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 December 31, 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 Identification Number)
incorporation or organization)
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 February 13, 1996
Common Stock, par value $.001 36,704,644
<PAGE>
TABLE OF CONTENTS
===============================================================================
Heading Page
PART I. FINANCIAL STATEMENTS
Item 1. Balance Sheets - December 31, 1996 and
March 31, 1996 4-5
Statements of Operations and Accumulated Deficit -
Nine months ended December 31, 1996 and 1995 and
three months ended December 31, 1996 and 1995 6-7
Statements of Cash Flows - Nine months ended December
31, 1996 and 1995 and three months ended December 31,
1996 and 1995 8-9
Notes to Financial Statements 10-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
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 21
SIGNATURES 22
<PAGE>
PART I
Item 1. Financial Statements
The following, unaudited Consolidated Financial Statements for the
period ended December 31, 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
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash $ 73,696 $ 790,744
Accounts receivable (Note 1) 72,528 92,153
Inventories (Note 1) 560,965 748,010
Marketable securities - 58,024
Total Current Assets 707,189 1,688,931
PROPERTY AND EQUIPMENT (Note 1)
Rental property 17,852 17,852
Non-rental property 62,022 52,414
Total depreciable assets 79,874 70,266
Less: accumulated depreciation (66,813) (63,901)
Net Property and Equipment 13,061 6,365
OTHER ASSETS
Land held for development, net
of long-term commitment payable (Notes 1, 6) 11,220,339 5,287,605
Deposits 1,970 1,970
Total Other Assets 11,222,309 5,289,575
TOTAL ASSETS $ 11,942,559 $ 6,984,871
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
CURRENT LIABILITIES (Unaudited)
<S> <C> <C>
Accounts payable - trade $ 708,646 $ 765,956
Accrued interest payable 814,196 551,986
Current portion of notes payable (Note 4) 694,700 1,156,014
Total Current Liabilities 2,217,542 2,473,956
LONG-TERM DEBT
Commission payable (Note 6) 90,000 90,000
Notes payable (Note 4) 6,257,511 1,415,044
Total Long-Term Debt 6,347,511 1,505,044
Total Liabilities 8,565,053 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 December 31, 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 December 31, 1996 and March 31,
1996, respectively 36,705 36,705
Additional paid-in capital 12,991,439 11,910,212
Accumulated deficit (9,650,890) (8,941,298)
Total Stockholders' Equity 3,377,506 3,005,871
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,942,559 $ 6,984,871
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
December 31, December 31,
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INCOME
<S> <C> <C> <C> <C>
Sales - real estate $ 274,000 $ 669,661 $ 113,000 $ 320,160
Total Income 274,000 669,661 113,000 320,160
COST OF SALES
Cost of sales - real estate 160,422 430,254 67,938 151,207
Total Cost of Sales 160,422 430,254 67,938 151,207
Gross Profit 113,578 239,407 45,062 168,953
GENERAL AND
ADMINISTRATIVE
EXPENSES
Depreciation and
amortization 2,912 2,768 1,038 1,190
General expenses 1,043,397 538,303 272,414 205,473
Total General and
Administrative
Expenses 1,046,309 541,071 273,452 206,663
Net Operating (Loss) (932,731) (301,664) (228,390) (37,710)
OTHER INCOME AND
(EXPENSES)
Interest income 35,026 5,639 9,798 2,184
Other income 15,892 - 6,641 -
Gain on sale of assets 191,101 149,880 13,323 49,594
Interest expense (18,880) (21,296) (5,850) (7,410)
Total Other Income
and (Expenses) 223,139 134,223 23,912 44,368
Net (Loss) Before
Income Tax (709,592) (167,441) (204,478) 6,658
Less: Provisions for
(Income Tax) - - - -
NET (LOSS) $ (709,592) $ (167,441) $ (204,478) $ 6,658
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Operations and Accumulated Deficit (Continued)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
December 31, December 31,
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET (LOSS) $ (709,592) $ (167,441) $ (204,478) $ 6,658
BEGINNING
ACCUMULATED DEFICIT (8,941,298) (5,155,153) (9,446,412) (5,329,252)
ENDING
ACCUMULATED DEFICIT $ (9,650,890) $ (5,322,594) $ (9,650,890) $ (5,322,594)
EARNINGS (LOSS)
PER SHARE $ (0.02) $ (0.00) $ (0.01) $ (0.00)
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 33,488,244 36,704,644 33,488,244 36,704,644
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
December 31, December 31,
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss $ (709,592) $ (167,441) $ (204,478) $ 6,658
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating
Activities:
Depreciation and
amortization 2,912 2,768 1,038 1,190
Decrease in inventory 187,045 338,533 113,000 126,913
(Increase) in accounts
receivable 19,625 41,737 24,250 (35,388)
Increase in accounts
payable and other
current liabilities 310,028 80,768 197,905 (128,048)
Decrease (Increase) in
other current assets 59,024 (58,609) 58,024 675
Net Cash Provided
(Used) by Operating
Activities (130,958) 237,756 (189,739) (28,000)
INVESTING ACTIVITIES
Purchase of property
and equipment (9,608) (8,495) (3,620) (8,495)
Investment in land (3,498,966) (495,888) (2,196,360) (95,274)
Net Cash Provided
(Used) by Investing
Activities (3,508,574) (504,383) (2,199,980) (103,769)
FINANCING ACTIVITIES
Preferred stock of
subsidiary redeemed (12,500) - (12,500) -
Stock offering costs (209,000) - 209,000 -
Common stock of
subsidiary issued for cash 1,046,521 168,383 - -
Long-term borrowings 2,833,805 250,000 275,000 250,000
Payment on long-term
debt (736,342) (25,626) (235,628) (15,735)
Borrowings from related
parties - 100,111 - 79,764
Net Cash Provided
(Used) by Financing
Activities $ 2,922,484 $ 492,868 $ 235,872 $ 314,029
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
December 31, December 31,
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Increase in Cash and
Cash Equivalents $ (717,048) $ 226,241 $ (1,774,369) $ 182,260
Cash and Cash Equivalents,
Beginning of Period 790,744 16,994 1,848,065 60,975
Cash and Cash Equivalents,
End of Period $ 73,696 $ 243,235 $ 73,696 $ 243,235
Cash Paid For:
Interest $ 18,880 $ 64,649 $ 5,850 $ 50,678
Income Taxes - - - -
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 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.
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 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, the Company exceeded the insured limit by
approximately $584,380.
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:
December 31, March 31,
1996 1996
Real estate held for resale $ 560,965 $ 748,010
Total inventory $ 560,965 $ 748,010
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 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 December 31, 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:
December 31, 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.)
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1996
NOTE 4 - NOTES PAYABLE
Notes payable are comprised of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
<S> <C> <C>
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. 201,890 204,435
Promissory note secured by land, bearing
interest at 9.75%, payable in full including
accrued interest on June 18, 1997. 1,188,805 355,000
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. 6,484 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. 80,470 211,433
Page totals $ 2,022,019 $ 1,849,556
</TABLE>
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1996
<TABLE>
<CAPTION>
NOTE 4 - NOTES PAYABLE (Continued)
December 31, March 31,
1996 1996
<S> <C> <C>
Balance forward $ 2,022,019 $ 1,849,556
Purchase contract and note secured by
land. Interest accrued at 10% per annum,
payable monthly at $25,000 per month
until May 15, 1998, at which time the
balance including accrued interest will
be due. 2,283,690 -
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 6,952,211 2,571,058
Less current portion (694,700) (1,156,014)
Long-term portion $ 6,257,511 $ 1,415,044
</TABLE>
Maturities of long-term debt are as follows:
March 31, 1996 $ 694,700
1997 1,147,677
1998 2,516,881
1999 2,196,884
2000 145,936
Thereafter 250,133
$ 6,952,211
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 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 - - - - 1,081,227 - 1,081,227
Net (loss) - - - - - (709,592) (709,592)
Balance, December 31, 1996 36,705 $ 36,705 252 $ 252 $ 12,991,439 $(9,650,890) $ 3,377,506
</TABLE>
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 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
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.
<PAGE>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 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
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.
<PAGE>
Item 2. Management's Discussion & Analysis of Financial Condition and Result
of Operations
Results of Operations
Three Months ended 12/31/96 compared to Three Months ended 12/31/95
Sales for this period decreased $207,160 (65%) from $320,160 to
$113,000. Income from operations decreased from a net gain of $6,658 to a net
loss of $204,478, a change of $211,136 (3,171%).
Sales include the sale of real estate from the Cotton Manor and Cotton
Acres subdivisions in Golf Ventures, Inc.. During the current three month period
four lots were sold from the Cotton Acres subdivision for an average of $28,250.
This compares to ten lots sold for an average of $23,363 in the comparable prior
year period. The average cost of the lots sold in the current period was
$12,643, 45% of sales, and the average cost of the lots sold for the same period
last year was $12,691, 54% 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 $66,789 (32%) from
$206,663 during the three months ended December 31, 1995 to $273,452 during the
three months ended December 31, 1996. The increase is due primarily to the
increase in legal fees paid for ongoing matters. Interest income was $9,798 this
period compared with $2,184 for the same period last year, resulting in a change
of $7,614 (349%). Interest income relates to the interest earned by GVI on the
remaining balance of the $2,000,000 CD placed in the bank for Granite
Construction's (Granite) work on Red Hawk. Through January 31, 1997 Granite had
earned and received $1,981,681 on the Red Hawk contract. Granite has completed
their contract and the CD account has been closed.
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.
Nine Months ended 12/31/96 compared to Nine Months ended 12/31/95
Sales for this period decreased from the same period in the prior year
by $395,661 (59%) from $669,661 to $274,000. The net loss also increased for the
same period by $542,151 (324%) from $167,441 to $709,592.
Sales include the sale of real estate from the Cotton Manor and Cotton
Acres subdivisions in Golf Ventures, Inc.. During the current nine month period,
ten lots were sold from the Cotton Acres subdivision for an average of $26,833
compared with fourteen lots and three condominiums sold for an average of
$21,950 and $84,667, respectively, in the comparable prior year period. The
average cost of lots sold this year was $12,462 and total cost of sales was
$160,422, 59% of sales, compared with the average cost of the lots and
<PAGE>
condominiums sold last year of $12,391 and $56,420, respectively, and total cost
of sales of $430,254, 64% of sales. The cost of sales is higher due to the sale
of three condominiums during the prior year period compared with no condominiums
sold in the current period.
Total general and administrative expenses increased $505,238 (93%) from
$541,071 during the nine months ended December 31, 1995 to $1,046,309 during the
nine months ended December 31, 1996. The increase is due primarily to the cost
of travel and fees paid for promotional services incurred by GVI in an effort to
increase awareness and expand the markets for its common stock. Legal fees
increased for a $75,000 payment to settle a lawsuit and ongoing matters. Also a
$100,000 fee was paid by GVI to a landowner to renegotiate the terms of the land
purchase. This fee was expensed during the period.
Liquidity and Capital Resources
At December 31, 1996, the Company had total assets of $11,942,559,
total liabilities of $8,565,053 and total stockholders equity of $3,377,506
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 December 31, 1996
cash decreased by $717,048 (91%) to $73,696 from $790,744 on March 31, 1996. The
increase in total assets was due primarily to the addition of the Stucki land
($2,266,104) to the GVI balance sheet. Also, development costs in GVI increased
for capitalized payments of $1,981,681 to Granite Construction, capitalized
interest on borrowings of $733,948 and $93,169 paid to Washington City for
installation of a water line. Total liabilities at December 31, 1996 increased
by $4,586,053 (115%) to $8,565,053 from $3,979,000 at March 31, 1996. The
increase was due to an increase in long-term debt in GVI of $4,842,495, related
to the loans from Miltex Industries and Banque SCS received in the prior quarter
and the addition of the Stucki loan for $2,266,104 offset by loan paydowns and a
reduction in accrued expenses.
As of December 31, 1996, the Company had total current assets of
$707,189 and total current liabilities of $2,217,542 which results in a current
ratio of 0.32:1; compared with a current ratio of 0.75:1 as of March 31, 1996.
The current ratio decrease was due primarily to the decrease in cash in banks in
GVI after GVI completed payment to Granite Construction. Real estate inventory
as of December 31, 1996 decreased by $187,045 (25%) from $748,010 to $560,965
due primarily to the sale of ten lots in the Cotton Acres subdivision since
March 31, 1996. Accounts receivable also decreased $19,625 (21%) from $92,153 to
$72,528 for the receipt on lot sales receivables in Cotton Acres.
Current liabilities at December 31, 1996 decreased by $256,414 (10%),
from March 31, 1996 due primarily to a loan payoff of $401,366, offset by an
increase in accrued interest of $262,210 (48%) from $551,986 at March 31, 1996
to $814,196 at December 31, 1996, and a decrease in accounts payable of $57,310
(7%) from $765,956 to $708,646 for the same period.
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 Industries. 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 January,
1997 GVI has paid to Granite $1,981,613 toward the Phase I improvements and
<PAGE>
Granite has completed its work on Red Hawk. Crown Construction is now doing
finish work on the golf course. During this fiscal year, through January 1997,
GVI has borrowed $933,805 from Banque SCS, a stockholder of GVI.
Construction on the Red Hawk project has now slowed significantly due
to the lack of sufficient long-term financing. GVI 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.
Subject to receipt of sufficient financing to complete construction, the Company
believes that 19 lots in Phase X of Cotton Acres will be completed in May. Many
of these lots have been pre-sold and should be completely sold out by May. Also,
19 pads for townhome units in Cotton Manor, Phase IV have been completed. One
townhome has been built and sold, two more are under construction. These sales
will not be sufficient to financially support the Company and GVI's Red Hawk
project. If the Company does not receive sufficient financing for the Red Hawk
project, the Company intends to meet its obligations through private or public
offerings of common and/or preferred stock for cash and additional borrowings.
No assurance can be given that the Company will succeed in obtaining sufficient
financing for Red Hawk or, if unsuccessful, that it will raise sufficient cash
to meet its obligations through the sale of securities or additional borrowings.
Without the additional financing, the Company has sufficient cash for operations
to continue for only two or three months.
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.
Mid Valley Ventures, ( Mid Valley) was the holder of a mortgage on
certain of GVI's properties and had recorded a notice of default in the
Washington County recorders office. On April 12, 1996 GVI filed an action in the
U.S. District Court of Utah, Central Division, to enjoin the foreclosure. On
June 19, 1996 Mid Valley filed a counter claim against GVI. On August 30, 1996
in an effort to mitigate damages, GVI paid $436,025.39 as payment for sums due
under the trust deed being foreclosed on by Mid Valley, subject to GVI's
reserving its claims against Mid-Valley. The note is now considered paid in
<PAGE>
full, and a deed of reconveyance has been executed and received by GVI. GVI's
complaint for damages and Mid Valley's counter claim were referred to mediation
which was unsuccessful. The matter will probably proceed to trial.
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 through December 31, 1996 is $116,972. The Company has not yet
redeemed the debentures and intends to convert the majority of the debentures to
common stock.
GVI's note with Property Alliance became payable in full on February 1,
1997. The principle balance of the note was $646,502 on said date. Property
Alliance has taken no action against GVI and GVI's management expects to extend
the term of the note on favorable terms.
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 December 31, 1996.
Item 5. Other Information
On October 9, 1996, George H. Badger, former President and Director of
the Company, was arraigned 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.
On December 31, 1996, George H. Badger resigned as the President and a
Director of the Company. On the same date the Board of Directors appointed Karl
F. Badger President and Director of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) This Item is not applicable to the Company.
(b) No Report on form 8-K was filed by the Company during the
three month period ended December 31, 1996.
<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/ Karl F. Badger
-----------------------------
KARL F. BADGER, President
Dated: February 13, 1997
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.
<PAGE>
Signature Title Date
/s/ Karl F. Badger President, Chief Executive February 13, 1997
-------------------- Officer and Director
KARL F. BADGER (Principal Executive Officer)
/s/ Stephen B. Spencer Secretary / Treasurer and February 13, 1997
----------------------- Director (Chief Financial
STEPHEN B. SPENCER Officer, Chief Accounting
Officer and Controller)
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<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 73,696
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<RECEIVABLES> 72,528
<ALLOWANCES> 0
<INVENTORY> 560,965
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<PP&E> 79,874
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<OTHER-SE> 3,340,549
<TOTAL-LIABILITY-AND-EQUITY> 11,942,559
<SALES> 274,000
<TOTAL-REVENUES> 274,000
<CGS> 160,422
<TOTAL-COSTS> 160,422
<OTHER-EXPENSES> 1,046,309
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,880
<INCOME-PRETAX> (709,592)
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<INCOME-CONTINUING> (709,592)
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