2,556,984 as of December 31, 1997. Working capital increased due to an increase in cash and a decrease in accounts payable which more than offset a reduction in receivables and inventory. As a result, the Company's current ratio as of March 31, 1998 increased to 1.9 from a current ratio of 1.6 as of December 31, 1997. As of December 31, 1997, the Company was operating under a forbearance agreement with Silicon Valley Bank (the "Bank"), as a result of the breach of certain financial covenants by the Company during 1997. This forbearance agreement expired in February 1998. At December 31, 1997, the Company had lines of credit with the Bank aggregating $3,500,000 which were collateralized by accounts receivable, inventory and property, plant and equipment. These lines of credit expired on March 15, 1998. At March 31, 1998, the Company had $1,000,000 outstanding under these lines of credit. Of these borrowings, $1,000,000 was at the Bank's prime rate of interest plus 1.5% (8.5% at March 31, 1998). As part of this credit facility the Company was able to borrow at prime plus 1.0% (8.5% at March 31, 1998) to support international receivables 90% guaranteed by the Export-Import Bank of the United States. The Company is currently negotiating with a bank to establish a new line of credit. Although there can be no assurance that a new line of credit will be made available to it, the Company believes that it will be successful in securing new borrowing arrangements. The failure to establish and maintain adequate borrowing arrangements would have a material adverse effect on the Company. The Company believes that cash generated from ongoing operations and its borrowing capability will satisfy the anticipated cash requirements of the Company's current operations over the next 12 months, though there can be no assurance that this will be the case. The Company's ability to continue funding its planned operations beyond the next 12 months is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, or to obtain additional funds though equity or debt financing, or from other sources of financing, as may be required. PART II. OTHER INFORMATION Item 1 Legal Proceedings Information is incorporated by reference from the Company's Report on Form 10-KSB, as amended, for the year ended December 31, 1997. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits 2.7 Financial Data Schedule 3.1 Composite Certificate of Incorporation of Registrant as amended through July 5, 1994. Incorporated by reference from the Form 8-A filed on June 26, 1996. 3.2 Bylaws of Registrant. Incorporated by reference from the Form 8-A filed on June 26, 1996. (b) The following Form 8-K was filed by Registrant during the quarter ended March 31, 1998: Form 8-K filed January 29, 1998 reporting under Item 5 that on January 14, 1998, Quinn Johnson, Richard Long, Patricia Onderdonk and Stanley Weiss resigned from the Board of Directors and Harold D. Schwartz was appointed to the Board of Directors of Registrant. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARIZONA INSTRUMENT CORPORATION May 14, 1998 /s/George G. Hays - ---------------------------------- ------------------------------------ Date George G. Hays, President and Chief Executive Officer (Principal executive officer) May 14, 1998 /s/Linda J. Shepherd - ---------------------------------- ------------------------------------ Date Linda J. Shepherd, Controller (Principal accounting officer) EX-27 2 ARTICLE 5 FDS FOR 1ST QUARTER 10-QSB
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTRD FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND ITS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 724904 ARIZONA INSTRUMENT CORPORATION 1 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 740,958 0 3,506,572 321,368 2,208,048 6,182,630 3,538,172 2,651,485 10,883,074 3,336,148 62,569 68,156 0 0 7,416,202 10,883,074 3,817,396 3,822,375 1,763,262 1,824,267 0 0 31,727 203,120 70,050 133,070 0 0 0 133,070 0.02 0.02
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