U.S. Securities and Exchange Commission
Washington, D.C. 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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ______________
Commission file number: 1-14219
Integrated Technology Group
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(Exact name of small business issuer as specified in its charter)
Nevada 87-058319
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
301 West Main, Suite 500, Ardmore, Oklahoma 73401
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(Address of principal executive offices) (Zip Code)
(580) 226-0511
(Registrant's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
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 No X
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of December 1, 2000: 11,125,000
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INTEGRATED TECHNOLOGY GROUP
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30,
ASSETS 2000 1999
------ ---------- --------------
<S> <C> <C>
Current assets:
Cash $ 64,655 260,092
Accounts receivable - trade 1,384,743 2,513,297
Allowance for bad debts (68,034) (82,434)
Other receivables 38,140 33,476
Prepaid expenses 149,300 132,424
Deposits 127,000 18,000
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Total Current Assets 1,695,804 2,874,855
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Property, plant and equipment
Land 467,040 467,040 -
Buildings and improvements 2,552,295 2,552,295
Transportation equipment 7,783,351 7,815,647
Plant equipment 12,623,006 12,237,695
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23,425,692 23,072,677
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Less accumulated depreciation (17,977,002) (16,815,436)
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Net property, plant and equipment 5,448,690 6,257,241
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Other assets 3,137,861 365,311
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$ 10,282,355 $ 9,497,407
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 1,360,922 $ 568,272
Current installments of long-term debt 2,745,709 2,842,352
Other current liabilities 455,459 345,089
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Total current liabilities 4,562,090 3,755,713
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Long-term debt, excluding current installments 16,103 7,014,311
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Minority Interests 95,350 -
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Stockholders' equity:
Common stock, $.001 par value, 20,000,000 shares
authorized, 11,100,000 shares issued
and outstanding (8,000,000 in 1999) 11,100 1,000
Additional paid-in capital 15,942,270 8,579,205
Accumulated deficit (10,344,558) (9,852,822)
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Total stockholders' equity 5,608,812 (1,272,617)
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$ 10,282,355 $ 9,497,407
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</TABLE>
The accompanying notes are an integral part of these finanancial statements
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<PAGE>
Integrated Technology Group
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------------
2000 1999
<S> <C> <C>
Revenues:
Tire revenues $ 2,256,974 $ 4,209,771
Other revenue 498,104 327,301
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Total revenues 2,755,078 4,537,072
Operating expenses:
Facility 713,315 834,657
Transportation 1,264,280 1,191,908
General and administrative 515,525 587,303
Depreciation 228,406 336,000
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Total operating expenses 2,721,526 2,949,868
Operating income 33,552 1,587,204
Other income (expenses):
Interest expense (119,421) (116,627)
Other 332 140
Gain on sale of assets 15,000 -
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Income (loss) before income taxes (70,537) 1,470,717
Income tax expense - -
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Net Income (loss) $ (70,537) $ 1,470,717
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</TABLE>
The accompanying notes are an integral part of these financial satements
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<PAGE>
INTEGRATED TECHNOLOGY GROUP
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30, 2000
---------------------------
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (70,537) $ 1,470,717
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 228,406 336,000
Gain on sale of assets (15,000) -
Changes in assets and liabilities related to
operating activities:
(Increase) decrease in accounts receivable (517,722) (553,718)
(Increase) decrease in other current assets 63,589 5,644
Increase (decrease) in accounts payable 216,572 (110,026)
Increase (decrease) in other current liabilities (31,543) (26,260)
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Net cash provided (used) by operating activities (126,235) 1,122,357
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (70,792) (389,842)
Proceeds from disposal of property 15,000 -
Purchase of other assets - (35,832)
Advances to related party (49,292) (139,615)
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Net cash used by investing activities (105,084) (565,289)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Preceeds from issuance of common stock 340,000 -
Additional long-term debt 12,000 -
Repayment of long-term debt (98,215) (458,336)
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Net cash provided (used) by financing activities 253,785 (458,336)
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NET INCREASE IN CASH 22,466 98,732
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 42,189 161,360
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 64,655 $ 260,092
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</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE>
INTEGRATED TECHNOLOGY GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. They do not include all information and notes required by
generally accepted accounting principals for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended September 30, 2000, are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2001.
2. NATURE OF OPERATIONS
Integrated Technologies Group, Inc. (the "Company") collect and dispose of waste
tires. The process involves converting the whole waste tire into shredded chips
available for sale as a by-product. The Company owns and operates one processing
plant in the state of Oklahoma and four processing plants in the state of Texas.
The Company's significant sources of revenues are from the states of Oklahoma
and Texas for the collecting and shredding of waste tires. The Company's
operations and revenues are impacted by laws and regulations of the states of
Oklahoma and Texas.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the financial
statements of the Company and its subsidiaries. Intercompany balances and
transactions between the Company and its subsidiaries have been eliminated in
consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and highly liquid short-term
investments in money market accounts.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation. All material property, plant, and equipment additions are
capitalized and depreciated on a straight-line basis over the estimated useful
lives of the assets. Estimated useful lives range from 5 to 30 years. As assets
are disposed of, cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in operations.
Income Taxes
The Company provides for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recorded or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has released FAS 134, Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise, FAS 135, Rescission of FASB
Statement No. 75 and Technical Corrections, FAS 136, Transfers of Assets to a
Not-for-Profit or Charitable Trust That Raises or Holds Contributions for
Others, and FAS 137, Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective date of FASB Statement No. 133. In December
1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB No. 101").
The Company believes that the impact of these new standards and bulletins will
not have a material effect on the Company's consolidated financial position,
results of operations or disclosures.
3. Acquisition of Safe Tire by Integrated Technology Group
In July 2000 the Corporation acquired all of the issued and outstanding shares
of Safe Tire Disposal Corp., a Delaware Corporation. In connection with this
acquisition, (i) the Corporation sold the assets of the Company, which consisted
of assets related to the conduct of the Living Card Company, to John F. Lund and
R. Blair Lund in exchange for cancellation of 5,900,000 restricted common shares
of the Company, thus reducing to 2,100,000 the number of common shares
outstanding; (ii) Issued 9,000,000 common shares of the registrant, constituting
80.89% of the shares of the registrant's shares outstanding after the close, to
the owners of 100% of the outstanding shares of Safe Tire Disposal Corp., an
Oklahoma corporation, in exchange for all of the issued and outstanding equity
securities; and (iii) issued 25,000 shares to James N. Barber, Trustee in
consideration of legal and finders' fees incurred in connection with the
acquisition.
As a result of these transactions the only remaining asset of the registrant was
100% of the issued and outstanding common stock of Safe Tire Disposal Corp.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Forward-Looking Information
The Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of the Form 10-Q contain forward-looking
information. The forward-looking information involves risks and uncertainties
that are based on current expectations, estimates, and projections about the
Company's business, management's beliefs and assumptions made by management.
Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", and variations of such words and similar expressions are intended
to identify such forward-looking information. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking information due to numerous factors, including, but not limited
to, availability of financing for operations, successful performance of internal
operations, impact of competition and other risks detailed below as well as
those discussed elsewhere in this Form 10-QSB and from time to time in the
Company's Securities and Exchange Commission filings and reports. In addition,
general economic and market conditions and growth rates could affect such
statements.
General
The Company derives its revenues from two sources. The majority of the revenue
is generated from the tire shredding operations in Texas and Oklahoma. Other
revenue is derived from the sales of the tire chips. The two major markets the
company has developed are tire derived fuel sales to cement kilns and civil
engineering sales for use in Subtitle D landfill cell construction. The laws of
both Texas and Oklahoma require the purchasers of new tires pay a tire disposal
fee. Prior to the beginning of 2000, both Texas and Oklahoma required that
dealers charging this fee forward the fee to state agencies which would then pay
various entities a portion of that fee to dispose of the tires. The Company
derived its revenues by converting the tires to chips approximately two inches
square, and received its revenues from the state as compensation for this
conversion.
Effective September 1997, the Waste Tire Program in Texas ceased due to a sunset
provision enacted in prior legislation. While dealers still charges a disposal
fee, Texas law now requires the dealers to arrange for the disposal of their
tires. In Texas, accordingly, the Company now markets its services directly to
sellers of new tires. The change permits the Company to receive a greater
portion of the fee from dealers than the portion previously received from the
state. Also during the period between Septembers, 1997 to 1999 the Company
participated with States abandoned waste tire stockpile clean up program. The
Company received the majority of the projects due to their ability to market all
the tires collected from these dumps to a recycling end use. Efforts are
underway in Texas to enact legislation that ensures waste tires are directed
towards recycling operations through an enforcement program.
While state laws have encouraged the recycling of tires by dealers, the
conversion of tires to chips does not by itself effect the overall disposal of a
used tire. The Company has developed and implemented technology to extract from
the chips oil, carbon black and steel without creating environmentally harmful
byproducts. The Company is seeking funding to expand this technology.
Quarter ended September 30, 2000 compared to the quarter ended
September 30, 1999
The Company incurred a net loss of $70,537 for the three months ended September
30, 2000 compared to net income of $1,470,717 for the same period in 1999. The
loss when compared to the income reflects the decline in revenues in the later
period to $2,755,078 from $4,537,072, a decrease of 39.3%. The decline in
revenues principally reflects the decline in tire revenues, a decline to
$2,256,974 from $4,209,771, or a decrease of 46.4%. The decrease is offset
partially by revenues derived from the sale of chips, primarily for use as a
fuel, which increased 52.2% to $498,104 from $327,301.
This decrease is attributable a change in the state program in Texas where the
Company receives its revenues directly from dealers rather than through the
state. Of the $2,256,974 in revenues generated by the Company in the quarter
ended September 30, 2000, approximately 70% of the tire revenues were derived
from the State of Texas.
Operating expenses declined $228,342 in the quarter ended September 30, 2000,
when compared to the same period in 1999. This change reflects the decline
resulting from decreased business activity. The Company significantly increased
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<PAGE>
its spending in facilities to develop the processes to convert the tire chips to
usable products. Despite this spending, facilities spending decreased $121,342,
to $713,315 from $834,657.
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<PAGE>
Liquidity and Capital Resources
Operations continue to fund the Company's day-to-day operations. However, the
Company is seeking additional funding of approximately $5,000,000 to develop the
processes to convert the inventory of tire chips to usable products.
The balance sheet does not reflect the inventory of tire chips created by the
Company since it began the process of converting tires to tire chips. The
Company owns approximately 225,231 tons of tire chips.
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<PAGE>
PART - II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) The following Current Reports on Form 8-K have been filed since June
30, 2000:
Form 8-K filed on August 15, 2000 Form 8-K/A filed on September
22, 2000 Form 8-K/A filed on October 27, 2000
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities exchange Act of 1934;
registrant has duly caused this report to be signed on its behalf by the
undersigned.
Integrated Technology Group, Inc.
Dated: December 15, 2000 /s/ H. Scott Holden
-----------------------------------
H. Scott Holden, President
/s/ C. Sue Rushing
-----------------------------------
C. Sue Rushing, Treasurer,
Comptroller and Principal Financial
Officer
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