U. S.
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended July 31,2002 |
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OR |
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition prior from to
Commission File No. 021245
Image Systems Corporation
(Exact Name of
Small Business Issuer as Specified in its Charter)
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Minnesota |
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41-1620497 |
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(State or Other Jurisdiction |
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(I.R.S. Employer |
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of Incorporation or Organization) |
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Identification No.) |
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6103 Blue Circle Drive, Minnetonka, Minnesota 55343 |
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(Address of Principal Executive Offices) |
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(952) 935-1171 |
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(Issuer’s Telephone Number, Including Area Code) |
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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 July 15, 2002 there were 4,452,597 shares of Common Stock, no par value per share, outstanding.
1
Part 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IMAGE SYSTEMS CORPORATION
BALANCE SHEETS
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July 31, 2002 |
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April 30,2002 |
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(Unaudited) |
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(Audited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash |
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$ |
4,856 |
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$ |
44,876 |
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Accounts Receivable, Net |
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259,432 |
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460,337 |
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Inventory |
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1,408,619 |
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1,496,101 |
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Prepaid Expenses |
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42,261 |
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18,049 |
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Income Tax Receivable |
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274,000 |
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274,000 |
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Total Current Assets |
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1,989,168 |
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2,293,363 |
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PROPERTY AND EQUIPMENT |
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Land |
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396,043 |
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396,043 |
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Building |
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1,310,062 |
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1,310,062 |
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Furniture and Fixtures |
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263,567 |
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260,198 |
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Production Equipment |
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344,036 |
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344,036 |
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Less Accumulated Depreciation |
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(719,620 |
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(703,470 |
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Net Property and equipment |
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1,594,088 |
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1,606,869 |
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Total Assets |
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$ |
3,583,256 |
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$ |
3,900,232 |
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LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
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CURRENT LIABILITIES |
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Note Payable-Bank |
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$ |
280,000 |
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$ |
280,000 |
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Accounts Payable |
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156,908 |
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229,406 |
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Accrued Liabilities |
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319,711 |
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355,264 |
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Total Current Liabilities |
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756,619 |
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864,670 |
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STOCKHOLDERS’ INVESTMENT: |
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Undesignated Stock, 5,000,000 shares |
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Authorized: No shares issued or outstanding |
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Common Stock, No Par Value, 5,000,000 shares |
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1,104,289 |
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1,104,289 |
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Retained Earnings |
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1,722,348 |
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1,931,273 |
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Total Stockholders’ Investment |
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2,826,637 |
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3,035,562 |
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Total Liabilities and Stockholders’ Investment |
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$ |
3,583,256 |
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$ |
3,900,232 |
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See Accompanying Notes To Financial Statements
2
IMAGE SYSTEMS CORPORATION
(Unaudited)
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For the Three Months Ended |
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July 31,2002 |
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July 31,2001 |
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NET SALES |
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$ |
638,202 |
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$ |
1,015,826 |
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COST OF PRODUCTS SOLD |
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493,213 |
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731,849 |
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Gross Profit |
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144,989 |
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283,977 |
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OPERATING EXPENSES |
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Product development |
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122,705 |
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123,538 |
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Selling |
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111,265 |
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121,947 |
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Administrative |
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115,730 |
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97,925 |
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Total Operating Expenses |
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349,700 |
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343,410 |
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Operating(Loss) |
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(204,711 |
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(59,433 |
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INTEREST INCOME |
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0 |
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10 |
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INTEREST EXPENSE |
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(4,214 |
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(5,571 |
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Net(Loss) Before Income Taxes |
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(208,925 |
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(64,994 |
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(PROVISION FOR) INCOME TAXES |
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0 |
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(1,000 |
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NET(LOSS) |
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$ |
(208,925 |
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$ |
(65,994 |
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NET(LOSS)PER SHARES |
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Basic |
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$ |
(0.05 |
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$ |
(0.01 |
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Diluted |
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$ |
(0.05 |
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(0.01 |
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WEIGHTED AVERAGE COMMON SHARES |
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OUTSTANDING: |
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Basic |
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4,452,597 |
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4,452,597 |
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Diluted |
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4,452,597 |
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4,452,597 |
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3
IMAGE SYSTEMS CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
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For the Three Months Ended |
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July 31, 2002 |
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July 31, 2001 |
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OPERATING ACTIVITIES |
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Net (Loss) |
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$ |
(208,925 |
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(65,994 |
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Adjustments to Reconcile Net (Loss) to Net Cash |
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(Used) by Operating Activities: |
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Depreciation |
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16,152 |
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20,629 |
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Change in Operating Items: |
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Accounts Receivable |
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200,905 |
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131,590 |
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Inventory |
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87,482 |
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(153,202 |
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Prepaid Expenses |
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(24,212 |
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17,829 |
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Accounts Payable |
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(72,498 |
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(96,956 |
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Accrued Liabilities |
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(33,046 |
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(22,263 |
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Deferred Income |
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(2,507 |
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7,280 |
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Net Cash Used by Operating Activities |
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$ |
(36,649 |
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$ |
(161,087 |
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INVESTING ACTIVITIES: |
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Furniture and Equipment Additions |
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$ |
(3,371 |
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$ |
(2,004 |
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FINANCING ACTIVITIES |
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Borrowed from Line of Credit |
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470,000 |
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790,000 |
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Repayment to Line of credit |
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(470,000 |
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(685,000 |
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Net Cash Provided by Financing Activities |
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— |
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105,000 |
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Net Decrease in Cash |
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(40,020 |
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(58,091 |
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CASH AT BEGINNING OF PERIOD |
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44,876 |
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63,423 |
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CASH AT END OF PERIOD |
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$ |
4,856 |
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$ |
5,332 |
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SUPPLEMENTAL DISCLOSURES |
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Interest Paid |
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$ |
3,844 |
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$ |
4,757 |
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Taxes Paid |
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$ |
— |
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$ |
1,000 |
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See Accompanying Notes to Financial Statements
4
Item 1. FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
July 31, 2002 and July 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 three months ended July 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, 2002
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:
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For the First Quarter Ending |
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July 31, 2002 |
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July 31,2001 |
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Weighted Average Common Shares Outstanding for Basic Earnings Per Share |
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4,452,597 |
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4,452,597 |
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Weighted Average Common Shares Issuable Under the Exercise of Options |
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— |
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Shares Used in Diluted Earnings Per Share |
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4,452,597 |
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4,452,597 |
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3. INVENTORY
Breakdown of inventory is as follows:
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July 31, 2002 |
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April 30, 2002 |
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(Unaudited) |
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(Audited) |
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Finished Goods |
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$ |
285,483 |
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$ |
370,311 |
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Work in Process |
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45,574 |
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18,715 |
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Components |
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1,235,562 |
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1,293,075 |
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Inventory Reserve |
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(158,000 |
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(186,000 |
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Total Inventory |
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$ |
1,408,619 |
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$ |
1,496,101 |
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5
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, 2002.
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 July 31, 2002 decreased $377,624 or 37.2% compared to the three months ended July 31, 2001. The primary reason for the decrease is selling lesser quantity of monitors.
Gross profit decreased from $283,977 for the three months ended July 31, 2001 to $144,989 for the three months ended July 31, 2002. The decrease is due to the fixed effect of overhead expenses and less effective production levels.
For the three months ended July 31, 2002 development and research expenses decreased a modest $833 compared to the three months ended July 31, 2001. The primary reason for the decrease is decreased personnel expenses.
Selling expenses decreased from $121,947 for the three months ended July 31, 2001 to $111,265 for the three months ended July 31, 2002. The decrease of $10,682 or 8.8% is due to a reduction of personnel expenses.
Administrative expenses increased from $97,925 for the three months ended July 31, 2001 to $115,730 for the three months ended July 31, 2002. An increase of personnel and professional fee expenses are the primary reasons for the $17,805 or 18.2% increase
Interest expense decreased $1,357 or 24.4% for the three months ended July 31, 2002 compared to the three months ended July 31, 2001. The decrease in the usage of the bank line of credit is the primary reason for the decrease.
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The provision for income taxes decreased from $1,000 for the three months ended July 31, 2001 to no provision for income taxes for the three months ended July 31, 2002. No benefits from income taxes will be recorded until the Company determines that the recoverability of additional tax benefits is more likely than not.
Cash used by operations totaled $36,649 for the three months ended July 31, 2002 compared to $161,087 used for operations for the three months ended July 31, 2001. The decrease of $124,438 in cash used is due primarily to increased cash flow from accounts receivable and inventory offset by decreased cash flow from net loss.
Cash used for investing activities totaled $3,371 for the three months ended July 31, 2002 compared to $2,004 used for the three months ended July 31, 2001.
Cash used for financing activities totaled $105,000 for the three months ended July 31, 2001 compared to zero dollars for the three months ended July 31, 2002. Additional funds provided by operations reduced the need to use the Company’s bank line of credit.
The Company’s primary source of liquidity on July 31, 2002 is the bank line of credit of $1,000,000. The Company obtained a bank revolving line of credit of $1,000.000 effective December 1, 2000 for two years. The revolving line of credit balance on July 31, 2002 is $280,000. 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.
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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
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By: |
/s/ David Sorensen |
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David Sorensen, President |
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and Chief Financial Officer |
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(Principal Executive Officer and |
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Principal Financial Officer) |
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Dated September 11, 2002
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Pursuant to section 906 of the Sarbanes-Oxley act of 2002, each of the undersigned certifies that this periodic report fully complies with the requirements of section 13(a) or 15(d) of the Security Exchange Act of 1934 and that information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of Image Systems Corporation.
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Image Systems Corporation |
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Date : September 11, 2002 |
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/s/ David Sorensen |
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David Sorensen, President |
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And Chief Financial Officer |
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(Principal Executive Officer and |
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Principal Officer) |
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9