-----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, NBopaF6wzjyUkreZ3WteMZXRnGPBL3gX62cDPfHHHgaXBSgdNh76P9ufzMKDUuj0 T2LrHNDYBNO8cCA6+k3muA== 0000950147-00-000766.txt : 20000516 0000950147-00-000766.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950147-00-000766 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 635192 BUSINESS ADDRESS: STREET 1: 1912 WEST 4TH ST CITY: TEMPEIX STATE: AZ ZIP: 85281 BUSINESS PHONE: 6024701414 MAIL ADDRESS: STREET 1: 1912 WEST 4TH ST CITY: TEMPEIX STATE: AZ ZIP: 85281 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 FOR THE QTR ENDED 3/31/00 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 Quarter Ended March 31, 2000 Commission File Number 0-12575 Arizona Instrument Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 86-0410138 ------------------------ ---------------- (State of incorporation) (I.R.S. Employer identification number) 1912 W. 4th Street, Tempe, Arizona 85281-1941 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (602) 470-1414 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 and 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 May 10, 2000, 1,371,399 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, 2000 and December 31, 1999 3 Consolidated Statements of Operations Three months ended March 31, 2000 and March 31, 1999 4 Consolidated Statements of Cash Flows Three months ended March 31, 2000 and March 31, 1999 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1 Legal Proceedings 9 Item 5 Other Information 9 Item 6 Exhibits and Reports on Form 8-K 9 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 2000 December 31, 1999 -------------- ----------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,158,101 $ 3,471,429 Receivables, net 1,155,412 1,649,030 Inventories 691,278 688,236 Deferred Income Tax 333,000 358,000 Prepaid expenses and other current assets 63,679 35,827 ----------- ----------- Total current assets 6,401,470 6,202,522 PROPERTY, PLANT AND EQUIPMENT, net 730,936 793,971 GOODWILL, net of accumulated amortization 1,260,035 1,306,727 DEFERRED INCOME TAXES 379,500 379,500 OTHER ASSETS 339,063 335,139 ----------- ----------- TOTAL ASSETS $ 9,111,004 $ 9,017,859 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 155,261 $ 191,798 Current portion of long-term debt and capital lease obligations 6,277 10,691 Other accrued expenses 934,748 907,566 ----------- ----------- Total current liabilities 1,096,286 1,110,055 ----------- ----------- SHAREHOLDERS' EQUITY Common stock, .01 par value per share: Authorized, 10,000,000 shares; Issued, 1,391,098 and 1,383,213 shares outstanding 1,371,399 and 1,363,514 shares 13,911 13,832 Preferred stock, $.01 par value per share: Authorized, 1,000,000 shares Additional paid-in capital 9,997,371 9,978,131 Accumulated deficit (1,761,782) (1,849,377) ----------- ----------- 8,249,500 8,142,586 Less treasury stock, 19,699 shares at cost (234,782) (234,782) ----------- ----------- Total shareholders' equity 8,014,718 7,907,804 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,111,004 $ 9,017,859 =========== ===========
See Notes to Consolidated Financial Statements 3 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended -------------------------------- March 31, 2000 March 31, 1999 -------------- -------------- NET SALES $ 2,018,123 $ 2,140,665 COST OF GOODS SOLD 696,662 768,524 ----------- ----------- Gross margin 1,321,461 1,372,141 ----------- ----------- EXPENSES Marketing 450,954 662,364 General & administrative 441,657 391,535 Research & development 178,671 297,955 Amortization & depreciation 114,952 140,039 ----------- ----------- Total Expenses 1,186,234 1,491,893 ----------- ----------- OPERATING INCOME (LOSS) 135,227 (119,752) ----------- ----------- OTHER REVENUE (EXPENSE) Interest income 39,928 -- Interest expense (1,184) (9,833) Other 1,219 4,264 ----------- ----------- Total other (expense) 39,963 (5,569) ----------- ----------- INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) FROM OPERATIONS 175,190 (125,321) INCOME TAXES EXPENSE 87,595 -- ----------- ----------- NET INCOME $ 87,595 $ (125,321) =========== =========== NET INCOME (LOSS) PER SHARE - BASIC $ 0.06 $ (0.09) =========== =========== NET INCOME (LOSS) PER SHARE - DILUTED $ 0.06 $ (0.09) =========== =========== BASIC SHARES OUTSTANDING (WEIGHTED AVERAGE) 1,370,273 1,361,300 EQUIVALENT SHARES - STOCK OPTIONS 21,011 -- ----------- ----------- DILUTED SHARES OUTSTANDING 1,391,284 1,361,300 =========== =========== See Notes to Consolidated Financial Statements 4 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
March 31, 2000 December 31, 1999 -------------- ----------------- OPERATING ACTIVITIES: Net income (loss) $ 87,595 $ (125,320) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 123,771 149,324 Decrease in receivables 493,618 1,625,276 Increase in inventories (3,042) (201,313) Increase in prepaid expenses and other current assets (27,852) (5,519) (Increase) decrease in other assets (3,924) 1,611 Decrease in deferred income tax 25,000 -- Decrease in accounts payable and other accrued expenses (9,355) (399,229) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 685,811 1,044,830 ----------- ----------- INVESTING ACTIVITIES: Purchases of capital equipment (14,044) (41,804) ----------- ----------- NET CASH USED BY INVESTING ACTIVITIES (14,044) (41,804) ----------- ----------- FINANCING ACTIVITIES: Net payment under lines of credit -- (150,000) Issuance of common stock pursuant to stock purchase plan 19,319 31,717 Payments of long-term debt and capital leases (4,414) (2,965) ----------- ----------- NET CASH USED BY FINANCING ACTIVITIES 14,905 (121,248) ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 686,672 881,778 CASH AND CASH EQUIVALENTS, beginning of period 3,471,429 1,098,846 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 4,158,101 $ 1,980,624 =========== =========== Supplemental cash flow information: Interest expense $ 1,184 $ 9,833
See Notes to Consolidated Financial Statements 5 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of March 31, 2000, and the consolidated statements of operations and cash flows for the three-month periods ended March 31, 2000, and March 31, 1999, 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, 2000, and the results of operations and cash flows for the three-month periods ended March 31, 2000, and March 31, 1999, 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 1999 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. Certain reclassifications have been made to the prior period financial statements to conform to classifications used in the current period. The reclass relates to discontinued operations in prior periods reclassed to continuing operations. 2. INVENTORIES Inventories consist of the following: March 31, December 31, 2000 1999 ---------- ---------- Finished Goods $ 138,230 $ 81,961 Components 553,048 606,275 ---------- ---------- $ 691,278 $ 688,236 ========== ========== 3. STOCK OPTIONS ISSUED Pursuant to a 1991 Stock Option Plan, the Company issued 6,000 stock options to members of the Board of Directors on January 1, 2000, at an exercise price of $3.88 per share, which approximate fair value at the time of grant. 6 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 OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The statements contained herein regarding management's anticipation of the Company's future market position, development of additional products, product introduction and delivery dates, reliability of products, adequate sources of supplies, acquisition of related product lines or companies, and positive responses to new developments, 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, and stability of the regulatory environment. 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, 2000 AND MARCH 31, 1999. Net sales for the three months ended March 31, 2000, decreased 6%, or $122,542, to $2,018,123 from $2,140,665 generated for the first three months of 1999. This decrease was due primarily to a reduction in Soil Sentry/Encompass sales, and to a lesser degree from a decrease in international sales. Cost of goods sold for the three months ended March 31, 2000, was $696,662, a decrease of 9% from the $768,524 incurred for the first three months of 1999. The decrease in cost of goods sold was primarily due to improved manufacturing efficiencies and, to a lesser extent, the costs of goods associated with decreased sales. Operating expenses for the first quarter of 2000 were $1,186,234, a decrease of $305,659 or 20%, as compared to operating expenses of $1,491,893 for the first quarter of 1999. Marketing expenses for the first quarter of 2000 were $450,954, a decrease of 32%, or $211,410, over the same period in 1999. Decreased marketing expenses were due to the sale of the Soil Sentry/Encompass product lines. General and administrative expenses for the first quarter of 2000 were $441,657, an increase of 13%, or $50,122, as compared to the first quarter of 1999, due primarily to legal expenses related to the Soil Sentry/Encompass product lines. Research and development expenses for the first quarter of 2000 were $178,671, a decrease of 40%, or $119,284, compared to the $297,955 of research and development expenses incurred in the first quarter of 1999. The decrease in research and development expenses was primarily due to a reduction in personnel related to the sale of the Soil Sentry/Encompass product lines. 7 Other expenses for the first quarter of 2000 were $35, a decrease from the $5,569 in other expenses incurred for the first quarter of 1999. This decrease was due primarily to a reduction in interest expense that resulted from reduced levels of borrowing by the Company for the first quarter of 2000, as compared to the first quarter of 1999. Interest income for the first quarter of 2000 was $39,928, as compared to no interest income in the first quarter of 1999. This increase was due to interest income from short-term investments. As a result of these changes, income before taxes for the first quarter of 2000 was $175,190, as compared to the loss of $125,321 recorded for the first quarter of 1999. Tax expense for the first quarter of 2000 was $87,595, as compared to no provision in 1999. The unusual relationship between income tax expense and pre-tax net income (loss) is due to non-deductible amortization of Goodwill. The net income for the first quarter 2000 was $87,595, as compared to the net loss of $125,321 achieved for the first quarter of 1999. 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. LIQUIDITY AND CAPITAL RESOURCES: Working capital at March 31, 2000, was $5,305,184, an increase of $212,717, or 4%, from the working capital of $5,092,467 as of December 31, 1999. Working capital increased due to an increase in cash, as well as due to a reduction of accrued expenses, which offset a reduction in receivables. As a result, the Company's current ratio as of March 31, 2000, increased to 5.8 from a current ratio of 5.6 as of December 31, 1999. The Company currently has one line of credit available through a bank, collateralized by accounts receivable, inventory, and property, plant and equipment, which provides for a maximum commitment of $2,000,000 through June 2000. Advances can be made against the line based on qualified levels of receivables and inventory. As of March 31, 2000, nothing had been borrowed under this line of credit. The Company believes that cash generated from ongoing operations and the borrowing arrangements described above 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. 8 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In February 2000, the Company received a demand in the amount of $100,000 from Maxey Energy System for alleged difficulties with Encompass/Soil Sentry software and hardware. This matter was settled for the amount of $27,000 pursuant to a Release and Settlement Agreement dated May 5, 2000. From time to time, the Company is involved in routine litigation that is incidental to its business. The Company is not currently involved in any other legal proceedings, the result of which the Company believes would have a material adverse effect upon the Company. ITEM 5. OTHER INFORMATION a) On February 1, 2000, the company entered into a letter of intent with George G. Hays, its President and Chief Executive Office, Harold D. Schwartz, a member of the Company's Board of Directors, and G. James Hays, the father of George G. Hays, for the acquisition of all of AZI's outstanding shares not owned by them. This transaction was approved by a Special Committee of the Board of Directors, which was formed in August, 1999, and is subject to approval by the Company's shareholders, satisfactory completion of a due diligence investigation by Mr. Hays, receipt of a fairness opinion, and certain other customary conditions. The Company anticipates that a shareholder vote and the closing of the transaction (if approved by the shareholders) will likely occur in the second quarter of 2000. b) The employment agreement between George G. Hays and the Company, effective as of January 1, 1998, was amended by the Board of Directors effective March 18, 1999. Pursuant to the amendment, the term of the employment contract was extended to March 31, 2001. The contract was further modified by granting Mr. Hays his salary for the full term of the contract in the event the Company sells all or substantially all of its assets or if a change in control of the Company occurs. c) The Company currently has a line of credit with Imperial Bank. As of March 31, 1999, the Company was in default under certain financial covenants of its borrowing agreement with the bank. The bank has granted the Company forbearance from compliance with these covenants, subject to certain customary conditions, including one relating to the Company's affirmation of its current compliance with all of the representations and warranties that it made in the original borrowing agreement. Currently there is no outstanding balance on this line of credit. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 2.1 Letter of Intent dated January 1, 2000, between Arizona Instrument Corporation and George G. Hays, Harold D. Schwartz, and G. James Hays. Filed herewith. 3.1 Composite Certificate of Incorporation of Registrant as amended through February 16, 1999. Incorporated by reference from the Form 10-QSB for period ended March 31, 1999, filed on May 17, 1999. 9 3.2 Bylaws of Registrant. Incorporated by reference from the Form 8-A filed June 26, 1996. 10.1 Amendment of employment agreement between George G. Hays and Registrant dated March 18, 1999 (management contract or compensatory plan). Incorporated by reference from the Form 10-QSB for the period ended March 31, 1999, filed on May 17, 1999. 27.0 Financial Data Schedule. Filed herewith. (b) Reports on Form 8-K. On February 8, 2000, the Registrant filed a Form 8-K for a change in accountant from Toback CPAs P.C. to McGladrey & Pullen, LLP, who acquired the attest assets of Toback CPAs P.C. 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 15, 2000 /s/ George G. Hays - ---------------- ---------------------------------------- Date George G. Hays, President and CEO (Authorized officer) May 15, 2000 /s/ Linda J. Shepherd - ---------------- ---------------------------------------- Date Linda J. Shepherd, Controller (Principal Accounting officer) 10 EX-2.1 2 LETTER OF INTENT FROM GEORGE G. HAYS GEORGE G. HAYS 6227 EAST SUNNYSIDE DRIVE SCOTTSDALE, AZ 85254 January 31, 2000 Board of Directors Arizona Instrument Corporation 1912 West 4th Street Tempe, AZ 85281 Gentlemen: The purpose of this letter is to propose a merger/business combination transaction (the "Business Combination") between Arizona Instrument Corporation ("AZI") and a corporation ("NewCo") to be formed and owned by George G. Hays, Harold D. Schwartz, and G. James Hays (the "Proposing Parties"). This letter sets forth certain details of the proposed offer. 1. Consideration. In the Business Combination, all of the common stock of AZI will be acquired by NewCo in exchange for $5.00 per share in cash, based on the approximately 1,363,514 shares of AZI common stock outstanding as of January 31, 2000. 2. Financing for the Transaction. The Proposing Parties have arranged to complete the Business Combination with financing provided primarily by Imperial Bank and the Proposing Parties which will be supplemented with financing from a source of mezzanine funding (all financing sources together referred to as the "Financing Parties"). As fiuther described below, the Financing Parties commitment to provide the financing for the Business Combination is subject to the satisfactory completion of their due diligence investigation. 3. Acquisition Agreement. AZI, NewCo, and the Proposing Parties agree to act in good faith to negotiate and cause the execution of a definitive acquisition agreement (the "Acquisition Agreement") at or before the end of the Due Diligence Period (as defined herein). The Acquisition Agreement will contain representations, warranties, covenants and conditions to be agreed upon by the parties customary for transactions of the type contemplated in accordance with this letter of intent. The Acquisition Agreement shall provide that the Proposing Parties and NewCo shall be entitled to a termination fee not to exceed the lesser of their out-of-pocket expenses or $100,000 in the event that (a) AZI ACCEPTS A proposal that would, if consummated, result in a transaction more favorable to AZI's stockholders from a financial point of view than the transaction contemplated by the Acquisition Agreement, (b) AZI's Board of Directors shall have withdrawn or adversely modified its recommendation of the Acquisition Agreement to the AZI stockholders, or (c) AZI's Board of Directors shall have recommended to the AZI stockholders that they approve a proposal other than the transaction contemplated by the Acquisition Agreement. 4. Contingencies. This offer is subject to (a) the satisfactory completion of a due diligence investigation by the Financing Parties during the due diligence period (the "Due Diligence Period") of thirty days that shall commence on the date AZI accepts this letter of intent, (b) the negotiation and execution of the Acquisition Agreement, (c) the receipt by the Board of Directors of a fairness opinion that the transaction is fair to AZI's stockholders from a financial point of view, and (d) obtaining all third-party consents required to complete the Business Combination including approval by the stockholders and the disinterested members of the Board of Directors (the "Disinterested Directors") of AZI in accordance with the AZI Certificate of Incorporation and Bylaws. 5. Benefits of the Business Combination. The Business Combination will provide benefits to the stakeholders associated with AZI including the following: (a) The Business Combination values the AZI common stock at $5.00 per share, which represents a significant (43%) premium to the last bid price of the AZI common stock of $3.50 on January 27, 2000. (b) The Business Combination will provide valuable liquidity for AZI stockholders. (c) The present business of AZI would not be disrupted because NewCo plans to continue such business in the same location and in substantially the same manner for the foreseeable future. (d) There would be a greater likelihood that AZI's officers and other employees would continue in their present terms for the foreseeable future. (e) The customers and vendors of AZI will benefit from the Business Combination because the relationship they have with AZI will not be disrupted based on the foregoing plans to continue AZI's business in substantially the same manner and retain AZI's personnel. 6. Communications. Without the prior consent of the parties hereto, between the date hereof and the execution date of the Acquisition Agreement, neither AZI, NewCo or the Proposing Parties nor any of the officers, directors, employees, affiliates, stockholders or agents of any of them, shall make any statement or public announcement or any release to trade publications or through the press or otherwise, or make any statement to any competitor, customer or any other third party, with respect to the transaction contemplated hereby; provided, however, that nothing contained herein shall prevent (a) a party from communicating with those employees who will be involved in facilitating the closing of the transaction contemplated hereby, (b) a party from disclosing this transaction to its lenders or advisors and as required by law, or (c) responding to or negotiating with other possible acquiring parties. 7. No Solicitation. AZI agrees that the Disinterested Directors and it shall not, prior to the execution date of the Acquisition Agreement, directly or indirectly, initiate, encourage or solicit the making, submission or announcement of any Acquisition Proposal. As used herein, the term "Acquisition Proposal" means and includes any offer, indication of interest or proposal (other than by NewCo or the Proposing Parties) (a) to acquire thirty percent or more of AZI's assets or (b) relating to a transaction which would upon the consummation thereof result in any person beneficially owning thirty percent or more of the capital stock of AZI, in either case whether by merger, consolidation, share exchange, reorganization or other business combination, purchase of assets, tender or exchange offer or otherwise. 8. Expenses. Each party will be responsible for all of its respective expenses incurred in connection with this transaction. AZI shall be responsible for all of the expenses incurred to file with Securities and Exchange Commission the proxy statement and Schedule 13E-3 required to be filed on behalf of all of the parties in connection with the Business Combination. If AZI violates paragraph 7 hereof, it shall reimburse to NewCo and the Proposing Parties all of the expenses not exceeding $100,000 they have incurred in connection with this transaction from the date hereof through the end of the Due Diligence Period. 9. Termination. Except for paragraphs 6 and 8 hereof, this letter of intent will automatically terminate and be of no further force and effect upon the earliest of (a) execution of a definitive Acquisition Agreement, (b) mutual agreement of all of the parties to terminate this letter of intent, and (c) the end of the Due Diligence Period. Notwithstanding anything in the previous sentence, the termination of this letter agreement shall not affect any rights a party has with respect to the breach of this letter of intent by another party prior to such termination. This letter of intent is intended to be, and shall be construed only as a letter of intent and except for paragraphs 6, 8 and 9 shall not impose any binding obligations on any person. Except as provided in the immediately preceding sentence, it is understood that the rights and obligations of the parties remain to be defined in a definitive Acquisition Agreement into which this letter of intent shall be merged. If you are in agreement with the terms set forth above and desire to proceed with the Business Combination on that basis, please sign this letter of intent in the space provided below and return it to the undersigned. The offer in this letter of intent will expire at 5:00 p.m., Arizona time, on February 10, 2000, unless this letter of intent is signed by AZI on the appropriate line below and returned to the undersigned such that it is received prior to such time. Sincerely, Accepted and Agreed as of Jan. 31, 2000 /s/ George G. Hays Arizona Instrument Corporation George G. Hays on behalf of myself, By /s/ S. Thomas Emerson the other Proposing Parties and NewCo ------------------------------- Director Chairman, The Special Committee EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED 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-31-2000 JAN-01-2000 MAR-31-2000 1 4,158,102 0 1,345,939 190,526 691,278 6,401,470 3,334,810 2,603,874 9,111,004 1,096,286 6,277 0 0 13,911 8,000,807 9,111,004 2,018,123 2,058,051 696,662 1,186,234 1,219 1,184 175,190 87,595 87,595 0 0 0 0 87,595 0.06 0.06
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