<PAGE>
As filed with the Securities and Exchange
Commission on December 22, 1997 Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FROM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
Information Management Technologies Corporation
(Exact name of registrant as specified in its charter)
Delaware 58-1722085
(State of Incorporation) (I.R.S. Employer I.D. Number)
130 Cedar Street, 4th Fl.
New York, NY 10005
(212) 306-6100
(Address, including zip code, and telephone number, including area code,
of Registrant's Principal Executive Office)
----------------------
Joseph A. Baratta, Esq.
Baratta & Goldstein
597 Fifth Avenue
New York, NY 10017
(212) 750-9700
(Address, including zip code, and telephone number, including area code,
of agent for service)
----------------------
Approximate date of commencement of proposed sale of the securities to
the public: From time to time after the effective date of this
Registration Statement
----------------------
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of each class of securites to Amount to be offering price per aggregate offering Amount of
be registered registered(1) share(2) price registration fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock 2,459,535 $0.9875 $2,428,790.81 $716.49
Par value $.04 per share
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Common Stock 100,000 $1.12 $112,000.00 $33.04
Par value $.04 per share
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Common Stock 351,686 $1.50 $527,529.00 $155.62
Par value $.04 per share
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Common Stock 3,287,535 $1.75 $5,735,186.25 $1,691.88
Par value $.04 per share
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Common Stock 3,537,535 $2.50 $8,843,837.50 $2,608.93
Par value $.04 per share
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 9,736,291 $5,205.96
--------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 146,765 shares of Class A Common Stock issued by the Company to
security holders; 3,287,535 shares of Class A Common Stock underlying Class A
Warrants; 3,287,535 shares Class A Common Stock underlying Class B Warrants;
983,344 shares of Class A Common Stock underlying options granted by the
Company; 1,192,537 shares of Class A Common Stock underlying Promissory
Notes; and 838,575 shares of Class A Common Stock underlying Warrants issued
by the Company.
(2) Estimated solely for the purpose of determining the registration fee.
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION
ACTING PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
<PAGE>
----------------------
Cross Reference Sheet
Pursuant to Rule 501
Caption and Location in
Form S-3 Prospectus or Registration
Item No. Information Called For By Item Statement
- -------- ------------------------------ ------------------------------
1 Forepart of the Registration Forepart of the Registration
Statement and Outside Front Statement and Outside Front
Cover Page of Prospectus...... Cover Page of Prospectus
2 Inside Front and Outside Back AVAILABLE INFORMATION;
Cover Pages of Prospectus.... DOCUMENTS INCORPORATED BY
REFERENCE; Outside Back Cover
Page of Prospectus
3 Summary Information, Risk RISK FACTORS, Page 6
Factors......................
4 Use of Proceeds.............. USE OF PROCEEDS, Page 12
5 Determination of Offering Outside Front Cover Page
Price........................ of Prospectus; DETERMINATION
OF OFFERING PRICE, Page 12
6 Dilution..................... Inapplicable
7 Selling Security Holders..... SELLING STOCKHOLDERS, Page 33
8 Plan of Distribution......... Outside Front Cover Page of
Prospectus; PLAN OF
DISTRIBUTION, Page 39
9 Description of Securities to
be Registered............... DESCRIPTION OF SECURITIES,
Page 40
10 Interests of Named Experts
and Counsel................. INTEREST OF NAMED EXPERTS;
Inapplicable
11 Material Changes............ Inapplicable
12 Incorporation of Certain
Information By Reference.... INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE,
Page 43
13 Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................. INDEMNIFICATION, Page 44
14 Other Expenses of
Issuance and Distribution... Other Expenses of Issuance
and Distribution, Page II-1
15 Indemnification of Directors
and Officers................ Indemnification of Directors
And Officers, Page II-1
16 Exhibits.................... Exhibits, Page II-2
17 Undertakings................ Undertakings, Page II-13
i
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under securities laws of any such State.
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1997
PROSPECTUS
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
9,736,291 SHARES OF CLASS A COMMON STOCK
This Prospectus relates to the subsequent resale or offer for sale by
Selling Stockholders (as hereinafter defined) of up to 9,736,291 shares (the
Shares) of Class A Common Stock, par value $.04 per share (Common Stock), of
Information Management Technologies Corporation (IMTECH or the Company), a
Delaware corporation including 146,765 shares of Class A Common Stock currently
owned by the Selling Stockholders, 838,575 shares of Class A Common Stock
issuable upon conversion of the Company's Warrants; 3,287,535 shares of Class A
Common Stock issuable upon the exercise of Class A Warrants, 3,287,535 shares of
Class A Common Stock issuable upon exercise of the Company's Class B Warrants;
983,344 shares of Class A Common Stock which may be issued upon the exercise of
Options granted by the Company; and 1,192,537 shares of Class A Common Stock
issuable upon conversion of Promissory Notes. The distribution of the Shares may
be effected in one or more transactions through one or more transactions through
one or more brokers or dealers, through privately negotiated transactions or
otherwise at market prices prevailing at the time of sale or at prices otherwise
negotiated.
Upon any sale of the Shares covered by this Prospectus, Selling Stockholders
and any participating brokers or dealers may be deemed to be underwriters as
that term is defined in the Securities Act of 1933, as amended (the Act), and
commissions or discounts or any profits realized on the sale of such Shares
received by Selling Stockholders and such brokers or dealers may be deemed to be
underwriting commissions or discounts within the meaning of the Act.
The Common Stock and Warrants of the Company are listed on the NASDAQSM
Small Cap Market under the symbols IMTKA for the Class A Common Stock and IMTKW
for the Class A Warrants. On December 10, 1997, the last sale price of the
Common Stock as reported by NASDAQSM was $1.1875 per share of Class A Common
Stock, on December 10, 1997 the last sale price of the Class A Warrants as
reported by NASDAQSM was $.09375 per Warrant.
The expenses of this offering will be paid by the Company.
FOR INFORMATION CONCERNING CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE RISK FACTORS BEGINNING ON PAGE 6.
---------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SUBSTANTIAL IMMEDIATE DILUTION UPON EXERCISE OF
OPTIONS AND WARRANTS. SEE "RISK FACTORS"
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Company will not receive any proceeds from the sale of Common Stock
under the Offering by Selling Stockholders. In the event a warrant or option
holder elects to exercise then in that event the Company will receive proceeds
from the exercise of the Warrants or option.
The date of this Prospectus is , 1997
1
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS,
INCLUDING INFORMATION UNDER RISK FACTORS. THE COMMON STOCK OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK.
OVERVIEW OF THE COMPANY
Information Management Technologies Corporation ("IMTECH" or the "Company")
provides information processing services and facilities management services such
as research report printing, imaging and distribution services, duplication,
litigation duplication, numbering and imaging services and complex binding and
finishing 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.
The Company's outsourcing services include traditional 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,
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 Regional Service Center ("RSC") in New York City.
Facilities management services include independent management of a clients
system for providing document duplication, distribution and word processing
services.
The Company maintains an 11% 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 RSC, 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. The fees established 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. Backup resources are maintained at IMTECH's RSC to handle
unusual work loads, or for disaster
2
<PAGE>
recovery purposes occurring at the facility management sites within the region.
During the year ended March 31, 1997, IMTECH realized revenues of
approximately $893,000 from facility management contracts. 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 as a result 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 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--production and distribution of reports by
research analysts at brokerage firms or securities department at banks.
- 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.
- OFFSET PRINTING--traditional printing, digital 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
3
<PAGE>
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 provides high volume duplication and
document related services to the corporate and legal communities. These services
are generally performed at the Company's RSC. Litigation duplication document
services include on and off line numbering in red and black. The on and off line
numbering system is a recently developed technology. Additional document related
services include accurate bar coding as well as binding, addressing, inserting
and mailings.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock being registered....... 9,736,291 shares of Class A Common Stock $.04
par value per share
Class A Common Stock outstanding and to be
outstanding after this registration
assuming all Warrants, options and
convertible securities are exercised...... 15,315,843 Shares of Class A Common Stock
$.04 par value per share
Class A Common Stock to be outstanding after
the registration assuming the exercise of
all options and warrants and the conversion
of all shares of Preferred Stock issued.... _______________
Use of Proceeds.............................. IMTECH will not receive any proceeds from the
sale of Class A Common Stock pursuant to the
offering unless options and warrants are
exercised. In that event, proceeds received
will be used for working capital, and general
corporate purposes as well as to partially
fund the Company's acquisition strategy.
NASDAQSM Small Cap Market Symbol............ IMTKA, Class A Common Stock; IMTKAW Class A
Warrants
</TABLE>
RISK FACTORS
See "Risk Factors" beginning on page 6 for a description of certain risks
relevant to an investment in the Class A Common Stock.
SUMMARY FINANCIAL DATA
The summary historical financial data presented below for each of the five
fiscal years ended March 31, have been derived from audited Financial
Statements. The summary historical data presented below for the six months ended
September 30, 1996 and September 30, 1997, were derived from Information
Management Technology Corporation's Unaudited Condensed Financial Statements
which contain all accruals and adjustments (consisting only of normal recurring
adjustments) which management considers necessary for a fair presentation of the
financial information for such periods. The results of operations for the six
months ended September 30, 1997, are not necessarily indicative of the operating
4
<PAGE>
results that may be expected of the full fiscal year. This financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations", the Financial Statements and Notes
thereto, the Unaudited Condensed Financial Statements and Notes thereto and the
other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Twelve Months Ended Six Months Ended
March 31, (Unaudited)
In thousands, except per share amounts
FISCAL FISCAL FISCAL FISCAL FISCAL SEPT. 30, SEPT. 30,
1993 1994 1995 1996 1997 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............................... $ 23,103* $ 27,507* $ 14,048 $ 11,806 $ 10,715 $ 5,423 $ 4,662
Gross Profit............................ $ 6,708* $ 8,747* $ 3,406 $ 2,748 $ 2,226 $ 1,182 $ 950
Net Income (loss)....................... $ (2,964)* $ (3,813)* $ (5,664) $ (5,579) $ 189 $ 1,324 $ (955)
Net Income (loss) Per Share............. $ (0.36)* $ (.41)* $ (2.05) $ (1.77) $ 0.04 $ 0.28 $ (0.17)
Total Assets............................ $ 10,979* $ 12,868* $ 11,362* $ 7,767 $ 8,430 $ 10,430 $ 7,824
Working Capital......................... $ 687* $ (2)* $ 391* $ (407) $ 217 $ 1,606 $ (577)
Long Term Debt.......................... $ 4,855* $ 4,502* $ 3,499* $ 2,793 $ 900 $ 659 $ 790
Preferred Stock......................... -- -- -- $ 2,027 $ 2,534 $ 2,295 $ 2,663
</TABLE>
- ------------------------
* Represents consolidated figures with former majority owned subsidiary INSCI
Corp.
5
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27(A) OF THE SECURITIES ACT AND SECTION 21(E) OF THE
SECURITIES & EXCHANGE ACT OF 1934 THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE", "BELIEVE",
"ESTIMATE", "EXPECT" AND SIMILAR EXPRESSIONS AS THEY RELATE TO THE COMPANY OR
ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE
COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY
FROM THE RESULTS EXPRESSED IN, OR IMPLIED BY, THESE FORWARD-LOOKING STATEMENTS.
MANY FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCES OR ACHIEVEMENTS OF THE
COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCES OR
ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS, INCLUDING, AMONG OTHERS, CHANGES IN GENERAL ECONOMIC AND BUSINESS
CONDITIONS, LOSS OF MARKET SHARE THROUGH COMPETITION, INTRODUCTION OF COMPETING
PRODUCTS AND SERVICES BY OTHER COMPANIES, PRESSURE ON PRICES FROM COMPETITION OR
FROM PURCHASERS OF THE COMPANY'S PRODUCTS AND SERVICES, LACK OF ACCEPTANCE OF
NEW PRODUCTS OR SERVICES BY THE COMPANY'S TARGETED CUSTOMERS, CHANGES IN
INDUSTRY CAPACITY, CHANGES IN BUSINESS STRATEGY, THE AVAILABILITY OF CAPITAL ON
ACCEPTABLE TERMS AND VARIOUS OTHER FACTORS BOTH REFERENCED AND NOT REFERENCED IN
THIS PROSPECTUS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE THOSE DISCUSSED BELOW.
1. LACK OF EARNINGS -- HISTORICAL LOSSES
The Company since inception has sustained accumulated losses and a deficit
in the sum of $33,351,524 through September 30, 1997, and has incurred a net
loss of $955,318 for the six months ended September 30, 1997 or ($.17) per
share. The history of losses sustained by the Company is such that there is no
assurance that the Company will be able to achieve a profit, or if the Company
operates at a profit at any time in the future, that it will be able to sustain
and maintain profitable operations.
2. FLUCTUATIONS IN OPERATING RESULTS
The Company's revenues and operating results are subject to significant
variations from quarter to quarter depending on a number of factors, including,
but not limited to: (i) the timing and number of client projects commenced and
completed during the quarter, (ii) the number of working days in the quarter and
(iii) employee hiring, attrition and utilization rates. Because a high
percentage of the Company's expenses, in particular personnel, equipment leases
and facilities costs, is relatively fixed, variations in revenues may cause
significant variations in operating results. Additionally, the Company
periodically incurs cost increases due to both the hiring of new employees and
strategic investments in its infrastructure in anticipation of future
opportunities for revenue growth. Quarterly results are likely to fluctuate,
which may cause a material adverse effect on the market price of the Class A
Common Stock. See "Management's Discussion and Analysis".
3. LEASEHOLD AT 130 CEDAR STREET
The Company's executive offices and RSC are located at 130 Cedar Street, New
York, NY, wherein the Company has entered into a lease and addendum to the lease
with A. J. Goldstein & Co., Inc. The lease expires on July 31, 2003. Pursuant to
the amended lease agreement, effective July 1, 1995, the Company's monthly
rental is approximately $45,000 through the remainder of the lease. The Company
has currently acknowledged that there is the sum of approximately $150,000 due
for back rent and adjustments to the landlord. Non-payment of rent may be
considered a violation of the Company's existing Lease for its premises and,
while the landlord has not instituted any legal action to enforce its rights for
payment under the Lease or declared a formal default in the lease, the Company
faces the potential and/or threat of legal action wherein, unless the Company
was able to make payment in full or resolve a satisfactory payment to the
landlord of all amounts due, the Company would be in danger of the loss of its
legal right to occupancy of its premises. The Landlord and the Company are
continuing to discuss a settlement of the Landlord's claim, and the Landlord
continues to accept rental payments from the Company.
6
<PAGE>
4. RECENTLY OBTAINED CREDIT LINE
In November 1997, IMTECH (the "Company") entered into a two year credit
arrangement with MTB Bank (the "Bank"). Under the credit arrangement, the
Company can borrow up to 80% of eligible accounts receivable and 35% of eligible
paper inventory (up to a maximum of $50,000), both of which in the aggregate
cannot exceed a total of $1,500,000 (including $250,000 in outstanding letters
of credit) at any one time. The outstanding advances under the arrangement will
bear interest at the banks prime rate plus two percent (2%). The credit line is
secured by a first lien on all of the Company's accounts receivable, machinery
and equipment and all of its tangible and intangible assets to secure the
payment of the indebtedness plus interest due to the Bank. The collateral
pledged to the Bank also includes 100,000 shares of Common Stock of INSCI Corp.
(the Company's former majority owned subsidiary) which is owned by the Company.
In the event of the Company's default in the payment of its obligation to the
Bank, the Bank has the right to exercise its security rights under the Uniform
Commercial Code to sell and liquidate the assets pledged to the Bank to satisfy
the Company's debt to the Bank. There is no assurance, that in the event of a
default, the collateral pledged to the Bank will be sufficient to satisfy the
debt to the Bank. As of December 15, 1997, the Company had utilized the sum of
approximately $535,000 of the credit line availability. Additionally, there can
be no assurance that the credit line will be sufficient for the Company's needs.
5. PLEDGE OF INSCI CORP. STOCK
In addition to the pledge of 100,000 shares as collateral for the Company's
credit line, the Company has further agreed to the pledge of the balance of the
shares it owns in INSCI which shares (approximately 400,000 shares) are subject
to a primary pledge to collateralize the remaining $800,000 of 12% Convertible
Secured Promissory Notes issued by the Company.
6. DEPENDENCE UPON KEY CUSTOMERS
The Company depends upon one (1) key customer which represents approximately
35% of the Company's annual sales, and the loss of this customer would cause a
substantial loss of sales volume, and in the event the Company is unable to find
new customers or increase its business, with its current customers, then in that
event, the Company could sustain substantial additional operating losses in its
business operations. If the Company was unable to raise additional working
capital or reduce operating costs, the Company could face a substantial loss
which would prevent the Company from continuing in its current business.
7. FUTURE NEED FOR ADDITIONAL INVESTMENT CAPITAL
The Company believes that it must expend substantial resources to expand its
efforts to acquire new equipment and upgrade existing equipment and facilities,
in order to achieve and maintain profitability. In order to accomplish these
objectives, the Company will be required to obtain additional investment
capital. The Company is presently unable to determine the amount or potential
source of such additional investment capital, but believes that such additional
capital will be necessary. There can be no assurance that the Company will be
able to raise additional funds on favorable terms or at all, or that such funds,
if raised, will be sufficient to permit the Company to conduct its operations as
currently contemplated. The Company cannot assure investors whether or not it
will be able to achieve and sustain positive cash flow from its operations.
Because of its continuing financial losses, and the other risk factors discussed
herein, the Company may be unable to generate a positive cash flow from
operations at any time in the near-term or long-term.
8. FACTORS AFFECTING OPERATING RESULTS.
The Company's operating results are affected by a wide variety of factors,
many of which are beyond its control. These factors include the Company's
ability to determine and introduce new services and products on a timely basis
which compete effectively on the basis of price and performance and which
7
<PAGE>
address customer requirements, market acceptance of the Company's products and
services, customer demand, the level of orders which are received and can be
performed in a quarter, product performance and reliability, technological
changes, competition and competitive pressures on price, and general economic
conditions affecting the purchase of services and products offered by the
Company.
9. INTENSE COMPETITION.
Several companies market products and services to compete directly with the
Company's products and services, and many other companies offer products and
services that may be considered by customers to be acceptable alternatives to
the Company's products and services. The Company expects that the developing
need for cost effective solutions for back-office services such as printing,
duplication, facilities management and other similar services, will attract new
competitors and alternative technological solutions that may be more
sophisticated and cost effective than the Company's products and services. Many
existing and potential competitors may have considerably greater financial,
technological, marketing and personnel resources than those available to the
Company. Competitive pressure or technological changes or advances may
materially and adversely affect the Company in the future.
10. "PENNY STOCK" RULES/ NEW NASDAQ LISTING REQUIREMENTS
If the Company fails to maintain NASDAQSM Small Cap Market listing for its
securities, and no other exclusion from the definition of a "penny stock" under
the Exchange Act is available, then any broker engaging in a transaction in the
Company's securities would be required to provide a customer with a risk
disclosure document and the compensation of the Broker-Dealer in the transaction
and monthly account statements showing the market values of the Company's
securities held in the customer's accounts. The bid and offer quotations and
compensation information must be provided prior to effecting the transaction and
must be contained on the customer's confirmation statement. If brokers become
subject to the "penny stock" rules when engaging in transactions in the
Company's securities, they would become less willing to engage in such
transactions, thereby making it more difficult for purchasers in this offering
to dispose of their shares. The NASDAQSM organization has adopted changes in
trading requirements and those changes are scheduled to be effective in March
1998 The new regulations will affect the Company's ability to maintain its
qualification for trading status of its Class A Common Stock. There is no
assurance that the Company will be able to comply with the new NASDAQ listing
requirements and that the Company will maintain Small Cap trading status. In the
event that the Company does not continue to qualify, then in that event, the
Company's Common Stock will be subject to a potential loss of liquidity in
trading as a result of being relegated to trading on the NASDAQSM Bulletin Board
Trading System which is governed by the Penny Stock Regulations.
11. CHANGE IN CONTROL PROVISIONS.
The Company's Bylaws and the Delaware General Corporation Law contain
provisions that may have the effect of making more difficult or delaying
attempts by others to obtain control of the Company, even when these attempts
may be in the interest of the Company's stockholders. The Delaware General
Corporation Law also imposes conditions on certain business combinations with
"interested stockholders" (as defined by Delaware law).
12. DIVIDENDS NOT LIKELY.
There can be no assurance that existing or proposed operations of the
Company will result in significant revenues or any level of profitability. Any
earnings that may be generated, of which no assurance can be given, will be used
in the foreseeable future to finance the growth of the Company's business. No
cash dividends have been declared or paid by the Company from its inception, and
the Company does not presently intend to declare or pay cash dividends for
common stock in the foreseeable future.
8
<PAGE>
13. COMPANY'S CURRENT DEFAULT IN REGISTERING SHARES AND UNDERLYING SHARES OF
COMMON STOCK
The Company under its Exchange Offering in 1995, provided holders of
Subordinated Convertible Debentures ("Debentures"), an opportunity to convert
their outstanding debentures into 12% Redeemable Convertible Preferred Stock
("12% Preferred Stock"). Of $2,301,000 outstanding Debentures, $2,146,000 were
converted into shares of 12% Preferred Stock. Of the 2,146,000 shares of 12%
Preferred Stock issued , none have been converted into the Company's Class A
Common Stock. As a part of the 1995 Exchange Offering, the Company agreed to use
its best efforts on or before the later of December 31, 1995 or sixty (60) days
from the date of issuance of the 12% Preferred Stock to file a registration
statement with the Securities and Exchange Commission for the underlying shares
of Class A Common Stock. The Company has failed to date to file a registration
statement for the underlying shares of Class A Common Stock under the Exchange
Offering, and as a result may be subject to a claim. The Company has requested
specific information from the 23 holders of its 12% Preferred Stock, which
information has not as yet been provided to the Company. Resultantly, the
underlying shares of Common Stock have not been included in this registration.
The Company upon obtaining all of the required information will be required to
file an amendment to the Registration Statement, or as an alternative may be
required to file a new Registration Statement for the underlying shares of Class
A Common Stock, based upon the five-day average trading price of the Class A
Common Stock of the Company.
The Company has also granted Registration Rights to the holders of 12%
Convertible Secured Promissory Notes, which rights were granted in February 1997
to holders, who have the right to exchange their Promissory Notes into shares of
the Company's Class A Common Stock at a 40 % discount to the five (5) day
closing price of the Class A Common Stock prior to the holders' exchange.
In that a number of additional shares will be required to be registered in
connection with the Company's exchange offerings, the issuance of the underlying
shares by the Company will cause a substantial dilution to existing
shareholders. The registration of these additional shares will result in
additional expenses to the Company.
14. FUTURE SALES OF COMMON STOCK AND REGISTRATION RIGHTS/ POTENTIAL SUBSTANTIAL
DILUTION.
Of the Company's Class A Common Stock currently issued and outstanding and
issuable upon the exercise of currently exercisable options and warrants,
substantially all of such shares will be eligible for public resale pursuant to
the within Registration Statement when declared effective. The Company is unable
to predict the effect that sales made of its Class A Common Stock included in
this Registration Statement may have on the prevailing market price of the
Company's Class A Common Stock. Additionally, any substantial sale of restricted
securities under Rule 144 may have an adverse effect on the market price of the
Company's Class A Common Stock.
15. REGISTRATION OF THE SECURITIES ISSUABLE UPON CONVERSION OF CONVERTIBLE
DEBENTURES AND EXERCISE OF OPTIONS AND WARRANTS.
As of December 15, 1997, the Company had 13,150,263 outstanding Class A
Warrants (with every four Class A Warrant representing the right to acquire, for
$1.75, one share of Class A Common Stock and four Class B Warrants; each four
(4) Class B Warrant representing the right to acquire one share of Class A
Common Stock for $2.50), outstanding debentures convertible into an aggregate
2,716,510 shares of Class A Common Stock, and other options and warrants to
purchase a total of 983,344 shares. During the terms of such conversion rights,
option and warrant holders thereof are given the opportunity to profit from a
rise in the market price of the Company's Class A Common Stock. The existence
and exercise of these options and warrants may adversely affect the terms on
which the Company can obtain additional equity financing. Moreover, the holders
of those securities are likely to exercise them at a time when the Company would
otherwise be able to obtain capital on terms more favorable than those provided
by their exercise prices. The expiration date for exercise of the Company's
Class A and Class B Warrants has been extended to April 1999, and may be
extended for an additional period depending on conditions that exist prior to
the expiration date.
9
<PAGE>
16. POSSIBLE RESTRICTIONS ON MARKET-MAKING ACTIVITIES IN THE COMPANY'S
SECURITIES.
D.H. Blair & Co., Inc. ("Blair"), the Company's principal market-maker,
together with certain other individuals and entities who are or might be deemed
to be affiliates of Blair, beneficially own significant amounts of the Company's
outstanding securities. If Blair and/or its affiliates at any time are deemed to
control the Company, regulatory positions and requirements of the Securities and
Exchange Commission (with which Blair is a registered broker/dealer) and the
NASD and the New York Stock Exchange, Inc. (both of which Blair is a member)
would prevent Blair from engaging in market-making activities relating to the
Company's securities (i.e., the purchase or sale of the Company's securities for
Blair's own account). Further, to the extent Blair solicits the exercise of the
Warrants, it will be prohibited from engaging in any market making activities
with regard to the Company's securities for up to nine business days prior to
such solicitation. This may adversely affect the ability of investors to sell
their securities during such periods. If Blair is unable to continue to make a
market in the Company's securities because it is deemed to have effective voting
control of the Company, or if Blair for any other reason chooses or is unable to
make a market in the Company's securities, there can be no assurance that other
broker-dealers would continue to make a market in the Company's securities, thus
making it difficult for holders of the Company's securities to sell their
securities in a secondary market. Of recent date, Blair has been the subject of
press reports that indicate that regulatory authorities are currently
investigating Blair and its employees for civil and/or criminal violations of
the Securities Law. In the event of any legal action with respect to Blair, it
may effect the trading of the Company's Common Stock.
17. ATTRACTION AND RETENTION OF KEY PERSONNEL.
The Company's future success will depend to a significant extent upon the
efforts and abilities of its senior management and technical personnel. The
competition for qualified technical and management personnel is intense. There
can be no assurance that the Company will be successful in retaining its
existing key personnel or in attracting and retaining additional key personnel
which it requires. The loss of the services of one or more of its key personnel
or the inability to hire additional key personnel could have a material adverse
effect on the Company.
18. RISKS RELATED TO POSSIBLE ACQUISITIONS
The Company expects to attempt to expand its operations through
acquisition of additional businesses. There can be no assurance that the
Company will be able to identify, acquire or profitably manage additional
businesses or successfully integrate acquired businesses into the Company
without substantial expenses, delays or other operational or financial
difficulty. Furthermore, acquisitions may involve a number of special risks,
including, but not limited to: (i) diversion of management's attention, (ii)
possible failure to retain key acquired personnel, (iii) unanticipated events
or circumstances, (iv) risks of entering markets in which the Company has no
or limited prior experience or (v) legal liabilities and amortization of
acquired intangible assets. Client satisfaction or performance problems at a
single acquired business could have a material adverse effect on the
reputation of the Company as a whole. In addition, there can be no assurance
that acquired businesses will achieve anticipated financial performance.
While the Company from time to time considers acquisition opportunities, it
has no existing agreements, understandings or commitments to effect any
material acquisition. The failure of the Company to manage its acquisition
strategy successfully could have a material adverse effect on the Company's
business, operating results and financial condition.
19. LACK OF A SUFFICIENT NUMBER OF INDEPENDENT DIRECTORS
As of the date hereof, two of the three members of the Company's Board of
Directors are executive officers; employees of the Company. Although the Company
intends to appoint at least two independent directors to the Board currently,
the Company's Board does not have a majority of independent directors. In the
absence of a majority of independent directors, the Company's executive officers
could establish policies and enter into transactions without independent review
and approval thereof. In addition, while the Company has established audit and
compensation committees, the audit and compensation policies may not be approved
without independent review. These and other transactions
10
<PAGE>
could present the potential for a conflict of interest between the Company
and its stockholders, and the controlling officers or directors. See
"Management."
20. POTENTIAL CLAIM FOR SHARES OF COMPANY STOCK AND EXERCISE OF OPTIONS BY
CORPORATE RELATIONS GROUP, INC.
In November 1995, the Company entered into a three year service agreement
with Corporate Relations Group, Inc. ("CRG"), whereby CRG was to provide the
Company with promotional and brokerage communication services. As consideration
for their services, the Company was to pay CRG the sum of $300,000 or 171,000
shares of the Company's free trading Class A Common Stock plus 500,000 options
to purchase 500,000 shares of Class A Common Stock at exercise prices ranging
from $1.75 to $3.06 per share for a period of five years. The Company elected to
pay CRG by issuing 171,000 share of Class A Common Stock. Initially, the Company
arranged for delivery to CRG of 92,250 shares of freely traded Class A Common
Stock of the Company transferred to CRG from a number of shareholders. The
Company further agreed to grant cost free registration rights to each
shareholder who transferred freely traded shares as a result of the transaction.
The balance of the 78,750 shares were not issued to CRG. CRG asserted a claim
for the balance of the shares. The Company has disputed the claim based upon the
position that CRG did not perform under the provisions of the service contract.
While the Company has disputed the CRG claim, in the event that CRG were deemed
to be entitled to exercise the 500,000 outstanding stock options, there may be
additional dilution sustained by stockholders.
21. DEPENDENCE UPON THE COMPANY'S CHAIRMAN AND CHIEF EXECUTIVE OFFICER AND
PRESIDENT
The Company depends upon the services of Matti Kon, its Chairman and Chief
Executive Officer, and Joseph Gitto its and President and Chief Financial
Officer. In the event that Messrs. Kon and Gitto are no longer employed by the
Company, the Company may be unable to find a suitable replacements. The
Company's business operations and management may be effected by their loss and
the Company may not have adequate resources to locate and have new executive
management for the Company.
11
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds upon filing of this registration.
In the event any option or warrant holder elects to exercise, then in that event
the Company will receive proceeds. In the event proceeds are received, they will
be used for working capital, and general corporate purposes or to partially fund
its acquisition strategy.
IMTECH has agreed to pay certain fees and expenses related to this offering
and to provide to selling stockholders a cost free registration for shares owned
by Selling Stockholders and for the shares underlying preferred stock, options,
notes and warrants.
DETERMINATION OF OFFERING PRICE
The offering price is to be determined by the market price for the Company's
Class A Common Stock as traded on the NASDAQSM Small Cap Market.
DIVIDEND POLICY
IMTECH has never declared or paid any cash dividends on its Common Stock and
does not expect to pay cash dividends on its Common Stock in the foreseeable
future. The Company under certain circumstances may be required to pay cash
dividends on its Preferred Stock. See Dividends and Description of Securities -
Preferred Stock.
DIVIDENDS
COMMON STOCK
No dividends have been declared or paid by the Company since its inception.
IMTECH intends to retain all earnings when realized to finance future growth and
therefore does not anticipate paying any cash dividends on its Common Stock for
the foreseeable future.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of September 30, 1997. This table should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER
30, 1997
--------------
<S> <C>
STOCKHOLDERS' EQUITY
12% Preferred Stock authorized 3,000,000 shares at $1.00 par value, 2,662,860 shares issued and
outstanding....................................................................................... $ 2,662,860
Class A Common Stock authorized 100,000,000 shares at $.04 par value, 5,579,552 shares issued and
outstanding....................................................................................... 223,182
Additional paid in capital........................................................................ 31,972,922
Unrealized Gain from investment in securities available for sale.................................. 1,078,408
Accumulated deficit............................................................................... $ (33,351,524)
--------------
Total capitalization.............................................................................. $ 2,585,848
--------------
--------------
</TABLE>
12
<PAGE>
DILUTION
Dilution is not applicable.
SELECTED FINANCIAL DATA
The following Selected Financial Data should be read in conjunction with
the Financial Statements and the Notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operation included
elsewhere in this Prospectus. The Selected Financial Data presented below
under Statement of Operations Data and Balance Sheet Data as of and for each
of the fiscal years ended March 31, 1997, 1996, and 1995 are derived from the
Financial Statements of Information Management Technologies Corporation.,
which have been audited by Mahoney Cohen & Company., CPA, P.C., independent
certified public accountant. The Financial Data as of and for the fiscal
years ended March 31, 1994 and 1993, is derived from, and is qualified by
reference to, Financial Statements audited by Grant Thornton independent
certified public accountant. The information set forth below should be read
in conjunction with such Financial Statements and Notes thereto. The Selected
Financial Data presented below for the six months ended September 30, 1997
and 1996, are derived from the unaudited Financial Statements of the Company.
The unaudited Financial Statements have been prepared on the same basis as
the audited Financial Statements and, in the opinion of management, contain
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the Company's financial position and its results
of operations for such periods. The Financial Data for the fiscal years ended
March 31, 1994 and 1993 include the consolidated amounts of the Company's
former majority owned subsidiary, INSCI Corp.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
TWELVE MONTHS ENDED (UNAUDITED)
MARCH 31, ------------------------
----------------------------------------------------- SEPT. 30, SEPT. 30,
1993 1994 1995 1996 1997 1996 1997
--------- --------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
OPERATING DATA:
Sales..................................... 23,103* 27,507* 14,048 11,806 10,715 5,423 4,662
Cost of sales............................. 15,498* 18,760* 10,642 9,058 8,489 4,241 3,712
Write down of software development
costs................................... 897* -- -- -- -- -- --
Selling, general and administrative
costs................................... 8,725* 11,140* 3,876 4,104 2,938 1,578 1,303
Write-off of registration costs........... -- 330* -- -- -- -- --
Termination of facility contract.......... -- -- -- 75 -- -- --
Lease agreement buyout.................... -- -- -- 377 -- -- --
Write-down of property and equipment...... -- -- 750 -- -- -- --
Relocation expenses....................... -- -- -- -- -- -- --
Other (income) costs...................... (48)* -- -- -- 550 -- --
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
TWELVE MONTHS ENDED (UNAUDITED)
MARCH 31, ------------------------
---------------------------------------------------------- SEPT. 30, SEPT. 30,
1993 1994 1995 1996 1997 1996 1997
----------- ------------ --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss)............. (1,969)* (2,723)* (1,220) (1,808) (1,262) (396) (353)
Interest expense, net............... 995* 1,089* 484 560 392 201 217
(Gain) Loss from sale of INSCI Corp.
stock............................... -- -- -- 73 (2,089) (2,079) (59)
Interest amortization of beneficial
conversion feature attached to
convertible debt.................... -- -- -- 900 88 -- 444
Equity in Net loss of INSCI Corp.... -- -- 2,187 1,452 158 158 --
Credit facility buyout.............. -- -- -- 395 -- -- --
Minority interest................... -- -- -- -- -- -- --
Income (loss) from continuing
operations.......................... (2,964)* (3,812)* (3,891) (5,188) 189 1,324 (955)
Loss from discontinued operations... -- -- (1,773) (391) -- -- --
Net Income (loss)................... (2,964)* (3,812)* (5,664) (5,579) 189 1,324 (955)
Net Income (loss) per common
share............................... (0.36)* (1.91)* (2.05) (1.77) 0.04 0.28 (0.17)
Weighted average common shares
outstanding......................... 8,233* 2,400* 2,762 3,140 5,129 4,711 5,580
BALANCE SHEET DATA:
Working capital (deficiencies)...... 687* (2)* 391* (407) 217 1,606 (577)
Total assets........................ 10,979* 12,868* 11,362* 7,767 8,430 10,430 7,824
Long-term debt...................... 4,855* 4,502* 3,499* 2,793 900 659 790
Stockholders' equity (deficit)...... (2,544)* 441* 1,169* (858) 3,664 5,986 2,586
</TABLE>
- ------------------------
* Represents consolidated figures of the Company's former majority owned
subsidiary INSCI Corp.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
COMPARISON OF RESULTS OF OPERATIONS
The following schedule sets forth the percentage relationship of significant
items of the Company's results of operations to revenues for the six months
ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED SEPTEMBER 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues.......................................................................................... 100% 100%
Cost of sales..................................................................................... 80 78
------- ------
Gross profit...................................................................................... 20 22
Operating expenses:
Selling, general and administrative............................................................. 28 29
------- ------
Loss from operations.............................................................................. (8) (7)
Other (income) expenses:
Interest expense, net........................................................................... 5 4
Interest on beneficial conversion of
12% convertible secured notes................................................................ 9 --
Gain from sale of INSCI Corp. stock............................................................. (1) (38)
Equity in net loss of INSCI Corp................................................................ -- 3
------- ------
Net other (income) expense........................................................................ 13 (31)
------- -------
Net income (loss)................................................................................. (21%) 24%
------- -------
------- -------
</TABLE>
SIX MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO THE SIX MONTHS ENDED
SEPTEMBER 30, 1996
During the six months ended September 30, 1997 the Company generated
total revenues of approximately $4,662,000 which reflects a decrease of
$761,000 (or 14%) as compared to revenues of approximately $5,423,000 which
were reported for the six months ended September 30, 1996.
Revenues from the Company's RSC division totaled approximately $4,078,000
(87% of total revenues for the six months ended September 30, 1997); a
decrease of approximately $368,000 (or 8%) when compared to revenues of
approximately $4,446,000 (82% of total revenues) that were generated during
the six months ended September 30, 1996. The decrease in RSC revenues is
primarily attributable to the Company's decision to exit certain unprofitable
lines of business, which in total, accounted for approximately $306,000 of
the decrease. In addition, the Company experienced a slower than usual summer
period, as well as, the loss of one of it's larger clients. The decreases
were partially offset by the addition of 11 new clients to the Company's core
research report printing business during the six months
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (CONTINUED)
ended September 30, 1997. Revenues generated from the Company's Facility
Management division amounted to approximately $422,000 (9% of total revenues)
for the six months ended September 30,1997; a decrease of $73,000 (or 15%)
from revenues of approximately $495,000 (9% of total revenues) reported for
the six months ended September 30, 1996. The decrease is a result of the
Company's decision not to renew certain facility management agreements which
did not meet the Company's minimum profit margin requirements. The Company's
Litigation Duplication division reported revenues of approximately $163,000
(3% of 1997 revenues), which decreased approximately $319,000 from revenues
of approximately $482,000 reported in the prior year's period.
Cost of sales for the six months ended September 30, 1997 amounted to
approximately $3,712,000 (80% of revenues at September 30, 1997); a decrease
of $529,000 (or 12%) from cost of sales of approximately $4,241,000 (78% of
revenues) reported in the prior year's period. The decrease is a direct
result of decreased volumes experienced in the quarter ended September 30,
1997.
Selling, general and administrative ("SG&A") expenses totaled
approximately $1,303,000 (28% of revenues) for the six months ended September
30, 1997; a decrease of approximately $276,000 (or 17%) from SG&A expenses of
approximately $1,579,000 (29% of revenues) reported for the six months ended
September 30, 1996. The decrease comes as a result of a reduction in support
personnel and related costs as the company continues to achieve certain
economies from new technologies.
Net interest expense for the six months ended September 30, 1997 amounted
to approximately $218,000 (5% of 1997 revenues) as compared to interest
expense of approximately $201,000 (4% of revenues) charged to the six month
period ended September 30,1996; an total increase of $17,000 (or 8%).
As a result of complying with the Securities and Exchange Commissions
("SEC") position of accounting for the beneficial conversion feature of debt
instruments announced in March of 1997, the Company recorded an additional
interest charge of approximately, $444,000 (10% of revenues) for the six
months ended September 30, 1997. The additional interest charge, as it
relates only to the compliance of the SEC's position, and has no bearing on
the operations of the Company, represents the amortization of the conversion
feature attached to the 12% convertible secured promissory notes outstanding
at September 30, 1997. The interest is calculated as the difference between
the conversion price and the fair value of the common stock into which the
notes are convertible.
During the six months ended September 30, 1997 the company exchanged
shares of stock in INSCI Corp. , its former majority-owned subsidiary, for
repayment of certain debt. As a result of the transaction, the Company
recognized a gain of approximately $59,000 (1% of revenues) from the
exchange. During the six month period ended September 30, 1996, the Company
recognized a gain of approximately $2,079,000 (which represented 38% of
September 1996 revenues) from the sale of 600,000 shares in INSCI Corp.
common stock.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The schedule below sets forth the Company's cash flow activities for the
six months ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1996
----------- -------------
<S> <C> <C>
Operating activities.................................................................. $ 84,000 $ (1,415,000)
Investing activities.................................................................. (295,000) 2,269,000
Financing activities.................................................................. (292,000) (1,200,000)
---------- -----------
Decrease in cash and cash equivalents................................................. $ (503,000) $ (346,000)
---------- -----------
---------- -----------
</TABLE>
During the quarter ended September 30, 1997, net cash generated from
operating activities amounted to approximately $84,000, which was the result
of an increase in accounts payable, offset in part by an increase in accounts
receivable and prepaid expenses.
Net cash used for investing activities amounted to approximately $295,000
as a result of cash outlays for capital expenditures of approximately
$390,000. The cash outlays were offset by proceeds generated from the sale of
INSCI Corp. stock (approximately $68,000) and proceeds from the repayments of
certain related party loans (which amounted to approximately $27,000).
Net cash used in financing activities amounted to approximately $292,000.
The net cash outlay was primarily attributable to the repayments of long-term
debt and capital lease obligations (approximately $343,000 and $164,000,
respectively). The cash outlays were offset in part by proceeds generated
from the issuance of debt (approximately $90,000) and the receipt of loan
(approximately $125,000) by the Company from one of its Board members.
At of September 30, 1997, the Company had a working capital deficiency of
approximately $577,000 as compared to a working capital surplus of
approximately $1,606,000 at September 30, 1996.
In November 1997, the Company entered into a two year credit arrangement
with MTB Bank (the "Bank"). Under the credit arrangement, the IMTECH can
borrow up to 80% of eligible accounts receivable and 35% of eligible paper
inventory (up to a maximum of $50,000), both of which in the aggregate cannot
exceed a total of $1,500,000 (including $250,000 in outstanding letters of
credit) at any one time. The credit facility provides a key source of working
capital to the Company.
17
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS
The following schedule sets forth the percentage relationship of
significant items of the Company's results of operations to revenues for the
fiscal years ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------
1997 1996 1995
----- ----- ------
<S> <C> <C> <C>
Revenues........................................................ 100% 100% 100%
Cost of sales................................................... 79 77 76
---------- ---------- --------
Gross profit.................................................... 21 23 24
Operating expenses:
Selling, general and administrative........................... 28 34 28
Termination of facility contract.............................. -- 1 --
Lease agreement buyout........................................ -- 3 --
Write-down of property and equipment.......................... -- -- 5
Other costs................................................... 5 -- --
---------- ---------- --------
Loss from operations............................................ (12) (15) (9)
Other (income) expenses:
Interest expense, net......................................... 4 5 3
(Gain) loss from sale of INSCI stock.......................... (19) 1 --
Interest on beneficial conversion of 12% Secured notes........ 1 8 --
Equity in net loss of INSCI Corp.............................. 1 12 16
Credit facility buyout........................................ -- 3 --
--------- ---------- ---------
Income (loss) from continuing operations........................ 1 (44) (28)
Loss from discontinued operations............................... -- (3) (13)
---------- ---------- ----------
Net income (loss)............................................... 1% (47)% (41)%
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
18
<PAGE>
FISCAL YEAR 1997 AS COMPARED TO FISCAL YEAR 1996
During the fiscal year ended March 31, 1997, the Company reported
revenues of approximately $10,715,000, a decrease of $1,091,000 from revenues
of $11,806,000 reported during the fiscal year ended March 31, 1996.
The decrease in revenues is primarily attributable to management's
decision not to renew certain Facility Management contracts as they became
due. Competitive pricing of the contracts reduced operating margins below
management's expectations. At of March 31, 1997, there were five Facility
Management contracts in effect as compared to seven in effect at March 31,
1996. Revenues from Facility Management contracts amounted to approximately
$893,000 (or 8% of total revenues) for the fiscal year ended March 31, 1997;
a decrease of approximately $2,319,000, or 72%, from revenues of Facility
Management contracts of approximately $3,212,000 (27% of total 1996 revenues)
generated for the fiscal year ended March 31, 1996. The Company executed a
contract renewal with its largest Facility client for an additional one year
period, and is in the process of pursuing other Facility Management
arrangements with terms more favorable to the Company. The decrease in total
revenues from 1996 to 1997 is also attributable in part to a decrease in the
revenues generated by the Company's Litigation Duplication division, which
decreased approximately $376,000, or 33%, to revenues of $775,000 (7% of
total revenues), as compared to revenues of $1,151,000 (10% of total 1996
revenues) reported for the fiscal year ended March 31, 1996.
Revenues from the Company's Regional Service Center ("RSC") operations
increased $1,596,000, or 21%, to approximately $9,038,000 (84% of total
revenues) for the fiscal year ended March 31, 1997; compared to revenues of
$7,442,000 (63% of total 1996 revenues) reported for the fiscal year ended
March 31, 1996. The Company deployed the majority of its financial and human
resources towards expanding the Company's market share in its core research
printing market, the main product of the RSC division.
Cost of sales decreased by $569,000, or 6%, to approximately $8,489,000,
(or 79% of total revenues) for the fiscal year ended March 31, 1997, as
compared to cost of sales of approximately $9,058,000 (or 77% of total
revenues) reported for the fiscal year ended March 31, 1996. The decrease is
attributable to a reduction in personnel costs, equipment leases and various
other production expenses.
Selling, general and administrative costs ("SG&A") for the year ended
March 31, 1997 amounted to approximately $2,938,000 (or 28% of total
revenues), a decrease of approximately $1,167,000, or 28%, from SG&A of
$4,105,000 (34% of total 1996 revenues) reported during fiscal year ended
March 31, 1996. The cost reductions are primarily attributable to a decrease
in overhead, (specifically, personnel costs), and service charges related to
the Company's terminated revolving credit facility, as well as decreases in
consulting fees and other professional costs.
During the fiscal year ended March 31, 1997, the Company recorded a charge of
$550,000 to account for costs incurred in connection with management's plan
to restructure its work force and re-deploy various operating assets which it
believes will enable the Company to become more competitive and efficient.
Net interest expense for the year ended March 31, 1997 was approximately
$392,000 (or 4% of total revenues), a decrease of approximately $168,000, or
30%, from interest expense of approximately $560,000 (which represented 5% of
total 1996 revenues) reported for the year ended March 31, 1996. In
accordance with the Securities and Exchange Commission's ("SEC") position,
announced in March 1997, of accounting for the beneficial conversion feature
of debt instruments, the Company recorded an additional interest charge of
approximately $89,000. The statement of operations for the year ended March
31, 1996 has been adjusted to reflect the retroactive application of the
SEC's position, and therefore, a charge of $900,000 of additional interest
was included in operations for the year then ended.
The additional interest charge represents the amortization of the conversion
feature which is calculated as the difference between the conversion price
and the fair value of the common stock into which the debt instruments are
convertible.
19
<PAGE>
During the fiscal year ended March 31, 1997, the Company realized a net
gain of approximately $2,089,000 from the sale of INSCI Corp. stock, its
former majority-owned subsidiary as compared to a loss of $73,500 reported in
1996. As of March 31, 1997, the Company held a 16% ownership interest in
INSCI Corp.
FISCAL YEAR 1996 AS COMPARED TO FISCAL YEAR 1995
During the fiscal year ended March 31, 1996, the Company reported
revenues of approximately $11,806,000, a decrease of approximately
$2,242,000, or 16%, from revenues of $14,048,000 generated during fiscal year
ended March 31, 1995.
The decrease in total revenues was primarily attributable to a reduction
of revenues from the Company's RSC operations of approximately $1,892,000 (a
20% decrease), to revenues of $7,443,000 in fiscal year ended March 31, 1996,
as compared to revenues of $9,335,000 reported for the fiscal year ended
March 31, 1995. During the fiscal year ended March 31, 1995, the Company lost
its largest client (Kidder Peabody & Co., Inc.) as a result of a merger. The
decrease in revenues from the RSC operations was a direct result of losing
the client. The Company did however replace 75% of the revenues lost during
the fiscal year ended March 31, 1996. Also attributable to the decline in
total revenues from 1995 to 1996, was the decrease in revenues from the
Company's Facility Management operations, of approximately $854,000, or 21%,
to revenues of $3,212,000 for the fiscal year ended March 31, 1996, as
compared to revenues of $4,066,000 reported during fiscal year ended March
31, 1995. At March 31, 1996, there were seven Facilities contracts in effect
as compared to twelve in 1995. The Company elected not to renew certain
contracts as they became due because of competitive pricing. In addition, the
operating margins of the facility arrangements which expired did not meet
management's expectations. During the fourth quarter of fiscal year ended
March 31, 1996, the Company was not successful in renewing a Facility
contract with American Express ("AMEX"), which accounted for approximately
$1.8 million of revenue. Revenues generated from the Company's Litigation
Duplication operations increased by approximately $504,000, or 78%, to
$1,151,000 in fiscal year ended March 31, 1996, as compared to revenues of
$647,000 reported for the year ended March 31, 1995.
Cost of sales for the Company during the fiscal year ended March 31, 1996
was approximately $9,058,000 (77% of total revenues), a decrease of
$1,584,000 from cost of sales of $10,642,000 (76% of total 1995 revenues)
reported in fiscal year ended March 31, 1995. The decrease was primarily
attributable to reductions in direct material costs of approximately $97,000,
production salaries of $626,000 and equipment maintenance costs of $225,000,
reflective of the decline in volume that resulted from the loss in business.
Selling, general and administrative costs ("SG&A") for the year ended
March 31, 1996 were approximately $4,105,000 (or 35% of total 1996 revenues),
an increase of approximately $229,000, or 6%, from SG&A of $3,876,000, or
28%, reported during the fiscal year ended March 31, 1995. Although there was
a reduction in administrative personnel, any savings realized in SG&A for the
fiscal year ended March 31, 1996 were offset by costs incurred by the Company
to improve the technology employed to service clients more efficiently.
Included in SG&A for the fiscal year ended March 31, 1995 was a charge of
$50,000 which related to the settlement of litigation with Marine Midland.
During the fiscal year ended March 31, 1996, the Company incurred net
interest expense of approximately $560,000, as compared to $484,000 reported
for 1995. The increase was due largely to additional borrowings by the
Company under its revolving credit facility during the year ended March 31,
1996. In addition, the increase was due in part to interest charges paid to
vendors from trade payable financing. The statement of operations for the
year ended March 31, 1996 was adjusted to reflect the retroactive application
of the SEC's position regarding the accounting for the beneficial conversion
feature related to convertible debt, and therefore, a charge of $900,000 of
additional interest was included in operations for the year then ended.
Other income and/or charges reported during the fiscal years ended March
31, 1996 and 1995 are summarized as follows:
20
<PAGE>
- During fiscal year 1996, the Company negotiated with its landlord to
return approximately 20,000 square feet of previously occupied space. In
that connection, the Company recorded a charge of approximately $377,000
which represented a buyout fee against the lease agreement for the space
returned.
- During fiscal year 1996, the Company sold 350,000 shares of restricted
INSCI Corp. (its former majority-owned subsidiary) common stock and
received net proceeds of $331,129. The transaction resulted in a loss
charged to continuing operations of $73,500.
- During March 1996, the Company terminated its credit facility arrangement
with BNY Financial, and as a result incurred a charge of approximately
$395,000 as an early termination fee.
- During fiscal year 1996, the Company recorded a charge of approximately
$391,000 (3% of total 1996 revenues) to reflect the write-off of the
assets and liabilities which remained from a discontinued segment that
was disbanded in the fiscal year ended March 31, 1995.
- In January 1996, the Company's ownership in INSCI Corp. was reduced to
38%, as compared to the majority ownership IMTECH maintained in fiscal
1995. As a result, the investment in INSCI Corp. was accounted for
under the equity method for the fiscal year ended March 31, 1996. Since
the Company included INSCI's results on a consolidated basis in 1995,
management restated the presentation of the financial statements for
the fiscal year ended March 31, 1995 to conform to the 1996
presentation. In that respect, the Company recorded equity in the net
loss in INSCI Corp. of approximately $1,452,000 and $2,187,000 for the
years ended March 31, 1996 and 1995, respectively.
- During the fiscal year ended March 31, 1995, the Company recorded a charge
of $750,000 to write down property and equipment. A review of the records
underlying the Company's property and equipment caused management to
conclude that certain assets listed in the records were not owned by the
Company.
NEW ACCOUNTING STANDARDS
During the fiscal year ended March 31, 1997, the Company adopted SFAS No.
123, "Accounting for Stock-Based Compensation". The pronouncement requires
entities to recognize as compensation expense over the vesting period the
fair value of stock-based awards on the date of grant. Alternatively, SFAS
No. 123 allows entities to continue to apply the provisions of APB No. 25 and
provide pro forma net income and pro forma income (loss) per share
disclosures for employee stock option grants made from 1995 forward as if the
fair-valued-based method defined in SFAS No. 123 had been applied. The
Company has elected to adopt the disclosure-only provisions of SFAS No. 123
and will continue to apply APB No. 25 to account for stock options.
In an Emerging Issues Task Force ("EITF") meeting sponsored by the
Financial Accounting Standards Board held on March 13, 1997, the Securities
and Exchange Commission ("SEC") announced their position on the accounting
for the issuance of convertible debt securities with a non-detachable
conversion feature that is "in-the-money" at the date of issue. Those
securities are typically convertible into common stock at the lower of a
conversion rate fixed at the date of issue or a fixed discount to the common
stock's market price at the date of conversion, creating a "beneficial
conversion feature". The SEC believes that the beneficial conversion feature
should be recognized and measured by allocating a portion of the proceeds
equal to the intrinsic value of that feature to additional paid-in capital.
The amount is calculated at the date of issue as the difference between the
conversion price and the fair value of the common stock into which the
security in convertible. The discount resulting from the allocation of the
proceeds, in effect, increases the interest rate of the security and should
therefore be amortized as a charge to interest expense over the period from
the date the security is issued to the date it first becomes convertible. The
Company calculated the beneficial conversion feature of the 12% convertible
secured promissory notes issued in February 1997 and recognized a portion of
it as interest expense for the year ended March 31, 1997.
21
<PAGE>
INFLATION
The Company has not experienced significant increases in the prices of
materials or in the payment of operating expenses as a result of inflation.
Although inflation has not been a significant factor to date, there can be no
assurances that it will not be in the future.
BUSINESS
INTRODUCTION
Information Management Technologies Corporation ("IMTECH" or the
"Company") provides information processing and facilities management services
such as research report printing, electronic imaging, litigation duplication,
binding, finishing and distribution services to financial, legal, accounting
and other medium to large service organizations which operate in business
environments that are characterized by substantial information processing,
communications and document administration requirements.
Specifically, the Company's outsourcing services include two and four
color digital printing, intelligent inserting, high volume duplication,
electronic publishing, document fulfillment, micrographics, data processing
and distribution services. Litigation duplication services range from high
speed litigation duplication to on and off line numbering, accurate bar
coding and other traditional litigation document processing services. The
Company's outsourcing and litigation support services are generally performed
at its Regional Service Center ("RSC") in New York City. Facilities
management services include independent management of client systems for
providing document duplication, distribution and word processing.
The Company currently holds an 11% ownership interest in INSCI Corp.
("INSCI"), its former majority-owned subsidiary (a NASDAQ small cap company).
INSCI develops, markets and supports computer software that utilizes
magnetic, optical and CDR disk storage technologies. Used with compatible
hardware, the software is able to archive, index, retrieve, print and fax
computer generated documents such as invoices, statements, reports and
transaction data.
SERVICES
FACILITIES MANAGEMENT SERVICES
The Company's facility management services, which may be provided on-site
in a variety of departments at a customer's facility or at IMTECH's RSC,
include the following:
* DUPLICATION MANAGEMENT -- in connection with this service, the Company
provides personnel and equipment required 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
the software in addition to the personnel and equipment 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
them as electronically published documents.
* DISTRIBUTION SERVICES -- for these type of services the Company provides
the equipment, systems and personnel to process, track and distribute
time sensitive materials.
Under a typical facilities management contract, IMTECH assumes complete
management and operating responsibility for a customer's in-house
duplication, word processing and/or other administrative functions located or
performed on the client's premises. The fees established for the facilities
management services are generally agreed upon in advance and set forth in the
facility management contract.
22
<PAGE>
The Company generally provides the personnel, equipment and systems
required to perform the agreed-upon services on-site at the customer's
facilities. In many instances, upon commencement of a facility management
contract, IMTECH will assume from its customer, responsibility for the
employment of the existing personnel. In addition, the Company provides all
of the necessary equipment and bears the related expenditures. In many cases,
the Company assumes ownership of the customer's existing equipment, and when
economically feasible, IMTECH will assume the customer's existing lease
obligations. Backup resources are maintained at IMTECH's RSC to handle
unusual work loads, or for disaster recovery purposes occurring at the
facility management sites within the region.
During the year ended March 31, 1997, IMTECH realized revenues of
approximately $893,000 generated from seven facility management contracts.
Five of the contracts had initial terms expiring in 1996 and one in 1997. Due
to increased competition from larger companies in the facility management
market and a continuing decrease in the Company's operating margins related
to that business, management has elected not to pursue renewal of certain
agreements.
OUTSOURCING
The Company provides outsourcing services from its RSC in New York City
primarily to financial, legal, institutional and commercial clients. Those
services include corporate bureau services that have historically been
outsourced or produced "in-house". The following specifies the types of
outsourcing services the RSC provides to clients in New York City
metropolitan area:
* RESEARCH REPORT SERVICES WITH DOCUMENT IMAGING -- IMTECH produces and
distributes reports developed by research analysts at brokerage firms or
securities departments at banks.
* DUPLICATION -- the RSC can generate high volume black and white or color
document duplication using state of the art digital xerographic equipment
for print-on-demand or rapid processing of time sensitive documents.
* OFFSET PRINTING -- as part of the Company's core printing production
services, the RSC can perform all traditional, color, lithographic and
offset printing. To meet the demand of cost effective, low volume, high
quality digital printing, the Company purchased a Heidelberg Quickmaster
DI Digital Printing Press (the "Heidelberg"). The Heidelberg is one of
the newest, most technologically advanced sheet fed press system
available in the printing trade today. The press allows IMTECH to offer
its clients high quality, four color print capabilities that are
extremely cost effective and ideal for meeting the increasing needs of
the competitive financial research report market. As a complete digital
printing system, the Heidelberg guarantees faster turnaround by
consolidating and reducing pre-press and setup time by recognizing
various data formats that would otherwise require conversion to a
standard pre-press format.
* ELECTRONIC PUBLISHING -- IMTECH's electronic publishing department can
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 them as
electronically published documents.
* FINISHING SERVICES -- the Company provides the standard printed, laser or
duplicated document finishing services such as perfect binding,
plastikoiling, velobinding, saddle stitching and padding.
* DISTRIBUTION SERVICES -- distribution services include intelligent and
selective inserting of multi-page documents into envelopes, traditional
inserting, packaging, mailing and shipping of completed work.
LITIGATION DUPLICATION SERVICES
The Company's litigation duplication division utilizes state of the art
equipment located at its RSC to perform high volume duplication and other
document processing related services primarily to companies in the corporate
and legal business environment. The typical litigation support services,
which use the most recently developed technology, include on and off line
numbering in red and black, scanning and imaging, accurate bar coding and
traditional finishing services, such as binding, addressing, inserting and
mailing.
23
<PAGE>
MARKETING AND SALES
The Company employs a sales force that is currently located at its RSC in
New York City. Together and as a whole, members of management who are
involved with sales, facilities management, outsourcing services and
litigation duplication continually increase their marketing efforts on behalf
of IMTECH directed toward major financial, manufacturing, legal, accounting
and other medium to large service companies located in New York City and the
surrounding metropolitan area (New Jersey, Southeast Connecticut and
Westchester County). The Company's advertising and promotional efforts
include participation in selected trade shows, general advertising, articles
in pertinent trade publications, direct mailings and, commencing in March
1997, the publication and wide selected distribution of a Company newsletter
called "24/7". The newsletter is distributed as a no cost service to existing
and potential IMTECH clients and broad based investor groups. Produced and
published completely in-house utilizing the newly acquired Heidelberg digital
printing press, the newsletter is devoted to maintaining a channel of
communication that keeps clients and investors aware of developments within
the Company.
To further broaden its abilities to provide superior and complete service
and pursue clients beyond its primary metropolitan area marketplace, in
fiscal year 1997, IMTECH developed strategic alliances with Blitz Systems,
Inc. ("Blitz") and Research Distribution Services, Inc. ("RDS"). Blitz,
through its versatility of services, has been instrumental in assisting the
Company in introducing technologically advanced concepts to research print
production and distribution. RDS developed an "intelligent" distribution
process that physically consolidates multiple subscriptions by a single
subscriber into single envelope. The strategic alliance between IMTECH, Blitz
and RDS offers clients a seamless process of receiving and managing data for
print production and subsequent distribution. Each company in the alliance is
a specialist, and depends on the others to maintain a high level of client
satisfaction. Working together, the three companies offer clients reliable,
expedient and cost effective service from the point of production to final
destination.
COMPETITION
Management is aware that the Company operates in a market that contains
several large direct competitors, as well as many smaller regionally based
companies, that provide services similar to IMTECH. IMTECH competes with
those companies primarily on the basis of price and quality of performance.
Management's efforts are directed toward maintaining strong employee
training and competitive compensation programs to enable the Company to
continue to provide its customers with the high quality service and personnel
necessary to maintain the competitive advantage.
EMPLOYEES
As of September 30, 1997, the Company employed approximately 115 persons.
The Company has no collective bargaining agreements with any personnel and
considers its relationships with all of its employees to be in good standing.
PROPERTIES
The Company leases its executive offices and RSC facilities
(approximately 32,000 square feet), located at 130 Cedar Street, New York,
NY, under a lease expiring in July 2003. The rental payments under the lease
agreement are subject to annual cost of living and maintenance increases. In
addition, the Company occupies 1,000 square feet of space at a midtown
Manhattan location under a sublease agreement.
24
<PAGE>
LEGAL PROCEEDINGS
In January 1994, IMTECH received correspondence from the U.S. Department
of Labor ("DOL") stating their intent to penalize the Company in connection
with their investigation of past IMTECH employee benefit plans. The DOL
determined that for certain plan years in question, the Company did not file
the proper financial information required. The DOL stated in their
correspondence that they intended to penalize the Company for the amount of
$50,000 regarding their findings. As of September 30, 1997, the Company and
the DOL reached a settlement agreement whereby the Company agreed to pay
$25,000, in 12 monthly installments commencing December 1, 1997. The
Agreement covers the plan years January 1, 1989 through December 31, 1995.
The Company to the best of its knowledge believes that it has been current in
its filings with the DOL since that time.
On April 13, 1995, the SEC issued a private order of investigation of
IMTECH and INSCI, the Company's former majority-owned subsidiary (which
IMTECH currently holds a 11% ownership interest in), and their officers and
directors for the period March 1993 through April 1995. The order of
investigation inquired into whether the Companies and their 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 SEC 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 September 10, 1996, the SEC informed IMTECH
and INSCI that the staff inquiry related to those matters had been terminated
and no action had been recommended at that time.
In November 1995, the Company entered into a three year service agreement
with Corporate Relations Group, Inc. ("CRG"), whereby CRG was to provide
IMTECH with promotional and brokerage communication services. As
consideration for their services, IMTECH was to pay CRG the sum of $300,000
or 171,000 shares of the Company's free trading Class A Common Stock plus
500,000 options to purchase 500,000 shares of Class A Common Stock at
exercise prices ranging from $1.75 to $3.06 per share for a period of five
years. The Company elected to pay CRG by issuing 171,000 shares of Class A
Common Stock. Initially, the Company arranged for delivery to CRG of 92,250
shares of the freely traded Class A Common Stock which were transferred from
a number of shareholders. The Company agreed to repay the shareholders by
making interest payments at a rate of 10% per annum in addition to returning
the borrowed shares plus one additional share of Class A Common Stock for
each ten shares of stock transferred (an aggregate of 9,250 additional
shares). The Company further agreed to grant cost free registration rights to
each lender for the additional shares as a result of the transaction. The
balance of the 78,750 shares were not remitted to CRG. CRG asserted a claim
for the balance of the shares. The Company has disputed the claim based upon
the position that CRG did not perform under the provisions of the service
contract. The Company is continuing to review the needs of the instituting
legal action in the state of Florida to recover the stock and seek punitive
damages from CRG.
25
<PAGE>
MANAGEMENT
The following table sets forth the name, age and positions of each of the
directors and executive officers of Information Management Technologies
Corporation. Each director of Information Management Technologies Corporation
will hold office until the next annual meeting of stockholders, or until his
successor has been elected and qualified. Officers of Information Management
Technologies Corporation are elected by the Board of Directors of Information
Management Technologies Corporation and serve at the discretion of the Board
of Directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE CURRENT POSITION WITH THE COMPANY SINCE
- ------------------------------ --- ------------------------------------------------------------ -------------
<S> <C> <C> <C>
Matti Kon..................... 35 Chairman, Chief Executive Officer, Director 1996 [1]
Joseph A. Gitto, Jr........... 34 President, Chief Financial Officer, Secretary, Director 1995 [2]
Harry Markovits............... 46 Director 1997 [3]
</TABLE>
- ------------------------
[(1)] Appointed as Chief Executive Officer and Director on December 5, 1996,
and appointed Chairman of the Board of Directors on April 21, 1997.
[(2)] Appointed President in April 1996.
[(3)] Appointed Director on June 18, 1997.
MATTI KON
Mr. Kon was appointed as Chief Executive Officer and Director in December
1996, and subsequently appointed as Chairman in April 1997. Mr. Kon is also
President of a company known as Blitz Systems, Inc., a computer systems
consulting firm specializing in the development of total business solutions
for business management systems. In addition, Mr. Kon owns a controlling
interest in Research Distribution Services, Inc., a company that provides
mailing list database management, fulfillment and related services.
JOSEPH A. GITTO, JR.
Mr. Gitto served as the Company's accounting manager from April 1992 through
September 1993, after which, he was promoted to, and retained the position
of, controller until March 1995. In March 1995, Mr. Gitto was appointed Chief
Financial Officer and Director of IMTECH. In addition, Mr. Gitto was
appointed President of the Company in April 1996. Prior to joining IMTECH,
Mr. Gitto held several key financial positions with companies known as
EnviroSpan Safety Corp., Shearson Lehman Bros. and Dreyfus Corp.
HARRY MARKOVITS
Mr. Markovits has served as a financial consultant to the Company for the
past five years. On June 18, 1997, Mr. Markovits was appointed to serve as
Director. Mr. Markovits is a registered representative at D.H. Blair & Co.,
Inc. and Amerivet/Dymally Securities, Inc., both stock brokerage firms.
26
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended March 31, 1997, there were a total of fourteen
(14) meetings of the Board of Directors held, of which all of the Directors
attended. The Board of Directors establishes policies for the Company and
reviews management compensation standards and practices, and administers the
following stock option plans of the Company: (1) the Amended and Restated 1987
Incentive Stock Option Plan; (2) the Amended and Restated 1987 Non-Qualified
Stock Option Plan; and (3) Directors Option Plan.
The Board established a compensation committee for the fiscal year ended
March 31, 1997 and appointed two (2) individuals who are not employed by the
Company to serve as members of the committee.
The Board also established an audit committee during the fiscal year ended
March 31, 1997, which had four (4) appointed members; two of which are employed
by the Company.
27
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following schedule sets forth the compensation earned by the Chief
Executive Officer and each of the three most highly compensated executive
officers and directors whose individual remuneration exceeded $100,000 for the
last three completed fiscal years ended March 31, 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------------------
NAME YEAR COMPENSATION RESTRICTED OPTIONS
AND ENDED ----------------------- STOCK AND/OR ALL OTHER
PRINCIPAL POSITION MARCH SALARY BONUS AWARDS SARS COMPENSATION
- -------------------------------------------- --------- ----------- ---------- ------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Matti Kon [1] 1997 $ 57,700 -- -- 500,000 --
Chief Executive Officer 1996 -- -- -- -- --
1995 -- -- -- -- --
Joseph A. Gitto, Jr. [2] 1997 $ 127,500 $ 15,000 -- 350,000 --
President and Chief Financial 1996 90,100 17,500 -- 250,000 --
Officer 1995 82,300 17,500 -- 75,000 --
Christopher D. Holbrook [3], [7] 1997 $ 172,500 $ 10,000 -- 175,000 --
Former Chief Executive Officer 1996 140,000 20,000 -- 250,000 --
and Chief Operating Officer 1995 142,000 31,000 -- 125,000 --
Robert H. Oxenberg [4], [7] 1997 $ 42,700 -- -- 250,000 --
Former Chief Executive 1996 22,154 -- -- -- --
Officer 1995 -- -- -- -- --
David W. Grace [5] 1997 -- -- -- -- --
Former President and Chief 1996 -- -- -- -- --
Executive Officer 1995 $ 14,000 -- -- -- --
Gerald E. Dorsey [6] 1997 -- -- -- -- --
Former President and Chief 1996 -- -- -- -- --
Executive Officer 1995 $ 144,200 -- -- -- --
</TABLE>
- ------------------------
[1] Mr. Kon was appointed as Chief Executive Officer on December 5, 1996. In
addition, Mr. Kon was appointed Chairman of the Board on April 21, 1997;
Salary figure represents pro-rated amount for fiscal year ended March 31,
1997.
[2] Mr. Gitto was appointed President in April 1996 and also serves as Chief
Financial Officer and Director.
[3] Appointed and served as President, Chief Operating Officer and Director
from March 1995 through April 1996 when he was appointed Chief Executive
Officer; subsequently resigned all of his positions with the Company on
November 22, 1996.
[4] Served as Chief Executive Officer from March 1995 through April 1996 when
he resigned, but continued to serve on the Board until April 1997.
[5] Mr. Grace served as Chief Executive Officer of the Company from September
1994 through March 1995, in addition to, serving as a Director from
September 1992 to November 1995. In
28
<PAGE>
November 1995, Mr. Grace elected not to stand for re-election to the
board.
[6] Mr. Dorsey served as Chief Executive Officer and Director from January
1991 through September 1994.
[7] Resigned or chose not to stand for re-election and has no disagreements
with the Company regarding matters affecting the Company's operations,
policies and practices and/or financial statements.
STOCK OPTION GRANTS
The following schedule summarizes the grant of stock options to the
Company's executive officers made during the fiscal year ended March 31, 1997:
OPTIONS GRANTED IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
SHARES PER POTENTIAL REALIZED
SHARES UNDERLYING SHARE VALUE AT ASSUMED
UNDERLYING OPTIONS EXERCISE ANNUAL RATES
OPTIONS GRANTED TO PRICE EXPIRATION OF STOCK PRICE
GRANTED EMPLOYEES [1] DATE APPRECIATION
----------- ------------- ------------ ------------ ---------------------
<S> <C> <C> <C> <C> <C>
Matti Kon.............................. 500,000 44% $ 1.18 12/05/99 --
Joseph A. Gitto........................ 350,000 31% $ 1.25 4/15/2000 --
Christopher D. 175,000 16% $ 1.25 11/23/97 --
Holbrook............................. [2]
Robert H. Oxenberg..................... 250,000 [3] $ 1.88 4/15/2002 --
</TABLE>
- ------------------------
[1] Based upon the market price of the underlying shares at that time.
[2] 300,000 shares, net of a cancellation of 125,000 options to purchase
125,000 shares.
[3] Mr. Oxenberg served on the Board but was not an employee of the Company
for the fiscal year ended March 31, 1997.
29
<PAGE>
STOCK OPTIONS EXERCISED AND STOCK OPTION HOLDINGS
The following schedule summarizes the exercise of stock options by the
Company's executive officers during the fiscal year ended March 31, 1997, and
those options that were unexercised and held at the end of the fiscal year:
AGGREGATE OPTION EXERCISES AND
YEAR END OPTION VALUES
<TABLE>
<CAPTION>
FISCAL NUMBER OF SHARES
YEAR SHARES UNDERLYING UNEXERCISED
ENDED ACQUIRED VALUE OPTIONS
MARCH ON REALIZED --------------------------
31, EXERCISE [1] EXERCISABLE UNEXERCISABLE
--------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Matti Kon............................. 1997 -- -- -- 500,000
Joseph A. Gitto....................... 1997 -- -- 269,792 433,333
Christopher D......................... 1997 -- -- 420,417 50,000
Holbrook
Robert H. Oxenberg.................... 1997 -- -- 166,966 166,667
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY OPTIONS
[2]
---------------------------
EXERCISABLE UNEXERCISABLE
----------- -------------
<S> <C> <C>
Matti Kon............................. -- --
Joseph A. Gitto....................... -- --
Christopher D......................... -- --
Holbrook
Robert H. Oxenberg.................... -- --
</TABLE>
- ------------------------
[1] Calculated by multiplying the number of shares underlying the options by
the difference between the average of the closing bid and ask prices of the
common stock, as reported by NASDAQ on the date of exercise, and the
exercise price of the options.
[2] Calculated by multiplying the number of shares underlying the options by
the difference between the average of the closing bid and ask prices of the
common stock, as reported by NASDAQ on March 31, 1997, and the exercise
price of the options.
REMUNERATION OF NON-MANAGEMENT DIRECTORS
Each member of the Board of Directors who is not an officer or employee of
the Company is entitled to participate in the Directors Option Plan described
herein below. In addition, those Directors will be reimbursed for travel and
other expenses directly related to his activities performed as Director. The
Company currently compensates non-employee Directors $1,000 for each Board of
Directors meeting attended, up to a maximum of $4,000 per fiscal year.
30
<PAGE>
STOCK OPTION PLANS
1987 NON-QUALIFIED STOCK OPTION PLAN
In August 1987, the Board of Directors approved and adopted a Non-Qualified
Stock Option ("NQSO") Plan. Under the NQSO Plan, individuals determined to be
key persons whom the Company relies on for the successful conduct of its
business, as determined by the Compensation Committee (the "Committee"), are
granted options to purchase IMTECH's Class A Common Stock. There are 4,000,000
shares reserved for grant under the NQSO Plan.
The exercise prices of the options granted under the NQSO Plan, which are
determined by the Committee in its sole discretion, may not be less than the par
value of the shares, or fifty percent of the fair market value of the shares on
the dates of grant. The Committee also determines the time periods during which
the NQSO's may be exercised, although in no event shall any NQSO's have an
expiration date later than ten (10) years from the date of its grant. As of
December 15, 1997, options to acquire a total of approximately 2,366,000 shares
of Class A Common Stock were outstanding or approved for grant under the NQSO
Plan, at exercise prices ranging from $1.00 to $9.90 per share, after giving
effect to the Company's four-for-one reverse stock split which occurred on June
14, 1995. The NQSO Plan will continue for a term of ten years from its inception
unless terminated earlier by the Board of Directors.
INCENTIVE STOCK OPTION PLAN
In August of 1987, the Board of Directors adopted the Company's Incentive
Stock Option ("ISO") Plan. The ISO Plan allows the Company to grant to employees
determined to be key personnel by management, incentive stock options under the
guidelines of Section 422 of the Internal Revenue Code. The Plan is available to
all of the Company's employees, including officers and employee directors, and
is intended to be used by management to attract and retain key employees.
The ISO Plan is administered by the Compensation Committee, who establishes
the terms of the options granted including their exercise prices, the dates of
grant and number of shares subject to options. The exercise prices of all of the
options granted under the ISO Plan must be equal to no less than the fair market
value of the Class A Common Stock on the date of grant, and the terms of the
options may not exceed five years. 3,000,000 shares of IMTECH Class A Common
Stock are reserved under the ISO Plan for grant.
For any employee/stockholder who may own more than 10% of the Company's
outstanding voting shares, the exercise price of options received under the ISO
Plan 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 of the options must not exceed
ten years. As of December 15, 1997, options to purchase approximately 2,346,000
shares of IMTECH's Class A common stock were outstanding and approved for grant
under the ISO Plan at exercise prices ranging from $1.88 to $5.85 per share,
after giving effect to the Company's four-for-one reverse stock split which
occurred on June 14, 1995. The ISO Plan will continue for a term of ten years
from the date of inception unless terminated earlier by the Board of Directors.
DIRECTORS OPTION PLAN
In October 1988, the Board of Directors adopted the Directors Option
("DO") Plan, which was authorized by the stockholders' on December 19, 1988,
and was subsequently amended in October 1992. The purpose of the DO Plan is
to help IMTECH retain the services of qualified non-officer or non-employee
directors, who are considered essential to the business progress of the
Company. Under the DO Plan, options are granted only on the date of the
annual stockholders' meeting held once every calendar year. A total of
1,500,000 shares of the Company's Class A Common Stock has been reserved for
grant under the DO Plan. As of December 15, 1997, there were no options
outstanding under the DO Plan.
31
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table summarizes, to the best of the Company's knowledge, as
of March 31, 1997, certain information regarding (1) the beneficial owners of
more than five percent (5%) of the outstanding Class A common stock of the
Company; (2) the beneficial ownership of shares of the Company's Class A common
stock by each director and named executive; and (3) the beneficial ownership of
shares of Class A common stock of the Company by all directors and executive
officers as a group:
<TABLE>
<CAPTION>
BENEFICIALLY PERCENT OF
OWNED CLASS
SHARES OWNED
NAME OF BENEFICIAL OWNER [1] [1]B
- -------------------------------------------------------------------- ------------------------ -----------------------
<S> <C> <C>
Matti Kon........................................................... 950,749[2] 7%
Robert Sachs........................................................ 910,015 7%
Joseph A. Gitto..................................................... 703,125 5%
Robert H. Oxenberg.................................................. 380,885 3%
Christopher D. Holbrook............................................. 470,417 3%
Harry Markovits..................................................... 183,333 1%
Directors and Executive[3].......................................... 1,837,207 13%
Officers as a group
</TABLE>
- ------------------------
[1] a) Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the persons indicated.
(b) The figures are based upon the aggregate number of all the shares of
Class A Common Stock currently issued and outstanding in addition to the
shares issuable upon the exercise of stock options or warrants
exercisable within 60 days, and which are held by the individuals named
in the table. The figures also include the shares of Class A Common Stock
underlying the Company's outstanding 12% convertible preferred stock
which has not been converted to date and still qualifies for conversion.
(c) The figures do not include the portions of stock options to purchase
shares which are not currently exercisable or will become exercisable for
the period sixty days subsequent to the date this registration.
[2] D.H. Blair Investment Banking Corp. ("Blair") and its affiliates entered
into a voting agreement whereby Blair granted the Chief Executive Officer of
the Company and his successors the voting rights to the shares they own, and
accordingly, this figure includes 450,749 shares owned by Blair.
[3] Includes all of the Company's current Directors, Executive Officers and
Nominees, and as appropriate, 450,749 shares owned by Blair in accordance
with the voting agreement noted in [2].
32
<PAGE>
SELLING SECURITY HOLDERS
The following table identifies the Selling Shareholder and indicates: the
nature of any position, office or other material relationship that such Selling
Shareholder has had within the past three years with the Company (or any of its
predecessors or affiliates) and the number of shares of Common Stock owned by
the Selling Shareholder's prior to the offering, the number of shares to be
offered for the Selling Shareholder's account and the number of shares and
percentage of outstanding shares to be owned by the Selling Shareholder after
completion of the offering.
<TABLE>
<CAPTION>
SHARES SHARES SHARES AND
OWNED SHARES SHARES UNDERLYING PERCENTAGE OF
BEFORE SHARES UNDERLYING UNDERLYING SHARES CONVERTIBLE SHARES CLASS OWNED
NAME OF BENEFICIAL THE BEING CLASS A CLASS B UNDERLYING PROMISSORY UNDERLYING AFTER THE
OWNER OFFERING OFFERED(1) WARRANTS(2) WARRANTS(2) OPTIONS NOTES WARRANTS OFFERING(8)
- ------------------------- --------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adams, Kalman............ 2,940 775 775 700
Adams, Kalman as
Custodian for Auraham
Adams.................... 500 500
Adams, Kalman as
Custodian for TZVI-Hersh
Adams.................... 250 250
Anschutz Family
Foundation............... 6,250 10,826 10,826 6,250
Anschutz, Nancy.......... 4,000 5,500 5,500 4,000
Baker, EPH & Bess
Baker.................... 93 93
Bertram, Miriam.......... 750 750
Biafore, John............ 250 250
Blume, Gloria & Audrey
Farber................... 27 27
Blume, Gloria & Sheldon
Blume.................... 13 13
Boom, John A............. 5,742 5,742
Boulier, Gary & Carol
Boulier.................. 387 387
Brenner, Elsie........... 250 250
Bresler, Isadore......... 250 250
Bresler, Mildred......... 162 162
Caldwell, George......... 3 3
Cama, Helen.............. 25 25
Cede & Co................ 5,011,186 2,534,508 2,534,508 5,011,186
Charlotee, Roy........... 7,000 1,667
Cody, Colin & Catherine K
Cody..................... 1,777 1,777
Cody, Colin M............ 3,307 3,307
Cohen, Bob M & Michele K
Cohen.................... 22,916 22,916
Cohen, Lenny............. 19,250 4,583
Cohen, Leonard........... 32,500 51,375 51,375 32,500
Conti, Edward............ 250 250
Cooper, Marilyn.......... 500 500
Cromwell, M. Jenkins
Jr....................... 312 312
D. H. Blair & Co......... 58,333 44,000 44,000 58,333
D.H. Blair & Co.Inc.
Trustee FBO Ruth Columbo
IRA,..................... 210 210
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES SHARES AND
OWNED SHARES SHARES UNDERLYING PERCENTAGE OF
BEFORE SHARES UNDERLYING UNDERLYING SHARES CONVERTIBLE SHARES CLASS OWNED
NAME OF BENEFICIAL THE BEING CLASS A CLASS B UNDERLYING PROMISSORY UNDERLYING AFTER THE
OWNER OFFERING OFFERED(1) WARRANTS(2) WARRANTS(2) OPTIONS NOTES WARRANTS OFFERING(8)
- ------------------------- --------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D.H. Blair Investment
Banking Corp............. 70,832 86,979 86,979 70,832
Datz, Francine & Mitchell
Datz..................... 27 27
Daye, Samuel L........... 14,700 8,085 8,085 14,700
Dimaria, Philip.......... 250 250
Dorsey, Gerard E......... 5,729 5,729
Duchin, Eugene........... 75 75
Eckstein, Abraham B. &
Adele L. Eckstein........ 12,089 12,089
Equity Group Profit
Sharing Plan, The........ 13,750 13,750
Falcone, John............ 8,400 2,000
Farkas, Thomas P.(3,4)... 33,792 24,178 24,178 704,403 628,931 33,792
Feldman, Marian.......... 4,700 2,672 2,672 4,700
Finkle, S Marcus......... 8,263 8,263
Finlay, Joseph H......... 375 1,125 1,125 375
Fiore, Maria............. 2 2
Flindt, Douglas R. &
Rosanne B. Flindt........ 250 250
Fotenot, Frank........... 4,900 1,167
Freeborn, John B......... 8 8
Frohman, Scott R......... 875 875
Gavankar, Peter.......... 1,000 6,300 1,500 1,000
Gelber, Bret............. 500 500
Geller, Evelyn........... 2,940 700
Gelsomino, Steven L...... 375 375
Ginsberg, Morton S....... 750 10,300 3,500 3,500 2,500 750
Goldfarb, Bruce.......... 7,000 1,667
Goldsman, Molses......... 3,600 12,600 3,846 3,846 3,000 3,600 J.
Goldwert, Josef.......... 1,400 333
Gottesman, Fred S........ 375 82 82 375
Grubb, M. Wayne.......... 125 125
Gunn, Keith M............ 4,500 3,937 3,937 4,500
Hallenback, Mark......... 75 75 A.
Hatch, John - Retirement
Accts Inc., Cust IRA..... 1,250 1,250
Hill, Steven & Goldie
Hill..................... 250 250
Horstman, Richard A...... 17,208 17,208
Horstman, Richard D...... 92,928 92,928
Ingenito, John........... 12,600 3,000
Jones, Wesley & Susan
Jones.................... 20 20
Kern, Albert............. 1,652 1,652
Kiley, Peter............. 12,600 3,000
Kirincich, Shirley....... 1 1
Kirsch, Benjamin......... 13,475 3,208
Kovach, Margaret......... 25 25
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES SHARES AND
OWNED SHARES SHARES UNDERLYING PERCENTAGE OF
BEFORE SHARES UNDERLYING UNDERLYING SHARES CONVERTIBLE SHARES CLASS OWNED
NAME OF BENEFICIAL THE BEING CLASS A CLASS B UNDERLYING PROMISSORY UNDERLYING AFTER THE
OWNER OFFERING OFFERED(1) WARRANTS(2) WARRANTS(2) OPTIONS NOTES WARRANTS OFFERING(8)
- ------------------------- --------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Krinick, Ronald M. &
Elizabeth J.
Krinich(3,4)............. 25,000 6,562 6,562 117,401 104,822 25,000
Ksieski, Stephen C....... 16,041 16,041
Lee, Ting F.............. 13 13
Leichter, Moe............ 2,000 2,000
Levin, Jack.............. 75 90 90 75
Levitt, James............ 9,100 2,167
Lincoln Trust Company FBO
Norman R. Malo IRA....... 3,500 4,812 4,812 3,500
Lipetz, Ilan............. 625 625
Markey, Barbara Ann...... 25 25
Markov, Rochelle......... 35 35
Markovitz, Harry(5)...... 25,000 600,000 25,000
Marks, Frances(3,4)...... 117,401 104,822
McFee, Albert S.......... 75 90 90 75
Meislen EX UW, Zelda --
Bernard Meislen.......... 1,210 1,210
Micheline, Florence...... 7 7
Migdon, Mitchell......... 500 500
Milstein, Albert......... 82 82
Minadeo, Claude M........ 1,175 1,175
Monastero, Sal........... 3,437 3,437
Monte, Frank............. 3,500 3,500
Nap & Co Nominee for
Merchantile Safe Deposit
& Trust Custodian M
Jenkins Cromwell Jr...... 10,062 15,960 15,960 10,062
Noddings, Thomas C....... 2 2
Orenstein, D.(7)......... 33,333
Orenstein, S.(7)......... 33,333
Oxenberg, Howard......... 15,887 6,610 6,610 15,887
Oxenberg, Robert......... 7,805 7,718 7,718 7,805
Parliament Hill Capital
Corp..................... 2,720 2,720
Patel, Ghanshyam......... 650 650
Pekarchik, Ron........... 3,500 833
Peruche, Glenn R......... 2,000 3,500 3,500 2,000
Philadep & Co............ 121,134 90 90 121,134
Platt, Lawrence & Wendy S
Platt.................... 5,000 6,875 6,875 5,000
Poplack, Alvin M......... 105 105
Prudential Securities
Cust Robert Oxenberg IRA
Rollover................. 3,525 3,525
Rachlin, Robert.......... 5,600 1,333
Raymond, David........... 12 12
Reiter, Gilda Herman
Reiter................... 16 16
Renov, Kalman............ 16,666 7,562 7,562 16,666
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES SHARES AND
OWNED SHARES SHARES UNDERLYING PERCENTAGE OF
BEFORE SHARES UNDERLYING UNDERLYING SHARES CONVERTIBLE SHARES CLASS OWNED
NAME OF BENEFICIAL THE BEING CLASS A CLASS B UNDERLYING PROMISSORY UNDERLYING AFTER THE
OWNER OFFERING OFFERED(1) WARRANTS(2) WARRANTS(2) OPTIONS NOTES WARRANTS OFFERING(8)
- ------------------------- --------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reynolds, Stanley &
Claire E. Reynolds....... 5,500 4,875 4,875 5,500
RHS Corp(7).............. 86,667
Rodgers, Sue Anschutz.... 15,750 7,305 7,305 15,750
Rose(7).................. 33,333
Rosenberg, Michael....... 2,500 2,500
Roth, Harriette.......... 1,000 1,000
Ruscitti, Daniel......... 50,000 50,000
Sachs, Robert(6)......... 348,353
Sarco & Co. a
partnership.............. 8,750 8,750
Sarco and Company........ 4,125 4,125
Schilan, Nancy & Samuel
Schilan.................. 27 27
Schnapp(7)............... 33,333
Schraub, Howard.......... 8,653 8,653
Security Trust Co &
McEvoy Cromwell Tr Mary
Cromwell Trust Security
Trust Co. Acct........... 17,584 24,178 24,178 17,584
Security Trust Co P
McEvoy Cromwell M.
Jenkins Cromwell Jr. Tr M
Jenkins Cromwell 3rd
Trust.................... 6,154 7,253 7,253 6,154
Security Trust Co P
McEvoy Cromwell M.
Jenkins Cromwell Jr. Tr
UW Jenkins Cromwell 3rd
Trust.................... 8,462 8,462
Security Trust Co........ 6,154 8,462 8,462 6,154
Seiden(7)................ 33,333
Selwyn, Mike............. 4,620 1,100
Shropshire, Daniel &
Patricha Shropshire...... 250 250
Simon, Jonathan.......... 44 44
Simon, Joseph............ 325 325
Smith, Gregory L......... 275 275
Soderlun, James.......... 15 15
Spitzer, Charlotte....... 175 175
Stahler, Alan............ 16,666 15,125 15,125 16,666
Stahler, Alan & Kalman
Renov.................... 7,000 7,000
Starzel, Mary
Elizabeth................ 5,776 3,305 3,305 5,776
Starzel, Robert F........ 10,832 23,697 23,697 10,832
Steiger, Ralph B......... 500 750 750 500
Tompkins, Richard J...... 3,475 3,475
Trembley, Roger &
Rosemarie Trembley....... 32 32
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES SHARES AND
OWNED SHARES SHARES UNDERLYING PERCENTAGE OF
BEFORE SHARES UNDERLYING UNDERLYING SHARES CONVERTIBLE SHARES CLASS OWNED
NAME OF BENEFICIAL THE BEING CLASS A CLASS B UNDERLYING PROMISSORY UNDERLYING AFTER THE
OWNER OFFERING OFFERED(1) WARRANTS(2) WARRANTS(2) OPTIONS NOTES WARRANTS OFFERING(8)
- ------------------------- --------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Udell, Alan.............. 2,240 533
Voorheis, Bruce M........ 5,495 5,495
Warren, Harold........... 4,375 2,186 2,186 4,375
Waters, Steven........... 125 125
Wechsler, Stephen B. &
Ellen S. Wechsler........ 1,250 1,250
Wolbach, William W....... 11,550 11,550
Wood, Jennifer........... 1,718 1,718
Wood, Kenton E........... 497 497
Wood, Samantha........... 1,718 1,718
Zisa, James F............ 1,250 1,250
Zisa, James F. & Denise
L. Zisa.................. 1,050 1,050
TOTAL.................... 5,568,388 146,765 3,287,535 3,287,535 983,344 1,192,537 838,575 5,568,388
</TABLE>
- ------------------------
(1) Includes shares of Class A Common Stock which were transferred by security
holders in connection with the CRG Service Agreement. The Company has agreed
to repay shareholders with interest and has granted cost free registration
rights.
(2) Every four Class A Warrants are redeemable at $1.75 for one share of Class A
Common Stock and four Class B Warrants; Every four Class B Warrants are
redeemable at $2.50 for one share of Class A Common Stock. The Company does
not issue any fractional shares upon exercise of Warrants. See "Description
of Securities".
(3) Based upon redemption of 12% Convertible Secured Promissory Notes ("Notes")
at a 40% discount to the previous five day trading average of the Company's
Class A Common Stock. The assumed five day average price for calculation of
underlying shares of Class A Common Stock is $1.59. Also includes interest
on Notes, paid in shares of Class A Common Stock at 12% per annum. The
interest calculation is for an assumed period of three years from the date
of issuance.
(4) Includes shares underlying warrants issued in conjunction with the
Convertible Promissory Notes. For every $1.00 principal amount of Promissory
Notes subscribed to, the holder is entitled to one Warrant exercisable into
one share of Class A Common Stock at a 40% discount to the previous five day
average closing price. The assumed five day average price for calculation of
underlying shares of Class A Common Stock is $1.59.
(5) Mr. Markovitz is a member of the Company's Board of Directors. Includes
500,000 options exercisable at $0.88 which expire February 2002, 100,000
exercisable at $1.12 which expire May 2002.
(6) Includes 250,000 options exercisable at $2.50 which expires September 2002
and 98,353 options exercisable at $1.50 which expires September 2000.
(7) Includes shares of Class A Common Stock underlying the Company's 12%
Subordinated Convertible Debentures
(8) Assumes the sale of all shares of Class A Common Stock covered by this
Prospectus.
37
<PAGE>
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Mr. Matti Kon, currently the Chief Executive Officer of IMTECH, is the
sole stockholder of a company known as Blitz Systems, Inc. ("Blitz"), a
computer systems consulting firm specializing in developing total business
solutions for all business management systems. During the year ended March
31, 1997, the Company renewed a consulting agreement with Blitz for a period
of one year (November 1, 1996 through October 31, 1997), at a cost to IMTECH
of $40,000 per month. Prior to fiscal year 1997, Blitz had performed computer
consulting services for IMTECH on a one year contractual basis. Blitz's
responsibilities under the contract are to reengineer, reorganize and run the
day-to-day operations of IMTECH's data processing department. In addition,
Blitz is to provide extensive technical support for many of IMTECH's clients
on-site and analyze, design and develop customized database systems as
required by the management of IMTECH. Fees paid to Blitz and charged to
operations for the year ended March 31, 1997 amounted to approximately
$489,000. In December 1996, IMTECH provided Blitz with a secured loan in the
amount of $250,000. The loan is evidenced by a Secured Promissory Note and
collateralized by a security interest on the accounts receivable, equipment
and all tangible and intangible rights of Blitz, which is not as yet
perfected..
Mr. Matti Kon also holds a controlling interest in a company known as
Research Distribution Services, Inc. ("RDS"). In November 1996, the Company
entered into a service agreement with RDS to provide mailing list database
management, fulfillment, mailing and related services to IMTECH for a period
of one year. The contract runs from January 1, 1997 through December 31,
1997, at a monthly minimum cost to IMTECH of $22,500.
On November 21, 1996, Mr. Christopher Holbrook voluntarily resigned his
positions as Chief Executive Officer, Chief Operating Officer and as Director
of IMTECH. Mr. Holbrook relinquished all remuneration and other benefits,
except for 300,000 options to purchase 300,000 shares of Class A Common Stock
of IMTECH at exercise prices ranging from $1.25 to $1.88.
In addition, the Company entered into a consulting agreement with Mr.
Holbrook for a period of eight months, which terminated on July 20, 1997.
Mr. Robert Oxenberg, who was a Board member from April 1992 through April
1997, has acquired securities of the Company through several private
placements ("Securities Ownership of Certain Beneficial Owners and
Management"). In October 1992, Mr. Oxenberg entered into a consulting
agreement with IMTECH and INSCI Corp. (the Company's former majority-owned
subsidiary) for a period of three years. The consulting agreement was
terminated in November 1993. Mr. Oxenberg has also served on the Board of
Directors of INSCI Corp. In April 1996, upon his resignation from his
position as Chief Executive Officer of IMTECH, Mr. Oxenberg and IMTECH
entered into a one year consulting agreement. On April 15, 1996, Mr. Oxenberg
was granted 250,000 options to purchase 250,000 shares of IMTECH Class A
Common Stock at an exercise price of $1.88 (the fair market value of the
Common Stock on the date of grant). The options expire on April 15, 2002. In
April 1997, Mr. Oxenberg resigned his position as Director.
On June 18, 1997, the Board appointed Mr. Harry Markovits to serve as a
Director. Mr. Markovits was awarded 100,000 options to purchase 100,000
shares of the Company's Class A common stock at an exercise price of $1.12
(the fair market value of the Common Stock on the date of grant). Mr.
Markovits performs consulting services for IMTECH through a contract which
expires in the year 2000, at an monthly cost of $7,500.
DH Blair Investment Banking Corp. ("Blair") and its affiliates have
granted a voting proxy in the shares which it owns or shall acquire during
the term of such proxy to the Chief Executive Officer of the Company, and his
successors. The voting agreement terminates in February 1999, and is
suspended during any period when Blair or its affiliates are not "market
makers" for the Company's securities.
38
<PAGE>
On July 15, 1994, the Company entered into consulting agreements with Mr.
Norman R. Malo and Mr. George T. Olmstead, both of whom resigned their
positions as Directors of the Board on that date. Each agreement had an
initial term of three years and granted an aggregate of 22,500 Non-Qualified
Stock Options ("NQSO") to purchase the Company's Class A Common Stock to both
Mr. Malo and Mr. Olmstead. The NQSO's granted to Mr. Malo and Mr. Olmstead
become exercisable as follows: 7,500 shares were exercisable until December
31, 1995 at an exercise price of $10.00 per share; 7,500 shares were
exercisable until December 31, 1996 at an exercise price of $8.00 per share;
and the remaining 7,500 shares are exercisable until December 31, 1997 at an
exercise price of $13.00 per share.
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus are being registered by the Company
for the respective accounts of the Selling Stockholders. The Company will pay
all expenses of registering the Shares. Although, the Company will receive
proceeds upon exercise of options or warrants by the Selling Stockholders,
the Company will not receive any of the proceeds from sales by the Selling
Stockholders. The Company understands that none of such Shares will be
offered through underwriters.
The Shares may be sold from time to time by Selling Stockholders either
through one or more brokers or dealers on the NASDAQSM Small Cap Market,
through privately negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at prices otherwise negotiated. In
connection therewith, the Selling Stockholders and participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Act, and
commissions or discounts or any profit realized on the sale of Shares
received by the Selling Stockholders or any such broker or dealer may be
deemed to be underwriting commissions or discounts within the meaning of the
Act. As of the date of this Prospectus, the Company understands that the
Selling Stockholders do not have any agreement, arrangement or understanding
with any brokers or dealers concerning the distribution of their respective
Shares.
39
<PAGE>
DESCRIPTION OF SECURITIES
The following are brief summaries of certain provisions of the Company's
Certificate of Incorporation, By-Laws and other documents. These summaries
are qualified in their entirety by reference to the actual documents, copies
of which may be obtained from the Securities and Exchange Commission, or upon
request, from the Company.
AUTHORIZED STOCK
The authorized capital stock of the Company consists of 100,000,000
shares of Class A Common Stock, $.04 par value ("Class A Common Stock"), and
3,000,000 shares of 12% Convertible Preferred Stock.
CLASS A COMMON STOCK
As of December 15, 1997, there were 5,579,552 shares of Class A Common
Stock outstanding and approximately 3,200 record holders of the Class A
Common Stock. The holders of Class A Common Stock have no preemptive rights,
redemption, sinking fund or conversion privileges. Each share is entitled to
equal rights in the assets of the Company upon liquidation subject to the
prior rights on liquidation of creditors. The holders of Class A Common Stock
are entitled to share equally in any dividends declared by the Board of
Directors. All of the outstanding shares of Class A Common Stock are, and the
shares of Class A Common Stock to be issued upon exercise of the Class A and
Class B Warrants will, upon issuance, be fully paid and non-assessable and
not subject to liability for future calls or assessment and for liabilities
of the Company or its stockholders.
There are no cumulative voting rights with respect to the shares of Class
A Common Stock, and therefore, the Company's principal stockholders will have
the ability to elect all of the directors of the Company and control the
Company, assuming non-exercise of the Company's outstanding options granted
and to be granted under the Company's stock options plans and other
outstanding options, warrants and convertible securities. See "Management",
"Stock Option Plans" and "Principal Stockholders".
CLASS A AND CLASS B WARRANTS
The Class A and Class B Warrants offered hereby were issued in registered
form under, governed by and subject to the terms of, substantially identical
warrant agreements dated April 6, 1988, February 23, 1989, May 22, 1990,
August 16, 1990, March 25, 1991 and February 1, 1993 (the "Warrant
Agreements") between the Company, D.H. Blair & Co. Inc. ("Blair") and
Chemical Bank, New York, New York, as warrant agent (the "Warrant Agent").
The following statements are brief summaries of certain provisions of the
Warrant Agreements and are subject to the detailed provisions thereof, to
which reference is made for a complete statement of such provisions. Copies
of the Warrant Agreements may be obtained from the Company or the Warrant
Agent and have been filed with the Securities and Exchange Commission.
References to the number of outstanding Warrants and shares reserved for
issuance include all currently outstanding Warrants.
The Company has authorized the issuance of 13,150,263 Redeemable Class A
Warrants to purchase an aggregate of approximately 3,287,535 shares of Class
A Common Stock and 13,150,263 Class B Warrants, and has reserved an
equivalent number of shares of Class A Common Stock for issuance upon
exercise of such Class B Warrants. As of December 4, 1997, there were
13,150,263 Class A Warrants outstanding.
Every four Class A Warrants entitle the registered holder thereof to
purchase one share of Class A Common Stock and four Class B Warrants at a
price of $1.75 per share subject to adjustment under certain circumstances,
at any time until the close of business on April 5, 1999. The Class A
Warrants are transferable separately from the Class A Common Stock. If the
closing bid price of the Class A Common Stock on the small cap market, as
reported on NASDAQ, or the closing price of the Class A Common Stock (if the
Class A Common Stock is then traded on a national securities exchange), shall
have exceeded
40
<PAGE>
$2.80 for any 30 consecutive trading days ending within 15 days of the date
of notice of redemption, then upon at least 30 days' prior written notice the
Company will be able to call all (but not less than all) of the Class A
Warrants (other than Warrants contained in options held by Blair or its
affiliates) for redemption at any time at a price of $0.04 per Class A
Warrant. Class A Warrants which have been issued by the Company after the
initial public offering in private transactions may be excluded from a
redemption until they are registered for public resale. The right to purchase
the Class A Common Stock and Class B Warrants will be forfeited unless it is
exercised before the date specified in the notice of redemption or any
extensions by the Company thereof.
The Company has authorized the issuance of 13,150,263 Redeemable Class B
Warrants to purchase an aggregate of 3,287,535 shares of Class A Common
Stock, and has reserved an equivalent number of shares of Class A Common
Stock for issuance upon exercise of such Warrants. As of December 4, 1997 ,
there were 13,150,263 of the Company's Class B Warrants outstanding.
Every four Class B Warrant entitle the registered holder thereof to
purchase one share of Class A Common Stock at a price of $2.50 per share,
subject to adjustment under certain circumstances, at any time after the
exercise of the Class A Warrant with respect to which such Class B Warrant
was issued, until the close of business on April 5, 1999 . If the closing bid
price of the Class A Common Stock on the small cap market, as reported on
NASDAQ, or the closing price of the Class A Common Stock (if the Class A
Common Stock is then traded on a national securities exchange), shall have
exceeded $2.80 for any 30 consecutive trading days, ending within 15 days of
the date of notice of redemption, then upon at least 30 days' written notice
the Company will thereafter be able to call all (but not less than all), of
the Class B Warrants (other than Warrants contained in options held by Blair
or its affiliates) for redemption at any time at a price of $0.04 per Class B
Warrant. Class B Warrants which are issued pursuant tot he exercise of Class
A Warrants issued by the Company after the initial public offering in private
transactions may be excluded from a redemption until they are registered for
public resale. The right to purchase Class A Common Stock will be forfeited
unless it is exercised before the date specified in the notice of redemption.
The Class A and Class B Warrants contain provisions that protect the
holders thereof against dilution by adjustment of the exercise price in
certain events including, but not limited to, stock dividends, stock splits,
reclassifications, mergers, a sale of substantially all of the Company's
assets at less than market value, a sale of stock at below market or exercise
price of the Warrants, but not for stock issuances pursuant to employee
benefit and stock option plans for employees or consultants to the Company.
However, upon the issuance of additional shares at prices below market or
conversion price in a merger or acquisition with a non-affiliated entity, the
anti-dilution provisions of the Warrants will not be triggered. The Company
does not intend to issue fractional shares of Class A Common stock, but will
pay cash in lieu thereof. A Class A and Class B Warrant holder will not
possess any rights as a stockholder of the Company. The shares of Class A
Common Stock, when issued upon the exercise of the Class A and Class B
Warrants in accordance with the terms thereof, will be fully paid and
non-assessable.
By reason of the Company's February 1989 private placement, each of the
Company's Class A Warrants, including those issued in the private offering,
were adjusted as follows: each Class A Warrant outstanding as of February 23,
1989 was adjusted so that each such Class A Warrant represented 1.1 Class A
Warrants. The exercise price of each Class A Warrant was reduced from $2.00
to $1.8494. Each Class A Warrant continued to represent the right to acquire
one share of the Company's Class A Common Stock and one Class B Warrant. The
exercise price of the underlying Class B Warrants was also adjusted, and that
was reduced from $3.00 to $2.6211 per Class B Warrant. The redemption prices
of the Warrants were also reduced from $.05 to $.0462 per Class A Warrant and
from $.05 to $.0437 per Class B Warrant. Subsequently, notices of the
adjustment and certificates representing the additional Warrants were issued
to all holders of record of the Warrants on February 23, 1989.
By reason of the issuance of the shares in the Company's April 1991
private placement, each of the Company's Class A Warrants, were adjusted as
follows: each Class A Warrant outstanding as of April 26, 1991 was adjusted
so that each such Class A Warrant represented 1.1 Class A Warrants. The
exercise price of each Class A Warrant was reduced from $1.8494 to $1.70.
Each Class A Warrant continued to represent the right to acquire one share of
the Company's Class A Common Stock and Class B Warrant.
41
<PAGE>
The exercise price of the underlying Class B Warrants was also adjusted, and
that was reduced from $2.6211 to $2.33 per Class B Warrant. The redemption
prices of the Warrants were also reduced from $.0462 to $.0424 per Class A
Warrant and from $.0437 to $.0389 per Class B Warrant. Subsequently, notices
of the adjustment and certificates representing the additional Warrants were
issued to all holders of record of the Warrants on April 26, 1991.
The exercise prices of the Class A and Class B Warrants may, at the
Company's option, upon 30 days prior written notice, be reduced and the
expiration date may be extended.
On June 14, 1995, the Company reverse split on a four-for-one basis its
share of Class A Common Stock. The authorization for the reverse split was
obtained by stockholder's approval. As a result, the Class A Warrants were
re-priced from $1.70 to $6.70 per Warrant. The Class B Warrants were
re-priced from $2.33 to $9.32. The Class A and Class B Warrants expiration
date was extended to April 5, 1996.
Subsequently, the Company in December 1995 extended the expiration date
of the Class A and Class B Warrants from April 5, 1996 to April 5, 1997.
In October 1996, the Company re-priced the Class A Warrants to an
exercise price of $4.25, the Class B Warrant exercise price remained at $9.32.
In April 1997, the Company further extended the expiration date of the
Class A and Class B Warrants to April 5, 1999. In addition, the Company
re-priced the exercise price of the Class A Warrants to $1.75 and re-priced
the Class B Warrants from $9.32 to $2.50.
12% CONVERTIBLE PREFERRED STOCK
GENERAL
The rights, preferences and limitation of the 12% Convertible Preferred
Stock are described generally in the summary following.
VOTING RIGHTS
Holders of the 12% Convertible Preferred Stock will not be entitled to
vote except, as otherwise required by the Delaware General Corporation Law"
("DGCL").
DIVIDENDS
The 12% Convertible Preferred Stock will accrue cumulative dividends at a
rate equal to 12 % per annum of the issue price of $1.00 per share (the "Issue
Price"), payable quarterly out of funds legally available therefore on each
December, March, June and September 15th in each year with respect to dividends
accrued as calculated by the Company in each such quarter (each a "Dividend
Payment Date"). At the option of the Company, dividends may be paid in cash or
in-kind. Dividends in kind shall be paid by delivery of that number of shares of
Common Stock determined by the dividing the amount of the aggregate dividend
accrued and payable by an amount (not less than $.10) equal to 50% of the
average closing bid price of the shares of Class A Common Stock during the 20
trading days immediately preceding a Dividend Payment Date. The Company
currently anticipates that, to the extent that funds are legally available
therefore, dividends will be paid in-kind by delivery of Class A Common Stock.
Upon any default by the Company in the payment of dividends, the sole remedy
shall be acceleration of the conversion privilege so that 100% of the shares of
12% Preferred Stock then held by a holder shall become immediately convertible .
Should the Company seek protection from its creditors through bankruptcy, the
shares of 12% Convertible Preferred Stock shall be convertible into the greater
of (i) that number of shares of Class A Common Stock determined so that all
holders of 12% Preferred Stock will receive, upon conversion, a number of shares
of Class A Common Stock which, when added to shares of Class A Common Stock
previously issued upon conversion or as payment for dividends, shall equal to
51% of the shares of the Company's Common Stock issued and outstanding
immediately following such conversion,
42
<PAGE>
or (ii) that number of shares of Common Stock determined by multiplying the
shares of 12% Convertible Preferred Stock owned by each holder by the
quotient of the Issue Price divided by the Conversion Price then in effect.
LIQUIDATION PREFERENCE
The 12% Convertible Preferred Stock shall carry a liquidation preference
in the amount of the Issue Price. Upon the liquidation and winding up of the
Company for any reason, each holder of shares 12% Convertible Preferred Stock
shall receive, prior to any distribution in respect to the Common Stock, a
liquidation distribution in the amount of the number of shares of 12%
Convertible Preferred Stock owned by such holder multiplied by the Issue
Price, plus the amount of all accrued but unpaid dividends thereon.
LEGAL OPINION
The validity of the securities being offered hereby is being passed upon
Baratta & Goldstein, 597 Fifth Avenue, New York, New York 10017.
EXPERTS
The financial statements of the Company as of March 31, 1997 and 1996 and
for each of the three years in the period ended March 31, 1997 included in
this Prospectus and elsewhere in the Registration Statement have been audited
by Mahoney Cohen & Company, CPA, P.C. independent certified public
accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Securities
and Exchange Act of 1934 (the "1934 Act") and in accordance therewith files,
reports and other information with the Securities and Exchange Commission
("Commission"). Such reports and other information can be inspected and
copied at the Public Reference facilities maintained by the Commission, 450
Fifth Street, NW Washington D.C. 20549, as well as the Regional Officer of
the Commission at 7 World Trade Center, suite 1300, New York, New York 10048,
and copies can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, NW, Washington D.C. 20549, at prescribed
rates. Reports, Proxy and other information regarding the Company can be
obtained from the Commission Web site http://www.sec.gov. Reports and other
information about the Company can be inspected at the offices of NASDAQ Stock
Market 1733 K Street, NW, Washington D.C. 20006-1500.
DOCUMENTS INCORPORATED BY REFERENCE
There is hereby incorporated in this Prospectus by reference the
Company's Annual Report on Form 10-K for the year ended March 31, 1997, Forms
10-QSB for the fiscal quarter ended June 30, 1997, and Form 10-QSB for the
fiscal quarter ended September 30, 1997 and the Company's current reports on
Forms 8-K Reports filed heretofore with the Securities and Exchange
Commission pursuant to the 1934 Act, to which reference is hereby made.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of a
post-effective amendment to the Registration Statement which indicates that
all securities offered by this prospectus have been sold or which
de-registers all securities then remaining unsold shall be deemed to
incorporated by reference in this prospectus and to be a part hereof from the
date of filing such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes hereof to the extent that statements contained herein (or in
any other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any such statement so modified
or superseded shall be deemed to constitute a part hereof, except as so
modified or superseded.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner to whom a copy of the Prospectus has been
delivered on written or oral request of such person, a copy of any or all of
the documents referred to above which have been or may be incorporated in
43
<PAGE>
this Prospectus by reference, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such documents.
Requests for such copies should be directed to the offices of the Company,
(212 306-6100) 130 Cedar Street, New York, New York 10006, Attn: Tom
Ricapito, Controller.
No dealer, sales representative or other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in the Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or any underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of any offer to buy, any
securities other than the registered securities to which it relates or any
offer to, or the solicitation of, any person in any jurisdiction where such
an offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as
of any time subsequent to the date hereof.
INDEMNIFICATION
The General Corporation Law of the State of Delaware grants each
corporation organized hereunder the power to indemnify its officers and
directors against liability under certain circumstances. The Company's
Certificate of Incorporation provides that the Company shall, to the full
extent permitted by law, indemnify all directors, officers, employees and
agents of the Company. The Company's Certificate of Incorporation also
contains a provision eliminating the liability of directors of the Company to
the Company or its stockholders for monetary damages, except under certain
circumstances.
The Company also has a policy insuring its directors and officers against
certain liabilities, including liabilities under the Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expresses in the Act and is
therefore unenforceable.
44
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS PAGE
Report of Independent Accountants.......................... F-1
Balance Sheets as of March 31, 1997 and 1996............... F-2
Statements of Operations for the Years Ended
March 31, 1997, 1996 and 1995.......................... F-4
Statements of Stockholders' Equity (Deficiency)
for the Years Ended March 31, 1997, 1996 and 1995...... F-5
Statements of Cash Flows for the Years Ended
March 31, 1997, 1996 and 1995.......................... F-8
Notes of Financial Statements.............................. F-11
Balance Sheet (unaudited) as of September 30, 1997......... F-27
Statement of Operations (unaudited) as of September 30,
1997 and 1996......................................... F-29
Statement of Cash Flows (unaudited) as of September 30,
1997 and 1996......................................... F-30
Notes to Financial Statement as of September 30, 1997...... F-31
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualification Accounts......... F-34
Schedules not listed in the above table of contents have been omitted
because they do not apply or are not required or the information required to
be set forth therein is included in the financial statements and accompanying
notes thereto.
F-i
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
Information Management Technologies
Corporation
We have audited the accompanying balance sheets of Information Management
Technologies Corporation as of March 31, 1997 and 1996, and the related
statements of operations, stockholders' equity (deficiency), and cash flows
for each of the three years in the period ended March 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Information
Management Technologies Corporation as of March 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles.
As described in Note B(12) to the financial statements, the Company
changed its method of accounting for the beneficial conversion feature of
convertible debentures in 1996 to comply with the Securities and Exchange
Commission staff's position of retroactive application of this accounting
practice.
F-1
<PAGE>
Our previous report on the 1996 financial statements, dated June 19, 1996,
included an explanatory paragraph that described the uncertain outcome of an
investigation by the Securities and Exchange Commission. As explained in
Note N to the financial statements, that investigation has been terminated on
September 10, 1996.
We have also audited Schedule II for the years ended March 31, 1997, 1996
and 1995. In our opinion, this schedule presents fairly the information
required to be set forth therein.
/s/ Mahoney Cohen & Company, CPA, P.C.
---------------------------------------
Mahoney Cohen & Company, CPA, P.C.
New York, New York
June 12, 1997
F-1/A
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Notes B-2 and B-7).............. $ 1,228,819 $ 2,011,560
Accounts receivable, net of allowance for doubtful
accounts of $36,800 at March 31, 1997 and
$104,500 at March 31, 1996 (Notes B-7 and L)............. 1,331,428 1,406,731
Inventory (Note B-3)....................................... 281,729 303,133
Note receivable--related party (Note F).................... 54,886 --
Prepaid expenses and other current assets (Note M)......... 590,224 972,214
------------ ------------
Total current assets....................................... 3,487,086 4,693,638
PROPERTY AND EQUIPMENT--AT COST
(Notes B-4 and G)
Production equipment....................................... 2,548,699 5,102,268
Software................................................... 242,932 295,128
Furniture and fixtures..................................... 459,696 399,899
Leasehold improvements..................................... 609,888 461,089
Computer equipment......................................... 806,066 1,101,323
------------ ------------
4,667,281 7,359,707
Less: Accumulated depreciation and amortization............ 2,065,833 5,013,249
------------ ------------
Net property and equipment......................... 2,601,448 2,346,458
------------ ------------
OTHER ASSETS
Note receivable--related party (Note F).................... 195,114 --
Deposits and other assets (Note B-5)....................... 364,405 347,636
Investment in INSCI Corp. (Note C)......................... 1,782,108 379,057
------------ ------------
Total other assets................................. 2,341,627 726,693
------------ ------------
TOTAL ASSETS................................................... $ 8,430,161 $ 7,766,789
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
BALANCE SHEETS (Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
MARCH 31,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Bank credit facility (Note E-2)................................. $ -- $ 640,056
Current debt (Note D)........................................... 380,000 431,975
Current maturities of long-term debt (Note E)................... 288,329 497,328
Current maturities of long-term capital lease obligations
(Note G)...................................................... 280,878 333,728
Accounts payable................................................ 1,479,166 1,455,015
Accrued salaries................................................ 157,820 156,007
Deferred revenue................................................ -- 129,090
Other accrued liabilities....................................... 684,221 1,457,798
------------- -------------
Total current liabilities............................... 3,270,414 5,100,997
LONG-TERM DEBT, less current maturities
(Note E)........................................................ 900,000 2,793,329
DEFERRED RENT (Note H).............................................. 382,677 368,494
CAPITAL LEASE OBLIGATIONS, less current maturities
(Note G)........................................................ 213,002 362,279
------------- -------------
Total long-term liabilities............................. 1,495,679 3,524,102
------------- -------------
COMMITMENTS AND CONTINGENCIES
(Notes D through K and M)
STOCKHOLDERS' EQUITY (DEFICIENCY)
(Notes E, J and K)
12% Preferred Stock--authorized 3,000,000 shares at
$1.00 par value; 2,534,100 and 2,026,580 shares
issued and outstanding at March 31, 1997 and
1996, respectively.............................................. 2,534,100 2,026,580
Class A common stock--authorized 100,000,000 shares
at $.04 par value; 5,579,552 and 3,535,078 shares
issued and outstanding at March 31, 1997 and
1996, respectively.............................................. 223,182 141,403
Additional paid-in capital.......................................... 31,528,477 29,558,530
Unrealized gain from investment in securities available
for sale (Note C)............................................... 1,774,515 --
Accumulated deficit................................................. (32,396,206) (32,584,823)
------------- -------------
Total stockholders' equity (deficiency)................. 3,664,068 (858,310)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)............. $ 8,430,161 $ 7,766,789
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues (Note L)................................................... $ 10,714,711 $ 11,805,891 $ 14,047,883
Cost of sales....................................................... 8,488,716 9,057,533 10,641,843
------------- ------------- -------------
Gross profit........................................................ 2,225,995 2,748,358 3,406,040
Operating expenses:
Selling, general and administrative............................... 2,937,712 4,104,526 3,875,693
Termination of facility contract.................................. -- 75,000 --
Lease agreement buyout (Note H)................................... -- 376,826 --
Write-down of property and equipment.............................. -- -- 750,000
Other costs (Note O).............................................. 550,000 -- --
------------- ------------- -------------
Total operating expenses........................................ 3,487,712 4,556,352 4,625,693
------------- ------------- -------------
Loss from operations................................................ (1,261,717) (1,807,994) (1,219,653)
Other (income) expenses:
Interest expense, net............................................. 391,767 559,710 484,320
(Gain) loss from sale of stock in INSCI Corp. (Note C)............ (2,089,020) 73,500 --
Interest--beneficial conversion--convertible debt (Notes B-12
and E-6)........................................................ 88,889 900,000 --
Equity in net loss of INSCI Corp.................................. 158,030 1,452,000 2,187,411
Credit facility buyout............................................ -- 394,614 --
------------- ------------- -------------
Net other (income) expenses..................................... (1,450,334) 3,379,824 2,671,731
------------- ------------- -------------
Income (loss) from continuing operations............................ 188,617 (5,187,818) (3,891,384)
Loss from discontinued operations (Note N).......................... -- (390,696) (1,772,722)
------------- ------------- -------------
Net income (loss)................................................... $ 188,617 $ (5,578,514) $ (5,664,106)
------------- ------------- -------------
------------- ------------- -------------
Income (loss) per share from continuing operations (Note B-6)....... $ 0.04 $ (1.65) $ (1.41)
Loss per share from discontinued operations (Note B-6).............. -- (0.12) (0.64)
------------- ------------- -------------
Net income (loss) per share (Note B-6).............................. $ 0.04 $ (1.77) $ (2.05)
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of shares outstanding....................... 5,129,143 3,139,758 2,762,072
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
For the Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
A TOTAL
-------------------------- PREFERRED STOCK ADDITIONAL STOCKHOLDERS'
CLASS COMMON STOCK ------------------------ PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
---------- -------------- ----------- ----------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1994...... 2,762,077 $ 108,557 -- $ -- $ 21,674,671 $ (21,342,203) $ 441,025
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) -- --
Value assigned to options
granted in connection with
bridge financing.......... -- -- -- -- 155,000 -- 155,000
Costs associated with various
registrations and private
placements................ -- -- -- -- (2,647) -- (2,647)
Net loss.................... -- -- -- -- -- (5,664,106) (5,664,106)
---------- -------------- ----------- --------- ------------- -------------- ------------
Balance at March 31, 1995
(carried forward)........... 2,778,132 $ 111,125 -- $ -- $ 28,064,680 $ (27,006,309) $1,169,496
---------- -------------- ----------- --------- ------------- -------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Continued)
For the Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
A TOTAL
-------------------------- PREFERRED STOCK ADDITIONAL STOCKHOLDERS'
CLASS COMMON STOCK ------------------------ PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
---------- -------------- ---------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1995 (brought
forward)............ 2,778,132 $ 111,125 -- $ -- $ 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"--
Oportunidad......... 200,000 8,000 -- -- 242,000 -- 250,000
Issuance of preferred
stock from debenture
conversion.......... -- -- 2,026,580 2,026,580 -- -- 2,026,580
Amortization of
beneficial
conversion feature
related to
convertible debt.... -- -- -- -- 900,000 -- 900,000
Net loss.............. -- -- -- -- -- (5,578,514) (5,578,514)
---------- -------------- ---------- ------------ ------------- -------------- ------------
Balance at March 31,
1996 (carried
forward)............ 3,535,078 $ 141,403 2,026,580 $ 2,026,580 $ 29,558,530 $ (32,584,823) $ (858,310)
---------- -------------- ---------- ------------ ------------- -------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(CONCLUDED)
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
TOTAL
CLASS A COMMON STOCK PREFERRED STOCK ADDITIONAL STOCKHOLDERS'
-------------------- -------------------- UNREALIZED PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT GAIN CAPITAL DEFICIT (DEFICIENCY)
--------- --------- --------- --------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996
(brought forward)............... 3,535,078 $ 141,403 2,026,580 $2,026,580 $ -- $29,558,530 ($32,584,823) $ (858,310)
Issuance of common stock for
services.................... 60,000 2,400 -- -- -- 48,000 -- 50,400
Issuance of common stock from
debenture conversion -
Infinity Investors............ 1,883,643 73,346 -- -- -- 2,026,654 -- 2,100,000
Issuance of preferred stock
from debenture conversion... -- -- 507,520 507,520 -- -- -- 507,520
Transfer agent administration
error....................... 100,831 6,033 -- -- -- (6,033) -- --
Costs associated with various
registrations and private
placements.................. -- -- -- -- -- (187,563) -- (187,563)
Unrealized gain from
investment in securities
available for sale.......... -- -- -- -- 1,774,515 -- -- 1,774,515
Amortization of beneficial
conversion feature related
to convertible debt......... -- -- -- -- -- 88,889 -- 88,889
Net income.................... -- -- -- -- -- -- 188,617 188,617
--------- --------- --------- --------- ----------- ---------- ------------ ------------
Balance at March 31, 1997....... 5,579,552 $ 223,182 2,534,100 $2,534,100 $1,774,515 $31,528,477 ($32,396,206) $3,664,068
--------- --------- --------- --------- ----------- ---------- ------------ ------------
--------- --------- --------- --------- ----------- ---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------
1997 1996 1995
----------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)................................................... $ 188,617 $ (5,578,514) $ (5,664,106)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Write-down of property and equipment............................... -- -- 750,000
Depreciation and amortization...................................... 456,579 458,741 558,975
Amortization of loan and consulting fees........................... 183,628 69,000 65,675
Amortization of goodwill........................................... -- -- 4,873
Amortization of beneficial conversion feature related to convertible
debt............................................................... 88,889 900,000 --
Interest paid on issuance of preferred stock....................... 232,520 130,580 --
Accretion of interest on current debt.............................. -- -- 32,292
(Gain) loss on sale on INSCI Corp. stock........................... (2,089,020) 73,500 --
Equity in net loss of INSCI Corp................................... 158,030 1,452,000 2,187,411
Write-off of net assets of discontinued operations................. -- 185,331 --
Provision for doubtful accounts.................................... -- 48,115 209,169
Deferred rent...................................................... 14,183 (200,954) 302,653
Changes in assets and liabilities:
Accounts receivable.............................................. 75,303 1,177,813 400,377
Inventory........................................................ 21,405 75,390 14,197
Prepaid expenses and other current assets........................ 63,562 (300,873) 147,506
Deposits and other assets........................................ (16,769) 231,143 (107,872)
Accounts payable................................................. 24,151 692,673 (161,897)
Accrued salaries................................................. 1,813 (58,993) 84,093
Deferred revenue................................................. (129,090) (424,933) 168,103
Customer deposits................................................ -- -- (210)
Other accrued liabilities........................................ (783,535) 143,747 (355,443)
----------- ------------- -------------
Net cash used in operating activities...................... (1,509,734) (926,234) (1,364,204)
----------- ------------- -------------
Cash flows from investing activities
Capital expenditures................................................ (568,390) (56,456) (214,348)
Proceeds from the sale of stock in INSCI Corp....................... 2,258,072 331,129 --
Loan to related party............................................... (250,000) -- --
Advances to INSCI Corp.............................................. -- -- (38,095)
Repayments by INSCI Corp............................................ -- 1,000,000 2,450,585
----------- ------------- -------------
Net cash provided by investing activities.................. 1,439,682 1,274,673 2,198,142
----------- ------------- -------------
Totals carried forward................................................ $ (70,052) $ 348,439 $ 833,938
----------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
Information Management Technologies Corporation
STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------
1997 1996 1995
----------- ------------- -------------
<S> <C> <C> <C>
Totals brought forward................................................ $ (70,052) $ 348,439 $ 833,938
Cash flows from financing activities
Net repayments under bank credit facility........................... (640,056) (479,442) (415,441)
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............................ 900,000 2,340,185 --
Repayments of long-term debt........................................ (627,328) -- (79,617)
Payments of capital lease obligations............................... (345,305) (529,721) (499,236)
Repayment of BNY warrant............................................ -- (200,000) --
Payment of stockholder loan......................................... -- -- (185,900)
Proceeds from equity placements and the exercise of options and
warrants.......................................................... -- 624,128 --
Costs associated with equity placements and preferred stock
redemptions....................................................... -- -- (213,500)
----------- ------------- -------------
Net cash provided by (used in) financing activities............... (712,689) 1,663,121 (874,813)
----------- ------------- -------------
Net increase (decrease) in cash and cash equivalents.................. (782,741) 2,011,560 (40,875)
Cash and cash equivalents, beginning of year.......................... 2,011,560 -- 40,875
----------- ------------- -------------
Cash and cash equivalents, end of year................................ $ 1,228,819 $ 2,011,560 $ --
----------- ------------- -------------
----------- ------------- -------------
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest............................................................ $ 94,450 $ 355,852 $ 387,518
----------- ------------- -------------
----------- ------------- -------------
Income taxes........................................................ $ -- $ 11,592 $ 2,166
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
(Concluded)
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the fiscal year ended March 31, 1997:
The holder of the Company's $2,100,000 6% convertible debenture issued in
March 1996 elected to convert the debt into 1,883,643 shares of Class A common
stock.
Holders of the Company's 12% subordinated convertible debentures elected to
convert $250,000 of debentures into shares of the Company's 12% preferred stock.
The Company repaid a short-term note valued at $51,975 by issuing INSCI
Corp. stock.
The Company incurred capital lease obligations of approximately $144,000.
During the fiscal 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 three year period.
The Company negotiated with one of its primary suppliers to convert $545,000
of trade payables into a two year interest bearing note.
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.
The Company incurred capital lease obligations of approximately $405,000.
During the fiscal 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.
The Company negotiated with several key vendors to convert $148,821 of trade
payables into twelve month notes.
The Company incurred capital lease obligations of approximately $311,000.
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE A--THE COMPANY
Information Management Technologies Corporation (referred to as "IMTECH"
or the "Company") was incorporated in 1986 in the State of Delaware. The
Company provides information processing and facilities management services to
financial, legal, accounting and other medium to large service organizations
which operate in business environments that are characterized by substantial
information processing, communications and document administration
requirements. The Company's customer base is principally located in New York
City and the surrounding metropolitan area, such as New Jersey, Southeast
Connecticut and Westchester County. The Company has also begun to service
clients in Pennsylvania, the midwest and in Europe, as a result of strategic
alliances with two New York based service providers (See Note F). The
alliances allow IMTECH to offer its clients a smooth process of receiving and
managing data for print production and subsequent distribution.
The Company holds a 16% ownership interest in INSCI Corp. ("INSCI") at
March 31, 1997. At March 31, 1996 and 1995, the Company held a 38% and 64%
ownership interest in INSCI, respectively. The investment in INSCI was
accounted for under the equity method through the period when the Company
owned more than 20% of the common stock in INSCI. When the Company's
investment in INSCI decreased below 20% the investment in INSCI was accounted
for under the "Securities Available For Sale" method as promogulated by
Statement of Financial Accounting Standards ("SFAS") No. 115.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies that
have been applied on a consistent basis in the preparation of the
accompanying financial statements:
1. REVENUE RECOGNITION
Revenue is recorded when services are performed or upon delivery of the
product.
2. CASH AND CASH EQUIVALENTS
For the purposes of reporting cash flows (presented under the indirect
method), the Company considers all highly liquid investments with
insignificant interest rate risk and an original maturity of three months
or less to be cash equivalents. The cash equivalents are carried at cost
which approximates fair value. At March 31, 1997, cash equivalents
included funds deposited in a liquid asset fund with a financial
institution.
3. INVENTORY
Inventory consists primarily of paper, toner and inks, and is stated at
the lower of cost (determined by the first-in, first-out method) or market.
4. PROPERTY AND EQUIPMENT
Depreciation of capital assets is provided to relate the cost of the
depreciable assets to operations over their estimated useful service
lives. In that connection, production equipment, computer hardware and
software and furniture and fixtures are depreciated by the straight-line
method over estimated useful lives ranging from five to seven years.
F-11
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4. PROPERTY AND EQUIPMENT (Continued)
Leasehold improvements are amortized by the straight-line method over the
lesser of the lease term or estimated useful lives of the improvements.
Major additions and betterments are capitalized and repairs and
maintenance are charged to operations in the period incurred. At the time
of disposal of any property and equipment, the cost and accumulated
depreciation or amortization are removed from the accounts and any
resulting gain or loss is recognized in the current period's earnings.
5. DEFERRED FINANCING COSTS
Costs incurred to secure financing arrangements are included in deposits
and other assets in the balance sheets. The costs, which amounted to
approximately $98,000 and $53,000, net of accumulated amortization of
approximately $38,000 and $13,000 as of March 31, 1997 and 1996,
respectively, are amortized over the life of the related credit
facilities, which range from 24 to 110 months.
6. Income (Loss) Per Share
Net income (loss) per share is calculated on the basis of the weighted
average of number shares outstanding during the fiscal year. The effect on
net income (loss) per share of the stock options and warrants outstanding
is antidilutive and is not included in the calculation of the 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 maintains cash balances at various banks and places its
temporary cash investments in a liquid asset fund (See Note B-2) with one
financial institution. Accounts at the banks and financial institution are
insured by the Federal Deposit Insurance Corporation (FDIC) and the
Securities Investor Protection Corporation (SIPC) up to $100,000 and
$500,000, respectively.
The Company performs ongoing credit evaluations of its customers and
records reserves for potentially uncollectible accounts receivable which
are deemed credit risks as determined by management. Accounts receivable
consist of geographically and industry dispersed customers.
8. USE OF ESTIMATES
The preparation of the accompanying 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 results could
differ from those estimates.
F-12
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, trade receivables and
payables and debt instruments. The carrying amount of cash and short-term
instruments approximates their fair values because of the relatively short
period of time between the origination of the instruments and their
expected realization. The carrying amount of the debt is based on the
current market interest rates being paid, and as a result, it approximates
fair value.
10. IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that the cost of an
asset may be impaired, an evaluation of recoverability would be performed.
If an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market or discounted cash flow value is
required. No such write-downs were required for the fiscal year ended
March 31, 1997.
11. ACCOUNTING FOR STOCK OPTIONS
Prior to April 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. APB No. 25 requires that compensation expense be recorded
on the date of grant only if the current market price of the underlying
stock exceeded the exercise price. During the fiscal year ended March 31,
1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair value of
all stock-based awards on the date of grant. Alternatively, SFAS No. 123
allows entities to continue to apply the provisions of APB No. 25 and
provide pro forma net income (loss) and pro forma income (loss) per share
disclosures for employee stock option grants made from 1995 forward as if
the fair-valued-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No.
25 and provide pro forma disclosure provisions of SFAS No. 123.
12. CONVERTIBLE DEBT
The beneficial conversion feature of outstanding convertible secured
promissory notes payable (See Note E-6) is accounted for as additional
interest to the note holders and amortized over the period from the date
of issue through the date the securities first become convertible. This
policy conforms to the accounting for these transactions announced by the
Securities and Exchange Commission ('SEC") Staff in March 1997.
The statement of operations for the fiscal year ended March 31, 1996 has
been adjusted to include a $900,000 interest charge from the beneficial
conversion feature related to convertible debentures to comply with the
staff's position of retroactive application of this accounting practice.
As a result, net loss per share has been increased from ($1.49) to ($1.77).
F-13
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE C--INVESTMENT IN INSCI CORP.
The Company holds a 16% ownership interest in INSCI, its former
majority-owned subsidiary. At March 31, 1997, the carrying value and
estimated fair market value of the Company's investment in INSCI is as
follows:
<TABLE>
<CAPTION>
COST BASIS MARKET VALUE UNREALIZED GAIN
----------- ------------ ---------------
<S> <C> <C> <C>
Investment in INSCI Corp. (636,467 shares)......................... $ 7,593 $1,782,108 $ 1,774,515
</TABLE>
The investment is accounted for under the "Securities Available For Sale"
method as promogulated by SFAS No. 115. As a result, the investment is
carried at fair market value. During the second quarter of fiscal year 1997,
the Company sold 703,000 shares of INSCI Corp. stock. Prior to that sale,
IMTECH owned a 38% interest in INSCI, whose results were accounted for under
the equity method. At March 31, 1996 and 1995, the Company had a 38% and a
64% ownership interest in INSCI, respectively. INSCI's financial position and
the results of its operations for the years ended March 31, 1996 and 1995
were as follows (in ,000):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net
sales....................................................................................... $ 7,913 $ 7,188
--------- ---------
--------- ---------
Net loss.................................................................................... $ (1,452) $(3,113)
--------- ---------
--------- ---------
Total assets................................................................................ $ 5,223
---------
---------
Total liabilities........................................................................... $ 2,704
Total stockholders' equity.................................................................. 2,519
---------
Total liabilities and stockholders' equity.................................................. $ 5,223
---------
---------
Investment in INSCI Corp.................................................................... $ 379
---------
---------
</TABLE>
NOTE D--CURRENT DEBT
At March 31, 1997 and 1996, current debt consisted of:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Loan-option note payable [1]............................................................. $ -- $ 51,975
12% subordinated convertible debentures [2].............................................. 380,000 380,000
---------- ----------
$ 380,000 $ 431,975
---------- ----------
---------- ----------
</TABLE>
[1] In January 1995, the Company obtained financing under a series of
loan-option agreements with five individuals in the aggregate of $250,000.
The loans were payable in one year and bore interest at a per annum rate of
9%. In January 1996, the Company repaid $200,000 of the outstanding loans
plus accrued interest ( to four out of the five individuals). During the
fiscal year ended March 31, 1997, the remaining loan-option holder was
repaid in shares of INSCI stock, at his request.
F-14
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE D--CURRENT DEBT (Continued)
[2] In connection with a private placement completed in January 1996, the
Company issued $380,000 in subordinated convertible debentures. The
debentures accrue interest at a per annum rate of 12% and entitle the
holders to convert the debentures plus accrued interest into Class A
common stock of the Company at a price per share of $1.50. The debentures
mature in January 1998. Interest charged to operations for the years
ended March 31, 1997 and 1996 amounted to approximately $46,000 and
$9,000, respectively.
NOTE E--LONG-TERM DEBT
At March 31, 1997 and 1996, long-term debt obligations consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31,
------------------------
<S> <C> <C>
1997 1996
---------- ------------
12% convertible subordinated debentures [1].......................................... $ -- $ 405,000
Revolving bank credit and term facility [2].......................................... -- 240,185
Trade payable conversion note [5].................................................... 288,329 545,472
6% convertible debenture [3], [6].................................................... -- 2,100,000
12% convertible secured notes [4], [6]............................................... 900,000 --
--------- ---------
1,188,329 3,290,657
Less: Current maturities............................................................. 288,329 497,328
--------- ---------
Total long-term debt................................................................. $ 900,000 $ 2,793,329
--------- ---------
--------- ---------
</TABLE>
[1] During the fiscal year ended March 31, 1992, the Company received
proceeds totaling $2,301,000 from a private placement whereby it issued
12% convertible subordinated debentures. Originally, the debentures were
convertible into Class A common stock of IMTECH at any time prior to
maturity at a price of $10.00 per share. In December 1995, the Company
established an exchange program which allowed the debenture holders to
receive $1.00 of preferred stock for every $1.00 of debentures. As of
March 31, 1996, the debenture holders converted $1,896,000 of debentures
into preferred stock.
During the fiscal year ended March 31, 1997, $250,000 of debentures were
converted into the Company's 12% preferred stock, and the remainder of
the debentures were redeemed. Interest from the debentures charged to
operations for the years ended March 31, 1997, 1996 and 1995 was
approximately $16,000, $210,000 and $276,000, respectively.
[2] During fiscal year ended March 31, 1996, the Company maintained a credit
facility arrangement with BNY Financial Corp. ("BNY") under which BNY
advanced the Company funds at a rate of 2% above the prime rate. As part
of the financing arrangement, the Company granted BNY a warrant to
purchase 100,000 shares of IMTECH's Class A common stock at an exercise
price equal to 80% of the market value on the date of grant. In addition,
the Company granted BNY the right to "put" the warrant back to the
Company if the warrant remained unexercised. In April of 1995, the
Company commenced payment of the warrant upon BNY's notification that it
was going to exercise the "put" option.
F-15
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
March 31, 1997, 1996 and 1995
NOTE E--LONG-TERM DEBT (Continued)
[2] (Continued)
On April 10, 1996, the Company terminated its financing arrangement with
BNY. The Company paid approximately $1,500,000 to BNY in full
satisfaction of all outstanding loans, advances and debt obligations,
including the "put" back warrant. In addition, the Company paid a
termination fee of $75,000, and received a release from BNY of all
collateral pledged as security for the lending agreement.
[3] In March 1996, the Company issued a two year 6% convertible debenture in
exchange for $2,100,000. The debenture was issued to a company called
Infinity Investors Ltd. ("Infinity"), under Regulation "S" of the
Securities Act, and it entitled Infinity to convert the debenture
principal plus accrued interest into Class A common stock of the Company
at a 30% discount to the market rate based on a five day average trading
price at the time of conversion. Interest charged to operations for the
years ended March 31, 1997 and 1996 amounted to $25,212 and $9,100,
respectively.
During the fiscal year ended March 31, 1997, the debentures were
completely converted, and as a result, the Company issued 1,833,643
shares of Class A common stock.
[4] On February 27, 1997, the Company issued convertible secured promissory
notes in exchange for proceeds of $900,000 as part of a private placement
offering. The notes bear interest at a per annum rate of 12%, and at the
option of MTECH, the interest can either be paid in cash or in the
Company's Class A common stock. The notes are secured by a pledge of
500,000 shares of INSCI Corp. stock. The Company has the right, under the
pledge agreement, to receive the return of 100,000 shares of the pledged
stock in the event it becomes required in order for IMTECH to obtain a
credit line or enter into a lease agreement for equipment. The notes can
be converted into Class A common stock of the Company at a 40% discount
to the previous five day average closing price, subject to certain
conversion limitations as set forth in the placement memorandum. The
right of conversion permits the holders the right to convert up to a
maximum of 10% of their note holdings in any month for a period of three
years from the effective date of registration for the shares of Class A
common stock underlying the notes. The Company will make its best efforts
to file a registration statement for the shares underlying the notes
within 180 days from the date of issue. The notes will be automatically
converted at the end of the three year conversion period. In addition,
each $1.00 principal amount of the notes entitles the holders to one
warrant to purchase one share of IMTECH's Class A common stock at a 40%
discount to the previous five day average closing price prior to the
conversion of the warrants. Interest charged to operations for the year
ended March 31, 1997 amounted to $9,000.
[5] In March 1996, the Company negotiated with one of its key suppliers to
convert $545,472 of payables to a two year unsecured installment
promissory note. The note is payable in twenty-four monthly installments
of $25,550 including interest at a per annum rate of 11.5%. Interest
charged to operations for the year ended March 31, 1997 amounted to
$49,456. The Company is current with the scheduled payments.
[6] In an Emerging Issues Task Force ("EITF") meeting sponsored by the
Financial Accounting Standards Board, held on March 13, 1997, the
Securities and Exchange Commission ("SEC") announced their position on
the accounting for the issuance of convertible debt securities with a
nondetachable conversion feature that is "in-the-money" at the date of
issue.
F-16
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
March 31, 1997, 1996 and 1995
NOTE E--LONG-TERM DEBT (Continued)
[6] (Continued)
Those securities are usually convertible into common stock at the lower
of a conversion rate fixed at the date of issue or a fixed discount to
the common stock's market price at the date of conversion, creating a
"beneficial conversion feature". The SEC believes that the beneficial
conversion feature should be recognized and measured by allocating a
portion of the proceeds equal to the intrinsic value of that feature to
additional paid-in capital. The amount is calculated at the date of issue
as the difference between the conversion price and the fair value of the
common stock into which the security is convertible. The discount
resulting from the allocation of the proceeds, in effect, increases the
interest rate of the security and should therefore be amortized as a
charge to interest expense over the period from the date the security is
issued to the date it first becomes convertible. The beneficial
conversion feature of the convertible secured promissory notes above is
accounted for as additional interest expense. For the years ended March
31, 1997 and 1996, additional interest expense of approximately $89,000
and $900,000, respectively, was charged to operations.
NOTE F--RELATED PARTY TRANSACTIONS
INSCI CORP.
In April 1994, INSCI Corp., the Company's then majority-owned subsidiary
(See Note C), completed a public offering ("IPO") of $1,250,000 units for
which IMTECH received net proceeds of approximately $7,200,000. Out of the
proceeds raised from the IPO, INSCI used $2,327,000 as partial repayment
toward its indebtedness to IMTECH. Unpaid principal due to IMTECH was
converted into 41,343 shares of INSCI preferred stock.
In December 1994, IMTECH converted 25,000 shares of INSCI preferred stock
into 500,000 shares of INSCI common stock at a rate of 20 INSCI common shares
for each share of preferred stock held. In June 1995, IMTECH redeemed the
remaining 16,343, shares of INSCI preferred stock for $1,000,000.
BLITZ SYSTEMS, INC.
IMTECH is party to a consulting agreement with Blitz Systems, Inc.
("Blitz"), a company owned 100% by the Chief Executive Officer of IMTECH.
Blitz is a computer systems consulting firm specializing in developing total
business solutions for all business management systems. During the year ended
March 31, 1997, the Company renewed the agreement for one year (November 1,
1996 through October 31, 1997), at a cost to IMTECH of $40,000 per month.
Prior to fiscal year 1997, Blitz had performed computer consulting services
for IMTECH on a month-to-month basis. Blitz's responsibilities under the
contract are to reengineer, reorganize and run the day-to-day operations of
IMTECH's data processing department. In addition, Blitz is to (1) provide
extensive technical support for many of IMTECH's clients on-site; (2)
analyze, design and develop customized database systems as required by the
management of IMTECH; and (3) provide support for the Company's Xerox 9700
laser printing system and related programming. Fees paid to Blitz and charged
to operations for the year ended March 31, 1997 amounted to approximately
$489,000.
F-17
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
March 31, 1997, 1996 and 1995
NOTE F--RELATED PARTY TRANSACTIONS (Continued)
BLITZ SYSTEMS, INC. (Continued)
In December 1996, IMTECH provided Blitz with a secured loan in the amount
of $250,000. The loan is evidenced by a Secured Promissory Note and
collateralized by a security interest on the accounts receivable, equipment
and all tangible and intangible rights of Blitz, which the Company is
currently in the process of perfecting. According to the terms of the loan
agreement, by no later than April 30, 1997, Blitz had the option to exchange
50% of the outstanding shares of Research Distribution Services, Inc., a
company owned 100% by the sole stockholder of Blitz, or repay the loan on an
installment basis with interest at the prime rate. On April 30, 1997, Blitz
commenced payment of the note on an installment basis over a forty-eight
month period at $6,162 per month including interest at 8.5%, through March
2001.
RESEARCH DISTRIBUTION SERVICES, INC.
In November 1996, the Company entered into a service agreement with
Research Distribution Services, Inc. ("RDS"), a company owned by the Chief
Executive Officer of IMTECH. Under the contract, RDS is to provide mailing
list database management, fulfillment, mailing and related services to IMTECH
for a period of one year. The contract runs from January 1, 1997 through
December 31, 1997, at a monthly minimum cost to IMTECH of $22,500 (based on
minimum average fulfillment levels as stipulated in the agreement). Total
fees paid to RDS and charged to operations for the year ended March 31, 1997
amounted to $67,500.
NOTE G--CAPITAL LEASE OBLIGATIONS
The Company is the lessee of various high speed duplicating equipment
under noncancellable capital leases expiring in various years through 2002.
The assets and liabilities under the capital leases are recorded at the lower
of the present value of the minimum lease payments (based on interest rates
ranging from 10% to 26%) or the fair value of the assets. The assets are
depreciated over the lower of their related lease terms or their estimated
productive lives (See Note B-4). At March 31, 1997 and 1996, the book value
of the equipment under capital leases was approximately $901,000 and
$1,212,000, respectively.
Minimum future lease payments under capital leases as of March 31, 1997
and for each of the next five years and in the aggregate are as follows:
YEAR ENDING MARCH 31,
- ---------------------
1998................................................... $357,580
1999................................................... 159,965
2000................................................... 51,625
2001................................................... 51,625
2002................................................... 12,909
--------
Total minimum lease payments........................... 633,704
Less: Amount representing interest..................... 139,824
Less: Current portion.................................. 280,878
--------
Present value of long-term capital lease obligations... $213,002
--------
--------
F-18
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
March 31, 1997, 1996 and 1995
NOTE H--OPERATING LEASE
The Company leases its executive and regional service center facilities
(approximately 32,000 square feet) in a building located at 130 Cedar Street
in New York City, under a noncancellable lease expiring in July 2003. The
rental payments under the lease are subject to annual cost of living and
maintenance increases. Rent expense charged to operations for the years ended
March 31, 1997, 1996 and 1995 amounted to approximately $494,000, $629,000
and $1,013,000, respectively. In June 1995, the Company renegotiated the
terms of the lease for 130 Cedar Street to reflect the return of 20,000
square feet of previously occupied space. A lease buyout agreement was
executed which required IMTECH to pay a fixed fee of approximately $377,000
in full satisfaction of the previously leased space.
Generally accepted accounting principles require that rental payments
under a noncancellable lease with scheduled rent increases be recognized on a
straight-line basis over the lease term. As a result, additional rent expense
has been recognized for the years ended March 31, 1997, 1996 and 1995.
Consequently, deferred rent of approximately $383,000 and $368,000
representing pro-rata future payments is reflected in the accompanying
balance sheets as of March 31, 1997 and 1996, respectively.
Minimum future rental payments under the noncancellable operating lease
as of March 31, 1997 are as follows:
FOR THE YEAR ENDED MARCH 31,
- ----------------------------
1998...................................... $ 496,600
1999...................................... 512,000
2000...................................... 528,000
2001...................................... 544,600
2002...................................... 579,800
Thereafter................................... 775,000
----------
$3,436,000
----------
----------
NOTE I--INCOME TAXES
Deferred income tax assets and liabilities are computed as the difference
between the financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
F-19
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
March 31, 1997, 1996 and 1995
NOTE E--INCOME TAXES (Continued)
At March 31, 1997, the Company has net operating loss carryforwards
("N.O.L.'s") totaling $13,785,000 available to offset future federal and
state taxable income through 2011 as follows:
N.O.L.'S EXPIRING
------------- -----------
March 31,
1989.............................. $ 2,209,000 2004
1990.............................. 2,405,000 2005
1991.............................. 1,407,000 2006
1992.............................. 1,628,000 2007
1994.............................. 284,000 2009
1995.............................. 1,350,000 2010
1996.............................. 4,502,000 2011
-----------
$13,785,000
-----------
-----------
In 1997 the Company utilized approximately $189,000 of N.O.L.'s to reduce
taxable income to zero. Accordingly, the Company has not recorded a provision
for income taxes for the year ended March 31, 1997. The tax benefits
resulting from the N.O.L.'s have been fully reserved because the likelihood
of their realization could not be determined.
NOTE J--COMMON STOCK
In May 1995, with the approval of its shareholders, the Company recorded
a four-for-one reverse stock split of IMTECH's Class A common stock. In
addition, the shareholders approved an increase in the par value of the Class
A common stock from $.01 to $.04. The number of shares authorized under the
Company's stock option plans, as stated in Note K, increased. Accordingly,
all references to the number of shares outstanding have been adjusted for all
of the periods presented to give effect to the aforementioned reverse stock
split.
In November 1995, the Company entered into a loan arrangement with a
foreign entity known as Fondo De Adquisciones E Inversiones Internationales
XL, S.A. ("Fondo"), whereby Fondo loaned IMTECH the sum of $250,000, which
bore interest at a per annum rate of 15%, in exchange for a convertible
subordinated debenture. In December 1995, in accordance with the terms of the
loan agreement, Fondo converted the debenture into shares of the Company's
Class A common stock at a per share price of $.875. As a result of the
conversion, 285,750 shares of IMTECH Class A common stock was issued under
Regulation "S" of the Securities Act.
In January 1996, the holders of options issued as a result of the January
1995 loan-option agreements (See Note D-1), 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.
In January 1996, the Company sold 200,000 shares of its Class A common
stock for total proceeds of $250,000 ($1.25 per share price), to a company
known as C.A. Opprtunidad S.A. under the rules of Regulation "S" of the
Securities Act.
F-20
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE J--COMMON STOCK (Continued)
In March 1996, the Company issued a two year 6% convertible debenture in
exchange for $2,100,000. The debenture was issued to a company called Infinity
Investors Ltd. ("Infinity"), under Regulation "S" of the Securities Act, and it
entitled Infinity to convert the debenture principal plus accrued interest into
Class A common stock of the Company at a 30% discount to the market based on a
five day average trading price at the time of conversion. During the fiscal year
ended March 31, 1997, the debenture was completely converted, and as a result,
the Company issued 1,833,643 shares of Class A common stock at an average per
share price of $1.15.
During the fiscal year ended March 31, 1997, the Company issued 60,000
shares of its Class A common stock in exchange for promotional services valued
at $50,400.
NOTE K--STOCK OPTIONS
NON-QUALIFIED STOCK OPTION PLAN
In August 1987, the Board of Directors approved and adopted a Non-Qualified
Stock Option plan ("NQSO"). Under the NQSO plan, individuals determined to be
key persons whom the Company relies on for the successful conduct of its
business, as determined by the Compensation Committee, are granted options to
purchase IMTECH's Class A common stock. There are 4,000,000 shares reserved for
grant under the NQSO plan. At March 31, 1997, options to purchase approximately
1,766,000 shares of Class A common stock were outstanding and approved for grant
under the NQSO plan at exercise prices ranging from $1.00 to $9.90 per share.
INCENTIVE STOCK OPTION PLAN
Also in August of 1987, the Board of Directors adopted the Company's
Incentive Stock Option plan ("ISO"). The ISO plan allows the Company to grant to
employees determined to be key personnel by management, incentive stock options
under the guidelines of Section 422 of the Internal Revenue Code. The plan is
available to all of the Company's employees, including officers and employee
directors, and is intended to be used by management to attract and retain key
employees. The ISO is administered by the Compensation Committee, who
establishes the terms of the options granted including their exercise prices,
the dates of grant and number of shares subject to options. The exercise prices
of all of the options granted under the ISO plan must be equal to no less than
the fair market value of the Class A common stock on the date of grant, and the
terms of the options may not exceed ten years. 3,000,000 shares of IMTECH Class
A common stock are reserved under the ISO plan for grant. For any stockholder
who may own more than 10% of the Company's outstanding voting shares, the
exercise price of options received under the ISO plan 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 of the options must not exceed five years. At March 31, 1997,
options to purchase approximately 2,346,000 shares of IMTECH's Class A common
stock were outstanding and approved for grant under the ISO plan at exercise
prices ranging from $1.88 to $5.85 per share.
F-21
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE K--STOCK OPTIONS (CONTINUED)
DIRECTORS OPTION PLAN
In October 1988, the Board of Directors adopted the Directors Option ("DO")
plan, which was authorized by the stockholders' on December 19, 1988, and was
subsequently amended in October 1992. The purpose of the DO plan is to help
IMTECH retain the services of qualified non-officer or non-employee directors,
who are considered essential to the business progress of the Company. Under the
DO plan, options are granted only on the date of the annual stockholders'
meeting held once every calendar year. A total of 1,500,000 shares of the
Company's Class A common stock has been reserved for grant under the DO plan. At
March 31, 1997, there were no options outstanding under the DO plan.
The following is a summary of the stock option activity for the three years
ended March 31, 1997 (in ,000):
<TABLE>
<CAPTION>
NQSO ISO DO OTHER
-------------------- -------------------- -------------------- --------------------
[A] [B] [A] [B] [A] [B] [A] [B]
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at April 1, 1994........... 279 8.18 272 2.08 60 3.13 20 10.00
Granted.............................. -- 300 .33 -- -- --
Canceled............................. (58) 1.69 (104) .33 (45) 3.13 -- --
--------- ------- ------ ------
Outstanding at March 31, 1995.......... 221 9.90 468 5.85 15 3.13 20 10.00
Granted.............................. 1,195 2.07 878 2.16 -- -- --
Canceled............................. -- -- -- (20) 10.00
--------- ------- ------ ------
Outstanding at March 31, 1996.......... 1,416 3.29 1,346 3.44 15 3.13 -- --
Granted.............................. 350 1.68 1,125 1.24 -- -- --
Canceled............................. -- (125) 1.88 (15) 3.13 -- --
--------- ------- ------ ------
Outstanding at March 31, 1997.......... 1,766 2.97 2,346 2.47 -- -- --
--------- ------ ------- ----- ------ ----
Exercisable at March 31, 1997.......... 1,016 2.09 954 1.53 -- -- -- --
--------- ------ ------- ----- ------ ----- ------
</TABLE>
- ------------------------
[a] = Number of options.
[b] = Weighted average exercise price per share.
STOCK-BASED COMPENSATION
During the fiscal year ended March 31, 1997, the Company adopted SFAS No.
123, "Accounting for Stock-Based Compensation". The pronouncement requires
entities to recognize as compensation expense over the vesting period the fair
value of stock-based awards on the date of grant. Alternatively SFAS No. 123
allows entities to continue to apply the provisions of APB No. 25 and provide
pro forma net income and pro forma income (loss) per share disclosures for
employee stock option grants made from 1995 forward as if the fair-valued-based
method defined in SFAS No. 123 had been applied.
F-22
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE K--STOCK OPTIONS (Continued)
STOCK-BASED COMPENSATION (Continued)
The Company has elected to adopt the disclosure-only provisions of SFAS No.
123, and as described above, will continue to apply APB No. 25 to account for
stock options. Had compensation expense been determined as provided in SFAS No.
123 for stock options using the Black-Scholes option pricing model, the pro
forma effect would have been:
<TABLE>
<CAPTION>
For the Years Ended March 31,
1997 1996
-------------- -------------
<S> <C> <C>
Net income (loss) applicable to common shares--as reported.............................. 188,617 (5,578,514)
Net income (loss) applicable to common shares--pro forma................................ (560,483) (6,059,414)
Net income (loss) per common share--as reported......................................... .04 (1.77)
Net income (loss) per common share--pro forma........................................... (.11) (1.93)
</TABLE>
The fair value of each option grant is calculated using the following
weighted average assumptions:
<TABLE>
<CAPTION>
For the Years Ended March 31,
1997 1996
--------------- -------------
<S> <C> <C>
Expected life (in years)................................................................ 5 5
Interest rate........................................................................... 6.01% 5.86%
Volatility.............................................................................. 287% 286%
Dividend yield.......................................................................... -- --
</TABLE>
NOTE L--MAJOR CUSTOMERS
During the years ended March 31, 1997 and 1996, sales to the two largest
customers of the Company accounted for approximately 38% and 39% of total
revenue, respectively. During the year ended March 31, 1995, sales to three of
the Company's largest customers accounted for 56% of the total revenue for that
year. At March 31, 1997 and 1996, the two largest customers of the Company had
accounts receivable balances in the aggregate of approximately $156,000 and
$120,000, respectively.
F-23
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE M--CONTINGENCIES
INVESTIGATION BY THE SECURITIES AND EXCHANGE COMMISSION
In September 1992, IMTECH and INSCI Corp., the Company's then majority-owned
subsidiary (See Note C), (collectively known as the "Companies"), reached an
agreement with the Securities and Exchange Commission ("SEC") to conclude and
settle an informal investigation of the Companies. The Companies, without
admitting or denying any of the allegations made by the SEC in its complaint,
and without trial or final adjudication of the allegations made, consented to
the entry of an order enjoining IMTECH 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 Companies by restricting
their ability to raise funds from individuals located in certain significant
states. The impact of the restrictions may prevent both IMTECH and INSCI from
conducting future public offerings or private placements to raise capital.
On April 3, 1995, the SEC issued a private order of the investigation of
both IMTECH and INSCI, the Company's then majority-owned subsidiary (which
IMTECH currently holds a 16% ownership interest in), and their officers and
directors for the period March 1994 through April 13, 1995. The order of
investigation inquired into whether the Companies and their then officers and
directors violated the following Rules of the Securities Exchange Act of
1934: Rule 10b-5; Section 13(a) and Rules 12b-20, 13a-11 and 13a-13, failure
to file annual reports and other required information of the SEC rules and
regulations; Section 13(b)3, failure to maintain proper books and records;
Section 13(b)(2)(a), Rules 13b-1 and 13b-2, falsification or caused to be
falsified books and records of the Companies. On September 10, 1996, the SEC
informed IMTECH that the staff inquiry related to those matters had been
terminated and no action had been recommended at that time.
EMPLOYEE BENEFIT PLANS
In January 1994, the Company received correspondence from the United States
Department of Labor (the "DOL") stating their intent to penalize the Company in
connection with an investigation of past IMTECH employee benefit plans (prior to
April 1, 1992). The DOL concluded that for one of the plan years in question,
the Company did not file the proper financial information required. As a result,
the DOL states in their correspondence that they intend to penalize the Company
for the amount of $50,000 regarding their findings. As of March 31, 1997, the
penalty amount had not yet been assessed.
In January 1996, the Company implemented a 401(k) plan covering all eligible
employees (personnel with twelve consecutive months of service). Employer
contributions to the plan are based on the discretion of management. Employees
can elect to contribute up to a maximum of 15% of their salaries to the plan.
Since its inception, IMTECH has not made any contributions to the plan, matching
or otherwise.
REGISTRATION RIGHTS
The Company has granted, without cost, demand and "piggyback" registration
rights with respect to the stock underlying securities issued or issuable to the
holders of certain outstanding warrants and shares of the Company. Although the
Company has agreed to register the underlying shares with respect to these
securities, no registration statement has been filed as of the current time.
Consequently, the security holders may assert a potential claim against the
Company for damages.
F-24
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE M--CONTINGENCIES (Continued)
EMPLOYMENT AGREEMENTS
In December 1996, the Board of Directors appointed Matti Kon as the
Company's Chief Executive Officer. Consequently, the Company entered into an
employment agreement with Mr. Kon which provides for a base annual salary of
$200,000 plus an incentive bonus equal to 20% of operating income as reported in
the annual 10-K document, up to a maximum of $500,000. The agreement has an
initial one year term and awarded Mr. Kon 500,000 options to purchase 500,000
shares of the Company's Class A common stock at an exercise price of $1.18 per
share as a signing bonus. In the event the employment agreement is renewed for
an additional one year term, Mr. Kon will be entitled to receive an additional
500,000 options to purchase 500,000 shares of Class A common stock at his
original exercise price. The agreement further provides that Mr. Kon has the
right to devote a some of his time and attention to his other business
interests.
The Company has entered into an employment agreement with Mr. Joseph Gitto,
its President and Chief Financial Officer. The agreement has an initial one year
term and provides for an annual base salary of $140,000. In addition, Mr. Gitto
is entitled to an incentive bonus equal to 15% of operating income as reported
in the annual 10-K document, up to a maximum of $150,000, and has been awarded
600,000 options to purchase 600,000 shares of the Company's Class A Common stock
at exercise prices ranging from $1.25 to $1.88 per share.
OTHER
In November 1995, the Company entered into a three year service agreement
with Corporate Relations Group, Inc. ("CRG"), whereby CRG was to provide IMTECH
with promotional and brokerage communication services related to the marketing
of the Company's stock. As consideration for their services, IMTECH was to pay
CRG the sum of $300,000 or 171,000 shares of the Company's free trading Class A
common stock plus 500,000 options to purchase 500,000 shares of Class A common
stock at exercise prices ranging from $1.75 to $3.06 per share for a period of
five years.
The Company elected to pay CRG by issuing 171,000 shares of Class A common
stock. The Company made an initial payment to CRG of 92,250 shares of freely
traded Class A common stock which IMTECH borrowed from a number of shareholders.
The Company agreed to repay the shareholders by making interest payments at
a rate of 10% per annum in addition to returning the borrowed shares plus one
additional share of Class A common stock for each ten shares of borrowed stock
(an aggregate of 9,250 additional shares). The Company further agreed to grant
cost free registration rights to each lender for the additional shares as a
result of the loan transaction. The balance of the 78,750 shares was not
remitted to CRG. CRG asserted a claim for the balance of the shares. The Company
has disputed the claim based upon the position that CRG did not perform under
the provisions of the service contract. The Company is currently in the process
of instituting legal action, in the state of Florida based upon the jurisdiction
which was decided in the agreement, to recover the stock and seek punitive
damages from CRG.
F-25
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
NOTE N--DISCONTINUED OPERATIONS
During the fiscal year ended March 31, 1995, the Company discontinued its
Litigation Support Services division, which generated sales of approximately
$1,563,000 and recorded a net loss of approximately $1,773,000 for that year.
The discontinued division wound down its operations during the fiscal year ended
March 31, 1996, and as a result, the Company recorded a final charge of
approximately $390,000 to write off the remaining assets.
NOTE O--OTHER COSTS
During the third quarter of fiscal year ended March 31, 1997, management
adopted a formal plan to restructure IMTECH's work force and redeploy the
operating assets of the Company. Management's intentions are to make the Company
operate more efficiently and remain competitive in the research printing market.
In accordance with the restructuring plan, the Company recorded a charge of
$550,000 for the year ended March 31, 1997 to account for the costs incurred to
reorganize the work force and redeploy the production equipment, summarized as
follows:
Severance payments..................... $ 259,000
Payroll taxes and benefits............. 77,000
Consulting fees........................ 131,000
Asset redeployment costs............... 83,000
---------
$ 550,000
During the year ended March 31, 1997, the Company paid approximately
$400,000 of the costs detailed in the schedule above and had a reserve in the
amount of $150,000 included in other accrued liabilities appearing on the
balance sheet, which is expected to cover any remaining costs that will be paid
subsequent to March 31, 1997.
F-26
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C>
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 725,870
Accounts receivable, net of allowance for doubtful
accounts of $61,000.............................................. 1,336,716
Inventory.......................................................... 279,903
Note receivable--related party..................................... 57,175
Prepaid expenses and other current assets.......................... 738,776
-------------
Total current assets.......................................... 3,138,440
PROPERTY AND EQUIPMENT--AT COST
Production equipment............................................... 2,944,182
Software........................................................... 367,508
Furniture and fixtures............................................. 340,110
Leasehold improvements............................................. 674,718
Computer equipment................................................. 833,157
-------------
5,159,675
Less:Accumulated depreciation and amortization..................... 2,149,415
-------------
Net property and equipment.................................... 3,010,260
-------------
OTHER ASSETS
Note receivable--related party..................................... 165,889
Deposits and other assets.......................................... 431,454
Investment in INSCI Corp........................................... 1,078,408
-------------
Total other assets............................................ 1,675,751
-------------
TOTAL ASSETS.......................................................... $ 7,824,451
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
BALANCE SHEET (Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
------------
(UNAUDITED)
<S> <C>
CURRENT LIABILITIES
Loan payable--related party......................................... $125,000
Current debt........................................................ 380,000
Current maturities of long-term debt................................ 256,839
Current maturities of long-term capital lease obligations........... 232,540
Accounts payable.................................................... 1,565,852
Accrued salaries.................................................... 133,501
Other accrued liabilities........................................... 1,021,749
---------
Total current liabilities......................................... 3,715,481
LONG-TERM DEBT, less current maturities............................... 790,000
DEFERRED RENT......................................................... 376,515
CAPITAL LEASE OBLIGATIONS, less current maturities.................... 356,607
---------
Total long-term liabilities.................................. 1,523,122
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
- --------------------
12% Preferred Stock--authorized 3,000,000 shares at
$1.00 par value; 2,662,860 shares issued and
outstanding........................................................ 2,662,860
Class A common stock--authorized 100,000,000
shares at $.04 par value; 5,579,552 shares
issued and outstanding............................................. 223,182
Additional paid-in capital........................................... 31,972,922
Unrealized gain from investment in securities
available for sale................................................. 1,078,408
Accumulated deficit.................................................. (33,351,524)
---------
Total stockholders' equity.......................................... 2,585,848
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................ $7,824,451
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
Information Management Technologies Corporation
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Revenues.................................................................. $ 4,662,346 $ 5,423,043
Cost of sales.............................................................. 3,712,059 4,240,873
------------ ------------
Gross profit............................................................... 950,287 1,182,170
Selling, general and administrative expenses............................... 1,302,848 1,578,513
------------ ------------
Loss from operations....................................................... (352,561) (396,343)
Other (income) expenses:
Interest expense, net.................................................... 217,543 200,563
Interest--beneficial conversion attached to convertible debt............. 444,444 --
Gain from the sale of INSCI Corp.
stock.................................................................. (59,230) (2,078,661)
Equity in net loss of INSCI Corp......................................... -- 158,030
------------ ------------
Net other (income) expense......................................... 602,757 (1,720,068)
------------ ------------
Net income (loss).......................................................... $ (955,318) $ 1,323,725
------------ ------------
------------ ------------
Net income (loss) per share................................................ $ (0.17) $ 0.28
------------ ------------
------------ ------------
Weighted average number of shares outstanding.............................. 5,579,552 4,710,822
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
-------------------------
<S> <C> <C>
1997 1996
----------- ------------
Cash flows from operating activities
Net income (loss)................................................ $ (955,318) $ 1,323,725
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization.................................. 240,000 202,377
Amortization of loan and consulting fees....................... 42,500 --
Amortization of beneficial conversion feature related
to convertible debt.......................................... 444,445 --
Interest paid on the issuance of preferred stock............... 128,760 --
Equity in net loss of INSCI Corp............................... -- 158,030
Gain from sale of INSCI Corp. stock............................ (59,230) (2,078,661)
Provision for doubtful accounts................................ 33,468 7,604
Deferred rent.................................................. (6,162) (49)
Changes in assets and liabilities:
Accounts receivable.......................................... (38,755) (26,980)
Inventory.................................................... 1,826 (77,366)
Prepaid expenses and other current assets,
deposits and other......................................... (258,102) (98,944)
Accounts payable, accrued expenses and other
current liabilities........................................ 510,478 (824,630)
----------- ------------
Net cash provided by (used in) operating activities... 83,910 (1,414,894)
----------- ------------
Cash flows from investing activities
Capital expenditures............................................. (389,507) (267,977)
Repayments from loan to related party............................ 26,936 --
Proceeds from the sale of INSCI Corp. stock...................... 67,931 2,536,947
----------- ------------
Net cash (used in) provided by investing activities... (294,640) 2,268,970
----------- ------------
Cash flows from financing activities
Net repayments under bank credit facility........................ -- (640,056)
Net proceeds from issuance of long-term debt..................... 90,000 --
Proceeds from related party loan................................. 125,000 --
Payments of capital lease obligations............................ (164,037) (128,192)
Repayments of long-term debt..................................... (343,182) (431,975)
----------- ------------
Net cash used in financing activities................. (292,219) (1,200,223)
----------- ------------
Net decrease in cash and cash equivalents.......................... (502,949) (346,147)
Cash and cash equivalents, beginning of year....................... 1,228,819 2,011,560
----------- ------------
Cash and cash equivalents, end of period........................... $ 725,870 $ 1,665,413
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
September 30, 1997
THE COMPANY
Information Management Technologies Corporation (referred to as
"IMTECH" or the "Company") was incorporated in 1986 in the State of
Delaware. The Company provides information processing and facilities
management services to financial, legal, accounting and other medium to
large service organizations which operate in business environments that
are characterized by substantial information processing, communications
and document administration requirements. The Company's customer base
is principally located in New York City and the surrounding metropolitan
area, such as New Jersey, Southeast Connecticut and Westchester County.
The Company has also begun to service clients in Pennsylvania, the
midwest and in Europe, as a result of strategic alliances with two New
York based service providers. The alliances allow IMTECH to offer its
clients a smooth process of receiving and managing data for print
production and subsequent distribution.
At September 30, 1997, the Company holds a 11% ownership interest
in INSCI Corp. ("INSCI") , a Massachusetts based developer of software.
At September 30, 1996, the Company held a 18% ownership interest in
INSCI. The investment in INSCI was accounted for under the equity
method through the period when the Company owned more than 20% of the
common stock in INSCI. When the Company's investment in INSCI decreased
below 20% the investment in INSCI was accounted for under the
"Securities Available For Sale" method as promulgated by Statement of
Financial Accounting Standards ("SFAS") No. 115.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP")
established for interim financial information and Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by GAAP for complete financial
statements. Management believes however that all of the adjustments
considered necessary for a fair presentation have been included.
Operating results for the six months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the
fiscal year ended March 31, 1998. For further information, refer to the
financial statements and disclosures thereto included in the Company's
annual report on Form 10-K for the year ended March 31, 1997.
CONTINGENCIES
INVESTIGATION BY THE SECURITIES AND EXCHANGE COMMISSION
On April 3, 1995, the SEC issued a private order of the
investigation of both IMTECH and INSCI, the Company's then
majority-owned subsidiary (which IMTECH currently holds a 11% ownership
interest in), and their officers and directors for the period March 1994
through April 13, 1995. The order of investigation inquired into
whether the Companies and their then officers and directors violated the
following Rules of the Securities Exchange Act of 1934: Rule 10b-5;
Section 13(a) and Rules 12b-20, 13a-11 and 13a-13, failure to file
annual reports and other required information of the SEC rules and
regulations; Section 13(b)3, failure to maintain proper books and
records; Section 13(b)(2)(a), Rules 13b-1 and 13b-2, falsification or
caused to be falsified books and records of the Companies. On September
10, 1996, the SEC informed IMTECH that the staff inquiry related to
those matters had been terminated and no action had been recommended at
that time.
F-31
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
September 30, 1997
CONTINGENCIES (Continued)
EMPLOYEE BENEFIT PLANS
In January 1994, the Company received correspondence from the
United States Department of Labor (the "DOL") stating their intent to
penalize the Company in connection with an investigation of past IMTECH
employee benefit plans (prior to April 1, 1992). The DOL concluded that
for certain plan years the Company did not file the proper financial
information required. In October 1997, the DOL assessed the Company
with a penalty of $25,000 as a result of their findings. The penalty
which is payable, without interest, in twelve monthly installments of
$2,083, through November 1998 is included in accrued liabilities on the
balance sheet as of September 30, 1997.
In January 1996, the Company implemented a 401(k) plan covering all
eligible employees (personnel with twelve consecutive months of
service). Employer contributions to the plan are based on the
discretion of management. Employees can elect to contribute up to a
maximum of 15% of their salaries to the plan. Since its inception,
IMTECH has not made any contributions to the plan, matching or
otherwise.
OTHER
In November 1995, the Company entered into a three year service
agreement with Corporate Relations Group, Inc. ("CRG"), whereby CRG was
to provide IMTECH with promotional and brokerage communication services
related to the marketing of the Company's stock. As consideration for
their services, IMTECH was to pay CRG the sum of $300,000 or 171,000
shares of the Company's free trading Class A common stock plus 500,000
options to purchase 500,000 shares of Class A common stock at exercise
prices ranging from $1.75 to $3.06 per share for a period of five years.
The Company elected to pay CRG by issuing 171,000 shares of Class A
common stock. The Company made an initial payment to CRG of 92,250
shares of freely traded Class A common stock which IMTECH borrowed from
a number of shareholders.
The Company agreed to repay the shareholders by making interest payments
at a rate of 10% per annum in addition to returning the borrowed shares
plus one additional share of Class A common stock for each ten shares of
borrowed stock (an aggregate of 9,250 additional shares). The Company
further agreed to grant cost free registration rights to each lender for
the additional shares as a result of the loan transaction. The balance
of the 78,750 shares was not remitted to CRG. CRG asserted a claim for
the balance of the shares. The Company has disputed the claim based
upon the position that CRG did not perform under the provisions of the
service contract. The Company is currently considering instituting
legal action, in the state of Florida based upon the jurisdiction which
was recited in the agreement, to recover the stock and seek punitive
damages from CRG.
SUBSEQUENT EVENTS
In November 1997, IMTECH (the "Company") entered into a two year
credit arrangement with MTB Bank (the "Bank"). Under the credit
arrangement, the Company can borrow up to 80% of eligible accounts
receivable and 35% of eligible paper inventory (up to a maximum of
$50,000), both of which in the aggregate cannot exceed a total of
$1,500,000 (including $250,000 in outstanding letters of credit) at any
one time. The outstanding advances under the arrangement will bear
interest at the banks prime rate plus two percent (2%).
F-32
<PAGE>
Information Management Technologies Corporation
Notes to Financial Statements
September 30, 1997
SUBSEQUENT EVENTS (Continued)
In conjunction with the execution of the credit arrangement, the
Company entered into a security agreement which grants the Bank a
security interest in substantially all of the assets of IMTECH as
collateral for all indebtedness outstanding under the arrangement. The
credit arrangement contains a minimum tangible net worth covenant of
$2,000,000. In addition to the collateral secured as part of the
security agreement, the Company also pledged 100,000 shares of INSCI
Corp. common stock.
In connection with the closing of the credit arrangement, the
Company issued a warrant to the Bank which entitles it to purchase
25,000 shares of Class A common stock of IMTECH at the market price of
the underlying shares on the closing date.
F-33
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------- ---------- ---------------------- ----------- -----------
Additions
----------------------
[1] [2]
---------- ---------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS- AT
DESCRIPTION OF YEAR EXPENSES DESCRIBE DESCRIBE END OF YEAR
- ----------------------------------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
[A]
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended March 31, 1997........ $104,500 $ 34,660 $ -- $102,360 $ 36,800
---------- ---------- ----- ----------- -----------
---------- ---------- ----- ----------- -----------
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
---------- ---------- ----- ----------- -----------
---------- ---------- ----- ----------- -----------
ACCUMULATED AMORTIZATION OF COST IN
EXCESS OF NET ASSETS ACQUIRED:
Year ended March 31, 1997........ $255,059 $ -- $ -- $255,059 $ --
---------- ---------- ----- ----------- -----------
---------- ---------- ----- ----------- -----------
Year ended March 31, 1996........ $255,059 $ -- $ -- $ -- $255,059
---------- ---------- ----- ----------- -----------
---------- ---------- ----- ----------- -----------
Year ended March 31, 1995........ $250,186 $ 4,873 $ -- $ -- $255,059
---------- ---------- ----- ----------- -----------
---------- ---------- ----- ----------- -----------
</TABLE>
[A] REPRESENTS AMOUNTS WRITTEN OFF DURING THE YEAR.
F-34
<PAGE>
Table of Contents
Page
Prospectus
Summary................................................................ 1
Risk Factors........................................................... 6
Use of Proceeds........................................................ 12
Determination of Offering Price........................................ 12
Selected Financial Data................................................ 13
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................................... 15
Business............................................................... 22
Management............................................................. 26
Principal Holders...................................................... 32
Selling Stockholders................................................... 33
Certain Relationships and Related
Transactions......................................................... 38
Plan of Distribution................................................... 39
Description of Securities.............................................. 40
Validity of Shares..................................................... 43
Experts................................................................ 43
Additional Information................................................. 43
Documents Incorporated by Reference.................................... 43
Indemnification........................................................ 44
Index to Consolidated Financial Statements............................. F-i
9,736,291 Shares of
Class A Common Stock
$.04 par value
Information Management
Technologies Corporation
______________________
Prospectus
______________________
December 22, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution. (1)
Registration Fee......................... $5,353.14
Legal Fees and Disbursements............. $10,000.00
Accounting Fees.......................... $4,000.00
Printing Expenses........................ $2,500.00
Miscellaneous............................ $1,000.00
-----------
Total................................. $22,583.14
-----------
-----------
(1) All of the items except the Registration Fee are estimated.
All of the expenses of this offering are being borne by the Company.
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors of corporations
in terms sufficiently broad to indemnify the officers and directors of the
registrant under certain circumstances from liabilities (including
reimbursement of expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act").
As permitted by the DGCL, the registrant's Certificate of Incorporation
(the "Charter") provides that, to the fullest extent permitted by the DGCL,
no director shall be liable to the registrant or to its stockholders for
monetary damages for breach of his fiduciary duty as a director. Delaware
law does not permit the elimination of liability (i) for any breach of the
director's duty of loyalty to the registrant or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) in respect of certain unlawful dividend
payments or stock redemptions or repurchases, or (iv) for any transaction
from which the director derives an improper personal benefit. The effect of
this provision in the Charter is to eliminate the rights of the registrant
and its stockholders (through stockholders' derivative suits on behalf of the
registrant) to recover monetary damages against a director for breach of
fiduciary duty as a director thereof (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described
in clauses (i)-(iv), inclusive, above. These provisions will not alter the
liability of directors under federal securities laws.
The registrant's Bylaws (the "Bylaws") provide that the registrant may
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the registrant) by reason of the fact that he is
or was a director, officer, employee or agent of the registrant or is or was
serving at the request of the registrant as a director, officer, employee or
agent of any other corporation or enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such action, suit
or proceeding if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.
The Bylaws also provide that the registrant may indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the registrant to
procure judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted under
similar standards, except that no indemnification may be made in respect of
any claim, issue or matter as to
II-1
<PAGE>
which such person shall have been adjudged to be liable to the registrant
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall
determine that despite the adjudication of liability but in view of all the
circumstances of the case, such person if fairly and reasonably entitled to
be indemnified for such expenses which the Court of Chancery of the State of
Delaware or the court in which such action was brought shall deem proper.
The Bylaws also provide that to the extent a director or officer of the
registrant has been successful in the defense of any defense of any action,
suit or proceeding referred to in the previous paragraphs or in the defense
of any claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith; that indemnification provided for in the Bylaws
shall not be deemed exclusive of any other rights to which the indemnified
party may be entitled; and that the registrant may purchase and maintain
insurance on behalf of a director or officer of the registrant against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the registrant would have
the power to indemnify him against such liabilities under such Bylaws.
Item 16. 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):
3.1 Certificate of Incorporation of the Company, as filed on December 24,
1986, amended October 16, 1987, amended July 20, 1989 and as amended
December 14, 1989(11)
3.2 Certificate of Incorporation 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 5, 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)
II-2
<PAGE>
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 completed in November 1991.(17)
4.13 Form of Convertible Subordinated Note issued in connection with INSCI
Corp. private placement completed 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)
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)
5.1 Opinion of Baratta & Goldstein as to legality.*
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 the 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., Inc. for the Company's facilities at 130 Cedar Street,
New York, NY 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, N.Y.(10)
II-3
<PAGE>
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 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)
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 1988.(8)
10.22 Facilities Management Agreement, dated September 7, 1988, by and
between the Company and Kidder, Peabody & Co., Inc., 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 Agreement, 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)
II-4
<PAGE>
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)
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.(1)
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 completed in February 1991.(16)
10.43 Accounts Financing Agreement [Security Agreement] (with Supplements)
and $100,000 Term Notes 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 completed in January 1992.(17)
10.48 Form of Unit Exchange Agreement issued in connection with INSCI Corp.
private placement completed in January 1992.(17)
II-5
<PAGE>
10.49 Form of Warrant issued in connection with INSCI Corp. private
placement completed 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 Director'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 1006, dated
October 7, 1993.(17)
10.56 Loan Agreement (and supplemental documentation) between BNY Financial
Corp., 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)
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 Notes.(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 Corp.
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)
II-6
<PAGE>
10.83 Distribution Agreement between Fiserv CIR, Inc. and INSCI Corp.(28)
10.84 Lease Agreement relating to INSCI Corp.'s White Plains, NY
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 Grisby.(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 Corp.(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)
10.96 Business Partner Agreement between International Business Machines
Corp. and INSCI Corp.(32)
10.97 Waiver by BNY Financial Corp.(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 Corp. and
Registrant.(19)
10.105 Amendment to Loan Agreement between NY Financial Corp. and
Registrant.(19)
10.106 BNY Agreement with Registrant.(20)
10.107 Preferred Stock Redemption Agreement.(20)
II-7
<PAGE>
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
heaquarters.(44)
10.111 Employment Agreement with Jack Steinkrauss.(44)
10.112 Employment Agreement with John Gillis.(44)
10.113 Employment Agreement with Kris Canckeratne.(44)
10.114 Agreement for system purchase by 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 shares of the Company's proposed 10%
convertible preferred stock.(20)
10.117 First Amendments 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)
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.(60)(62)
10.124 Termination of Asset-Based Financing Agreement with BNY Financial
Corp.(56)
10.125 Form of Subscription Agreement with J. Michael Reisert, Inc.(63)
10.126 Employment Agreement with Mr. Matti Kon.(66)
10.127 12% Convertible Secured Promissory Note Private Placement Term Sheet
with exhibits(67)
10.128 Form of credit agreement with MTB Bank for the Company's $1,500,000
accounts receivable and equipment financing credit line.(65)
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)
II-8
<PAGE>
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 for the 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)
13.13 Form 10-Q for the quarter ended June 30, 1996.(57)
13.14 Form 10-Q for the quarter ended September 30, 1996.(58)
13.15 Form 10-Q for the quarter ended December 31, 1996.(59)
16.1 Letter regarding dismissal of independent certified public
accountant.(38)
16.2 Letter regarding engagement of new independent certified public
accountant.(39)
16.3 Letter regarding resignation of independent certified public
accountant.(38)
16.4 Letter regarding potential prior period adjustment.(41)
16.5 Letter regarding engagement of new independent certified public
accountant.(42)
21.1 List of subsidiaries.(20)
22.1 Proxy Statement for the Company's 1994 Annual Shareholders'
Meeting.(43)
22.2 Proxy Statement for the Company's 1995 Annual Shareholders'
Meeting.(50)
23.1 Consent of Mahoney Cohen & Company, CPA, P.C.
23.2 Consent of Baratta & Goldstein (to be included in Exhibit 5.1)
24.1 Power of Attorney.
27.1 Financial Date Schedule year ended March 31, 1997.
27.2 Financial Data Schedule quarter ended September 30, 1997.
(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
of Form S-1, File No. 33-18245, as filed with the Securities and
Exchange Commission on February 29, 1988.
II-9
<PAGE>
(3) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 2 to the Company's Registration Statement
of 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
of 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
of 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
of 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
of 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 Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990.
(13) Incorporated herein by reference to the Exhibit with the same
description to the Company's Registration Statement of Form S-1,
File No. 33-36185, as filed with the Securities and Exchange
Commission 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
of Form S-1, File No. 33-36185, as filed with the Securities and
Exchange Commission 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.
II-10
<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 Company's 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 the fiscal year
ended March 31, 1995.
(21) Filed with this report.
(22) Incorporated by reference herein 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 Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993.
(24) 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 September 30, 1993.
(25) 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 December 31, 1993.
(26) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q/A
(Amendment No. 1) for the quarter ended December 31, 1993.
(27) Incorporated herein by reference to the Exhibit with the same
description to the 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 of the INSCI Corp. Registration Statement of Form S-1,
File No.33-54558, as filed with the Securities and Exchange Commission
on November 13, 1993.
(29) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1,
File No.33-54558, as filed with the Securities and Exchange Commission
on December 2, 1993.
(30) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1,
File No.33-54558, as filed with the Securities and Exchange Commission
on February 2, 1994.
(31) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1,
File No.33-54558, as filed with the Securities and Exchange Commission
on March 15, 1994.
(32) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1,
File No.33-54558, as filed with the Securities and Exchange Commission
on March 25, 1994.
(33) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
January 17, 1995.
II-11
<PAGE>
(34) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated March 3, 1995.
(35) 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 June 30, 1994.
(36) 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 September 30, 1994.
(37) 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 December 31, 1994.
(38) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated August 9, 1994.
(39) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated August 15, 1994.
(40) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
November 1, 1994.
(41) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
November 14, 1994.
(42) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
December 21, 1994.
(43) Incorporated herein by reference to the Exhibit with the same
description of the Company's Definitive Proxy Statement for the 1994
Annual Shareholders' Meeting, as filed with the Commission.
(44) Incorporated herein by reference to the Exhibit with the same
description as filed by INSCI Corp. the majority owned subsidiary of
the Registrant.
(45) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated July 14, 1995.
(46) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
November 30, 1995.
(47) 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 June 30, 1995.
(48) 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 September 30, 1995.
(49) 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 December 31, 1995.
(50) Incorporated herein by reference to the Exhibit with the same
description of the Company's Definitive Proxy Statement for the 1995
Annual Shareholders' Meeting, as filed with the Commission.
II-12
<PAGE>
(51) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
September 22, 1995.
(52) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
October 24, 1995.
(53) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated January 3, 1996.
(54) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
January 22, 1996.
(55) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated March 6, 1996.
(56) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated April 11, 1996.
(57) 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 June 30, 1996.
(58) 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 September 30, 1996.
(59) 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 December 31, 1996.
(60) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated April 25, 1996.
(61) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K/A (Amendment No. 1),
dated July 25, 1996.
(62) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
September 16, 1996.
(63) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
December 5, 1996.
(64) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on form 8-K, dated March 20, 1997.
(65) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-k, dated
December 2, 1997.
* To be filed by amendment.
Items 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
II-13
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individual or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Not withstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the Calculation of Registration Fee table in the effective
registration statement.
(iii) To include any material information with respect tot the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of this chapter at the start of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the Act
need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant tot his paragraph (a)(4) and other information necessary to
ensure that all other information in the prospectus is at least as current as
the date of those financial statements. Notwithstanding the foregoing, with
respect to registration statements on Form F-3, a post effective amendment
need not be filed to include financial statements and information required by
Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on
December 22, 1997.
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
By: /s/ Joseph A. Gitto Jr.
---------------------------------
(Joseph A. Gitto, Jr. President, Chief Financial Officer
and Director)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Matti Kon
- ------------------------ Chief Executive Officer December 22, 1997
Matti Kon and Director
/s/ Joseph A. Gitto Jr.
- ------------------------ President, Chief Financial December 22, 1997
Joseph A. Gitto, Jr. Officer and Director
/s/ Harry Markovitz
- -------------------------- Director December 22, 1997
Harry Markovitz
II-15
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333- ) of our report dated June 12, 1997, on our audits of the
financial statements and financial statement schedules of Information
Management Technologies Corporation. We also consent to the references to our
firm under the captions "Experts" and "Selected Financial Data" in the
Prospectus.
/s/ Mahoney Cohen & Company, CPA, P.C.
---------------------------------------
New York, New York
December 19, 1997
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
We the undersigned directors and/or officers of Information Management
Technologies Corporation (the "Company"), hereby severally constitute and
appoint Joseph A. Gitto, Jr. President, Chief Financial Officer and Director
of the Company, individually, with full powers to him, to sign for us, in or
names and in the capacities indicated below, the Registration Statement on
Form S-3 filed with the Securities and Exchange Commission, and any and all
amendments to said Registration Statement (including post-effective
amendments), and any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity
securities of the Company, and to file or cause to be filed the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby ratifying
and confirming all that said attorney, or his substitute or substitutes,
shall do or cause to be done by virtue of this Power of Attorney.
WITNESS our hands on this 22nd day of December, 1997.
SIGNATURES TITLES
- ---------- ------
/s/ Matti Kon Chief Executive Officer and Director
- --------------------
Matti Kon
/s/ Harry Markovitz Director
- --------------------
Harry Markovitz
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