UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2000.
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to __________.
Commission file number 0-30467
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INTACTA TECHNOLOGIES INC.
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(Exact name registrant as specified in its charter)
Nevada 58-2488071
------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
235 Peachtree Street, N.E.
2215 North Tower
Atlanta, Georgia 30303
------------------------------- -----------------------------
(Address of principal executive (Zip Code)
offices)
(404) 880-9919
(Registrant's telephone number, including area code)
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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 17,909,000 as of August 10,
2000.
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INTACTA TECHNOLOGIES INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets (unaudited) as of
June 30, 2000 and December 31, 1999 1
Consolidated Statements of Operations (unaudited) for
the three and six months ended June 30, 2000 and 1999 3
Consolidated Statements of Cash Flows (unaudited) for
the three and six months ended June 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
(ii)
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PART I. - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. The consolidated balance sheet as of June 30, 2000; the
consolidated statements of operations for the three and six months ended June
30, 2000 and June 30, 1999; and the consolidated statements of cash flows for
the three and six months ended June 30, 2000 and June 30, 1999 have been
prepared without audit. The consolidated balance sheet as of December 31,
1999 has been examined by independent certified public accountants. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures herein are adequate to make the
information presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's Registration Statement on Form
S-1, File No. 333-30400.
In the opinion of the Company, the statements for the unaudited interim
periods presented include all adjustments, which were of a normal recurring
nature, necessary to present a fair statement of the results of such interim
periods. The results of operations for the interim periods presented are not
necessarily indicative of the results of operations for the entire year.
INTACTA TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Jun 30, Dec 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents 2,726,400 917,400
Accounts receivable 75,600 31,700
Inventories 225,400 278,600
Related party and employee receivables -- 45,000
Other -- 30,800
---------- ----------
Total current assets 3,027,400 1,303,500
Property and equipment, net 130,000 156,100
Other assets, net 112,000 111,300
---------- ----------
3,269,400 1,570,900
========== ==========
See accompanying notes to consolidated financial statements.
1
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INTACTA TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Jun 30, Dec 31,
2000 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 202,200 472,400
Accounts payable - related parties 106,700 90,200
Advances from shareholder 245,000 89,000
Accrued expenses 15,500 77,800
Bridge loan financing 2,494,400 --
---------- ----------
Total current liabilities 3,063,800 729,400
---------- ----------
Total liabilities 3,063,800 729,400
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value;
50,000,000 shares authorized; no
shares issued and outstanding -- --
Common stock $.0001 par value;
100,000,000 shares authorized;
17,909,000 and 17,909,000 shares
issued and outstanding, respectively 1,791 1,791
Additional paid-in capital 19,866,761 19,710,553
Deficit (19,144,500) (17,671,200)
Unamortized stock compensation (518,452) (1,199,644)
---------- ----------
Total stockholders' equity 205,600 841,500
---------- ----------
3,269,400 1,570,900
========== ==========
See accompanying notes to consolidated financial statements.
2
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INTACTA TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Revenues
Products and components 111,000 20,200 251,800 65,000
Royalties from licensing
arrangements 43,900 12,800 56,700 12,800
Other Revenue 325,300 -- 325,300 --
---------- ---------- ---------- ----------
Total revenues 480,200 33,000 633,800 77,800
---------- ---------- ---------- ----------
Operating expenses
Cost of products and
components 24,300 -- 96,400 --
Research and development
(including non-cash
compensation expense in 2000
and 1999 respectively for
the three months ended June
30 ($90,400, $90,400) and
for the six months ended
June 30 ($180,700, $180,700)308,200 257,800 608,600 523,300
Sales and marketing
(including non-cash
compensation expense in 2000
and 1999 respectively for
the three months ended June
30 ($28,200, $0) and for
the six months ended June
30 ($52,100, $0) 268,700 44,800 484,600 47,300
General and administrative
(including non-cash
compensation expense in
2000 and 1999 respectively
for the three months ended
June 30 ($225,400, $200,100)
and for the six months ended
June 30 ($391,200,
$412,700) 580,800 641,800 930,000 1,182,800
---------- ---------- ---------- ----------
Total operating expenses 1,182,000 944,400 2,119,600 1,753,400
---------- ---------- ---------- ----------
Loss from operations (701,800) (911,400) (1,485,800) (1,675,600)
---------- ---------- ---------- ----------
Other income (expense)
Interest income 15,800 27,200 34,000 72,000
Interest (expense) (20,600) -- (20,600) (400)
---------- ---------- ---------- ----------
Loss before provision for
income taxes (706,600) (884,200) (1,472,400) (1,604,000)
Provision for income taxes -- (1,300) (900) (3,600)
---------- ---------- ---------- ----------
Net loss (706,600) (885,500) (1,473,300) (1,607,600)
Deficit, beginning of
period ========== ========== ========== ==========
Basic and diluted loss
per common share $ (0.04) $ (0.05) $ (0.08) $ (0.09)
========== ========== ========== ==========
Basic and diluted weighted -
average common shares
outstanding 17,909,000 17,673,615 17,909,000 17,672,315
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
3
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INTACTA TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Operating activities
Net loss (706,600) (885,500)(1,473,300) (1,607,600)
Adjustments to reconcile net
loss to cash used in
operating activities
Non cash compensation
expense 155,700 302,900 499,700 593,400
Depreciation and
amortization 34,900 26,200 55,100 59,400
Changes in operating
assets and liabilities:
Accounts receivable 42,500 35,500 31,900 41,100
Inventories 8,900 -- 53,200 (8,700)
Accounts payable (143,300) 77,200 (253,700) 18,400
Accrued expenses 15,500 -- (62,300) --
---------- ---------- ---------- ----------
Cash (used in) operating
activities (592,400) (443,700)(1,149,400) (904,000)
---------- ---------- ---------- ----------
Investing activities
Capital expenditures (29,700) (14,900) (29,700) (35,200)
---------- ---------- ---------- ----------
Cash (used in) investing
activities (29,700) (14,900) (29,700) (35,200)
---------- ---------- ---------- ----------
Financing activities
Contributed capital 400,500 -- 400,500 --
Advances from shareholder -- -- 704,500 --
Bridge loan financing 2,494,400 -- 2,494,400 --
Cost of financing (62,800) -- (62,800) --
Advance conversion (250,000) -- (250,000) --
Repayment of shareholder
advances (30,000) (20,000) (298,500) (280,000)
---------- ---------- ---------- ----------
Cash provided by (used in)
financing activities 2,552,100 (20,000) 2,988,100 (280,000)
---------- ---------- ---------- ----------
Increase/(decrease) in cash 1,930,000 (478,600) 1,809,000 (1,219,200)
Cash, beginning of period 796,400 2,306,500 917,400 3,047,100
---------- ---------- ---------- ----------
Cash, end of period $2,726,400 $1,827,900 $2,726,400 $1,827,900
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
4
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INTACTA TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
The Company
Intacta Technologies Inc. ("Intacta"), a Nevada corporation, was incorporated
in October 1997.
In May 1998, Intacta acquired Intacta Delaware Inc. ("Intacta Delaware"), a
Delaware corporation, and Intacta Labs Ltd. (formerly Fontech Ltd.) ("Intacta
Labs").
Intacta is headquartered in Atlanta, Georgia with its research and development
facilities in Beer Sheva, Israel. The Company develops and markets technologies
designed to bridge enterprise communications and information management systems
across digital and non-digital media. INTACTA.code(TM), the Company's flagship
technology is platform transparent, and language transparent, and is designed to
integrate with existing enterprise communications and information management
systems requiring enhancements to security, transmission and device handling on
any number of handheld platforms, including Windows CE, and Palm OS. Intacta
licenses its technology to third party solution providers such as independent
software developers and systems integrators, to market as a stand-alone module
for seamless and transparent integration within any application.
Consolidation
The accompanying consolidated financial statements for the three and six
months ended June 30, 2000 and 1999 and the year ended December 31, 1999
include the amounts of the Company and its wholly owned subsidiaries. All
intercompany accounts and transactions have been eliminated in the
consolidated financial statements.
Revenue Recognition
The Company's revenue recognition policies are in compliance with generally
accepted accounting principles including Statement of Position (SOP) 97-2,
Software Revenue Recognition. As such, the Company recognizes product revenue
upon shipment if persuasive evidence of an arrangement exists, delivery has
occurred, the fees are fixed and determinable and collectability is probable.
Appropriate reserves are considered to effectively defer revenue recognition
when material amounts of inventory have not been sold through to the end user.
Generally, the right of return of these products is of short duration
(90 days). No provision for estimated product returns has been necessary based
on historical experience.
Maintenance and support arrangements and other post-delivery obligations are
insignificant to the Company's revenues.
License revenues are recognized based on actual sales of the licensed software
by the customer/licensee and therefore are not recognized as revenue until
reported by the customer/licensee. This is the time at which the Company
believes that revenue recognition in accordance with SOP 97-2, as
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described above, has occurred. Support revenue is not integral to the
functionality of the licensed software and is billed and recognized as
incurred.
Software Development Costs
In accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed, costs related to the research and development of new products and
enhancements to existing products are expensed as incurred until technological
feasibility of the product has been established, at which time such costs are
capitalized, subject to expected recoverabilty. To date, the Company has not
had a general release of any of its new products nor has it received overall
market acceptance. Therefore, the Company has not capitalized any software
development costs related to its products, since the time period between
technological feasibility and the general release of a market accepted product
is not significant.
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.
Loss Per Share
Basic earnings per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted-average number of common and potentially dilutive
common shares outstanding during the period, if dilutive.
2. Bridge Financing:
During the quarter ended June 30, 2000, the Company completed a bridge
financing in which 25 bridge units were issued. Each bridge unit consisted of
a $100,000 bridge note and bridge warrants to purchase 25,000 shares of common
stock at an exercise price of $3.50 per share for aggregate gross proceeds of
$2,500,000. A discount for the fair value of the detachable warrants was
recognized concurrent with this transaction. As part of this bridge financing,
other short term debt in the amount of $250,000 was converted into 2.5 units
identical to the bridge units described above.
3. Warrants
During the quarter ended June 30, 2000, the Company issued 250,000 warrants to
a third party at an exercise price of $3.50 per share for services to be
rendered during 2000.
6
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Safe harbor Statement under the Private Securities Litigation Reform Act of
1995:
Statements in this Quarterly Report which are not historical fact,
including those concerning our expectations of future sales revenues, gross
profits, research and development, sales and marketing, and administrative
expenses, product introductions and cash requirements are "forward-looking"
statements. These "forward-looking" statements are subject to risks and
uncertainties that may cause our actual results to differ from expectations
including variations in the level of orders, general economic conditions in the
markets served by our customers, international economic and political climates,
timing of future product releases, difficulties or delays in product
functionality or performance, our failure to respond adequately to either
changes in technology or customer preferences, or to changes in our pricing or
that of our competitors and our inability to manage growth. All of the above
factors constitute significant risks to our company. There can be no assurance
that our results of operations will not be adversely affected by one or more of
these factors. As a result, our actual results may vary materially from our
expectations.
General
We have developed our patented Intacta technology which, through its unique
compression, encoding and error correction processes, provides solutions and
applications that enable enterprises to bridge their communications and
information management systems across digital and non-digital media.
We were organized in October 1997 to acquire two subsidiary companies of Corsa
S.A. Holdings ("Corsa") that marketed and developed two related facsimile
storage and retrieval products that incorporated an early version of the
Intacta technology. Development and production of the facsimile products was
performed in Israel by Intacta Labs Ltd. and marketing and distribution was
performed in the United States by Intacta Delaware, Inc. We acquired the
subsidiaries from Corsa in May 1998 in exchange for approximately 70% of our
outstanding capital stock immediately after the acquisition. The acquisition
was treated, for accounting purposes, as a reverse acquisition. The
references to "we" and "us" refer to the operation of the entities we acquired
both before and after the acquisition.
During 1997 and part of 1998 we derived substantially all of our revenues from
the sale of facsimile-based products. Beginning in the latter part of 1997
and continuing into 1998 we began to wind down our production and active
marketing of the facsimile-based products due to reduced profit margins and
anticipated further deterioration of profit margins from increased competition
and costs of marketing the products to the retail market. At that time, we
initiated research and development of advanced products and software
applications based on our Intacta technology. We also began, on a very
limited basis, licensing the Intacta technology for integration with
applications and solutions to end users. As a result, our revenues declined
substantially from approximately $895,000 for 1997 to approximately $138,000
for each of 1998 and 1999, and our research and development expenses increased
substantially from approximately $343,000 in 1997 to approximately $903,500 in
1998 and $1,047,400 in 1999.
In the middle of 1999, due to competitive pressures and our re-evaluation of
our business model and revenue/cost projections, we determined to focus on
direct marketing of our technology for licensing to large enterprise end users
and third party solution providers. Three products based upon our Intacta
technology were at or nearing completion at the time we shifted our focus to
marketing our technology; Intacta.MobileCE Intacta.Courier, and
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Intacta.Bridgeway. Intacta MobileCE and Intacta.Courier are developed
software products that are marketable as a diskette or as a download file.
Our limited financial and other marketing resources, however, have prevented
us from engaging in a full-scale marketing campaign for these products and
based upon our current business model and operating strategy we do not intend
to devote any significant financial or other resources at this time to the
further development or marketing of these products.
Primarily as a result of the limited financial resources and personnel
available for marketing activities, we had limited licensing arrangements
during the first quarter of 2000.
In April 2000, we entered into an agreement with Fujitsu Limited, of Japan,
for Fujitsu to have a non-exclusive right to license a specialized application
of technology to bring multi-media capabilities to newspapers. Fujitsu, in
turn, licensed our technology to Yomiuri Shimbun, a Japanese newspaper with one
of the world's largest daily circulations. Our agreement with Fujitsu contains
limitations on their licensing rights of our technology. Customization fees
received from Fujitsu have been recognized in the second quarter.
Primarily as a result of our recurring loses, our independent auditors
modified their opinion on our 1999 financial statements and in the two
preceding years to include an explanatory paragraph expressing substantial
doubt about our ability to continue as a going concern.
Results of Operations
Three Months Ended June 30, 2000 as compared to the Three Months Ended June
30, 1999
Revenues:
Revenues increased by $447,200 from $33,000 in the second quarter of 1999 to
$480,200 in the comparable period this year. The growth in revenues resulted
from (i) sales of products and components, primarily software development
testing platforms, assembled for our own testing purposes and sold to
supplement our cash flows, (ii) an increase in core technology licensing
income, and (iii) custom programming fees associated with a new licensing
agreement for our technology.
Cost of products and components:
Cost of products and components was $24,300 for the three months ended June
30, 2000. There was no cost of products and components in the second
quarter of 1999. The increase in costs during the second quarter of 2000 is a
result of components consumed in the manufacture and sale of the development
test platforms. There were no costs for products and components sold in 1999
as all inventories of older products had been written off in the prior year.
Research and development expenses:
Research and development expenses increased by 19.6% to $308,200 for the
second quarter of 2000, up from $257,800 for the comparable period in 1999.
The increase was primarily attributable to an increase in personnel as well as
related office and other support facility costs. The amounts reflected as
research and development expense for the second quarter of each of 1999 and
2000 include a non-cash charge to account for changes in the value of options
granted to employees amounting to $90,400, respectively.
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Sales and marketing expenses:
Sales and marketing expenses increased by 499.8% to $268,700 for the second
quarter of 2000 as compared to $44,800 for the prior comparable period. The
increase reflects our hiring of personnel together with transfers of existing
personnel to this function from our administrative group, and costs for the
development of marketing materials and other market research data. The amount
reflected as sales and marketing expense for the three months ended June 30,
2000 includes a portion of a non-cash charge of $52,100 to account for changes
in the value of options granted to certain employees.
General and administrative expenses:
General and administrative expenses decreased by 9.5% to $580,800 for the
three months ended June 30, 2000 from $641,800 for the comparable period in
1999. The decrease was primarily attributable to (i) reductions in salaries
and related costs for certain employees transferred to our sales and marketing
department, and (ii) the proportionate reduction of non-cash charges for changes
in the value of stock options to $165,900, from $212,600 for 1999 resulting from
such employee transfers.
Operating Expenses:
Operating expenses for the second quarter of 2000 were $1,182,000 representing
an increase of 25.2% over the comparable second quarter of 1999 of $944,400.
The increase is primarily attributable to the increase in sales and marketing
expenses reflecting the addition of personnel and related supporting costs in
this function.
Interest income (expense):
Interest income was $15,800 for the three months ended June 30, 2000 as
compared to $27,200 for the comparable 1999 period. We incurred an interest
expense in the second quarter of 2000 of $20,600 resulting from the bridge
financing completed in May and June, 2000. We had no comparable interest
expense in the second quarter of 1999.
Net loss:
As a result of the foregoing, we experienced a net loss of $706,600 as
compared to a net loss of $885,500 during the quarter ended June 30, 1999.
Six Months Ended June 30, 2000 as compared to the Six Months Ended June 30,
1999
Revenues:
Revenues for the six months ended June 30, 2000 increased by 585.2% to
$633,800 from $77,800 for the prior comparable period in 1999. The growth in
revenues resulted from (i) sales of products and components, primarily software
development testing platforms, assembled for our own testing purposes and sold
to supplement our cash flows, (ii) an increase in technology licensing income,
(iii) custom programming fees associated with a new licensing agreement for our
technology, and (iv) sales of surplus non-proprietary chips from our inventory.
Cost of products and components:
Cost of products and components for the six-months ended June 30, 2000 were
$96,400. There was no cost of products and components for the comparable
period in 1999 as all inventories of older products had previously been
written off in our accounts. The increase in cost of products and components
is attributable to purchase costs of (i) components consumed in the
manufacture of the test platforms sold and (ii) surplus non-proprietary memory
chips held in inventory and sold in the first quarter of 2000.
Research and development expenses:
Research and development expenses for the six months ended June 30, 2000 were
$608,600, representing an increase of 16.3% from $523,300 for the
comparable
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period in 1999. The increase was primarily attributable to an increase in
personnel as well as related office and other support facility costs. The
amounts reflected as research and development expenses for the six-month period
in each of 1999 and 2000 include a non-cash charge of $180,700, respectively
for the imputed cost of the stock option compensation granted to certain
employees.
Sales and marketing expenses:
Sales and marketing expenses for the six months ended June 30, 2000 were
$484,600, as compared to $47,300 in 1999. The increase in sales and marketing
expenses is attributable to the transfer of personnel from our administration
function and the hiring of new personnel, and for costs for the
development of marketing materials and other market research. In addition, the
amount reflected as sales and marketing expenses for the six months ended June
30, 2000 includes a non-cash charge of $52,100 for changes in the value of
options granted to certain employees as part of their compensation this year. No
similar charge was required in the prior year.
General and administrative expenses:
General and administrative expenses for the six-month period ended June 30,
2000 decreased to $930,000 from $1,182,800 for the comparable period in 1999.
The decrease of 21.4% is primarily attributable to the decrease in salaries
and related costs for certain employees transferred to our sales and marketing
department, and to the reduction of non-cash stock option charges to $391,200
for the six months ended June 30, 2000 from $412,700 in 1999.
Operating Expenses:
Operating expenses for the six months ended June 30, 2000 were $2,119,600,
representing an increase of 20.9% from $1,753,400 for the comparable period in
1999. The increase is primarily due to increased sales and marketing
expenses reflecting the addition of personnel in this function coupled with
higher costs of products and components and higher research and development
function costs.
Interest income (expense):
Interest income for the six months ended June 30, 2000 was $34,000, as
compared to $72,000 in the 1999 period. Interest expense for the six months
was $20,600, resulting from the bridge financing completed in June 2000, as
compared to interest expense in 1999 of only $400.
Net loss:
As a result of the foregoing, net loss for the six months ended June 30, 2000
was $1,473,300, as compared to a net loss in the prior comparable period of
1999 of $1,607,600.
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Liquidity and Capital Resources:
Since inception, we have financed our capital requirements primarily through
the private sale of our capital stock to various parties and advances from
Valor Invest Limited ("Valor"), an affiliate of our President and Chief
Executive Officer, a portion of which was subsequently converted into equity,
and from cash acquired in connection with the acquisition of our subsidiaries
from Corsa. At December 31, 1999, we had working capital of $574,100. At June
30, 2000, primarily as a result of short-term indebtedness resulting from a
bridge financing completed in the past quarter, we had a working capital deficit
of $36,400.
Cash used in operating activities for the six months ended June 30, 2000 was
$1,149,400, consisting primarily of our net loss and a decrease in accounts
payable of approximately $253,700 and accrued expenses of approximately
$62,300 and partially offset by $499,700 of non-cash compensation expenses.
Cash used in investing activities was $29,700 and cash provided by financing
activities was $2,988,100 primarily resulting from the proceeds of the bridge
financing of $2,494,400 (including conversion of a portion of unpaid advances
by Valor) and approximately $704,500 of advances from Valor.
Cash used in operating activities for the six months ended June 30, 1999 was
$904,000, consisting primarily of our net loss and an increase in accounts
receivable of $41,100 and partially offset by $593,400 of non-cash compensation
expenses. Cash used in investing activities was $35,200 and cash used in
financing activities was $280,000, consisting entirely of repayment of
prior advances by Valor.
As a consequence of our net loss and capital expenditures this year,
our cash at the beginning of the period of approximately $917,000 was
substantially depleted, and the additional advances from Valor and the bridge
financing have served to supplement our cash shortfall and to
provide the present cash on hand of $2,726,400.
In May and June 2000, we completed a bridge financing in which we issued 25
Bridge Units, each Bridge Unit consisting of a $100,000 principal amount Bridge
Note and Bridge Warrants to purchase 25,000 shares of our common stock at an
exercise price of $3.50 per share, for aggregate gross proceeds of $2,500,000.
At December 31, 1999, an aggregate of $89,000 of advances from Valor remained
outstanding. During the six months ended June 30, 2000, Valor had advanced
to us an additional $704,500 on a non interest-bearing basis. We repaid
$298,500 against this indebtedness during this period, such that our net
indebtedness to Valor prior to the bridge financing was $495,000. As part of the
bridge financing, Valor agreed to convert $250,000 of the outstanding
indebtedness into 2.5 Valor Units identical to the Bridge Units
offered by us in the bridge financing. Valor also agreed to subordinate the
balance of the $245,000 of indebtedness to repayment of the Bridge Notes.
We currently are not generating sufficient revenues from operations to fund
our operating activities and we are dependent upon additional financing from
external sources. We are currently seeking additional sources of financing.
We cannot assure you, however, that any additional sources of financing will
be available to us when needed, on commercially reasonable terms or at all.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable
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PART II. - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In May and June 2000, we completed a $2,500,000 private placement
(the "Bridge Financing") of 25 units (the "Bridge Units"), each Bridge Unit
consisting of (i) an unsecured promissory note in the principal amount of
$100,000, bearing interest at the rate of 12% per annum (the "Bridge Notes"),
and (ii) warrants to purchase 25,000 shares of Common Stock at an exercise
price of $3.50 per share (the "Bridge Warrants"). Harmonic Research, Inc.
acted as the placement agent ("Placement Agent") of the Bridge Financing.
After reimbursement to the Placement Agent of $20,000 of expenses and the
payment of other offering expenses of approximately $30,000, we received net
proceeds of approximately $2,450,000 from the sale of the Bridge Units. In
connection with the Bridge Financing, Valor converted $250,000 of the debt
owed to it into 2.5 units, comprised of an unsecured promissory note and
warrants identical to the Bridge Notes and Bridge Units (the "Valor Units").
The sale of the Bridge Units and the issuance of the Valor Units pursuant to
the conversion by Valor of the $250,000 of debt owed to it, was made in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
(i) The Company filed a Form 8-K dated May 31, 2000 related to a
press release by the Company announcing the first closing of the
bBridge financing for 16.75 units at a price of $100,000 per unit,
providing the Company with gross proceeds of $1,675,000.
(ii) The Company filed a Form 8-K dated June 15, 2000 related to
a press release by the Company announcing a subsequent closing of
the bridge financing for an additional 8.25 units at a price of
$100,000 per unit, providing the Company with additional gross
proceeds of $825,000.
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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.
Dated: August 14, 2000
Intacta Technologies Inc.
(Registrant)
By: /s/ Altaf Nazerali
----------------------
Altaf Nazerali
President
By: /s/ Ross Wilmot
----------------------
Ross Wilmot
Chief Financial Officer
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