SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-QSB
Quarterly report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended: December 31, 1996 Commission File No. 0-16753
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 58-1722085
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
130 Cedar Street, Fourth Floor, New York, New York 10006
(Address of principal executive offices) (Zip Code)
(212) 306-6100
(Registrant's telephone number, including area code)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of January 27, 1997, registrant had outstanding 5,579,302 shares
of Class A Common Stock.
Traditional Small Business Disclosure Format (check one)
Yes X No
--- ---
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Information Management Technologies Corporation
FORM 10-QSB FOR QUARTER ENDED DECEMBER 31, 1996
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Balance Sheets as of December 31, 1996 and March 31, 1996.
(b) Statements of Operations for the three months and nine months ended
December 31, 1996 and 1995.
(c) Statements of Cash Flows for the nine months ended December 31, 1996
and 1995.
(d) Notes to Financial Statements.
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None filed with this report.
(b) Reports on Form 8-K
(1) Report on Form 8-K filed on September 16, 1996.
(2) Report on Form 8-K filed on October 8, 1996.
(3) Report on Form 8-K filed on November 22, 1996
(4) Report on Form 8-K filed on December 5, 1996
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Information Management Technologies Corporation
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
December 31, March 31,
1996 1996
------------ -----------
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 840,834 $ 2,011,560
Accounts receivable, net of allowance for doubtful
accounts of $75,780 at December 31, 1996 and
$104,500 at March 31, 1996 1,564,575 1,406,731
Inventory 404,846 303,133
Prepaid expenses and other current assets 657,344 972,214
------------ -----------
Total current assets 3,467,599 4,693,638
PROPERTY AND EQUIPMENT - AT COST
Production equipment 5,656,028 5,102,268
Software 298,617 295,128
Furniture and Fixtures 402,896 399,899
Leasehold improvements 503,205 461,089
Computer equipment 1,136,450 1,101,323
------------ -----------
7,997,196 7,359,707
Less: Accumulated depreciation and amortization 5,314,362 5,013,249
------------ -----------
Net property and equipment 2,682,834 2,346,458
------------ -----------
OTHER ASSETS
Deposits and other 401,713 347,636
Investment in INSCI Corp. 2,337,475 379,057
------------ -----------
Total other assets 2,739,188 726,693
------------ -----------
$ 8,889,621 $ 7,766,789
============ ===========
The accompanying notes are an integral part of these statements.
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Information Management Technologies Corporation
BALANCE SHEETS (Continued)
December 31, March 31,
1996 1996
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited)
CURRENT LIABILITIES
Bank credit facility $ -- $ 640,056
Current debt -- 431,975
Current maturities of long-term debt 128,576 497,328
Current maturities of long-term capital
lease obligations 258,700 333,728
Accounts payable 939,703 1,455,015
Accrued salaries 100,771 156,007
Deferred revenue 51,011 129,090
Other accrued liabilities 1,343,626 1,457,798
------------ -----------
Total current liabilities 2,822,387 5,100,997
LONG-TERM DEBT, less current maturities 804,229 2,793,329
ACCRUED RENT 368,494 368,494
CAPITAL LEASE OBLIGATIONS, less current maturities 459,866 362,279
------------ -----------
Total long-term liabilities 1,632,589 3,524,102
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
12% Preferred Stock - authorized 3,000,000
shares at $1.00 par value; 2,592,499
and 2,026,580 shares issued and
outstanding at December 31, 1996
and March 31, 1996, respectively 2,592,499 2,026,580
Class A common stock - authorized 100,000,000
shares at $.04 par value; 5,635,078 and
3,535,078 shares issued and outstanding
at December 31, 1996 and
March 31, 1996, respectively 225,403 141,403
Additional paid-in capital 30,880,205 28,658,530
Unrealized gain from investment in
securities available for sale 2,337,475 --
Accumulated deficit (31,600,937) (31,684,823)
------------ -----------
Total stockholders'
equity (deficit) 4,434,645 (858,310)
------------ -----------
$ 8,889,621 $ 7,766,788
============ ===========
The accompanying notes are an integral part of these statements.
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Information Management Technologies Corporation
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ -------------------------
1996 1995 1996 1995
----------- ---------- ---------- -----------
Sales $ 2,626,573 $2,834,706 $8,049,613 $ 9,065,909
Cost of sales 2,238,877 2,225,801 6,380,876 7,520,285
----------- ---------- ---------- -----------
Gross profit 387,696 608,905 1,668,737 1,545,624
Selling, general and
administrative
expenses 908,046 1,059,105 2,480,714 1,951,494
Other costs 550,000 -- 550,000 50,000
----------- ---------- ---------- -----------
Loss from operations (1,070,350) (450,200) (1,361,977) (455,870)
Interest expense, net 102,920 160,574 303,480 401,958
(Gain) loss from sale of
stock in INSCI Corp. -- -- (2,078,661) 73,500
----------- ---------- ---------- -----------
Income (loss) from
continuing operations
before equity in net
income (loss)
of INSCI Corp. (1,173,270) (610,774) 413,204 (931,328)
Equity in net income
(loss) of INSCI Corp. -- 151,303 (341,140) (1,492,825)
----------- ---------- ---------- -----------
Income (loss) from
continuing operations (1,173,270) (459,471) 72,064 (2,424,153)
Loss from discontinued
operations -- (13,570) -- (33,526)
----------- ---------- ---------- -----------
Net income (loss) $(1,173,270) $ (473,041) $ 72,064 $(2,457,679)
=========== ========== ========== ===========
Income (loss) per share
from continuing
operations $ (0.21) $ (0.17) $ 0.01 $ (0.87)
=========== ========== ========== ===========
Loss per share from
discontinued
operations $ -- $ (0.00) $ -- $ (0.01)
=========== ========== ========== ===========
Weighted average number
of shares outstanding
for each 5,635,078 2,781,322 5,011,500 2,779,191
=========== ========== ========== ===========
The accompanying notes are an integral part of these statements.
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Information Management Technologies Corporation
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
1996 1995
----------- -----------
Cash flows from operating activities:
Net income (loss) $ 72,064 $(2,457,679)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 301,114 347,763
Equity in net loss of INSCI Corp. 341,140 1,492,825
Amortization of loan fees -- 32,963
Accretion interest on current debt -- 38,750
(Gain) loss from sale of INSCI Corp.
common stock (2,078,661) 73,500
Provision for doubtful accounts 33,907 (19,742)
Accrued rent -- (150,000)
Changes in operating assets and liabilities:
Accounts receivable (191,751) 436,925
Inventory (101,713) 27,599
Prepaid expenses, deposits and other assets 260,793 (332,763)
Accounts payable and accrued liabilities (750,978) 12,529
----------- -----------
Net cash used in operating activities (2,114,085) (497,330)
Cash flows from investing activities:
Capital expenditures (409,261) (95,844)
Repayment by INSCI Corp. -- 1,000,000
Proceeds from the sale of INSCI Corp.
common stock 2,457,718 --
----------- -----------
Net cash provided by investing activities 2,048,457 904,156
----------- -----------
Cash flows from financing activities:
Net repayment of bank credit facility (640,056) (463,521)
Financing from bank overdrafts -- 52,969
Payments of long-term debt (431,975) (2,077,298)
Proceeds from equity placements and option
and warrant exercises 172,602 2,621,790
Payment of stock issuance costs -- (109,959)
Payments of capital lease obligations (205,669) (430,807)
----------- -----------
Net cash used in financing activities (1,105,098) (406,826)
----------- -----------
Net decrease in cash and cash equivalents (1,170,726) 0
Cash and cash equivalents, beginning of year 2,011,560 0
----------- -----------
Cash and cash equivalents, end of period $ 840,834 $ 0
=========== ===========
The accompanying notes are an integral part of these statements.
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Information Management Technologies Corporation
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
ORGANIZATION
Information Management Technologies Corporation (the "Company"), a Delaware
corporation, was incorporated in 1986. The Company provides information
facilities management services primarily to financial and other service
industries which are characterized by substantial information processing,
communications and document administration requirements. The Company's customer
base consists primarily of major financial, manufacturing, legal, accounting and
other medium to large service organizations which are principally located in New
York City and the surrounding metropolitan area (including New Jersey, Southeast
Connecticut and Westchester County). The Company, through a strategic alliance
with a New York City based technology provider has begun to service clients in
Pennsylvania, the midwest and Europe. As of December 31, 1996, the Company holds
approximately an 18% ownership interest in INSCI Corp., a Massachusetts based
developer of computer software.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
March 31, 1997. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended March 31, 1996.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies applied
on a consistent basis in the preparation of the accompanying financial
statements:
1. Revenue Recognition
Revenues from the Company's services are recognized as the services are
performed or upon shipment.
2. Income (Loss) Per Share
Income (loss) per share has been calculated on the basis of weighted
average number of shares outstanding during the period after giving retroactive
effect to the reverse stock split. There is no effect on the income (loss) per
share of the stock options and warrants outstanding; consequently, they have not
been included in the calculation of weighted average number of shares
outstanding.
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Information Management Technologies Corporation
3. Investment in INSCI Corp.
The carrying value and estimated market value of the Company's investment
in INSCI Corp. as of December 31, 1996 is as follows:
Cost Basis Market Value Unrealized Gain
---------- ------------ ---------------
Investment in INSCI Corp.
(703,000 shares) $ 0 $2,337,475 $2,337,475
As of December 31, 1996, the Company maintains an 18% ownership interest in
INSCI Corp. The investment is accounted for under the "Securities Available For
Sale" method as promulgated by SFAS 115. During the second quarter of fiscal
year ended March 31, 1997, the Company sold 703,000 shares of INSCI Corp. Class
A Common Stock. The sales were transacted pursuant to the Company's divestiture
plan which was adopted during the second fiscal quarter. Prior to the sale, the
Company held a 38% ownership interest in INSCI Corp., whose results were
accounted for under the "Equity" method of accounting.
CONTINGENCIES
Securities and Exchange Commission ("SEC") Investigation
On September 30, 1992, the Company and INSCI, the Company's former majority
owned subsidiary, reached an agreement with the SEC to conclude and settle the
SEC's informal investigation of the Company and INSCI. The Company and INSCI,
without admitting or denying any of the allegations made by the SEC in its
complaint, and without a trial or final adjudication of the allegations made in
the SEC's complaint, consented to the entry of an order enjoining the Company
and INSCI from future violations of certain provisions of the Federal securities
laws and the rules and regulations thereunder. The settlement may adversely
affect the Company and INSCI and restrict the Company's and INSCI's ability to
raise funds from persons located in certain significant states. The impact of
these restrictions may be to prevent the Company and INSCI from conducting
future public offerings or private placements.
The SEC issued an order, dated April 13, 1995, authorizing a private
investigation of the Company and INSCI, and their officers and directors for the
period March 1993 through April 13, 1995. The order of investigation inquired
into whether the Company and its then officers and directors engaged in
violations of Rule 10b-5 of the Securities Exchange Act of 1934 (the "Exchange
Act"); failed to file annual reports and other information as required by the
rules and regulations of the 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)3 of the Exchange Act or falsified or
caused to be falsified books and records of the Companies in violation of
Sections 13(b)(2)(a), Rule 13b2-1and Rule 13b2-2 of the Exchange Act. On
September 10, 1996, the Company was informed by the SEC that the staff inquiry
relating to those matters had been terminated and that no enforcement action had
been recommended.
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Information Management Technologies Corporation
Employee Benefit Plans
From time to time, the Company had not made employee contribution payments
to the trustee of its employee benefit plans at the time such contributions were
due. Also, in the past the Company has not always made employee contributions to
the plans concurrent with the deduction of these contributions from payroll.
However, beginning in the fiscal year ended March 31, 1992, management believes
that the Company has made employee contributions on a current basis.
The Company was notified by regulatory authorities on January 7, 1994, that
certain required regulatory filings made in connection with the employee benefit
plans lacked requisite financial information. The Company received
correspondence from the U.S. Department of Labor stating the Department's intent
to assess a penalty against the Company in the amount of $50,000 for one of the
years in question.
The issues regarding contributions to its employee benefit plans and
regulatory filings for the plans may subject the Company to certain tax, penalty
and/or interest payments.
In January 1996, the Company implemented a 401(k) plan covering all
eligible employees. Contributions to the plan are based on a discretionary
matching contribution of the employee's deferred compensation. Employee
contributions are limited to 15% of salary. Since its inception, no employer
contributions have been made to the plan.
Registration Rights
The Company has granted to the holders of certain warrants and shares of
the Company's securities without cost demand and "piggyback" registration rights
with respect to the underlying stock of the securities issued, or issuable.
Compliance with these registration rights may involve substantial expense to the
Company.
Employment Agreements
On December 5, 1996, the Company entered into a one year employment
agreement with its Chief Executive Officer, Mr. Matti Kon. The agreement
provides for a base salary of $200,000 per annum plus an incentive bonus equal
to 20% of net income up to a maximum of $500,000. In addition, Mr. Kon was
awarded 500,000 options to purchase 500,000 shares of the Company's Class A
Common Stock at an exercise price of $1.18.
The Company also has an employment agreement with its President and Chief
Financial Officer, Joseph A. Gitto, Jr. The agreement provides for a base salary
of $140,000 per annum, and 600,000 options to purchase 600,000 shares of the
Company's Class A Common Stock at prices ranging from $1.25 to $1.88.
Other
In November 1995 the Company entered into an agreement with Corporate
Relations Group ("CRG") to provide promotional, shareholder and brokerage
communications services. The agreement was for a period of 3 years, in which the
Company agreed to pay CRG the sum of $300,000 or 171,000 shares of free trading
Class A Common Stock, in addition to 500,000 options to purchase 500,000 shares
of Class A Common Stock for prices ranging from $1.75 per share to $3.06 per
share for a period of 5 years. The Company elected to pay CRG by issuing 171,000
shares of Class A Common Stock. Subsequent to the agreement, the Company
borrowed 92,250 shares of Class A freely traded Common Stock from a number of
shareholders in the Company. The agreement for the repayment of the borrowed
shares required the Company to make interest payments at a rate of 10% per annum
in addition to the returning the borrowed shares plus (1) one additional share
of Class A Common Stock for each (10) ten shares of borrowed stock (an aggregate
of 9,250 shares). The Company further agreed to grant cost free registration
rights to each lender for the additional shares and interest as a result of the
loan transaction.
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Information Management Technologies Corporation
Other (cont..)
CRG asserted a claim for the balance of the 78,750 shares of Class A Common
Stock, which the Company disputed based upon the position that CRG did not
performed under its agreement with the Company. On November 1, 1996, the Company
commenced a lawsuit against CRG to recover damages.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Comparison of Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship that certain items in the Company's results of operations bear to
sales:
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
Sales 100% 100% 100% 100%
Cost of sales 85 79 79 83
---- ---- ---- ----
Gross profit 15 21 21 17
Selling, general and
administrative expenses 35 37 31 21
Other costs 21 -- 7 1
---- ---- ---- ----
Loss from operations (41) (16) (17) (5)
Interest expense, net 4 6 4 4
(Gain) loss from sale of stock
in INSCI Corp. -- -- (26) 1
---- ---- ---- ----
Income from continuing
operations before equity in
net income (loss) of INSCI
Corp (45) (22) 5 (10)
Equity in net income (loss) of
INSCI stock -- 5 (4) (17)
---- ---- ---- ----
Income (loss) from continuing
operations (45) (17) 1 (27)
Income (loss) from discontinued
operations -- -- -- --
---- ---- ---- ----
Net income (loss) (45)% (17)% 1% (27)%
==== ==== ==== ====
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Information Management Technologies Corporation
Three Months Ended December 31, 1996 as compared to the Three Months Ended
December 31, 1995:
For the three months ended December 31, 1996, the Company reported sales of
$2,627,000 a decrease of $208,000 from sales of $2,835,000 for the three months
ended December 31, 1995.
Sales in the Company's Regional Service Center ("RSC") division were $
2,256,000 or 86% of sales as of December 31, 1996, an increase in the RSC
division, of $473,000 or 27% from sales of $1,783,000 or 63% for the period
ended December 31, 1995. The increase in RSC sales offset a decrease in sales of
the Company's facility management division of $583,000 or 75% from sales of
$777,000 for the three months ended December 31, 1995 to sales of $194,000 or 7%
for the three months ended December 31, 1996. The decrease is primarily
attributable to the Company's decision not to renew certain facility management
agreements as they became due because competitive pricing has reduced operating
margins below the Company's required minimum operating margins. Sales in the
Company's litigation duplication division were $176,000 or 7% for the three
months ended December 31, 1996, a decrease of $99,000 or 36% from sales of
$275,000 or 10% for the three months ended December 31, 1995.
Cost of sales for the three months ended December 31, 1996 were $2,239,000
or 85% from $2,226,000 or 79% for the three months ended December 31, 1995, an
increase of $13,000 or 1%.
Selling, general , and administrative expenses were $908,000 or 35% for the
three months ended December 31, 1996, a decrease of $151,000 or 14% from
selling, general, and administrative expenses of $1,059,000 or 37% for the three
months ended December 31, 1995.
In addition, the Company recorded a charge of $550,000 for the three months
ended December 31, 1996, as the Company's new management implements its plan to
reorganize its work force and redeploy various operating assets which it
believes will enable the Company to become more competitive and efficient.
Interest expense for the three months ended December 31, 1996 was $103,000
or 4%, a decrease of $58,000 or 36% from interest expense of $161,000 or 6% for
the three months ended December 31, 1995. The decrease is attributable to the
savings realized from the early termination of its revolving credit facility
during the first quarter of fiscal year 1997.
Nine Months Ended December 31, 1996 as compared to Nine Months Ended December
31, 1995:
For the nine months ended December 31, 1996, the Company reported sales of
$8,050,000, a decrease of $1,016,000 or 11% from sales of $9,066,000 for the
nine months ended December 31, 1995.
The decrease in sales is primarily attributable to the company's decision
not to renew certain facility management agreements as they became due because
competitive pricing has reduced operating margins below the Company's required
minimum operating margins. As of December 31, 1996, there were 5 (five) facility
management agreements in effect compared to (8) eight facility management
agreements for the period ended December 31, 1995. Sales from facility
management agreements were $688,000 or 9% for the nine months ended December 31,
1996, a decrease of $1,765,000 or 72% from sales of $2,453,000 or 27% for the
nine months ended December 31, 1995.
Sales in the Company's Regional Service Center ("RSC") division were
$6,703,000 or 83% of sales for the nine months ended December 31, 1996, an
increase of $1,069,000 or 19% from sales of $5,634,000 for the nine months ended
December 31, 1995. Sales in the Company's litigation duplication division were
$658,000 or 8% for the nine months ended December 31, 1996, a decrease of
$317,000 or 32% from sales of $975,000 or 11% for the nine months ended December
31, 1995.
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Nine Months Ended December 31, 1996 as compared to Nine Months Ended December
31, 1995 (cont...)
Cost of sales for the nine months ended December 31, 1996 were $6,381,000
or 79%, a decrease of $1,139,000 or 15% from cost of sales of $7,520,000 or 83%
for the nine months ended December 31, 1995. The decrease is primarily
attributable to a reduction in the Company's personnel associated with the
expired facility management agreements.
Selling, general, and administrative expenses for the nine months ended
December 31, 1996 were $2,481,000 or 31%, a increase of $530,000 or 27% from
selling, general, and administrative expenses of $1,951,000 or 21% for the nine
months ended December 31, 1995. The decrease is primarily attributable to a
reduction in overhead such as personnel, service charges related to the
Company's terminated revolving credit facility and other consulting fees.
In addition, the Company recorded a charge of $550,000 for the period ended
December 31, 1996, as the Company's new management implements its plan to
reorganize its work force and redeploy various operating assets which it
believes will enable the Company to become more competitive and efficient.
Interest expense for the nine months ended December 31, 1996 was $303,000
or 4%, a decrease of $99,000 or 25% from interest expense of $402,000 or 4% for
the nine months ended December 31, 1995. The decrease is primarily attributable
to the Company's termination of its revolving credit facility during Fiscal
1997.
The Company realized a gain of approximately $2,079,000 for the nine months
ended December 31, 1996 from the sale of shares of stock in its former majority
owned subsidiary INSCI Corp. As of December 31, 1996, the Company holds an 18%
ownership interest in INSCI Corp.
Liquidity and Capital Resources
The Company's cash flows are summarized below for the periods indicated:
Nine Months
Ended December 31,
1996 1995
-------------- -------------
Operating Activities $ (2,114,000) $ (497,000)
Investing Activities $ 2,048,000 $ 904,000
Financing Activities $ (1,105,000) $ (407,000)
-------------- -------------
Decrease in Cash $ (1,171,000) $ 0
============= =============
During the nine months ended December 31, 1996 cash used in operating
activities amounted to $2,114,000 which is attributable to a decrease in
accounts payable and other accrued liabilities of $751,000 and a net increase in
accounts receivable of $192,000 and inventory supplies of $102,000 partially
offset by a decrease in cost of sales and selling, general and administrative
expenses.
Cash used in financing activities amounted to $1,105,000 and is principally
attributable to the Company's repayment of the outstanding balances of its
revolving credit facility and term loans with BNY Financial Corp., as well as
other long term obligations.
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Information Management Technologies Corporation
Liquidity and Capital Resources (cont...)
Cash from investing activities amounted to $2,048,000.
During the nine months ended December 31, 1996, the Company sold 703,000
shares of Class A Common Stock which reduced the Company's ownership in INSCI to
approximately 18%. The Company has accounted for its remaining investment in
INSCI as "Securities Available for Sale" as promulgated by SFAS 115. In
accordance with the change in accounting method, the Company, marked up its
investment in INSCI to its approximate fair market value of $2,337,000, and
recorded an unrealized gain of $2,337,000 on its December 31, 1996 balance
sheet.
As of December 31, 1996 the Company had a working capital of $645,000
compared to a working capital deficiency of $407,000 at March 31, 1996.
During the Company's third fiscal quarter ended December 31, 1996, the
Company's CEO and COO, and member of the Board of Directors, Christopher D.
Holbrook, resigned his positions at the Company.
The Company's Board of Directors named Mr. Matti Kon as the Company's new
CEO. Together with the Company's management team he has reviewed the Company's
operations and is in the process of reorganizing the Company's work force and
its operations.
The Company's strategic plan focuses on the use of technology to streamline
the communication flow between the Company and its clients as well as to enhance
the Company's production capabilities.
The Company's strategic plan will also expand the Company's current revenue
streams. In accordance with its plan, the Company purchased a Hiedelberg 4 color
digital press which will be delivered during the quarter ended March 31, 1997.
The Company will be the only financial printer in the New York Metropolitan area
with the newly advanced printing capabilities provided by the use of the
Hiedelberg press.
The Company estimates a capital purchasing requirement of approximately
$1,500,000 to $2,000,000 to install the new equipment as well as to introduce
its expanded services and strategic marketing plan to the market place. The
Company is currently in the process of raising capital through a private
placement as well as by negotiating with several leasing companies to secure
financing through a sales / leaseback arrangement.
If deemed necessary, the Company could establish a banking facility through
a pledge of its accounts receivable or could further divest its approximate 18%
ownership interest in INSCI Corp. under the terms of its divestiture plan.
The Company believes that the additional production equipment will enable
the Company to introduce its production capabilities to a broader base of
potential clients which will be necessary to achieve its aggressive expansion
plans.
Inflation
The Company has not experienced significant increases due to inflation in
either the cost of merchandise or the operating expenses. Although inflation has
not been a significant factor to date, there can be no assurance that it will
not be in the future.
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Information Management Technologies Corporation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 30, 1992, the Company and INSCI, the Company's then majority
owned subsidiary, reached an agreement with the Securities and Exchange
Commission ("SEC") to conclude and settle the an informal investigation of the
Company and INSCI. The Company and INSCI, without admitting or denying any of
the allegations made by the SEC in its complaint, and without a trial or final
adjudication of the allegations made in the SEC's complaint, consented to the
entry of an order enjoining the Company and INSCI from future violations of
certain provisions of the Federal securities laws and the rules and regulations
thereunder. The settlement may adversely affect the Company and INSCI and
restrict the Company's and INSCI's ability to raise funds from persons located
in certain significant states. The impact of these restrictions may be to
prevent the Company and INSCI from conducting future public offerings or private
placements. The Company and INSCI may be subject to contempt of court or other
sanctions if the Company or INSCI, at any time in the future, engages in actions
that are deemed to violate the consent judgment and the injunctions.
The Company was notified by regulatory authorities on January 7, 1994, that
certain required regulatory filings made in connection with the employee benefit
plans lacked requisite financial information. The Company received
correspondence from the U.S. Department of Labor stating the Department's intent
to assess a penalty against the Company in the amount of $50,000 for one of the
years in question.
The SEC issued an order, dated April 13, 1995, authorizing a private
investigation of the Company and INSCI, and their officers and directors during
the period March 1994 through April 13, 1995. The order of investigation
inquired into whether the Company and its then officers and directors engaged in
violations of Rule 10b-5 of the Securities Exchange Act of 1934 (the "Exchange
Act"); failed to file annual reports and other information as required by the
rules and regulations of the 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)3 of the Exchange Act or falsified or
caused to be falsified books and records of the Companies in violation of
Sections 13(b)(2)(a), Rule 13b2-1and Rule 13b2-2 of the Exchange Act. On
September 10, 1996, the Company was informed by the SEC that the staff inquiry
relating to those matters had been terminated and that no enforcement action had
been recommended.
In November 1995, the Company entered into an agreement with Corporate
Relation Group ("CRG") for it to provide promotional, shareholder and brokerage
communications services. The agreement is for a period of 3 years, and the
Company agreed to pay CRG the sum of $300,000 or 171,000 shares of free trading
Class A Common Stock, in addition to 500,000 options to purchase 500,000 shares
of Class A Common Stock for prices ranging from $1.75 per share to $3.06 per
share for a period of 5 years. Subsequent to the agreement, the Company borrowed
92,250 shares of Class A freely traded Common Stock from a number of
shareholders in the Company. The agreement for the repayment of the borrowed
shares required the Company to make interest payments at a rate of 10% per annum
in addition to the returning the borrowed shares plus (1) one additional share
of Class A Common Stock for each (10) shares borrowed by the Company (an
aggregate of 9,250 shares). The Company further agreed to grant cost free
registration rights to each lender for the additional shares and interest as a
result of the loan transaction. CRG asserted a claim for the balance of the
78,750 shares of Class A Common Stock, which the Company disputed based upon the
contention the CRG did not performed under its agreement with the Company. On
November 1, 1996, the Company commenced litigation in New York State to recover
the shares transferred to CRG as well as to terminate the remainder of its
agreement with CRG.
14
<PAGE>
Information Management Technologies Corporation
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. No exhibits are being filed with this report.
(b) Reports on Form 8-K.
(1) A report on Form 8-K dated September 16, 1996 reporting the
sale of 600,000 shares of stock in INSCI Company.
(2) A report on Form 8-K dated October 8, 1996 reporting the
extension and repricing of the Company's Class A Warrants.
(3) A report on Form 8-K dated November 22, 1996 reporting the
resignation of Christopher D. Holbrook as Chief Executive
Officer
(4) A report on Form 8-K dated December 5, 1996 reporting Mr.
Matti Kon as the Company's Chief Executive Officer.
15
<PAGE>
Information Management Technologies Corporation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFORMATION MANAGEMENT
TECHNOLOGIES CORPORATION
By:/s/Joseph A. Gitto
-------------------------
Joseph A. Gitto
President and Chief Financial Officer
Dated February 13, 1997
16
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 840,834
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2,592,499
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