UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996
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 0-18865
LEASING TECHNOLOGY INCORPORATED
(Exact name of registrant as specified in its charter)
UTAH 87-0401400
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Indentifaction Number)
102 WEST 500 SOUTH, SUITE 400, SALT LAKE CITY, UTAH, 84101
(Address of principal executive offices, including zip code)
(801) 363-8961
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has: (1) 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) been subject to such
filing requirements for the past 90 days. Yes X No
Number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of November 15, 1996
Common Stock, par value $.001 36,704,644
<PAGE>
============================================
TABLE OF CONTENTS
================================================================================
Heading Page
PART I. FINANCIAL STATEMENTS
Item 1. Consolidated Balance Sheets - September 30, 1996 and 4-5
March 31, 1996
Consolidated Statements of Operations and Accumulated Deficit
- Six months ended September 30, 1996 and 1995 and three
months ended September 30 , 1996 and 1995 6-7
Consolidated Statements of Cash Flows - Six months ended
September 30, 1996 and 1995 and three months ended
September 30, 1996 and 1995 8-9
Notes to Consolidated Financial Statements 10-18
Item 2. Management's Discussion and Analysis of Financial Condition 19-20
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Securities Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
<PAGE>
PART I
Item 1. Financial Statements
The following, unaudited Consolidated Financial Statements for the
period ended September 30, 1996, include all adjustments which management
believes are necessary for the financial statements to be presented in
conformity with generally accepted accounting principals.
(THIS SPACE INTENTIONALLY LEFT BLANK)
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Balance Sheets
ASSETS
September 30, March 31,
1996 1996
CURRENT ASSETS (Unaudited)
Cash $ 1,848,065 $ 790,744
Accounts receivable (Note 1) 96,778 92,153
Inventories (Note 1) 673,965 748,010
Marketable securities - 58,024
--------------- ----------------
Total Current Assets 2,618,808 1,688,931
--------------- ----------------
PROPERTY AND EQUIPMENT (Note 1)
Rental property 17,852 17,852
Non-rental property 58,402 52,414
--------------- ----------------
Total depreciable assets 76,254 70,266
Less: accumulated depreciation (65,775) (63,901)
--------------- ----------------
Net Property and Equipment 10,479 6,365
--------------- ----------------
OTHER ASSETS
Land held for development, net
of long-term commitment
payable (Notes 1, 6) 6,590,211 5,287,605
Deposits 1,970 1,970
--------------- ----------------
Total Other Assets 6,592,181 5,289,575
--------------- ----------------
TOTAL ASSETS $ 9,221,468 $ 6,984,871
=============== ================
The accompanying notes are an integral part of these financial statements
-4-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, March 31,
1996 1996
CURRENT LIABILITIES (Unaudited)
Accounts payable - trade $ 631,584 $ 765,956
Accrued interest payable 625,143 551,986
Current portion of notes payable
(Note 4) 469,525 1,156,014
--------------- ----------------
Total Current Liabilities 1,726,252 2,473,956
--------------- ----------------
LONG-TERM DEBT
Commission payable (Note 6) 90,000 90,000
Notes payable (Note 4) 3,973,849 1,415,044
--------------- ----------------
Total Long-Term Debt 4,063,849 1,505,044
--------------- ----------------
Total Liabilities 5,790,101 3,979,000
--------------- ----------------
COMMITMENTS AND CONTINGENCIES (NOTE 8) - -
--------------- -----------
MINORITY INTEREST (Note 1) - -
--------------- -----------
STOCKHOLDERS' EQUITY (NOTE 5)
Preferred stock, par value $0.001
per share: 10,000,000 shares
authorized; issued and outstanding:
102,220 and 102,220 Class B shares,
150,000 and 150,000 Class C shares
-0- and -0- Class A shares at September
30, 1996 and March 31, 1996,
respectively (in order of liquidation
rights) (See Note 7) 252 252
Common stock, par value $0.001 per
share: 125,000,000 shares authorized;
issued and outstanding: 36,704,644 and
36,704,644 shares issued and 33,488,244
and 33,488,244 shares outstanding at
September 30, 1996 and March 31, 1996,
respectively 36,705 36,705
Additional paid-in capital 12,747,733 11,910,212
Accumulated deficit (9,353,323) (8,941,298)
--------------- ----------------
Total Stockholders' Equity 3,431,367 3,005,871
--------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,221,468 $ 6,984,871
=============== ================
The accompanying notes are an integral part of these financial statements
-5-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
September 30, September 30,
-------------------------------------------------------------------------
1996 1995 1996 1995
---------------- ---------------- --------------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INCOME
<S> <C> <C> <C> <C>
Sales - real estate $ 161,000 $ 349,501 $ 28,000 $ 261,701
---------------- ---------------- --------------- ----------------
Total Income 161,000 349,501 28,000 261,701
---------------- ---------------- --------------- ----------------
COST OF SALES
Cost of sales - real estate 92,484 279,047 15,902 233,813
----------- --------- --------- ---------
Total Cost of Sales 92,484 279,047 15,902 233,813
---------------- ---------------- --------------- ----------------
Gross Profit 68,516 70,454 12,098 27,888
---------------- ---------------- --------------- ----------------
GENERAL AND
ADMINISTRATIVE
EXPENSES
Depreciation and
amortization 1,874 1,578 869 576
General expenses 677,892 332,830 358,769 187,001
---------------- ---------------- --------------- ----------------
Total General and
Administrative
Expenses 679,766 334,408 359,638 187,577
---------------- ---------------- --------------- ----------------
Net Operating (Loss) (611,250) (263,954) (347,540) (159,689)
---------------- ---------------- --------------- ----------------
OTHER INCOME AND
(EXPENSES)
Interest income 25,228 3,455 23,190 -
Other income 9,249 - 6,343 -
Gain on sale of assets 177,778 100,286 (58,805) 71,769
Interest expense (13,030) (13,886) (5,950) (7,317)
---------------- ---------------- --------------- ----------------
Total Other Income
and (Expenses) 199,225 89,855 (35,222) 64,452
---------------- ---------------- --------------- ----------------
Net (Loss) Before
Income Tax (412,025) (174,099) (382,762) (95,237)
Less: Provisions for
(Income Tax) - - - -
---------------- ---------------- --------------- -----------
NET (LOSS) $ (412,025) $ (174,099) $ (382,762) $ (95,237)
---------------- ---------------- --------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
-6-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Operations and Accumulated Deficit (Continued)
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
September 30, September 30,
-------------------------------------------------------------------------
1996 1995 1996 1995
---------------- ---------------- --------------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET (LOSS) $ (412,025) $ (174,099) $ (382,762) $ (95,237)
BEGINNING
ACCUMULATED DEFICIT (8,941,298) (5,155,153) (8,970,561) (5,234,015)
---------------- ---------------- --------------- ----------------
ENDING
ACCUMULATED DEFICIT $ (9,353,323) $ (5,329,252) $ (9,353,323) $ (5,329,252)
================ ================ =============== ================
EARNINGS (LOSS)
PER SHARE $ (0.01) $ (0.00) $ (0.01) $ (0.00)
================ ================ =============== ================
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 33,488,244 33,488,244 33,488,244 33,488,244
================ ================ =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements
-7-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
September 30, September 30,
-------------------------------------------------------------------------
1996 1995 1996 1995
---------------- ---------------- --------------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss $ (412,025) $ (174,099) $ (382,762) $ (95,237)
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating
Activities:
Depreciation and
amortization 1,874 1,578 869 576
Decrease in inventory 74,045 211,620 12,691 169,260
(Increase) in accounts
receivable (4,625) 77,125 14,000 49,283
Increase in accounts
payable and other
current liabilities (246,990) (59,284) 53,068 133,741
Decrease (Increase) in
other current assets 97,143 208,816 58,024 (59,284)
---------------- ---------------- --------------- ----------------
Net Cash Provided
(Used) by Operating
Activities (490,578) 265,756 (244,110) 198,339
---------------- ---------------- --------------- ----------------
INVESTING ACTIVITIES
Purchase of property
and equipment (5,988) - (5,988) -
Investment in land (1,302,606) (400,614) (888,767) (87,096)
---------------- ---------------- --------------- ----------------
Net Cash Provided
(Used) by Investing
Activities (1,308,594) (400,614) (894,755) (87,096)
---------------- ---------------- --------------- ----------------
FINANCING ACTIVITIES
Stock offering costs (209,000) - (109,000) -
Common stock of
subsidiary issued for cash 1,007,402 168,383 7,402 -
Long-term borrowings 2,558,805 - 558,805 -
Payment on long-term
debt (500,714) (9,891) (472,546) (90,515)
Borrowings from related
parties - 20,347 - -
---------------- ---------------- --------------- -----------
Net Cash Provided
(Used) by Financing
Activities $ 2,856,493 $ 178,839 $ (15,339) $ (90,515)
---------------- ---------------- --------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
-8-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
September 30, September 30,
-------------------------------------------------------------------------
1996 1995 1996 1995
---------------- ---------------- --------------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Increase in Cash and
Cash Equivalents $ 1,057,321 $ 43,981 $ (1,154,204) $ 20,728
Cash and Cash Equivalents,
Beginning of Period 790,744 16,994 3,002,269 40,247
---------------- ---------------- --------------- ----------------
Cash and Cash Equivalents,
End of Period $ 1,848,065 $ 60,975 $ 1,848,065 $ 60,975
================ ================ =============== ================
Cash Paid For:
Interest $ 13,030 $ 14,971 $ 5,950 $ 7,317
Income Taxes - - - -
</TABLE>
The accompanying notes are an integral part of these financial statements
-9-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Leasing Technology Incorporated (the Company) was formed as a Utah
corporation on March 31, 1983 for the purpose of leasing equipment.
The Company has significantly increased its investing activities
which include startup companies, real estate development, and/or
other projects. Operations include related and non related party
transactions.
b. Property and Equipment
Property and equipment are recorded at cost. When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain
or loss is reflected in income for the period.
The costs of maintenance and repairs are charged to income as
incurred. Renewals and betterments are capitalized and depreciated
over their estimated useful lives.
c. Depreciation
Depreciation is computed using the declining-balance method over
the estimated useful life of the assets (usually three years).
d. Earnings (Loss) Per Share
Earnings (loss) per common share is computed based on the weighted
average number of common shares outstanding during the period
(there are no common stock equivalents).
e. Income Taxes
Income taxes consist of Federal Income and State Franchise taxes.
The Company has elected a March 31 fiscal year-end.
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No.109 (SFAS No. 109),
"Accounting for Income Taxes."
f. 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.
-10-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Estimates
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of commitments
and contingencies, and the reported revenues and expenses.
h. Concentrations of Risk
The Company maintains its cash in bank deposit accounts at high
credit quality financial institutions. The balances, at times, may
exceed federally insured limits. At March 31, 1996 and September
30, 1996, the Company exceeded the insured limit by approximately
$584,380 and $1,548,065, respectively.
The Company builds and develops real property in Southern Utah. In
the normal course of business the Company extends secured credit to
its customers.
i. Principles of Consolidation
The accompanying consolidated financial statements include Leasing
Technology Incorporated and its subsidiary, Golf Ventures, Inc.
(GVI). During the year ended March 31, 1994, the Company reduced
ownership in its subsidiary TKI, to the point where it no longer
has control, therefore, its investment is accounted for under the
equity method. Due to losses of TKI, the investment has been
reduced to $0.
All significant intercompany transactions have been eliminated in
the consolidated financial statements. The only significant
intercompany transactions are loans made by the Company to GVI. The
notes receivable on the books of the Company and the accrued
interest receivable have been eliminated against the liability on
the books of the subsidiaries and the related accrued interest
payable. The interest income accrued by the Company has been
eliminated against the interest expense accrued by the subsidiary.
j. Inventories
Inventories are stated at the lower of cost or market using the
first-in, first-out method. Inventories consist of the following:
September 30, March 31,
1996 1996
Real estate held for resale $ 673,965 $ 748,010
---------------- ------------------
Total inventory $ 673,965 $ 748,010
================ ==================
-11-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Income Recognition
GVI recognizes gain on real estate sales in accordance with the
provisions of FASB-66.
l. Accounts Receivable
Accounts receivable are shown net of the allowance for bad debts of
$5,000 at March 31, 1996 and September 30, 1996.
NOTE 2 - COMMON STOCK ISSUED BUT NOT OUTSTANDING
The Company has issued 3,216,400 shares of common stock which have
been offered to the holders of the class "B" preferred stock and
the debentures. The shares have not been accepted by the holders of
those investments as of the date of the financial statements.
NOTE 3 - INCOME TAXES
The Company had net operating loss carry-forwards available to
offset future taxable income. The Company has net operating loss
carry-forwards of approximately $8,500,000 to offset future tax
liabilities. The loss carry-forwards will begin to expire in 2007.
Deferred income taxes payable are made up of the estimated federal
and state income taxes on items of income and expense which due to
temporary differences between books and taxes are deferred. The
temporary differences are primarily caused by the use of the equity
method for reporting investment in subsidiaries.
The source and deferred tax effect of these differences are as
follows:
September 30, March 31,
1996 1996
Net operating loss carryover
equity subsidiary * $ (53,373) $ (53,373)
---------------- ------------------
Deferred income taxes payable $ - $ -
================ =============
* (Note - no deferred tax asset is recorded in accordance with F.A.S.B.
109, because it can not be reasonably determined if the net operating loss will
be useable.)
-12-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 4 - NOTES PAYABLE
Notes payable are comprised of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, March 31,
1996 1996
Convertible subordinated debentures,
due June 30, 1996 bearing interest at
12% per annum. Interest payable
quarterly, secured by land. 185,000 $ 210,500
Promissory note payments through August
15, 2016 at $30,524 per year including
interest at 10% per annum. 204,435 204,435
Promissory note secured by land, bearing
interest at 9.75%, payable in full including
accrued interest on June 18, 1997. 913,805 355,000
Trust deed note secured by land. Interest
accrued at 10% per annum, payable monthly
at $5,000 per month through January 30,
1996 at which time the balance including
accrued interest will be due. - 401,366
Trust deed note payable, secured by land.
Interest accrued at 8% per annum. Payable
$100,000 per year plus the accrued interest
for that year. 359,370 459,370
Note payable bearing interest at 13.75%,
monthly payments of $331 through February
1998, secured by personal property of officers. 7,189 7,452
Trust deed note, secured by land and 50,000
shares of the Company's common stock.
Interest accrued at 15% per annum. Principal
and interest due May 31, 1995. 127,073 211,433
----------- ------------------
Page totals $ 1,796,872 $ 1,849,556
----------- ------------------
</TABLE>
-13-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 4 - NOTES PAYABLE (Continued)
September 30, March 31,
1996 1996
Balance forward $ 1,796,872 $ 1,849,556
Promissory note secured by land.
Interest accrued at 10% per annum,
payable in shares of the Company's
common stock. $120,000 plus a percentage
of the proceeds of lot sales payable
annually beginning on February 1, 1991
through February 1, 1997 at which time
the balance will be due as a balloon
payment. $2,000 from each Red Hawk lot
sale also applies to the note 646,502 721,502
Trust deed note, dated June 10, 1996, to
be repaid after 36 months. The note is
secured by a trust deed on 616 acres of
the Red Hawk property. The note bears
interest at 10.5% per annum which is
payable monthly. 2,000,000 -
---------------- -------------
Subtotal 4,443,374 2,571,058
Less current portion (469,525) (1,156,014)
---------------- ------------
Long-term portion $ 3,973,849 $ 1,415,044
================ ============
Maturities of long-term debt are as follows:
March 31, 1996 $ 469,525
1997 1,147,677
1998 233,219
1999 2,196,884
2000 145,936
Thereafter 250,133
------------
$ 4,443,374
==================
-14-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 5 - STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Stock Preferred Stock Additional Stock-
Shares Shares Paid-in Accumulated holders'
(in 000s) Amount (in 000s) Amount Capital Deficit Equity
--------- ------- --------- ------ -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1995 36,705 $ 36,705 252 $ 252 $ 7,679,394 $(5,155,153) $ 2,561,198
Capital contributed by stock
issuances of the subsidiary - - - - 4,230,818 - 4,230,818
Net (loss) - - - - - (3,786,145) (3,786,145)
-------- -------- ------- -------- ------------ ----------- ----------
Balance, March 31, 1996 36,705 36,705 252 252 11,910,212 (8,941,298) 3,005,871
Capital contributed by stock
issuances of the subsidiary - - - - 837,521 - 837,521
Net (loss) - - - - - (412,025) (412,025)
-------- -------- ------- -------- ------------ ----------- -----------
Balance, June 30, 1996 36,705 $ 36,705 252 $ 252 $ 12,747,733 $(9,353,323) $ 3,431,367
======== ======== ======= ======== ============ =========== ===========
</TABLE>
-15-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 6 - LAND HELD FOR DEVELOPMENT
On March 30, 1990 the Company purchased 486 acres from Karl Stucki
and the Stucki Family Trust for $3,004,356, and on July 31, 1990
the Company purchased 130 acres from Dynamic American Corporation
for $610,000 which makes up the Red Hawk real estate development.
On December 28, 1992, this real estate development, together with
Cotton Manor/Cotton Acres was transferred to Golf Ventures, Inc.
(GVI) in exchange for 654,746 (post-split) shares of GVI common
stock. The Red Hawk land (616 acres) is undeveloped, and in order
for GVI to realize its investment, adequate financing will need to
be obtained.
The purchase price was comprised as follows:
Cash $ 49,356
Assumption of commission obligation 90,000
Trust deed note:
Stucki Income Trust 2,865,000
Total $ 3,004,356
================
The purchase of the property is recorded on a "cash basis" whereby
the cost in the financial statements reflects only the cash invested
in the land and debts assumed from the seller. The trust deed note
is excluded because of the uncertainty of obtaining adequate
development financing. The principal paid on the trust deed note is
added to the cost when it is paid.
For the year ended March 31, 1996 the Company capitalized $514,687
in construction period interest costs. The costs of the land is less
than the estimated net realizable value of the land.
NOTE 7 - PREFERRED STOCK
The shareholders of the Company have authorized 10,000,000 shares of
preferred stock with a par value of $0.001. The terms of the
preferred stock are to be determined when issued by the board of
directors of the Company.
CLASS A:
There are no Class A preferred shares presently outstanding.
CLASS B:
Each share of Class "B" preferred stock may, at the option of the
holder thereof any time on or before March 31, 1995, be converted
into shares of the Company's common stock, none of the shares were
converted.
-16-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 7 - PREFERRED STOCK (Continued)
CLASS C:
In September 1991, the Company purchased the Cotton Manor real
estate project as follows:
Cash $ 23,601
Debt assumed 431,449
Promissory note 1,387,000
Class "C" preferred stock 750,000
----------
$2,592,050
The Company delivered to the seller, 150,000 shares of authorized
but previously unissued Class "C" preferred stock, which for the
purpose of the agreement were valued at $5.00 per share or a total
of $750,000. The shares of Class "C" preferred stock may be
redeemed by the Company at any time prior to September 3, 1997, by
the Company paying to the seller or its assigns, the sum of $5.50
cash per share if redeemed within 12 months from the date hereof;
$6.00 cash per share if redeemed between 12 and 24 months from the
date hereof; and $6.50 if redeemed between 24 and 36 months from
the date hereof; and $7.00 cash per share if redeemed between 36
and 48 months from the date hereof; and $7.50 cash per share if
redeemed within 48 and 60 months from the date hereof. Prior to the
Company redeeming the preferred shares to be issued to the seller
hereunder and prior to the 3rd day of September, 1997, the seller
will have the right to convert any remaining shares of preferred
stock into shares of the Company's common stock at the rate of 5
shares of common stock for each share of preferred stock converted.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Commitments include trust deed notes not recorded for accounting
purposes (see Note 6) which the Company has committed to pay to
acquire the Red Hawk real estate development. The liability and
accompanying asset will be recorded when the Company resolves the
uncertainty described in Note 6.
September 30, March 31,
1996 1996
Stucki Income Trust: $2,865,000
of Trust Deed notes secured by land.
Interest accrued at 10% with monthly
payments of $25,000 through May 15,
1998. $ 2,283,690 $ 2,390,725
Less Current Portion (36,867) (2,390,725)
---------------- ----------------
Long-Term Portion $ 2,246,823 $ -
================ ================
-17-
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and September 30, 1996
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
Maturities of long-term commitments are as follows:
1996 $ 36,867
1997 78,830
1998 2,167,993
1999 -
2000 -
After 2000 -
-----------
$ 2,283,690
On July 19, 1993, the Company became the subject of a formal order
of investigation captioned "In the Matter of Leasing Technology,
Inc." (NY-6027) issued by the Securities and Exchange Commission.
The order states that the Commission deems certain acts and
practices to be in possible violation of Section 19(a) of the
Securities Act of 1933 and Sections 10(b), 13(a) and 15(c) of the
Securities Act of 1934, and various rules thereunder. As of the
date hereof, the Company is unable to make a determination as to
the extent of the investigation or to any possible material effect
that it may have on the Company.
The Company is leasing its principle place of business pursuant to
a 24-month lease for a monthly rental of $2,407. The Company shares
this office space with GVI.
NOTE 9 - GOING CONCERN
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. In order to carry out
its operating plans, the Company will need to obtain additional
funding from outside sources. The Company has received funds from a
private placement and plans to continue making private placements
of its preferred and common stock. There is no assurance that the
Company will be able to obtain sufficient funds from other sources
as needed or that such funds, if available, will be obtainable on
terms satisfactory to the Company. Management also intends to
renegotiate the terms of its debt for longer repayment periods as
needed.
-18-
<PAGE>
Item 2. Management's Discussion & Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months ended 9/30/96 compared to Three Months ended 9/30/95
Sales for this period decreased $233,701, (89%) from $261,701 to
$28,000. The net loss also increased from the same period last year $287,525,
(302%) from $95,237 to $287,525.
Sales include the sale of real estate from Golf Ventures Inc. During
the current period one lot was sold from the Cotton Acres subdivision for
$28,000 compared to three condominiums from Cotton Manor sold for an average of
$84,667 in the prior year. The cost of the lot sold was $12,691, 45% of sales,
and the average cost of the condominiums was $56,420, 67% of sales. The volume
of lot sales has been adversely affected by the non-availability of funds needed
to develop new lots. Inventory levels of completed lots remain very low. GVI has
completed building two model townhomes within the Cotton Manor subdivision. GVI
is considering selling these units to generate funds to continue the development
of both lots and townhomes.
Total general and administrative expenses increased $172,061 (92%) from
$187,577 last year to $359,638 this year. The increase is due primarily to the
cost of travel and fees paid for promotional services incurred for GVI in an
effort to increase awareness and expand the markets for its common stock.
Management believes that the future of the Company will depend on its
ability to find good merger and, or acquisition candidates and the ability of
GVI to find long term financing for its Red Hawk project.
Six Months ended 9/30/96 compared to Six Months ended 9/30/95
Sales for this period decreased from the same period in the prior year
$188,501, (54%) from $349,501 to $161,000. The net loss also increased for the
same period $237,926, (137%) from $174,099 to $412,025.
Sales include the sale of real estate from Golf Ventures Inc. During
the current period six lots were sold from the Cotton Acres subdivision for an
average of $26,833 compared to four lots sold for an average of $21,950 and
three condominiums from Cotton Manor sold for an average of $84,667 in the prior
year. The average cost of lots sold this year was $12,341 and total cost of
sales was $92,484, 46% of sales, compared to the average cost of the lots sold
last year was $11,641 and the average cost of the condominiums was $56,420 for a
combined cost of sales of $215,822, 63% of sales.
Total general and administrative expenses increased $345,358,
103% from $345,358 last year to $679,766 this year. The increase is due
primarily to the cost of travel and fees paid for promotional services incurred
for GVI in an effort to increase awareness and expand the markets for its common
stock. Additionally, a $100,000 fee was paid by GVI to a landowner to
renegotiate the terms of the land purchase.
-19-
<PAGE>
Liquidity and Capital Resources
At September 30, 1996, the Company had total assets of $9,221,468,
total liabilities of $5,790,101 and total stockholders equity of $3,431,367
compared with total assets of $6,984,871, total liabilities of $3,979,000 and
total stockholders equity of $3,005,871 at March 31, 1996. At September 30, 1996
cash increased $1,057,321, 134% to $1,848,065 from $790,744 on March 31, 1996.
The increase in total assets was due primarily to the cash received by GVI for a
$2,000,000 loan from Miltex Industries, Geneva, Switzerland (Miltex) during the
first quarter and an additional $558,000 loan received from Banque SCS, Geneva,
Switzerland (Banque SCS) during the second quarter, capitalized interest and
payments of $323,464 to Granite Construction for the Red Hawk project. Total
liabilities at September 30, 1996 increased $1,811,101, 46%, from $3,979,000 at
March 31, 1996 to $5,790,101. The increase was due to an increase in long-term
debt of $2,558,000, related to loans from Miltex as described above, offset
somewhat by loan paydowns and a reduction in accrued expenses.
As of September 30, 1996, the Company had total current assets of
$2,618,808 and total current liabilities of $1,726,252 which results in a
current ratio of 1.52:1; compared with a current ratio of 0.75:1 as of March 31,
1996. The current ratio increase was due to the substantial increase in cash, as
explained above. Real estate inventory as of September 30, 1996 decreased by
$74,045 (10%) to $673,965 due primarily to the sale of six lots in the Cotton
Acres subdivision since March 31, 1996.
Current liabilities at September 30, 1996 decreased $747,704, (30%),
from March 31, 1996 due primarily to a loan payoff of $401,366 and a reduction
in accrued expenses of $134,372,(18%).
The Company has historically satisfied its cash needs through the sale
of real estate in GVI, the private placements of securities and secured
borrowings. In June 1996, GVI completed an offering under Section 504 of the
Securities Act of 1933 (the "Securities Act"). Net proceeds to GVI were
$889,424. Also in June, GVI borrowed $2,000,000 from Miltex and borrowed an
additional $558,805 from Banque SCS, a stockholder of GVI. With this cash GVI
escrowed sufficient funds to allow Granite to commence construction on Phase I
of the Red Hawk project in July, 1996. Through November, 1996 GVI has paid to
Granite $1,981,613 toward the Phase I improvements.
The Company has land and debt payments due during the current year of
approximately $600,000 and liquidity for the coming year will be dependent on
its ability to secure long- term financing for the Red Hawk project, upon the
cash flow generated from the closing of lot sales in Red Hawk, and from sales
related to Cotton Manor and Cotton Acres projects. If Red Hawk does not receive
sufficient financing and the Company should require additional cash during the
year, the Company intends to meet its obligations through private offerings of
common and/or preferred stock for cash and additional borrowings.
<PAGE>
PART II
Item 1. Legal Proceedings
On July 19, 1993, the Company became the subject of a formal order of
investigation captioned "In the Matter of Leasing Technology, Inc. (NY-6027)
issued by the Securities and Exchange Commission. The order states that the
commission deems certain acts and practices to be in possible violation of
Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a) and 15(C)
of the Securities Act of 1934, and various rules thereunder. The Company is
unaware of the circumstances concerning the order entered against LTI;
furthermore, the company has had no communication with the SEC regarding this
matter since 1994, and therefore, cannot make a judgment as to the possible
effect on the Company of the investigation.
On July 26, 1994, the company was served with a complaint entitled
Aksglade, et al. vs. Leasing Technology, Incorporated, et al., civil number 94C
345S, filed in the United States District court for the District of Utah,
Central Division. On July 22, 1996, the complaint was dismissed with prejudice
as to the Company by an order signed by a judge of the Federal court.
The Company is not a party to any other material, pending legal
proceeding and no such action by, or to the best of its knowledge, against the
Company or any of its officers or directors, has been contemplated or
threatened.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
On June 30, 1996 the Company's 12% Convertible Subordinated Debentures
matured. The principle value of the debentures is $185,000 and the related
accrued interest is $114,174. The Company has not yet redeemed the debentures
and intends to convert the majority of the debentures to common stock.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's securities holders
during the quarter ended September 30, 1996.
Item 5. Other Information
On October 9, 1996 George H. Badger, President and director of the Company
was arraingned in the U.S. Federal District Court for the Southern District on
charges of conspiracy to commit securities fraud and criminal contempt. Mr.
Badger is cooperating fully with the U.S. Attorney in the investigation of this
matter.
21
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
This Item is not applicable to the Company.
No Report on form 8-K was filed by the Company during the three
month period ended September 30, 1996.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LEASING TECHNOLOGY INCORPORATED
(Registrant)
BY: /s/ George H. Badger
GEORGE H. BADGER, President
Dated: November 19, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ George H. Badger President, Chief Executive November 19, 1996
GEORGE H. BADGER Officer and Director
(Principal Executive Officer)
/s/ Stephen B. Spencer Secretary/Treasurer and Director November 19, 1996
STEPHEN B. SPENCER (Chief Financial Officer,
Chief Accounting Officer and
Controller)
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,848,065
<SECURITIES> 0
<RECEIVABLES> 96,778
<ALLOWANCES> 0
<INVENTORY> 673,965
<CURRENT-ASSETS> 2,618,808
<PP&E> 76,254
<DEPRECIATION> (65,775)
<TOTAL-ASSETS> 9,221,468
<CURRENT-LIABILITIES> 1,726,252
<BONDS> 0
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252
<COMMON> 36,705
<OTHER-SE> 3,394,410
<TOTAL-LIABILITY-AND-EQUITY> 9,221,468
<SALES> 161,000
<TOTAL-REVENUES> 161,000
<CGS> 92,484
<TOTAL-COSTS> 92,484
<OTHER-EXPENSES> 679,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,030
<INCOME-PRETAX> (412,025)
<INCOME-TAX> 0
<INCOME-CONTINUING> (412,025)
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