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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 March 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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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 April 30, 1999
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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2
INTEGRATED TECHNOLOGY USA, INC.
FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheet as of March 31, 1999 (unaudited)..............3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1998 and 1999 (unaudited).............................. ....4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1998 and 1999 (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 2 Changes in Securities and Use of Proceeds..........................................9
Item 5 Other Information..................................................................9
Item 6 Exhibits and Reports on Form 8-K...................................................9
Signatures.........................................................................9
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3
Integrated Technology USA, Inc.
Part I
Condensed Consolidated Balance Sheet
- ------------------------------------------------------------------------------
March 31,
1999
---------
(Unaudited)
Current assets:
Cash and cash equivalents $10,115,955
Prepaid expenses and other current assets 73,575
-----------
Ttoal current assets $10,189,530
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 130,204
Accrued expenses 44,601
-----------
Total current liabilities 174,805
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Commitments and contingencies (Note 10)
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 21,768,888
Treasury stock, at cost, 107,048 shares (217,500)
Accumulated deficit (11,599,088)
-----------
Total stockholders' equity 10,014,725
-----------
Total liabilities and stockholders' equity $10,189,530
===========
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
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Three Months Ended March 31,
1998 1999
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(Unaudited)
Interest income, net $ 139,411 $ 123,759
Expenses - general and administrative (92,810) (197,957)
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Net income (loss) $ 46,601 $ (74,198)
========== ==========
Net income (loss) per share -
basic and diluted $ 0.01 $ (0.01)
========== ==========
Weighted average shares outstanding 6,079,126 6,139,401
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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5
Integrated Technology USA, Inc.
Condensed Consolidated Statement of Cash Flows
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Three Months Ended March 31,
1998 1999
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(Unaudited)
Net income (loss) $ 46,601 $ (74,198)
Adjustments to reconcile net income (loss)
to net cash (used for) provided by
operating activities:
Non-cash compensation expense -- 71,061
Change in Assets & Liabilities
Assets of Discontinued Operations 31,344 --
Other assets 35,442 9,215
Accounts payable 12,666 100,490
Accrued expenses and other liabilities (226,690) (100,349)
----------- -----------
Net cash (used for) provided by
operating activities (100,637) 6,219
Cash flows from financing activities
Proceeds form exercise of options and
bridge warrants 5,354 --
----------- -----------
Net cash provided by financing activities 5,354 --
----------- -----------
Net (decrease) increase in cash and
cash equivalents (95,283) 6,219
Cash and cash equivalents, beginning
of period 10,101,950 10,109,736
----------- -----------
Cash and cash equivalents, end of period $10,006,667 $10,115,955
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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6
Integrated Technology USA, Inc.
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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.
On February 22, 1999, the Company signed a merger agreement with
Empire Resources, Inc. ("Empire"), a distributor of value added,
semi-finished aluminum products. The merger is subject to approval of
the Company's shareholders and will effect a change in control. Under
the terms of the Agreement and Plan of Merger, Empire will be merged
with and into the Company, and the Company will issue to the current
shareholders of Empire 9,384,761 shares of common stock, of which
3,824,511 shares of common stock will be placed in escrow. Some or all
of the escrowed shares will be released to the stockholders of Empire
based on a two-year earn-out formula. Any escrowed shares not released
to the stockholders of Empire will be returned to the treasury of the
merged company or retired. Upon completion of the merger, the merged
company will continue the business of Empire.
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 presentation 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 1998 Annual Report on Form
10-KSB.
2. Summary of Significant Accounting Policies
Use of estimates
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7
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 income and expenses during the reported period. Actual
results could differ from these estimates.
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8
Integrated Technology USA, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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3. Non-cash Compensation Expense
In February 1999, the Company's board approved the extension of the
expiration date of certain options held by its former Chairman. These
options were originally granted to the former Chairman in 1994. The
board agreed to extend these options because the former Chairman was
precluded from selling the shares underlying these options as a result
of trading restrictions that were imposed during the extended period
during which the Company was engaged in seeking a business combination
opportunity. As a result of such extension, the Company recorded a
non-cash compensation charge of approximately $71,000 during the three
months ended March 31, 1999.
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9
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 1998 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 March 31, 1999. 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 a net loss from operations in the three months ended March 31,
1999 of approximately $74,000. This loss reflected interest income of
approximately $124,000 less (i) operating expenses of approximately $127,000
and (ii) non-cash compensation expense of approximately $71,000. The non-cash
compensation expense resulted from the extension of certain options as
described in Note 3 to the Condensed Consolidated Financial Statements included
elsewhere herein.
On February 22, 1999, the company announced that it had agreed to
merge with Empire Resources, Inc. ("Empire"), a distributor of value added,
semi-finished aluminum products. Upon completion of this merger (the "Merger"),
the merged company will change its name to "Empire Resources, Inc." and will
continue the business of Empire. Empire had net sales of $101 million and
pre-tax earnings of approximately $2.5 million for the fiscal year ended
December 31, 1998.
Completion of the Merger is subject to certain conditions, including
approval by the stockholders of the Company. Although the Company anticipates
that the Merger will be completed during the third quarter of 1999, there can
be no assurance of this.
The Company's only activity at present is seeking to complete the
Merger. Until the Company completes the Merger, 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 consummating the Merger. The
costs associated with being a public company are principally professional fees
and director's fees. The costs associated with consummating the merger include
professional 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 the Merger.
The executive officers of the Company are not currently receiving any
cash compensation for their services (their sole compensation at present being
stock options). The Company may, however, resume paying cash compensation to
its executive officers in the future.
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10
Part II
Item 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
At December 31, 1998, the remaining net proceeds from the Company's
initial public offering amounted to approximately $10.1 million. During the
three months ended March 31, 1998, the Company did not use any of such net
proceeds to fund its working capital requirements.
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:
27.1 Financial Data Schedule
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: May 13, 1999
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<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>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
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<OTHER-EXPENSES> 197,957
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