<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended September 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act For the
transition period from ---- to ----
Commission file number 001-12127
INTEGRATED TECHNOLOGY USA, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 22-3136782
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
107 West Tryon Ave, Teaneck, New Jersey 07666
(Address of Principal Executive Offices)
201-837-8000
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,048,210 shares of common
stock outstanding as of November 10, 1997
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
INTEGRATED TECHNOLOGY USA, INC.
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 1997 (unaudited).......................3
Condensed Consolidated Statements of Operations for the Three Months and Nine
Months Ended September 30, 1996 and 1997 (unaudited)............................................4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1997 (unaudited).........................................................5
Notes to Condensed Consolidated Financial Statements (unaudited)................................6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................................10
PART II OTHER INFORMATION
Item 5 Other Information..............................................................................10
Item 6 Exhibits and Reports on Form 8-K...............................................................11
Signatures.....................................................................................11
</TABLE>
<PAGE>
3
Integrated Technology USA, Inc.
<TABLE>
<CAPTION>
Part I
Condensed Consolidated Balance Sheet Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
September 30, 1997
------------------
(Unaudited)
<S> <C>
Assets
Current Assets
Cash and cash equivalents .......................................................................... $ 11,453,214
Accounts receivable (net of allowance for doubtful accounts of approximately $10,820
and reserves for sales returns of approximately $35,015) ........................................... 23,999
Inventories ........................................................................................ 206,768
Prepaid expenses and other current assets .......................................................... 116,813
------------
Total current assets ...................................................................... 11,800,794
Fixed assets, net .................................................................................. 183,008
Security deposits .................................................................................. 20,252
------------
Total assets .............................................................................. $ 12,004,054
============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable ................................................................................... $ 121,357
Accrued expenses ................................................................................... 177,386
------------
Total current liabilities ................................................................. 298,743
Provision for severance payments ............................................................................ 115,205
Provision for disposal of discontinued operations ........................................................... 1,196,270
------------
Total liabilities ......................................................................... 1,610,218
------------
Commitments and Contingencies
Stockholders' equity
Preferred stock $.01 par value, 5,000,000 shares authorized; none issued and outstanding ........... --
Common stock, $.01 par value; 40,000,000 shares authorized; 6,048,210 shares issued and outstanding 61,492
Additional paid-in capital ......................................................................... 21,692,910
Treasury stock, at cost, 107,048 shares ............................................................ (217,500)
Accumulated deficit ................................................................................ (11,316,792)
Cumulative translation adjustment .................................................................. 173,726
------------
Total stockholders' equity ................................................................ $ 10,393,836
------------
Total liabilities and stockholders' equity ................................................ $ 12,004,054
============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
4
Integrated Technology USA, Inc.
Condensed Consolidated Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1997 1996 1997
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from continuing operations--
interest income ................... $ -- $ 155,161 $ -- $ 468,058
Discontinued operations:
Loss from discontinued operations . (839,581) (840,420) (1,788,738) (2,467,873)
Loss from disposal of discontinued
operations ........................ -- (1,196,270) -- (1,196,270)
----------- ----------- ----------- -----------
Loss from discontinued
operations ............... (839,581) (2,036,690) (1,788,738) (3,664,143)
----------- ----------- ----------- -----------
Net Loss ........ $ (839,581) $(1,881,529) $(1,788,738) $(3,196,085)
=========== =========== =========== ===========
Earnings per share from continuing
operations ........................ $ -- $ 0.03 $ -- $ 0.08
Loss per share from discontinued
operations ........................ (0.27) (0.34) (0.57) (0.61)
----------- ----------- ----------- -----------
Net loss per share ....... $ (0.27) $ (0.31) $ (0.57) $ (0.53)
=========== =========== =========== ===========
Weighted average shares
outstanding .............. 3,134,198 6,035,879 3,134,198 6,037,466
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
5
Integrated Technology USA, Inc.
Condensed Consolidated Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1996 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows used for operating activities
Net loss ........................................................ $ (1,788,738) $ (3,196,085)
Adjustments to reconcile net loss to net cash used for
operating activities
Provision for disposal of discontinued
operations ............................................. -- 1,196,270
Deprecation and amortization ........................... 30,942 51,460
Amortization of loan discount .......................... 292,054 --
Non-cash compensation expense .......................... 202,963 --
Gain on sale of property and equipment ................. -- (3,725)
Changes in assets and liabilities
Accounts receivable .................................... 21,045 211,494
Inventories ............................................ 180,336 (588)
Deferred financing costs ............................... (539,452) --
Other assets ........................................... (18,299) 17,626
Accrued expenses and other liabilities ................. 334,796 (134,868)
------------ ------------
Net cash used for operating activities ........ (962,811) (2,119,165)
------------ ------------
Cash flows used for investing activities
Proceeds from sales of property and equipment ................... -- 3,725
Capital expenditures ............................................ (13,404) (89,708)
------------ ------------
Net cash used for investing activities ........ (13,404) (85,983)
------------ ------------
Cash flows from financing activities
Increase in bank overdraft ...................................... 41,895 --
------------ ------------
Proceeds from bridge financing net of expenses .................. 1,062,500 --
Purchase of treasury stock ...................................... -- (52,500)
Proceeds from exercise of options ............................... -- 757
Net cash provided by/(used for) financing
activities ............................................. 1,104,395 (51,743)
------------ ------------
Effect of exchange rate changes on cash .................................. (9,113) --
Net decrease in cash and cash equivalents ................................ 119,067 (2,256,891)
Cash and cash equivalents, beginning of period ........................... 33,473 13,710,105
------------ ------------
Cash and cash equivalents, end of period ................................. $ 152,540 $ 11,453,214
============ ============
Supplement schedule of cash paid during the period for
interest ................................................................. -- --
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
6
Integrated Technology USA, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
1. Organization and Basis of presentation
Integrated Technology USA, Inc. (the "Company") was incorporated in 1990 to
design, develop and market products for emerging computer related markets.
Through September 30, 1997, the Company had generated revenues from the
sale of its products, CompuPhone 2000 (and a predecessor product) and
CompuNet 2000. On November 6, 1997, the Company announced its decision to
discontinue its existing operations in their entirety by December 31, 1997.
The Company had cash of approximately $10.7 million as of November 6, 1997.
The Company estimates that it will be required to make net cash outlays of
approximately $600,000 in connection with the discontinuation of its
existing operations, although there can be no assurance that the amount
will not exceed such estimate. Upon completing the discontinuation of its
existing operations, the Company will be a "shell company" and its
principal asset will be its remaining cash. The Company intends to focus on
seeking a merger/acquisition opportunity that will enable the Company to
redeploy its cash to a new operating business.
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, I.T.I. Innovative Technology,
Ltd. ("Innovative") and CompuPrint Ltd. ("CompuPrint"), both of which are
incorporated and conduct business in Israel. All significant intercompany
transactions and account balances have been eliminated in consolidation.
The condensed consolidated interim financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission with respect to Form
10-QSB. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. In the opinion of management, such financial statements
reflect all adjustments necessary for a fair statement of the results for
the interim periods presented and to make such financial statements not
misleading. It is suggested that these interim financial statements be read
in conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1996 Annual Report on Form 10-KSB.
2. Summary of Significant Accounting Policies
Functional Currency
Effective January 1, 1997, the Company changed the functional currency of
its Israeli subsidiaries from the New Israeli Shekel to the U.S. dollar.
Changes in economic facts and circumstances necessitated such change in the
functional currency. Accordingly, pursuant to the requirements of Statement
of Financial Accounting Standards No. 52, Foreign Currency Translation, the
U.S. dollar translated amounts of Innovative's and CompuPrint's nonmonetary
assets, primarily fixed assets and security deposits, at December 31, 1996
became the accounting basis for those assets at January 1, 1997 and for
subsequent periods.
<PAGE>
7
Integrated Technology USA, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
In addition, the $173,726 cumulative translation adjustment at December 31,
1996 accumulated in stockholders' equity prior to this change in functional
currency will remain as a separate component of stockholders' equity. Had
the Company not changed the functional currency of its Israeli
subsidiaries, consolidated net loss for the three months ended September
30, 1997 would have been decreased by approximately $118,000 ( $0.02 per
share) and consolidated net loss for the nine months ended September 30,
1997 would have increased by approximately $242,680 ( $0.04 per share).
Net loss per share
Net loss per share is computed using the weighted average number of common
shares outstanding and dilutive common share equivalents. Common shares
issued, and options and warrants granted, by the Company during the twelve
months preceding the Company's Initial Public Offering (the "IPO") have
been included in the calculation of common and common equivalent shares
outstanding as if they were outstanding for all periods presented using the
treasury stock method and an estimated initial public offering price prior
to the IPO. Options and warrants granted prior to the aforementioned twelve
month period and subsequent to the IPO have been included in the
calculation of common and common equivalent shares outstanding when
dilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 128, Earnings per Share ("FAS 128"), which
requires the presentation of basic earnings per share in a company's
financial statements for reporting periods ending subsequent to December
15, 1997. Early adoption of FAS 128 is not permitted. The adoption of FAS
128 is not expected to have a material impact on the Company's consolidated
financial statements.
As of September 30, 1997, the Company had outstanding warrants and options
to purchase 3,360,082 and 892,403 shares, respectively, of common stock
which are not included in the calculation of earnings per share for the
nine months ended September 30, 1997 and would not be included in such
calculation under the guidance prescribed by FAS 128, due to the
anti-dilutive nature of these instruments.
Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at
the date of the financial statements and the reported amount of revenues
and expenses during the reported period. Actual results could differ from
these estimates.
<PAGE>
8
Integrated Technology USA, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Disclosure of Effect of Adoption of FAS 130
In June 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 130, Reporting Comprehensive Income ("FAS 130"),
which requires the presentation of the components of comprehensive income
in a company's financial statements for reporting periods beginning
subsequent to December 15, 1997. Comprehensive income is defined as the
change in a company's equity during a financial reporting period from
transactions and other circumstances from nonowner sources (including
cumulative translation adjustments, minimum pension liabilities and
unrealized gains/losses on available for sale securities). The adoption of
FAS 130 is not expected to have material impact on the Company's
consolidated financial statements.
Concentration of Credit Risk
Financial instruments which subject the Company to concentration of credit
risk consist principally of trade receivables.
3. Accrued Expenses
Accrued expenses are detailed as follows:
Accrued payroll and benefits..................... 77,100
Accrued professional fees........................ 80,200
Other............................................ 20,086
-------
177,386
=======
4. Provision for Disposal of Discontinued Operations
In connection with the decision to discontinue its existing operations as
described in Note 1, the Company has recorded a reserve for the loss on
disposal of such discontinued operations which is detailed as follows:
<TABLE>
<S> <C>
Reserve for liquidation of certain assets below cost and
warranty costs.............................................................. $ 248,680
Severance obligations....................................................... 294,770
Reserve for expected loss on resale of goods on order....................... 356,400
Reserve to satisfy purchase commitments and lease
termination payments........................................................ $ 296,420
---------
$1,196,270
=========
</TABLE>
<PAGE>
9
Integrated Technology USA, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
5. Loss from Discontinued Operations
Loss from discontinued operations is detailed as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1997 1996 1997
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales .................................. $ 425,701 $ 40,504 $ 634,158 $ 417,796
Cost of products sold ...................... 334,849 18,558 448,556 208,583
----------- ----------- ----------- -----------
Gross profit ...................... 90,852 21,946 185,602 209,213
----------- ----------- ----------- -----------
Operating expenses
Selling, general and administrative 505,526 749,249 1,321,318 2,319,612
Research and development, net ..... 110,033 113,117 261,297 357,474
----------- ----------- ----------- -----------
Total costs and expenses . 615,559 862,366 1,582,615 2,677,086
----------- ----------- ----------- -----------
Loss from operations ..... (524,707) (840,420) (1,397,013) (2,467,873)
Interest income (expense) ......... (314,874) -- (391,725) --
----------- ----------- ----------- -----------
Net Loss .......................... $ (839,581) $ (840,420) $(1,788,738) $(2,467,873)
=========== =========== =========== ===========
</TABLE>
6. 1996 Stock Option Plan
In May 1997, the Company's Board of Directors and Stockholders approved an
amendment to the Company's 1996 Stock Option Plan (the "Stock Option Plan")
pursuant to which the aggregate number of stock options authorized for
issuance under the Stock Option Plan was increased from 833,333 to
1,129,000. All officers, directors and employees of the Company and other
persons who perform services for the Company are eligible to participate in
the Stock Option Plan. Some or all of the options may be "Incentive stock
options" within the meaning of the Internal Revenue Code of 1986, as
amended. As of September 30, 1997, the Company had granted options to
purchase approximately 570,000 shares under the Stock Option Plan,
including an aggregate of approximately 455,001 options to executive
officers and directors of the Company.
7. Stock Repurchase Plan
In April 1997, the Board of Directors authorized the Company to repurchase
shares of the Company's common stock for an aggregate cost not to exceed
$1,000,000. As of September 30, 1997, the Company had repurchased 50,000
shares for an aggregate cost of $52,500.
<PAGE>
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements and related Notes thereto of
Integrated Technology USA, Inc.(the "Company"), included herein and the
Consolidated Financial Statements and related Notes thereto included in the
Company's 1996 Annual Report on Form 10-KSB.
The Company continued to make only limited sales in the third quarter of
1997 (with net sales amounting to approximately $41,000). In view of the
continued failure of the Company's products to achieve market acceptance, the
Company has decided to discontinue its existing operations in their entirety by
the end of 1997. The Company intends to focus on seeking a merger/acquisition
opportunity that will enable the Company to redeploy its cash to a new operating
business. There can be no assurance, however, that the Company will succeed in
the near term, or at all, in identifying an appropriate merger/acquisition
opportunity that is available on terms that are satisfactory to the Company.
The Company had cash of approximately $10.7 million as of November 6, 1997.
The Company estimates that it will be required to make net cash outlays of
approximately $600,000 in connection with the discontinuation of its existing
operations, although there can no assurance that the amount will not be higher.
Upon completing the discontinuation of its existing operations, the Company will
be a "shell company" and its principal asset will be its remaining cash.
The Company's net loss in the third quarter of 1997 amounted to
approximately $1.9 million and includes a loss from discontinued operations of
$2,037,000 which is partially offset by interest income of $155,000. The loss
from discontinued operations includes a provision for disposal of discontinued
operations of approximately $1.2 million, consisting of (i) a provision of
approximately $249,000 attributable to the expected loss on liquidation of
certain assets below cost and warranty costs, (ii) a provision for severance
payments of approximately $295,000, (iii) a provision of approximately $356,000
for anticipated losses on resale of goods on order and (iv) a provision of
approximately $296,000 for satisfaction of certain purchase commitments and
lease termination payments.
Part II
Item 5. OTHER INFORMATION
On November 5, 1997, William Spier, a director of the Company, was
appointed Acting Chief Executive Officer of the Company. Mr. Spier replaces Alan
P. Haber, who resigned on such date as Chairman and Chief Executive Officer of
the Company. Mr. Haber continues to serve as a director of the Company.
The American Stock Exchange ("AMEX") has advised the Company that it has
fallen below certain of AMEX's continued listing guidelines. As a result, there
is no assurance that the Company's listing on AMEX will be continued.
<PAGE>
11
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are furnished with this report:
10.1 Termination Agreement dated November 5, 1997, between the Registrant
and Alan Haber
11.1 Statement re: computation of per share earnings
27.1 Financial Data Schedule
(b) The Registrant filed one report on form 8-K (Item 5) during the quarter
ended September 30, 1997. This Report was dated July 24, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
INTEGRATED TECHNOLOGY USA, INC.
By: Simon Kahn
-----------------------------
Simon Kahn
Chief Financial Officer
(signing both on behalf of the registrant and in his capacity as Principal
Financial and Principal Accounting Officer)
Dated: November 14, 1997
<PAGE>
Exhibit 10.1
TERMINATION AGREEMENT dated as of November 5, 1997, between Alan P. HABER
("Haber") and INTEGRATED TECHNOLOGY USA, INC., a Delaware corporation (the
"Company").
Preamble
The parties wish to enter into this Agreement in order to confirm certain
agreements of the parties relating to Haber's decision to resign all his
positions with the Company and its subsidiaries (other than his position as a
director of the Company).
Accordingly, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. (a) Subject to the following sentence, effective immediately (i) Haber
hereby resigns all his positions with the Company and with each subsidiary of
the Company (including, without limitation, his positions as Chairman and Chief
Executive Officer of the Company and as a director of the Company's
subsidiaries) and (ii) Haber shall cease to be employed in any capacity as an
employee of the Company or any of its subsidiaries. Notwithstanding the
foregoing, Haber is not resigning his position as a director of the Company.
(b) The Company shall take reasonable efforts to remove Haber
reasonably promptly as the representative of the Company's subsidiaries with
respect to Israeli tax authorities (including, without limitation, the Value
Added Tax authorities).
2. Haber and the Company are parties to an Employment Agreement dated as of
July 1, 1996 (the "Employment Agreement"). The Employment Agreement is hereby
terminated, provided that the provisions of the first paragraph of Section 9 of
the Employment Agreement (the "Surviving Paragraph") shall survive such
termination and continue in effect. No other provision of the Employment
Agreement shall survive the termination of the Employment Agreement. The Company
will cause any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) that assumes the Company's indemnification
obligations to the other directors of the Company to assume to the same extent
the Company's obligations to Haber under the Surviving Paragraph.
3. The Company shall make the following payments to Haber (in each case
less any withholding required under applicable law):
a. The Company shall pay to Haber New Israeli Shekels 12,600
(representing accrued and unpaid base salary through the date hereof).
-1-
<PAGE>
b. The Company shall pay to Haber any amounts due under the Employment
Agreement in respect of accrued unused vacation (up to a maximum of New
Israeli Shekels 41,000).
c. The Company shall pay to Haber US $320,000 (representing severance
grant) (the "Severance Payment").
d. The Company shall make all payments required by Sections 5(a), 5(b)
and 5(d) of the Employment Agreement (to the extent not heretofore paid) in
respect of the period July 1, 1996 to November 5, 1997 (up to a maximum
amount of US $16,000).
d. The Company shall transfer to Haber the ownership of the Betuach
Menahelim policy that the Company has maintained in the name of Haber
pursuant to Section 5(a) of the Employment Agreement.
e. Haber shall be entitled to expense reimbursement in accordance with
Section 7 of the Employment Agreement with respect to any unreimbursed
expenses incurred prior to the date hereof (provided that such request is
submitted no later than 60 days after the date of hereof).
f. The Company shall transfer to Haber (as additional compensation)
the car that the Company has made available to Haber pursuant to Section
5(c) of the Employment Agreement.
g. The Company shall transfer to Haber's name the Keren Hishtalmut
maintained by the Company pursuant to Section 5 of the Employment
Agreement.
The Company shall make the Severance payment within seven days following the
date hereof. The Company shall make the other payments and transfers provided
for in this Section 3 (excluding subparagraph e) within 30 days of the date
hereof.
4. Haber hereby agrees with the Company and its subsidiaries that he shall
not have any further claims of any kind against the Company or any of its
subsidiaries for any "Pitzue Piturin" payments (under Israeli law) as a result
of the cessation of his employment or for any payments in respect of unused
vacation. Haber hereby waives any right to advance notice relating the cessation
of his employment.
5. (a) Haber agrees that the payments and other benefits provided for in
this Agreement represent an agreed upon settlement of any and all amounts and
other benefits to which he might be entitled under any provision of any policy,
plan or procedure of or contract (including, without limitation, the Employment
Agreement) with the Company or any of its subsidiaries or under any applicable
law. Haber acknowledges that he has read this Agreement in its entirety, that he
understands all of its terms, that he knowingly and voluntarily assents to all
of the terms
-2-
<PAGE>
and conditions contained herein including, without limitation, the waiver and
release set forth below, and that he has been advised by counsel with respect to
this Agreement.
(b) Haber, for himself and for his heirs, executors, administrators
and assigns (collectively, the "Employee Parties"), hereby forever waives,
releases and discharge the Company and its subsidiaries, and their respective
affiliates, successors and assigns and past and present officers, directors,
employees and agents, and any fiduciaries of any employee benefit plan or policy
of any of the foregoing (collectively, the "Employer Parties"), from any and all
claims, demands, causes of actions, fees and liabilities and expenses (inclusive
of attorneys' fees) of any kind whatsoever, whether known or unknown, which he
ever had or now has against any of the Employer Parties by reason of any actual
or alleged act, omission, transaction, practice, conduct, occurrence, or other
matter up to and including the date of this Agreement, including but not limited
to, any claims under any Federal, state, local or foreign law (statutory or
decisional), regulation, or ordinance; provided, however, that the foregoing
shall not in any manner release or discharge any of Haber's rights under this
Agreement or under the Surviving Paragraph of the Employment Agreement or under
any stock option heretofore granted to Haber by the Company.
6. Haber has heretofore been granted certain options under the Company's
1996 Stock Option Plan. Section 3 of the option grant instruments relating to
such options contains certain early termination provisions. The parties hereto
agree that such grant instruments shall be deemed amended by replacing the
existing Section 3 thereof with the following new Section 3 (but shall otherwise
be unchanged):
3. Termination of Option. The Option may not be exercised after the
Expiration Date set forth above. The Option is subject to early termination
as provided in the Plan and as hereinafter set forth. The Option shall
terminate immediately upon Optionee's ceasing to be a director of the
Company, subject to the following exceptions: (i) if such ceasing to be a
director is by reason of the death or disability of Optionee, the
unexercised portion of the Option shall (subject to the Plan) continue to
be exercisable for 12 months after such ceasing to be a director (provided,
however, that during such 12 months the Option will only be exercisable
with respect to the number of shares, if any, as to which the Option could
have been exercised immediately prior to the date of such termination
pursuant to paragraph 2 above) and (ii) if such ceasing to be a director is
for any other reason, the unexercised portion of the Option shall (subject
to the Plan) continue to be exercisable for three months after such ceasing
to be a director (provided, however, that during such three months the
Option will only be exercisable with respect to the number of shares, if
any, as to which the Option could have been exercised immediately prior to
the date of such termination pursuant to paragraph 2 above). For purposes
of this paragraph 3, the term "Company" shall have the meaning given in the
Plan.
7. This Agreement shall be binding upon and inure to the benefit of the
heirs, trustees, executors, administrators, successors and assigns of the
respective parties. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute the
same instrument. This Agreement shall be governed by and subject to the laws
-3-
<PAGE>
of the State of New York without giving effect to conflict of laws rules. The
Company's subsidiaries shall be a third party beneficiary of this Agreement. The
Company's obligations to make payments hereunder are unfunded and claims for
payments by Haber or any beneficiary of Haber shall be those of a general,
unsecured creditor.
8. The parties agree that this Agreement contains a complete statement of
all the arrangements between Haber, the Company and its subsidiaries with
respect to Haber's employment, his resignation and the termination of his
employment and supersedes all existing agreements, whether written or oral,
between the Company (or any of its subsidiaries) and Haber concerning Haber's
employment or such resignation and termination.
In Witness Whereof, the parties have executed this Agreement as of the date
and year first above written.
INTEGRATED TECHNOLOGY USA, INC.
By: Alan P. Haber
_______________________________
Alan P. Haber
-4-
<PAGE>
12
Integrated Technology USA, Inc. Exhibit 11.1
Earnings per share ------------
<TABLE>
<CAPTION>
Days Shares Weighted
Period Outstanding Outstanding Outstanding Shares
------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Three Months Ended September 30, 1997
Balance at 7/1/97 7/1/97-9/30/97 92 6,018,212 5,553,675,504
Exercise of Stock Options 7/5/97-9/30/97 87 3,000 261,000
Exercise of Stock Options 7/18/97-9/30/97 74 5,346 395,604
Exercise of Stock Options 7/18/97-9/30/97 74 4,156 307,544
Exercise of Stock Options 7/18/97-9/30/97 74 3,994 295,556
Exercise of Stock Options` 8/28/97-9/30/97 33 2,092 69,036
Exercise of Stock Options 9/4/97-9/30/97 26 11,410 296,660
------
6,048,210
---------
Nine Months Ended September 30, 1997
Balance at 7/1/97 1/1/97-9/30/97 113 6,005,179 678,585,227
After repurchase of certain shares 4/23/97-9/30/97 160 5,995,179 952,828,640
Exercise of Stock Options 1/20/97-9/30/97 253 38,032 9,622,096
Exercise of Bridge Warrants 2/5/97-9/30/97 237 16,667 3,950,079
Exercise of Bridge Warrants 3/20/97-9/30/97 194 8,334 1,616,796
Exercise of Stock Options 7/5/97-9/30/97 87 3,000 261,000
Exercise of Stock Options 7/18/97-9/30/97 74 5,346 395,604
Exercise of Stock Options 7/18/97-9/30/97 74 4,156 307,544
Exercise of Stock Options 7/18/97-9/30/97 74 3,994 295,556
Exercise of Stock Options` 8/28/97-9/30/97 33 2,092 69,036
Exercise of Stock Options 9/4/97-9/30/97 26 11,410 296,660
------
12,053,389
----------
</TABLE>
<TABLE>
<CAPTION>
Weighted
Average Net Net Loss
Shares Loss Per Share
------- ---- ---------
<S> <C> <C> <C>
Three Months Ended September 30, 1997
Balance at 7/1/97 6,018,212
Exercise of Stock Options 2,837
Exercise of Stock Options 4,300
Exercise of Stock Options 3,343
Exercise of Stock Options 3,213
Exercise of Stock Options` 750
Exercise of Stock Options 3,225
-----
6,035,879 -1,881,529 -0.31
---------
Nine Months Ended September 30, 1997
Balance at 7/1/97 2,485,660
After repurchase of certain shares 3,490,215
Exercise of Stock Options 35,246
Exercise of Bridge Warrants 14,469
Exercise of Bridge Warrants 5,922
Exercise of Stock Options 2,837
Exercise of Stock Options 4,300
Exercise of Stock Options 3,343
Exercise of Stock Options 3,213
Exercise of Stock Options` 750
Exercise of Stock Options 3,225
-----
6,037,466 -3,196,085 -0.53
---------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such consolidated financial statements and notes.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,453,214
<SECURITIES> 0
<RECEIVABLES> 69,834
<ALLOWANCES> 45,835
<INVENTORY> 207,768
<CURRENT-ASSETS> 11,800,794
<PP&E> 426,704
<DEPRECIATION> 243,696
<TOTAL-ASSETS> 12,004,054
<CURRENT-LIABILITIES> 298,743
<BONDS> 0
0
0
<COMMON> 61,492
<OTHER-SE> 10,332,344
<TOTAL-LIABILITY-AND-EQUITY> 12,004,054
<SALES> 417,796
<TOTAL-REVENUES> 417,796
<CGS> 208,583
<TOTAL-COSTS> 208,583
<OTHER-EXPENSES> 2,677,086
<LOSS-PROVISION> 1,196,270
<INTEREST-EXPENSE> (468,058)
<INCOME-PRETAX> (3,196,085)
<INCOME-TAX> 0
<INCOME-CONTINUING> 468,058
<DISCONTINUED> (3,664,143)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,196,085)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> 0
</TABLE>
