SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-QSB
----------
Quarterly report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended: June 30, 1996 Commission File No. 0-16753
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
(Exact name of Registrant as 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)
---------------------
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|_|
As of August 5, 1996, registrant had outstanding 4,979,773 shares of
Class A Common Stock.
Traditional Small Business Disclosure Format (check one)
Yes |X| No|_|
<PAGE>
Information Management Technologies Corporation
FORM 10-QSB FOR QUARTER ENDED JUNE 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Balance Sheets as of June 30, 1996 (Unaudited) and March 31, 1996.
(b) Statements of Operations (Unaudited) for the three months ended June
30, 1996 and 1995.
(c) Statements of Cash Flows (Unaudited) for the three months ended June
30, 1996 and 1995.
(d) Notes to Financial Statements.
Item 2. Management's Discussion and Analysis or plan of operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None filed with this report.
(b) Reports on Form 8-K
(1) Report on Form 8-K filed on April 11, 1996.
(2) Report on Form 8-K filed on April 25, 1996.
(3) Report on Form 8-K filed on May 15, 1996.
(4) Report on Form 8-K/A filed on July 25, 1996.
<PAGE>
Information Management Technologies Corporation
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
June 30, March 31,
1996 1996
---------- ----------
SSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $ -- $2,011,560
Accounts receivable, less allowance for doubtful
accounts of $61,783 and $104,500 at
June 30, 1996 and March 31, 1996, respectively 1,554,660 1,406,731
Inventory 448,056 303,133
Prepaid expenses and other 834,919 972,214
---------- ----------
Total current assets 2,837,635 4,693,638
---------- ----------
PROPERTY AND EQUIPMENT - AT COST
Production equipment 5,389,034 5,102,268
Software 298,153 295,128
Furniture and fixtures 399,899 399,899
Leasehold improvements 483,356 461,089
Computer equipment 1,114,080 1,101,323
---------- ----------
7,684,522 7,359,707
Less accumulated depreciation and amortization 5,116,890 5,013,249
---------- ----------
Property and equipment, net 2,567,632 2,346,458
---------- ----------
OTHER ASSETS
Deposits and other assets 474,639 347,636
Investment in INSCI Corp. 378,637 379,057
---------- ----------
Total other assets 853,276 726,693
---------- ----------
$6,258,543 7,766,789
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
Information Management Technologies Corporation
BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT) (unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft $ 195,035 $ 0
Bank credit facility -- $ 640,056
Current debt 240,545 431,975
Current maturities of long-term debt -- 497,328
Current maturities of long-term capital lease
obligations 289,652 333,728
Accounts payable 1,179,303 1,455,015
Accrued salaries 63,225 156,007
Deferred revenue 128,430 129,090
Other accrued liabilities 779,863 1,457,798
------------ ------------
Total current liabilities 2,876,053 5,100,997
------------ ------------
LONG-TERM DEBT, less current maturities 1,639,379 2,793,329
ACCRUED RENT 368,494 368,494
CAPITAL LEASE OBLIGATIONS, less current maturities 590,507 362,279
------------ ------------
Total long-term liabilities 2,598,380 3,524,102
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
12% Preferred Stock - authorized 3,000,000
shares at $1.00 par value; 2,295,330 and 2,026,580
shares issued and outstanding at June 30, 1996
and March 31, 1996, respectively 2,295,330 2,026,580
Class A common stock authorized 100,000,000
shares of $.04 par value; 4,819,925 and 3,535,078
shares issued and outstanding at June 30, 1996 and
March 31, 1996 respectively 192,797 141,403
Additional paid-in capital 29,880,392 28,658,530
Accumulated deficit (31,584,409) (31,684,823)
------------ ------------
Total stockholders' equity (deficit) 784,110 (858,310)
------------ ------------
$ 6,258,543 $ 7,766,789
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Information Management Technologies Corporation
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Sales $ 2,606,118 $ 3,439,760
Cost of sales 1,755,063 2,234,760
----------- -----------
Gross profit 851,055 1,205,000
Selling, general and
administrative expenses 678,200 1,226,741
----------- -----------
Operating income [loss] 172,855 (21,741)
Interest expense, net 97,521 142,489
----------- -----------
Income (loss) from continuing operation before equity in
net income (loss) of INSCI Corp. 75,334 (164,230)
Equity in net income (loss) of INSCI Corp. 25,080 (1,654,971)
----------- -----------
Income (loss) from continuing operation 100,414 (1,819,201)
Loss from discontinued operation 0 (20,874)
----------- -----------
Net income [loss] $ 100,414 $(1,840,075)
=========== ===========
Income (loss) per share continuing operations .03 (.65)
=========== ===========
Loss per share discontinued operations $ 0 (.01)
=========== ===========
Weighted average number
of shares outstanding
for each period 3,937,684 2,781,382
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Information Management Technologies Corporation
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1996 1995
------------- --------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 100,414 $(1,840,075)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization 103,642 77,491
Amortization of loan fees 32,963
Accretion interest on current debt 38,750
Equity in net (income) loss of INSCI Corp. (25,080) 1,654,971
Provision for doubtful accounts (43,717) (5,814)
Changes in operating assets and liabilities:
Accounts receivable (104,214) 89,094
Inventory (144,910) 37,416
Prepaid expenses, deposits and other assets 10,281 25,843
Accounts payable and accrued liabilities (1,047,088) (223,778)
----------- -----------
Net cash (used in) provided by operating activities (1,150,672) (113,139)
----------- -----------
Cash flows from investing activities:
Capital expenditures (96,588) (146,484)
Repayment by INSCI Corp. 25,500 1,000,000
Net cash (used in) provided by investing activities (71,088) 853,516
----------- -----------
Cash flows from financing activities:
Repayment of revolving credit facility, net $ (640,056) $ (485,898)
Financings from overdrafts 195,035 59,251
Payments of other debt (300,702) --
Payments of long-term debt -- (26,383)
Payments on capital
lease obligations (44,077) (135,904)
Payment of stock issuance costs -- (151,443)
----------- -----------
Net cash used in
financing activities (789,800) (740,377)
----------- -----------
Net increase (decrease) in cash (2,011,560) 0
Cash at beginning of year 2,011,560 0
----------- -----------
Cash at end of period $ 0 $ 0
=========== ===========
</TABLE>
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
ORGANIZATION
Information Management Technologies Corporation (the "Company"), a Delaware
corporation, was incorporated in 1986. The Company provides information
facilities 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 June 30, 1996, the
Company maintains a 38% ownership interest in INSCI Corp., a Massachusetts based
developer of computer software.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended June 30, 1996
are not necessarily indicative of the results that may be expected for the year
ended March 31, 1997. For further information, refer to the financial statements
and footnotes therto included in the Company's annual report on Form 10-K for
the year ended March 31, 1996.
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.
2. Income (Loss) Per Share
Income (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. The effect on income (loss) per share of
stock options and warrants outstanding is antidulutive and has not been included
in the calculation of weighted average number of shares outstanding.
3. Investment in INSCI Corp.
The Company reports INSCI's results from operations on the equity method of
accounting.
The financial statements as of June 30, 1995 (unaudited) 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.
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996
INVESTMENT IN INSCI CORP.
At June 30, 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 June 30,
1996 and 1995 and the results of operations for the three months ended June 30,
1996 and 1995 are set forth below:(000's)
June 30, 1996 June 30, 1995
------------- -------------
Net sales $ 2,936 $ 841
Net income (loss) 66 (1,687)
Current assets 2,494 1,725
Other assets 2,392 1,981
------- -------
Total assets $ 4,886 $ 3,706
======= =======
Current liabilities 2,136 2,007
Long term debt 44 16
8% redeemable preferred stock -- --
Stockholders' equity 2,706 1,683
------- -------
$ 4,886 $ 3,706
======= =======
Total Liabilities and
Stockholders' Equity
As of June 30, 1995 and for the three months then ended, the Company had a
majority ownership interest in INSCI, and thereby reported their results on a
consolidated basis. Presentation of the June 1995 financial statements have been
restated to give effect to accounting for INSCI on the equity method. The market
value of INSCI stock as of June 30, 1996 is approximately $9,400,000.
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996
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.
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.
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996
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 employee's deferred compensation. Employee
contributions are limited to 15% 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.
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. 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.
<PAGE>
Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996
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 position
that CRG has not performed under its agreement with the Company.
SUBSEQUENT EVENT
On July 11 and July 22, 1996, Infinity Investors notified the Company of
its election to convert the remaining $825,150 in outstanding convertible
debentures issued to Infinity into an aggregate of 803,886 shares of the
Company's Class A common stock. The conversion increases the company's equity by
$825,150 which enables the Company to be in compliance with the capital
requirements of NASDAQ.
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
PRO-FORMA BALANCE SHEET
June 30, 1996 June 30, 1996
As Reported Pro-forma Pro-forma
----------- --------- ---------
Assets $ 6,258,543 $ 6,258,543
============ ============
Current liabilities 2,876,053 2,876,053
Long term liabilities 2,598,380 (825,150) 1,773,230
Stockholders equity
Preferred stock 2,295,330 2,295,330
Class A common shares 192,797 33,006 225,803
Additional paid in capital 29,880,392 792,144 30,672,536
------------ ------------
Accumulated deficit (31,584,409) (31,584,409)
------------ ------------
Total shareholders equity 784,110 825,150 1,609,260
------------ ------------ ------------
$ 6,258,543 $ -- $ 6,258,543
============ ============ ============
<PAGE>
Information Management Technologies Corporation
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Comparison of Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship that certain items in the Company's consolidated results of
operations bear to sales:
Three Months Ended
June 30,
------------------
1996 1995
---- ----
Sales 100% 100%
Cost of sales 67 70
---- ----
Gross profit 33 30
Selling, general and
administrative expenses 26 31
Operating income (loss) 7 (1)
Interest expense, net 4 4
---- ----
Income (loss) from continuing operations before equity in net 3 (5)
income (loss) of INSCI
Equity in net income (loss) of INSCI Corp. -- (48)
---- ----
Income (loss) from continuing operation 3 (53)
Income (loss) from discontinued operation -- 1
---- ----
Net income (loss) 3% (54)%
==== ====
Three Months Ended June 30, 1996 as compared to the Three Months Ended June 30,
1995:
For the three months ended June 30, 1996, the Company reported sales of
$2,606,000 a decrease of $834,000 or 24% from sales of $3,440,000 for the three
months ended June 30, 1995.
The decrease in sales is primarily attributable to the Company's decision
not to renew certain facility management agreements as they come due because
competitive pricing has reduced operating margins below the Company's required
minimum operating margins. As of June 30, 1996, there were six (6) facility
management agreements in effect compared to nine (9) facility management
agreements for the period ended June 30, 1995. Sales from facility management
agreements were $302,000 or 12% of sales for the period ended June 30, 1996, a
decrease of $640,000 or 68% from sales of $942,000 or 27% of sales for the
period ended June 30, 1995.
Sales in the Company's Regional Service Center ("RSC") division were
$2,008,000 or 77% of sales as of June 30, 1996, a decrease of $101,000 or 5%
from sales of $2,109,000 or 61% of sales for the period ended June 30, 1995.
Sales in the Company's litigation duplication division were $296,000 or 11% a
decrease of $93,000 or 24% from sales of $389,000 or 11% for the three months
ended June 30, 1995.
<PAGE>
Information Management Technologies Corporation
Cost of sales for the three months ended June 30, 1996, were $1,755,000 or
67% of sales compared to $2,423,000 or 70% of sales for the three months ended
June 30, 1995, a decrease of $668,000 or 28%. The decrease is attributable to
overall decreased staffing related to the expiration of several facility
management agreements of $312,000 as well as a decrease of the cost of materials
and supplies of $328,000.
Selling, general and administrative expenses for the three months ended
June 30, 1996, were $678,000 or 26% a decrease of $361,00 or 35% from $1,039,000
or 31% as the Company continued to reduce its operating overhead.
Interest expense for the three months ended June 30, 1996 was $98,000 or 4%
compared to $142,000 or 4% a decrease of $44,000 or 31% as the Company realized
savings from the early termination of its revolving credit facility during the
first quarter of fiscal 1997.
<PAGE>
Information Management Technologies Corporation
Liquidity and Capital Resources
The Company's cash flows are summarized below for the periods indicated:
Three Months
Ended June 30,
------------------------------
1996 1995
----------- -----------
Operating Activities $(1,151,000) $ (113,000)
Investing Activities $ (71,000) $ 854,000
Financing Activities $ (789,000) $ (741,000)
----------- -----------
Increase (decrease) in Cash $(2,011,000) $ 0
=========== ===========
During the first quarter ended June 30, 1996 cash used in operating
activities amounted to $1,151,000 and is attributable to:
A decrease in accounts payable and other accrued liabilities of
$1,047,000 and a net increase in accounts receivable of $104,000 and
inventory supplies of $145,000 partially offset by a decrease in cost
of sales and selling, general and administrative expenses.
Cash used in investing activities amounted to $71,000 primarily
attributable to the purchase of capital expenditures as the Company
continues to address its operating constraints as it continues to grow
its core research report printing business.
Cash used in financing activities amounted to $789,000 and is
principally attributable to the Company's repayment of the outstanding
balances of its revolving credit facility and term loans with BNY
Financial Corp.
As of June 30, 1996 the Company had a working capital deficiency of $38,000
compared to a working capital deficiency of $407,000 at June 30, 1995.
Inflation
The Company has not experienced significant increases due to inflation in
either the cost of merchandise or the 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.
<PAGE>
Information Management Technologies Corporation
PART II. OTHER INFORMATION
Item 1. 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 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 a 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.
<PAGE>
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. No exhibits are being filed with this report.
(b) Reports on Form 8-K.
(1) A report on Form 8-K dated April 11, 1996 reporting the
early termination of the Company's revolving credit
facility with BNY Financial was filed with the Commission.
(2) A report on Form 8-K dated April 25, 1996 was filed
announcing the appointment of new officers.
(3) A report on Form 8-K was filed by the Company dated on May
15, 1996 reporting the conversion by Infinity Investors of
a portion of the Company's 6% Convertible Debentures.
(4) A report on Form 8-K/A was filed by the Company dated July
25, 1996 updating the original conversion of the Company's
6% Convertible Debentures by Infinity Investors.
<PAGE>
Information Management Technologies Corporation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFORMATION MANAGEMENT
TECHNOLOGIES CORPORATION
By:
------------------------------------
Joseph A. Gitto
President and Chief Financial Officer
Dated August _______, 1996
