SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the Fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number: 0-16753
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
(Exact name of registrant specified in its charter)
Delaware 58-1722085
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
130 Cedar Street, Fourth Floor, New York, New York 10006
(Address of principal executive offices) (Zip Code)
(212) 306-6100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Class A Common Stock, $.04 par value
Redeemable Class A Warrants
Redeemable Class B Warrants
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ---
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the average of the closing bid and asked quotations
for the Class A Common Stock on June 20, 1996 as reported by NASDAQ, was
approximately $7,270,590.
As of June 20, 1996, the registrant had outstanding 4,154,623 shares
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of Class A Common Stock.
Part III incorporates information by reference to the registrants
definitive proxy statement for its 1996 Annual Meeting of stockholders to be
filed with the Commission within 120 days following March 31, 1996.
<PAGE>
PART I
ITEM 1. BUSINESS
INTRODUCTION
Information Management Technologies Corporation ("IMTECH" or the "Company")
provides information processing service bureau services and facilities
management services including research report printing, imaging and distribution
services, electronic imaging, CD-ROM based electronic microfiche, litigation
duplication, numbering and imaging services and complex distribution services to
financial, legal, accounting and other medium to large service organizations
which are characterized by substantial information processing, communications
and document administration requirements.
Outsourcing services include traditional printing, imaging of printed
materials to CD-ROM, electronic fiche and/or laser printing, intelligent
inserting, high volume duplication, electronic publishing, document fulfillment,
micrographics, data processing and distribution services. Litigation
Duplication Services include high speed litigation duplication, on and off line
numbering, scanning and imaging, electronic storage onto CD-ROM, accurate bar
coding as well as traditional services associated with litigation document
processing. Outsourcing and litigation support services are generally performed
at the Company's facilities. Facilities management services include the
management of a clients system for providing document duplication, distribution
and word processing services.
The Company maintains a 38% ownership in its former majority owned
subsidiary, INSCI Corp. ("INSCI"). INSCI develops, markets and supports computer
software that utilizes magnetic, optical and CDR disk storage technologies with
hardware systems to archive, index, retrieve, print and fax computer generated
documents such as invoices, statements, reports and transaction data.
SERVICES
Facility Management Services. The Company's facility management services,
which may be provided in a variety of departments at a customer's facility or at
IMTECH's regional service center, include:
- Duplication management - the Company provides personnel and equipment to
perform standard copying of original printed documents and their subsequent
sorting, inserting, binding, packaging and distribution.
- Electronic publishing and word processing management - IMTECH provides
equipment, software and personnel necessary to create and print customized
documents directly from magnetic media with near typeset appearance and quality,
integrate word processing produced files into these documents and reproduce,
bind, package and distribute these electronically published documents.
- Distribution services - the Company provides the equipment, systems and
personnel to process, track and distribute time sensitive materials.
Under a typical facility management contract, IMTECH assumes complete
management and operating responsibility for a customer's in-house duplication,
word processing or other administrative facilities and functions located or
performed on the customer's premises. Prices for facility management services
generally are agreed upon in advance and are set forth in the facility
management contract. The Company generally provides personnel, equipment and
systems necessary to perform facility management services on-site at a
customer's facility. In many instances, upon commencement of a facility
management agreement, IMTECH will assume from its customer, responsibility for
the employment of many or all of the customer's existing personnel. The Company
also typically undertakes to provide all necessary equipment at its cost and
expense. In many instances, the Company assumes ownership of the customer's
existing equipment, and where economically feasible, the Company may assume a
customer's existing equipment lease obligations. IMTECH's service center
provides a backup to handle unusual work loads for the facility management sites
within the region.
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IMTECH currently has seven facility management contracts with three
customers. One of the Company's customers has five facility management
contracts, and two customers each have one facility management contract with the
Company, with each contract providing for different services. IMTECH realized
revenues of approximately $3,212,000 from seven facility management contracts
during the Fiscal year ended March 31, 1996. During the Fiscal year ended March
31, 1996, the Company had five facility management contracts expire without
renewal. Of the seven facility management contracts in place at March 31, 1996,
five contracts have an initial term expiring in 1996 and two contracts have an
initial term expiring in 1997. All facility management contracts are terminable
by either party on 30 to 90 days notice. IMTECH generally believes that many of
its customers will renew agreements with the Company if the Company provides
satisfactory services and continues to offer competitive prices for these
services. Due to increased competition from larger companies in the facility
management market, the Company's operating margins have diminished
substantially, and resultantly the Company has elected not to pursue and renew
certain contracts in that segment of the Company's business.
Out Sourcing. The Company provides out sourcing services from its New York
City regional service center ("RSC") to financial, legal, institutional and
commercial clients. Out sourcing services include corporate service bureau
services that historically have been outsourced or produced "in house." The RSC
provides the following out sourcing services to clients in New York City and
surrounding areas:
- Research Report Services with Document Imaging - production and
distribution of reports by research analysts at brokerage firms or securities
department at banks. In addition to traditional distribution, the Company at
the clients request, now provides a CD-ROM to the client containing images of
all reports printed by the client during the month.
- Duplication - high volume black and white or color document duplication
using digital xerographic equipment for print on demand or rapid processing of
time sensitive documents.
- Laser printing - laser printing of documents directly from magnetic tape,
cartridge disk and electronic transmission. Laser printed documents typically
include customer statements, confirmations, reports, catalogs and manuals.
- Offset printing - traditional printing, color printing, lithographic
printing and offset printing. Typical applications include equity research
reports, forms and newsletters.
- Electronic publishing - create and print customized documents directly from
magnetic media with near typeset appearance and quality, integrate word
processing into these documents, and reproduce, bind, package and distribute
these electronically published documents. Electronically published documents
include research reports, manuals, forms design, and production and benefit
booklets.
- Finishing services - the finishing of printed, duplicated and laser printed
documents, including perfect binding, plastikoiling, velobinding, saddle
stitching and padding.
- Distribution services - intelligent inserting and selective inserting of
multi-page documents into envelopes, traditional inserting, packaging, mailing
and shipping of completed work.
The RSC's outsourcing services complement the Company's facility management
operations. First, the service center handles all facility management site
backup work and unusual workload requirements. This enables the Company to
staff and furnish each facility management site at a level sufficient to satisfy
a customer's average requirements, rather than its peak requirements. Second,
IMTECH's service center provides personnel training for all of the Company's
employees. The Company's employees are fully trained in all aspects of IMTECH's
operating procedures, quality standards and equipment usage. Finally, the
service center provides backup for facility management sites in the event of a
temporary equipment, power or other interruption.
Litigation Duplication Services. IMTECH's Litigation Duplication division
provides high volume duplication and document related services to the corporate
and legal communities. These services are generally performed at the Company's
regional service center, although the Company opened a midtown location in New
York City during fiscal 1996. Litigation duplication document related services
include on and off line numbering in red and black. The on and off line
numbering
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system is a recently developed technology. Additional document related services
include scanning and imaging, electronic storage on CD-ROM, accurate bar coding
as well as binding, addressing, inserting and mailings.
MARKETING AND SALES
The Company's sales force is currently located in New York City. The Company
currently employs six sales persons as well as other members of management who
are involved in sales, facility management, outsourcing and litigation
duplication services. The Company's marketing efforts are directed primarily to
major financial, manufacturing, legal, accounting and other medium to large
service institutions located in New York City and the surrounding metropolitan
area (New Jersey, Southeast Connecticut and Westchester County, New York). The
Company's general advertising and promotional activities are limited, and
include participation in selected trade shows, advertising, articles in
pertinent trade publications and direct mailings. The Company had previously
engaged the services of a New York City based marketing firm to assist the
Company in developing a strategic advertising and sales promotion plan which was
favorably received. During fiscal 1996, the Company entered into a strategic
alliance with its primary technology provider. The Company's ability to
leverage the available communications technology with its traditional services
has enabled the Company to pursue clients beyond its primary metropolitan area
marketplace.
COMPETITION
The Company knows of several large direct competitors, as well as many
smaller regionally based companies that provide some or all of IMTECH's
services. Pitney Bowes Management Services and Xerox Business Centers are two
competitors that provide facility management and/or outsourcing services.
Management believes that the Company's direct competitors generally have
substantially greater financial resources, facilities and organizations than the
Company. The Company competes primarily on the basis of price and performance.
Management of the Company believes that its employee training program, as well
as its competitive compensation, will enable the Company to provide its
customers with the quality of services and personnel necessary to maintain a
competitive advantage.
EMPLOYEES
As of March 31, 1996, IMTECH employed approximately 165 employees which is a
reduction from 190 employees as of March 31, 1995.
The Company has no collective bargaining agreements and considers its
relationships with its employees to be good.
ITEM 2. PROPERTIES
The Company's executive offices and New York service center are located at
130 Cedar Street, New York, New York 10006 under a lease that expires on July
31, 2003. The Company during Fiscal 1996 negotiated with its landlord to
finalize the return of approximately 20,000 square feet (40%) previously
occupied as well as certain other expenses in the Company's lease. The Company
currently occupies approximately 32,000 square feet. The rental payments are
subject to annual cost of living and maintenance increases.
During fiscal 1996, the Company entered into an agreement whereby the Company
sublets 1,000 square feet at a midtown Manhattan location.
ITEM 3. LEGAL PROCEEDINGS
On September 30, 1992, the Company and INSCI, the Company's then majority
owned subsidiary, reached an agreement with the Securities and Exchange
Commission ("SEC") to conclude and settle the SEC's informal investigation of
the Company and INSCI. The Company and INSCI, without admitting or denying any
of the allegations made by the SEC in its complaint, and without a trial or
final adjudication of the allegations made in the SEC's complaint, consented to
the entry of an order enjoining the Company and INSCI from future violations of
certain provisions of the Federal securities laws and the rules and regulations
thereunder. The settlement may adversely affect the Company and INSCI and
restrict the Company's and INSCI's ability to raise funds from persons located
in certain significant states. The impact of these restrictions may be to
prevent the Company and INSCI from conducting future public offerings or private
placements. The Company and INSCI may be subject to
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contempt of court or other sanctions if the Company or INSCI, at any time in the
future, engages in actions that are deemed to violate the consent judgment and
the injunctions.
The Company was notified by regulatory authorities on January 7, 1994, that
certain required regulatory filings made in connection with the employee benefit
plans lacked requisite financial information. The Company received
correspondence from the U.S. Department of Labor stating the Department's intent
to assess a penalty against the Company in the amount of $50,000 for one of the
years in question.
On June 29, 1995, the Company's special counsel obtained a copy of a private
order of investigation from the Securities and Exchange Commission,
("Commission"). The Commission had issued an order of investigation of the
Company and its former majority owned subsidiary, INSCI Corp. which the Company
maintains 38% ownership and/or its former officers and directors during the
period March 1993 and continuing until April 13, 1995. The order of
investigation inquiring into whether the Company and its then officers and
directors engaged in violations of rule 10b-5 of the Securities Exchange Act of
1934 (the "Exchange Act"), failed to file annual reports and other information
as required by the rules and regulations of the Commission in violation of
Section 13 (a) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13, and
failed to maintain proper books and records in violation of section 13(b)(2) of
the Exchange Act or falsified or caused to be falsified books and records of the
Companies in violation of section 13(b)(2)(a), Rule 13b 2-1, and Rule 13b 2-2 of
the Exchange Act.
On July 26, 1995, the Company was further notified by its special counsel
that the Commission had issued subpoenas to the Company for the Company's
records related to the engagement and subsequent resignation in October 1994 of
the Company's then independent certified public accountants, Coopers and Lybrand
LLP ("Coopers"). Following the resignation, the Company filed a report on Form
8-K disclosing certain accounting questions brought to the attention of Coopers
by the Company relating to adjustments made in the Company's financial
statements for the quarter ended September 30, 1994. The Company subsequently
reviewed these questions and in the Company's opinion concluded that such
matters were accounted for in the proper periods.
The Company is unaware of any violations with respect to annual reports or
other information disclosed by the Company during the time period stated in the
order. The Company cannot predict, however the outcome of the Commission's
investigation and whether such investigation will result in any type of formal
enforcement action against the Company and INSCI and/or any of its former
officers and directors, or, if so, whether any such action would have an adverse
effect on the Company and INSCI. An adverse outcome may result in the payment
by the Company and INSCI of potential fines and penalties, restrict the
Company's ability to obtain additional required financing, and may result in the
delisting of the Company's securities from the NASDAQ stock market. In
addition, as described above, the Company is currently under a consent order
relating to a prior Commission Investigation. If the Company is found to have
violated the existing Commission consent order, the Company and/or its officers
and directors may be subject to sanctions for civil and criminal contempt and
fines and/or penalties.
In November 1995 the Company entered into an agreement with Corporate
Relations Group ("CRG") for it to provide promotional, shareholder and brokerage
communications services. The agreement is for a period of 3 years, and the
Company agreed to pay CRG the sum of $300,000 or 171,000 shares of free trading
Class A Common Stock, in addition to 500,000 options to purchase 500,000 shares
of Class A Common Stock for prices ranging from $1.75 per share to $3.06 per
share for a period of 5 years. Subsequent to the agreement, the Company
borrowed 92,250 shares of Class A freely traded Common Stock from a number of
shareholders in the Company. The Company's agreement for the repayment of the
borrowed shares involved the Company making payment of interest at 10% per annum
in addition to the return of the borrowed shares and an additional (1) one share
of Class A Common Stock for each (10) ten shares borrowed by the Company (an
aggregate of 9,250 shares). The Company further agreed to grant cost free
registration rights to each lender for the additional shares and interest as a
result of the loan transaction. CRG has asserted a claim for the balance of
78,750 shares of Class A Common Stock, and the Company has disputed the claim
based upon the Company's contention that CRG has not performed under its
agreement with the Company.
The Company intends to file a registration statement for all of the borrowed
shares plus interest and the additional 9,250 shares on or before September 30,
1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Stock is traded in the over-the-counter market
and is included in the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") under the symbol "IMTKA". Also traded in the
over-the-counter market and quoted on NASDAQ are the Company's Redeemable Class
A Warrants under the symbol "IMTKW". The following table indicates the high and
low bid prices for the Company's Class A Common Stock and the Class A Warrants
Units for the three most recent fiscal years, as reported in NASDAQ
informational reports. These prices represent prices between dealers, do not
include retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
CLASS A CLASS A
COMMON STOCK WARRANTS
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HIGH LOW HIGH LOW
---- --- ---- ---
Fiscal 1996
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First Quarter 3 1/16 1 3/4 5/16 3/16
Second Quarter 3 9/16 2 3/16 15/32 3/16
Third Quarter 3 1/8 2 11/16 3/8
Fourth Quarter 2 7/8 2 7/16 3/16
Fiscal 1995
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First Quarter 13/4 113/16 11/16 15/32
Second Quarter 113/16 23/32 13/32 3/16
Third Quarter 5/8 3/16 5/32 3/16
Fourth Quarter 5/8 7/32 5/16 3/16
Fiscal 1994
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First Quarter 45/8 23/8 5 15/8
Second Quarter 4 21/4 41/8 23/16
Third Quarter 3 17/8 111/16 13/4
Fourth Quarter 25/8 21/4 21/4 13/4
There were approximately 180 holders of record of the Company's Class A Common
Stock on June 20, 1996. This does not include individuals with beneficial
interests in the Company's Class A Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below for the fiscal years noted, are
derived from the audited financial statements of the Company. The information
set forth below should be read in conjunction with, and are qualified by
reference to, the financial statements and the notes thereto included elsewhere
herein. Fiscal years 1994, 1993 and 1992 include the consolidated results of the
Company's former majority owned subsidiary INSCI Corp.
<TABLE><CAPTION>
YEAR ENDED MARCH 31
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1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales $ 11,806,000 $ 14,048,000 27,507,000 $ 23,103,000 $ 18,957,000
Operating Loss (1,808,000) (1,220,000) (2,723,000) (2,017,000) (4,217,000)
Loss From Continuing
Operations (4,288,000) (3,891,000) (3,813,000) (2,964,000) (4,984,000)
Loss From Discontinued
Operations (391,000) (1,773,000) -- -- --
Net Loss (4,679,000) (5,664,000) (3,813,000) (2,964,000) (4,984,000)
Net Loss Per Share Continuing
Operations (1.37) (1.41) (1.91) (.36) (.65)
Net Loss Per Share Discontinued
Operations (.12) (.64) -- -- --
<CAPTION>
YEAR ENDED MARCH 31
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1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
YEAR END FINANCIAL
POSITION:
Total Assets $ 7,767,000 $ 9,593,000 $ 12,868,000 $ 10,979,000 $ 8,811,000
Long Term Obligations 3,524,000 4,497,000 5,512,000 5,816,000 5,162,000
Redeemable Preferred
Stock -- -- -- 2,481,000 --
Stockholders'
Equity (Deficiency) (1) (858,000) 1,169,000 441,000 (2,544,000) (575,000)
</TABLE>
(1) The Company has not paid dividends since its inception.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS
COMPARISON OF RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship certain items in the Company's results of operations bear to sales:
YEARS ENDED MARCH 31,
1996 1995 1994
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Sales ......................................... 100% 100% 100%
Cost of sales ................................. 77 76 64
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Gross profit .................................. 23 24 36
Selling, general and administrative expenses .. 34 28 45
Termination of facility contract .............. 1 -- --
Buyout of lease agreement ..................... 3 -- --
Write off of registration costs ............... -- -- 1
Write-down of property and equipment .......... -- 5 --
---- ---- ----
Operating loss (15) (9) (10)
---- ----
Interest expense 5 3 4
Loss on sale of stock 1 -- --
Buyout of credit facility 3 -- --
---- ---- ----
Loss from continuing operations before
equity in net loss of INSCI Corp. (24) (12) (14)
Equity in net loss of INSCI Corp. (12) (16) --
---- ---- ----
Loss from continuing operations (36) (28) (14)
Loss from discontinued operations (3) (13) --
Net loss (39)% (41)% (14)%
---- ---- ----
FISCAL 1996 COMPARED TO FISCAL 1995
During the fiscal year ended March 31, 1996, ("Fiscal 1996") the Company
reported sales of $11,806,000, a decrease of $2,242,000 or 16% from sales of
$14,048,000 during the year ended March 31, 1995 ("Fiscal 1995").
The decrease in sales is primarily attributable to a decrease in sales of the
Company's Regional Service Center ("RSC") division of $1,892,000 or 20%, to
sales of $7,443,000 in fiscal 1996 from sales of $9,335,000 in fiscal 1995.
During the third quarter of fiscal 1995, the Company was notified by Kidder
Peabody and Co., the Company's largest client representing approximately 25% of
fiscal 1994 revenues, that Kidder Peabody was in the process of being sold to
Paine Webber. Effective upon the completion of the sale to Paine Webber, the
contract between the Company and Kidder Peabody was terminated. The
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decrease in sales in the RSC division in fiscal 1996 resulted from the sales
lost from Kidder Peabody. The Company estimates that on an annualized basis,
that the Company has now replaced 75% of the volume lost from Kidder Peabody.
Sales from facility management agreements decreased to $3,212,000, a decrease
of $854,000 or 21% from sales of $4,066,000 in fiscal 1995. As of March 31, 1996
there were 7 IFM agreements in effect compared to 12 IFM agreements in effect at
March 31, 1995. The Company has elected not to renew certain contracts as they
become due because competitive pricing has reduced operating margins below the
Company's required minimum operating margins. During the fourth quarter of
fiscal 1996, the Company was notified by one of its facility management
clients, American Express, that the Company's contract would not be renewed at
its expiration in April 1996. The Company provided duplication and management
services for American Express at its World Financial Center location. The
Company has experienced continued declining operating margins in the facility
management business and has de-emphasized the pursuit of new facility contracts.
The expiring American Express contract accounted for approximately $1.8 million
of fiscal 1996 sales or 15%. The Company still has 3 facility management
contracts with American Express that expire at various times in fiscal 1997.
The Company has recorded a $75,000 charge in the fourth quarter of fiscal 1996
related to the expiring contract. Sales in the Company's litigation duplication
division increased by $504,000 or 78% to $1,151,000 in fiscal 1996 from sales
of $647,000 in fiscal 1995.
Cost of sales for the Company during fiscal 1996, were $9,058,000 or 77%, a
decrease of $1,584,000 or 15% from cost of sales of $10,642,000 or 76% in fiscal
1995. The decrease reflects a decrease in direct materials of $97,000, (net of
an increase in paper prices of approximately 50%), salaries of $626,000 and
equipment costs of $225,000 reflecting the decrease from Kidder Peabody volumes.
In addition, the Company reduced its personnel costs related to the non renewal
of several contracts during fiscal 1996.
Selling, general and administrative expenses for the Company during fiscal
1996 were $4,105,000 or 35%, an increase of $229,000 or 6% from selling, general
and administrative expenses of $3,876,000 or 28% during fiscal 1995. The
decrease is directly attributable to the reduction in administrative personnel.
During fiscal 1996, the Company made a significant investment in its technology
infrastructure to provide its clients with faster, higher quality service. In an
effort to better support the installed client base and the new technology
employed, the Company now has a help desk from 8:00 a.m. to 12:00 p.m. to handle
client calls. These costs offset savings realized from overall overhead
reduction. In the third quarter ended December 31, 1995, the Company and its
former majority owned subsidiary INSCI recorded charges of $50,000 and $250,000
respectively related to the settlement of the Marine Midland litigation.
During fiscal 1996, the Company negotiated with its landlord to return
approximately 20,000 square feet (40%) of previously occupied space. The Company
recorded a charge of $377,000 during fiscal 1996 related to the return of the
space.
During fiscal 1996, the Company had interest expense, net, of $560,000
compared with $484,000 in fiscal 1995, the increase is due to increased
borrowings under the Company's revolving credit facility as well as interest
paid on various vendor notes payable and financing transactions.
During the second quarter ended September 30, 1995, the Company sold 350,000
restricted shares of its then majority owned subsidiary, INSCI Corp. with net
proceeds from the transaction of $262,500. The Company recorded a charge of
$73,500 related to the transaction.
In March 1996, the Company reached an agreement with its primary lender, BNY
Financial, whereby the Company would terminate its revolving credit facility
with one year remaining. The Company has recorded approximately $395,000 in
charges related to the early termination which includes the write-off of various
deferred charges. The Company anticipates that the early termination will save
the Company approximately $600,000 in annual interest and bank charges.
During the fourth quarter of fiscal 1996, the Company took a charge of
$391,000 or 3% related to the write-off of the remaining assets and obligations
of its discontinued litigation support services division, which the Company
disbanded in fiscal 1995. The Company does not anticipate any future expenses
connected with the former division. The Litigation Support division lost
$1,773,000 or 13% in fiscal 1995.
During fiscal 1995 the Company had a majority ownership in INSCI Corp. and
previously reported their results on a consolidated basis. In January 1996 the
Company's ownership was reduced to 38%, therefore, the Company will be
accounting for INSCI on the equity method for fiscal 1996, and has restated
For the
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years ended March 31, 1996 and 1995 the Company had equity in the net
loss of INSCI of $1,452,000 and $2,187,000 respectively.
During the second quarter of fiscal 1995, management's review of its property
and equipment records caused management to believe that certain property and
equipment listed was not owned by the Company. As a result the Company recorded
a $750,000 charge to write down property and equipment based on management's
best estimate.
FISCAL 1995 COMPARED TO FISCAL 1994.
The following compares the results of operations of IMTECH on an
unconsolidated basis.
Sales decreased by $5,272,000 or 27% to $14,048,000 in fiscal 1995 from
sales of $19,320,000 in fiscal 1994. The decrease in sales is primarily
attributable to a decrease in Litigation Support Services sales of $2,477,000
which reflects management's decision to stop accepting new projects during
fiscal 1995. During the Company's third fiscal quarter, the Company was notified
by Kidder Peabody and Company, the Company's largest client representing
approximately 25% of fiscal 1994 revenues, that Kidder Peabody was in the
process of being sold to Paine Webber. Effective upon the completion of the sale
to Paine Webber, the contract between Kidder Peabody and the Company was
terminated. The loss of the Kidder Peabody revenue during the fourth fiscal
quarter represented the majority of the decrease in the Company's RSC division.
The RSC division reported sales of $9,335,000 for fiscal 1995 compared to sales
of $9,976,000 in fiscal 1994, a decrease of $641,000. Sales from facilities
management agreements amounted to $4,065,000 in fiscal 1995, a decrease of
$328,000 from sales of $4,393,000 in fiscal 1994. At March 31, 1995, there were
12 IFM agreements in effect compared to 20 IFM agreements in effect at March 31,
1994. During the period between such fiscal periods 9 agreements expired without
renewal and 1 new agreement went into effect. Sales from discontinued operations
in Litigation Support Services were $1,563,000 in fiscal 1995 and are not
included in fiscal 1995 sales. Sales for Litigation Support Services were
$4,040,000 in fiscal 1994.
Cost of sales decreased by $2,630,000 or 20% to $10,642,000 or 76% of
sales in fiscal 1995 compared to cost of sales of $13,272,000 or 69% of sales in
fiscal 1994. The decrease principally reflects a decrease in the cost of direct
materials of $370,000 and salaries and related costs of approximately $100,000
in the Company's RSC division reflecting the decrease from Kidder volumes These
decreases were partially offset by $657,000 reflecting a reclassification in the
direct allocation of occupancy and related costs which were previously absorbed
in administration. Costs associated with discontinued operations in Litigation
Support Services of $1,443,000 are not included in fiscal 1995 costs. Cost of
sales from Litigation Support Services of $2,448,000 are included in fiscal 1994
costs.
Selling, general and administrative expenses decreased by $2,581,000 or
40% to $3,876,000 or 28% of sales in fiscal 1995 compared to $6,457,000 or 33%
of sales in fiscal 1994. The decrease is primarily attributable to a decrease in
administrative salaries ($410,000), bonus and incentives ($105,000), salesperson
commissions ($309,000) reflecting the overall decrease in sales. These decreases
were partially offset by charges related to cost cutting measures implemented by
the Company in the reduction of personnel, outside consultants and the
re-evaluation of the Company's lines of business, use of technology, and work
flow processing of approximately $500,000.
In addition, costs associated with discontinued operations in Litigation
Support Services of $1,773,000 are not included in fiscal 1995 continuing
operations. Costs associated with Litigation Support Services were $1,630,000 in
fiscal 1994.
During Fiscal 1995, the Company had interest expense net, of $484,000
compared with $410,000 in Fiscal 1994. Interest expense is primarily related to
interest on the Company's revolving credit facility with BNY as well as interest
on the Company's convertible debentures.
During the second quarter of fiscal 1995, management's review of its property
and equipment records caused management to believe that certain property and
equipment listed was not owned by the Company. As a result the Company recorded
a $750,000 charge to write down property and equipment based on management's
best estimate.
During fiscal 1995 the Company had a majority ownership in INSCI Corp. and
previously reported their results on a consolidated basis. In January 1996 the
Company's ownership was reduced to 38%, therefore, the Company will be
accounting
-10-
<PAGE>
for INSCI on the equity method for fiscal 1996, and has restated
fiscal 1995 to conform to fiscal 1996 presentation. For the year ended March 31,
1995 the Company had equity in the net loss of INSCI of $2,187,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized below for the periods indicated:
YEAR ENDED MARCH 31,
1996 1995 1994
-------- -------- ------
Operating Activities $(926,000) $(1,364,000) $(2,035,000)
-----------
Investing Activities 1,275,000 2,198,000 (1,604,000)
-----------
Financing Activities 1,663,000 (875,000) 3,142,000
--------- --------- -----------
Increase (Decrease) in Cash $2,012,000 $ (41,000) $ (497,000)
========= ======== ========
During the Fiscal year ended March 31, 1996, cash used in operating
activities amounted to $926,000 and is attributable to the following:
o Sales decreased by approximately $2,242,000, and accounts receivable
decreased by $1,178,000 which resulted in a cash loss from sales of
approximately $1,064,000.
o Cost of sales declined by $1,584,000 and and accounts payable increased
by $693,000 which resulted in a cash savings of $2,267,000 partially offset by
an increase in selling, general and administrative costs of $229,000, interest
expense of $76,000 and one time charges and settlements of $210,000, offset by
an increase in other accrued liabilities of $144,000..
o The Company used cash related to an increase in prepaid expenses of
$301,000.
Cash used in investing activities relating to capital expenditures amounted
to $56,000 and is attributable to additions for equipment, and furniture and
fixtures, as the Company began to experience capacity issues as it continues to
expand its research printing business.
On June 15, 1995, the Company's former majority owned subsidiary INSCI
Corp. completed the first phase of a private placement of 90 day subordinated
notes ("the notes") which are repayable in cash or in shares of INSCI's proposed
10% Convertible Redeemable preferred stock ("10% Preferred Stock"). A total of
$1,200,000 of notes were sold with the net proceeds to INSCI of approximately
$950,000. From the net proceeds of the offering, INSCI paid $1,000,000 to IMTECH
to redeem the outstanding balance of 16,343 shares of INSCI preferred stock, par
value $100 per share, and satisfy approximately $195,000 of net accrued
dividends.
During fiscal 1996 cash provided from financing activities was $2,670,000
as follows:
o On March 5, 1996, the Company completed the issuance of a two year, 6%
convertible debenture for $2,100,000 with a company known as Infinity Investors
Ltd. ("Infinity") with net proceeds to the Company of $1,905,000. Infinity has
the option to convert the principal and/or accrued interest at its discretion
into shares of the Company's Class A Common Stock at a 30% discount to market
based on the 5 day average trading price at the time of conversion. Infinity has
represented that it is a foreign investor and is qualified under Regulation "S"
of the Securities Act with respect to the shares that it receives upon its
election to convert.
o On January 22, 1996, the Company issued $380,000 in 12% subordinated
convertible debentures due January 22, 1997. The debenture holders have the
right to convert the principal amount of each debenture plus accrued interest
into shares of the Company's Class A Common Stock.
-11-
<PAGE>
o During January 1996, holders of options from the Company's $250,000
January 1995 Bridge Placement, exercised 125,000 stock options to purchase
125,000 shares of the Company's Class A Common Stock at an exercise price of
$.04 per share. In addition, the holders elected to exercise, 500,000 stock
options to purchase 500,000 shares of the Common Stock of the Company's then
majority owned subsidiary INSCI Corp. at an exercise price of $.51 per share.
The Company received net proceeds of $280,000 from the option exercise. The
exercise of the 500,000 INSCI options reduced the Company's ownership in INSCI
from 54% to 38%.
o On January 22, 1996, the Company completed the sale of 200,000 shares of
its Class A Common Stock with a company known as C.A. Opportunidad S.A. under
the rules of Regulation "S" of the Securities Act. The Company received net
proceeds of $250,000.
o In November 1995, the Company completed a loan arrangement in the form of
a convertible subordinated debenture with the Company known as Fondo De
Adquisciones E Inversiones Internationales XL S.A. ("Fondo") a foreign entity,
wherein Fondo loaned the Company the sum of $250,000 at 15% per annum. On
December 28, 1995, in accordance with the terms of the agreement, Fondo notified
the Company of its election to convert the subordinated convertible debenture
into shares of the Company's Class A Common Stock at $.875 per share. As a
result of the conversion, 285,750 shares of the Company's Class A Common stock
were issued under Regulation "S" of the Securities Act.
At its annual meeting of stockholders on November 30, 1995 the Company
received shareholder approval to initiate its proposed exchange of $2,301,000 in
subordinated convertible debentures into shares of the Company's newly created
12% Redeemable Preferred Stock. As of March 31, 1996 the Company had received
subscriptions to convert $1,896,000 in subordinated convertible debentures plus
accrued interest into shares of the Company's 12% preferred stock. The Company
estimates the conversion will reduce its cash interest payments by approximately
$190,000 per year.
During the second quarter ended September 30, 1995, the Company sold 350,000
restricted shares of its then majority owned subsidiary, INSCI Corp. with net
proceeds from the transaction of $262,500.
In March 1996, the Company agreed with BNY Financial to terminate the
Company's lending and credit relationship. On April 10, 1996, the Company
terminated its lending and credit relationship with BNY and obtained a release
from BNY of all collateral security pledged to BNY as a result of the Company's
financing arrangement with BNY.
The Company on April 10, 1996 paid $1,462,707 to BNY in full payment of all
outstanding loans, advances and debt obligations due to BNY from the Company,
including a $75,000 termination fee.
On February 29, 1996, the Company entered into a two year note in the sum of
$545,000 bearing interest at the rate of 11.5% per annum representing past due
trade payables with one of its major suppliers.
During the Company's Fourth Fiscal quarter of fiscal 1995, the Company
negotiated with several key vendors to convert trade payables into twelve month
notes. The notes, aggregating $127,831 as of March 31, 1995, were due in various
installments through December 1995. Interest, at prime plus 2%, was payable
monthly. As of March 31, 1996, all notes had been paid in full.
Although the Company does not have an organized plan to raise additional
working capital through a private placement or the public markets, the Company
may elect to pursue additional financing from these sources during fiscal 1997.
Additionally, the Company owns approximately 1,450,000 shares, a portion of
which are eligible under Rule 144, of the Common Stock of INSCI Corp. which the
Company may be required to sell to raise additional working capital.
At March 31, 1996, the Company had a working capital deficiency of
$407,359.
During the year ended March 31, 1996, and continuing through the first
quarter of fiscal 1997, the Company has implemented various strategies and
measures which were fundamental to the Company's future growth and
profitability.
-12-
<PAGE>
o During the period April 1, 1995 through June 15, 1996, the Company has
obtained business from 13 new clients which represent $4,850,000 in
annualized revenue. The majority of new clients have signed three (3)
year agreements with the Company.
o In March 1996, the Company issued $2,100,000 in 6% convertible
debentures, of which $1,500,000 of the net proceeds were used to
satisfy the Company's outstanding obligations to BNY Financial and the
remaining balance will be used to supplement the Company's working
capital and to purchase additional production equipment to help the
Company meet its increasing capacity demands. As part of the
settlement with BNY, the Company received a release of all liens held
by BNY and therefore its assets are now unencumbered.
o The Company maintains ownership of approximately 1,450,000 shares of
the Class A Common Stock of INSCI Corp. which has a present market
value of $9,000,000.
o In November 1995, the Company implemented its debenture exchange
program whereby holders of the Company's 12% $2.3 million subordinated
convertible debentures received (1) one share of the Company's 12%
Preferred Stock (PIK interest), which carries a mandatory conversion
into shares of the Company's Class A Common Stock by April 1998 for
each one dollar in 12% subordinated convertible debenture held. As of
March 31, 1996, the Company will save approximately $200,000 in annual
interest cost and has eliminated the majority of its long term debt.
(The debentures were due and payable in November 1996).
o The Company has repaid all vendor note payables from prior years and
is in good credit standing with all its major suppliers of materials
and services. In addition, prices of the Company's primary raw
material, cut sheet paper and 17" rolls, have begun to decline to
levels 15 to 20% below what the Company paid in fiscal 1996.
o The Company has no existing loan convenants or other borrowing
restrictions.
The Company presently has no fixed material commitment for capital
expenditures.
NEW ACCOUNTING STANDARDS
During 1996, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation". Under the present circumstances this pronouncement is not
expected to have a material effect on the Company's financial statements.
SFAS No. 123, "Accounting for Stock-Based Compensation," is also required
to be implemented in 1996 and introduces a choice of the method of accounting
used for stock-based compensation. Entities may use the "Intrinsic value" method
currently based on APB No. 25 or the new "fair value" method contained in SFAS
No. 123. The Company intends to implement SFAS No. 123 in 1996 by continuing to
account for stock-based compensation under APB No. 25. As required by SFAS No.
123, the pro forma effects on net income and earnings per share will be
determined as if the fair value based method had been applied and disclosed in
the notes to the financial statements.
INFLATION
The Company has not experienced significant increases due to inflation in
either the cost of merchandise or operating expenses. Although inflation has not
been a significant factor to date, there can be no assurance that it will not be
in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to the
Table of Contents to Financial Statements and Schedules which appears on page 17
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None
-13-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be included in the Company's
Proxy Statement with respect to its 1996 Annual Meeting of Stockholders to be
filed with the Commission within 120 days following March 31, 1996 under the
captions "Election of Directors," and "Directors and Executive Officers of the
Registrant" and is incorporated herein by this reference as if set forth in full
herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included in the Company's
Proxy Statement with respect to its 1996 Annual Meeting of Stockholders to be
filed with the Commission within 120 days following March 31, 1996 under the
captions "Summary Compensation Table," "Option Grants in Last Fiscal Year,"
"Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values," and "Directors' Compensation," and is incorporated herein by this
reference as if set forth in full herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be included in the Company's
Proxy Statement with respect to its 1996 Annual Meeting of Stockholders to be
filed with the Commission within 120 days following March 31, 1996 under the
caption "Security Ownership of Certain Beneficial Owners" and is incorporated
herein by this reference as if set forth in full herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be included in the Company's
Proxy Statement with respect to its 1996 Annual Meeting of Stockholders to be
filed with the Commission within 120 days following March 31, 1996 under the
caption "Certain Relationships and Related Transactions," and is incorporated
herein by this reference as if set forth in full herein.
-14-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. Incorporated by reference to the list of
--------------------
Financial Statements on page 17 of this Report on Form 10-K.
(a)(2) Financial Statements Schedules. Incorporated by reference to the
------------------------------
list of Financial Statement Schedules on page 17 of this Report on Form 10-K.
(a)(3) Exhibits: Incorporated by reference to the Index of Exhibits
--------
appearing at the end of this Report on Form 10-K.
(b) Reports on Form 8-K. During the period between December 31, 1995 and
-------------------
June 28, 1996, the Company filed with the Commission reports, on Form 8-K as
follows:
(1) A report on Form 8-K dated March 5, 1996 was filed by the Company
on March 14, 1996 reporting the issuance of $2,100,000 6% convertible
debentures.
(2) A report on Form 8-K dated April 11, 1996 was filed by the Company
on April 11, 1996 reporting the payment in full of all outstanding loans,
advances and debt obligations to BNY, the Company's former primary lender.
(3) A report on Form 8-K dated April 25, 1996 was filed by the Company
on April 25, 1996 reporting the appointment of officers and directors.
(4) A report on Form 8-K dated May 15, 1996 was filed by the Company on
May 22, 1996 reporting the conversion of $580,000 of the 6% convertible
debentures issued March 5, 1996.
-15-
<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.
INFORMATION MANAGEMENT TECHNOLOGIES
CORPORATION
By: /s/ JOSEPH A. GITTO, JR.
---------------------------------------
Joseph A. Gitto Jr., Chief Financial Officer;
Principal Accounting Officer
Dated June 29, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert H. Oxenberg, as his attorney-in-fact, with
the power of substitution, for him in any attached and all capacities, to sign
any amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
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 dates indicated.
<TABLE><CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/ / ROBERT H. OXENBERG Chairman, Chief Executive Officer, June 29, 1996
- ---------------------------- Director
Robert H. Oxenberg
/ / CHRISTOPHER D. HOLBROOK President, Chief Operating Officer, June 29, 1996
- ----------------------------- Director
Christopher D. Holbrook
/s/ JOSEPH A. GITTO, JR. Chief Financial Officer, June 29, 1996
- ----------------------------- Principal Accounting Officer,
Joseph A. Gitto, Jr. Director
Director June __, 1996
- ------------------------------
David Grace
</TABLE>
-16-
<PAGE>
TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES
Financial Statements Page
Report of Independent Accountants F-1
Report of Independent Certified Public Accountants F-3
Balance Sheets - March 31, 1996 and 1995 F-4
Statements of Operations - Years Ended F-6
March 31, 1996, 1995 and 1994
Statements of Stockholders' Equity F-7
(Deficiency) - Years Ended March 31, 1996,
1995 and 1994
Statements of Cash Flows - Years Ended
March 31, 1996, 1995 and 1994 F-10
Notes to Financial Statements F-13
Financial Statement Schedules
Schedule Page
----
II. -Valuation and Qualifying Accounts F-30
Schedules not listed above have been omitted because they are not applicable
or not required or the information required to be set forth therein is included
in the Financial Statements or Notes thereto.
-17-
<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.
INFORMATION MANAGEMENT TECHNOLOGIES
CORPORATION
By:
Joseph A. Gitto, Jr.,
Chief Financial Officer;
Principal Accounting Officer
Dated June __, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert H. Oxenberg, as his attorney-in-fact, with
the power of substitution, for him in any attached and all capacities, to sign
any amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
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 dates indicated.
<TABLE><CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
______________________________________ Chairman, Chief Executive Officer June __, 1996
Robert H. Oxenberg Director
______________________________________ President, Chief Operating Officer, June __, 1996
Christopher D. Holbrook Director
_____________________________________ Chief Financial Officer, June __, 1996
Joseph A. Gitto, Jr. Principal Accounting Officer,
Director
_____________________________________
David Grace Director June __, 1996
</TABLE>
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
BALANCE SHEETS
ASSETS
MARCH 31,
---------------------
1996 1995
-------- ------------
CURRENT ASSETS
Cash and cash equivalents (Notes B-2 and B-7) $2,011,560 $ --
Accounts receivable, less allowance for doubtful
accounts of $104,500 and $56,385 at
March 31, 1996 and 1995, respectively (Note B-7) 1,406,731 2,632,659
Inventory (Note B-3) 303,133 378,523
Prepaid expenses and other (Note N) 972,214 238,341
Net assets of discontinued operations (Note O) -- 185,331
Total current assets 4,693,638 3,434,854
--------- ---------
PROPERTY AND EQUIPMENT - AT COST
(Notes B-4 and H)
Production equipment 5,102,268 4,700,871
Software 295,128 255,123
Furniture and fixtures 399,899 281,008
Leasehold improvements 461,089 456,494
Computer equipment 1,101,323 1,204,756
--------- ---------
7,359,707 6,898,252
Less accumulated depreciation and amortization 5,013,249 4,554,508
2,346,458 2,343,744
OTHER ASSETS
Deposits and other assets (Note B-5) 347,636 578,779
Investment in INSCI Corp. (Note D) 379,057 3,235,775
--------- ---------
726,693 3,814,554
TOTAL ASSETS
$7,766,789 $9,593,152
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE><CAPTION>
MARCH 31,
-----------------------
1996 1995
------ --------
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft $ -- $ 268,881
Bank credit facility (Note F) 640,056 --
Current debt (Note E) 431,975 255,123
Current maturities of long-term debt (Note F) 497,328 121,500
Current maturities of long-term capital lease
obligations (Note H) 333,728 392,284
Accounts payable 1,455,015 1,307,814
Accrued salaries 156,007 215,000
Deferred revenue 129,090 554,023
Other accrued liabilities (Note N) 1,457,798 812,051
------------ ------------
Total current liabilities 5,100,997 3,926,676
------------ ------------
LONG-TERM DEBT, LESS CURRENT MATURITIES (Notes F and Q) 2,793,329 3,499,088
ACCRUED RENT (Note I) 368,494 569,448
CAPITAL LEASE OBLIGATIONS, LESS CURRENT MATURITIES (Note H) 362,279 428,444
------------ ------------
Total long-term liabilities 3,524,102 4,496,980
COMMITMENTS AND CONTINGENCIES
(Notes E,F,G,H,I,J,K,L,and N)
STOCKHOLDERS' EQUITY (DEFICIENCY) (Notes K, L, and Q)
12% Preferred stock - authorized 3,000,000 shares
$1.00 par value, 2,026,580 shares issued and
outstanding at March 31, 1996, liquidation
preference of $2,026,580 2,026,580 --
Class A common stock - authorized 100,000,000 shares
of $.04 par value; 3,535,078 and 2,778,132 shares
issued and outstanding at March 31, 1996 and 1995,
respectively 141,403 111,125
Additional paid-in capital 28,658,530 28,064,680
Accumulated deficit (31,684,823) (27,006,309)
------------ ------------
Total stockholders' equity (deficiency) (858,310) 1,169,496
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIENCY) $ 7,766,789 $ 9,593,152
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-6
<PAGE>
Information Management Technologies Corporation
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
YEARS ENDED MARCH 31,
1996 1995 1994 1994
------------ ------------ ------------ ------------
(consolidated) (unaudited
deconsolidated)
<S> <C> <C> <C> <C>
Sales (Note M) $ 11,805,891 $ 14,047,883 $ 27,506,819 $ 19,319,414
----------
Cost of sales 9,057,533 10,641,843 17,610,404 13,272,404
--------- ---------- ---------- -----------
Gross profit 2,748,358 3,406,040 9,896,415 6,047,010
Operating expenses:
Selling, general and administrative expenses 4,104,526 3,875,693 12,289,848 6,469,669
------------ ------------
Termination of facility contract (Note O) 75,000 -- -- --
Buyout of lease agreement (Note I) 376,826 -- -- --
Write off of registration costs (Note G) 330,000 --
Write-down of property and equipment (Note B-4) -- 750,000 -- --
------------ ------------ ------------ ------------
4,556,352 4,625,693 12,619,848 6,469,669
------------ ------------ ------------ ------------
Operating loss (1,807,994) (1,219,653) (2,723,433) (422,659)
Other expenses:
Interest expense, net (Note B-11) 559,710 484,320 1,089,112 421,667
Loss on sale of stock (Notes D and G) 73,500 -- -- --
Buyout of credit facility (Note F) 394,614 -- -- --
------------ ------------ ------------ ------------
1,027,824 484,320 1,089,112 421,667
------------ ------------ ------------ ------------
Loss from continuing operations before
equity in net loss of INSCI Corp. (Note D) (2,835,818) (1,703,973) (3,812,545) (844,326)
Equity in net loss of INSCI Corp. (1,452,000) (2,187,411) -- (2,968,219)
---------- ---------- ---------- ----------
Loss from continuing operations (4,287,818) (3,891,384) (3,812,545) (3,812,545)
---------- ---------- ---------- ----------
Loss from discontinued operations (Note O) (390,696) (1,772,722) -- --
---------- ---------- ---------- ----------
Net loss $ (4,678,514) $ (5,664,106) $ (3,812,545) $ (3,812,545)
=========== =========== =========== ===========
NET LOSS PER SHARE
Net loss $(4,678,514) $(5,664,106) $(3,812,545) $ (3.812,545)
----------- ----------- ----------- ------------
Add: Aggregate value assigned to
warrants issued upon surrender
of redemption rights -- -- (775,000) (775,000)
----------- ----------- ----------- -----------
Net loss for computation of net loss per share $(4,678,514) $(5,664,106) $ (4,587,545) $ (4,587,545)
=========== =========== =========== ===========
Net loss per share continuing operations
(Note B-6) $ (1.37) $ (1.41) $ (1.91) $ (1.91)
----------- ----------- ----------- -----------
Net loss per share discontinued operations
(Note B-6) (.12) (.64) -- --
----------- ------------ ----------- -----------
Net loss per share (Note B-6) $ (1.49) $ (2.05) $ (1.91) $ (1.91)
----------- ----------- ----------- -----------
Weighted average number of shares outstanding 3,139,758 2,762,072 2,400,373 2,400,373
=========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-7
<PAGE>
<TABLE><CAPTION>
Information Management Technologies Corporation
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)
Years Ended March 31, 1996, 1995 and 1994
Class A Class B Additional Total
common common paid-in Accumulated stockholders'
stock stock capital deficit equity/(deficiency)
---------------------- ----------------- --------- --------- -------------------
Shares Amount Shares Amount
------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1993 2,420,187 $74,744 187,750 $ 7,550 $14,128,810 $(16,754,658) $ (2,543,554)
Exercise of Class A Warrants 12,144 1,943 385,868 387,811
Exercise of stock options 2,599 416 74,572 74,988
Costs associated with various
registrations and private
placements (379,851) (379,851)
Surrender of redemption
rights on common stock 121,230 20,997 3,303,542 3,324,539
Conversion of Class B Stock to
Class A Stock 187,750 7,550 (187,750) (7,550)
Private placement of 6,266,602
Class A Warrants 2,351,636 2,351,636
December 1993 Private Placement 18,167 2,907 1,035,094 1,038,001
Net loss for the year (3,812,545) (3,812,545)
Aggregate value assigned to
warrants
issued upon surrender
of redemption rights 775,000 (775,000)
---------- -------- ------ ----- ---------- ----------- -----------
Balance at March
31, 1994 - (carried
forward) 2,762,077 $108,557 0 $ 0 $21,674,671 $(21,342,203) $441,025
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
Information Management Technologies Corporation
<TABLE><CAPTION>
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY) (continued)
Years Ended March 31, 1996, 1995 and 1994
Class A Class B Additional Total
common common paid-in Accumulated stockholders'
stock stock capital deficit equity/(deficiency)
------------------- ----------------- --------- --------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994
- (brought forward) 2,762,077 $ 108,557 $ 0 $ 0 $ 21,674,671 $(21,342,203) $ 441,025
Costs associated with various
registrations and private
placements (2,647) (2,647)
Initial public offering of
INSCI common stock 6,240,224 6,240,224
Conversion of INSCI warrants
to Imtech stock 16,055 2,568 (2,568) 0
Value assigned to options
granted in connection
with bridge financing 155,000 155,000
Net loss for the year (5,664,106) (5,664,106)
-------- ------ ------ ------ ------------ ------------ -----------
Balance at March 31,
1995 - (carried forward) 2,778,132 $ 111,125 0 $ 0 $ 28,064,680 $ (27,006,309) $ 1,169,496
========= ========== ====== ====== ============ ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
Information Management Technologies Corporation
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY) (continued)
Years Ended March 31, 1996, 1995 and 1994
<TABLE><CAPTION>
Class A Additional Total
common Preferred paid-in Accumulated stockholders'
stock Stock capital deficit equity/(deficiency)
------------------- ----------------- --------- --------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance of stock
March 31, 1995
- (brought forward) 2,778,132 $ 111,125 0 $ 0 $ 28,064,680 $ (27,006,309) $ 1,169,496
Exercise of stock options 125,000 5,000 113,360 118,360
Transfer agent administration
error 144,196 5,768 -- 5,768
Issuance of common stock
under Regulation "S" -
Fondo 287,750 11,510 238,490 250,000
Issuance of common stock under
Regulation "S" - Opportunidad 200,000 8,000 242,000 250,000
Issuance of preferred stock
from debenture conversion 2,026,580 2,026,580 2,026,580
Net loss for the year (4,678,514) (4,678,514)
--------- -------- --------- --------- ----------- -------------- -------------
Balance at March 31, 1996 3,535,078 $ 141,403 2,026,580 $2,026,580 $28,658,530 $ (31,684,823) $ (858,310)
========= ========= ========= ========== =========== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
YEARS ENDED MARCH 31,
1996 1995 1994 1994
---- ---- ---- ----
(unaudited
deconsolidated)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $(4,678,514) $(5,664,106) $(3,812,545) $ (3,812,545)
Adjustments to reconcile net loss
to net cash provided by (used in) in operating
activities:
Write-down of property and equipment -- 750,000 -- --
Depreciation and amortization 458,741 558,975 1,062,624 880,624
Amortization of loan and consulting fees 69,000 65,675 -- --
Amortization of goodwill -- 4,873 57,220 57,220
Amortization of software development 427,370 --
Interest paid by issuance of preferred stock 130,580 -- -- --
Accretion interest on current debt -- 32,292 -- --
Loss on sale of stock 73,500 -- -- --
Equity in net loss of INSCI Corp. 1,452,000 2,187,411 -- 2,968,219
Write off of registration costs 330,000 --
Write off net assets of discontinued operations 185,331 -- -- --
Provision for doubtful accounts 48,115 209,169 328,060 134,060
Accrued rent (200,954) 302,653 266,795 266,795
Changes in operating assets and liabilities:
Accounts receivable 1,177,813 400,377 (2,162,035) (491,035)
Inventory 75,390 14,197 403,500 (41,500)
Prepaid expenses and other (300,873) 147,506 (66,578) (63,578)
Deposits and other assets 231,143 (107,872) (299,237) (299,237)
Accounts payable 692,673 (161,897) 123,414 (117,586)
Accrued salaries (58,993) 84,093 48,256 48,256
Deferred revenue (424,933) 168,103 860,298 398,298
Customer deposits -- (210) (332,628) (8,961)
Other accrued liabilities 143,747 (355,443) 730,962 443,962
---------- ---------- ---------- ----------
Net cash provided by (used in) (926,234) (1,364,204) (2,034,524) 362,992
---------- ---------- ---------- ----------
in operating activities
Cash flows from investing activities
Capital expenditures (56,456) (214,348) (1,323,763) (1,017,312)
Capitalized software development costs -- -- (298,451) --
Proceeds from sale of INSCI common stock 331,129 -- -- --
Advances to INSCI Corp. -- (38,095) -- (3,923,000)
Repayment by INSCI Corp. 1,000,000 2,450,585 -- --
Proceeds from collections of
notes receivable -- -- 18,142 18,142
---------- ---------- ---------- ----------
Net cash provided by (used in) investing
activities 1,274,673 2,198,142 (1,604,072) (4,922,170)
---------- ---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-11
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE><CAPTION>
YEARS ENDED MARCH 31,
1996 1995 1994 1994
---- ---- ---- ----
(unaudited -
deconsolidated)
<S> <C> <C> <C> <C>
Cash flows from financing activities
Net borrowings (repayments) under bank
credit facility $ (479,442) $ (415,441) $ (176,375) $ 120,625
Financing from bank overdraft (268,881) 268,881 -- --
Proceeds from bank issuance of short term
debt and options 176,852 250,000 -- --
Proceeds from issuance of long-term debt 2,340,185 (79,617) (137,561) (72,561)
Payments of capital lease obligations (529,721) (499,236) (352,860) (300,860)
Repayment of BNY warrant (200,000) -- -- --
Payment of stockholder loan -- (185,900) -- --
Proceeds of private placement of common stock
with mandatory redemptions -- -- 3,194,913 3,194,913
Proceeds from equity placements, option
and warrant exercises 624,128 -- 1,120,949 1,120,922
Deferred registration costs -- -- (506,609) --
Costs associated with equity placements and
preferred stock redemption (213,500) -- --
Net cash provided (used in) financing activities 1,663,121 (874,813) 3,142,457 4,063,039
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,011,560 (40,875) (496,139) (496,139)
Cash and cash equivalents at beginning of year -- 40,875 537,014 537,014
----------- ----------- ----------- -----------
Cash and cash equivalents at end of year 2,011,560 $ -- $ 40,875 $ 40,875
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 355,852 $ 331,518 $ 701,867 $ 627,867
Income taxes $ 11,592 $ 2,166 $ 2,041 $ 2,041
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-12
<PAGE>
STATEMENTS OF CASH FLOWS (CONTINUED)
Supplemental information on noncash investing and financing activities:
During the year ended March 31,1996 the Company issued 171,000 shares of
Class A Common Stock valued at $502,000 for services rendered over a 3 year
period.
During the year ended March 31, 1996, the Company negotiated with one of its
primary suppliers, to convert $545,000 in trade payables into a two year
interest bearing note.
During the year ended March 31,1996, holders of the Company's 12%
subordinated convertible debentures elected to convert $1,896,000 in
debentures into shares of the Company's 12% Preferred Stock.
During the year ended March 31, 1995, BNY notified the Company that it would
exercise its right to "put" the $200,000 warrant back to the Company.
During the year ended March 31, 1995, the Company negotiated with several key
vendors to convert $148,821 trade payables into 12 month notes.
During the year ended March 31, 1994, the Company canceled 187,750 shares of
its Class B Common Stock, which was converted into the Company's Class A
Common Stock.
Capital lease obligations of approximately $405,000, $311,000, and $356,000
were incurred during the years ended March 31, 1996, 1995, and 1994,
respectively, when the Company entered into leases for new equipment.
F-13
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS
March 31, 1996, 1995 and 1994
NOTE A - ORGANIZATION
Information Management Technologies Corporation (the "Company"), a Delaware
corporation, was incorporated in 1986. The Company provides information and
facility management services primarily to financial and other service industries
which are characterized by substantial information processing, communications
and document administration requirements. The Company's customer base consists
primarily of major financial, manufacturing, legal, accounting and other medium
to large service organizations which are principally located in New York City
and the surrounding metropolitan area (New Jersey, Southeast Connecticut and
Westchester County, New York). The Company, through a strategic alliance with a
New York City based technology provider has begun to service clients in
Pennsylvania, the midwest and Europe. As of March 31, 1996 the Company
maintains a 38% ownership interest in INSCI Corp., a Masschusetts based
developer of computer software.
The Company has reported INSCI's results from operations on a consolidated
basis in fiscal 1994 and on the equity method of accounting for the fiscal years
ended March 31, 1996 and 1995.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
1. Revenue Recognition
-------------------
Revenues from the Company's services are recognized as the services are
performed or upon shipment.
Revenue from the sale of the Company's former majority owned subsidiary
INSCI's multi-user system installations which require significant
customization is recognized upon customer acceptance, when there are no
longer significant obligations to be fulfilled and when collectibly is
probable and imminent. Stand-alone version installations do not require
significant obligations after delivery of the hardware and software. Revenue
on such sales is recognized upon shipment and remaining obligations, if any,
are accrued. The INSCI's software license agreement does not (i) entitle the
buyer to any right of return or exchange, or (ii) grant the customer any
right to product upgrades or enhancements. Software maintenance is
recognized ratably over the contract period, generally one year. Advance
payments required from customers under contractual agreements, which have not
been fulfilled, are classified as customer deposits.
2. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consist of highly liquid investments with
insignificant interest rate risk and original maturity of three months or
less. They are carried at cost which approximates market value.
3. Inventory
---------
Inventory consists primarily of paper, toner and ink and is stated at the
lower of cost (FIFO) or market.
4. Property and Equipment
----------------------
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives.
Leasehold improvements are amortized over the lives of the respective leases
or the service lives of the improvements, whichever is shorter. Equipment
under capital leases is amortized over the service lives of the assets. The
straight-line method of depreciation and amortization is used for
F-14
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. Property and Equipment (continued)
----------------------
substantially all assets for financial reporting purposes. Accelerated
depreciation methods are used for tax purposes.
The estimated useful lives are as follows:
Production equipment 7 years
Software 5 years
Furniture and fixtures 7 years
Leasehold improvements Life of Lease
Computer equipment 3-5 years
During the second quarter of Fiscal 1995, management's review of its
property and equipment records caused management to believe that certain
property and equipment listed was not presently owned by the Company. As a
result, the Company recorded a $750,000 charge to write-down property and
equipment based on management's best estimate.
During the fourth quarter of Fiscal 1995 the Company engaged an
independent firm to provide the Company with an independent property and
equipment inventory and valuation. As a result of the independent
appraisers review of the assets listed by the Company, the report supports
the Company's belief that its records more accurately reflect the assets
owned by the Company after the charge recorded in the second quarter of
fiscal 1995.
5. Deferred Financing Costs
------------------------
Deferred financing costs, included in deposits and other assets on the
balance sheet, are amortized over three years. Such costs were written
off upon the termination of the related credit facility.
6. Loss Per Share
--------------
Loss per share has been calculated on the basis of weighted average
number of shares outstanding during the period after giving retroactive
effect to the reverse stock split as discussed in Note K. The effect on
loss per share of stock options and warrants outstanding is antidilutive
and has not been included in the calculation of weighted average number of
shares outstanding.
7. Concentration of Credit Risk
----------------------------
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of cash and accounts
receivable. The Company places its temporary cash investments in money
market investments with one financial institution. At March 31, 1996, the
uninsured amounts were approximately $1,500,000. These balances are insured
by the Federal Deposit Insurance Corporation up to $100,000 per
institution. The Company has not experienced any losses on these
investments to date.
The Company has not experienced significant losses relating to
receivables. The Company performs on- going credit evaluations of its
customers and maintains reserves for potential credit risks as determined
by management. Accounts receivable consist of geographically and industry
dispersed customers.
F-15
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
8. Use of Estimates
----------------
The preparation of financial statements 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 period. Actual result could differ from those
estimates.
9. Fair Value of Financial Instruments
-----------------------------------
Included in the Company's financial instrument portfolio are cash,
trade receivables and payables and debt instruments. The carrying value of
short-term financial instruments approximates fair value because of the
relatively short period of time between the origination of the instruments
and their expected realization. The carrying value of the debt represents
its fair value due to the market rate of interest being paid.
10. Investment in INSCI Corp.
-------------------------
The financial statements as of March 31, 1995 for the years ended
March 31, 1994 have been restated to record the Company's investment in its
former majority owned subsidiary INSCI Corp. under the equity method of
accounting INSCI Corp. had been previously recorded on a consolidated basis
(See Note D).
11. Interest Expense
----------------
Interest expense for the years ended March 31, 1996, 1995 and 1994 is
$560,000, $484,0000 and $1,117,000, respectively.
NOTE C - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company has sustained substantial
losses in recent years and as a result has experienced a deficiency in cash
flows from operations in those years. The Company had a working capital
deficiency of $407,359 as of March 31, 1996. Management believes that it has
sufficient working capital and other resources to meet its current obligations
as they come due.
During the year ended March 31, 1996, and continuing through the first
quarter of fiscal 1997, the Company has implemented various strategies and
measures which were fundamental to the Company's future growth and
profitability.
- During the period April 1, 1995 through June 15, 1996, the Company
obtained business from 13 new clients. The majority of the new clients
have signed three (3) year agreements with the Company.
- In March 1996, the Company issued $2,100,000 in 6% convertible
debentures, of which $1,500,000 of the net proceeds were used to satisfy
the Company's outstanding obligations to BNY Financial and the remaining
balance will be used to supplement the Company's working capital and to
purchase additional production equipment to help the Company meet its
increasing capacity demands. As part of the settlement with BNY, the
Company received a release of all liens held by BNY and therefore its
assets are now unencumbered.
- The Company maintains ownership of approximately 1,450,000 shares of the
Class A Common Stock of INSCI Corp. which has a present market value of
$9,000,000.
F-16
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE C - BASIS OF PRESENTATION (continued)
- In November 1995, the Company implemented its debenture exchange program
whereby holders of the Company's 12% $2.3 million subordinated
convertible debentures received (1) one share of the Company's 12%
Preferred Stock (PIK interest), which carries a mandatory conversion into
shares of the Company's Class A Common Stock by April 1998 for each one
dollar in 12% subordinated convertible debenture held. As of March 31,
1996, the Company will save approximately $200,000 in annual interest
cost and has eliminated the majority of its long term debt. (The
debentures were due and payable in November 1996).
- The Company has repaid all vendor note payables from prior years and is
in good credit standing with all its major suppliers of materials and
services.
- The Company has no existing loan convenants or other borrowing
restrictions.
NOTE D - INVESTMENT IN INSCI CORP.
At March 31, 1996 the Company has a 38% ownership interest in INSCI Corp.,
a Massachusetts based developer of computer software, which is accounted for
under the equity method of accounting. INSCI's financial position as of
March 31, 1996 and 1995 and their results of operations for the years ended
March 31, 1996, 1995, and 1994 (unaudited) is set forth below: (000's)
1996 1995 1994
---- ---- ----
(unaudited)
-----------
Net Sales $ 7,913 $ 7,188 $ 8,187
Net Loss $ (1,452) $ (3,113) $ (2,968)
--------
Current Assets $ 2,690 $ 2,915
Other Assets 2,533 2,384
----- -----
Total Assets $ 5,223 $ 5,299
======= =======
Current Liabilities $ 2,660 $ 2,032
Long term Debt 44 32
8% redeemable preferred
stock -- 1,634
Stockholders' Equity 2,519 1,601
----- -------
Total Liabilities and
Stockholders' Equity $ 5,223 $ 5,299
Investment in INSCI Corp. $ 379 $ 3,236
--- -----
As of March 31, 1995 and 1994 and for the years then ended the Company
had a majority ownership interest in INSCI, and thereby reported their
results on a consolidated basis. Presentation of fiscal 1995 and 1994
(unaudited) financial statements have been restated to give effect to
accounting for INSCI on the equity method.
In April 1994, the Company's 100% owned subsidiary INSCI, completed an
initial public offering whereby the Company's ownership was reduced to 58%.
In addition, the Company received 41,134 shares of INSCI preferred stock in
exchange for $4,134,000 in intercompany debt.
F-17
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE D - INVESTMENT INSCI CORP. (continued)
During fiscal 1995, the Company converted 25,000 shares of the INSCI
preferred stock into shares of INSCI Class A Common Stock thereby increasing
the Company's ownership in INSCI to approximately 64%.
During fiscal 1996, the Company sold 350,000 restricted shares of INSCI
Class A Common Stock, and in addition, issued 500,000 shares of INSCI Common
Stock related to an option exercise. These transactions reduced the
Company's ownership in INSCI to approximately 38%.
NOTE E - CURRENT DEBT
(1) On January 22, 1996, the Company issued $380,000 in 12% subordinated
convertible debentures due in January 1997. The debenture affords the
right to the holder to convert the debenture plus accrued interest into
shares of Class A Common Stock at $1.50 per share. The holders were
further granted cost free registration rights.
(2) On January 17, 1995, the Company completed a financing transaction wherein
it obtained loans and issued options for the aggregate sum of $250,000
from five (5) individuals ("Option-Holders"). The Company entered into a
series of Loan-Option Agreements wherein the loans were repayable in one
(1) year with interest at nine percent (9%) per annum. Each option
Holder received a pledge of an option to purchase 100,000 shares of the
Company's former majority owned subsidiary, INSCI Corp. In addition, the
Option Holders had a period of one (1) year to exercise, on a pro rata
basis, the option to purchase up to 125,000 shares of the Common Stock of
the Company at $.04 per share. Each Option Holder upon exercise of the
option to purchase common stock of the Company and INSCI, were granted
registration rights with respect to said shares, and agreed to pay a pro
rata cost of registration up to the sum of $25,000. The Company had the
right to repurchase the INSCI options at the rate of $.11 per option
during the first ninety (90) days of the loan period. The Option Holders
had a period of one (1) year to exercise the purchase of the INSCI
options at $.51 per share. In January 1996 the Company repaid $200,000
of the $250,000 in loan options. The remaining loan option holder has
requested that the Company repay the remaining outstanding principal and
accrued interest in shares of INSCI stock. In addition, in January 1996,
the option holders exercised their options to purchase 125,000 and
100,000 common shares of the Company and INSCI, respectively.
(3) During the Company's Fourth quarter of fiscal 1995, the Company negotiated
with several key vendors to convert currently due trade payables into
twelve month notes. The notes, aggregating $127,831, were due in various
installments through December 1995. Interest, at prime plus 2%, is
payable monthly. The notes were repaid in full during fiscal 1996.
F-18
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE F - LONG-TERM DEBT
Long-term debt consists of the following:
March 31,
---------------------------
1996 1995
----------------------------
12% Convertible subordinated debentures (1) $405,000 $2,301,000
Revolving credit and term loan facility (2) 240,185 1,119,588
BNY warrant put (2) -- 200,000
Vendor notes payable (3) 545,472 --
6% Convertible debentures (4) 2,100,000 --
--------- --
3,290,657 3,620,588
Less current maturities (497,328) (121,500)
---------- ---------
$ 2,793,329 $ 3,499,088
============ ============
Scheduled maturities of long-term debt are as follows:
Year ending March 31,
1997 $ 497,328
1998 2,793,329
------------
$ 3,290,657
------------
(1) During fiscal 1992, the Company received proceeds of $2,301,000 from a
private placement of convertible subordinated debentures. Interest, at the
rate of 12% per annum, is payable semiannually each May 15 and November 15,
commencing May 15, 1992. The debentures are convertible into Class A
common stock of the Company, at the option of the holders, at any time on
or before maturity at $10.00 per share, subject to adjustment upon the
occurrence of certain events. The debentures are redeemable in whole on the
fifth anniversary of issuance.
In December 1995, the Company initiated its debenture exchange program
whereby holders of the Company's 12% subordinated convertible debenture
were entitled to receive $1.00 of the Company's newly created 12% preferred
stock for every $1.00 in subordinated convertible debentures. As of March
31, 1996, the holders converted $1,896,000 in convertible subordinated
debentures into shares of the Company's 12% Preferred Stock.
(2) The Company had a lending and credit facility with BNY Financial ("BNY")
upon which BNY made advances to the Company at a rate of prime plus 2%. In
March 1996, the Company agreed with BNY to terminate the Company's lending
and credit relationship. In connection with the financing arrangement the
Company had granted to BNY a warrant to purchase 100,000 shares of its
Class A Common Stock with an exercise price equal to at least 80% of the
market value of the Company's Class A Common Stock on the date of grant.
BNY had a right to "put" the warrant back to the Company for $200,000 if
the warrant remains unexercised after five years. During the fourth
quarter of Fiscal 1995, BNY notified the Company that it would exercise its
right to "put" the warrant back to the Company. On April 1, 1995 the
Company commenced payment on the put over an 18 month period ending in
September of 1996. The remaining balance of the BNY warrant put was
satisfied upon the Company's termination of its agreement with BNY. On
April 10, 1996, the Company terminated its lending and credit relationship
with BNY and obtained a release from BNY of all collateral security pledged
to BNY as a result of the Company's financing arrangement with BNY. The
Company paid $1,462,707 to BNY in full payment of all outstanding loans,
advances and debt obligations due to BNY from the Company, including a
$75,000 termination fee. The outstanding obligation to BNY has been
classified separately as a current liability on the balance sheet as of
March 31, 1996.
F-19
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE F - LONG-TERM DEBT (continued)
(3) In March 1996, the Company negotiated with one of its primary vendors to
convert trade payables into a 24 month note in the aggregate amount of
$613,203 which is due in monthly installments of $25,549 through March
1998, with interest at 11.5% per annum.
(4) On March 5, 1996, the Company issued a two year, 6% convertible debenture
for the sum of $2,100,000 to Infinity Investors Ltd. ("Infinity") under
Regulation "S" of the Securities Act. Infinity has the option to convert
the principal and/or accrued interest, payable quarterly, at its discretion
into shares of the Company's Class A Common Stock at a 30% discount to
market based on the 5 day average trading price at the time of conversion.
Reference is made to Note P.
NOTE G - RELATED PARTY TRANSACTIONS
On April 21, 1994, the Company's then wholly owned subsidiary INSCI Corp.
completed an initial public offering ("IPO") of 1,250,000 units
("Units") of which the Company received net proceeds of approximately
$7,159,000. Prior to April 21, 1994, the Company provided working
capital advances to INSCI. As of March 31, 1994 the outstanding balance
of the intercompany indebtedness owed by INSCI to the Company was
$6,461,000. Of the proceeds of the IPO, INSCI used $2,327,000 to
partially repay the principal portion of the indebtedness. The
remaining unpaid balance at April 21, 1994 of $4,134,000 was converted
into 41,343 shares of INSCI preferred stock. The Board of Directors of
the Company and INSCI each has adopted a policy that neither company
will make further advances to the other. During fiscal year 1996 no
advances were made between the Companies.
Effective December 15, 1994, the Company converted 25,000 shares of its
majority owned subsidiary INSCI's preferred stock, par value $100, held
by the Company into 500,000 shares of INSCI Common Stock at a rate of 20
INSCI Common Shares for each share of Preferred Stock held. On June 15,
1995, the Company redeemed the remaining 16,343 shares of preferred
stock of INSCI Corp. for $1,000,000.
In November 1992 the Company's former majority owned subsidiary, INSCI
filed a registration statement with respect to an initial public
offering of shares of its Common Stock. As a result of the
restructuring of the customer support staff, completion of development
of enhancements to improve ease of installation and customer support and
negotiations to achieve a firm underwriting for the said initial public
offering, INSCI delayed the completion of the offering. Costs incurred
in connection with that registration statement of $330,000 were charged
to expenses during the second quarter of fiscal 1994.
NOTE H - CAPITAL LEASES
For financial reporting purposes, certain equipment leases have been
treated as capital leases. The present value of minimum future
obligations is calculated based on interest rates (ranging from 8% to
24%) applicable at the inception of the leases. The leases are
noncancellable and expire on various dates through fiscal 1998. The
cost of equipment under capital leases amounted to approximately
$2,106,000 and $1,701,000, with related accumulated depreciation of
approximately $894,000 and $634,000, at March 31, 1996 and 1995,
respectively. This equipment is primarily production equipment.
The following is a schedule of the present value of future minimum lease
payments under capital leases as of March 31, 1996:
F-20
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE H - CAPITAL LEASES (continued)
Year ending March 31,
1997 $ 476,748
1998 258,700
1999 103,550
-------
Total minimum lease payments 838,998
Amount representing interest (142,991)
Current portion of capital lease obligations (333,728)
------------
Present value of long-term obligations under
capital leases $ 362,279
=============
NOTE I - OPERATING LEASES
The Company leases certain equipment and conducts a portion of its operations
in leased facilities under leases classified as operating leases. The lease for
the Company's main operating facility contains a provision for annual
adjustments based on the cost of living (COLA) rate. The following represents
approximate minimum rental payments under such operating leases:
Year ending March 31,
1997 $ 482,000
1998 496,000
1999 512,000
2000 528,000
2001 544,000
Thereafter 1,338,000
------------
Total minimum payments required $ 3,900,000
============
Rent expense charged to operations was approximately $629,000, $1,013,000,
and $996,000 of which approximately $40,000, $35,000, and $47,000 consists
of COLA adjustments for the years ended March 31, 1996, 1995 and 1994,
respectively; rent expense for INSCI was $288,000.
In Fiscal 1994, the lease for the Company's offices at 130 Cedar Street, New
York, New York was extended for ten years commencing in August 1993. In
connection with the amended lease, the Company was granted various
concessions. The accompanying statements of operations reflect rent
expense on a straight-line basis over the term of the lease. A rent
accrual of approximately $369,000 and $569,000 representing pro-rata future
payments is reflected in the accompanying balance sheets at March 31, 1996
and 1995, respectively.
In June 1995, the Company completed negotiations with its landlord whereby
the Company returned 20,000 square feet of previously occupied space. The
Company entered into an agreement whereby the Company would pay $377,000
over an (8) eight month period in full satisfaction of the previously
leased space. As of March 31, 1996 the Company had paid approximately
$311,500.
F-21
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE J - INCOME TAXES
At March 31, 1996, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $12,400,000 that are available
to offset future taxable income and expire at various dates through the
year 2011.
The Tax Reform Act of 1986 enacted a complex set of rules limiting the
utilization of net operating loss carryforwards to offset future taxable
income following a corporate "ownership change." The Company's ability to
utilize its net operating loss carryforwards would in general be limited if
there is a change in ownership in excess of fifty percentage points.
Although the Company has not performed a detailed study, it does not
believe that an ownership change has taken place.
The Company has fully reserved the tax benefits of these operating losses
because the likelihood of realization of the tax benefits cannot be
determined.
NOTE K - COMMON STOCK
During February 1993, the Company commenced a private placement of units
("1993 Units") comprised of one share of Class A Common Stock and one and
three quarters Class A Warrants sold for $3 per 1993 Unit. The original
placement provided that in the event that INSCI consummates an initial
public offering of its Common Stock pursuant to which at least $4,500,000
of gross proceeds are received on or before December 31, 1993, then each
holder of shares of Class A Common Stock included in the 1993 Units had an
election, which may be exercised by 30 days notice to the Company, either
(i) to cause the Company to redeem the shares of Common Stock included in
the 1993 Units at a redemption price of $3.00 per share; or (ii) to retain
all shares of Class A Common Stock included in the Units acquired by such
holder. The initial public offering of INSCI's Common Stock was completed
on April 21, 1994. The original placement provided that if INSCI had not
received such proceeds by December 31, 1993, then the election stated above
shall expire, that the subscribers are entitled to receive one additional
Class A Warrant and the subscribers will retain the shares of Common Stock
included in the 1993 Units subscribed by them. No transfer of any of the
shares of Common Stock comprising the 1993 Units was permitted until the
earlier of the date of the redemption or December 31, 1993. As of March
31, 1994, the Company had received cash subscriptions for $5,000,000, and
non-cash subscriptions for $1,100,000 issued in exchange for INSCI
convertible notes and $225,000 issued in exchange of professional services
payable. In connection with the surrender of redemption rights, each
holder of the 1993 Units was issued an additional warrant for a total of
2,009,647 warrants valued at $.37 each, by an investment banker, with an
aggregate value of approximately $775,000.
In December 1993, the Company commenced a private placement of a maximum
1,000,000 Units ("1994 Units") comprised of one share of Class A Common
Stock and one and three quarters Class A Warrants, sold for $3 per 1994
Unit. The Company completed the sale of 376,028 1994 Units for an
aggregate subscription price of $1,128,084, resulting in the issuance of
376,028 shares of Class A Common Stock and 658,049 Class A Warrants. As of
March 31, 1994, the Company had received subscriptions for $1,038,000 of
1994 Units. Holders of the 1994 Units also received an option (the
"Litigation Support Purchase Option") to purchase from the Company all of
the Common Stock of IMTECH Litigation Support Services, Inc. for a price of
$4,000,000. The Litigation Support Purchase Option was exercisable for a
period of 30 days commencing on June 6, 1994. The Company had the right to
acquire the Litigation Support Purchase Option (and thereby to cancel such
Option) for a purchase price equal to $125,000.
F-22
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE K - COMMON STOCK (continued)
On May 15, 1995 the Company's shareholders approved a four (4) for one (1)
reverse stock split of the Company's Class A Common Stock and approved
increasing the par value of the Class A Common Stock from $.01 to $.04, and
increased the number of shares authorized under the Company's stock option
plan as stated in Note L. The accompanying financial statements give
retroactive effect of the reverse stock split for all periods presented.
In November 1995, the Company completed a loan arrangement in the form of a
convertible subordinated debenture with the Company known as Fondo De
Adquisciones E Inversiones Internationales XL S.A. ("Fondo") a foreign
entity, wherein Fondo loaned the Company the sum of $250,000 at 15% per
annum. On December 28, 1995, in accordance with the terms of the
agreement, Fondo notified the Company of its election to convert the
subordinated convertible debenture into shares of the Company's Class A
Common Stock at $.875 per share. As a result of the conversion, 285,750
shares of the Company's Class A Common Stock were issued under Regulation
"S" of the Securities Act.
During January 1996, holders of options from the Company's $250,000 January
1995 Loan Option Agreement exercised 125,000 options to purchase 125,000
shares of the Company's Class A Common Stock at an exercise price of $.04
per share.
On January 22, 1996, the Company completed the sale of 200,000 shares of its
Class A Common Stock at $1.25 per share, with a Company known as C.A.
Opportunidad S.A. under the rules of Regulation "S" of the Securities Act.
The Company received net proceeds of $250,000.
NOTE L - STOCK OPTIONS
Non-Qualified Stock Option Plan
- -------------------------------
The Company's 1987 Non-Qualified Stock Option Plan (the "NQSO Plan") was
adopted by the Board of Directors and approved by the stockholders in
August 1987. The NQSO Plan provides for the granting of options to
purchase shares of the Company's Class A Common Stock to key persons whom,
in the judgment of the Compensation Committee of the Board of Directors
(the "Committee"), the Company relies on for the successful conduct of its
business. Directors of the Company who are not employees of the Company
are not eligible to participate in the NQSO Plan. There are 4,000,000
shares reserved for issuance under the NQSO Plan as amended. As of March
31, 1996, options to acquire a total of 1,415,772 shares were outstanding
or approved for grant under the NQSO Plan at an exercise price ranging from
$1.00 to $9.89 per share. The NQSO Plan will continue in effect for a term
of ten years unless terminated earlier by the Board of Directors.
Incentive Stock Option Plan
- ---------------------------
The Company's Incentive Stock Option Plan (the "ISO Plan") was adopted by the
Board of Directors and approved by the stockholders in August 1987. There
are 3,000,000 shares reserved for issuance under the ISO Plan as amended.
The ISO Plan, provides for the granting to key employees of "Incentive
stock options" within the meaning of Section 422 of the Internal Revenue
Code of 1986 (the "Code"). All employees, including officers and employee
directors of the Company, are eligible under the ISO Plan, which is
intended to be used to attract and retain key personnel.
F-23
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE L - STOCK OPTIONS (continued)
Incentive Stock Option Plan (continued)
- ---------------------------
The ISO Plan is administered by the Committee, which determines the terms of
options granted, including the exercise price, dates and number of shares
subject to the option. The exercise price of all options granted under
the ISO Plan must be at least equal to the fair market value of the shares
on the date of grant, and the term of each option may not exceed 10
years. With respect to any participant who may own more than 10% of the
Company's outstanding voting shares, the exercise price of any incentive
stock option must be at least equal to 110% of the fair market value of
the Class A Common Stock on the date of grant and the term may be no
longer than five years.
As of March 31, 1996, options to acquire a total of 1,345,661 shares were
outstanding or approved for grant under the ISO Plan at an exercise price
ranging from $1.250 to $5.845 per share. The ISO Plan will continue in
effect for a term of ten years unless terminated earlier by the Board of
Directors.
Directors Option Plan
- ---------------------
The Company's Directors Option Plan (the "Directors Plan") was adopted by
the Board of Directors in October 1988, approved by the stockholders on
December 19, 1988 and amended by the stockholders in October 1992. A
total of 1,500,000 shares of Class A Common Stock have been reserved for
issuance under the Directors Plan, as amended. The Directors Option Plan
provides that director stock options will be granted only on the date of
the Annual Stockholders meeting in each even calendar year. The purpose
of the Directors Plan is to retain the service of qualified non-officer,
or non-employee, directors who are considered essential to the sustained
progress of the Company.
Stock option transactions during the three years ended March 31, 1996 are as
follows:
<TABLE><CAPTION>
Directors'
NQSO ISO Option
Plan Plan Plan Other
--------------- ------------ ----------- -----
<S> <C> <C> <C> <C>
Balance at April 1, 1993 276,354 213,238 60,000 20,300
Exercised (5,000) (3,125)
Granted 7,500 61,875
Canceled
--------- ---------- ----------- -----------
Balance at March 31, 1994 278,854 271,988 60,000 20,300
--------- ---------- ----------- -----------
Exercised
Granted 300,000
Canceled (58,440) (103,827) (45,000)
--------- ---------- ----------- -----------
Balance at March 31, 1995 220,414 468,161 15,000 20,300
--------- ---------- ----------- -----------
Exercised
Granted 1,195,358 877,500
Canceled (20,300)
--------- ---------- ----------- -----------
Balance at March 31, 1996 1,415,772 1,345,661 15,000 0
--------- ---------- ----------- -----------
Exercisable at March 31, 1996 1,015,772 590,660 15,000 0
=========== =========== =========== ===========
</TABLE>
F-24
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE L - STOCK OPTIONS (continued)
Directors Option Plan (continued)
- ---------------------
The shares available for future grant, exclusive of the contingent shares
discussed above, are 2,584,228 under the NQSO Plan and 1,654,339 under the
ISO Plan and 1,485,000 under the Director's Option Plan at March 31, 1996.
NOTE M - MAJOR CUSTOMERS
Sales to the Company's two largest customers during the year ended March 31,
1996, and the three largest customers during the years ended March 31, 1995
and 1994 accounted for approximately 39%, 56% and 53% of total sales during
such years, respectively.
NOTE N - CONTINGENCIES
SEC Investigation
- -----------------
On September 30, 1992, the Company and INSCI the Company's former majority
owned subsidiary, reached an agreement with the SEC to conclude and settle
the SEC's informal investigation of the Company and INSCI. The Company and
INSCI, without admitting or denying any of the allegations made by the SEC
in its complaint, and without a trial or final adjudication of the
allegations made in the SEC's complaint, consented to the entry of an order
enjoining the Company and INSCI from future violations of certain
provisions of the Federal securities laws and the rules and regulations
thereunder. The settlement may adversely affect the Company and INSCI and
restrict the Company's and INSCI's ability to raise funds from persons
located in certain significant states. The impact of these restrictions may
be to prevent the Company and INSCI from conducting future public offerings
or private placements.
On June 29, 1995, subsequent to the Company filing its annual report on Form
10-K for the year ended March 31, 1995, which was filed with the Commission
on June 27, 1995, the Company's special counsel obtained a copy of a
private order of investigation from the Securities and Exchange Commission
("Commission"). The Commission has issued an order of investigation of the
Company and INSCI Corp. and/or its former officers and directors during the
period March 1993 and continuing until April 13, 1995. The order of
investigation inquiring into whether the Company and its then officers and
directors engaged in violations of rule 10b-5 of the Securities Exchange
Act of 1934 (the "Exchange Act"), failed to file annual reports and other
information as required by the rules and regulations of the Commission in
violation of Section 13 (a) of the Exchange Act and Rules 12b-20, 13a-11
and 13a-13, and failed to maintain proper books and records in violation of
section 13(b)(2) of the Exchange Act or falsified or caused to be falsified
books and records of the Companies in violation of section 13(b)(2)(a),
Rule 13b 2-1, and Rule 13b 2-2 of the Exchange Act.
On July 26, 1995, the Company was further notified by its special counsel
that the Commission had issued subpoenas to the Company for the Company's
records related to the engagement and subsequent resignation in October
1994 of the Company's then independent certified public accountants,
Coopers and Lybrand LLP ("Coopers"). Following the resignation, the
Company filed a report on Form 8-K disclosing certain accounting questions
brought to the attention of Coopers by the Company relating to adjustments
made in the Company's financial statements for the quarter ended September
30, 1994. The Company subsequently reviewed these questions and in the
Company's opinion concluded that such matters were accounted for in the
proper periods.
F-25
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE N - CONTINGENCIES (continued)
SEC Investigation (continued)
- -----------------
The Company is unaware of any violations with respect to annual reports or
other information disclosed by the Company during the period stated in the
order. The Company cannot predict, however the outcome of the Commission's
investigation and whether such investigation will result in any type of
formal enforcement action against the Company and INSCI and/or any of its
officers and directors, or, if so, whether any such action would have an
adverse effect on the Company and INSCI. An adverse outcome may result in
the payment by the Company and INSCI of potential fines and penalties,
restrict the Company's ability to obtain additional required financing, and
may result in the delisting of the Company's securities from the NASDAQ
stock market. In addition, the Company is currently under a consent order
relating to a prior Commission Investigation. If the Company is found to
have violated the existing Commission consent order, the Company and/or its
officers and directors may be subject to sanctions for civil and criminal
contempt and fines and/or penalties.
Employee Benefit Plans
- ----------------------
From time to time, the Company had not made employee contribution payments to
the trustee of its employee benefit plans at the time such contributions
were due. Also, in the past the Company has not always made employee
contributions to the plans concurrent with the deduction of these
contributions from payroll. However, beginning in the fiscal year ended
March 31, 1992, management believes that the Company has made employee
contributions on a current basis.
The Company was notified by regulatory authorities on January 7, 1994, that
certain required regulatory filings made in connection with the employee
benefit plans lacked requisite financial information. The Company received
correspondence from the U.S. Department of Labor stating the Department's
intent to assess a penalty against the Company in the amount of $50,000 for
one of the years in question.
The issues regarding contributions to its employee benefit plans and
regulatory filings for the plans may subject the Company to certain tax,
penalty and/or interest payments.
In January 1996, the Company implemented a 401(k) plan covering all eligible
employees. Contributions to the plan are based on a discretionary matching
contribution of the employees's deferred compensation. Employee
contributions are limited to 5% of salary. There were no employer
contributions to the plan for the year ended March 31, 1996.
Registration Rights
- -------------------
The Company has granted to the holders of certain warrants and shares of the
Company's securities without cost demand and "piggyback" registration rights
with respect to the underlying stock of the securities issued, or issuable.
Compliance with these registration rights may involve substantial expense to the
Company.
Employment and Consulting Agreements
- ------------------------------------
The Company has employment agreements with its Chief Executive Officer and
Chief Operating Officer, Christopher D. Holbrook and its President and Chief
Financial Officer, Joseph A. Gitto, Jr. The agreements call for a base salary
of $165,000 and $115,000 respectively, stock option grants of 670,000 and
603,000 respectively,
F-26
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE N - CONTINGENCIES (continued)
Employment and Consulting Agreements (continued)
- ------------------------------------
with 2/3 vested and additional vesting of 1/3 on the anniversary date of the
agreements at prices ranging from $1.30 to $2.06.
Robert H. Oxenberg, a director of the Company, has agreed to act as a
consultant to the Company and is paid the sum of $5,000 per month in addition to
reimbursement of expenses for services rendered to the Company. Additionally,
Mr. Oxenberg has received stock option grants of 375,000 at a price range of
$1.30 to $1.88.
Other
- -----
In November 1995 the Company entered into an agreement with Corporate
Relations Group ("CRG") to provide promotional, shareholder and brokerage
communications services. The agreement was for a period of 3 years, and the
Company agreed to pay CRG the sum of $300,000 or 171,000 shares of free trading
Class A Common Stock, in addition to 500,000 options to purchase 500,000 shares
of Class A Common Stock for $1.75 per share to $3.06 per share for a period of 5
years. The Company elected to pay CRG by issuing 171,000 shares of Class A
Common Stock and has recorded a prepaid asset of $433,000 and an accrued
liability of $502,000. Subsequent to the agreement, the Company borrowed 92,250
shares of Class freely traded Common Stock from a number of shareholders in the
Company. The Company's agreement for the repayment of the borrowed shares
involved the Company making payment of interest at 10% per annum in addition to
the return of the borrowed shares and an additional (1) one share of Class A
Common Stock for each (10) ten shares borrowed by the Company (an aggregate of
9,250 shares). The Company further agreed to grant cost free registration
rights to each lender for the additional shares and interest as a result of the
loan transaction.
The Company will use its best efforts to file a registration statement for
all of the borrowed shares plus interest and the additional 9,250 shares on or
before September 30, 1996.
CRG has asserted a claim for the balance of 78,750 shares of Class A Common
Stock, and the Company has disputed the claim based upon the Company's
contention that CRG has not performed under its agreement with the Company.
NOTE O - DISCONTINUED OPERATIONS
In January 1995, the Company decided to discontinue its Litigation Support
Services division.
Sales of the Litigation Support Services division were $1,563,000 in Fiscal
1995 with a net loss of $1,773,000. The Company during the fourth fiscal
quarter of 1996 took a charge of $390,000 to write-off the remaining net assets.
There were no sales in fiscal 1996. At March 31, 1995 the assets and liabilities
of the discontinued operations consisted of the following:
F-27
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE O - DISCONTINUED OPERATIONS (continued)
ASSETS
-------
Accounts receivable, net $147,299
Property and equipment, net 272,172
Other assets, net 11,556
--------
Total assets discontinued 431,027
LIABILITIES
-----------
BNY line of credit 178,858
Accounts payable 66,838
-------
Total liabilities discontinued 245,696
-------
Nets assets discontinued $ 185,331
=======
The foregoing assets and liabilities were classified as current at March 31,
1995.
F-28
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
NOTE P - BUSINESS SEGMENT INFORMATION
The Company's two business segments are Information Facilities Management
("IFM") and Optical Disk Data Storage Systems ("INSCI"). Summarized
financial information by business segment is as follows:
As of March 31, 1994 and for the year ended March 31, 1994, the Company had a
majority ownership interest in INSCI, and thereby reported their results on
a consolidated basis.
Year ended March 31,
----------------------
1994
--------------------
Sales
IFM $19,319,414
INSCI 8,187,405
----------
27,506,819
==========
Operating earnings (loss)
IFM 585,000
INSCI (2,314,025)
-----------
Operating loss from continuing
operations before other expenses (1,729,025)
Other expenses (income):
Corporate expenses 994,408
Interest expense 1,116,944
Interest income (27,832)
--------
Total other expenses 2,083,520
---------
Net loss (3,812,545)
============
NOTE Q - SUBSEQUENT EVENTS
(1) On April 15, 1996, Robert H. Oxenberg resigned as CEO and continued to
serve as a Director of the Company. The Board of Directors appointed Mr.
Christopher D. Holbrook as CEO and Mr. Holbrook resigned his
office as President but will continue to serve as a Director of the Company.
The Board appointed Mr. Joseph A. Gitto, Jr. as President and he continues to
serve as CFO and a Director of the Company.
(2) In May and June 1996, Infinity Investors Ltd. notified the Company that
they would convert an aggregate of $1,280,000 of the $2.1 million in 6%
convertible debentures into shares of the Company's Class A Stock. As a result
of the conversion, the Company issued 619,520 shares of the Company's Class A
Common Stock. Infinity still owns $820,000 in 6% convertible debentures. The
proforma unaudited condensed balance sheet gives effect to the above
transaction.
F-29
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996, 1995 and 1994
<TABLE><CAPTION>
NOTE Q - SUBSEQUENT EVENTS (continued)
As Reported Pro-Forma As Adjusted
----------- --------- -----------
<S> <C> <C> <C>
Current assets $ 4,693,638 $ -- $ 4,693,638
Property and equipment, net 2,346,458 -- 2,346,458
Other assets 726,693 (113,000) (A) 613,693
----------- --------- -----------
Total assets $ 7,776,789 $(195,000) $ 7,653,789
- -
Current liabilities $ 5,100,997 $ 5,100,997
- -- -
Long term liabilities 3,524,102 (1,280,000) (A) 2,244,102
Stockholders equity (deficiency) (858,310) 1,167,000 (A) 308,690
--------- --------- ---------
Total liabilities and
stockholders equity/(deficiency) $ 7,776,789 $ (113,000) $ 7,653,789
-
(A) To record the conversion of the Infinity 6% debentures into shares of the
Company's Class A Common Stock, of which 880,000 was on June 17, 1996 and
another 440,000 is expected to be converted in July 1996.
</TABLE>
F-30
<PAGE>
<TABLE><CAPTION>
Information Management Technologies Corporation
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended March 31, 1996, 1995 and 1994
-----
Column A Column B Column D Column E
- -------- -------- Column C -------- --------
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance at
beginning costs and accounts- Deductions - end of
Description of period expenses describe describe (a) year
- ----------- --------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year ended March 31, 1996 $ 56,385 $ 209,850 $ 161,735 $ 104,500
------- --------
Year ended March 31, 1995 43,461 127,158 114,234 56,385
Year ended March 31, 1994 34,577 134,060 125,176 43,461
Accumulated amortization of
cost in excess of net
assets acquired
Year ended March 31, 1996 255,049 255,049
Year ended March 31, 1995 250,186 4,873 255,059
Year ended March 31, 1994 192,966 57,220 250,186
Accumulated amortization of
capitalized software development
costs
Year ended March 31,1994 821,047 427,370 1,248,417
(a) Amounts written off
</TABLE>
F-31
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
INDEX TO EXHIBITS
-----------------
The following Exhibits are filed as part of, or incorporated by reference into,
this Report on Form 10-K, as indicated below (footnote explanations are at end
of Index):
<TABLE><CAPTION>
Sequential
Page Number
-----------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company, as filed December 24, 1986,
amended October 16, 1987, amended July 20, 1989, and amended December 14,
1989.11/
3.2 Certificate of Incorpoation of the Company as amended June 13, 1995 and
amended June 28, 1995. 20/
3.3 Certificate of Incorporation of the Company as amended November 30,
1995.46/
3.4 Bylaws of the Company.1/
4.1 Unit Purchase Option for 46,300 Units dated April 6, 1988
issued to D. H. Blair & Co., Inc.8/
4.2 Unit Purchase Option for 32,000 Units dated April 6, 1988 issued to
Parliament Hill Capital Corp.8/
4.3 Unit Purchase Option for 500 Units dated April 6, 1988 issued to David
Nachamie.8/
4.4 Unit Purchase Option for 500 Units dated April 6, 1988 issued to Vincent
Coakley.8/
4.5 Unit Purchase Option for 500 Units dated April 6, 1988 issued to Michael
Siciliano.8/
4.6 Unit Purchase Option for 200 Units dated April 6, 1988 issued to Allison
Brown.8/
4.7 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and the
Warrant Agent dated April 6, 1988.8/
4.8 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and the
Warrant Agent dated February 23, 1989.9/
4.9 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and the
Warrant Agent dated May 22, 1990.11/
4.10 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and the
Warrant Agent dated August 16, 1990.12/
4.11 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and the
Warrant Agent dated March 25, 1991.16/
4.12 Form of Convertible Subordinated Debenture issued in connection with the
Company's private placement in November 1991.17/
4.13 Form of Convertible Subordinated Note issued in connection with INSCI
Corp. private placement in June 1992.17/
4.14 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and the
Warrant Agent, dated February 1, 1993 as amended by Supplemental Agreement
to Amend Warrant Agreement, dated June 27, 1993.18/
4.15 Loan option agreement, dated January 17, 1995, issued to Shor Yeshev. 20/
4.16 Loan option agreement, dated January 17, 1995, issued to Raquel Grunwald.
20/ Sequential
<PAGE>
Sequential
Page Number
-----------
4.17 Loan option agreement, dated January 17, 1995, issued to Lou Gurman. 20/
4.18 Loan option agreement, dated January 17, 1995, issued to Dynamic Control.
20/
4.19 Loan option agreement, dated January 17, 1995, issued to Dr. Rona Krinick.
20/
9.1 Voting Agreement between D.H. Blair & Co., Inc. and Pierce Lowrey, Jr.
dated February 23, 1989 accompanied by a schedule of seven other
substantially identical agreements reflecting parties names and amount of
securities subject to agreements .10/
9.2 Voting Agreement between D.H. Blair & Co., Inc. and Gerald E. Dorsey.18/
9.3 Voting Agreement between the Company and Pierce Lowrey, Jr.19/
10.1 Employment Agreement dated as of September 1, 1987 between the Company and
Pierce Lowrey, Jr.1/
10.2 Escrow Agreement by and among the Company, the existing stockholders, and
the Escrow Agent.8/
10.3 Amended and Restated 1987 Incentive Stock Option Plan.10/
10.4 Amended and Restated 1987 Non-Qualified Stock Option Plan.8/
10.5 Sublease dated September 7, 1988, between the Company and Kidder, Peabody
& Co., Incorporated for the Company's facilities at 130 Cedar Street, New
York, New York with lease attached thereto.10/
10.6 Lease dated November 2, 1988, between the Company and Carol Gaynor,
Marguerite K. Lewis and William A. Goldstein, as Trustees for additional
facilities at 130 Cedar Street, New York, New York.10/
10.7 Lease dated August 19, 1987, between the Company and California State
Teacher's Retirement System for the Company's facilities at Six Piedmont
Center, Suite 100, Atlanta, Georgia.1/
10.8 Form of Facilities Management Agreement.1/
10.9 Form of Service Agreement.1/
10.10 Employment Agreement dated January 1, 1988 between the Company and Ronald
A. Bibbo.3/
10.11 Non-Compete Agreement dated September 3, 1986 by and among Datacopi, Inc.,
NCR Corporation, and Pierce L. Lowrey, Jr.2/
10.12 Line of Credit for the Company with The Robinson-Humphrey Company, Inc.2/
10.13 Agreement for Sale of 150,000 shares of Class B Common Stock between the
Company and Pierce Lowrey, Jr.2/
10.14 Subscription Agreement for Ronald A. Bibbo.2/
10.15 Cease and Desist Agreement between the Company and Independent Printing
Company, Inc.3/
10.16 Settlement Agreement between the Company and Mathias & Carr, Inc.3/
10.17 Line of Credit for the Company with The First National Bank of Atlanta.3/
<PAGE>
Sequential
Page Number
10.18 March 31, 1988 accrued salary waiver between Pierce Lowrey, Jr. and the
Company.7/
10.19 Letter Agreement between the Company and D. H. Blair & Co., Inc. regarding
merger and acquisition consulting services dated April 13, 1988.8/
10.20 Consulting Agreement between the Company and D.H. Blair & Co., Inc. dated
April 13, 1988.8/
10.21 Facilities Management Agreement dated June 6, 1988 by and between the
Company and Manufacturers Hanover Trust Company, with Addendum thereto
dated July 8, 1988.8/
10.22 Facilities Management Agreement dated September 7, 1988 by and between the
Company and Kidder, Peabody & Co., Incorporated, and related agreements
and documents.8/
10.23 Directors Option Plan.10/
10.24 Employment Agreement dated May 1, 1988 between the Company and Ray Miller,
with attachments and exhibits.10/
10.25 Stock Option Agreements each dated May 1, 1988 between the Company and Ray
L. Miller.10/
10.26 Agency Agreement dated January 30, 1989 between the Company and D.H. Blair
& Co., Inc.10/
10.27 Unit Purchase Option for 2.55 Private Placement Units dated February 23,
1989 issued to D.H. Blair & Co., Inc.10/
10.28 May 1, 1989 letter regarding salary waiver from Pierce Lowrey, Jr. to the
Company.10/
10.29 Assignment Agreement dated May 24, 1989 between the Company and Pierce
Lowrey, Jr. regarding assignment of claims against Ronald A. Bibbo.10/
10.30 Asset Purchase Agreement dated May 5, 1989 between Jon Rothenberg &
Associates and the Company, with related documents and agreements.10/
10.31 Promissory Note in the original principal amount of $100,000 dated June 9,
1989 payable by the Company to Pierce Lowrey, Jr.10/
10.32 Commitment Letter dated July 17, 1989 from Pierce Lowrey, Jr. to the
Company with respect to additional loans to the Company.10/
10.33 Employment Agreement dated December 15, 1989 between the Company and John
Hoffman.11/
10.34 Credit Agreement dated August 1, 1989, as amended, by and between the
Company and State Street Bank and Trust Company.11/
10.35 $750,000 Loan Commitment, Master Note and Security Agreement by and
between Pierce Lowrey, Jr. and the Company dated March 1, 1990.11/
10.36 Asset Purchase Agreement by and between Imtech Optical Systems, Inc. and
Acctex Information Systems, Inc. dated December 29, 1989.11/
10.37 Distribution Agreement between the Company and The Vault Company dated
June 25, 1990.13/
10.38 Letter Agreement dated May 15, 1990 from D.H. Blair & Co., Inc. to the
Company regarding amendment to Unit Purchase Option dated February 23,
1989.14/
<PAGE>
Sequential
Page Number
-----------
10.39 Letter Agreement between the Company and D.H. Blair & Co., Inc. regarding
1990 Bridge Loan dated May 22, 1990.14/
10.40 Form of 12% Subordinated Promissory Note issued in connection with 1990
Bridge Loan.14/
10.41 Asset Purchase Agreement between the Company and IMTECH Atlanta, Inc.15/
10.42 Form of Subordinated Promissory Note issued in connection with the
Company's private placement in February 1991.16/
10.43 Accounts Financing Agreement [Security Agreement] (with Supplements) and
$100,000 Term Note between the Company and Congress Financial Corporation
dated May 3, 1991 and $500,000 Letter of Credit from The First National
Bank of Atlanta dated May 2, 1991.16/
10.44 Warrant Agreements between the Company and Pierce Lowrey, Jr. dated
February 1, 1991, February 5, 1991 and February 28, 1991 for 425,000
shares, 125,000 shares and 153,000 shares, respectively.16/
10.45 Share Purchase Option for 243,750 shares of Class A Common Stock dated
April 26, 1991, between the Company and D.H. Blair & Co., Inc.16/
10.46 Form of Share Purchase Option issued in connection with INSCI Corp.
private placement in July 1991.17/
10.47 Form of Warrant issued in connection with INSCI Corp. private placement in
January 1992.17/
10.48 Form of Unit Exchange Agreement issued in connection with INSCI Corp.
private placement in January 1992.17/
10.49 Form of Warrant issued in connection with INSCI Corp. private placement in
June 1992.17/
10.50 Consulting Agreement dated March 8, 1993 by and between INSCI Corp. and
The Raymond Group, Inc.18/
10.51 Lease Agreement dated May 31, 1993 by and between INSCI Corp. and
Connecticut General Life Insurance Company.18/
10.52 Settlement Agreement with the SEC dated September 30, 1992.18/
10.53 Consulting Agreement by and between the Company and Edward I. Rosen dated
April 1, 1993.18/
10.54 First Amendment to Directors's Stock Option Plan dated October 20,
1992.18/
10.55 Lease Agreement between the Company and A.J. Goldstein & Co., Inc. for
premises located at 130 Cedar Street, New York, New York 10006, dated
October 7, 1993.17/
10.56 Loan Agreement (and supplemental documentation) between BNY Financial
Corporation, the Company, INSCI Corp. and Imtech Litigation Support
Systems, Inc.32/
10.57 INSCI Corp. 1992 Stock Option Plan.28/
10.58 INSCI Corp. 1992 Directors Option Plan.28/
10.59 INSCI Corp. 1992 Advisory Committee Plan.28/
<PAGE>
Sequential
Page Number
-----------
10.60 INSCI Corp. Accounts Financing Agreement between INSCI Corp. and Congress
Financial Corporation, and related documents.28/
10.61 INSCI Corp. Form of 1991 Option.28/
10.62 INSCI Corp. Form of 1992 Warrants.28/
10.63 INSCI Corp. Form of 1992 Convertible Subordinated Note.28/
10.64 INSCI Corp. Form of 1992 Contingent Warrants.28/
10.75 INSCI Corp. Form of 1993 Warrant -- Version A.30/
10.76 INSCI Corp. Form of 1993 Release Agreement.30/
10.77 INSCI Corp. Form of Management Agreement between INSCI Corp.
and Imtech.28/
10.78 INSCI Corp. Form of Tax Sharing Agreement between INSCI
Corp. and Imtech.28/
10.79 Form of Indemnification Agreement with INSCI Corp.'s
Directors.28/
10.80 Marketing Associate Solution Alliance Agreement between
UNISYS Corporation and INSCI Corp.28/
10.81 Data General Value Added Reseller Discount Purchase
Agreement.28/
10.82 Data General Optical Systems and Software Agreement.28/
10.83 Distribution Agreement between Fiserv CIR, Inc. and INSCI
Corp.28/
10.84 Lease Agreement relating to INSCI Corp.'s White Plains, New York
headquarters.29/
10.85 Forms of Customer License Agreements used by INSCI Corp.29/
10.86 Forms of Employee Confidentiality Agreements used by INSCI Corp.29/
10.87 Nondisclosure and Noncompetition Agreement between INSCI Corp., the
Company and Mason Grigsby.29/
10.88 Form of 1993 Warrant -- Version B.30/
10.89 Employment Agreement between INSCI Corp. and John L. Gillis.30/
10.90 Employment Agreement between INSCI Corp. and Kris Canekeratne.30/
10.91 Form of 1993 Exchange Agreement and Investor Suitability
Representations.30/
10.92 Form of 1993 Conversion Agreement.30/
10.93 Waivers by Congress Financial Corporation.30/
10.94 License Agreement between Bull HN Information Systems, Inc. and INSCI
Corp.30
10.95 Preferred Stock Subscription Agreement between INSCI Corp.
and the Company relating to Preferred Stock.19/
<PAGE>
Sequential
Page Number
-----------
10.96 Business Partner Agreement between International Business Machines
Corporation and INSCI Corp.32/
10.97 Waiver by BNY Financial Corporation.31/
10.98 Stock Escrow Agreement between INSCI Corp., the Company and First Union
National Bank of North Carolina (as Escrow Agent).32/
10.99 Promissory Note and Security Agreement in favor of INSCI Corp. from John
L. Gillis and Sandra Gillis, in the original principal amount of
$150,000.19/
10.100 Stock pledge agreement by John L. Gillis and Sandra Gillis, in favor of
INSCI Corp.19/
10.101 April 1993 Private Placement term sheet and exhibits.19/
10.102 December 1993 Litigation Support Systems, Inc. Private Placement
Documents.19/
10.103 Consulting Agreement between the Company and Boulder Financial Group,
Ltd.19/
10.104 Amendment to loan agreement between BNY financial and registrant.19/
10.105 Amendment to Loan agreement between BNY Financial and Registrant. 20/
10.106 BNY agreement with registrant. 20/
10.107 Preferred Stock Redemption Agreement. 20/
10.108 Employment agreement between IMTECH and Christopher D. Holbrook. 34/
10.109 Employment agreement between IMTECH and Joseph A. Gitto, Jr. 34/
10.110 Lease agreement relating to INSCI's Westborough, Massachusetts
headquarters. 44/
10.111 Employment agreement with Jack Steinkrauss. 44/
10.112 Employment agreement with John Gillis. 44/
10.113 Empoloyment agreement with Kris Canckeratne. 44/
10.114 Agreement for system purchase by the Northern Trust Company. 44/
10.115 Technology and reseller agreement with Elixir Technology. 20/
10.116 Private Placement Term Sheet for offering of 90 day 10% subordinated
notes repayable in cash or in shares of the Company's proposed 10%
convertible preferred stock. 20/
10.117 First Amendment to Private Placement Term Sheet and Exhibits. 20/
10.118 Copy of modification of lease executed by the Company and A.J. Goldstein
& Co., Inc. 45/
10.119 Form of Subordinated Convertible Debenture Exchange Agreement for 12%
Convertible Preferred Stock. 51/
10.120 Agreement between the Company and the Corporate Relations Group for the
Company's Corporate and Stockholder public relations. 52
<PAGE>
Sequential
Page Numbering
--------------
10.121 Form of Agreement by and between the Company and a shareholder with
respect to a loan of stock. 53/
10.122 Form of Subscription Agreement for 12% Subordinated Convertible
Debentures. 54/
10.123 Offshore Convertible Debenture Subscription Agreement between the Company
and Infinity Investors Ltd. and related agreement between the Company and
Alpine Capital Partners Inc. 55/
10.124 Termination of asset based financing agreement with BNY Financial. 56/
13.1 The Company's Annual Report to Security Holders for the year ended March
31, 1993.22/
13.2 Form 10-Q for the quarter ended June 30, 1993.23/
13.3 Form 10-Q for the quarter ended September 30, 1993.24/
13.4 Form 10-Q for the quarter ended December 31, 1993.25/
13.5 Form 10-Q/A (Amendment No. 1) for the quarter ended December
31, 1993.26/
---
13.6 Proxy Statement for the Company's 1993 Annual Shareholders' Meeting.27/
13.7 Form 10-Q for the quarter ended June 30, 1994. 35/
13.8 Form 10-Q for the quarter ended September 30, 1994. 36/
13.9 Form 10-Q fo rthe quarter ended December 31, 1994. 37/
13.10 Form 10-Q for the quarter ended June 30, 1995. 47/
13.11 Form 10-Q for the quarter ended September 30, 1995. 48/
13.12 Form 10-Q for the quarter ended December 31, 1995. 49/
16.1 Letter regarding dismissal of independent certifying accountant. 38/
16.2 Letter regarding engagement of new independent certifying
accountant. 39/
16.3 Letter regarding resignation of independent certifying accountant. 40/
16.4 Letter regarding potential prior period adjustment. 41/
16.5 Letter regarding engagement of new independent certifying
accountant. 42/
21.1 List of Subsidiaries.20/
22.1 Proxy statement for the Companys 1994 annual shareholders meeting. 43/
22.2 Proxy Statement for the Company's 1995 Annual Shareholders
Meeting. 50/
24.1 Powers of Attorney.20/
</TABLE>
<PAGE>
1/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Registration Statement on Form S-1, File No. 33-18245 as
filed with the Securities and Exchange Commission on October 30, 1987.
2/ Incorporated herein by reference to the Exhibit with the same description
to Amendment No. 1 to the Company's Registration Statement on Form S-1,
File No. 33-18245 as filed with the Securities and Exchange Commission on
February 29, 1988.
3/ Incorporated herein by reference to the Exhibit with the same description
to Amendment No. 2 to the Company's Registration Statement on Form S-1,
File No. 33-18245 as filed with the Securities and Exchange Commission on
March 15, 1988.
4/ Incorporated herein by reference to the Exhibit with the same description
to Amendment No. 3 to the Company's Registration Statement on Form S-1,
File No. 33-18245 as filed with the Securities and Exchange Commission on
March 23, 1988.
5/ Incorporated herein by reference to the Exhibit with the same description
to Amendment No. 4 to the Company's Registration Statement on Form S-1,
File No. 33-18245 as filed with the Securities and Exchange Commission on
March 24, 1988.
6/ Incorporated herein by reference to the Exhibit with the same description
to Amendment No. 5 to the Company's Registration Statement on Form S-1,
File No. 33-18245 as filed with the Securities and Exchange Commission on
March 25, 1988.
7/ Incorporated herein by reference to the Exhibit with the same description
to Amendment No. 6 to the Company's Registration Statement on Form S-1,
File No. 33-18245 as filed with the Securities and Exchange Commission on
April 5, 1988.
8/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Report on Form 10-K for the fiscal year ended July 31,
1988.
9/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1989.
10/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Transition Report on Form 10-K for the eight month period
ended March 31, 1989.
11/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Report on Form 10-K for the fiscal year ended March 31,
1990.
12/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Report on Form 10-Q for the fiscal quarter ended September
30, 1990.
13/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Registration Statement on Form S-1, File No. 33-36185 as
filed on August 2, 1990.
14/ Incorporated herein by reference to the Exhibit with the same description
to Amendment No. 1 to the Company's Registration Statement on Form S-1,
File No. 33-36185 as filed on October 18, 1990.
15/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Report on Form 8-K dated December 6, 1990.
16/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Report on Form 10-K for the fiscal year ended March 31,
1991.
17/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Report on Form 10-K for the fiscal year ended March 31,
1992.
<PAGE>
18/ Incorporated herein by reference to the Exhibit with the same description
to the Company's Report on Form 10-K for the fiscal year ended March 31,
1993.
19/ Incorporated herein by reference to the Exhibit with the same description
to the Companys report on Form 10-K for the Fiscal year ended March 31,
1994.
20/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 10-K for fiscal year ended March 31, 1995.
21/ Filed with this report.
22/ Incorporated herein by reference to the Company's Annual Report to Security
Holders for the year ended March 31, 1993 as filed with the Commission.
23/ Incorporated herein by reference to the Company's 10-Q for the quarter
ended June 30, 1993.
24/ Incorporated herein by reference to the Company's 10-Q for the quarter
ended September 30, 1993.
25/ Incorporated herein by reference to the Company's 10-Q for the quarter
ended December 31, 1993.
26/ Incorporated herein by reference to the Company's 10-Q/A (Amendment No. 1)
for the quarter ended December 31, 1993.
27/ Incorporated herein by reference to the Company's Proxy Statement for the
Company's 1993 Annual Shareholders' Meeting as filed with the Commission.
28/ Incorporated herein by reference to the Exhibit with the same description
on the INSCI Corp. Registration Statement on Form S-1, file No. 33-54558,
as filed with the commission on November 13, 1993.
29/ Incorporated herein by reference to the Exhibit with the same description
on the INSCI Corp. Registration Statement on Form S-1, file No. 33-54558,
as filed with the commission on December 2, 1993.
30/ Incorporated herein by reference to the Exhibit with the same description
on the INSCI Corp. Registration Statement on Form S-1, file No. 33-54558,
as filed with the commission on February 2, 1994.
31/ Incorporated herein by reference to the Exhibit with the same description
on the INSCI Corp. Registration Statement on Form S-1, file No. 33-54558,
as filed with the commission on March 15, 1994.
32/ Incorporated herein by reference to the Exhibit with the same description
on the INSCI Corp. Registration Statement on Form S-1, file No. 33-54558,
as filed with the commission on March 25, 1994.
33/ Incorporated herein by reference to the exhibit with the same description
to the Companys report on Form 8-K dated Janaury 17, 1995.
34/ Incorporated herein by reference to the exhibit with the same description
to the Companys report on Form 8-K dated March 3, 1995.
35/ Incorporated herein by reference to the Companys 10-Q for the quarter ended
June 30, 1994.
36/ Incorporated herein by reference to the Companys 10-Q for the quarter ended
September 30, 1994.
<PAGE>
37/ Incorporated herein by reference to the Companys 10-Q for the quarter ended
December 31, 1994.
38/ Incorporated herein by reference to the exhibit with the same description
to the Companys report on Form 8-K dated August 9, 1994.
39/ Incorporated herein by reference to the exhibit with the same description
to the Companys report on Form 8-K dated August 15, 1994.
40/ Incorporated herein by reference to the exhibit with the same description
to the Companys report on Form 8-K dated November 1, 1994.
41/ Incorporated herein by reference to the exhibit with the same description
to the Companys report on Form 8-K dated November 14, 1994.
42/ Incorporated herein by reference to the exhibit with the same description
to the Companys report on Form 8-K dated December 21, 1994.
43/ Incorporated herein by reference to the Companys definite proxy statement
for the Companys 1994 annual shareholder meeting as filed with the
Commission.
44/ Incorporated by reference as filed by INSCI Corp. the majority owned
subsidiary of the registrant.
45/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 8-K dated July 14, 1995.
46/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 8-K dated November 30, 1995.
47/ Incorporated herein by reference to the Company's 10-Q for the quarter
ended June 30, 1995.
48/ Incorporated herein by reference to the Company's 10-Q for the quarter
ended September 30, 1995.
49/ Incorporated herein by reference to the Company's 10-Q for the quarter
ended December 31, 1995.
50/ Incorporated herein by reference to the Company's Definitive Proxy
Statement for the Company's 1995 Annual Shareholder Meeting as filed with
the Commission.
51/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 8-K dated September 22, 1995.
52/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 8-K dated October 24, 1995.
53/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 8-K dated January 3, 1996.
54/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 8-K dated Januay 22,1996.
55/ Incorporated herein by reference to the Exhibit withthe same description to
the Company's report on Form 8-K dated March 5, 1996.
56/ Incorporated herein by reference to the Exhibit with the same description
to the Company's report on Form 8-K dated April 11, 1996.
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report, dated June 28, 1994, accompanying the
consolidated financial statements and schedules included in the Annual Report on
Form 10-K of Information Management Technologies Corporation for the fiscal year
ended March 31, 1994. We hereby consent to the incorporation by reference of
said report in the Registration Statement of Information Management Technologies
Corporation on Form S-8 (Registration No. 33-26336).
New York, New York
June 28, 1994
