SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
Commission file number 0-15858
IMP, Inc.
----------
(Exact name of registrant as specified in its charter)
Delaware 94-2722142
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2830 North First Street, San Jose, CA 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 432-9100
-----------------------------------------------------------------
(Former name, former address and former fiscal year if
changed since last report)
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 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.05 par value outstanding at September 30, 2001: 1,809,000
IMP, Inc.
FORM 10-Q
Three Months and Six Months Ended September 30, 2001
INDEX
PAGE
Part I: Financial Information (unaudited)
Condensed Balance Sheets as of September 30, 2001 and March 31, 2001 3
Condensed Statements of Operations for the three months and
six months ended September 30, 2001 and September 24, 2000 4
Condensed Statements of Cash Flows for the six months ended
September 30, 2001 and September 24, 2000 5
Notes to condensed
financial statements 6
Management's discussion and analysis of
financial condition and results of operations 10
Part II: Other Information
Item 1. Legal Proceedings 18
Item 3. Defaults by the Company on its Senior Securities 18
Item 6. Reports on Form 8-K 18
Signatures 18
2
IMP, Inc.
CONDENSED BALANCE SHEETS
(In thousands)
(unaudited)
ASSETS
SEPTEMBER 30, MARCH 31,
2001 2001
------------ --------
Current assets:
Cash and cash equivalents
36 41
Accounts receivable, net of allowances for
doubtful accounts and returns of $302
and $2,290, respectively 4,310 2,095
Accounts receivable from related party 422 720
Inventories 7,163 7,462
Other current assets 1,415 1,445
---------- ----------
Total current assets 13,346 11,764
Property and equipment:
Leasehold improvements 9,073 9,073
Machinery and equipment 85,973 86,341
---------- ----------
95,046 95,414
Less accumulated depreciation and
amortization 89,766 88,897
---------- ----------
Net property and equipment 5,280 6,517
Deposits and other long term assets 490 544
---------- ----------
Total assets $ 19,116 $ 18,825
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of debt $ 964 $ 3,925
Convertible debentures, net of discount of $993 at September 30, 2001 2,507 -
Current portion of capital lease obligations 1,814 1,593
Trade accounts payable 4,974 7,183
Accrued payroll and related expenses 709 1,325
Other current liabilities 2,783 3,454
---------- ----------
Total current liabilities 13,752 17,480
Long term portion of capital lease obligations 273 760
Convertible debentures - 3,500
---------- ----------
Total Liabilities 14,024 21,740
---------- ----------
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value;
1,000 shares authorized; no shares issued and
outstanding - -
Common stock, $0.05 par value; 10,000 shares authorized; 1,809
shares issued and outstanding 90 90
Additional paid-in capital 80,399 78,764
Obligation to issue common stock 6,040 40
Receivable from investors (60) -
Accumulated deficit (77,480) (77,912)
Treasury stock, at cost, 41 shares (3,897) (3,897)
---------- ----------
Total stockholders' equity (deficit) 5,092 (2,915)
---------- ----------
Total liabilities and stockholders' equity (deficit) $ 19,116 $ 18,825
========== ==========
See accompanying notes to unaudited condensed financial statements
3
IMP, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ --------------------------------
SEPTEMBER 30, SEPTEMBER 24, SEPTEMBER 30, SEPTEMBER 24,
------------- ------------- ------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
Net revenues:
Component $ 6,678 $ 7,866 $ 14,060 $ 15,325
Design and engineering services 86 183 86 721
--------- --------- --------- ---------
6,764 8,049 14,146 16,046
Cost of revenues
Component $ 4,029 $ 7,937 $ 7954 $ 15,266
Design and engineering services 56 123 56 360
--------- --------- --------- ---------
4,085 8,060 8,010 15,626
Gross profit (loss) 2,679 (11) 6,136 420
Operating expenses:
Research and development 556 989 1,144 1,963
Selling, general and administrative 1,631 1,361 3,651 2,356
--------- --------- --------- ---------
Total operating expenses 2,187 2,350 4,795 4,319
Income (loss) from operations 492 (2,361) 1,341 (3,899)
Interest expense (211) (190) (406) (291)
Amortization of debt discount (412) - (640) -
Other income, net 137 - 137 -
--------- --------- --------- ---------
Net income (loss) $ 6 $ (2,551) $ 432 $ (4,190)
========= ========= ========= ==========
Basic net income (loss) per share $ 0.00 $ (1.44) $ 0.11 $ (3.12)
========= ========= ========= =========
Diluted net income (loss) per share $ 0.00 $ (1.44) $ 0.10 $ (3.12)
========= ========= ========= =========
Shares used in computing basic
net income (loss) per share 6,230 1,768 4,039 1,341
========= ========= ========= =========
Shares used in diluted
net income (loss) per share 6,406 1,768 4,216 1,341
========= ========= ========= =========
See accompanying notes to unaudited condensed financial statements.
4
IMP, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
SIX MONTHS ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 24,
2001 2000
------------- -------------
Cash flows from operating activities:
Net income (loss) $ 432 $ (4,190)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 1,301 1,373
Amortization of debt discount 640 -
Provision for doubtful accounts 1,074 67
Gain on disposal of property and equipment (80) -
Changes in operating assets and liabilities:
Accounts receivable (3,289) 364
Accounts receivable from related party 298 (388)
Inventories 299 (759)
Other current assets 30 (384)
Deposits and other long term assets 34 30
Trade accounts payable (1,875) 791
Accrued payroll and related expenses (616) 121
Other current liabilities (671) 1,927
---------- --------
Net cash used in operating activities (2,423) (1,048)
---------- --------
Cash flows from investing activities:
Net cash used for investing activities
for purchases of property and equipment (295) (1,643)
---------- --------
Cash flows from financing activities:
Net proceeds from debt 1,074 943
Net repayments of short-term advance from related parties (1,363) (1,352)
Net repayments of revolving credit facility (2,672)
Principal payments under capital lease obligations (266) (975)
Advance proceeds for future issuance of common stock 5,940 -
Proceeds from issuance of common stock - 3,861
--------- --------
Net cash provided by financing activities 2,713 2,477
--------- --------
Net decrease in cash and cash equivalents (5) (214)
Cash and cash equivalents at beginning of period 41 261
--------- --------
Cash and cash equivalents at end of period $ 36 $ 47
========= ========
Supplemental information:
Cash paid during the period for interest $ - $ 291
========= ========
Acquisition of equipment under capital lease obligations $ - $ 1,150
========= ========
Receivable from investors $ 60 $ -
========= ========
Discount on convertible debentures $ 1,633 $ -
========= ========
Return of equipment and reduction of accounts payable $ 253 $ -
========= ========
See accompanying notes to unaudited condensed financial statements.
5
IMP, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
IMP, Inc. (the "Company") has prepared the accompanying unaudited interim
condensed financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments (consisting of normal recurring items) considered
necessary for a fair presentation have been included. The results of operations
for the three months and six months ended September 30, 2001 are not necessarily
indicative of the results to be expected for the entire year. These financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 2001.
Teamasia Semiconductors (India) Ltd, ("Teamasia"), a private corporation
headquartered in India, owns 51% of the common stock of the Company on a fully
diluted basis. Upon issuance of shares of common stock to a new investor group
(see below), Teamasia will own 14% of the common stock of the Company on a fully
diluted basis.
In 2001, the Company changed its year-end to March 31. Prior to the year ended
March 31, 2001, the Company's fiscal year ended on the Sunday nearest to March
31.
On October 2, 2001, the Company completed a five for one reverse stock split.
All shares, options, warrants and per share amounts in the condensed financial
statements have been retroactively adjusted to reflect this stock split.
The accompanying condensed financial statements have been prepared assuming that
the Company will continue as a going concern. The Company incurred net losses of
$10.5 million for the year ended March 31, 2001. For the six months ended
September 30, 2001, the Company generated net income of $432,000, however the
current economic slowdown, the downturn in the semiconductor sector and the
Company's liquidity problems cause significant uncertainty over the Company's
ability to continue to operate profitably. In addition, the Company has an
accumulated deficit of $77.5 million as of September 30, 2001. The Company has
failed to make required payments under various debt agreements and capital lease
obligations. As a result the Company is in default with respect to these
agreements.
During the fiscal year ended March 31, 2001 and the six months ended September
30, 2001, management actively negotiated with the Company's creditors. As a
result of these negotiations, the Company was able to bring current, refinance
or pay off certain of its debt and lease obligations using cash from sales of
stock and convertible debentures. As of September 30, 2001, the Company remained
in default on all capital lease obligations.
The indebtedness related to agreements in which the Company was in default was
classified as current on the Company's balance sheet as of March 31, 2001
because such creditors and lessors had the right to effectively declare the
principal amount of the Company's indebtedness to be immediately due and payable
(or to exercise an equivalent remedy with respect to a capitalized lease). As of
September 30, 2001, the Company has paid off some of the indebtedness related to
these agreements, but remained in default on the capital lease obligations.
On May 10, 2001, the Company entered into a Memorandum of Understanding ("MOU")
with Teamasia and an investor group led by the Chairman of the Company's Board
of Directors ("Investor Group") to purchase 72% of the equity of the Company.
The general terms of the MOU are as follows:
o the due date of the $3.5 million convertible debenture held by
Teamasia was extended to no earlier than May 2002;
o the Company agreed to issue a warrant to Teamasia to purchase 319,800
shares of common stock at an exercise price of $1.10;
o the interest rate on the convertible debenture was raised from 0% to
prime;
6
o the Company agreed to sell to the Investor Group shares of common
stock representing 72% of the Company's fully diluted equity for $6.0
million. As of September 30, 2001, $5.980 million had been received by
the Company. The remaining portion of the purchase price was received
in October 2001.
Certain events have occurred which may have an impact on the Company's ability
to continue as a going concern, including:
In June 2001, International Rectifier Corporation (IR) notified the Company
that it would be canceling future orders. The final shipments of product
under open purchase orders to IR occurred in August 2001. Revenues for the
three months ended September 30, 2001 and six months ended September 30,
2001 totaled $1.1 million and $3.0 million, respectively. In future
periods, although IR is expected to remain as a customer, the Company
expects significantly lower revenue from this customer. The impact of this
cancellation could have a significant negative impact on the results of
operations of the Company.
On July 10, 2001, CIT gave notice of termination and acceleration and
demand for repayment for both the revolving credit facility and the term
loan. This cancellation results from defaults under both the CIT agreement
and related forbearance letters. CIT declared all obligations due and
payable as of July 11, 2001. All amounts due to CIT were repaid on August
13, 2001. No new financing has been secured.
On July 26, 2001, the Company attended a hearing before a Nasdaq Listing
Qualifications Panel concerning the Company's failure to comply with
certain requirements for continued listing on The Nasdaq SmallCap Market.
Nasdaq has determined the Company's securities will continue to be listed
as long as certain conditions are met. The conditions require that
stockholders equity, as reported in the Company's Quarterly Reports on Form
10-Q for the quarters ended September 30, 2001 and December 31, 2001, meet
specified minimum amounts. In addition, the conditions require that the
Company be able to demonstrate compliance with all requirements for
continued listing on The Nasdaq SmallCap Market. There can be no assurance
that the Company will be able to comply with the terms of the conditions.
The Company incurred net losses of $10.5 million for the year ended March 31,
2001 and showed a net income of $432,000 for the six months ended September 30,
2001. At September 30, 2001, the Company had stockholders' equity of $5.1
million. Management has put in place plans to reduce the cost of operating the
business, improve the operating efficiency of the Company's manufacturing
facility and obtain new customers. If the Company is unable to successfully
continue to meet its obligations under the renegotiated payment terms on its
borrowings, or if management's operating plans do not materialize, this could
significantly and adversely impact the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty
NOTE 2 - REVENUE RECOGNITION
Component revenues are recognized as products are shipped except for sales
through distributors, which are recognized on a sell-through basis. Design and
engineering service revenues are recognized under design and engineering
contracts once defined development phases are completed by the Company and
accepted by the customers.
NOTE 3 - CASH AND CASH EQUIVALENTS
The Company considers all highly liquid financial instruments purchased with a
maturity of three months or less at the date of purchase to be cash and cash
equivalents. The fair market value of these highly liquid instruments
approximates cost at September 30, 2001 and March 31, 2001.
NOTE 4 - INVENTORIES
Inventories are stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out basis) or market.
7
Inventories consist of the following (in thousands):
SEPTEMBER 30, MARCH 31,
2001 2001
------------ --------
Raw materials $ 346 $ 848
Work-in-process 4,247 4,490
Finished goods 2,570 2,124
------- -------
$ 7,163 $ 7,462
------- -------
During the quarter ended June 30, 2001, the Company re-evaluated the practical
production capacity of its fabrication facility in light of measures taken to
reduce the costs and improve the efficiency of the manufacturing process, and
considering the steep decline in the semiconductor market. Prior to the quarter
ended June 30, 2001, the practical capacity of the Company's fabrication
facility was estimated to be approximately 3,000 wafers per week. After
re-evaluating the production capacity of the fabrication facility in light of
changes made to the production process, reductions in headcount and other
considerations, management estimates the current production capacity to be
approximately 1,200 wafers per week. Accordingly, overhead absorption is higher
than it would have been using the prior estimate of production capacity.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are amortized and depreciated
using the straight-line method over the shorter of the period of the lease for
leasehold improvements or the estimated useful lives of the assets. The
estimated useful life of equipment is five years.
NOTE 6 - EARNINGS PER SHARE
Earnings per share are calculated in accordance with the provisions of SFAS No.
128 "Earnings per Share." SFAS No. 128 requires the Company to report both basic
and diluted earnings per share. Basic EPS is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares outstanding during the period. For the periods presented, no adjustments
to net income (loss) reported in the condensed statements of operations were
necessary to determine net loss available to common stockholders. Shares
issuable to new investors are included in computations of basic EPS for the
three and six month periods ended September 30, 2001, as they are not
contingently issuable.
Options to purchase 314,966 and 231,590 shares of common stock were outstanding
at September 30, 2001 and September 24, 2000, respectively, but do not impact
diluted earnings per share because the options' exercise price was greater than
the average market price of the common shares during those periods. Warrants to
purchase 381,545 shares of common stock were outstanding at September 30, 2001.
Of these, 61,745 warrants are anti-dilutive and are excluded from the diluted
earnings per share calculation. Of the remaining warrants, 176,684 and 138,064
for the three and six month periods ended September 30, 2001, respectively, have
been considered in computation of diluted earnings per share based on the
treasury stock method weighted for the period outstanding.
NOTE 7 - LEASING ARRANGEMENTS AND COMMITMENTS
The Company leases certain machinery and equipment under long-term lease
agreements reported as capital leases. The terms of the leases range from four
to five years, with purchase options at the end of the respective lease terms.
As of September 30, 2000, lease payments totaling $835,000 owed by the Company
are past due. The Company leases its San Jose facility under a non-cancelable
operating lease which will expire in December 2006. The lease requires the
Company to pay tax, insurance and maintenance expenses. Rental expense is
recorded using the straight-line method. As of September 30, 2001, amounts
totaling $126,000 owed under this lease agreement are past due.
NOTE 8 - RELATED PARTY TRANSACTIONS
Two members of the Board of Directors have an ownership interest in Teamasia.
Their combined ownership is approximately 22%.
As part of the stock purchase agreement entered into in October 1999, Teamasia
agreed to purchase wafers from the Company commencing with the Company's quarter
ended December 26, 1999. This agreement further stipulates that Teamasia's
purchase commitments are not to be less than 25% of the Company's installed
capacity for the quarters ended March 26, June 25 and September 24, 2000. To
date, Teamasia has not met the minimum purchase commitment.
8
Transactions and balances with Teamasia are as follows (in thousands):
SEPTEMBER 30, SEPTEMBER 24,
2001 2000
------------ ------------
Revenue for the three months ended $ - $ 60
Revenue for the six months ended $ - $1,141
SEPTEMBER 30, MARCH 31,
2001 2001
------------ --------
Accounts receivable $ 422 $ 720
Accounts payable $ - $ 1,253
Convertible debenture, net of discount of
$993,000 as of September 30, 2001 $2,507 $ 3,500
In November 2000, Teamasia loaned the Company $1.2 million under a convertible
debenture originally due on May 28, 2001. Under its original terms, the
debenture was non-interest bearing and convertible into 137,143 shares of common
stock at Teamasia's option, representing a conversion ratio equal to $8.75 per
share.
In December 2000, Teamasia loaned the Company an additional $2.3 million under a
convertible debenture originally due on June 18, 2001. Under its original terms,
the debenture was non-interest bearing and convertible into 262,857 shares of
common stock, at Teamasia's option, representing a conversion ratio equal to
$8.75 per share
In May 2001, a Memorandum of Understanding (MOU) was entered into with Teamasia
that modified the terms of the convertible debentures as follows:
o the due date for both debentures was extended until no earlier than
May 2002;
o the Company agreed to issue a warrant to Teamasia to purchase 319,800
shares of common stock at an exercise price of $1.10;
o the interest rate was raised to prime; and
o the convertible debentures are convertible into common stock, at
Teamasia's option, at a conversion ratio equal to $3.45 per share.
Under the MOU, the Company is required to issue warrants once the $6.0 million
had been received. As of September 30, 2001, a total of $5.98 million had been
received, however, no warrants have been issued pending formal approval of the
Board of Directors. Because the terms of the warrants were fixed at the time the
MOU was executed, the issuance of the warrants was recorded at that time. The
convertible debentures and warrants have been recorded based on their relative
fair values. The fair value of the warrants was determined using the
Black-Scholes pricing model using the following assumptions: 221% volatility;
zero dividends; 6.4% risk free interest rate; and 3-year term.
The Company also determined that the convertible debentures contained a
beneficial conversion feature after allocating value to the warrants as
described above. The beneficial conversion feature was calculated as the
difference between the effective conversion price per share and the fair value
of the common stock on the effective date of the MOU multiplied by the number of
shares into which the convertible debentures are convertible at the stated
conversion ratio of $3.45 per share.
The Company recorded this transaction as follows:
Convertible debentures $ 1,867,000
Warrants 821,000
Beneficial conversion feature 812,000
-------------
$ 3,500,000
=============
9
The combined warrants and beneficial conversion feature totaling $1.6 million
has been recorded as a discount to the convertible debentures and is being
amortized into interest expense over 12 months. During the three months and six
months ended September 30, 2001, $411,434, and $639,594 was amortized into
interest expense, respectively.
NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires the purchase method of accounting to be used for
all business combinations initiated after June 30, 2001 as well as all purchase
method business combinations completed after June 30, 2001. SFAS No. 141 also
specifies conditions intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill. SFAS
No. 142 specifies that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but instead be tested for impairment at least
annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also
requires that intangible assets with determinable useful lives be amortized over
their useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121.
The Company is required to adopt the provisions of SFAS No. 141 for any future
business combination entered into. SFAS No. 142 is effective for the Company on
April 1, 2002, and its adoption is not expected to have a significant impact on
the Company's financial condition or results of operations until such time when
significant goodwill or intangible assets are recorded by the Company.
In July 2001, FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 requires the recognition of a liability for an asset
retirement obligation in the period in which it is incurred. When the liability
is initially recorded, the carrying amount of the related long-lived asset is
correspondingly increased. Over time, the liability is accreted to its present
value and the related capitalized charge is depreciated over the useful life of
the asset. SFAS 143 is effective for fiscal years beginning after June 15, 2002.
Management is currently reviewing the impact of SFAS 143 on the Company.
In August 2001 the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS 144 addresses accounting and reporting for
the impairment or disposal of long-lived assets, including the disposal of a
segment of a business. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged. Management is currently
reviewing the impact of SFAS 144 on the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following discussion contains forward-looking statements that involve risks
and uncertainties. Our actual future results could differ materially from those
discussed here. Factors that would cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
the section entitled "Business" in our Form 10-K for the year ended March 31,
2001 filed with the Securities and Exchange Commission.
This information should also be read along with the unaudited condensed
financial statements and notes thereto included in Item I of this Quarterly
Report and the audited financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
fiscal year ended March 31, 2001 contained in the Company's Annual Report filed
on Form 10-K.
10
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
The following table sets forth, as a percentage of net revenues, certain
consolidated statement of operations data for the periods indicated.
THREE MONTHS ENDED
SEPTEMBER SEPTEMBER 24,
30, 2001 2000
--------- ------------
Total revenues 100.0% 100.0%
Cost of revenue 60.4 100.1
----- -----
Gross margin 39.6 (0.1)
Operating expenses:
Research and development 8.2 12.3
Selling, general and administrative 24.1 16.9
----- -----
Operating income (loss) 7.3 (29.3)
Interest expense (3.1) (2.4)
Amortization of debt discount (6.1) -
Other income, net 2.0 -
----- -----
Net income (loss) .1% (31.7)%
===== =====
During the quarter ended September 30, 2001, the Company generated net revenues
of $6.8 million compared to $8.0 million for the same period of the prior year.
The decrease in net revenues was due to decreased demand for the Company's
foundry and power management products. The decreased demand for the Company's
products reflects the industry wide slow down in demand for semiconductor
products. Foundry product sales accounted for 73% of net revenues in the quarter
ended September 30, 2001 and power management product sales accounted for 27% of
net revenues in the quarter ended September 30, 2001. This ratio has remained
consistent over the past year.
For the three months ended September 30, 2001, the Company's largest customers
were Linfinity Microelectronics, International Rectifier, and Tektronix, which
accounted for approximately 33%, 15% and 4% of net revenues and 4%, 6%, and 0%
of net accounts receivable at September 30, 2001, respectively.
COST OF REVENUES. Cost of revenues in the three months ended September 30, 2001
was $4.1 million, representing 60.4% of net revenues compared to $8.1 million,
representing 100.1% of net revenues for the same quarter in the prior fiscal
year. The decrease in cost of revenues as a percentage of revenues is a result
of several actions taken by the Company, including:
o an aggressive program to reduce the costs and improve the efficiency
of the manufacturing process;
o a reduction in force, reducing headcount from 201 on March 31, 2001 to
90 on September 30, 2001; and
o negotiations with vendors to reduce costs of raw materials and
supplies.
In addition, during the quarter ended June 30, 2001, the Company re-evaluated
the practical production capacity of its fabrication facility in light of the
actions described above, and considering the steep decline in the semiconductor
market. Prior to the quarter ended June 30, 2001, the practical capacity of the
Company's fabrication facility was estimated to be approximately 3,000 wafers
per week. After re-evaluating the production capacity of the fabrication
facility in light of changes made to the production process, reductions in
headcount and other considerations, management estimates the current production
capacity to be approximately 1,200 wafers per week. Accordingly, overhead
absorption is higher than it would have been using the prior estimated
production capacity.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$556,000 (8.2% of revenues) in the quarter ended September 30, 2001 compared to
$989,000 (12.3% of revenues) in the corresponding quarter of the prior fiscal
year. Costs of engineering resources associated with design revenues are
included in cost of revenues. The reduction in research and development expenses
is a result of cost control measures put in place. The Company believes that
research and development expenses in absolute dollars will increase from current
levels as it invests in the development, design and introduction of standard
product, at the appropriate time, this may include an increase in staffing and
related personnel compensation.
11
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $1.6 million (24.1% of revenues) in the quarter
ended September 30, 2001, up from $1.4 million (16.9% of revenues) in the same
quarter of the prior year. The increase in selling, general and administrative
expenses is due to increased sales and marketing, commissions, travel expenses
and professional fees.
INTEREST EXPENSE. Interest expense was $211,000 for the quarter ended September
30, 2001, an increase of $21,000 over the corresponding period in the prior
year. The increase reflects a full quarter of interest at the prime rate on the
subordinated debenture, offset by a decline in the interest expense on the
Company's operating line that was paid off in August 2001.
AMORTIZATION OF DEBT DISCOUNT. During the quarter ended June 30, 2001, the
Company granted warrants in connection with the issuance of convertible
debentures to Teamasia. The transaction also contained a beneficial conversion
feature. The value of the warrants and the beneficial conversion feature,
totaling $1.633 million, is reflected as a discount on the subordinated
debenture and is being amortized over the term of the subordinated debenture
which is one year. For the three months ended September 30, 2001, a non-cash
charge of $412,000, representing the amortization of the discount associated
with the warrant and beneficial conversion feature, was recorded by the Company.
OTHER INCOME, NET. During the three months ended September 30, 2001, the Company
realized $137,000 in other income composed of gains from asset sales.
NET INCOME (LOSS). The Company generated a net income of $6,000 for the three
months ended September 30, 2001, or no earnings per basic or diluted share
compared to a net loss of $2.6 million in the quarter ended September 24, 2000,
or $1.44 per share (both basic and diluted). Management has taken a number of
actions that are designed to enable the Company to achieve profitable results at
much lower revenue levels. Scaled down operations, cost control and improvements
in its manufacturing efficiency are the major drivers of the Company's return to
profitability.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001
The following table sets forth certain items from the Company's condensed
statements of operations as a percentage of net revenues for the periods
indicated.
SIX MONTHS ENDED
SEPTEMBER SEPTEMBER 24,
30, 2001 2000
--------- ------------
Total revenues 100.0% 100.0%
Cost of revenue 56.6 97.4
Gross margin 43.4 2.6
Operating expenses:
Research and development 8.1 12.2
Selling, general and administrative 25.8 14.7
----- -----
Income (loss) from operations 9.5 (24.3)
Interest expense, net (2.9) (1.8)
Amortization of debt discount (4.5) -
Other income, net 1.0 -
Net income (loss) 3.1% (26.1)%
===== =====
NET REVENUES. Net revenues for the six months ended September 30, 2001 decreased
11.8% to $14.1 million compared to $16.0 million for the same period of the
prior year. The decrease in net revenues was principally due to decreased demand
for the Company's products, which reflects the downturn in the semiconductor
market. Foundry product sales decreased 13.0% and accounted for 76% of net
revenues in the first half of fiscal 2002, versus 75% in the first half of
fiscal 2001. Standard product and design engineering sales decreased by 18.0%.
12
For the six months ended September 30, 2001, the Company's largest customers
were Linfinity Microelectronics, International Rectifier, and Tektronix, which
accounted for approximately 24%, 21% and 6% of net revenues and 4%, 6%, and 0%
of net receivables at September 30, 2001, respectively.
COST OF REVENUES. Cost of revenues for the six months ended September 30, 2001
was $8.0 million representing 56.6% of net revenues, compared to $15.6 million,
representing 97.4% of net revenues for the same period of the prior fiscal year.
Gross margins improved in the first six months of fiscal year 2002 due to the
cost cutting measures taken by the Company.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were $1.1
million (8.1% of revenues) in the six months ended September 30, 2001 compared
to $2.0 million (12.2% of revenues) in the corresponding period of the prior
fiscal year. Cost of engineering resources associated with design revenue is
included in cost of revenues. Management believes that research and development
expenses in absolute dollars will increase from current levels.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $3.7 million (25.8% of net revenues) in the six
months ended September 30, 2001 up from $2.4 million (14.7% of net revenues) in
the same period of the prior year. The increase was primarily due to an increase
in cost of marketing and sales administration, sales commissions, travel
expenses and professional fees.
INTEREST EXPENSE. Interest expense was $406,000 for the six months ended
September 30, 2001, an increase of $115,000 over the corresponding period in the
prior year. The increase reflects interest at the prime rate on the subordinated
debenture, offset by a decline in the interest expense on the Company's
operating line that was paid off in August 2001.
AMORTIZATION OF DEBT DISCOUNT. During the quarter ended June 30, 2001, the
Company granted warrants in connection with the issuance of convertible
debentures to Teamasia. The transaction also contained a beneficial conversion
feature. The value of the warrants and the beneficial conversion feature,
totaling $1.633 million, is reflected as a discount on the subordinated
debentures and is being amortized over the term of the subordinated debentures,
which is one year. For the six months ended September 30, 2001, a non-cash
charge of $640,000, representing the amortization of the discount associated
with the warrant and beneficial conversion feature, was recorded by the Company.
OTHER INCOME, NET. During the six months ended September 30, 2001, the Company
realized $137,000 in other income, which is primarily composed of gains from
asset sales.
NET INCOME (LOSS). The Company generated net income of $432,000 for the six
months ended September 30, 2001. This represents earnings per basic and diluted
common share of $0.11 and $0.10, respectively. For the corresponding period of
the prior year, the Company generated a net loss of $4.2 million or $3.12 per
share. The net income for the six months ended September 30, 2001 are due to
cost cutting measures taken by the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $36,000 at September 30, 2001 compared to $41,000
at March 31, 2001. In general, the decrease results from decreased sales, cost
cutting measures and advance proceeds from sale of stock, offset by growth in
accounts receivable and disbursements to vendors and creditors.
Cash used in operating activities for the six months ended September 30, 2001
totaled $2.4 million. The Company received $2.7 million net cash from financing
activities during the six months ended September 30, 2001 and used cash to
purchase equipment totaling $294,000
On May 10, 2001, the Company entered into an agreement with an investor group
whereby the investor group agreed to acquire 72% of the equity of the Company
for $6.0 million. Of this amount, $2.5 million was received in June 2001 and
$3.4 million was received in July 2001. The proceeds were used to pay down
certain borrowings and past due obligations.
In April 1999, the Company entered into an agreement with The CIT Group for a
$9.5 million loan facility. Included in the facility are secured term loans for
up to $2.0 million for equipment purchases and a revolving credit facility that
allows the Company to borrow up to $7.5 million based on qualifying accounts
receivable and inventory balances at 1.5% over prime. On July 10, 2001, the CIT
Group gave notice of termination and acceleration and demand for repayment for
the revolving credit facility, including the equipment
13
term loans. All amounts due to CIT were repaid in August 2001. Management is
actively negotiating with several lenders to replace the CIT Group revolving
credit facility.
The Company has been unable to meet its obligations under debt agreements and
certain of its capital lease obligations. These instances of non-payment put the
Company in default of these agreements.
Management has been actively negotiating with the Company's creditors. As a
result of these negotiations, and by using proceeds from sales of stock in June
2000 and convertible debentures in November and December 2000 to Teamasia
totaling $7,430,000, as well as additional proceeds from the Investor Group in
June and July 2001 totaling $6.0 million, the Company has been able to bring
current, pay off, or refinance certain of its debt and lease obligations.
As of September 30, 2001, the Company's short term portion of debt and capital
lease obligations totaled $5.3 million, which is comprised of (i) $3.5 million
of convertible debentures due in May 2002, net of a discount of $993,000, (ii)
$1.8 million of capital lease obligations and (iii) $964,000 of other debt
obligations. The capital lease obligations are comprised of five individual
leases, all of which are past due.
As of September 30, 2001, the Company had long term capital lease obligations
totaling $273,000. The capital lease obligation is comprised of four lessors
that account for the outstanding long-term portion of the capital lease
obligation.
In May 2001, the Company entered into a MOU with Teamasia whereby Teamasia
agreed, among other provisions, to extend the due date of $3.5 million of
convertible debentures until May 2002. In addition, under the MOU, an investor
group led by the Chairman of the Board of Directors agreed to purchase stock
representing 72% of the Company's fully diluted equity for $6.0 million, to be
received in installments, the last of which was due in July 2001. Approximately
$5.9 million has been received as of September 30, 2001. The remaining balance
of $60,000 was received in October 2001.
FACTORS AFFECTING FUTURE RESULTS
Except for historical information contained herein, the matters set forth in
this Report on Form 10-Q, including the statements in the following paragraphs,
are forward-looking statements that are subject to certain risks and
uncertainties including such factors as, among others, operating cash
availability, delays in new product and process technology announcements and
product introductions by the Company or its competitors, competitive pricing
pressures, fluctuations in manufacturing yields, changes in the mix or markets
in which products are sold, availability and costs of raw materials, reliance on
subcontractors, the cyclical nature of the semiconductor industry, industry-wide
wafer processing capacity, political and economic conditions in various
geographic areas, and costs associated with other events, such as under
utilization or expansion of production capacity, intellectual property disputes,
litigation, or environmental regulation and other factors described below.
The Company has minimal financial resources and its operating needs are funded
principally from the collection of accounts receivable and from the sale of
common stock and convertible debentures to Teamasia in fiscal year 2001 and the
sales of common stock to an investor group in fiscal year 2002. The Company
continues to focus on restructuring its operations to conserve cash.
Excluding the current and previous quarter, the Company has reported operating
losses and total negative cash flow from operating activities since the second
quarter of fiscal 1997. Unless a trend of increasing revenue is achieved or the
Company is able to sustain a lower break-even point, the Company may continue to
report losses and negative cash flows in the future.
The Company sells its products to distributors and manufactures in Southeast
Asia which is currently experiencing an economic downturn. Sales in this region
accounted for 25% of the Company's net revenues in fiscal year 2001 and 24% for
the six months ended September 30, 2001. The Company experienced a slight growth
in revenues from this region during fiscal year 2001. However, if the region is
not able to overcome its economic problems, there is no assurance that the
Company's results of operations will not be adversely affected.
As a result of the severe downturn in the semiconductor market, the Company
experienced a significant decrease in sales in the fourth quarter of fiscal year
2001, although this trend reversed itself in the 6 months ended September 30,
2001. However, the downturn in the semiconductor market is expected to continue
for the foreseeable future and could compound the Company's liquidity issues.
In June 2001, International Rectifier Corporation (IR) notified the Company that
they would be canceling future orders. Revenues for the year ended March 31,
2001 and three months ended September 30, 2001 totaled $9.3 million and $1.1
million respectively. The
14
impact of this cancellation could have a significant negative impact on the
results of operations of the Company. In subsequent quarters, although IR is
expected to remain a customer of the Company, the Company expects lower revenue
from this customer.
The semiconductor industry is extremely capital intensive. To remain
competitive, the Company must continue investing in advanced design tools,
manufacturing equipment and process technologies. The Company anticipates
significant continuing capital expenditure during the next several years. There
can be no assurance that the Company will not be required to seek additional
debt or equity financing to satisfy its cash and capital needs or that such
financing will be available on terms satisfactory to the Company. If such
financing is required and if such financing is not available on terms
satisfactory to the Company, its operations would be materially adversely
affected.
New products and process technology require significant research and development
expenditures. However, there can be no assurance that the Company will be able
to develop and introduce new products in a timely manner that new products will
gain market acceptance or that new process technologies can be successfully
implemented. If the Company is unable to develop new products in a timely
manner, and to sell them at gross margins comparable to the Company's current
products, the future results of operations could be adversely impacted.
Part of the Company's future product development strategy included the
acquisition of the product portfolio of Epic Semiconductor based in Phoenix,
Arizona. Such products are based on the UARTs and MOSFET technologies. The
Company currently believes that, if successful in manufacturing and marketing of
such products, these products could enhance the revenue of the Company. However
there can be no assurance that the manufacturing and marketing of these products
can be successfully implemented in a timely manner. From time to time, the
Company has experienced manufacturing difficulties due to equipment failures
that have caused delivery delays and product returns. There can be no assurance
that the Company will not experience manufacturing problems and product delays
in the future as a result of , among other reasons, changes to the process
technologies, equipment failure, or production scheduling issues. The Company
depends on outside contract assembly vendors to assemble and package our
products, and, any delays in product delivery, quality and assembly problems
from these outside contract assembly companies could adversely affect the
Company's operating results.
Although we are not currently a party to any material litigation relating to
patents and other intellectual property rights, because of technological
developments in the semiconductor industry, it may be possible that certain of
our designs or processes may involve infringement of existing patents. We also
cannot be sure that any of our patents will not be invalidated, circumvented or
challenged, that the rights granted thereunder will provide competitive
advantages to us or that any of our pending or future patent applications will
be issued. We have from time to time received, and may in the future receive,
communications from third parties asserting patents, maskwork rights, or
copyrights on certain of our products and technologies. Although we are not
currently a party to any material litigation, if a third party were to make a
valid intellectual property claim and a license were not available on
commercially reasonable terms, our operating results could be materially and
adversely affected. Litigation, which could result in substantial cost to us and
diversion of our resources, may also be necessary to enforce our patents or
other intellectual property rights or to defend us against claimed infringement
of the rights of others.
The Company is subject to a variety of federal, state, and local governmental
regulations related to the use, storage, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals and gases used in its manufacturing
process. Although the Company believes that its activities conform to presently
applicable environmental regulations, the failure to comply with present or
future regulations could result in penalties being imposed on the Company,
suspension of production or a cessation of operations. There can be no assurance
that regulatory changes or changes in regulatory interpretation or enforcement
will not render compliance more difficult and costly. Any failure of the Company
to control the use of, or adequately restrict the discharge of, hazardous
substances, or otherwise comply with environmental regulations, could subject it
to significant future liabilities.
Effective April 1999, our common stock was moved from the Nasdaq National Market
to the Nasdaq SmallCap Market where it continues to trade under the symbol
"IMPX." Our common stock trading price remains below $5.00 per share and could
also be subject to the requirements of certain rules promulgated under the
Securities Exchange Act of 1934, as amended, which requires additional
disclosure by broker-dealers in connection with any trades involving a stock
defined as a penny stock (generally, any non-Nasdaq equity security that has a
market price of less than $5.00 per share, subject to certain exceptions). The
additional burdens imposed upon broker-dealers by such requirements could
discourage broker-dealers from trading in our common stock. Additionally, future
announcements concerning the Company, its competitors or its principal
customers, including quarterly operating results, changes in earnings estimates
by analysts, technological innovations, new product introductions, governmental
regulations or litigation may cause the market price of the Company's Common
Stock to continue to fluctuate substantially. Further, in recent years the stock
market has experienced extreme price and volume fluctuations that have
particularly affected the market prices of equity
15
securities of many high technology companies and that often have been unrelated
or disproportionate to the operating performance of such companies. These
fluctuations, as well as general economic, political and market conditions such
as recessions or international currency fluctuations may materially adversely
affect the market price of the Common Stock.
On July 26, 2001, the Company attended a hearing before a Nasdaq Listing
Qualifications Panel concerning the Company's failure to comply with certain
requirements for continued listing on The Nasdaq SmallCap Market. Nasdaq has
determined the Company's securities will continue to be listed as long as
certain conditions are met. The conditions require that stockholders equity, as
reported in the Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 2001 and December 31, 2001, meet specified minimum amounts. In
addition, the conditions require that the Company be able to demonstrate
compliance with all requirements for continued listing on The Nasdaq SmallCap
Market. There can be no assurance that the Company will be able to comply with
the terms of the conditions.
The Company has taken steps to complete a major upgrade to its
manufacturing-execution software and hardware and currently is in the final
stages of implementing financial application software and hardware. The Company
expects that all upgrades to the financial system will be completed in the
quarter ending December 31, 2001.
The ability of the Company to transition from the fabrication of lower-margin
products to higher-margin products, including both those developed by the
Company and those for which it serves as a third-party foundry, is very
important for the Company's future results of operations. Rapidly changing
customer demands may result in the obsolescence of existing Company inventories.
There can be no assurances that the Company will be successful in its efforts to
keep pace with changing customer demands. In this regard, the ability of the
Company to develop higher-margin products will be materially and adversely
affected if it is unable to retain its engineering personnel due to the
Company's current business climate.
Many of our competitors have substantially greater technical, manufacturing,
financial and marketing resources than we do. Our international sales are
primarily denominated in U.S. currency. Consequently, changes in exchange rates
that strengthen the U.S. dollar could increase the price in local currencies of
our products in foreign markets and make our products relatively more expensive
than our competitor's products that are denominated in local currency. Due to
the current demand for semiconductors of all types, including both foundry
services and analog integrated circuits, we expect continued strong competition
from existing suppliers and the entry of new competitors. Such competitive
pressures could reduce the market acceptance of our products and result in
market price reductions and increases in expenses that could adversely affect
our business, financial condition or results of operations.
The fabrication of integrated circuits is a highly complex and precise process.
Minute impurities, contaminants in the manufacturing environment, difficulties
in the fabrication process, defects in the masks used to print circuits on a
wafer, manufacturing equipment failure, wafer breakage or other factors can
cause a substantial percentage of wafers to be rejected or numerous die on each
wafer to be nonfunctional. The majority of our costs of manufacturing are
relatively fixed, and, consequently, the number of shippable die per wafer for a
given product is critical to our results of operations. If we do not achieve
acceptable manufacturing yields, or if we experience product shipment delays, or
if we encounter capacity constraints, or issues related to volume production
ramp-ups, our financial condition or results of operations would be materially
and adversely affected. We have from time to time in the past experienced lower
than expected production yields, which have delayed product shipments and
adversely affected gross margins. Moreover, we cannot be sure that we will be
able to maintain acceptable manufacturing yields in the future.
In 2001, we experienced difficulties meeting product specifications for certain
customers and, as a result, accepted product returns from these customers. We
have since implemented changes to our processes to ensure our products meet
customer acceptance criteria, however, there can be no assurance that we will
not be required to accept product returns in the future.
We manufacture all of our wafers at our fabrication facility in San Jose,
California. Given the unique nature of our processes, it would be difficult to
arrange for independent manufacturing facilities to supply such wafers in a
short period of time. Any inability to utilize our manufacturing facility as a
result of fire, natural disaster or utility interruption, otherwise, would have
a material adverse effect on our financial condition or results of operations.
Although we believe that we have adequate capacity to support our near term
plans, we have in the past subcontracted the fabrication of a portion of our
wafer production to outside foundries, and may need to do so again. At the
present time, there are several wafer foundries that are capable of supplying
certain of our needs. However, we cannot be sure that we will always be able to
find the necessary foundry capacity.
Due to the relatively long manufacturing cycle for integrated circuits, we build
some of our inventory before we receive orders from our customers. Because of
inaccuracies inherent in forecasting the demand for such products, inventory
imbalances periodically occur that result in surplus amounts of some of our
products and shortages of others. Such shortages can adversely affect customer
16
relationships; surpluses can result in larger than desired inventory levels. Our
backlog consists of distributor and OEM customer orders required to be shipped
within six months following the order date. Customers may generally cancel or
reschedule orders to purchase products without penalty. As a result, to reflect
changes in their needs, customers frequently revise the quantities of our
products to be delivered and their delivery schedules. Because backlog can be
canceled or rescheduled without significant penalty, we do not believe our
backlog is a meaningful indicator of future revenue. In addition, our backlog
includes our orders from domestic distributors as to which revenues are not
recognized until the products are sold by the distributors. Such products when
sold may result in revenue lower than the stated backlog amounts as a result of
discounts that we authorize at the time of sale by the distributors.
The Company utilizes various external "silicon wafer service foundries" (for
epitaxial growth) and assembly sites to assemble and package its products. Any
product delivery delays, quality and manufacturing problems from these external
operations could adversely affect the Company's operating results.
We depend on a number of subcontractors for certain of our manufacturing
processes, such as epitaxial deposition services. If any of these subcontractors
fails to perform these processes on a timely basis, there could be manufacturing
delays, which would materially adversely affect our results of operations.
Currently, we purchase certain materials, including silicon wafers, on a
purchase order basis from a limited number of vendors. Any interruption or
termination of supply from any of these suppliers would have a material adverse
effect on our financial condition, results of operations, or liquidity. Our
products are packaged by a limited group of third party subcontractors in
Southeast Asia. Certain of the raw materials included in such products are
obtained from sole source suppliers. Although we are trying to reduce our
dependence on our sole and limited source suppliers, disruption or termination
of any of these sources could occur and such disruptions could have a material
adverse effect on our financial condition or results of operations. As is common
in the industry, independent third party subcontractors in Asia currently
assemble all of our products. In the event that any of our subcontractors were
to experience financial, operational, production or quality assurance
difficulties resulting in a reduction or interruption in our supply, our
operating results would be adversely affected until alternate subcontractors, if
any, became available.
The present and future success of the Company depends on its ability to continue
to attract, retain and motivate qualified senior management, sales and technical
personnel, particularly highly skilled semiconductor design and development
personnel, and process engineers, for whom competition is intense. The Company
is currently engaged in an executive search to hire a chief executive officer, a
chief financial officer and a controller. The loss of key executive officers,
key design and development personnel, or process engineers, or the inability to
hire and retain sufficient qualified personnel could have a material adverse
effect on the Company's business, financial condition and results of operations.
There can be no assurance that the Company will be able to retain these
employees.
17
IMP, Inc.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company was named as one of 88 defendants in a legal action brought by the
Lemelson Medical Foundation for patent violations. In December 2000, we settled
all outstanding claims for $150,000 due in three annual installments, the last
of which is due in December 2002. We are party to litigation in the ordinary
course of business. Any adverse outcome in any of these matters could have a
material adverse affect on our business and results of operations.
Item 3. Defaults by the Company on its Senior Securities
On July 10, 2001, CIT gave notice of termination and acceleration and demand for
repayment for both the revolving credit facility and the term loan. This
cancellation results from defaults under both the CIT agreement and related
forbearance letters. CIT has declared all obligations due and payable as of July
11, 2001. All amounts due to CIT were repaid on August 13, 2001. No new
financing has been secured.
Item 6. Reports on Form 8-K.
None.
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.
Date: November 13, 2001. IMP Inc.
Registrant
By: /s/ Subbarao Pinamaneni
----------------------------------
Name: Subbarao Pinamaneni
Title: Chairman of the Board
18