SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Quarter Ended: August 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-29019
Interactive Marketing Technology, Inc.
(Exact name of registrant as specified in its charter)
Nevada 22-3617931
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3575 Cahuenga Boulevard West, Suite 390
Hollywood, California 90068
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (323) 874-4484
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
As of October 2, 2000, the Registrant had a total of 15,873,667 shares of
common stock issued and outstanding.
<PAGE>
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements.............................................3
Item 2: Management's Discussion and Analysis or Plan of Operations......20
PART II: OTHER INFORMATION
Item 5: Other Information................................................23
Item 6: Exhibits and Reports filed on Form 8-K..........................24
Signatures...............................................................25
<PAGE> 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE> 3
INTERACTIVE MARKETING TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Accountant's Review Report................................F-1
Consolidated Balance Sheet as of August 31, 2000 [Unaudited]..........F-2
Consolidated Statements of Operations for the six and three
months ended August 31, 2000 and 1999 [Unaudited]...................F-3
Consolidated Statements of Stockholders' Equity for the six
months ended August 31, 2000 [Unaudited] and the fiscal year
ended February 29, 2000 [Audited]...................................F-4
Consolidated Statements of Cash Flows for the six and three
months ended August 31, 2000 and 1999 [Unaudited]...................F-5
Notes to Consolidated Statements......................................F-6
<PAGE> 4
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Board of Directors and Stockholders
Interactive Marketing Technology, Inc.
We have reviewed the accompanying consolidated balance sheet of
Interactive Marketing Technology, Inc. as of August 31, 2000, and the related
consolidated statement of stockholders' equity for the six months ended August
31, 2000, cash flows for the six months ended August 31, 2000 and 1999, and
the related consolidated statements of operations for the six and three months
ended August 31, 2000 and 1999. These consolidated financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements in order
for them to be in conformity with generally accepted accounting principles.
/s/ Moore Stephens, PC
MOORE STEPHENS, P. C.
Certified Public Accountants
Cranford, New Jersey
October 6, 2000
F-1
<PAGE> 5
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2000.
[UNAUDITED]
Assets:
Current Assets:
Cash $ 254,350
Accounts Receivable - Net 2,000
Inventory 227,974
Prepaid Expenses 24,826
Other Current Assets 129,907
--------------
Total Current Assets 639,057
--------------
Fixed Assets - At Cost [Net of Accumulated
Depreciation of $21,648] 161,001
--------------
Other Assets:
Master Recording Rights - Music Catalogues 600,000
Customer List [Net of Accumulated Amortization of $30,000] 106,560
Infomercial Costs [Net of Accumulated Amortization
of $103,000] 91,416
Licensing Fees [Net of Accumulated Amortization of $4,290] 15,720
Patents [Net of Accumulated Amortization of $3,250] 11,750
Deposits and Other Assets 299,291
Receivable - Related Party 49,980
--------------
Total Other Assets 1,174,717
--------------
Total Assets $ 1,974,775
==============
Liabilities and Stockholders' Equity:
Current Liabilities:
Promotional and Return Allowances $ 375,000
Accounts Payable and Accrued Liabilities 319,005
Accrued Royalties 540,000
--------------
Total Current Liabilities 1,234,005
--------------
Long-Term Liabilities:
Note Payable - Stockholder 56,400
--------------
Commitments and Contingencies -
--------------
Minority Interest [3A] -
--------------
Stockholders' Equity:
Common Stock, Par $.001, 60,000,000 Shares Authorized,
13,832,000 Shares Issued and Outstanding [12] 13,832
Paid-in Capital 2,064,708
Accumulated Deficit (1,394,170)
--------------
Total Stockholders' Equity 684,370
--------------
Total Liabilities and Stockholders' Equity $ 1,974,775
==============
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 6
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
<TABLE>
<CAPTION>
Six months ended Three months ended
August 31, August 31,
--------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Revenues $ 2,887,087 $ 157,684 $ 100,145 $ 157,684
Cost of Good Sold 1,558,042 237,670 90,481 237,670
------------- ------------- ------------- -------------
Gross Profit 1,329,045 (79,986) 9,664 (79,986)
------------- ------------- ------------- -------------
Costs and Expenses:
Payroll and Related Costs 235,698 202,119 117,088 154,704
General and Administrative Costs 181,133 85,384 99,289 20,423
Advertising and Media Buys 185,886 76,099 74,546 33,402
Royalties 530,000 - 50,000 -
Bad Debt Expense 75,400 - 400 -
Selling Expenses 39,920 3,832 29,267 3,832
Consulting Fees - Related Party - 33,332 - 16,666
Travel and Entertainment 98,821 79,259 47,452 15,494
Professional Fees 90,792 51,007 35,389 26,430
Depreciation and Amortization 78,351 5,535 40,755 5,535
Research and Development Costs 8,895 - 5,300 -
Interest Expense - Related Party 6,600 - 5,350 -
Debt Financing Costs 99,055 - 24,055 -
Non-Cash Financing Cost -Warrants 50,000 - - -
Stock Based Compensation Costs 45,000 - 45,000 -
------------- ------------- ------------- -------------
Total Costs and Expenses 1,725,551 536,567 573,891 276,486
------------- ------------- ------------- -------------
[Loss] from Operations Before
Minority Interest (396,506) (616,553) (564,227) (356,472)
Minority Interest [3A] - - - -
------------- ------------- ------------- -------------
Net [Loss] $ (396,506) $ (616,553) $ (564,227) $ (356,472)
============= ============= ============= =============
Basic and Fully Diluted [Loss]
Per Share $ (.03) $ (.06) $ (.04) $ (.03)
============= ============= ============= =============
Weighted Average Number of Shares 13,832,000 11,030,000 13,832,000 11,537,000
============= ============= ============= =============
See Notes to Consolidated Financial Statements.
F-3
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY [UNAUDITED]
Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at February 29, 2000 13,832,000 $ 13,832 $ 1,969,708 $ (997,664) $ 985,876
Warrants Issued in Connection
with Private Placement of
Convertible Debentures [6G] - - 50,000 - 50,000
Stock Options Issued in
Connection with Non-Employee
Services [6H] - - 45,000 - 45,000
Net [Loss] for the Six Month
Period March 1, 2000 through
August 31, 2000 - - - (396,506) (396,506)
------------- ---------- ------------ ------------ -------------
Balance at August 31, 2000
[Unaudited 13,832,000 $ 13,832 $ 2,064,708 $(1,394,170) $ 684,370
============= ========== ============ ============ =============
See Notes to Consolidated Financial Statements.
F-4
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
Six months ended
August 31,
2000 1999
------------- --------------
<S> <C> <C>
Operating Activities:
Net [Loss] $ (396,506) $ (616,553)
------------- --------------
Adjustments to Reconcile Net [Loss]
to Net Cash Provided by [Used for] Operating Activities:
Depreciation and Amortization 78,351 5,535
Fair Value of Warrants Issued 50,000 -
Fair Value of Stock Options Issued 45,000 -
Amortization of Deferred Financing Costs 83,000 -
------------- --------------
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable - Net 4,246 (56,875)
Inventory (63,750) (130,000)
Prepaid Expenses and Other Current Assets (68,771) (37,800)
Deposits and Other Assets (194,604) (10,899)
Increase [Decrease] in:
Accounts Payable and Accrued Liabilities 184,581 72,323
Accrued Royalties 465,000 -
Accrued Interest - Stockholder 2,200 -
------------- --------------
Total Adjustments 585,253 (157,716)
------------- --------------
Net Cash - Operating Activities 188,747 (774,269)
------------- --------------
Investing Activities:
Fixed Assets (103,663) (100,421)
------------- --------------
Financing Activities:
Proceeds from Common Stock - 1,000,000
Loans from Stockholders 176,000 -
Net Proceeds from Convertible Debentures 517,000 -
Repayment of Convertible Debentures (600,000) -
Repayment of Loans from Stockholders (176,000) (5,000)
------------- --------------
Net Cash - Financing Activities (83,000) 995,000
------------- --------------
Net Increase in Cash 2,084 120,310
Cash - Beginning of Periods 252,266 5,250
------------- --------------
Cash - End of Periods $ 254,350 $ 125,560
============= ==============
</TABLE>
Supplementary information on Non-Cash Investing and Financing Activities:
In fiscal 1999, the Company's minority shareholder's contribution of
$99,980 was exchanged for the application of a $100,000 promotional fee due to
him under a service agreement. These amounts were credited to paid-in capital
and capitalized as infomercial costs. Although the minority interest portion
of the February 29, 2000 loss is approximately $237,000, only the initial
contribution of the minority member of $99,980, has been allocated to the
minority partner for financial statement purposes, as there is no obligation
of the minority member to make good for such losses as defined under the
operating agreement. Therefore, as of February 29, 2000, there is no minority
interest on the balance sheet as the initial capitalization has been absorbed
by the allocated minority member's loss of $99,980 [See Note 3A].
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 9
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[1] Nature of Operations
Interactive Marketing Technology, Inc. ["Interactive" and the "Company"] was
formed on April 21, 1998. On April 7, 1999, the Company restated and amended
its bylaws under the State of Nevada. The Company's wholly-owned subsidiary
is Interactive's Plumber, Inc., which was formed February 4, 1999. Since
inception, the Company's principal business activity has been primarily to
produce, market, and sell a licensed product called the Plumbers Secret [the
"product"]. The subsidiary commenced selling the product in August 1999. The
Company intends on introducing new products in fiscal 2000 in a direct
response and retail sales environment. The Company continues to be involved
in negotiations to obtain licensing agreements for new products [See Note 3].
The Company was considered a development stage company for the year ended
February 28, 1999, however, since total net revenues of approximately $921,000
have been realized between August 1999 and February 2000, the Company is no
longer a development stage entity.
[2] Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiary, Interactive's Plumber, Inc. and include the consolidation of its
50.01% members' interest in the Plumbers Secret, LLC. Intercompany
transactions and balances have been eliminated in consolidation.
Basis of Presentation - In the opinion of management, the accompanying
unaudited consolidated financial statements include all adjustments,
consisting only of normal recurring accruals which are necessary in order to
make the financial statements not misleading. Although the Company believes
that the disclosures in these financial statements are adequate to make the
information presented not misleading, certain information and footnote
information normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. Results of operations for the periods ended August 31, 2000 are
not necessarily indicative of results to be expected for the full year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB for the year ended
February 29, 2000.
Use of Estimates - 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 results could differ from those estimates.
Cash and Cash Equivalents - The Company considers all highly liquid
investments, with a maturity of three months or less when purchased, to be
cash equivalents. At August 31, 2000, the Company did not have any cash
equivalents.
Research and Development Costs - The Company expenses research and development
costs as incurred. For the six months ended August 31, 2000 and 1999,
research and development costs totaled $8,895 and $-0-, respectively, for new
products.
F-6
<PAGE> 10
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[2] Summary of Significant Accounting Policies [Continued]
Net [Loss] Per Share - Net [loss] per share is based on the weighted average
number of shares outstanding, reflecting the shares issued in the transaction
[See Note 6B] and the shares reacquired and canceled [See Note 6D]. FASB
issued SFAS No. 128, "Earnings Per Share," in February 1997. SFAS No. 128
simplifies the earnings per share ["EPS"] calculations required by Accounting
Principles Board ["APB"] Opinion No. 15, and related interpretations, by
replacing the presentation of primary EPS with a presentation of basic EPS.
SFAS No. 128 requires dual presentation of basic and diluted EPS by entities
with complex capital structures. Basic EPS includes no dilution and is
computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could share in the
earnings of an entity, similar to the fully diluted EPS of APB Opinion No. 15.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. The Company adopted SFAS No. 128. Basic EPS is based on average
common shares outstanding and diluted EPS include the effects of potential
common stock, such as, options and warrants, if dilutive. The computation of
diluted earnings per share does not assume conversion, exercise or contingent
issuance of securities that would have anti-dilutive effect on earnings per
share [i.e. increasing earnings per share or reducing loss per share].
Securities that could potentially dilute earnings per share in the future are
disclosed in Notes 6G and 6H.
Investment in Joint Ventures - Joint ventures, in which the Company has a 50%
or less interest, are accounted for under the equity method.
Intangible Assets - Intangible assets include licensing fees, patents and
customer lists which are amortized over five years using the straight-line
method. Amortization commenced in August of 1999 when the Company commenced
selling the licensed product. Amortization expense for the six months ended
August 31, 2000 was approximately $17,500.
Fixed Assets - Fixed assets include office furniture and equipment.
Depreciation began in August of 1999 under the straight-line method over an
estimated useful live of five years. Depreciation expense for the six months
ended August 31, 2000 was approximately $13,000.
Infomercial Costs - These costs include the filming, editing and other film
producing costs for various product infomercials which are used for cable
network viewing audiences. These costs are of a direct response nature and
are therefore capitalized and amortized over the period during which benefits
are expected to be received, which is estimated to be two years. The
amortization expense for the six months ended August 31, 2000 was $48,000.
Advertising Costs - Advertising costs, except for costs associated with
direct-response advertising, are charged to operations when the advertising
first takes place. Advertising costs inclusive of media buys, amounted to
approximately $185,900 and $76,100 for the six months ended August 31, 2000
and 1999, respectively.
Revenue Recognition - Revenues from products are recognized at the time goods
are shipped to the customer from the fulfillment facility with an appropriate
provision for returns.
The Company's return policy for non retail customers is a full refund money
back guarantee in thirty days. Retail customers return policy is for
defective merchandise only.
F-7
<PAGE> 11
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[2] Summary of Significant Accounting Policies [Continued]
Promotional Allowances - Based on a discretionary policy, management grants to
certain major retail customers promotional allowances to successfully market
the Company's products. Promotional allowances are primarily targeted to the
cost of displays, advertising and other promotional incentives. The cost of
promotional allowances are accrued based upon the Company's estimate of the
reserve allowance using certain assumptions and based on the Company's
experience. Promotional allowances of $375,000 were included as a reduction
of net revenues for the year ended February 29, 2000 and are classified as a
current liability as of February 29, 2000 and August 31, 2000.
Inventory - Inventory is stated at the lower of cost or market. Cost is
determined by the first-in first-out method. The breakdown of the inventory
as of August 31, 2000 is as follows:
Supplies $ 37,255
Finished Goods 190,719
---------------
Total $ 227,974
===============
Impairment - Certain long-term assets of the Company are reviewed when changes
in circumstances require as to whether their carrying value has become
impaired, pursuant to guidance established in Statement of Financial
Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Management
considers assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations [undiscounted and without
interest charges]. If impairment is deemed to exist, the assets will be
written down to fair value. Management also reevaluates the periods of
amortization to determine whether subsequent events and circumstances warrant
revised estimates of useful lives. As of August 31, 2000, management expects
these assets to be fully recoverable.
[3] Commitments and Contingencies
[A] Operating Agreement for The Plumber's Secret, LLC - Interactive 's
subsidiary, Interactive's Plumber, Inc., entered into an operating agreement
in February of 1999 whereby it acquired a 50.01% interest in the Plumber's
Secret, LLC and all day-to-day management decisions of the operating entity
are made by Interactive. Interactive shall be entitled to 10% of "net cash
flow" as defined as a management fee. Interactive, as licensor, has assigned
to the limited liability company a licensing agreement with A2000 USA, Inc.
The other limited liability partner had the right to abandon its interest if
sales from the product are less than $2,000,000 subsequent to the first year
that the infomercial airs on the product, which was July 1999. Net sales
generated from this product since inception [August 1999] has exceeded this
threshold.
F-8
<PAGE> 12
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[3] Commitments and Contingencies [Continued]
[A] Operating Agreement for The Plumber's Secret, LLC [Continued] - On March
16, 1999, Interactive entered into an amendment of the operating agreement for
the limited liability company. The initial capital contribution by both
members was approximately $100,000 each. Interactive committed to lending the
limited liability company up to $150,000. As of February 29, 2000, $415,135
was owed by Plumber's Secret, LLC to Interactive. Interactive is entitled to
receive a preferred return on its capital contribution. Under a service
agreement, $100,000 was to be paid to the other limited liability member [Vila
Enterprises, LLC] for advertising and promoting the product in an infomercial.
In lieu of being paid $100,000 for the services rendered, the initial capital
contribution of $99,980 was satisfied by the performance of promotional
services rendered by the minority member valued at $100,000. As of February
29, 2000, the Plumber's Secret, LLC incurred a net loss from operations of
approximately $475,000 and for the six months ended August 31, 2000 incurred a
profit from operations of approximately $90,000. Pursuant to the agreement,
the first $100,000 in losses from the limited liability company has been
allocated for tax purposes to Vila Enterprises and then the remainder will be
allocated to the members according to the terms of the first agreement.
Future profits are to be distributed 50/50 after the accumulated losses are
offset. As a result, the accumulated net loss through August 31, 2000 is
approximately $385,000 and accordingly there is no minority interest members'
share of the accumulated earnings. Although the minority interest portion of
the February 29, 2000 loss is approximately $237,000, only the initial
contribution of the minority member of $99,980, has been allocated to the
minority partner for financial statement purposes, as there is no obligation
of the minority member to make good for such losses as defined under the
operating agreement. Therefore, as of February 29, 2000 and August 31, 2000,
there is no minority interest on the balance sheet as the initial
capitalization has been absorbed by the allocated minority member's loss of
$99,980. During the year ended February 29, 2000, the Company advanced
$49,980 to a shareholder in the limited liability company.
[B] Licensing Agreement Plumber's Secret - In June 1998, the Company entered
into a licensing agreement for the exclusive right to manufacture and or
produce, advertise, promote, market or sell worldwide the product for a
royalty per unit for a period of one year. Upon execution of agreement,
$20,000 was paid to the licensor. The Company is to pay a royalty fee of
$3.00 per each unit sold to the licensor. The Company paid $66,000 as of
February 29, 2000 and has accrued an additional $75,000 in royalties on this
obligation as of February 29, 2000. In July of 2000, the Company began
negotiating an amendment to the royalty agreement that is expected to be
finalized within 90 days.
[C] Operating Lease - In September 1999, the Company commenced leasing office
space under an operating lease which expires September 2004 for a monthly
minimum lease payment of approximately $5,400. This lease contains a renewal
option. In addition, the lease contains an escalation clause as defined and a
three percent automatic increase to the minimum monthly rent at the end of
each year. Total rent expense for the space for the six months ended August
31, 2000 was approximately $32,400 and is classified as general and
administrative costs. Approximate aggregate future minimum rental payments
under this noncancellable operating lease is as follows:
February 28,
------------
2001 $ 66,000
2002 68,000
2003 70,000
2004 72,000
2005 39,000
------------
Total $ 315,000
============
F-9
<PAGE> 13
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[3] Commitments and Contingencies [Continued]
[D] Telemarketing and Fulfillment Services Agreement - The Company entered
into an agreement on June 24, 1999 to telemarket the Plumber's Secret, LLC
throughout the world with PDS. PDS processes all orders received for bank
authorization and payment before shipping the products. PDS has acquired a
security interest in the Plumber's Secret products. PDS stores the inventory
and related materials as necessary to fulfill orders, subject to timely
receipt of product and materials from manufacturing centers. Total expense
during the six months ended August 31, 2000 were approximately $214,000 and
is classified as cost of goods sold in the statement of operations.
[E] Nonexclusive and Nontransferable License - On November 30, 1999, the
Company granted QVC a license to use the Plumber's Secret promotional video to
promote and sell the product on the televised shopping program through
December 31, 2001. The first promotional program is slated for the first
quarter of fiscal year 2001.
[F] Letter of Intent - Power-Ti-Pod - On July 14, 1999 entered into an
agreement for Interactive to sell the Power-Ti-Pod internationally and split
the profits 50/50 with a joint venture partner. This agreement was terminated
in April 2000.
[G] Letter of Intent - Tour-One Putter - On July 14, 1999 entered into an
agreement for Interactive to sell the Tour-One-Putter internationally first,
and back into a supply and demand, domestically. If an international market
is established Interactive will pay for telemarketing, media, fulfillment
costs, and product costs to generate a net profit split of 50/50 with a joint
venture partner. There were no sales as of February 29, 2000. This agreement
was terminated in April 2000.
[H] Marketing Agreement - Putter Ball - The Company agreed on November 11,
1999 to develop a marketing plan for the sale of the Putter Ball with a joint
venture partner and for the joint venture partner to pay for the production
infomercial to market the product both domestically and internationally and
the manufacturing costs used for the Putter Ball. The profit split would be
50/50. The Company accounts for this joint venture under the equity method as
it has a 50% or less interest in the venture. This agreement was terminated
in April 2000.
[I] Letter of Intent - EFL Product Line - On November 12, 1999, the Company
received a license to manufacture and market the fishing line product that is
called the EFL Product Line. Interactive will be responsible for developing
the product and the infomercial and for fulfilling orders. Interactive will
pay a 15% royalty of the net sales as defined under the agreement. There were
no sales of this product as of August 31, 2000, however, approximately
$109,000 has been incurred for a future infomercial to be produced and is
classified as part of other assets on the balance sheet.
[J] Universal Wrench - On January 5, 2000, the Company entered into a Sales
and Distribution Agreement with Lacrex SA of Switzerland ["Lacrex"] to solely
and exclusively market in North America the Lacrex Universal Wrench. The
Company is granted first right of refusal for worldwide direct response rights
on a country to country basis. In the event, the Company decides to move
forward with the marketing of the Universal Wrench, Interactive has committed
to purchase from Lacrex a minimum of 300,000 units of the product at a
purchase price of $5.00 per unit FOB China within one year and additional
purchases are required in subsequent years to renew this agreement. There
were no sales of this product as of August 31, 2000. There is a $20,000
deposit on the future infomercial that will be produced for this product and
is classified as part of other assets on the balance sheet. The agreement was
amended August 8, 2000 to exclude worldwide direct response rights.
[K] Personal Service Agreement - In 1998, Interactive received the exclusive
rights for product marketing whereby Interactive is to pay a 15% royalty.
Commencing April 1999, the Company paid $3,000 a month as a draw against the
profit split on Tom House tapes, kits, and products. No sales have been
recorded, therefore, these payments of $33,000 as of August 31, 2000 have been
recorded as part of other assets on the balance sheet.
F-10
<PAGE> 14
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[3] Commitments and Contingencies [Continued]
[L] Royalty Payment - "The Rake" - The Company has not finalized negotiations
related to a royalty arrangement for The Rake. There were no sales or costs
for The Rake as of August 31, 2000.
[M] Noncompete Agreement - "Specialized Collapsible Ladder" - In December of
1999, the Company entered into a noncompete agreement to market the ladder
with a profit split as defined under certain specifications. There were no
sales or cost for the ladder as of August 31, 2000.
[N] Sales Agreement - Life Mask - On November 17, 1999, the Company entered
into an agreement whereby Interactive will pay all costs of the products and
another individual will receive 12% of all income worldwide from the sales of
the product. There were no sales or costs for the Life Mask as of August 31,
2000.
[O] Employment Agreement - On June 30, 1999, the Company entered into a 2 year
employment agreement for an employee of the Company for an annual salary of
$135,000 plus reimbursable business expenses.
[P] Sales Price Guarantee - The Company has included a price guarantee on
sales orders for certain retail customers during first quarter of fiscal 2000.
The price guarantee provides that the Company will not sell its product to a
competitor at a lower price up until the shipment date.
[4] Related Party Transactions
[A] Stockholder/Former Officer - Legal fees totaling $14,680 and research and
development costs of $18,000 were incurred between October 1, 1997 and June
30, 1998 in connection with the formation of the business, the licensing
agreements, and applications for patents and trademarks for the product.
Total licensing fees for the product, "Plumbers Secret", of $20,000 were paid
in June and July of 1998. These costs were paid by a stockholder of the
Company and were therefore treated as a capital contribution. The stockholder
of the Company also remitted his acquisition of the title and interest in the
mailing list of past, current, and future names whereby his basis of $136,560
was treated as a capital contribution. Therefore, the Company expensed
$40,680 and credited paid-in capital $189,240 for the period ended February
28, 1999 on these related party transactions.
During the year ended February 29, 2000, the Company paid an entity, which is
controlled by this stockholder consulting fees of approximately $33,000 and
paid the stockholder payroll costs of approximately $18,000. Total expense to
the related entity for the year ended February 29, 2000 was $51,000. There
was no expense recorded for the six months ended August 31, 2000.
[5] Income Taxes
At February 29, 2000, the Company had a net operating loss carryforward of
approximately $538,000 resulting in a long-term deferred asset of
approximately $183,000. The operating loss carryforward of $538,000 will
expire February 2020. The Company has provided a valuation allowance of
approximately $183,000 due to the uncertainty that the Company will be able to
generate sufficient taxable income in the future necessary to utilize this
asset. There are no material temporary differences that would result in a
deferred tax asset or liability at February 29, 2000.
[6] Equity and Debt Transactions
[A] Formation - Interactive Marketing Technology, Inc. was authorized to issue
2,500 shares of common stock at no par value. At February 28, 1999, there
were 2,500 shares of common stock issued and outstanding to the founders and
there were no options or warrants outstanding. The 2,500 shares were
exchanged for 12,404,000 shares of common stock of Shur De Cor pursuant to the
Share Exchange Agreement dated March 15, 1999 [See Note 6B].
F-11
<PAGE> 15
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[6] Equity and Debt Transactions [Continued]
[B] Share Exchange Agreement - On March 15, 1999, Interactive entered into a
share exchange agreement with Shur De Cor, Inc. whereby 100% of the common
stock, or 2,500 shares of Interactive, were exchanged for 12,404,000 shares of
common stock of Shur De Cor, Inc. For accounting purposes, the acquisition
was treated as an issuance of shares for cash by Interactive, with Interactive
as the acquirer. The accounting is identical to that resulting from a reverse
acquisition, except that no goodwill or other intangible is recorded.
Historical information prior to March 24, 1999 is that of Interactive. Shares
of 12,404,000 issued in the acquisition are shown as outstanding for all
periods presented in these financial statements in the same manner as for a
stock split. Pro forma information on this transaction is not presented as,
at the date of this transaction, Shur De Cor, Inc. was considered a public
shell and accordingly, the transaction was not considered a business
combination. On March 24, 1999, Shur De Cor, Inc. changed its name to
Interactive Marketing Technology, Inc. and increased its authorized capital
stock from 20,000,000 to 60,000,000 common shares.
[C] Equity Financing - In April 1999, the Company received total proceeds of
$949,050 from the sale of 285,000 shares of common stock from two foreign
investors. In November of 1999, the Company received proceeds of $245,000 for
the issuance of 295,000 shares of the Company's common stock.
[D] Canceled Stock - In November 1999 and January 2000, two of the Company's
officers and directors returned and the Company canceled a total of 7,354,000
shares of the Company's common stock for no compensation in an attempt to
provide additional shares to the Company for future financing [See Note 12].
[E] Note Payable - Stockholder - In April 1999, the Company received note
proceeds of $50,000 from a stockholder. The note is due April 2001 with
interest at 10% per annum. Unpaid interest expense for the year ended
February 29, 2000 was $4,200. The total unpaid liability of $56,400 is
classified as a long-term liability.
[F] Acquisition of Rights for Master Recordings - During November 1999, the
Company purchased the non-exclusive rights to 5,000 master audio recordings
[the "Library"] for various types of music from an unrelated entity in
exchange for the issuance of 2,000,000 shares of the Company's common stock.
The value of $600,000 was assigned to these rights based upon an independent
valuation received, which included estimated revenue projections used by
management to assess the recoverability from its future revenue stream.
Under the agreement, the Company has the right to use the Library to compile
music on its own label. However, the agreement does not permit the relicense,
sublicense or the assignment of rights in the Library to a third party.
The Company will commence amortization of this asset over five years. As of
August 31, 2000, the Company has not realized any revenue stream from the
marketing compilations of these recordings. Therefore, the Company has not
commenced amortization for this asset through August 31, 2000. Management
intends to market various compilations of these recordings in fiscal year
2000.
F-12
<PAGE> 16
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[6] Equity and Debt Transactions [Continued]
[G] Private Placement Memorandum ["PPM"] - On March 23, 2000, the Company
engaged a placement agent for an offering to sell up to 6 units, each unit
consisting of one $100,000 convertible secured promissory 12% note and 50,000
warrants to purchase 50,000 shares of common stock at a price of $1.25 per
share. The offering price was $100,000 per unit and the net proceeds to the
Company was approximately $517,000. The promissory notes would mature on the
earlier of (a) 6 months from the closing, (b) certain change of control
events, (c) the closing of $2,000,000 of bridge financing or $5,000,000 of
equity financing, or (d) the receipt and collection by the Company of $600,000
in accounts receivable. The promissory notes were secured by the assets of
the Company. The placement agent was entitled to a 10% commission for all
units sold, a 2 1/2% non-accountable expense allowance and warrants for 10,000
shares of common stock exercisable at $1.25 for a period of five years. Total
fair value of the equity instruments of approximately $50,000 were charged to
operations in the six months ended August 31, 2000 as a non-cash financing
cost. The Company has repaid as of May 31, 2000 the convertible promissory
notes of $600,000 and recording financing costs of approximately $87,000.
[H] Stock Option Plan - On June 16, 2000, the Company amended its 2000 Stock
Option Plan [the "Plan"] adopted on March 28, 2000. The Plan reserved for
incentive rewards 10,000,000 shares of common stock for directors, employees,
and consultants. During the six months ended August 31, 2000, the Company
granted stock options under this plan for 1,592,000 shares of the Company's
common stock at an exercise price of $.25, which approximated the fair market
value at the date of grant. No stock options were exercised or canceled as of
August 31, 2000. All options have a ten year term.
No compensation cost was recognized for stock-based employee awards.
Non-employee compensation costs amount to approximately $45,000 and was
recorded in the statement of operations for the six months ended August 31,
2000.
If the Company has accounted for all options pursuant to the fair value based
method of SFAS No. 123, the Company would have recorded compensation expense
totaling approximately $163,000 for the six months ended August 31, 2000 and
the Company's net loss and net loss per share would have been as follows:
Six months ended
August 31, 2000
-----------------
Net [Loss] As Reported $ (396,506)
=================
Pro Forma Net [Loss] $ (559,506)
=================
Basic [Loss] Per Share as Reported $ (.03)
=================
Pro Forma Basis [Loss] Per Share $ (.04)
=================
The fair value of options at the date of grant was estimated using the fair
value based method with the following weighted average assumptions:
Expected Life [Years] 5
Interest Rate 6.5%
Annual Rate of Dividends 0%
Volatility 51.16%
The weighted average fair value of options at date of grant using the fair
value based method during the six months ended August 31, 2000 is estimated at
$.13.
F-13
<PAGE> 17
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[6] Equity and Debt Transactions [Continued]
[I] Officers' Loans - The Company received debt financing from two officers of
approximately $176,000 in the six month period ended August 31, 2000 for 90
days at 10%. These two officers were paid as of August 31, 2000.
[7] Significant Risks and Uncertainties
Concentrations of Credit Risk - Cash - Financial instruments which potentially
subject the Company to concentrations of credit risk consists of cash.
The Company places its cash with high credit quality institutions and is
subject to credit risk to the extent it exceeds federally insured limits. At
August 31, 2000, the Company has approximately $106,000 of cash subject to
such risk. The Company does not require collateral or other security to
support financial instruments subject to credit risk.
[8] Major Customer
For the six months ended August 31, 2000, the Company had sales to two resale
customers amounting to approximately 70% and 30% of net sales.
[9] Going Concern
The February 29, 2000 financial statements were prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern and realization of assets and settlement of
liabilities and commitments in the normal course of business.
The Company suffered a net loss of $956,984 and utilized $753,650 in cash for
operations for the year ended February 29, 2000. The inability of the Company
to generate cash from operations, considering currently available funds,
creates an uncertainty about the Company's ability to continue as a going
concern. The financial statements did not include any adjustments that might
be necessary if the Company is unable to continue as a going concern. The
Company completed a private placement memorandum and upon receipt of the
estimated net proceeds of $517,000 believes it will be able to complete
anticipated sales orders, including the introduction of new products, with the
infusion of additional working capital and sustain operations for twelve
months. In addition, the Company will also pursue debt financing to
supplement the equity financing if needed [See Notes 6G and 6I]. The
continuation of the Company as a going concern is dependent upon the success
of these plans.
There can be no assurances that management's plans to reduce operating losses
and to obtain additional financing to fund operations will be successful. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
[10] Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, other current assets as well
as accounts payable and other current liabilities approximates fair value as a
result of their short maturities. The carrying amount of due to stockholder
included in non-current liabilities approximates its fair value because it
bears interest at a rate that approximates the Company's cost of capital.
F-14
<PAGE> 18
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[11] New Authoritative Accounting Pronouncements
The Financial Accounting Standard Board ["FASB"] has issued Statement of
Financial Accounting Standards No. 133 ["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 other contracts and for hedging
activities. SFAS No. 133 requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The accounting for changes in the
fair value of a derivative depends on the intended use of the derivative and
how it its designated, for example, gain or losses related to changes in the
fair value of a derivative not designated as a hedging instrument is
recognized in earnings in the period of the change, while certain types of
hedges may be initially reported as a component of other comprehensive income
[outside earnings] until the consummation of the underlying transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter; on that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged,
but it is permitted only as of the beginning of any fiscal quarter. SFAS No.
133 is not to be applied retroactively to financial statements of prior
periods.
The Company does not currently have any derivative instruments and is not
currently engaged in any hedging activities.
In March 2000, the FASB issued Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation." Among other issues, this
Interpretations clarifies (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. The Company has adopted this pronouncement.
[12] Subsequent Events
[A] In September of 2000, the Company's Board of Directors resolved to
reissue 2,166,667 shares of common stock to the Company's Chairman as it was
previously believed to be necessary that the Chairman return his stock in a
prior period [See Note 6D].
[B] In September of 2000, the Company canceled a total of 125,000 shares of
common stock to two individuals.
F-15
<PAGE> 19
References in this quarterly report to "Interactive Marketing" "we,"
"us," and "our" refer to Interactive Marketing Technology, Inc.
This Form 10Q-SB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10Q-SB that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Interactive Marketing's control. These factors include but are not limited to
economic conditions generally and in the industries in which Interactive
Marketing may participate; competition within Interactive Marketing's chosen
industry, including competition from much larger competitors; technological
advances and failure by Interactive Marketing to successfully develop business
relationship.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Interactive Marketing provides comprehensive marketing services for
proprietary consumer products in both the United States and worldwide. We
began operations in August of 1999 and have primarily relied on one product,
The Plumbers Secret, for our revenues. We have had a short operating history
and a history of operating losses, however, management believes we are in the
later stages of developing additional product lines to enhance our current
revenue stream. Our second quarter was a time of product development for the
remainder of the fiscal year. Although, no new products were launched, we
arranged for production of new infomercials, developed new packaging design
and negotiated manufacturing for the new products we intend to launch within
the next six months. See "Part II, Item 5. Other Information," below.
Our fiscal year ends February 28 (or February 29) and the following
discussions are based on the consolidated financial statements of Interactive
Marketing and its wholly-owned subsidiary IMT's Plumber, Inc. and include the
consolidation of IMT's Plumber, Inc's 50.01% members' interest in the Plumbers
Secret, LLC.
Results of Operations
The following table summarizes our operations for the six months and
three months ended August 31, 2000 and 1999. Since we began operations in
August of 1999, the August 31, 1999 period depicts one month of operations for
the Plumbers Secret LLC only.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------------- -------------------------------
August 31, 2000 August 31, 1999 August 31, 2000 August 31, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Revenues 2,887,087 157,687 100,145 157,684
Costs of Sales 1,558,042 237,670 90,481 237,670
Gross Profit (Loss) 1,329,045 (79,986) 9,664 (79,986)
Total Costs and Expenses 1,725,551 536,567 573,891 276,486
Net (Loss) (396,506) (616,553) (564,227) (356,472)
</TABLE>
<PAGE> 20
For the six months ended August 31, 2000 we lost approximately $396,000
and for the three months ended August 31, 2000 we lost approximately $564,000.
The allocation of the three-month loss for August 31, 2000 is approximately
$296,000 to the Plumbers Secret L.L.C. and approximately $268,000 to
Interactive Marketing. Interactive Marketing's unconsolidated loss for the
first quarter was approximately $219,000. The Plumbers Secret L.L.C. loss of
$296,000 for the second quarter 2000 had a significant impact on our result of
operations as Plumbers Secret L.L.C. had a profit of approximately $386,000
for the first quarter 2000. This is primarily the result of sales of
approximately $100,000 for the 2000 second quarter as compared to the first
2000 quarter of approximately $2,700,000. Revenues to date are exclusively
sales of the Plumbers Secret product.
Management believes that with the rollout of two to four new products in
the next two quarters, we will generate approximate gross revenues in the
amount of $2.5 to $3.5 million dollars. However, it should be noted that a
strong positive public reaction to our products could produce significantly
higher results and, contrastly, a shortage of working capital could negatively
impact our ability to sell the product.
Our costs and expenses for the six and three months ended August 31, 2000
were $1,725,551 and $573,891 respectively. Payroll costs are averaging
$120,000 a quarter, advertising approximately $90,000 a quarter, general and
administrative expenses approximately $90,000 a quarter. The royalty expense
for the six months ended August 31, 2000 was $530,000. Management continues
to negotiate with the licensors of the Plumbers Secret with regard to
royalties and if successful, this figure could be reduced. We have incurred
interest costs of approximately $100,000 through August 31st, 2000 as a result
of debt financing earlier this year, along with non-cash financing costs for
warrants issued for the financing.
Our six and three month net losses for August 31, 1999 was $616,553 and
$356,472 respectively. This was primarily the result of quarterly costs and
expenses of approximately $275,000 each quarter.
Other than the introduction of new product lines, we are unaware of any
known trends, events or uncertainties that are reasonably likely to impact
revenues from operations. However, we may experience significant fluctuations
in operating results in future periods due to a variety of factors, including
but not limited to, the following factors:
* We may need additional financing in order to carry out our new
business plan and management cannot assure that we will be
successful in obtaining such financing. Failure to obtain
necessary financing could have a material adverse impact on our
operations.
* Sales from some of our products are yet to be tested in the retail
environment.
* We must continue to obtain new products and customers at reasonable
costs, retain customers and encourage repeat purchases.
* We need to develop our customer base for each product through
multiple marketing channels, which include the following: (i)
Development of an aggressive marketing campaign using a combination
of online and traditional marketing; (ii) by entering into linking
arrangements with other web sites; and (iii) using direct marketing
techniques to target new and existing customers with personalized
communications.
Liquidity and Capital Resources
As of August 31, 2000, we had a cash balance of approximately $254,000.
For the six months ended August 31, 2000 we generated $188,747 in cash from
operating activities compared to $774,269 of cash used at August 31, 1999.
Net cash utilized by financing activities for the six months of 2000 was
approximately $83,000 compared to $995,000 of cash provided for the six months
of 1999. In April and May of 2000 we received a total of $176,000 in loans
from two officers which were repaid as of August 31. Mr. Haehn loaned us
$100,000 and Mr. Lang loaned us $76,000. Sale of our common stock provided
proceeds of $1,000,000 from the sale of 285,000 shares to two accredited
investors in April of 1999.
<PAGE> 21
We conducted a private placement offering for an aggregate offering price
of $600,000 starting in March of 2000 and realized net proceeds of $517,000.
However, pursuant to the terms of the private placement, the notes matured on
May 31, 2000 and we repaid the $600,000 obligation.
On June 6, 2000 we terminated the Stock Acquisition and Exchange
Agreement with E-Pawn.com, Inc., dated April 15, 2000. This agreement was
terminated due to lack of performance by E-Pawn. As a result, we did not
receive $5 million in capital funding we anticipated from this agreement.
We have no plans to purchase significant equipment or make other capital
expenditures within the next twelve months. We have monthly lease commitments
for our office space of approximately $5,400. Interactive Marketing is
committed to lend The Plumber's Secret L.L.C. up to $150,000 as an initial
capital contribution. According to the terms of our marketing agreements we
will be obligated to share profits and/or pay royalties on any products we
sell. Further, the Wonder Wrench agreement requires us to purchase 300,000
units at an anticipated cost of $1.5 million during the first year of
marketing. To date we have purchased 25,000 units.
Financing
---------
During the May 31, 2000 quarter, we received short term loans from our
officers which allowed us to complete sales orders, however, we currently do
not anticipate seeking additional loans from these individuals within the next
twelve months.
For the 2001 fiscal year, we expect revenues to be the primary source of
funding for operations. We anticipate that revenues will increase as a result
of sales of our current product and anticipated sales from our new products.
Such expenses as production costs, royalties and fulfillment costs will offset
these revenues. We are in the final stages of negotiating an agreement with
an unrelated third party for investing roughly $1.5 million in the Strike
Jacket EFL product. This investment will allow us to introduce this product
within the 2000 calendar year. We are also in the process of developing
marketing programs for at least four other new products that we look to roll
out within the fiscal year. A shooting schedule for the production of three
infomercials is currently being planned. Management is reviewing various
product cost bids and is discussing with major retailers the selling of these
new products.
In the event revenues are insufficient to fund our operations, management
contemplates that additional capital will be provided by private placements of
our common stock or debt financing. We intend to complete any private
placements pursuant to exemptions provided by federal and state securities
laws. The purchasers and manner of issuance will be determined according to
our financial needs and the available exemptions. We do not currently intend
to make a public offering of our stock. We also note that if we issue more
shares of our common stock our shareholders may experience dilution in the
value per share of their common stock.
Management is investigating the availability, source and terms for
external debt financing. At this time we have not entered into any agreement
with any third parties regarding such financing. We cannot assure that funds
will be available from any source, or, if available, that we will be able to
obtain the funds on terms agreeable to us. Also, the acquisition of funding
through the issuance of debt could result in a substantial portion of our cash
flows from operations being dedicated to the payment of principal and interest
on the indebtedness, and could render us more vulnerable to competitive and
economic downturns.
We anticipate that our long-term liquidity sources will be primarily
product revenues. New products and expanded sales channels for our current
products hopefully will provide the necessary revenues to fund operations. In
the event revenues are insufficient to fund our operations, management expects
to rely on sales of our common stock and/or debt financing for needed funds.
Seasonal Trends
Our market is not seasonal because our products are marketed with a
direct response television media blitz, which is not related to the seasonal
variables.
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 5: OTHER INFORMATION
New Product Developments
The following discussions involve forward looking statements regarding
our recent new product developments that involve substantial risks and
uncertainties. We cannot assure that we will be able to finalize licensing or
marketing agreements for these products, or that the products will prove to be
marketable or successful.
Strike Jacket EFL.
This product, which was developed by screen and television star
Christopher Atkins, is a fishing product which takes a plastic or wood bait
and by covering this bait with the EFL, makes it appear to be a live bait.
Atkins invented this patented product with help from Hollywood special effects
artists. The EFL infomercial is complete and as soon as sufficient product
can be manufactured we will begin a direct response marketing campaign. It is
anticipated that this campaign will begin within the next 90 days. Prototypes
of the product and packaging, along with the infomercial, have been shown to
two of the larger retailers in the U.S. and both have expressed their intent
to order the product well before the next fishing season begins.
Wonder Wrench
The Wonder Wrench is manufactured in Switzerland and a two-minute
infomercial is in pre-production and should be ready within the next sixty
days. The Wonder Wrench can actually replace a full set of wrenches and is
targeted for home use. We intend to solicit distribution agreements with
direct response television programs, such as, QVC and Home Shopping Network.
When the infomercial is completed, our direct response test marketing phase
will begin.
Prime Healthcare Benefits Plan
In these days of out-of-control healthcare costs, The Prime Healthcare
Benefits Plan will save subscribers anywhere from 10-60% in the areas of
prescriptions, vision, hearing, dental, chiropractic and medical services.
Our Healthcare Plan will be presented to the public through a two-minute
infomercial that is currently in pre-production. We have arranged for
Discount Development Services, L.L.C., an Illinois limited liability company,
to administer the Healthcare Plan while we promote and enroll members in the
plan. Our targeted market is the over forty-five million Americans who do
not have any health coverage whatsoever along with the millions whose
insurance do not cover these crucial areas. The Prime Healthcare Benefits
Plan is not insurance so everyone is eligible to enjoy the savings. One
membership is good for the entire family. This is a continuity program and it
is estimated that we will have a 60-70% retention factor for at least two
years.
Beatles Book
Recently, Interactive Marketing Technology acquired the exclusive
worldwide distribution rights to five hundred photo negatives of the Beatles
that were recently discovered in a London attic. One hundred of these
negatives have already been put together in the form of a cocktail table book
entitled, Days In The Life, The Lost Beatles Archives and a two-minute
infomercial is currently being rushed into production.
<PAGE> 23
Easy Stor Ladder
The Easy Stor Ladder will be made available in a five and six foot model.
This aluminum ladder is very light and collapses into a small manageable unit
that is great for a house or an apartment. The unit has just completed
independent testing and qualifies as a Class II ladder under OSHA standards.
We expect production to commence within the next 60 days and as soon as
samples are available in sufficient quantity, retail orders will be solicited.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Part I: Exhibits.
Exhibit # Description Location
---------- ------------- ----------
27 Financial Data Schedule See attached
(b) Reports on Form 8-K.
On June 6, 2000, Interactive Marketing filed an 8-K regarding termination
of the Stock Acquisition and Exchange Agreement with E-Pawn.com, Inc., dated
April 15, 2000.
<PAGE> 24
SIGNATURES
Pursuant to the requirements 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.
INTERACTIVE MARKETING TECHNOLOGY, INC.
Date: October 17, 2000 By /s/ Sandy Lang
__________________________________________
Sandy Lang, CEO and Chairman of the Board
Date: October 16, 2000 By /s/ Gregory Haehn
___________________________________________
Gregory Haehn, President, Treasurer and
Director
<PAGE> 25
