<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, 1998
[ ] 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.)
c/o Madison Partners
444 Madison Avenue - 38th floor
New York, NY 10022
(Address of Principal Executive Offices)
212-751-2300 x122
(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: 6,139,401 shares of common
stock outstanding as of October 30, 1998
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
2
INTEGRATED TECHNOLOGY USA, INC.
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1998
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 1998
(unaudited).......................................................3
Condensed Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 1997 and 1998
(unaudited).......................................................4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1998 (unaudited)..............5
Notes to Condensed Consolidated Financial Statements
(unaudited).......................................................6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................8
PART II OTHER INFORMATION
Item 5 Other Information...........................................9
Item 6 Exhibits and Reports on Form 8-K............................9
Signatures..................................................9
<PAGE>
3
Integrated Technology USA, Inc. Part I
Condensed Consolidated Balance Sheet Financial Information
- --------------------------------------------------------------------------------
September 30, 1998
(Unaudited)
Assets
Current Assets
Cash and cash equivalents........................... $10,083,850
Prepaid expenses and other current assets........... 52,447
-----------
Total current assets..................... $10,136,297
===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable.................................... $ 1,260
Accrued expenses and other current liabilities...... 98,411
-----------
Total current liabilities................ $ 99,671
===========
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; 6,139,401 shares issued and
outstanding......................................... 62,425
Additional paid-in capital.......................... 21,697,827
Treasury stock, at cost, 107,048 shares............. (217,500)
Accumulated deficit................................. (11,506,126)
-----------
Total stockholders' equity............... 10,036,626
-----------
Total liabilities and stockholders'
equity................................... $10,136,297
===========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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4
Integrated Technology USA, Inc.
Condensed Consolidated Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1998 1997 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income from continuing operations--interest income $ 155,161 $ 139,156 $ 468,058 $ 415,258
----------- --------- ----------- ---------
Expenses - general and administrative................... -- 124,270 -- 338,116
Income from continuing operations....................... 155,161 14,886 468,058 77,142
Loss from discontinued operations....................... (2,036,690) (30,336) (3,664,143) (30,336)
----------- --------- ----------- ---------
Net (loss) income..................... $(1,881,529) $ (15,450) $(3,196,085) $ 46,806
=========== ========= =========== =========
Earnings (loss) per share from continuing operations -
basic and diluted....................................... $ 0.03 $ 0.00 $ 0.08 $ 0.01
Loss per share from discontinued operations - basic
and diluted............................................. (0.34) (0.00) (0.61) (0.00)
----------- --------- ----------- ---------
Net income (loss) per share - basic and diluted $ (0.31) $ (0.00) $ (0.53) $ 0.01
=========== ========= =========== =========
Weighted average shares outstanding................... 6,035,879 6,138,788 6,037,466 6,107,416
=========== ========= =========== =========
</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,
1997 1998
---- ----
<S> <C> <C>
Cash flows used for operating activities
Net (loss) income.................... $(3,196,085) $46,806
Adjustments to reconcile net loss to
net cash used for operating activities
Provision for disposal of discontinued
operations............................... 1,196,270 ---
Depreciation and amortization............. 51,460 ---
Changes in assets and liabilities
Assets of discontinued operations..... 210,906 79,904
Prepaid expenses and other current
assets................................ 17,626 108,453
Accounts payable...................... (260,749) (59,260)
Accrued expenses and other
liabilities........................... (134,868) (199,747)
--------- --------
Net cash used for
operating activities................ (2,115,440) (23,844)
----------- --------
Cash flows used for investing activities
Capital expenditures.................. (89,708) ---
-------- --------
Net cash used for
investing activities................ (89,708) ---
-------- --------
Cash flows from financing activities
Proceeds from exercise of options and bridge
warrants.................................. 757 5,744
Purchase of treasury stock................... (52,500) ---
-------- --------
Net cash (used for) provided by
financing activities (51,743) 5,744
-------- --------
Net decrease in cash and equivalents............. (2,256,891) (18,100)
Cash and cash equivalents, beginning of
period........................................... 13,710,105 10,101,950
Cash and cash equivalents, end of period $11,453,214 $10,083,850
============ ===========
</TABLE>
<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. As a result the Company's principal asset is its
remaining cash, and it intends to focus on seeking a merger/acquisition
opportunity that will enable it to deploy its cash into a new operating
business.
The condensed consolidated interim 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 in Israel and conducted
business in Israel prior to the discontinuation of operations. 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 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 1997 Annual Report on Form
10-KSB.
2. Summary of Significant Accounting Policies
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>
7
Integrated Technology USA, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- -------------------------------------------------------------------------------
3. Accrued Expenses and other current liabilities
Accrued expenses and other current liabilities are detailed as follows:
Accrued professional fees............................ $40,822
Other................................................ 57,589
-------
$98,411
=======
4. Loss from Discontinued Operations
Loss from discontinued operations is detailed as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales......................................... $ 40,504 $ 417,796
Cost of products sold............................. 18,558 208,583
------- -------
Gross Profit................................ 21,946 209,213
------- -------
Operating expenses
Selling, general and administrative............... 749,249 2,319,612
Research and development, net..................... 113,117 357,474
-------- -------
Total costs and expenses..................... 862,366 2,677,086
-------- ---------
Loss from discontinued operations........... (840,420) (2,467,873)
======== ==========
Loss from disposal of discontinued operations.... (1,196,270) (1,196,270)
----------- -----------
Net Loss from discontinued operations............ $(2,036,690) $(3,664,143)
=========== ===========
</TABLE>
The loss from discontinued operations in the three months and nine
months ended September 30, 1998 was caused by the write down of all
remaining assets of discontinued operations.
<PAGE>
8
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 1997 Annual Report on Form 10-KSB.
The Company's principal asset at present is its cash, which amounted to
approximately $10.1 million as of September 30, 1998. This cash represents the
remaining net proceeds from the Company's initial public offering. The Company's
cash is currently invested in short-term investment grade securities. The
Company had income from continuing operations in the three months and nine
months ended September 30, 1998 of approximately $15,000 and $77,000
respectively. All of such net income was interest income.
The Company's only activity at present is seeking a business
combination opportunity that will enable the Company to combine with an existing
operating business. Until the Company completes a business combination, the
Company expects that its principal cash requirement will be to pay (i) costs
associated with being a public company and (ii) costs associated with searching
for and consummating a business combination. The costs associated with being a
public company are principally professional fees and director's fees. The costs
associated with searching for and consummating a business combination include
professional fees and may include finders' fees, investment banking fees, the
costs associated with proxy solicitations, the costs of fairness opinions and
other transaction costs.
The Company believes that its existing cash will be sufficient to fund
the Company's cash requirements until consummation of a business combination.
The Company cannot at present predict (i) whether it will require additional
debt or equity financing in connection with any business combination or (ii) the
nature or extent of the Company's cash requirements following a business
combination.
The executive officers of the Company are not currently receiving any
cash compensation for their services (their sole compensation at present being
stock options) with the exception of the Chief Financial Officer who is being
paid on an hourly basis for certain accounting and financial reporting work. The
Company may, however, resume paying cash compensation to its executive officers
in the future.
The Company may retain investment bankers and other advisors in
connection with seeking or consummating a business combination. The Company may
pay such bankers and advisors in cash and/or with equity in the Company.
<PAGE>
9
Part II
Item 5. OTHER INFORMATION
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.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are furnished with this report:
11.1 Statement re: computation of per share earnings
27.1 Financial Data Schedule
(b) The Registrant did not file any Reports on Form 8-K during
the quarter ended September 30, 1998.
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: /s/ 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 9, 1998
<PAGE>
Exhibit 11.1
Integrated Technology USA, Inc. ------------
Condensed Consolidated Statement of Operations
<TABLE>
<CAPTION>
Weighted Net Net (Loss)
Period Days Shares Weighted Average (Loss) Income
Outstanding Outstanding Outstanding Shares Shares Income Per Share
----------- ----------- ----------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended
September 30, 1998
Balance at 7/1/98 7/1/98-9/30/98 92 6,138,477 564,739,884 6,138,477
Exercise of Stock Options 8/31/98-9/30/98 31 924 28,644 311
6,139,401 6,138,788 (15,450) $(0.00)
--------- ---------
Nine Months Ended
September 30, 1998
Balance at 1/1/98 1/1/98-9/30/98 273 6,058,670 1,899,716,910 6,058,670
Exercise of Stock Options 2/5/98-9/30/98 238 33,321 7,930,398 29,049
Exercise of Bridge Warrants 3/31/98-9/30/98 184 8,334 1,533,456 5,617
Exercise of Stock Options 6/22/98-9/30/98 100 38,152 3,815,200 13,975
Exercise of Stock Options 8/31/98-9/30/98 31 924 28,644 105 $46,806 $ 0.01
--------- ---------
6,139,401 6,107,416
---------
</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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 10,083,850
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,136,297
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,136,297
<CURRENT-LIABILITIES> 99,671
<BONDS> 0
0
0
<COMMON> 62,425
<OTHER-SE> 9,974,202
<TOTAL-LIABILITY-AND-EQUITY> 10,136,297
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 338,116
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (415,258)
<INCOME-PRETAX> 46,806
<INCOME-TAX> 0
<INCOME-CONTINUING> 77,142
<DISCONTINUED> (30,336)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,806
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
