-----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, IKB9PRjc04bzFJA2/34GEj0MFII55rlrL3Pq0CiM+0PYENcCU9QBDkFWWlpRvgqq zi1niYboQnaprHKfBObMDg== 0000950147-97-000785.txt : 19971113 0000950147-97-000785.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950147-97-000785 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: 97715730 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 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1997 Commission File Number 0-12575 Arizona Instrument Corporation (Exact name of small business issuer as specified in its charter) Delaware 86-0410138 (State of incorporation) (I.R.S. Employer Identification No.) 4114 East Wood Street, Phoenix, Arizona 85040-1941 (Address of principal executive offices) (Zip code) Issuer's telephone number, including area code: (602) 470-1414 Check whether 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 October 31, 1997, 6,687,391 shares of Common Stock ($0.01 par value) were outstanding. Transitional Small Business Disclosure Format (Check One) YES NO X --- --- II-2 ARIZONA INSTRUMENT CORPORATION TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheets September 30, 1997 and December 31, 1996 II-3 Consolidated Statements of Operations Three and Nine months ended September 30, 1997 and September 30, 1996 II-4 Consolidated Statements of Cash Flows Nine months ended September 30, 1997 and September 30, 1996 II-5 Notes to Consolidated Financial Statements II-6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations II-7 II. OTHER INFORMATION Item 1 Legal Proceedings II-11 Item 3 Defaults upon Senior Securities II-11 Item 6 Exhibits and Reports on Form 8-K II-12 II-3 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1997 1996 ------------- ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 275,345 $ 597,931 Receivables, net 2,541,760 2,917,476 Inventories 2,858,223 2,049,982 Current portion of notes receivable related party 14,765 45,501 Prepaid expenses and other current assets 158,655 550,840 ------------ ------------ TOTAL CURRENT ASSETS 5,848,748 6,161,730 PROPERTY, PLANT AND EQUIPMENT, NET 1,006,877 846,458 GOODWILL, NET 1,726,953 2,209,650 COVENANT NOT TO COMPETE, NET 0 102,084 DEFERRED INCOME TAXES 1,404,599 641,437 OTHER ASSETS 781,247 1,062,805 ------------ ------------ TOTAL ASSETS $ 10,768,424 $ 11,024,164 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Lines of credit $ 1,070,000 $ 0 Accounts payable 793,323 771,679 Current portion of long-term debt and capital leases 312,424 794,268 Other accrued expenses 1,076,019 648,501 ------------ ------------ TOTAL CURRENT LIABILITIES 3,251,766 2,214,448 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 163,407 378,010 SHAREHOLDERS' EQUITY Common stock, .01 par value per share: Authorized, 10,000,000 shares; Issued, 6,614,687 and 6,352,563 shares 67,684 66,777 Preferred stock, $.01 par value per share: Authorized, 1,000,000 shares Additional paid-in capital 9,821,301 9,706,163 Deficit (2,313,283) (1,118,783) ------------ ------------ 7,575,702 8,654,157 Less treasury stock, 86,165 shares at cost (222,451) (222,451) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 7,353,251 8,431,706 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,768,424 $ 11,024,164 ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS II-4 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended, Nine Months Ended, ---------------------------- ---------------------------- 09/30/97 09/30/96 09/30/97 09/30/96 ---------------------------- ---------------------------- NET SALES $ 3,078,738 $ 2,532,028 $ 10,364,559 $ 7,928,112 COST OF GOODS SOLD 1,858,148 1,000,221 5,257,138 3,344,702 ---------------------------- ---------------------------- GROSS PROFIT 1,220,590 1,531,806 5,107,421 4,583,410 ---------------------------- ---------------------------- OPERATING EXPENSES Marketing 995,716 603,004 2,806,071 1,993,025 General and administrative 1,037,252 398,084 1,972,651 1,213,748 Research and development 368,813 176,676 741,497 528,292 Amortization and depreciation 149,586 151,532 454,718 454,595 ---------------------------- ---------------------------- TOTAL OPERATING EXPENSES 2,551,367 1,329,296 5,974,937 4,189,660 ---------------------------- ---------------------------- OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS (1,330,777) 202,511 (867,516) 393,750 ---------------------------- ---------------------------- OTHER REVENUE (EXPENSE) Interest income 0 0 0 0 Interest expense (46,946) (51,140) (98,184) (169,766) Other income 3,770 30,553 8,448 1,061,842 ---------------------------- ---------------------------- TOTAL OTHER REVENUE (EXPENSE) (43,176) (20,587) (89,736) 892,076 ---------------------------- ---------------------------- INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS (1,373,953) 181,923 (957,252) 1,285,826 INCOME TAXES (517,980) 11,000 (427,980) (405,000) ---------------------------- ---------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS (855,973) 170,923 (529,272) 1,690,826 ---------------------------- ---------------------------- LOSS FROM DISCONTINUED OPERATIONS (499,840) (122,098) (665,227) (105,861) ---------------------------- ---------------------------- NET INCOME (LOSS) ($1,355,812) $ 48,825 ($1,194,499) $ 1,584,966 ============================ ============================ INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS ($0.13) $0.02 ($0.08) $0.24 ============================ ============================ INCOME (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS ($0.08) ($0.02) ($0.10) ($0.02) ============================ ============================ NET INCOME (LOSS) PER SHARE ($0.20) $0.01 ($0.18) $0.23 ============================ ============================ WEIGHTED AVERAGE NUMBER OF COMMON SHARES 6,626,542 6,634,679 ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON STOCK EQUIVALENTS 7,008,020 6,967,740 ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS II-5 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended, -------------------------- 9/30/97 9/30/96 -------------------------- OPERATING ACTIVITIES NET INCOME ($1,494,499) $ 1,584,966 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 979,666 598,945 Decrease in accounts receivable 375,716 644,928 Increase in inventory (808,241) (169,047) Decrease in prepaid expenses and other current assets 422,920 11,630 Decrease (Increase) in settlement receivable, net 0 (456,386) Decrease (increase) in other assets 207,039 (49,100) Decrease(Increase) in deferred income tax (463,162) (485,000) Increase (Decrease) in accounts payable and other accrued expenses 449,161 (425,002) -------------------------- NET CASH USED IN OPERATING ACTIVITIES (331,401) 1,255,934 -------------------------- INVESTING ACTIVITIES Proceeds from the sale of assets 0 34,100 Gain on the sale of assets 0 (33,375) Purchases of capital equipment (480,785) (135,955) -------------------------- NET CASH USED IN INVESTING ACTIVITIES (480,785) (135,230) -------------------------- FINANCING ACTIVITIES Net borrowing (payments) under lines of credit 1,070,000 (250,000) Issuance of common stock pursuant to earnout 0 202,585 Issuance of common stock pursuant to stock purchase plan 72,806 28,273 Stock issued pursuant to option exercises 43,240 34,754 Payments of long-term debt and capital leases (696,446) (970,431) -------------------------- NET CASH USED IN FINANCING ACTIVITIES 489,600 (954,819) -------------------------- NET DECREASE IN CASH & CASH EQUIVALENTS (322,586) 165,885 CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 597,931 486,382 -------------------------- CASH & CASH EQUIVALENTS AT END OF PERIOD $ 275,345 $ 652,267 ==========================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS II-6 ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of September 30, 1997, the consolidated statements of operations for the three-month and nine-month periods ended September 30, 1997 and 1996, and the consolidated statements of cash flows for the nine-month periods ended September 30, 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 September 30, 1997 and the results of operations and cash flows for the three-month and nine-month periods ended September 30, 1997 and September 30, 1996 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 1996 Report on Form 10-KSB. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for the entire year. The Financial Accounting Standards Board recently issued SFAS No. 130 on "Reporting Comprehensive Income" and SFAS No. 131 on "Disclosures about Segments of an Enterprise and Related Information." The "Reporting Comprehensive Income" standard is effective for fiscal years beginning after December 15, 1997. This standard changes the reporting of certain items currently reported in the common stock equity section of the balance sheet. The "Disclosure about Segments of an Enterprise and Related Information" standard is also effective for fiscal years beginning after December 15, 1997. This standard requires that public companies report certain information about operating segments in their financial statements. It also establishes related disclosures about products and services, geographic areas, and major customers. The Company is currently evaluating what impact these standards will have on its financial statements. 2. INVENTORIES Inventories consist of the following: September 30, 1997 December 31, 1996 ------------------------------------------- Finished Goods $1,170,200 $ 680,975 Components 1,688,023 1,369,007 ------------------------------------------- $2,858,223 $2,049,982 =========================================== II-7 The following discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's annual report on Form 10KSB for the year ended December 31, 1996. 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 Results of Operations Nine months ended September 30, 1997 and September 30, 1996 For the nine months ended September 30, 1997, the Company had a loss from discontinued operations, net of income tax benefit, of $665,227 which was due primarily to expenses incurred in discontinuing the Company's tank testing business, and to a lesser extent, the loss incurred in operating the tank testing business over the period. The loss from discontinued operations, net of income tax benefit, for the nine months ended September 30, 1997 was an increase of $559,367 from the loss of $105,861, which was incurred by the Company during the same period of 1996. Net sales for the nine months ended September 30, 1997 were $10,364,559, an increase of $2,436,447 or 31% from the $7,928,112 generated for the same period of 1996. This increase was due to higher sales in the Company's Encompass and Computrac product lines which more than offset lower sales in the Company's Jerome product line. Cost of goods sold for the nine months ended September 30, 1997 was $5,257,138, an increase of $1,912,436 or 57% from the $3,344,702 incurred for the same period of 1996. The increase in cost of goods sold was due to the additional costs of goods associated with increased sales, a shift in product mix which included a higher portion of lower margin products, and to expenses associated with a product phase out. As a result, gross profit for the nine months ended September 30, 1997 was $5,107,421 an increase of $524,011 or 11% as compared to the $4,583,410 of gross profit achieved for the same period of 1996. The gross profit margin for the nine months ended September 30, 1997 was 49% as compared to the gross profit margin of 58% for the same period of 1996. Operating expenses for the nine months ended September 30, 1997 were $5,974,937, an increase of $1,785,277 or 43% as compared to operating expenses of $4,189,660 for the same period of 1996. Marketing expenses for the nine months ended September 30, 1997 were $2,806,071, an increase of $813,045 or 41% as compared to marketing expenses of $1,993,025 for the same period in 1996. Increased marketing expenses were due to increased personnel expenses, expenses associated with introduction of a new product, as well as a higher level of activity required to support the Company's domestic and international sales and marketing functions. General and administrative expenses for the nine months ended September 30, 1997 were II-8 $1,972,651, an increase of $758,904 or 63% as compared to $1,213,748 for the same period of 1996. The increase was due primarily to increased bad debt expense, increased personnel related expenses, and the result of a state sales tax audit. Research and development expenses for the nine months ended September 30, 1997 were $741,497, an increase of $213,205 or 40% compared to the $528,292 of research and development expenses incurred in the comparable period of 1996. This increase was due primarily to expenses associated with new product development project. Amortization and depreciation for the nine months ended September 30, 1997 totaled $454,718, which was essentially unchanged as compared to $454,595 for the same period in 1996. As a result of the substantial increase in operating expenses, operating income from continuing operations for the nine months ended September 30, 1997 fell to a loss of $867,516, a decrease of $1,261,266 from the operating income of $393,750 earned by the Company for the same period of 1996. The Company incurred other expenses for the first nine months of 1997 totaling $89,736, a decrease of $981,813 from the $892,076 in other revenue generated by the Company for the same period of 1996. This decrease in other revenue was due primarily to the absence of income from the settlement of litigation which occurred in 1996, but did not recur in 1997. As a result of these changes, income before taxes from continuing operations for the nine months ended September 30, 1997 was a loss of $957,252, a decrease of $2,243,079 from the $1,285,826 in income recorded for the same period of 1996. The provision for income taxes for the nine months ended September 30, 1997 was tax benefit of $427,980 which resulted from applying the Company's tax rate to its pretax loss. The tax benefit increased by $22,980 when compared to the tax benefit of $405,000 booked by the Company for the nine months ended September 30, 1996, when the Company recognized the benefits of its net operating losses from previous years. As a result, the net loss from continuing operations for the nine months ended September 30, 1997 was $529,272, a decrease of $2,220,098 from the $1,690,826 in net income from continuing operations generated for the same period of 1996. As a result, the net loss for the nine months ended September 30, 1997 was $1,194,499, a decrease of $2,779,465 from the net income of $1,584,966 generated by the Company for the same period of 1996. Three months ended September 30, 1997 and September 30, 1996 For the three months ended September 30, 1997, the Company had a loss from discontinued operations, net of income tax benefit, of $499,840 which was due primarily to expenses incurred in discontinuing the Company's tank testing business, and to a lesser extent, the loss incurred in operating the tank testing business over the period. The loss from discontinued operations for the three months ended September 30, 1997 was an increase of $377,742 from the loss of $122,098, which was incurred by the Company during the same period of 1996. Net sales for the three months ended September 30, 1997 were $3,078,738, an increase of II-9 $546,710 or 22% from the $2,532,028 generated for the same period of 1996. This increase was due to higher sales relating to the installation of Company's Encompass systems which more than offset lower sales in the Company's Jerome product line. Cost of goods sold for the three months ended September 30, 1997 was $1,858,148, an increase of $857,927 or 86% from the $1,000,221 incurred for the same period of 1996. The increase in cost of goods sold was due primarily to expenses associated with a product phase out and a shift in product mix which included a higher portion of lower margin products. As a result gross profit for the three months ended September 30, 1997 was $1,220,590 a decrease of $311,216 or 20% as compared to the $1,531,806 of gross profit achieved for the same period of 1996. The gross profit margin for the three months ended September 30, 1997 was 40% as compared to the gross profit margin of 60% for the same period of 1996. Operating expenses for the three months ended September 30, 1997 were $2,551,367, an increase of $1,222,071 or 92% as compared to operating expenses of $1,329,296 for the same period of 1996. Marketing expenses for the three months ended September 30, 1997 were $995,716, an increase of $392,712 or 65% as compared to marketing expenses of $603,004 for the same period in 1996. Increased marketing expenses were due to increased personnel expenses, as well as a higher level of activity required to support the Company's domestic and international sales and marketing functions. General and administrative expenses for the three months ended September 30, 1997 were $1,037,252, an increase of $639,168 or 161% as compared to $398,084 for the same period of 1996. The increase was due primarily to increased bad debt expense, increased personnel related expenses, and the result of a state sales tax audit. Research and development expenses for the three months ended September 30, 1997 were $368,813, an increase of $192,137 or 109% compared to the $176,676 of research and development expenses incurred in the comparable period of 1996. This increase was due primarily to expenses associated with a new product development project. Amortization and depreciation for the three months ended September 30, 1997 totaled $149,586, a decrease of $1,946 or 1% from the $151,532 in amortization and depreciation expensed for the same period in 1996. As a result of the substantial increases in cost of goods sold and operating expenses, operating income from continuing operations for the three months ended September 30, 1997 fell to a loss of $1,330,777, a decrease of $1,533,288 from the operating income of $202,511 earned by the Company for the same period of 1996. The Company incurred other expenses for the three months ended September 30, 1997 totaling $43,176, a increase of $22,589 or 88% from the $20,587 in other expenses incurred by the Company for the same period of 1996. This increase in other expense was due primarily to a decrease in miscellaneous other income in 1997 as compared to 1996. As a result of these changes, income from continuing operations before taxes for the three months ended September 30, 1997 was a loss of $1,373,953, a decrease of $1,555,876 from the $181,923 in income recorded for the same period of 1996. The provision for income taxes for the three months ended September 30, 1997 was tax benefit of $517,980 which resulted from applying the Company's tax rate to its pretax loss. This compares to a tax expense of $11,000 incurred by the II-10 Company for the three months ended September 30, 1996. As a result, the net loss from continuing operations for the three months ended September 30, 1997 was $855,973, a decrease of $1,026,896 from the $170,923 in net income from continuing operations generated for the same period of 1996. As a result, the net loss for the three months ended September 30, 1997 was $1,355,812, a decrease of $1,404,638 from the net income of $48,825 generated by the Company for the same period of 1996. 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 September 30, 1997 was $2,596,982, a decrease of $1,350,300 from the working capital of $3,947,282 as of December 31, 1996. Working capital decreased due to decreases in cash, receivables, and prepaid expenses and increases in lines of credit and other accrued expenses which more than offset an increase in inventory and a decrease in the current portion of long term debt. The Company's current ratio as of September 30, 1997 decreased to 1.8 from a current ratio of 2.8 as of December 31, 1996. The Company currently has two lines of credit available through a bank, collateralized by accounts receivable, inventory, and property, plant and equipment. The amount available which under these facilities was increased in July 1997 by $1,000,000 to an aggregate maximum commitment of $3,500,000 which is available through March 15, 1998. At September 30, 1997, $1,070,000 had been borrowed under these lines of credit. At September 30, 1997, the Company was in default under certain financial covenants of its borrowing agreement with its bank. The bank has granted the Company forbearance from compliance with these covenants until February 15, 1998. There can be no assurance that the Company will be able to comply with its financial covenants by this date or that any future forbearance, if required, will be granted by the Company's bank. 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 II-11 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. This Quarterly Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and the Company intends that such forward-looking statements relate to anticipated fluctuations in quarterly results of operations, sufficiency of funds and adequacy of borrowing arrangements. The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are based on assumptions regarding 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, season variations of spending by customers and the timing of the Company's expenditures in anticipation of future orders. Assumptions relating to the foregoing involve judgements with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements, many of which are beyond the control of the Company, are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking information will be realized. Important factors which may cause actual results to differ materially from those contemplated or implied by such forward-looking statements are discussed in more detail in the Company's Form 10-KSB for the year ended December 31, 1996, and Forms 10-QSB for the quarters ended March 31, 1997 and June 30, 1997, as well as those factors discussed elsewhere herein. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. PART II. OTHER INFORMATION Item 1 Legal Proceedings Information is incorporated by reference from the Company's Report on Form 10-KSB for the year ended December 31, 1996. Item 3 Defaults upon Senior Securities At September 30, 1997, the Company was in default under certain financial covenants of II-12 its borrowing agreement with its bank. The bank has granted the Company forbearance from compliance with these covenants until February 15, 1998. There can be no assurance that the Company will be able to comply with its financial covenants by this date or that any future forbearance, if required, will be granted by the Company's bank. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits See exhibit index following the signature, page, which is incorporated herein by this reference. (b) There were no reports on Form 8-K for the quarter ended September 30, 1997 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 November 9, 1997 /s/ John P. Hudnall - ---------------- ------------------- Date John P. Hudnall, President, CEO (Authorized officer) November 9, 1997 /s/ George G. Hays - ---------------- ------------------ Date George G. Hays, Vice President, CFO (Principal financial officer) EXHIBIT INDEX TO ARIZONA INSTRUMENT CORPORATION FORM 10-QSB QUARTERLY REPORT FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 Exhibit Description - ------- ----------- 27. Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 724904 ARIZONA INSTRUMENT CORPORATION 1 U.S. Dollars 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1 275,345 0 3,109,785 568,024 2,858,223 5,848,749 3,355,977 2,520,247 10,768,424 3,251,766 163,407 67,684 0 0 7,285,567 10,768,424 11,219,191 11,231,059 5,955,372 7,093,204 0 0 104,962 (1,922,479) (427,980) (529,272) (665,227) 0 0 (1,194,499) (.18) (.18)
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