Item 1. Description of Business
(a) State of Incorporation; Offices and Facilities
ORS Automation, Inc. ("ORS"), the registrant, was incorporated under the laws of the State of Delaware in 1968 and commenced operations in 1972. The Company's executive offices and production facilities are located at 402 Wall Street, Princeton, New Jersey 08540.
(b) Nature of Business
ORS is primarily engaged in the production and sale of computer-based vision products for automatic part alignment, machine guidance, identification, inspection, control of industrial processes and visual sensing systems for use with industrial automation equipment. These products and control systems are sold to machine manufacturers who then incorporate them into their machines which are sold to the end user. The end users are typically automated, high volume electronic circuit and component manufacturers located in all parts of the world.
(c) Corporate Developments
Due to the nature of its business, which requires close working relationships with its customers, ORS has always depended on a few major customers that could be supported by its engineering department. In the fourth quarter of 1998, ORS' major customer was acquired by a large multinational corporation and subsequently ORS was able to develop a business relationship with this new customer which accounted for 47% of sales in 1999. Since the market for the Company's products is highly competitive and this new customer has its own large vision development engineering department along with a history of complete in-house control and manufacture of critical subassemblies regardless of cost or performance, there is no assurance that the Company will be successful in continuing this relationship.
On February 1, 1999, the Internal Revenue Service accepted ORS' Offer in Compromise relating to priority tax claims that were set forth in ORS' Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code dated April 18, 1991 ("Reorganization Plan"). On February 10, 1999 ORS paid $236,000 to the Internal Revenue Service to settle its priority tax claims. An additional $725 was paid as the Internal Revenue Service claimed interest from February 1 to February 10, 2000.
(d) Company's Technology
ORS's area of business is machine vision technology which evolved out of digital image processing research conducted in the past two decades. With lower costs and greatly increased speeds made possible by advances in micro-electronics, machine vision became practical for industrial use.
ORS vision systems are specifically oriented toward the recognition of visual patterns to determine an object's identity, position and quality. This information is used in conjunction with computer-based automation to control processes, machines and production quality. The principal vision products produced by ORS are comprised of a range of proprietary software processing algorithms, signal processors, and peripheral equipment. Where possible, these products utilize commercially available hardware components (e.g. television cameras, analog to digital converters, digital storage devices, display devices and microcomputers).
With these capabilities, ORS's products currently in production are used to provide guidance information to automatic precision machinery, primarily in the electronics manufacturing area.
(e) Products
Since 1986, ORS has concentrated its resources in refining and expanding guidance applications for screen printers used in the manufacture of electronic circuit boards and micro-circuit printing on ceramic substrates. The resulting units have high processing speeds with the flexibility to make them cost-effective in the factory environment. ORS' principal product in this area is "i-lign", which automatically and precisely positions patterned materials for further processing such as printing, and for other processing with various machine tools. We believe that our technical expertise combined with our industrial "solution" experience enable us to offer quality products at competitive prices to meet customer needs in the electronics and other manufacturing industries.
ORS intends to expand the market niches in which it has demonstrated technical and marketing capability, namely alignment systems and machine control applications. In these markets, ORS will emphasize the factory-ready nature of its products and its experience in automation in the electronics industry, to provide a cost-justified return to both equipment manufacturers and end user customers.
(f) Manufacturing
ORS assembles its vision and control products entirely from electronics and other components purchased from nonaffiliated supply sources. The major components of the products (cameras, display devices, microcomputers, controls, mechanical assemblies and cabinets) are available from various sources. To these, ORS adds its proprietary software and graphical user interfaces.
(g) 1999 Sales & Recent Backlog
ORS sells its products principally to manufacturers of automation equipment for the electronics industry. Sales of $1,434,117 were up 10.4% from 1998 sales of $1,298,536. Two customers accounted for almost all of the total sales for these periods.
As of March 1, 2000, ORS had unfilled orders for products totaling $510,920. Of this total backlog, approximately 92% is based on purchase orders from one customer scheduled to be delivered in 2000. This compares with the backlog of $480,822 on March 1, 1999.
(h) Patents and Trademarks
ORS holds United States Patent No. 3,877,019, titled "Photo-measuring Materials Device for Computer Storage of Photographic and Other Materials", granted April 8, 1975; No. 3,908,078, titled "Method and Apparatus for Digital Recognition of Objects Particularly Biological Materials", granted September 23, 1975; No. 4,613,269, titled "Robotic Acquisition of Objects By Means Including Histogram Techniques", granted September 23, 1986 and No. 4,642,813, titled "Electro-Optical Quality Control Inspection of Elements on a Product", granted February 10, 1987. Although ORS relies primarily on its technological know-how and expertise in the field of machine vision, some products are nevertheless based, in part, on the technology underlying these patents. No assurance can be given as to the validity and scope of the protection provided by these patents.
ORS holds and uses several registered trademarks. "ORS" is used as a general identifying symbol in respect of its Products. "i-bot" is used in conjunction with systems when adapted for use with industrial robots and the related electronic grippers. "FLEXVISION" identifies a flexible image computer. The alignment products are identified by "i-lign" and circuit board inspection systems are identified by "i-flex". ORS has also copyrighted critical software.
(i) Product Development
During fiscal years 1999 and 1998 ORS expended approximately $209,570 and $173,500 respectively, on software and product development activities. The product development in 1999 instituted more artificial intelligence in the vision algorithm setups. Using expert system rules-based algorithms, a complete point and click setup wizard allows optimized program settings without requiring vision system expertise on the part of the end user. New vision algorithms were and are continuing to be developed that can be implemented using the latest high-speed microprocessors. These faster microprocessors can now run complex vision algorithms in software that previously would have to been implemented in dedicated hardware. This permits rapid product customization to meet specific needs of customers.
(j) Competition
ORS believes that there are a substantial number of competitors in the automatic machine vision identification, inspection and control markets in which ORS' products compete. Recently several of these competitors have merged to improve their market position. There are several products now available that perform functions similar to those performed by existing ORS products and those that ORS intends to produce. Presently the field appears to be dominated by a few companies, the most prominent being Cognex, Robot Vision Systems, Electro Scientific Industries and Omron Electronics. These companies possess financial resources and research and development staffs far greater than those of ORS.
(k) Employees
At December 31, 1999, ORS had 7 employees. ORS also engages consultants from time to time to provide specialized expertise in areas in which it is uneconomical to utilize full-time employees. ORS enjoys good relations with its employees.
(l) Impact of Year 2000
A Year 2000 problem may occur when a computer program was written using two digits rather than four to define the applicable year. If a computer program with date sensitive functions is not Year 2000 compliant, it might recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a disruption of operations by a temporary inability to process transactions or send invoices or engage in other normal business activities.
Although ORS' products do not use date information for operation, current products have been tested and are Year 2000 compliant. Older systems, delivered prior to 1996, may or may not be Year 2000 compliant. However, since date information is not required for operation, the compliance issue relating to these products is not significant. Internal accounting systems have been checked and are Year 2000 compliant. Management believes that the likelihood of a material adverse impact due to problems with internal programs or products sold to customers is remote. As of March 1, 2000, there has been no indication of any Year 2000 problems.
The Year 2000 issue does create risk for ORS from unforeseen problems from third parties such as banks and financial institutions. As of March 1, 2000, there has been no indication of any Year 2000 problems.
Item 2.
Item 2. Description of Property
ORS leases 7,695 square feet of office and engineering space at 402 Wall Street, Princeton, New Jersey 08540, pursuant to a three year lease commencing on September 1, 1997 and ending August 31, 2000 at the following base rents:
9/01/97 - 8/31/98 $3,848 per month 9/01/98 - 8/31/99 $4,008 per month 9/01/99 - 8/31/00 $4,168 per month
The monthly base rent does not include tenant's share of operating expenses which currently amount to $2,245 per month. ORS does not anticipate any difficulty in extending the lease if it so desires.
Item 3.
Item 3. Legal Proceedings
There are no known legal actions in which ORS is a party.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters
On October 15, 1986, ORS' common stock was delisted from NASDAQ for failure to meet the minimum capital and surplus requirements of the NASD By-Laws. Since there are no market makers for ORS' stock, trading, if any, has been sporadic. As of December 31, 1999 there were 532 holders of record of ORS' common stock.
ORS has neither declared nor paid any dividends on its shares of Common Stock or Preferred Stock since its inception. Any decision as to the future payment of dividends will depend on the earnings and financial position of ORS and such other factors as the Board of Directors deems relevant. ORS anticipates that it will retain earnings, if any, in order to finance the development and expansion of its business.
Item 6.
Item 6. Management's Discussion and Analysis or Plan of Operation
The table below presents selected financial data for ORS for the past two years.
As discussed in the notes to the financial statements, a significant portion of ORS' sales are to two major customers. Any substantial decrease in sales to either of these two customers could have a material effect on ORS' results of operations and financial condition.
The cost of the components for ORS' products (primarily electronic components) has been decreasing in recent years, whereas the capacity and capability of such items have been increasing. However, as ORS increases its software emphasis, product development labor costs will likely increase in the future, but the labor component included in product costs will decrease. Therefore, ORS must increase the sales of its products and improve margins in order to generate sufficient cash to continue operations.
Results of Operations
Comparing the results of operations of 1999 with 1998, sales of $1,434,117 increased approximately 10% from 1998 sales of $ 1,298,536. Approximately 88% of the sales in 1999 were related to "i-lign" and "u-lign" vision alignment products compared with 87% of sales in 1998. Affiliated Manufacturers, Inc., ("AMI"), which has a controlling interest in ORS, accounted for 27% of the sales in 1999 compared with 31% of sales in 1998.
The gross profit remained constant at 38% of sales in 1999 and 1998. Administrative, Marketing and General expenses increased 24% to $343,995 for 1999 as compared to $278,544 for 1998. This increase was primarily due to the hiring of a new marketing manager to replace one that departed in mid-year 1998.
Software and product development expense increased 22% to approximately $209,500 in 1999 compared to approximately $173,500 in 1998. This increase was primarily due to the hiring of a new software engineer to replace one that resigned and the subsequent return to prior years expenditure levels. ORS expects to continue product development at the current rate, to enhance its current products and for the development of new products.
The income from operations for the year ended December 31, 1999 was $204,577, as compared to income from operations of $213,671 for the year ended December 31, 1998. In 1999, ORS had "Other Expenses" of $24,312 as compared to "Other Income" of $54,370 in 1998. Other income in 1998 reflects $83,239 of income reported as a result of ORS settling priority tax claims with the Internal Revenue Service in February 1999. As a result, ORS had net income before provision for income taxes of $180,265 for 1999, as compared to net income before provision for income taxes of $268,041 for 1998. At December 31, 1999 and December 31, 1998 there were no remaining state net operating loss carryforwards, resulting in a provision of $15,500 for state income tax in 1999 and $23,785 in 1998. Net income for 1999 was $164,765 as compared to $244,256 for 1998. There was no provision for federal income taxes as a result of ORS' net operating loss carryforwards.
Liquidity and Capital Resources
In 1999, operating activities used $317,702 and short term investing activities provided $81,434 less $3,613 for the purchase of equipment, as compared to $65,371 provided by operating activities and purchases of short term investments of $81,434 plus purchases of equipment of $17,028 in 1998. As a result, ORS had a net decrease in cash in 1999 of $239,881 which resulted in cash on hand at December 31, 1999 of $156,718. The decrease of cash in 1999 was due largely to the payment of principal and interest on priority tax claims, an increase in inventory to protect the company as various manufacturers gave notice of dropping some critical components, and the payment of state taxes due to the expiration of state tax net operating loss carryforwards.
On February 1, 1999, the Internal Revenue Service accepted ORS' Offer in Compromise relating to priority tax claims that were set forth in ORS' Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code dated April 18, 1991 ("Reorganization Plan"). On February 10, 1999 ORS paid $236,000 to the Internal Revenue Service to settle its priority tax claims. An additional $725 was paid as the Internal Revenue Service claimed interest from February 1, to February 10, 1999.
Total stockholder's equity of $206,190 in 1998 increased to a stockholder's equity of $370,955 in 1999 as a result of ORS' net income of $164,765 for the year ended December 31, 1999.
Item 7.
Item 7. Financial Statements and Supplementary Data
Financial Statements and schedules filed herewith are listed in the table of contents to the financial statements on page.
Item 8.
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Part III
Item 9.
Item 9. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are:
Edward Kornstein, Chairman of the Board, Chief Executive Office, Treasurer and Director. Mr. Kornstein has been President of ORS since February 1987, Director since 1991, and Chairman of the Board and Treasurer since 1997. From 1978 to 1987, he held various management positions with ORS. Prior to joining ORS, Mr. Kornstein was the owner of Kortron, a consulting firm, and previously held executive and management positions with Optel Corporation and RCA.
William E. Trautman, Director. Mr. Trautman is Managing Director of The Global Executive Search Division of the Stratford Group, and General Principal in Dupont, White and Stone, a NASD broker dealer. Previously, he held senior executive positions with several companies including A.T. Kearney, Boyden Company, Moore & Schley Securities, Seatrain Lines, Inc., XM World Trade, Litton Industries and Ford Motor Company.
Howard W. Imhof, Director. Mr. Imhof is a management consultant and principal in Empire International, a executive search firm. Previously he was President, Chief Operating Officer and Director of Affiliated Manufacturers, Inc. He has also held positions as chief operating officer, chief executive officer, and in other international sales and marketing management positions in the electronic materials industry. Mr. Imhof is a co-founder of Heraeus Cermalloy's Electronic Materials Division and served for several years in a number of top management positions.
Patricia M. Newbill, Secretary. Ms Newbill was elected Secretary of the Company in 1997 and is currently Secretary of Affiliated Manufacturers, Inc. Ms Newbill is an Administrative Assistant at Affiliated Manufacturers, a position she has held since 1987.
Item 10.
Item 10. Executive Compensation
The following summary compensation table sets forth all compensation paid by the Company during the fiscal years ended December 31, 1999, 1998 and 1997 in all capacities for the accounts of the Chief Executive Officer (CEO) and President.
Directors do not receive any remuneration for their services as such. The Company does not have a pension plan.
Stock Options
Under the terms of the Reorganization Plan confirmed in 1991, all options and warrants then outstanding were canceled. Since then, no options or warrants have been granted.
Item 11.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number and percentage of the shares of ORS' voting stock owned as of March 1, 2000 by all persons known to ORS who own more than 5% of the outstanding number of such shares, by all directors of ORS, and by all officers and directors of ORS as a group. Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned.
Common Stock
Affiliated Manufacturers, Inc.'s holdings includes 1,076,250 shares of Common Stock, $0.01 par value, and 12,000,000 shares of Class A Common Stock, $0.0035 par value. The ORS Class A Common Stock has the same rights and preferences as the ORS' Common Stock, $0.01 par value.
Series A Preferred Stock
Each share of Series A Preferred Stock, $0.01 par value, has the same rights and preferences as the Company's Common Stock, $0.01 par value.
Item 12.
Item 12. Certain Relationships and Related Transactions
Affiliated Manufacturers, Inc., a principal shareholder of ORS, currently holds a first priority secured note from ORS. As of December 31, 1999, the principal amounted to $166,102 and the accrued interest, which is being calculated using simple interest on a quarterly basis at a rate of 12% per annum, amounted to $289,012. No payments were made to Affiliated Manufacturers, Inc. in 1999 and 1998.
Sales to Affiliated Manufacturers, Inc. for the years ended December 31, 1999 and 1998 were $382,307 and $396,381, respectively. The sales represent approximately 27% and 31%, respectively, of the total sales of ORS for those years. At December 31, 1999 and December 31, 1998, accounts receivable from Affiliated Manufacturers, Inc. amounted to $250,677 and $140,102, respectively.
PART IV
Item 13.
Item 13. Exhibits List and Reports on Form 8-K
(a) Exhibits
See Page 11 for a List of Exhibits.
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with Section 13 or 15(d) 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.
ORS AUTOMATION, INC. (Registrant)
By: /s/ Edward Kornstein Dated: March 29, 2000 ----------------------- ----------------- Edward Kornstein, Chairman, CEO
In Accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
ORS AUTOMATION, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
ORS AUTOMATION, INC. CONTENTS TO FINANCIAL STATEMENTS DECEMBER 31, 1998 -----------------------------------------------------
WITHUM, SMITH & BROWN A Professional Corporation Certified Public Accountants & Consultants P. O. Box 646 81 Park Avenue Flemington, NJ 08822
INDEPENDENT AUDITORS' REPORT
To the Board of Directors, ORS Automation, Inc.:
We have audited the accompanying balance sheet of ORS Automation, Inc. as of December 31, 1999, and the related statements of income, stockholders' equity (deficit) and cash flows for the years ending December 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ORS Automation, Inc. as of December 31, 1999, and the results of its operations and its cash flows for the years ended December 31, 1999 and 1998 in conformity with generally accepted accounting principles.
Withum, Smith & Brown Flemington, NJ January 24, 2000
ORS AUTOMATION, INC. BALANCE SHEET DECEMBER 31, 1999
The Notes to Financial Statements are an integral part of these statements
ORS AUTOMATION, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
The Notes to Financial Statements are an integral part of these statements
ORS AUTOMATION, INC. STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
The Notes to Financial Statements are an integral part of these statements
ORS AUTOMATION, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Supplemental Disclosure of Cash Flow Information:
The Notes to Financial Statements are an integral part of these statements
ORS AUTOMATION, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies: A. Nature of the Business ORS Automation, Inc. is primarily engaged in the production and sales of microcomputer based hardware and software vision products for automatic control of industrial processes. The products are supplied as sub-assemblies or add-ons to machine manufacturers, who incorporate these products into their equipment.
B. Cash Equivalents Cash and cash equivalents include cash on hand and in the bank as well as all short-term securities held for the primary purpose of general liquidity. Such securities normally mature within three months from the date of acquisition.
C. Concentration of Credit Risk The Company maintains its cash and cash equivalents in bank deposit accounts at high credit quality financial institutions. The balances, at times, may exceed federally insured limits. As part of its cash management process, the Company periodically reviews the relative credit standing of these banks.
Other financial instruments which potentially subject the Company to credit risk consist of accounts receivable. The deterioration of the financial condition of one of the Company's major customers could adversely impact the Company's operations and financial condition (See Notes 7 and 8).
D. Inventory Inventory includes cost of materials and applicable labor and overhead. Inventory is stated at the lower of cost or market, determined on the moving-average cost basis.
E. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from 3-8 years.
F. Revenue Recognition Sales of products are recorded in the period the units are shipped.
G. Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
As described in Notes 7 and 8, a significant portion of the Company's sales are to two major customers. Any substantial decrease in sales to either of these two customers, could have a material adverse effect on the Company's results of operations and financial condition.
ORS AUTOMATION, INC. NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (Cont'd):
H. Income Taxes: Deferred income tax assets and liabilities are recognized for the differences between financial and income tax reporting basis of assets and liabilities based on enacted tax rates and laws. The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year. The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on the Company's various income tax returns for the year reported. The Company's only significant deferred tax items are net operating loss and tax credit carryforwards.
I. Fair Value of Financial Instruments: The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these items.
It was not practical to estimate the fair value of the state priority tax claims payable and note payable to related parties. See Notes 4 and 7, respectively, for additional information concerning such financial instruments.
J. Effect of New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in either assets or liabilities. As amended in June 1999 by SFAS No. 137 this statement is effective for all fiscal years beginning after June 15, 2000 and is not to be applied retroactively to financial statements for prior periods. The impact of adoption of the standard has not yet been determined.
SFAS No. 130 "Comprehensive Income", requires an enterprise report, by major components and as a single total, the change in its net assets, during the period from non-owner sources. The Company does not have any items of Other Comprehensive Income, as defined by SFAS No. 130, and thus Net Income is equal to Comprehensive Income.
Note 2 - Inventory:
ORS AUTOMATION, INC. NOTES TO FINANCIAL STATEMENTS
Note 3 - Property and Equipment:
The major classifications of property and equipment are summarized as follows at December 31, 1999:
Depreciation expense charged to operations amounted to $9,774 and $8,884 for years ended December 31, 1999 and 1998, respectively.
Note 4 - Priority Tax Claims Payable: On February 1, 1999 the Internal Revenue Service accepted an Offer of Compromise from the Company for their priority tax claims payable. The settlement called for the Company to pay $236,000. The Company recorded a change in estimate in the amount of $83,239 in 1998. The $236,000 was paid during 1999.
As of December 31,1999, a priority tax claim still exists for various state taxing authorities. The principal amount due on this payable is $12,650 with interest accruing on the unpaid balance at a statutory rate of 9% amounting to $15,677.
Note 5 - Preferred and Common Stock: The preferred stock of the Company has a par value of $.01 per share and 1,000,000 shares have been authorized to be issued. All are issued and outstanding at December 31, 1999 and 1998, respectively. No dividends have been declared by the Board of Directors. This preferred stock has no liquidating preferences.
The common stock of the Company has a par value of $.01 per share, 10,000,000 shares have been authorized and 8,267,889 have been issued. As of December 31, 1999 and 1998, 8,082,443 shares are outstanding. The difference between issued and outstanding shares represent shares that have been canceled pursuant to the Company's April 8, 1991 Plan of Reorganization.
The Company also has Class A common stock, which has a par value of $.0035 per share and 12,000,000 shares have been authorized to be issued. All are issued and outstanding at December 31, 1999 and 1998.
Both common stock and Class A common stock have the same voting rights.
Note 6 - Earnings Per Share: The Company has adopted Statement of Financial Accounting Standard No. 128, "Earnings Per Share". Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per common share would be computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to other outstanding options, warrants, etc. to purchase common stock. For the years ended December 31, 1999 and 1998, the Company had no such potential dilutive securities, hence, only basic earnings per share is presented.
ORS AUTOMATION, INC. NOTES TO FINANCIAL STATEMENTS
Note 7 - Related Party Transactions: As of December 31, 1999 and 1998, Affiliated Manufactures, Inc. (AMI) controlled approximately 13 percent of the outstanding common stock, 100 percent of the outstanding Class A - common stock, which collectively represents approximately 65% of the outstanding common stock, and 100 percent of the outstanding preferred stock of the Company.
A. Note Payable The Company currently owes AMI a note payable plus accrued interest. The principal amounted to $166,102 at December 31, 1999. Accrued interest is being calculated using simple interest at a rate of 12% per annum and amounted to $289,012 at December 31, 1999. Per a stipulation in the Company's April 8, 1991 Plan of Reorganization, no payment of this secured claim shall be made until all other bankruptcy claims have been paid in full or there is an event of default under the plan. Since the state tax claims are still outstanding, the Company has classified this as a long-term liability. Interest expense as a charge to operations in 1999 and 1998 was $19,932 per year.
B. Sales and Accounts Receivable Sales to AMI for the years ended December 31, 1999 and 1998 were $382,307 and $396,381, respectively, which represented 26% and 31% of net sales. Accounts receivable from this related party as of December 31, 1999 was $250,677 representing 46% of accounts receivable.
Note 8 - Major Customer: The following summarizes the non-related party sales and the percentage to total sales for the Company's major customer for years ended December 31:
This major customer's accounts receivable balance is approximately $245,461 at December 31, 1999.
Note 9 - Income Taxes: The provision for income taxes consist of the following for the year ended December 31:
ORS AUTOMATION, INC. NOTES TO FINANCIAL STATEMENTS
Note 9 - Income Taxes (Cont'd):
The reconciliation of income tax expense computed at the U.S. federal statutory rate to the provision for income taxes is as follows for the year ended December 31:
The Company has federal net operating loss carryforwards of approximately $11,161,000, which are available to offset federal income taxes. These carryforwards expire between the years 2000 and 2010. At December 31, 1999, there were no remaining state net operating carryforwards.
Deferred income taxes are summarized as follows at December 31, 1999:
During the year ended December 31, 1999, the Company's valuation allowance declined by $1,747,000 due to the utilization of net operating loss carryforwards as well as the expiration of state carryforwards. As seen in the above table, any future tax benefit which may result from utilization of these net operating loss carryforwards has been fully reserved for.
Note 10 - Lease Commitments: The Company conducts its operations in approximately 7,700 square feet of an office building. The lease expires August 31, 2000. Rent expense for the years ending December 31, 1999 and 1998, including taxes, insurance and maintenance reimbursements, amounted to $76,822 and $75,514, respectively.
Future minimum rentals on the above lease for the period ending after December 31, 1999 are as follows: