<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from __________ to __________
- --------------------------------------------------------------------------------
Commission File Number: 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, NY 10006
- ---------------------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 306-6100
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
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 [ ]
At August 10, 1998, the Registrant had outstanding 5,789,846 shares of
Class A Common Stock.
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<CAPTION>
PAGE
-------
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS 1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 14
CONDITION AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS 21
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURES 23
</TABLE>
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART I
FINANCIAL INFORMATION
ITEM 1. INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Balance Sheets as of June 30, 1998 and March 31, 1998 2
Statements of Operations for the Three Months Ended June 30, 1998 and 1997 4
Statements of Cash Flows for the Three Months Ended June 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
1
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Balance Sheets
June 30, 1998 and March 31, 1998
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash--Restricted ................................... $ 126,068 $ 126,068
Accounts receivable, net of allowance for doubtful
accounts of $81,400 at June 30, 1998 and
$99,200 at March 31, 1998 ........................ 1,495,345 1,302,212
Inventory .......................................... 331,193 230,144
Due from affiliate ................................. 329,168 329,088
Prepaid expenses and other current assets .......... 289,138 231,615
---------- ----------
Total current assets .......................... 2,570,912 2,219,127
---------- ----------
Property and equipment--at cost:
Production equipment ............................... 3,369,968 3,314,525
Computer software applications ..................... 530,676 439,676
Furniture and fixtures ............................. 363,968 359,490
Leasehold improvements ............................. 679,975 679,975
Computer equipment ................................. 842,564 713,871
---------- ----------
5,787,151 5,507,537
Less: Accumulated depreciation and amortization ...... 2,737,259 2,395,999
---------- ----------
Net property and equipment ..................... 3,049,892 3,111,538
---------- ----------
Other Assets:
Deposits and other ................................. 382,615 356,689
Cash--restricted ................................... 378,202 378,202
Investment in INSCI Corp. .......................... 436,032 436,032
---------- ----------
Total other assets ............................. 1,196,849 1,170,923
---------- ----------
$6,817,653 $6,501,588
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Balance Sheets
(Concluded)
June 30, 1998 and March 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Current liabilities:
Cash overdraft............................................. $ 209,197 $ 90,417
Current maturities of long-term debt....................... 203,690 266,925
Current maturities of long-term capital lease obligations.. 348,167 363,795
Accounts payable........................................... 1,878,620 1,606,549
Due to affiliate........................................... 277,713 255,213
Accrued salaries........................................... 72,534 138,865
Accrued expenses and other current liabilities............. 662,967 583,586
---------- ----------
Total current liabilities............................. 3,652,888 3,305,350
---------- ----------
Loan payable--bank........................................... 949,857 925,975
Long-term debt, less current maturities...................... 908,800 906,407
Capital lease obligations, less current maturities........... 555,706 614,354
Deferred rent................................................ 359,769 365,351
---------- ----------
Total long-term obligations......................... 2,774,132 2,812,087
---------- ----------
Commitments and contingencies
Stockholders' equity:
12% convertible preferred stock:
Authorized--3,000,000 shares at $1.00 par value;
2,722,113 and 2,660,733 shares issued and outstanding
at June 30, 1998 and March 31, 1998, respectively
($2,722,113 and $2,660,733 of aggregate liquidation
value as of June 30, 1998 and March 31, 1998,
respectively)............................................ 2,722,113 2,660,733
Class "A" common stock:
Authorized--100,000,000 shares at $.04 par value;
5,789,846 shares issued and outstanding at June 30, 1998
and March 31, 1998........................................ 231,594 231,594
Additional paid-in capital.................................. 32,040,227 32,040,227
Accumulated other comprehensive income...................... 430,831 430,831
Accumulated deficit......................................... (35,034,132) (34,979,234)
---------- ----------
Total stockholders' equity 390,633 384,151
---------- ----------
$ 6,817,653 $ 6,501,588
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Operations
For the Three Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenues ............................................. $ 2,754,668 $ 2,564,928
Cost of sales ........................................ 1,696,811 1,670,585
----------- -----------
Gross profit ......................................... 1,057,857 894,343
Operating expenses:
Selling, general and administrative .............. 991,527 756,583
----------- -----------
Income from operations ............................... 66,330 137,760
Other expenses:
Interest expense, net ............................ 59,848 32,116
Interest amortization of beneficial conversion
feature attached to 12% convertible secured
promissory notes ............................. -- 266,667
----------- -----------
Net other expenses ....................... 59,848 298,783
----------- -----------
Net income (loss) .................................... 6,482 (161,023)
Preferred stock dividends ............................ 61,380 64,380
----------- -----------
Net loss applicable to common stockholders ........... $ (54,898) $ (225,403)
(225,403)
----------- -----------
----------- -----------
Basic and diluted loss per share applicable to
common stockholders ............................. $ (0.01) $ (0.04)
----------- -----------
----------- -----------
Weighted average number of shares outstanding ....... 5,789,846 5,579,552
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Cash Flows
(Unaudited)
For the Three Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $ 6,482 $(161,023)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization............................. 246,016 120,000
Amortization of consulting fees........................... 27,639 28,135
Amortization of beneficial conversion feature related to
convertible debt........................................ -- 266,667
Property-in-kind interest paid on 12% convertible
secured promissory notes................................ 24,000 13,500
Provision for doubtful accounts........................... 19,916 18,025
Deferred rent............................................. (5,582) (1,830)
Changes in assets and liabilities:
Accounts receivable..................................... (213,049) (119,035)
Inventory............................................... (101,049) 16,747
Prepaid expenses and other current assets............... (85,162) (220,462)
Deposits and other assets............................... (25,926) (115,121)
Accounts payable........................................ 272,071 (54,041)
Accrued payable......................................... (66,331) (83,733)
Other accrued expenses and current liabilities.......... 79,381 (28,111)
--------- ---------
Net cash provided by (used in) operating activities... 178,406 (320,282)
--------- ---------
Cash flows from investing activities:
Capital expenditures........................................ (156,120) (232,249)
(Increase) decrease in due from affiliate................... (80) 13,351
Net increase in due to affiliate............................ 22,500 --
--------- ----------
Net cash used in investing activities................. (133,700) (218,898)
--------- ----------
Cash flows from financing activities:
Net borrowings under bank credit facility................... 23,882 --
Financing from bank overdraft............................... 118,780 --
Net proceeds from issuance of long-term debt................ -- 90,000
Repayments of long-term debt................................ (84,842) (269,017)
Payments of capital lease obligations....................... (102,526) (116,353)
--------- ----------
Net cash used in financing activities................. (44,706) (295,370)
--------- ----------
Net decrease in cash and cash equivalents..................... -- (834,550)
Cash and cash equivalents, beginning of year.................. -- 1,222,819
--------- -----------
Cash and cash equivalents, end of period...................... $ -- $ 394,269
--------- -----------
--------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE COMPANY
Information Management Technologies Corporation (referred to as
"IMTECH" or the "Company") was incorporated in 1986 in the State of Delaware.
IMTECH provides graphic communications to financial institutions such as banks
and brokerage firms, as well as, to medium and large service organizations
within such industries as accounting, law and finance. The Company's core
business is the production and subsequent distribution of time sensitive printed
financial research, financial reports and marketing materials. In addition, the
Company provides facility management services which include mail room and copy
center management. 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 also services clients in
Pennsylvania, the midwest, and as a result of strategic alliances with two New
York based service providers, in Europe as well. 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 an approximate 6% ownership interest in INSCI Corp.
("INSCI") at June 30, 1998. The investment in INSCI is accounted for under the
"Securities Available For Sale" method as promogulated 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 three months ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the fiscal
year ended March 31, 1999. 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, 1998.
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.
6
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2. Restricted Cash
During the fiscal year ended March 31, 1998, the Company deposited a
sum of $504,270 into a Certificate of Deposit account ("CD") with a bank. The CD
is maintained as collateral for the Company's obligation under a lease for
production equipment. According to the terms of the CD, the funds may be drawn
by the Company in accordance with the following schedule:
<TABLE>
<CAPTION>
---------------------------------- ------------
Available
Maturity Date for
Release
---------------------------------- ------------
<S> <C>
September 30, 1999 $ 126,068
September 30, 2000 378,202
------------
Total cash - restricted 504,270
Less: Current portion 126,068
------------
Cash - restricted - long-term $ 378,202
------------
------------
</TABLE>
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
Expenditures for capital assets are recorded at cost. 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. 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 operations.
5. Deferred Financing Costs
Costs incurred to secure financing arrangements are included in deposits
and other assets in the balance sheet. The costs are amortized over the
life of the related credit facilities, which range from 24 to 110 months.
7
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
6. 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 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. The Company generally
does not require collateral for its accounts receivable. Accounts
receivable consist of geographically and industry dispersed customers.
7. Use of Estimates
The preparation of the financial statements, in conformity with generally
accepted accounting principles, 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.
8. 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.
9. Convertible Debt
The beneficial conversion feature of the outstanding convertible secured
promissory notes payable (the "Notes") is accounted for as additional
interest to the 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.
10. Reclassification
Certain 1997 amounts have been reclassified to conform to the 1998
presentation. Accordingly, preferred stock dividends of $64,380 issued for
the three months ended June 30, 1997 have been reclassified separately on
the face of the statement of operations. The reclassification has no effect
on the presentation of the Company's financial position or income (loss)
per share applicable to common stockholders for the period presented.
8
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
11. Loss Per Share
The Company calculates loss per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS
No. 128 replaces the presentation of primary EPS with a presentation of
basic EPS and, if applicable, diluted EPS. The effect on loss per share of
the Company's outstanding stock options and warrants, convertible
debentures and notes and preferred stock is antidilutive for all periods
presented and therefore not included in the calculation of the
weighted-average number of shares outstanding.
12. New Financial Accounting Standards
During the three months ended June 30, 1998, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes new standards for reporting
and displaying comprehensive income and its components in a financial
statement that is displayed with the same prominence as other financial
statements.
INVESTMENT IN INSCI CORP.
The Company holds an approximate 6% ownership interest (investment) in
INSCI, its former majority-owned subsidiary. The investment is accounted for
under the "Securities Available For Sale" method as promulgated by SFAS No. 115.
As a result, the investment is carried at fair market value. At June 30, 1998,
369,497 shares of INSCI Corp. stock pledged as collateral against the Company's
outstanding 12% convertible secured promissory notes payable.
At June 30, 1998 and March 31, 1998, the carrying value and estimated
fair market value of the Company's investment in INSCI is as follows:
<TABLE>
<S> <C>
Shares 436,032
---------
---------
Cost basis $ 5,201
---------
---------
Market value $ 436,032
---------
---------
Unrealized gain $ 430,831
---------
---------
</TABLE>
9
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN PAYABLE - BANK
The Company maintains a secured credit arrangement with MTB Bank (the
"Bank") which expires in October 1999. Under the provisions of the credit
arrangement, 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. All outstanding obligations under the
arrangement bear interest at the bank's prime rate( 8.5% at June 30, 1998) plus
two percent (2%). At June 30, 1998, the Company was indebted to the Bank for
outstanding obligations totaling approximately $950,000. 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 (except for certain production equipment) as collateral for all
indebtedness outstanding under the arrangement.
In addition to the collateral secured as part of the security
agreement, the Company also pledged 66,535 shares of INSCI Corp. common stock to
secure payment of all outstanding obligations under the credit arrangement. In
connection with the closing of the credit arrangement, the Company issued a
warrant to the Bank which entitles MTB to purchase 25,000 shares of Class A
Common stock at $1.81 per share (the market price of the underlying shares on
the date of closing), exercisable until November 2000.
The credit arrangement contains a minimum tangible net worth ("net
worth") covenant of $2,000,000. At June 30, 1998, the Company was in default of
the net worth covenant. The Bank has waived the net worth requirement as of June
30, 1998.
12% CONVERTIBLE PREFERRED STOCK
During 1992, the Company issued $2,301,000 in subordinated debentures
(the "debentures") to a group of debenture holders with interest at 10% per
annum. The debentures were due and payable in 1995. Thereafter, in 1995, the
Company entered into an exchange offering with the debenture holders wherein the
Company issued 12% Convertible Preferred Stock ("Preferred Stock") to each
debenture holder for an aggregate of 2,301,000 shares of Preferred Stock.
The terms of the Preferred Stock were approved by shareholders. The
Preferred Stock received by debenture holders provided for the payment of
dividends at 12% per annum in addition to the right to convert a share of
Preferred Stock into a share of Class A common stock of the Company at 70% of
the 20-day average trading market price of the Company's Class A common stock at
the time of the conversion. Additionally, preferred stockholders were granted
cost-free registration rights with respect to the underlying shares of Class A
common stock.
The terms of the Preferred Stock further provided that holders could
only convert a percentage of the aggregate of their Preferred Stock until April
20, 1998 and, thereafter, for a period of 180 days until October 31, 1998,
holders of the Preferred Stock have a right to convert 100% of their Preferred
Stock that was not as yet converted into shares of Class A common stock. As of
June 30, 1998, the shares of Class A common stock underlying the Preferred Stock
were not registered in accordance with the terms of the exchange offering. As a
result, the holders of the Preferred Stock have been unable to exercise their
conversion rights and obtain registered shares of Class A common stock of the
Company.
10
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12% CONVERTIBLE PREFERRED STOCK (Continued)
On December 23, 1997, the Company filed with the Securities and
Exchange Commission a Form S-3 Registration Statement in accordance with the
Securities Act of 1933 for the purpose of registering all of the Company's Class
A common stock which will be offered for sale or resale (not eligible under Rule
144) and all other shares issuable upon exercise or conversion of certain
options, warrants, convertible debt and the conversion of the Preferred Stock.
Amendments to the Form S-3 Registration have been filed subsequently on both
January 14, 1998 and May 14, 1998, and the Company intends to file an additional
amendment to the Registration Statement; however, the registration has not yet
been declared effective.
Additionally, as a result of the change in the Rule 144(k) exemption
regulations, the underlying Class "A" Common Stock for preferred stockholders
that are listed in the Registration Statement may qualify for the exemption
under Rule 144 depending upon each preferred shareholder's qualification status
with respect to an exemption under either of these rules. One of the preferred
stockholders qualified for the exemption under Rule 144(k) and in March 1998,
that holder converted his shares of preferred stock.
RELATED PARTY TRANSACTIONS
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. Blitz's responsibilities under
the contract are to reengineer, reorganize and run the day-to-day operations of
IMTECH's data processing department at a cost to IMTECH of $40,000 per month.
More specifically, Blitz provides extensive technical support for many of
IMTECH's clients on-site and is responsible for analyzing, designing and
developing customized database systems as required by the management of IMTECH.
The Company is party to a service agreement with Research Distribution
Services, Inc. ("RDS"), a company in which the CEO of IMTECH is the sole
stockholder with controlling interest. RDS provides mailing list database
management, fulfillment, mailing and related services to IMTECH at a monthly
minimum cost of $22,500 (based on minimum average fulfillment levels as
stipulated in the agreement).
COMMITMENTS AND CONTINGENCIES
EMPLOYEE BENEFIT PLANS
The Company sponsors 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 Company's Class A common stock
underlying certain warrants, options, notes and preferred stock (collectively
known as "convertible securities") issued or issuable to certain holders of
convertible securities of the Company.
11
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Continued)
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Kon, its Chief
Executive Officer, which provides for a base annual salary of $250,000 plus an
incentive bonus equal to 20% of operating income, up to a maximum of $500,000.
In the initial contract year 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 per share as a signing bonus. The options vested after one year of service
and expire in July 2002. The agreement further provides that Mr. Kon has the
right to devote his time and attention to his other business interests. In
January 1998, the Board of Directors elected to renew Mr. Kon's contract.
Consequently, Mr. Kon was awarded an additional 500,000 options to purchase
500,000 shares of the Company's Class A Common stock at $1.18 per share. The
additional 500,000 options vest after the completion of Mr. Kon's second year of
service and expire in July 2002.
The Company has entered into an employment agreement with Mr. Joseph
Gitto, its President and Chief Financial Officer. The agreement, as amended in
July 1998, expires in July 2002 and provides for an annual base salary of
$180,000. In addition, Mr. Gitto is entitled to an incentive bonus equal to 15%
of operating income, up to a maximum of $150,000. At the time of the original
agreement, Mr. Gitto was 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. The options vest over a three year period and expire in July
2002.
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 repaid the shareholders by making
cash interest payments at a rate of 10% per annum, in addition to making cash
payments for the borrowed shares. 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 to recover the shares of stock and to seek punitive
damages from CRG.
SUBSEQUENT EVENTS
On July 24, 1998, IMTECH acquired all of the issued and outstanding
common stock of KRL Litho, Inc., d/b/a The Skillcraft Group ("Skillcraft") from
its principals for an aggregate purchase price of $9,000,000. Skillcraft
provides graphic communications services including financial research report
printing, commercial printing, graphics arts design and various fulfillment
services to financial and commercial organizations located primarily in the New
York Metropolitan area.
12
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBSEQUENT EVENTS (Continued)
The business combination will be accounted for under the Purchase Method of
accounting as promulgated by Accounting Principles Bulletin Opinion No. 16.
"Business Combinations". Both IMTECH and Skillcraft will operate as separate
divisions under a new consolidated entity known as Skilltech Global Graphics and
Communications, Inc. ("SKILLTECH").
The Company paid $5,000,000 at closing and issued promissory notes to
the sellers in the aggregate amount of $4,000,000 payable in forty (40) equal
monthly installments of $100,000, commencing in the fourth month from the
closing date.
In connection with the purchase of Skillcraft, IMTECH entered into
employment agreements with two key employees of Skillcraft; Mr. Harold Russell,
former principal and president of Skillcraft, who will remain active as the
president of the Skillcraft Division of SKILLTECH, and Mr. Jeffrey Craugh,
Senior Vice President of Sales with the Skillcraft Division. Each contract
extends for a period of forty-three (43) months, and awarded both Mr. Russell
and Mr. Craugh 100,000 and 300,000 options, respectively, to purchase Class A
Common Stock of IMTECH at $.9625 per share for a period of five years.
The Company raised $5,300,000 as a result of issuing 12% subordinated
convertible debentures (the "Debentures") for the aggregate amount of
$4,000,000, and executing a secured promissory note for $1,300,000 borrowed from
General Electric Capital Corporation ("GE"). The Debentures are convertible into
shares of IMTECH Class "A" Common Stock and bear interest at a rate of 12% per
annum in addition to providing debenture holders 10% of Skillcraft's profits for
a period of (5) years commencing from the date of closing of the acquisition.
The Debentures will automatically be converted into Class "A" Common Stock at
the end of the five (5) year term unless the Company elects to redeem them for
cash. The debenture holders can elect to convert the Debentures into shares of
Class "A" Common stock at any time during the five (5) year term subject to
certain conversion provisions stipulated in the private placement memorandum.
Upon conversion, or redemption on the due date of the Debentures, the debenture
holders will be entitled to receive 10% of the Company's then outstanding Class
"A" Common Stock with anti-dilution protection. The Debentures are
collateralized by a subordinated lien on the assets of Skillcraft.
The $1,300,000 promissory note is payable to GE in sixty (60) equal
monthly installments of approximately $28,000 including interest at a rate of
10.86% through June 2003, and is secured by a first lien and security interest
in certain production equipment of both companies, and a cross-corporate
guaranty by both IMTECH and Skillcraft.
The Company is currently negotiating to acquire all of the issued and
outstanding common stock of Research Distribution Services, Inc. ("RDS") from
Mr. Matti Kon, its Chairman and Chief Executive Officer, on a deferred payment
basis by issuing a promissory note for the purchase of the RDS stock. Upon
completion of the RDS acquisition, all of the RDS assets will be subject to the
existing liens of MTB Bank, GE, and the 12% Subordinated Convertible Debentures.
13
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION 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:
<TABLE>
<CAPTION>
--------------------
For the Three Months
Ended June 30,
-------------------
1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
Revenues 100 % 100 %
Cost of sales 62 66
- ------------------------------------------------------------------------------------
Gross profit 38 34
Selling, general and administrative 36 30
- ------------------------------------------------------------------------------------
Income from operations 2 4
Other expenses:
Interest expense, net 2 1
Interest amortization of beneficial conversion
feature attached to 12% convertible secured
promissory notes -- 10
- ------------------------------------------------------------------------------------
Net loss -- (7)
Preferred stock dividends 2 3
- ------------------------------------------------------------------------------------
Net loss applicable to common stockholders (2) % (10) %
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED 6/30/98 AS COMPARED TO THE THREE MONTHS ENDED 6/30/97
During the three months ended June 30, 1998, the Company generated
revenues of approximately $2,755,000; an increase of $190,000 (or 7%) from
revenues of approximately $2,565,000 reported for the three months ended June
30, 1997.
The net increase in revenues of $190,000 was attributable in part to an
increase in revenues generated by the Company's Regional Service Center Division
("RSC") which amounted to approximately $2,596,000 (which represents 94% of
total June 1998 revenues) for the three months ended June 30, 1998; an increase
of $344,000 (or 15%) when compared to revenues reported for the prior year's
period of approximately $2,252,000 (88% of June 1997 revenues). The increase in
RSC revenues is a result of an increase in the Company's core financial research
printing client base. In addition, the Company has realized work flow
efficiencies from increased production capacity as a result of management's
investment in production equipment and technology.
The increase in RSC revenues was offset in part by a decrease in
revenues generated by the Company's Facilities Management Division ("FACM") of
approximately $52,000 (or 25%) to revenues of approximately $158,000 (6% of
total 1998 revenues) for the three months ended June 30, 1998. Revenues
generated from the FACM for the three months ended June 30, 1997 amounted to
approximately $210,000, which represented 8% of total June 30, 1997 revenues.
The decrease in FACM revenues was a result of management's decision not to renew
certain FACM contracts as they became due since competitive pricing of the
contracts reduced operating margins below management's requirements. As of June
30, 1997, the Company was party to eight (8) FACM contracts as compared to four
(4) FACM contracts in effect at June 30, 1998; a decrease of four (4) from the
prior period.
In addition to the decrease in FACM revenues, the increase in revenues
reported by the Company for the three months ended June 30, 1998, when compared
to the prior period, were also offset in part by a decrease in revenues from the
Company's Litigation Duplication ("Lit Dup") Division of approximately $103,000.
The Lit Dup Division wound down and was effectively shut down by the end of the
Company's fiscal year ended March 31, 1998. Revenues generated and reported by
the Lit Dup Division for the three months ended June 30, 1997 amounted to
approximately $102,000 (4% of total June 1997 revenues). The closing of the Lit
Dup Division was planned by management as it continued to eliminate ancillary
production services that required the expenditure of both resources and capital
which management believed could be deployed more efficiently in IMTECH's core
business.
The Company's cost of sales increased in total by approximately $26,000
(or 2%) to $1,697,000 (62% of total June 30, 1998 revenues) for the three months
ended June 30, 1998 as compared to cost of sales of approximately $1,671,000
reported for the three months ended June 30, 1997, which represented 65% of
total June 1997 revenues. The net increase in cost of sales is attributable to
increases in the Company's purchase of paper and related production supplies,
offset by a decrease in personnel and related costs. The increase in purchases
is afforded by significant development and redeployment of idle warehouse space
attained in the last six to eight months at the Company's RSC Facilities.
For the three months ended June 30, 1998, the Company reported selling,
general and administrative ("SG&A") expenses of approximately $992,000 (36% of
June 30, 1998 revenues); an increase of $235,000 (or 31%) from SG&A expenses of
approximately $757,000 (30% of June 1997 revenues).
15
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED 6/30/98 AS COMPARED TO THE THREE MONTHS ENDED 6/30/97
(Continued)
The increase in SG&A expenses from 1998 to 1997 is primarily attributable to the
following factors: (1) because of the increase in capital expenditures and
technology, the Company's depreciation expense increased approximately $58,000
from the first fiscal quarter ended June 30, 1997; and (2) as the Company
continued to divest its ownership in the stock of INSCI Corp. ("INSCI"), its
former wholly-owned subsidiary, during the three months ended June 30, 1997, the
Company sold shares of INSCI stock at a gain of approximately $181,000, which
was included in SG&A expenses.
For the three months ended June 30, 1998, the Company incurred interest
expense of approximately $60,000 (which represented 2% of total June 30, 1998
revenues); an increase of $28,000 (or 87%) from interest expense reported for
the three months ended June 30, 1997 of approximately $32,000 (1% of total June
1997 revenues). The increase is directly attributable to interest costs incurred
in 1998 as a result of borrowings under a credit arrangement maintained with MTB
Bank which did not exist during the first fiscal quarter of the prior year.
To comply with the Securities and Exchange Commission position
announced in March 1997 regarding the accounting for the beneficial conversion
feature attached to certain convertible debt instruments, the Company recorded
an interest charge of $266,667 for the three months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The schedule below sets forth the Company's cash flow activities for the three
months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
---------------------------
For the Three Months Ended
June 30,
---------------------------
1998 1997
- -------------------------------------------------------------------------
<S> <C> <C>
Operating activities $ 178,000 $(320,000)
Investing activities (134,000) (219,000)
Financing activities (44,000) (295,000)
- -------------------------------------------------------------------------
Decrease in cash and cash equivalents $ -- $(834,000)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
16
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (Continued)
OPERATIONS
During the three months ended June 30, 1998, the Company generated
positive cash flow from operating activities of approximately $156,000, which
was primarily attributable to and increase in income from operations before
depreciation and amortization expense.
INVESTING ACTIVITIES
Net cash used as a result of investing activities amounted to
approximately $134,000, and is primarily attributable to cash used for capital
expenditures of approximately $156,000, offset by an increase in amounts due
from an affiliated entity of approximately $22,000.
FINANCING ACTIVITIES
During the three months ended June 30, 1998, the Company used net cash
for financing activities of approximately $22,000, which was a direct result of
the following:
* The Company borrowing net proceeds of approximately $24,000 from MTB Bank
under its current credit arrangement;
* Utilization of a bank overdraft of approximately $141,000;
* Cash in the aggregate of approximately $187,000 was used to repay capital
lease obligations of approximately $102,000 and other long-term debt
obligations of approximately $85,000.
CAPITAL RESOURCES
As of June 30, 1998 and 1997, the Company had a working capital
deficiency of approximately $1,082,000 and $148,000, respectively.
In November 1997, the Company entered into a secured credit arrangement
with MTB Bank (the "Bank"). Under the credit arrangement, IMTECH is allowed to
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 Company filed a form S-3 Registration Statement in accordance with
the Securities Act of 1933 on December 23, 1997 (amended on January 14, 1998 and
May 14, 1998). The statement covers the subsequent resale or offer for sale of
all of the Company's outstanding Class A Common stock (not eligible under Rule
144) and all other shares issuable upon exercise or conversion of certain
options, warrants, convertible debt and preferred stock. Upon exercise of any
options or warrants covered in the registration, the Company will receive
proceeds to be used for working capital purposes.
17
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
- -------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (Continued)
CAPITAL RESOURCES (Continued)
The Company's management is constantly focused on investing its capital
and human resources in the Company's production infrastructure, introducing
cutting edge technology in conjunction with investments in state-of-the-art
production equipment. These efforts are designed to stream line the Company's
operations and enable it to service its clients economically and more
efficiently, as well as, to broaden the scope of services the Company offers. In
addition, the Company has embarked on an extensive marketing campaign to create
an awareness in the financial research community. However, the changing
environment of the financial research printing industry requires that the
Company take certain measures to ensure its ability to stay competitive and
continue to build a business platform for future growth. Over the past several
months, the Company has been witness to the merger of many of its clients. These
mergers have created a perception in the financial research printing industry
that a larger printer is a needed to meet the resulting printing demand. The
creation of these larger combined entities, along with the emergence of the
presence of European banks in the U.S. brokerage industry, has created a need to
establish a global presence to remain competitive.
In response to these evolving market conditions, on July 24, 1998,
IMTECH acquired all of the issued and outstanding common stock of KRL Litho,
Inc., d/b/a The Skillcraft Group ("Skillcraft") for an aggregate price of
$9,000,000. Skillcraft provides graphic communications services including
financial research report printing, commercial printing, graphics arts design
and various fulfillment services to financial and commercial organizations
located primarily in the New York Metropolitan area. The acquisition of
Skillcraft provides a business platform capable of protecting the Company
against further declines of market share in the printing industry, and
establishes a basis for continued future growth. Both IMTECH and Skillcraft will
operate as separate divisions under a new consolidated entity known as Skilltech
Global Graphics and Communications, Inc. ("SKILLTECH"). By creating a new
organization that can provide both financial research and commercial printing
services, the Company is now more competitive in its existing markets and has
expanded its production capabilities to create new products and market
opportunities. In addition, Skillcraft's affiliation with a London based printer
will assist the Company in establishing a global presence.
The Company paid $5,000,000 at closing and issued promissory notes to
the sellers in the aggregate amount of $4,000,000 payable in forty (40) equal
monthly installments of $100,000, commencing in the fourth month from the
closing date. The funds for the $5,000,000 down payment were raised through a
private placement completed by the Company whereby it issued 12% subordinated
convertible debentures (the "Debentures") for the aggregate amount of
$4,000,000, and executing a secured promissory note for proceeds of $1,300,000
borrowed from General Electric Capital Corporation ("GE"). The excess funds
raised over the minimum down payment required at closing of the acquisition will
be used for the immediate working capital requirements of the combined
companies. In addition, management is negotiating with other lending
institutions to establish a working capital credit facility for the acquired
company.
The Company is currently in negotiations to acquire all of the issued
and outstanding common stock of Research Distribution Services, Inc. ("RDS"), a
New York based provider of intelligent fulfillment and distribution services to
the research report production industry. The Company is also in the process of
identifying and pursuing additional potential acquisition candidates to respond
to the changing environment of the financial research printing industry.
Industry mergers have created a perception in the financial research printing
industry that larger printers are needed to meet the resulting printing demands.
18
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
- -------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (Continued)
CAPITAL RESOURCES (Continued)
The creation of the combined entities coupled with the price cutting by
competitors to garner more market share has contributed toward IMTECH's past
operating difficulties. Therefore, management believes that the creation of
SKILLTECH and its current plan to perform additional key acquisitions, such as
RDS, will help the Company survive the changing market conditions, respond to
the client mergers and remain competitive within the industry.
NEW ACCOUNTING STANDARDS
During the three months ended June 30, 1998, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes new standards for reporting and
displaying comprehensive income and its components in a financial statement that
is displayed with the same prominence as other financial statements.
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.
YEAR 2000 COMPUTER SOFTWARE CONVERSION
The Company relies on numerous computer programs in its day to day
business. Older computer programs use only two digits to identify a year in its
date field. As a result, when the Company has to identify the year 2000, the
computer will think its means the year 1900 and the operation attempting to be
performed may fail or crash resulting in the potential interference in the
operations of the Company's business. The Company has formulated plans to
safeguard against the Year 2000 conversion problem. The cost of the
implementation of the Year 2000 safeguards will not be material to the Company.
In addition, the Company has had communications with all of its major
customers and suppliers to determine the extent to which the Company's interface
systems are vulnerable to any failure by third parties to upgrade their own
software. The Company believes that its large customers and suppliers are
addressing the issues and will timely adjust their systems. However, if such
modifications are not made by its vendors or customers, or are not completed in
a timely manner, the Company's operations could adversely be affected.
FORWARD LOOKING INFORMATION
This Form 10-Q report contains "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward
looking statements are based on management's expectations, estimates,
projections and assumptions. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates," and variations of such words and similar
expressions are intended to identify such forward looking statements which
include, but are not limited to, projections of revenues, earnings and cash
flows.
19
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
- -------------------------------------------------------------------------
FORWARD LOOKING INFORMATION (Continued)
These forward looking statements are subject to risks and uncertainties which
could cause the Company's actual results or performance to differ materially
from those expressed or implied in such statements. These risks and
uncertainties include, but are not limited to, the following: the Company's
successful execution of internal performance plans; performance issues with key
suppliers; subcontractors and business partners; legal proceedings; product
demand and market acceptance risks; the effect of economic conditions; the
impact of competitive products and pricing; product development;
commercialization and technological difficulties; and capacity and supply
constraints or difficulties
20
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
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 its 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 delivered to CRG 92,250 shares of the freely traded Class A Common
Stock which IMTECH borrowed from a number of shareholders. The Company repaid
the shareholders by making cash interest payments at a rate of 10% per annum, in
addition to making cash payments for the borrowed shares. The balance of the
78,750 shares were not remitted to CRG. CRG has 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 to recover the stock and to seek
punitive damages from CRG.
The Company has agreed to use its best efforts to file a registration
statement for certain convertible security holders for their underlying shares
of Class A Common Stock. While the Company has filed a registration statement on
Form S-3 (and amendments thereto) with the Securities and Exchange Commission
("SEC") as was required under various agreements with convertible security
holders, it is possible the holders of these securities may assert a claim
against the Company based on the Company's failure to timely comply with the
registration requirements for certain convertible security holders.
The Company is currently negotiating with its landlord to reduce its
rent covering the Regional Service Center facility. The landlord has claimed
certain defaults by the Company in its lease. In addition, the landlord has
requested that the Company post a letter of credit in the amount of $100,000
with a financial institution for additional rent security. There are no
assurances that the Company will be successful in its attempts to re-negotiate
its lease and reduce its monthly rent obligation, or resolve the claim of
additional rent by the landlord.
21
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
[a] Exhibits
1) Financial Data Schedule as of and for the three months ended
June 30, 1998.
[b] Reports on Form 8-K
During the period between April 1, 1998 and August 14, 1998, the
Company filed with the Commission reports on Form 8-K as follows:
1) A report on Form 8-K/A, dated June 18 , 1998, was filed with
the Commission supplementing the Form 8-K, dated March 20,
1997 reporting the terms of the 12% Secured Convertible
Promissory Notes issued by the Company.
2) A report on Form 8-K, dated July 24 , 1998, was filed with the
Commission reporting the acquisition by the Company of all of
the issued and outstanding common stock of KRL Litho, Inc.
(d/b/a The Skillcraft Group).
3) A report on Form 8-K, dated July 24 , 1998, was filed with the
Commission reporting the completion of outside financing in
the form of $4,000,000 of 12% convertible debentures and a
$1,300,000 equipment financing arrangement with GE Capital.
4) A Definitive Proxy Statement on Schedule 14-A, dated April 30,
1998, was filed with the Commission on May 1, 1998 for the
Company's 1998 Annual Meeting of Shareholders.
22
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, JR.
-----------------------------------------
Joseph A. Gitto Jr.,
President and Chief Financial Officer
Dated: New York, New York
August 10, 1998
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000824578
<NAME> INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> MAR-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,576,745
<ALLOWANCES> 81,400
<INVENTORY> 331,193
<CURRENT-ASSETS> 2,570,912
<PP&E> 5,787,151
<DEPRECIATION> 2,737,259
<TOTAL-ASSETS> 6,817,653
<CURRENT-LIABILITIES> 3,652,888
<BONDS> 908,800
2,722,113
0
<COMMON> 231,594
<OTHER-SE> (2,563,073)
<TOTAL-LIABILITY-AND-EQUITY> 6,817,653
<SALES> 2,754,668
<TOTAL-REVENUES> 2,754,668
<CGS> 1,696,811
<TOTAL-COSTS> 1,696,811
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19,916
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,482
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,482
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
