U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
|
ý |
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
|
|
For the quarterly period ended January 31, 2002 |
||
|
|
|
|
OR |
||
|
|
|
|
|
o |
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition prior from to
Commission File No. 021245
Image Systems Corporation
(Exact Name of Small Business Issuer as Specified in its Charter)
|
Minnesota |
|
41-1620497 |
|
(State or Other Jurisdiction |
|
(I.R.S. Employer |
|
of Incorporation or Organization) |
|
Identification No.) |
|
|
|
|
|
6103 Blue Circle Drive, Minnetonka, Minnesota 55343 (Address of Principal Executive Offices) |
||
|
|
||
|
(952) 935-1171 |
||
|
(Issuer’s Telephone Number, Including Area Code) |
||
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 ý No o
As of February 20, 2002, there were 4,452,597 shares of Common Stock, no par value per share, outstanding.
Part 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IMAGE SYSTEMS CORPORATION
|
|
|
January 31, 2002 |
|
April 30, 2001 |
|
||
|
ASSETS |
|
(Unaudited) |
|
(Audited) |
|
||
|
CURRENT ASSETS: |
|
|
|
|
|
||
|
Cash |
|
$ |
77,500 |
|
$ |
63,423 |
|
|
Accounts Receivable, Net |
|
368,959 |
|
799,177 |
|
||
|
Inventory |
|
1,586,083 |
|
1,410,095 |
|
||
|
Prepaid Expenses |
|
32,126 |
|
47,794 |
|
||
|
Total Current Assets |
|
2,064,668 |
|
2,320,489 |
|
||
|
PROPERTY AND EQUIPMENT: |
|
|
|
|
|
||
|
Land |
|
396,043 |
|
396,043 |
|
||
|
Building |
|
1,310,062 |
|
1,310,062 |
|
||
|
Furniture and Fixtures |
|
260,198 |
|
247,522 |
|
||
|
Production Equipment |
|
344,036 |
|
342,032 |
|
||
|
Less Accumulated Depreciation |
|
(682,491 |
) |
(619,932 |
) |
||
|
Net Property and Equipment |
|
1,627,848 |
|
1,675,727 |
|
||
|
OTHER ASSETS |
|
|
|
|
|
||
|
Deferred Income Taxes |
|
200,000 |
|
200,000 |
|
||
|
Total Assets |
|
$ |
3,892,516 |
|
$ |
4,196,216 |
|
|
LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
|
|
|
|
|
||
|
CURRENT LIABILITIES: |
|
|
|
|
|
||
|
Bank Line Of Credit |
|
$ |
— |
|
$ |
318,382 |
|
|
Accounts Payable |
|
412,570 |
|
394,531 |
|
||
|
Accrued Liabilities |
|
371,192 |
|
346,084 |
|
||
|
Total Current Liabilities |
|
783,762 |
|
1,058,997 |
|
||
|
STOCKHOLDERS’ INVESTMENT: |
|
|
|
|
|
||
|
Undesignated Stock, 5,000,000 Shares Authorized; No Shares Issued or Outstanding |
|
— |
|
— |
|
||
|
Common Stock, No Par Value, 5,000,000 Shares Authorized; 4,452,597 Issued and Outstanding |
|
1,104,289 |
|
1,104,289 |
|
||
|
Retained Earnings |
|
2,004,465 |
|
2,032,930 |
|
||
|
Total Stockholders’ Investment |
|
3,108,754 |
|
3,137,219 |
|
||
|
Total Liabilities and Stockholders’ Investment |
|
$ |
3,892,516 |
|
$ |
4,196,216 |
|
See Accompanying Notes To Financial Statements
2
IMAGE SYSTEMS CORPORATION
(Unaudited)
|
|
|
For The Third Quarter Ended |
For The Nine Months Ended |
||||||||||
|
|
|
January 31, 2002 |
|
January 31, 2001 |
|
January 31, 2002 |
|
January 31, 2001 |
|
||||
|
NET SALES |
|
$ |
1,285,276 |
|
$ |
1,132,454 |
|
$ |
3,436,201 |
|
$ |
3,704,813 |
|
|
COST OF PRODUCTS SOLD |
|
847,548 |
|
925,118 |
|
2,424,221 |
|
3,004,861 |
|
||||
|
Gross Profit |
|
437,728 |
|
207,336 |
|
1,011,980 |
|
699,952 |
|
||||
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
||||
|
Product Development |
|
138,733 |
|
148,798 |
|
361,487 |
|
438,679 |
|
||||
|
Selling |
|
146,893 |
|
156,634 |
|
385,741 |
|
504,796 |
|
||||
|
Administrative |
|
109,592 |
|
97,854 |
|
279,717 |
|
317,797 |
|
||||
|
Total Operating Expenses |
|
395,218 |
|
403,286 |
|
1,026,945 |
|
1,261,272 |
|
||||
|
Operating Income (Loss) |
|
42,510 |
|
(195,950 |
) |
(14,965 |
) |
(561,320 |
) |
||||
|
INTEREST INCOME |
|
— |
|
1,325 |
|
16 |
|
11,418 |
|
||||
|
INTEREST EXPENSE |
|
(735 |
) |
(5,291 |
) |
(12,516 |
) |
(21,105 |
) |
||||
|
Net Income (Loss) Before Income Taxes |
|
41,775 |
|
(199,916 |
) |
(27,465 |
) |
(571,007 |
) |
||||
|
BENEFIT FROM (PROVISION FOR) INCOME TAXES |
|
0 |
|
49,979 |
|
(1,000 |
) |
142,752 |
|
||||
|
NET INCOME(LOSS) |
|
$ |
41,775 |
|
$ |
(149,937 |
) |
$ |
(28,465 |
) |
$ |
(428,255 |
) |
|
NET INCOME(LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
0.01 |
|
$ |
(0.03 |
) |
$ |
(0.01 |
) |
$ |
(0.10 |
) |
|
Diluted |
|
$ |
0.01 |
|
$ |
(0.03 |
) |
$ |
(0.01 |
) |
$ |
(0.10 |
) |
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
||||
|
Diluted |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
||||
See Accompanying Notes To Financial Statements
3
IMAGE SYSTEMS CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
For the Nine Months Ended |
|||||
|
|
|
January 31, 2002 |
|
January 31, 2001 |
|
||
|
OPERATING ACTIVITIES: |
|
|
|
|
|
||
|
Net (Loss) |
|
$ |
(28,465 |
) |
$ |
(428,255 |
) |
|
Adjustments to Reconcile Net (Loss) To Net Cash Provided by (Used for) Operating Activities: |
|
|
|
|
|
||
|
Depreciation |
|
62,558 |
|
68,606 |
|
||
|
Change in Operating Items: |
|
|
|
|
|
||
|
Accounts Receivable |
|
430,218 |
|
46,915 |
|
||
|
Inventory |
|
(175,988 |
) |
107,547 |
|
||
|
Prepaid Expenses |
|
15,668 |
|
2,477 |
|
||
|
Accounts Payable |
|
18,039 |
|
(109,622 |
) |
||
|
Accrued Liabilities |
|
25,108 |
|
(6,242 |
) |
||
|
Deferred Income Taxes |
|
— |
|
(36,446 |
) |
||
|
Income Tax Receivable |
|
— |
|
65,657 |
|
||
|
Net Cash Provided by (Used for) Operating Activities |
|
347,138 |
|
(289,363 |
) |
||
|
|
|
|
|
|
|
||
|
INVESTING ACTIVITIES |
|
|
|
|
|
||
|
Furniture and Equipment Additions |
|
(14,679 |
) |
(1,501 |
) |
||
|
|
|
|
|
|
|
||
|
FINANCING ACTIVITIES: |
|
|
|
|
|
||
|
Checks Written in Excess of Cash |
|
— |
|
19,194 |
|
||
|
Net Payment on Line of Credit |
|
(318,382 |
) |
(76,704 |
) |
||
|
Repayments to Bank Real Estate Loan |
|
— |
|
(68,103 |
) |
||
|
Net Cash (Used for) Financing Activities |
|
(318,382 |
) |
(125,613 |
) |
||
|
Net Increase (Decrease) in Cash |
|
14,077 |
|
(416,477 |
) |
||
|
CASH AT BEGINNING OF PERIOD |
|
63,423 |
|
416,477 |
|
||
|
CASH AT END OF PERIOD |
|
$ |
77,500 |
|
$ |
0 |
|
|
SUPPLEMENTAL DISCLOSURES |
|
|
|
|
|
||
|
Interest Paid |
|
$ |
14,441 |
|
$ |
21,834 |
|
|
Taxes Paid |
|
$ |
1,000 |
|
$ |
0 |
|
|
Non-Cash Refinancing of Real Estate Loan |
|
$ |
0 |
|
$ |
285,086 |
|
See Accompanying Notes To Financial Statements
4
Item 1. FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
January 31, 2002 and January 31, 2001
(Unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES:
The unaudited interim financial statements furnished herein reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The operating results for the nine months ended January 31, 2002 are not necessarily indicative of the operating results to be expected for the full fiscal year. These statements should be read in conjunction with the Company’s most recent audited financial statements dated April 30, 2001.
2. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options using the treasury stock method. The denominator is not affected if there is a loss during the period. The components of the earnings per share denominator are as follows:
|
|
|
For The Third Quarter Ending |
For The Nine Months Ending |
||||||
|
|
|
January 31, 2002 |
|
January 31, 2001 |
|
January 31, 2002 |
|
January 31, 2001 |
|
|
Weighted Average Common Shares Outstanding for Basic Earnings Per Share |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
|
Weighted Average Common Shares Issuable Under the Exercise of Options |
|
— |
|
— |
|
— |
|
— |
|
|
Shares Used in Diluted Earnings Per Share |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
4,452,597 |
|
3. INVENTORY
Breakdown of inventory is as follows:
|
|
|
January 31, 2002 |
|
April 30, 2001 |
|
||
|
|
|
(Unaudited) |
|
(Audited) |
|
||
|
Finished Goods |
|
$ |
230,007 |
|
$ |
106,862 |
|
|
Work in Process |
|
96,221 |
|
53,974 |
|
||
|
Components |
|
1,259,855 |
|
1,249,259 |
|
||
|
Total Inventory |
|
$ |
1,586,083 |
|
$ |
1,410,095 |
|
5
4. CONTINGENCIES
The Company is a party to ongoing legal and tax proceedings arising in the ordinary course of business. The Company has been in contact with it’s bank since January 22, 2002 in regards to a customer’s forged check. Although the total loss could be nearly $50,000, management’s opinion is the loss will be substantially less and will not have a material adverse effect on the Company’s financial position or result of operations.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSUIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained herein are forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 that involve a number of risks and uncertainties. Such forward-looking information may be indicated by words such as will, may be, expects or anticipates. In addition to the factors discussed herein, among the other factors that could cause actual results to differ materially are the following: business conditions and growth in the personal computer industry and the general economy; competitive factors such as rival computer and peripheral product sellers and price pressures; availability of vendor products at reasonable prices; inventory risks due to shifts in market demand; and risks presented from time to time in reports filed by the Company with the Securities and Exchange Commission, including but not limited to the annual report on Form 10KSB for the year ended April 30, 2001.
The Company was formed on September 1, 1988 to design, assemble and market high resolution monitors for use with computers.
Net sales for the three months ended January 31, 2002 increased 13.5% or $152,822 compared to the three months ended January 31, 2001. The primary reason for the increase is selling more monitors at higher prices.
Gross profit percentage increased from 18.3% for the three months ended January 31, 2001 to 34.1% for the three months ended January 31, 2002. The increase is due to sales of higher margin monitors and a reduction in production expenses.
For the three months ended January 31, 2002 development and research expenses decreased $10,065 or 6.8% compared to the three months ended January 31, 2001. The primary reasons for the decrease are decreased personnel expenses.
Selling expenses decreased from $156,634 for the three months ended January 31, 2001 to $146,893 for the three months ended January 31, 2002. The decrease of $9,741 or 6.2% is due to a reduction of sales personnel .
Administrative expenses increased from $97,854 for the three months ended January 31, 2001 to $109,592 for the three months ended January 31, 2002.The primary reason for the $11,738 increase is consulting expenses during the last week of January 2002.
6
Interest income decreased from $1,325 for the three months ended January 31, 2001 to $0 for the three months ended January 31, 2002. Excess cash was depleted during December 2000 and the result is minimal interest has been earned since December 2000.
Interest expense decreased $4,556 or 86.1% for the three months ended January 31, 2002 compared to the three months ended January 31, 2001. The decrease in the real estate bank loan and the bank line of credit are the primary reasons for the decrease.
The benefit from income taxes decreased from $49,979 for the three months ended January 31, 2001 to no provision for income taxes for the three months ended January 31, 2002. No additional benefits from income taxes will be recorded until the Company determines that the recoverability of additional tax benefits is more likely than not.
Net sales decreased $268,612 or 7.3% for the nine months ended January 31, 2002 compared to the nine months ended January 31, 2001. The decrease is due to selling a lesser quantity of monitors.
Gross profit increased $312,028 for the nine months ended January 31, 2002 compared to the nine months ended January 31, 2001. The gross profit percentage also increased from 18.9% to 29.5%. The increase is due to selling higher margin monitors and reduced production expenses.
For the nine months ended January 31, 2002 product research and development expenses decreased $77,192 or 17.6% compared to the nine months ended January 31, 2001. Decreased use of inventory and decreased personnel expenses are the primary reasons for the decrease.
Selling expenses decreased $119,055 or 23.6% for the nine months ended January 31, 2002 compared to the nine months ended January 31, 2001. The primary reasons for the decreases are lower personnel, tradeshow, travel, and marketing expenses.
Administrative expenses decreased from $317,797 for the nine months ended January 31, 2001 to $279,717 for the nine months ended January 31, 2002. A reduction of personnel expense is the primary reason for the 12.0% decrease.
Interest income decreased from $11,418 for the nine months ended January 31, 2001 to $16 for the nine months ended January 31, 2002. Excess cash was depleted during December 2000 and the result is minimal interest has been earned since December 2000.
Interest expense decreased from $21,105 for the nine months ended January 31, 2001 to $12,516 for the nine months ended January 31, 2002. The decrease is due to the decline in the real estate bank loan and the bank line of credit.
The benefit from income taxes decreased from $142,752 for the nine months ended January 31, 2002 to a $1,000 provision for state income taxes for the nine months ended January 31, 2002. No additional benefit from income taxes will be recorded until the company determines that recoverability of additional tax benefits is more likely than not.
7
Cash provided by operations totaled $347,138 for the nine months ended January 31, 2002 compared to $289,363 used for operations for the nine months ended January 31, 2001. The increase of $636,501 is due primarily to the increased cash flow from accounts receivable, accounts payable and reduced net loss amount offset by cash used to fund inventory.
Cash used for investing activities totaled $14,679 for the nine months ended January 31, 2002 compared to $1,501 used for the nine months ended January 31, 2001.
Cash used for financing activities totaled $318,382 for the nine months ended January 31, 2002 compared to $125,613 used for financing activities for the nine months ended January 31, 2001. Additional funds provided by operating activities were used for reducing the Company’s bank line of credit.
The Company’s primary source of liquidity on January 31, 2002 is the bank line of credit of $1,000,000. The bank line of credit for $500,000 expired on October 29, 2000. The Company obtained a bank revolving line of credit of $1,000,000 effective December 1, 2000 for two years. The Company used the revolving line of credit to pay off the real estate loan of $285,086. The revolving line of credit balance on January 31, 2002 is $0. The Company believes that cash available from the revolving line of credit is adequate to meet the anticipated short term liquidity and capital resource requirements of its business.
8
Part. 2.
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K filed on December 7, 2001 for change in Board positions and membership.
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
Image Systems Corporation |
|
|
|
Registrant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ David Sorensen |
|
|
David Sorensen, President |
|
|
|
and Chief Financial Officer |
|
|
|
(Principal Executive Officer and |
|
|
|
Principal Financial Officer) |
|
|
Dated March 8, 2002 |
|
|
9