<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No fee required, effective October 7, 1996]
For the fiscal year ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No fee required]
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)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
Title of Class
Class A Common Stock, $.04 par value
Redeemable Class A Warrants
Redeemable Class B Warrants
Indicate by checkmark whether the registrant: (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ X]
The aggregate market value of the voting common equity by
non-affiliates computed by reference to the average of the bid and asked prices
of the Registrant's Class A Common Stock on the NASDAQ National Market on June
25, 1998, was approximately $5,066,115.
At June 25, 1998, the Registrant had outstanding 5,789,846 shares of
Class A Common Stock.
Part III incorporates information by reference to the registrant's
definitive proxy statement for its 1998 Annual Meeting of stockholders to be
filed with the Commission within 120 days following March 31, 1998.
<PAGE>
IMTECH
================================================================================
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
PART I
ITEM 1 BUSINESS 1
ITEM 2 PROPERTIES 6
ITEM 3 LEGAL PROCEEDINGS 6
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 8
ITEM 6 SELECTED FINANCIAL DATA 9
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF 10
OPERATIONS
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 18
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL 18
DISCLOSURES
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 19
ITEM 11 EXECUTIVE COMPENSATION 19
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 19
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 19
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 20
SIGNATURES 21
TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES 22
</TABLE>
<PAGE>
IMTECH
================================================================================
PART I
ITEM 1. BUSINESS
INTRODUCTION
- ------------
Information Management Technologies Corporation ("IMTECH" or the
"Company") 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 graphic communications services include digital
communications, two and four color digital printing, intelligent inserting, high
volume duplication, graphic design, electronic publishing, document fulfillment,
micrographics, data processing, as well as bindery and distribution services.
The Company's printing and distribution services are generally performed at its
Regional Service Center ("RSC") located in downtown New York City. The
facilities management services include independent management of client systems
for providing document duplication, distribution and mail room management.
The Company currently holds an 8% ownership interest in INSCI Corp.
("INSCI"), its former majority-owned subsidiary (a NASDAQ small cap company).
SERVICES
- --------
GRAPHIC COMMUNICATIONS SERVICES
The Company provides printing, distribution and support services from
its RSC in New York City primarily to financial, legal, institutional and
commercial clients. In addition, the Company provides corporate service bureau
services that have historically been outsourced or produced "in-house". The
following specifies the types of printing, distribution and support services
traditionally outsourced to IMTECH's RSC for clients in the New York City
metropolitan area:
Graphic Design and Electronic Publishing Services - IMTECH's Electronic
Publishing ("EPU") department has the ability to create and enhance electronic
documents on demand through the use of state-of-the-art desktop publishing
software in both MAC and PC versions. The EPU department is networked and has
multiple electronic data processing capabilities. IMTECH provides a variety of
services related to EPU such as file intervention, file data conversion and
manipulation, developing corporate identities, graphic design and lay out,
typesetting and image storaging. The EPU department also has the ability to scan
images and output printed proofs. The EPU department serves as the control
center for the digital printing and the electronic file transfer to film
processes. As a result of the EPU department's technological capabilities,
IMTECH is equipped to produce or receive electronic data files to accommodate
almost every need.
Digital Printing Services - In March 1997, the Company purchased a networked
Heidelberg Quickmaster DI 46 ("Heidelberg") digital printing press to meet the
growing demand for short run, high quality four color process and spot color
digital printing. The Heidelberg has the ability to print directly from
electronic data files, recognize various data formats and adjust color on the
press electronically. The Heidelberg also has image storage and data processing
image adjustment capabilities.
1
<PAGE>
IMTECH
================================================================================
ITEM 1. BUSINESS (Continued)
GRAPHIC COMMUNICATIONS SERVICES (Continued)
The Heidelberg press is perfectly suited for printing mailers, covers, marketing
brochures, inserts, seasonal reports, catalogues and a variety of other products
at a lower cost with superior quality and quicker turn around time than
traditional offset printing. The Heidelberg is the most technologically advanced
sheetfed press available in the printing industry today. The press is ideal for
meeting the increase in demand for the use of more color in financial research
reports and gives clients increased options of communicating their messages to
their clients.
Offset Printing Services - The Company operates a traditional offset printing
facility that comprises both web and sheetfed presses in a variety of format
sizes. The printing facility includes a technologically advanced pre- press
department which allows the Company to receive electronic data files in various
formats and output the electronic data files to film. The pre-press department
is networked and has multiple electronic data platform capabilities. The
versatility of the Company's offset printing presses and technological
advancement of its pre-press department gives IMTECH the ability to service its
clients' traditional offset printing and on demand needs efficiently.
Duplication Services - The Duplication department employs the use of three
networked hi-speed Xerographic Docutech document duplicators ("Docutechs"),
which have the ability to receive and duplicate electronic data files. The speed
at which the Docutechs produce duplicated documents allows the Company to
service its clients' print-on-demand needs for time sensitive documents in a
timely and efficient manner. The Duplication department also employs the use of
state-of-the-art "Docucolor" digital color copying equipment.
Financial Research Report Production Services - The Company utilizes a variety
of methods for producing high quality, time sensitive financial research printed
material published by medium to large financial institutions and brokerage
firms. Those methods are dedicated to producing and distributing the time
sensitive research reports and other financial reports in a timely fashion with
superior quality. IMTECH is able to do so primarily through maintaining a
strategic alliance with two New York based service providers, Blitz Systems,
Inc. and Research Distribution Services, Inc. (See "Marketing and Sales"). As a
result, IMTECH offers its clients a "one-stop-shop" solution to their printing
needs.
Outsourcing Services - The Company provides document production and distribution
services traditionally performed in-house to organizations that do not have the
resources to do so within. These services allow IMTECH's clients to concentrate
on operating their business while enjoying significant cost savings and high
quality service.
Bindery and Finishing Services - The Company provides several types of document
binding and finishing services such as saddle stitching, folding, perfect
binding, velo binding, tape binding, plastikoiling, GBC binding and padding.
Fulfillment and Distribution Services - The Company provides fulfillment and
distribution services which includes intelligent and selective inserting of
multi-page documents into envelopes, traditional inserting, ink-jet labeling,
mail merging, packaging, branch distributing and shipping.
2
<PAGE>
IMTECH
================================================================================
ITEM 1. BUSINESS (Continued)
FACILITIES MANAGEMENT SERVICES
The Company's facility management division, which provides its services
on-site at a customer's facility or at IMTECH's RSC, serves as an outsourcing
option to many organizations who do not have the resources to maintain and
operate mail rooms or copy centers from within. More specifically, the
facilities services can include:
Mail Room Operations - includes sorting and delivery of both incoming and
outgoing mail, administration and tracking of overnight and same day deliveries,
etc.
Airline Ticket Distribution - includes processing, packaging and standard
delivery of airline tickets, as well as distribution of tickets to and from host
companies and their clients.
Copy Center, Warehousing and Reception Services
Under a typical facilities management contract, IMTECH assumes complete
management and operating responsibility for a customer's in-house duplication,
distribution and/or other administrative functions located or performed on the
client's premises. The fees established for the facilities management services
are generally agreed upon in advance and set forth in a facility management
contract.
The Company generally provides the personnel, equipment and systems
required to perform the agreed-upon services on-site at the customer's
facilities. In many instances, upon commencement of a facility management
contract, IMTECH will assume from its customer, responsibility for the
employment of the existing personnel. In addition, the Company provides all of
the necessary equipment and bears the related expenditures. In many cases, the
Company assumes ownership of the customer's existing equipment, and when
economically feasible, IMTECH will assume the customer's existing lease
obligations. Backup resources are maintained at IMTECH's RSC to handle unusual
work loads, or for disaster recovery purposes occurring at the facility
management sites within the region.
During the year ended March 31, 1998, IMTECH realized revenues of
approximately $744,000 generated from four facility management contracts. During
April and May of 1998, the Company executed two new facilities contracts which
will generate an estimated $300,000 in annual revenues for the fiscal year ended
March 31, 1999.
MANAGEMENT INFORMATION SYSTEMS
- ------------------------------
The Company's production facilities, client service department and
corporate administration department have the ability to share work flow
information through the use of customized proprietary networked software. The
software includes a Work Order Tracking System ("WOTS") and various other
management information systems modules. WOTS is a production work flow
information database which records and maintains historical information about
the Company's print jobs. While logged into the WOTS (via the Company's hosted
internet web-site), users and clients can track the production status of a
particular print job. In addition, WOTS provides the Company with the ability to
ear mark specialized project requirements on a job-by-job basis. One of the more
valuable reporting features of the WOTS is the ability to track raw material
inventory usage and machine man hours by print job. Reports can be generated to
inform management about production capacity and machine utilization issues.
3
<PAGE>
IMTECH
================================================================================
ITEM 1. BUSINESS (Continued)
MANAGEMENT INFORMATION SYSTEMS (Continued)
- ------------------------------------------
The WOTS can be accessed by users by logging into the Company's
web-site, located at http:\[email protected]. Besides the WOTS, the IMTECH
web-site hosts a variety of different sub-sites which allow customers/clients
to: obtain price quotes for print jobs; access corporate and financial
information of the Company; respond to open job position postings; etc.
MARKETING AND SALES
- -------------------
The Company employs a sales force that is currently located at its RSC
in New York City. Together and as a whole, members of management who are
involved with sales, facilities management, graphic communications and
outsourcing services continually increase their marketing efforts on behalf of
IMTECH directed toward major financial, legal, accounting and other medium to
large service companies located in New York City and the surrounding
metropolitan area (New Jersey, Southeast Connecticut and Westchester County).
Supported by a major investment in recent years in advanced infrastructure
technology, IMTECH has been able to expand its client base beyond the New York
City Metropolitan area, and as a result, currently services clients in
Philadelphia, PA, Washington, DC, Denver, CO, and internationally in such places
as London, Asia, Mexico, Hong Kong and South America.
The Company's advertising and promotional efforts include participation
in selected trade shows, general advertising, articles in pertinent trade
publications, direct mailings and the publication and wide distribution of a
Company newsletter called "24/7". The newsletter is distributed as a no cost
service to existing and potential IMTECH clients and broad based investor
groups. Produced and published completely in-house utilizing the newly acquired
Heidelberg digital printing press, the newsletter is devoted to maintaining a
channel of communication that keeps clients and investors aware of developments
within the Company.
To further broaden its abilities to provide superior and complete
service and pursue clients beyond its primary metropolitan area marketplace
IMTECH maintains strategic alliances with Blitz Systems, Inc. ("Blitz") and
Research Distribution Services, Inc. ("RDS"). Blitz, through its versatility of
services, is instrumental in assisting the Company in introducing
technologically advanced concepts to research print production and distribution.
RDS employs the use of an "intelligent" distribution process that physically
consolidates multiple subscriptions by a single subscriber into a single
envelope. The strategic alliance among IMTECH, Blitz and RDS offers clients a
seamless process of receiving and managing data for print production and
subsequent distribution. Each company in the alliance is a specialist, and
depends on the others to maintain a high level of client satisfaction. Working
together, the three companies offer clients reliable, expedient and cost
effective services from the point of production to final destination.
BUSINESS STRATEGY
- -----------------
The Company recognizes that the landscape of the graphics communication
industry is constantly changing, and so is the competitiveness within. In
response to the changing environment, the Company has embarked on a three tiered
strategic plan to achieve and sustain growth and remain competitive within the
financial research and commercial printing industry. Management believes that in
order to survive the deep discounting by competitors and address the increasing
frequency of mergers by clients, the Company must grow in size by: 1) acquiring
other companies; 2) establishing and maintaining strategic business alliances;
and 3) taking advantage of outsourcing opportunities.
4
<PAGE>
IMTECH
================================================================================
ITEM 1. BUSINESS (Continued)
BUSINESS STRATEGY (Continued)
- ----------------------------
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 a 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.
Both IMTECH and Skillcraft will operate as separate divisions under a new
consolidated entity known as Skilltech Global Graphics and Communications, Inc.
("SKILLTECH").
In addition, the Company signed a letter of intent to purchase Research
Distribution Services, Inc. ("RDS"), a provider of intelligent fulfillment and
distribution services to the research report production industry. The Company is
currently negotiating with RDS to finalize the terms of the proposed
acquisition. However, IMTECH is continuing its search to acquire additional
potential companies which will conform to management's growth strategy.
Management believes that the Skillcraft acquisition is the most vital
piece to the overall growth strategy for IMTECH. Skillcraft's production
equipment configuration is complementary to that of IMTECH's. The result of
combining the varied equipment configurations and exploiting IMTECH's investment
in technology and infrastructure will expand production capabilities and provide
economies of scale and efficiencies that will allow the combined companies to
maximize profits while offering clients a variety of solutions to their research
report production requirements.
Along with IMTECH's strategic business alliance with Blitz Systems,
Inc., Skillcraft maintains an alliance with a London based financial research
printer, which will broaden the industry presence of the combined companies into
the global market and provide opportunities to increase the client base.
COMPETITION
- -----------
Management is aware that the Company operates in a market that is
highly competitive and contains several large direct competitors, as well as
many smaller regionally based companies that provide services similar to IMTECH.
Two key competitors that management believes have substantially greater
financial resources and facilities than the Company are Bowne & Co. and Xerox
Business Centers, both of whom provide facility management and/or outsourcing
services. IMTECH competes with these companies primarily on the basis of price
and quality of performance.
Management's efforts are directed toward maintaining strong employee
training and competitive compensation programs to enable the Company to continue
to provide its customers with the high quality service and personnel necessary
to maintain a competitive advantage.
EMPLOYEES
- ---------
As of March 31, 1998, the Company employed approximately 100 personnel
as compared to 125 as of March 31, 1997. The Company has no collective
bargaining agreements with any personnel and considers its relationships with
all of its employees to be in good standing.
5
<PAGE>
IMTECH
================================================================================
ITEM 2. PROPERTIES
The Company leases its executive offices and RSC facilities
(approximately 32,000 square feet), located at 130 Cedar Street, New York, NY,
under a lease expiring in July 2003. The rental payments under the lease
agreement are subject to annual cost of living and maintenance increases.
ITEM 3. LEGAL PROCEEDINGS
In January 1994, IMTECH received correspondence from the U.S.
Department of Labor ("DOL") stating its intent to penalize the Company in
connection with its investigation of past IMTECH employee benefit plans. The DOL
determined that for certain plan years in question, the Company did not file the
proper financial information required. In October 1997, the DOL and the Company
reached a settlement for $25,000, which is payable in twelve monthly
installments of $2,083 through November 1998.
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 was 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 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 RSC 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.
The Company has been advised by the NASDAQ Stock Market, Inc.
("NASDAQ-SM-") that the Company no longer meets the current NASDAQ-SM- listing
requirements for continued listing on the NASDAQ-SM- SmallCap Stock Market.
Continued inclusion on the NASDAQ-SM- SmallCap Stock Market generally requires
that (i) the Company maintains at least $2,000,000 in tangible net assets; or
(ii) $35,000,000 in market capitalization; or (iii) net income of at least
$500,000 in two of the three prior years. Additionally, the Company must
maintain at least 500,000 shares in the public float valued at $1,000,000 or
more, a minimum common stock bid price of $1.00, at least two active market
makers, and at least 300 shareholders of its stock.
6
<PAGE>
IMTECH
================================================================================
ITEM 3. LEGAL PROCEEDINGS (Continued)
If the Company is unable to satisfy NASDAQ-SM-'s maintenance requirements, its
securities may be de-listed from the NASDAQ Stock Market. In such an event,
trading, if any, in the Company's common stock would thereafter be conducted in
the over-the-counter market on the so-called "pink sheets" or the NASD's
"Electronic Bulletin Board". Consequently, the liquidity of the Company's
securities could be impaired, not only in the number of securities which could
be bought and sold, but also through delays in the timing of transactions,
reduction in security analysis and the news media's coverage of the Company and
lower prices for the Company's securities than might otherwise be attained.
The Company has provided to NASDAQ-SM- documentation in support of its
position that it does qualify under the NASDAQ-SM- listing requirements, and is
currently continuing to provide information to the NASDAQ-SM- to assure that it
maintains its NASDAQ-SM- Stock Market listing.
In the event that it is unable to satisfy the staff of NASDAQ-SM-
that it qualifies for continued listing, the Company will proceed with an
appeal of the NASDAQ-SM- decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
7
<PAGE>
IMTECH
================================================================================
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Class A common stock is traded in the over-the-counter
market and included in the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system. Also traded in the over-the-counter market and
quoted on NASDAQ are the Company's Redeemable Class A Warrants. The symbols in
the NASDAQ system for the Class A common stock and Class A Warrants are "IMTKA"
and "IMTKW", respectively. The following table sets forth the range of the high
and low closing bid prices for the Company's Class A common stock and Class A
Warrants for the three most recently completed years ended March 31, 1998, 1997
and 1996, as reported in the NASDAQ stock market reports. The prices listed in
the following table represent prices between dealers, and do not include
provisions for retail markups, markdowns or commissions. Consequently, they may
not represent actual transactions.
<TABLE>
<CAPTION>
Class A Class A
Common Warrants
Stock
High Low High Low
<S> <C> <C> <C> <C>
Year ended March 31, 1998:
First quarter 1 3/8 17/32 11/32 1/8
Second quarter 2 11/16 1 19/32 1/8
Third quarter 2 3/8 9/16 11/32 1/32
Fourth quarter 1 3/8 9/16 7/32 1/16
Year ended March 31, 1997:
First quarter 2 15/16 1 3/8 1/2 9/32
Second quarter 2 7/8 1 7/16 9/16 3/16
Third quarter 1 13/16 3/4 17/64 1/8
Fourth quarter 1 21/32 3/4 5/16 1/8
Year ended March 31, 1996:[1]
First quarter 3 1/16 1 3/4 5/16 3/16
Second quarter 3 9/16 2 3/16 15/32 3/16
Third quarter 3 1/8 2 11/16 3/8
Fourth quarter 2 7/8 2 7/16 3/16
</TABLE>
At June 26, 1998, there were approximately 1,515 holders of record of the
Company's Class A common stock, not including individuals with beneficial
ownership interest.
[1] The stock prices have been adjusted to give effect to the four-for-one
reverse stock split which occurred in June 1995.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below has been derived from the
Company's audited financial statements. It should be read in conjunction with,
and is qualified by reference to, the financial statements and accompanying
notes included elsewhere in this report. The selected financial data for the
fiscal year ended March 31, 1994 include the consolidated results of the
Company's former majority-owned subsidiary, INSCI Corp.
<TABLE>
<CAPTION>
For the Years Ended March 31,
1998 1997 1996 1995 1994
Income Statement (,000):
<S> <C> <C> <C> <C> <C>
Revenues $ 9,488 $ 10,715 $ 11,806 $ 14,048 $ 27,507
Operating loss (1,873) (1,262) (1,808) (1,220) (2,723)
Income (loss) from continuing
operations (2,313) 446 (5,188) (3,891) (3,813)
Loss from discontinued operations - - (391) (1,773) -
Net income (loss) (2,313) 446 (5,579) (5,664) (3,813)
Preferred stock dividends 270 258 - - -
Net income (loss) applicable to common
stockholders (2,583) 189 (5,579) (5,664) (3,813)
Basic and diluted earnings (loss) per
share from continuing operations (.46) .04 (1.65) (2.05) (1.91)
Basic and diluted loss per share
from discontinued operations - - (.12) (.64) -
</TABLE>
<TABLE>
<CAPTION>
As of March 31,
1998 1997 1996 1995 1994
Balance Sheet (,000):
<S> <C> <C> <C> <C> <C>
Total assets $ 6,502 $ 8,430 $ 7,767 $ 9,593 $ 12,868
Long-term obligations 2,812 1,496 3,524 4,497 5,512
Stockholders' equity (deficiency) (1) 384 3,664 (858) 1,169 441
</TABLE>
(1) The Company has not paid dividends since its inception.
9
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
COMPARISON OF RESULTS OF OPERATIONS
The following schedule sets forth the percentage relationship of
significant items of the Company's results of operations to revenues:
<TABLE>
<CAPTION>
For the Years Ended March 31,
1998 1997 1996
<S> <C> <C> <C>
Revenues 100 % 100 % 100 %
Cost of sales 77 79 77
------ ------ ------
Gross profit 23 21 23
Operating expenses:
Selling, general and administrative 43 28 34
Termination of facility contract - - 1
Lease agreement buyout - - 3
Other costs - 5 -
------ ------ ------
Loss from operations (20) (12) (15)
Other (income) expenses:
Interest expense, net 3 1 5
(Gain) loss from sale of INSCI stock (3) (19) 1
Interest amortization of beneficial
conversion feature attached to 12%
secured promissory notes 4 1 8
Equity in net loss of INSCI Corp. - 2 12
Credit facility buyout - - 3
------ ------ ------
Income (loss) from continuing operations (24) 3 (44)
Loss from discontinued operations - - (3)
Net income (loss) (24) 3 (47)
------ ------ ------
Preferred stock dividends 3 2 -
Net income (loss) applicable to common
stockholders (27) % 1 % (47) %
------ ------ ------
------ ------ ------
</TABLE>
10
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (Continued)
FISCAL YEAR 1998 AS COMPARED TO FISCAL YEAR 1997
- ------------------------------------------------
During the fiscal year ended March 31, 1998, the Company reported
revenues of approximately $9,488,000, a decrease of $1,227,000 (or 11%) from
revenues of approximately $10,715,000 generated for the fiscal year ended March
31, 1997.
The decrease in revenues is attributable in part to management's
decision not to renew certain Facility Management agreements as they became due,
since competitive pricing of the contracts reduced operating margins below
management's requirements. In addition, the Company decided to strategically
eliminate certain ancillary production services which required the expenditure
of both resources and capital which management believed could be deployed more
efficiently in IMTECH's core business. The decrease in revenues was offset by an
increase in the Company's core financial research printing client base. As of
March 31, 1998, there were four (4) facility management agreements in effect, a
decrease of one (1) from five (5) facility management agreements in place at
March 31, 1997.
Revenues generated from the Company's Regional Service Center ("RSC")
operations decreased by $465,000 (or 5%) to approximately $8,581,000, (which
represents 90% of total 1998 revenues) when compared to revenues of
approximately $9,046,000, (84% of total 1997 revenues) reported for the year
ended March 31, 1997. Revenues generated from the Company's' Facility Management
division for the fiscal year ended March 31, 1998 amounted to approximately
$744,000 (8% of total 1998 revenues); a decrease of $149,000, (or 17%) from
revenues of approximately $893,000 (8% of total 1997 revenues) generated for the
fiscal year 1997. Revenues from the Company's Litigation Duplication division,
which wound down during 1998, totaled approximately $163,000, which represents
2% of total revenues reported for fiscal year 1998; a decrease of approximately
$613,000 (or 79%) from revenues reported during 1997 of approximately $776,000
(7% of total 1997 revenues) . The Litigation Duplication division was
effectively shut down as of the end of fiscal year 1998.
The Company's cost of sales decreased by $1,165,000 (or 14%) to
approximately $7,324,000 (which represents 77% of total 1998 revenues), as
compared to cost of sales of approximately $8,489,000 (79% of total 1997
revenues) reported for the fiscal year ended March 31, 1997. The decrease in
costs to produce and resulting improvement of operating margins is directly
attributable to management's continuing effort to stream line the Company's
production process. Consequently, during 1998, management instituted programs to
reduce production staff and gain cost efficiencies through investments in the
Company's production infrastructure.
For the fiscal year ended March 31, 1998, the Company reported selling,
general and administrative ("SG&A") expenses of approximately $4,037,000 (which
represents 43% of total 1998 revenues); an increase of $1,099,000 (or 37%) from
SG&A expenses reported during fiscal year 1997 of approximately $2,938,000,
which represented 27% of total revenues reported for fiscal year 1997. The
increase in SG&A expenses for fiscal year 1998 when compared to the prior period
is a result of increases in professional costs such as legal fees, accounting
and compliance fees and consulting fees, which totaled approximately $582,000.
In addition, charges of approximately $271,000 were incurred which were directly
related to the termination of various contracts and resulting related severance
payments, project completion costs and a loss on sale of production equipment.
Operating expenses, in total, for fiscal year 1997 included a charge of
$550,000, (5% of 1997 revenues) to reflect expenses incurred in connection with
management's plan to restructure its work force and redeploy various operating
assets.
11
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (Continued)
FISCAL YEAR 1998 AS COMPARED TO FISCAL YEAR 1997 (Continued)
- ------------------------------------------------------------
Interest expense charged to operations for the year ended March 31,
1998 amounted to approximately $273,000 (3% of total revenues); an increase of
$139,000 from interest expense of approximately $134,000 (1% of 1997 revenues)
reported for the fiscal year ended March 31, 1997. The increase is primarily
attributable to finance and interest costs incurred to establish and maintain
the new credit arrangement with MTB Bank.
During fiscal year 1998, the Company sold and exchanged 200,435 shares
of stock in INSCI Corp., its former majority-owned subsidiary, resulting in a
realized gain of approximately $278,000. During the prior year period, the
Company recorded a gain of $2,089,000 from the sale of shares of INSCI Corp.
stock.
In accordance with the Securities and Exchange Commission ("SEC")
position announced in March 1997 of accounting for the beneficial conversion
feature of debt instruments, the Company recorded an interest charge of
approximately $444,000 and $89,000 for fiscal years ended March 31, 1998 and
1997, respectively.
FISCAL YEAR 1997 AS COMPARED TO FISCAL YEAR 1996
- ------------------------------------------------
During the fiscal year ended March 31, 1997, the Company reported
revenues of approximately $10,715,000, a decrease of $1,091,000 from revenues of
$11,806,000 reported during the fiscal year ended March 31, 1996.
The decrease in revenues was primarily attributable to management's
decision not to renew certain Facility Management contracts as they became due.
Competitive pricing of the contracts reduced operating margins below
management's expectations. At March 31, 1997, there were five (5) Facility
Management contracts in effect as compared to seven (7) in effect at March 31,
1996. Revenues from Facility Management contracts amounted to approximately
$893,000 (or 8% of total revenues) for the fiscal year ended March 31, 1997; a
decrease of approximately $2,319,000, or 72%, from revenues of Facility
Management contracts of approximately $3,212,000 (27% of total 1996 revenues)
generated for the fiscal year ended March 31, 1996. The decrease was total
revenues from 1996 to 1997 is also attributable in part to a decrease in the
revenues generated by the Company's Litigation Duplication division, which
decreased approximately $375,000, or 33%, to revenues of $776,000 (7% of total
revenues), as compared to revenues of $1,151,000 (10% of total 1996 revenues)
reported for the fiscal year ended March 31, 1996.
Revenues from the Company's Regional Service Center ("RSC") operations
increased $1,604,000, or 22%, to approximately $9,046,000 (84% of total
revenues) for the fiscal year ended March 31, 1997; compared to revenues of
$7,443,000 (63% of total 1996 revenues) reported for the fiscal year ended March
31, 1996. The Company deployed the majority of its financial and human resources
towards expanding the Company's market share in its core research printing
market, the main product of the RSC division.
Cost of sales decreased by $569,000, or 6%, to approximately
$8,489,000, (or 79% of total revenues) for the fiscal year ended March 31, 1997,
as compared to cost of sales of approximately $9,058,000 (or 77% of total
revenues) reported for the fiscal year ended March 31, 1996. The decrease was
attributable to a reduction in personnel costs, equipment leases and various
other production expenses.
12
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (Continued)
FISCAL YEAR 1997 AS COMPARED TO FISCAL YEAR 1996 (Continued)
- ------------------------------------------------------------
Selling, general and administrative costs ("SG&A") for the year ended
March 31, 1997 amounted to approximately $2,938,000 (or 27% of total revenues),
a decrease of approximately $1,167,000, or 28%, from SG&A of $4,105,000 (34% of
total 1996 revenues) reported during fiscal year ended March 31, 1996. The cost
reductions were primarily attributable to a decrease in overhead, (specifically,
personnel costs), and service charges related to the Company's terminated
revolving credit facility, as well as decreases in consulting fees and other
professional costs.
During the fiscal year ended March 31, 1997, the Company recorded a
charge of $550,000 to account for costs incurred in connection with management's
plan to restructure its work force and redeploy various operating assets which
it believes will enable the Company to become more competitive and efficient.
Interest expense for the year ended March 31, 1997 was approximately
$134,000 (or 1% of total revenues), a decrease of $426,000, or 76%, from
interest expense of approximately $560,000 (which represented 5% of total 1996
revenues) reported for the year ended March 31, 1996. In accordance with the
Securities and Exchange Commission's ("SEC") position, announced in March 1997,
of accounting for the beneficial conversion feature of debt instruments, the
Company recorded an additional interest charge of approximately $89,000. The
statement of operations for the year ended March 31, 1996 includes a charge of
$900,000 of additional interest. The additional interest charge represents the
amortization of the conversion feature which is calculated as the difference
between the conversion price and the fair value of the common stock into which
the debt instruments are convertible.
During the fiscal year ended March 31, 1997, the Company realized a net
gain of approximately $2,089,000 from the sale of INSCI Corp. stock, its former
majority-owned subsidiary as compared to a loss of $73,500 reported in 1996.
As of March 31, 1997, the Company held a 16% ownership interest in INSCI Corp.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The schedule below sets forth the Company's cash flow activities for the fiscal
years ended March 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
For the Years Ended March 31,
1998 1997 1996
<S> <C> <C> <C>
Operating activities $ (402,000) $ (1,352,000) $ (926,000)
Investing activities (224,000) 1,469,000 1,275,000
Financing activities (603,000) (900,000) 1,663,000
-------------- --------------- ----------------
Increase (decrease) in cash
and cash equivalents $ (1,229,000) $ (783,000) $ 2,012,000
-------------- --------------- ----------------
-------------- --------------- ----------------
</TABLE>
13
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
- -------------------------------------------
OPERATIONS
During the fiscal year ended March 31, 1998, the Company used net cash
of approximately $402,000 for operating activities, which was attributable in
part to the following:
* A decrease in revenues of approximately $1,227,000 coupled with a
decrease in accounts receivable of approximately $39,000;
* A decrease in total cost of sales of approximately $1,165,000 together with
an increase in accounts payable and other accrued liabilities of
approximately $244,000, which in the aggregate, resulted in a cash savings
of approximately $1,409,000; and
* An increase in operating expenses of approximately $549,000 coupled with an
increase in interest expense of approximately $139,000, of which resulted
in a use of cash of approximately $688,000.
INVESTING ACTIVITIES
Net cash used as a result of investing activities amounted to
approximately $224,000, and is primarily attributable to cash used for capital
expenditures of approximately $542,000, offset by a decrease in amounts due from
affiliates of approximately $146,000. In addition, proceeds of approximately
$130,000 were generated from the sale of INSCI Corp. stock.
FINANCING ACTIVITIES
During the fiscal year ended March 31, 1998 the Company used net cash
for financing activities of approximately $603,000, which was a direct result
of: 1) the Company borrowing net proceeds of approximately $926,000 from MTB
Bank under a credit agreement entered into in November 1997; 2) the utilization
of a bank overdraft of approximately $90,000; and 3) the net issuance of
long-term debt of $90,000. In addition, cash in the aggregate of approximately
$1,074,000 was used for the repayment of capital lease obligations of
approximately $382,000 and other long-term debt obligations of approximately
$692,000. The Company also incurred costs of securing equity placements during
1998 of approximately $130,000, and deposited approximately $504,000 into a
certificate of deposit account with Atlantic Bank of NY to secure obligations
under a certain lease agreement for production equipment.
CAPITAL RESOURCES
As of March 31, 1998 the Company had a working capital deficiency of
approximately $1,086,000 as compared to working capital of approximately
$412,000 at March 31, 1997.
14
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
- -------------------------------------------
CAPITAL RESOURCES (Continued)
In November 1997, the Company entered into a two year 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 credit facility has provided a key source of
working capital to the Company.
In January 1998, the Company generated working capital through sources
such as individual loans and the sale of INSCI Corp. common stock. In addition,
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 registration statement covers the subsequent resale or offer for
sale of all of the Company's outstanding Class A Common Stock and certain shares
issuable upon exercise or conversion of certain options, warrants, convertible
debt and preferred stock. When the registration statement is declared effective,
the Company will only receive proceeds upon exercise or conversion of the
convertible securities for the underlying shares of Class A Common Stock
included in the registration. In the event the Company receives proceeds, they
will be used for working capital purposes.
During the fiscal year ended March 31, 1998, the Company's management
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, such as the Heidelberg
Quickmaster DI 46, 4-color digital printing press. These efforts were designed
to streamline 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 offered. In addition, the Company embarked on an extensive marketing
campaign to create a greater 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 last year, 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 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
addition, price cutting by competitors who failed to invest in technology and
new equipment, and efforts of competitors to try to garner more market share
through deep discounting, have recently put pressure on operating margins and
have forced companies in the industry to seek every possible efficiency to stay
competitive.
In response to these evolving market conditions, the Company on July
24, 1998, acquired all of the issued and outstanding common stock of KRL Litho,
Inc., d/b/a The Skillcraft Group ("Skillcraft") from its principals for a
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.
Both IMTECH and Skillcraft will operate as separate divisions under a new
consolidated entity known as Skilltech Global Graphics and Communications, Inc.
("SKILLTECH").
15
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
CAPITAL RESOURCES (Continued)
In addition, Skillcraft's affiliation with a London based printer
assists the Company in establishing a global presence. The addition of RDS to
the combination of IMTECH and Skillcraft creates a company that is poised to
compete efficiently in this evolving market and offer clients a one-stop-shop
for their research report production needs.
The Company obtained $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. 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 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, which over the past
year, has witnessed the merger of many of its clients. The mergers have created
a perception in the financial research printing industry that larger printers
are needed to meet the resulting printing demands. The creation of the combined
entities coupled with price cutting by competitors to garner more market share
has contributed toward IMTECH's operating difficulties. Management believes that
its plans to perform key acquisitions as discussed above will help IMTECH
survive the changing market conditions, respond to the client mergers and remain
competitive within the industry. (See "Business Strategy" under ITEM 1.)
In August 1998, MTB Bank amended their credit arrangement with the
Company to include the eligible receivables of Skillcraft and increase the
borrowing line of credit to $2,500,000.
NEW ACCOUNTING STANDARDS
- ------------------------
During the year ended March 31, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" ("EPS").
Under SFAS No. 128 public companies and entities with complex capital structures
are required to present basic and diluted EPS on the face of the income
statement. SFAS No. 128 replaces the presentation of primary EPS with a
presentation of basic EPS and, if applicable, diluted EPS. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock are exercised or converted and the resulting
additional common shares are dilutive (their inclusion decreases the amount of
EPS).
16
<PAGE>
IMTECH
================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS (Continued)
NEW ACCOUNTING STANDARDS (Continued)
- ------------------------------------
In June 1997, Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income" was issued. SFAS No. 130 establishes new
standards for reporting comprehensive income and its components. The Company
will adopt SFAS No. 130 in the first quarter of fiscal year ending March 31,
1999. The Company expects that the comprehensive income will not differ
materially from net income (loss) applicable to common stockholders.
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 it 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-K 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. 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.
17
<PAGE>
IMTECH
================================================================================
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to
the Table of Contents to the Financial Statements and Schedules which appear on
page 18 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
[ The Remainder of This Page is Intentionally Left Blank ]
18
<PAGE>
IMTECH
================================================================================
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item will be included in the Company's
proxy statement with respect to its 1998 annual meeting of stockholders to be
filed with the Commission within 120 days following March 31, 1998 under the
captions "Election of Directors," and "Directors and Executive Officers of the
Registrant" and is incorporated herein by this reference as if set forth in full
herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in the Company's
proxy statement with respect to its 1998 annual meeting of stockholders to be
filed with the Commission within 120 days following March 31, 1998 under the
captions "Summary Compensation Table," "Option Grants in Last Fiscal Year,"
"Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values" and "Directors' Compensation" and is incorporated herein by this
reference as if set forth in full herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item will be included in the Company's
proxy statement with respect to its 1998 annual meeting of stockholders to be
filed with the Commission within 120 days following March 31, 1998 under the
caption "Security Ownership of Certain Beneficial Owners" and is incorporated
herein by this reference as if set forth in full herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be included in the Company's
proxy statement with respect to its 1998 annual meeting of stockholders to be
filed with the Commission within 120 days following March 31, 1998 under the
caption "Certain Relationships and Related Transactions" and is incorporated
herein by this reference as if set forth in full herein.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
[a] (1) Financial Statements
Incorporated by reference to the Table of Contents to Financial
Statements and Schedules on page 21 of this report Form 10-K.
[a] (2) Financial Statement Schedules
Incorporated by reference to the Table of Contents to Financial
Statements and Schedules on page 21 of this report Form 10-K.
[a] (3) Exhibits
Incorporated by reference to the Index of Exhibits appearing at the end
of this report on Form 10-K.
[b] Reports on Form 8-K
During the period between April 1, 1997 and June 29, 1998, the Company
filed with the Commission reports on Form 8-K as follows:
1) A report on Form 8-K, dated April 21, 1997, reporting the
resignation of Mr. Robert Oxenberg as the Chairman of the
Board of Directors of the Company.
2) A report on Form 8-K, dated April 22, 1997, was filed with the
Commission extending the expiration date and exercise price of
the issued and outstanding Class A and Class B Warrants of the
Company.
3) A report on Form 8-K, dated June 9, 1997, reporting the
resignation of Mr. Bruce Arnstein from the Board of Directors
of the Company.
4) A report on Form 8-K, dated June 18, 1997, was filed with the
Commission appointing Mr. Harry Markovits as a member of the
Board of the Directors of the Company.
5) A report on Form 8-K , dated November 13, 1997, was filed with
the Commission reporting the execution of an accounts
receivable credit arrangement between the Company and MTB
Bank.
6) A report on Form 8-K, dated February 2, 1998, was filed with
the Commission announcing the appointment of Ms. Dale L.
Hirschman and Mr. Kenneth J. Buettner as members to the Board
of Directors of the Company.
7) A report on Form 8-K, dated March 5, 1998, was filed with the
Commission announcing the resignation of Mr. Harry Markovits
as a member of the Board of Directors of the Company.
8) 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.
20
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INFORMATION MANAGEMENT TECHNOLOGIES
CORPORATION
By: /S/ JOSEPH A. GITTO, JR.
-------------------------
Joseph A. Gitto, Jr.,
President and Chief Financial Officer
Dated: New York, New York
October 2, 1998
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Joseph Gitto, as his attorney-in-fact,
with the power of substitution, for him in any attached and all capacities, to
sign any amendments to this report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/S/ MATTI KON Chairman, Chief Executive Officer, October 2, 1998
- ------------------------------------------------
Matti Kon Director
/S/JOSEPH A. GITTO, JR. President, Chief Financial Officer, October 2, 1998
- ------------------------------------------------
Joseph A. Gitto Director
/S/ DALE L. HIRSCHMAN Director October 2, 1998
- ------------------------------------------------
Dale L. Hirschman
/S/ KENNETH J. BUETTNER Director October 2, 1998
- ------------------------------------------------
Kenneth J. Buettner
</TABLE>
21
<PAGE>
IMTECH
================================================================================
TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants F-1
Balance Sheets as of March 31, 1998 and 1997 F-2
Statements of Operations for the Years Ended
March 31, 1998, 1997 and 1996 F-4
Statements of Stockholders' Equity (Deficiency)
for the Years Ended March 31, 1998, 1997 and 1996 F-5
Statements of Cash Flows for the Years Ended
March 31, 1998, 1997 and 1996 F-8
Notes to Financial Statements F-11
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts F-31
</TABLE>
Schedules not listed in the above table of contents have been omitted because
they do not apply or are not required or the information required to be set
forth therein is included in the financial statements and
accompanying notes thereto.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and
Board of Directors of
INFORMATION MANAGEMENT TECHNOLOGIES
CORPORATION
We have audited the accompanying balance sheets of INFORMATION
MANAGEMENT TECHNOLOGIES CORPORATION as of March 31, 1998 and 1997, and the
related statements of operations, stockholders' equity (deficiency), and cash
flows for each of the three years in the period ended March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, the evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of INFORMATION
MANAGEMENT TECHNOLOGIES CORPORATION as of March 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in
the period ended March 31, 1998, in conformity with generally accepted
accounting principles.
We have also audited Schedule II for the years ended March 31, 1998,
1997 and 1996. In our opinion, this schedule presents fairly the information
required to be set forth therein.
This report amends our previously issued report on the financial
statements of INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION as of March 31,
1998 and 1997 and for each of the three years in the period ended March 31,
1998, which expressed substantial doubt about the Company's ability to
continue as a going concern. As more fully discussed in Note A (2), the
Company consummated a significant business acquisition and amended its credit
line with its principal lender. Accordingly, our present report does not
include such a reference to the Company's ability to continue as a going
concern.
/S/MAHONEY COHEN & COMPANY, CPA, P.C.
Mahoney Cohen & Company, CPA, P.C.
New York, New York
June 8, 1998, except for
Note A (2), as to which
the date is September 23, 1998
F-1
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Balance Sheets
March 31, 1998 and 1997
ASSETS
(Note D)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Notes B-2 and B-6) $ -- $1,228,819
Cash - restricted (Note H) 126,068 --
Accounts receivable, net of allowance for doubtful
accounts of $99,200 at March 31, 1998 and
$36,800 at March 31, 1997 (Notes B-6 and N) 1,302,212 1,331,428
Inventory (Note B-3) 230,144 281,729
Due from affiliate (Note G) 329,088 250,000
Prepaid expenses and other current assets 231,615 590,224
---------- ----------
Total current assets 2,219,127 3,682,200
---------- ----------
Property and equipment - at cost (Notes B-4 and H):
Production equipment 3,314,525 2,548,699
Computer software applications 439,676 242,932
Furniture and fixtures 359,490 459,696
Leasehold improvements 679,975 609,888
Computer equipment 713,871 806,066
---------- ----------
5,507,537 4,667,281
Less: Accumulated depreciation and amortization 2,395,999 2,065,833
---------- ----------
Net property and equipment 3,111,538 2,601,448
---------- ----------
Other assets:
Deposits and other (Note B-5) 356,689 364,405
Cash - restricted (Note H) 378,202 --
Investment in INSCI Corp. (Note C) 436,032 1,782,108
---------- ----------
Total other assets 1,170,923 2,146,513
---------- ----------
$6,501,588 $8,430,161
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Balance Sheets
(Concluded)
March 31, 1998 and 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Current liabilities:
Cash overdraft $ 90,417 $ --
Convertible debt (Note E) -- 380,000
Current maturities of long-term debt (Note F) 266,925 288,329
Current maturities of long-term capital lease obligations
(Note H) 363,795 280,878
Accounts payable 1,606,549 1,449,241
Due to affiliate (Note G) 255,213 29,925
Accrued salaries 138,865 157,820
Accrued expenses and other current liabilities 583,586 684,221
------------ ------------
Total current liabilities 3,305,350 3,270,414
------------ ------------
Loan payable - bank (Note D) 925,975 --
Long-term debt, less current maturities (Note F) 906,407 900,000
Capital lease obligations, less current maturities (Note H) 614,354 213,002
Deferred rent (Note I) 365,351 382,677
------------ ------------
Total long-term obligations 2,812,087 1,495,679
------------ ------------
Commitments and contingencies (Notes D through K and O)
Stockholders' equity (Notes F, K and M):
12% Convertible preferred stock (Note L):
Authorized - 3,000,000 shares at $1.00 par value; 2,660,733 and
2,534,100 shares issued and outstanding at March 31, 1998 and 1997,
respectively ($2,660,733 and $2,534,100 of aggregate liquidation
value as of March 31,
1998 and 1997, respectively) 2,660,733 2,534,100
Class "A" common stock:
Authorized - 100,000,000 shares at $.04 par value;
5,789,846 and 5,579,552 shares issued and outstanding
at March 31, 1998 and 1997, respectively 231,594 223,182
Additional paid-in capital 32,040,227 31,528,477
Unrealized gain from investment in securities available for sale
(Note C) 430,831 1,774,515
Accumulated deficit (34,979,234) (32,396,206)
------------ ------------
Total stockholders' equity 384,151 3,664,068
------------ ------------
$ 6,501,588 $ 8,430,161
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Operations
For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ------------ -------------
<S> <C> <C> <C>
Revenues (Note N) $ 9,488,340 $ 10,714,711 $ 11,805,891
Cost of sales 7,323,641 8,488,716 9,057,533
------------ ------------ ------------
Gross profit 2,164,699 2,225,995 2,748,358
Operating expenses:
Selling, general and administrative 4,037,474 2,937,712 4,104,526
Termination of facility contract -- -- 75,000
Lease agreement buy-out (Note I) -- -- 376,826
Other costs (Note R) -- 550,000 --
------------ ------------ ------------
Total operating expenses 4,037,474 3,487,712 4,556,352
------------ ------------ ------------
Loss from operations (1,872,775) (1,261,717) (1,807,994)
Other (income) expenses:
Interest expense, net 273,435 134,247 559,710
(Gain) loss from sale of INSCI Corp. stock (Note C) (277,785) (2,089,020) 73,500
Interest amortization of beneficial conversion
feature attached to 12% convertible secured
promissory notes (Notes B-10 and F-3) 444,444 88,889 900,000
Equity in net loss of INSCI Corp. -- 158,030 1,452,000
Credit facility buy-out -- -- 394,614
------------ ------------ ------------
Net other (income) expenses 440,094 (1,707,854) 3,379,824
------------ ------------ ------------
Income (loss) from continuing operations (2,312,869) 446,137 (5,187,818)
Loss from discontinued operations (Note Q) -- -- (390,696)
------------ ------------ ------------
Net income (loss) (2,312,869) 446,137 (5,578,514)
Preferred stock dividends 270,159 257,520 --
------------ ------------ ------------
Net income (loss) applicable to common stockholders $ (2,583,028) $ 188,617 $ (5,578,514)
------------ ------------ ------------
------------ ------------ ------------
Basic and diluted earnings (loss) per share applicable to common stockholders
(Note P):
From continuing operations $ (0.46) $ 0.04 $ (1.65)
------------ ------------ ------------
------------ ------------ ------------
From discontinued operations $ -- $ -- $ (0.12)
------------ ------------ ------------
------------ ------------ ------------
Weighted average number of shares outstanding
(Note P) 5,589,483 5,129,143 3,139,758
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Stockholders' Equity (Deficiency)
For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Class A Common Stock Preferred Stock
--------------------------------------------------------
Shares Amount Shares Amount
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1995 2,778,132 $ 111,125 -- $ --
Exercise of stock options 125,000 5,000 -- --
Transfer agent administration error 144,196 5,768 -- --
Issuance of common stock under Regulation "S" - Fondo 287,750 11,510 -- --
Issuance of common stock under Regulation "S" - Oportunidad 200,000 8,000 -- --
Issuance of preferred stock from debenture conversion -- -- 2,026,580 2,026,580
Amortization of beneficial conversion feature related
to convertible debt -- -- -- --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balance at March 31, 1996 (carried forward) 3,535,078 $ 141,403 2,026,580 $ 2,026,580
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Total
Additional Stockholders'
Paid-in Accumulated Equity
Capital Deficit (Deficiency)
------------- ------------- --------------
<S> <C> <C> <C> <C>
Balance at April 1, 1995 $ 28,064,680 $(27,006,309) $ 1,169,496
Exercise of stock options 113,360 -- 118,360
Transfer agent administration error -- -- 5,768
Issuance of common stock under Regulation "S" - Fondo 238,490 -- 250,000
Issuance of common stock under Regulation "S" - Oportunidad 242,000 -- 250,000
Issuance of preferred stock from debenture conversion -- -- 2,026,580
Amortization of beneficial conversion feature related
to convertible debt 900,000 -- 900,000
Net loss -- (5,578,514) (5,578,514)
------------ ------------ ------------
Balance at March 31, 1996 (carried forward) $ 29,558,530 $(32,584,823) $ (858,310)
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Stockholders' Equity (Deficiency)
(Continued)
For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Class A Common Stock Preferred Stock
----------------------------------------------------------
Shares Amount Shares Amount
------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Balance at March 31, 1996 (brought forward) 3,535,078 $ 141,403 2,026,580 $ 2,026,580
Preferred stock dividends -- -- 257,520 257,520
Issuance of common stock for services 60,000 2,400 -- --
Issuance of common stock from debenture conversion -
Infinity Investors 1,883,643 73,346 -- --
Issuance of preferred stock from debenture conversion -- -- 250,000 250,000
Transfer agent administration error 100,831 6,033 -- --
Costs associated with various registrations and private
placements -- -- -- --
Valuation of investment in securities available for sale -- -- -- --
Amortization of beneficial conversion feature attached to
12% convertible secured promissory notes -- -- -- --
Net income -- -- -- --
------------ ------------ ------------ ------------
Balance at March 31, 1997 (carried forward) 5,579,552 $ 223,182 2,534,100 $ 2,534,100
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Total
Additional Stockholders'
Unrealized Paid-in Accumulated Equity
Gain Capital Deficit (Deficiency)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at March 31, 1996 (brought forward) $ -- $ 29,558,530 $(32,584,823) $ (858,310)
Preferred stock dividends -- -- (257,520) --
Issuance of common stock for services -- 48,000 -- 50,400
Issuance of common stock from debenture conversion -
Infinity Investors -- 2,026,654 -- 2,100,000
Issuance of preferred stock from debenture conversion -- -- -- 250,000
Transfer agent administration error -- (6,033) -- --
Costs associated with various registrations and private
placements -- (187,563) -- (187,563)
Valuation of investment in securities available for sale 1,774,515 -- -- 1,774,515
Amortization of beneficial conversion feature attached to
12% convertible secured promissory notes -- 88,889 -- 88,889
Net income -- -- 446,137 446,137
------------ ------------ ------------ ------------
Balance at March 31, 1997 (carried forward) $ 1,774,515 $ 31,528,477 $(32,396,206) $ 3,664,068
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Stockholders' Equity (Deficiency)
(Concluded)
For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Class A Common Stock Preferred Stock
----------------------------------------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at March 31, 1997 (brought forward) 5,579,552 $ 223,182 2,534,100 $ 2,534,100
Preferred stock dividends -- -- 270,159 270,159
Issuance of common stock from preferred stock
conversion 210,294 8,412 (143,526) (143,526)
Costs associated with various registrations -- -- -- --
Valuation of investment in securities available for sale -- -- -- --
Non-employee compensation expense from stock options
granted during the year -- -- -- --
Amortization of beneficial conversion feature attached to
12% convertible secured promissory notes -- -- -- --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balance at March 31, 1998 5,789,846 $ 231,594 2,660,733 $ 2,660,733
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Total
Additional Stockholders'
Unrealized Paid-in Accumulated Equity
Gain (Loss) Capital Deficit (Deficiency)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at March 31, 1997 (brought forward) $ 1,774,515 $ 31,528,477 $(32,396,206) $ 3,664,068
Preferred stock dividends -- -- (270,159) --
Issuance of common stock from preferred stock
conversion -- 135,114 -- --
Costs associated with various registrations -- (130,210) -- (130,210)
Valuation of investment in securities available for sale (1,343,684) -- -- (1,343,684)
Non-employee compensation expense from stock options
granted during the year -- 62,402 -- 62,402
Amortization of beneficial conversion feature attached to
12% convertible secured promissory notes -- 444,444 -- 444,444
Net loss -- -- (2,312,869) (2,312,869)
------------ ------------ ------------ ------------
Balance at March 31, 1998 $ 430,831 $ 32,040,227 $(34,979,234) $ 384,151
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Cash Flows
For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,312,869) $ 446,137 $(5,578,514)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization 865,408 456,579 458,741
Amortization of consulting fees 72,500 183,628 69,000
Non-employee compensation expense from stock options
granted during the year 62,402 -- --
Amortization of beneficial conversion feature related to
convertible debt 444,444 88,889 900,000
Property-in-kind interest paid on 12% convertible
secured promissory notes 94,800 9,000 --
Equity in net loss of INSCI Corp. -- 158,030 1,452,000
(Gain) loss from sale of INSCI Corp. stock (277,785) (2,089,020) 73,500
Provision for doubtful accounts 68,143 -- 48,115
Deferred rent (17,326) 14,183 (200,954)
Loss from the sale of property and equipment 47,740 -- --
Write-off of net assets of discontinued operations -- -- 185,331
Changes in assets and liabilities:
Accounts receivable (38,927) 75,303 1,177,813
Inventory 51,585 21,405 75,390
Prepaid expenses and other current assets 286,109 63,562 (300,873)
Deposits and other assets 7,716 (16,769) 231,143
Accounts payable 413,050 (5,774) 692,673
Accrued salaries (18,955) 1,813 (58,993)
Deferred revenue -- (129,090) (424,933)
Other accrued expenses and current liabilities (150,391) (629,972) 274,327
----------- ----------- -----------
Net cash used in operating activities (402,356) (1,352,096) (926,234)
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (541,704) (568,390) (56,456)
Net increase in due from affiliate (79,088) (250,000) --
Net increase in due to affiliate 225,288 29,925 --
Proceeds from the sale of INSCI Corp. stock 129,933 2,258,072 331,129
Proceeds from the sale of property and equipment 42,000 -- --
Repayments by INSCI Corp. -- -- 1,000,000
----------- ----------- -----------
Net cash provided by (used in) investing activities (223,571) 1,469,607 1,274,673
----------- ----------- -----------
Totals carried forward $ (625,927) $ 117,511 $ 348,439
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Cash Flows
(Continued)
For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Totals brought forward $ (625,927) $ 117,511 $ 348,439
----------- ----------- -----------
Cash flows from financing activities:
Net borrowings (repayments) under bank credit facility 925,975 (640,056) (479,442)
Financing from bank overdraft 90,417 -- (268,881)
Proceeds from bank issuance of short-term debt
and options -- -- 176,852
Net proceeds from issuance of long-term debt 90,000 900,000 2,340,185
Repayments of convertible debt (380,000) -- --
Repayments of long-term debt (312,457) (627,328) --
Payments of capital lease obligations (382,347) (345,305) (529,721)
Repayment of BNY warrant -- -- (200,000)
Cash deposited into a restricted Certificate of
Deposit account with a bank (504,270) -- --
Proceeds from equity placements and the exercise of
options and warrants -- -- 624,128
Costs associated with equity placements
and registrations (130,210) (187,563) --
----------- ----------- -----------
Net cash provided by (used in) financing
activities (602,892) (900,252) 1,663,121
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (1,228,819) (782,741) 2,011,560
Cash and cash equivalents, beginning of year 1,228,819 2,011,560 --
----------- ----------- -----------
Cash and cash equivalents, end of year $ -- $ 1,228,819 $ 2,011,560
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Supplemental Disclosures of Cash Flow Information
<TABLE>
Cash paid during the year for:
<S> <C> <C> <C>
Interest $303,717 $ 94,450 $355,852
-------- -------- --------
-------- -------- --------
Income taxes $ -- $ -- $ 11,592
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-9
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Statements of Cash Flows
(Concluded)
For the Years Ended March 31, 1998, 1997 and 1996
Supplemental Disclosures of Non-Cash Investing and Financing Activities
During the fiscal year ended March 31, 1998:
One holder of the Company's 12% convertible preferred stock elected to
convert his 143,526 shares of preferred stock into 210,294 shares of
the Company's Class A Common Stock.
The Company exchanged 117,000 shares of INSCI Corp. stock for the
repayment of $200,000 of principal plus interest of the 12%
convertible secured promissory notes issued in connection with a
February 1997 private placement.
The Company negotiated with two of its key vendors to convert $312,660 of
trade payables into interest bearing installment promissory notes.
The Company issued stock dividends on its 12% convertible preferred stock
in the amount of $270,159.
The Company paid property-in-kind interest of $94,800 on the outstanding
12% convertible secured promissory notes.
The Company incurred capital lease obligations of $947,312.
During the fiscal year ended March 31, 1997:
The holder of the Company's $2,100,000 6% convertible debenture issued in
March 1996 elected to convert the debt into 1,883,643 shares of Class
A common stock.
Holders of the Company's 12% subordinated convertible debentures elected to
convert $250,000 of debentures into shares of the Company's 12%
preferred stock.
The Company repaid a short-term note valued at $51,975 by issuing INSCI
Corp. stock.
The Company issued stock dividends on its 12% convertible preferred stock
in the amount of $257,520.
The Company paid property-in-kind interest of $9,000 on the outstanding
12% convertible secured promissory notes.
The Company incurred capital lease obligations of approximately $144,000.
During the fiscal year ended March 31, 1996:
The Company issued 171,000 shares of Class A common stock valued at
$502,000 for services rendered over a three year period.
The Company negotiated with one of its primary suppliers to convert
$545,000 of trade payables into a two year interest bearing note.
Holders of the Company's 12% subordinated convertible debentures elected to
convert $1,896,000 in debentures into shares of the Company's 12%
preferred stock.
The Company incurred capital lease obligations of approximately $405,000.
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE A - THE COMPANY
(1) OPERATIONS
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 (See Note G). 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 8% ownership interest in INSCI Corp. ("INSCI") at
March 31, 1998. At March 31, 1997 and 1996, the Company held a 16% and 38%
ownership interest in INSCI, respectively. The investment in INSCI was accounted
for under the equity method through the period when the Company owned more than
20% of the common stock in INSCI. When the Company's investment in INSCI
decreased below 20% the investment in INSCI was accounted for under the
"Securities Available For Sale" method as promulgated by Statement of Financial
Accounting Standards ("SFAS") No. 115.
(2) BASIS OF PRESENTATION AND MANAGEMENT'S PLANS
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate the continuation
of the Company as a going concern. However, the Company has sustained
substantial losses in two out of the three most recent years (including the year
ended March 31, 1998) and has experienced a deficiency in cash flows from
operations in each of its last three years. The Company had a working capital
deficiency of approximately $1,086,000 as of March 31, 1998. Management has
implemented plans to perform strategic acquisitions and obtain additional
financing to provide sufficient working capital and other resources to meet
current obligations as they come due.
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 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.
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.
F-11
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE A - THE COMPANY (Continued)
(2) BASIS OF PRESENTATION AND MANAGEMENT'S PLANS (Continued)
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 obtained $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. 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.
Management believes that as a result of the measures taken to date,
which include the Skillcraft acquisition described above, as well as an increase
in IMTECH's credit line with MTB Bank to $2,500,000, the Company will be able to
generate sufficient working capital and cash flow to meet its current
obligations as they become due through the remainder of the fiscal year ending
March 31, 1999.
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, which over the past
year, has witnessed the merger of many of its clients. The mergers have created
a perception in the financial research printing industry that larger printers
are needed to meet the resulting printing demands. The creation of the combined
entities coupled with price cutting by competitors to garner more market share
has contributed toward IMTECH's operating difficulties. Management believes that
its plans to perform key acquisitions as discussed above will help IMTECH
survive the changing market conditions, respond to client mergers and remain
competitive within the industry.
F-12
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies that
have been applied on a consistent basis in the preparation of the accompanying
financial statements:
1. Revenue Recognition
Revenue is recorded when services are performed or upon delivery of the
product.
2. Cash and Cash Equivalents
The Company considers all highly liquid investments with insignificant
interest rate risk and an original maturity of three months or less to be
cash equivalents. The cash equivalents are carried at cost which
approximates fair value. Cash equivalents includes funds deposited in a
money market account at a financial institution.
3. Inventory
Inventory consists primarily of paper, toner and inks, and is stated at the
lower of cost (determined by the first-in, first-out method) or market.
4. Property and Equipment
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 sheets. The costs, which amounted to
approximately $194,000 and $98,000, net of accumulated amortization of
approximately $49,500 and $38,000 as of March 31, 1998 and 1997,
respectively, are amortized over the life of the related credit facilities,
which range from 24 to 110 months.
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 (See Note B-2) with
one financial institution. Accounts at the banks and financial institution
are insured by the Federal Deposit Insurance Corporation (FDIC) and the
Securities Investor Protection Corporation (SIPC) up to $100,000 and
$500,000, respectively.
F-13
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. Fair Value of Financial Instruments
The Company's financial instruments consist of cash, trade receivables and
payables and debt instruments. The carrying amount of cash and short-term
instruments approximates their fair values because of the relatively short
period of time between the origination of the instruments and their
expected realization. The carrying amount of the debt is based on the
current market interest rates being paid, and as a result, it approximates
fair value.
9. 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.
10. Convertible Debt
The beneficial conversion feature of the outstanding convertible secured
promissory notes payable (See Note F-3) 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.
11. Reclassification
Certain 1996 and 1997 amounts have been reclassified to conform to the 1998
presentation. Accordingly, preferred stock dividends of $257,520 issued for
the year ended March 31, 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.
F-14
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
12. New Financial Accounting Standards
In June 1997, Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" was issued. SFAS No. 130 establishes new
standards for reporting comprehensive income and its components. The
Company will adopt SFAS No. 130 in the first quarter of fiscal year ended
March 31, 1999. The Company expects that the comprehensive income will not
differ materially from net income (loss) applicable to common stockholders.
NOTE C - INVESTMENT IN INSCI CORP.
The Company holds an 8% 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.
During the second quarter of fiscal year 1997, the Company sold 703,000
shares of INSCI Corp. stock. Prior to that sale, IMTECH owned a 38% interest in
INSCI, whose results were accounted for under the equity method. At March 31,
1997 and 1996, the Company had a 16% and a 38% ownership interest in INSCI,
respectively. For the year ended March 31, 1996 INSCI had net sales of
approximately $7,913,000 and a net loss of approximately $1,452,000.
At March 31, 1998 and 1997, the carrying value and estimated fair
market value of the Company's investment in INSCI is as follows:
<TABLE>
<CAPTION>
----------- -------------
1998 1997
----------- -------------
<S> <C> <C>
Shares 436,032 636,467
----------- -------------
Cost basis $ 5,201 $ 7,593
----------- -------------
Market value $ 436,032 $ 1,782,108
----------- -------------
Unrealized gain $ 430,831 $ 1,774,515
----------- -------------
</TABLE>
NOTE D - LOAN PAYABLE - BANK
In November 1997, IMTECH (the "Company") entered into a two year
secured credit arrangement, which expires in October 1999, with MTB Bank (the
"Bank").
F-15
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE D - LOAN PAYABLE - BANK (Continued)
Under the credit arrangement, the Company can borrow up to 80% of eligible
accounts receivable and 35% of eligible paper inventory (up to a maximum of
$50,000), both of which in the aggregate cannot exceed a total of $1,500,000
(including $250,000 in outstanding letters of credit) at any one time. All
outstanding obligations under the arrangement bear interest at the bank's prime
rate (8.5% at March 31, 1998) plus two percent (2%). At March 31, 1998, the
Company was indebted to the Bank for outstanding obligations totaling
approximately $926,000. 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 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. Interest paid to the bank
for outstanding obligations under the credit arrangement during the fiscal year
ended March 31, 1998 amounted to approximately $36,000.
The credit arrangement contains a minimum tangible net worth ("net
worth") covenant of $2,000,000. At March 31, 1998, the Company was in default of
the net worth covenant. In June 1998, the Bank waived the net worth requirement
as of March 31, 1998.
NOTE E - CONVERTIBLE DEBT
At March 31, 1997, convertible debt consisted of $380,000 of 12%
subordinated debentures issued in connection with a private placement which was
completed in January 1996. The debentures accrued interest at a per annum rate
of 12% and entitled the holders to convert the debentures plus accrued interest
into shares of the Company's Class A common stock at a price per share of $1.50.
In January 1998, the Company redeemed the debentures, and as a result, none of
the debentures were converted into Class A common stock. Interest charged to
operations for the years ended March 31, 1998, 1997 and 1996 amounted to
approximately $37,000, $46,000 and $9,000, respectively.
[The Remainder of This Page Is Intentionally Left Blank]
F-16
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE F - LONG-TERM DEBT
At March 31, 1998 and 1997, long-term debt obligations consisted of the
following:
<TABLE>
<CAPTION>
--------------------------------
March 31,
--------------------------------
1998 1997
---------------------------------------------- --- ------------ -- ------------
<S> <C> <C>
Trade payable conversion notes [1] $ 288,532 $ 288,329
12% convertible secured notes [2], [3] 884,800 900,000
------------ ------------
1,173,332 1,188,329
Less: Current maturities 266,925 288,329
------------ ------------
Total long-term debt $ 906,407 $ 900,000
------------ ------------
</TABLE>
[1] In March 1996, the Company negotiated with one of its key suppliers to
convert $545,472 of payables to a two year unsecured installment promissory
note. The note was payable in twenty-four monthly installments of $25,550
including interest at a per annum rate of 11.5%. Interest charged to
operations for the year ended March 31, 1997 amounted to $49,456. In
October 1997, at the request of the Company, the terms of the note were
revised to include additional outstanding payables, and as a result, the
note became payable in eighteen installments of $21,892 including interest
at 16% per annum through April 1999. Interest charged to operations for the
year ended March 31, 1998 amounted to approximately $34,000.
In addition, in July 1997, the Company negotiated with another of its key
vendors to convert approximately $112,000 of outstanding trade payables
into a one year unsecured installment promissory note. The note is payable
in twelve monthly installments of $9,742 including interest at a per annum
rate of 8.5% through June 1998. The note was satisfied on June 15, 1998.
Interest charged to operations for the fiscal year ended March 31, 1998
amounted to $4,800.
[2] In connection with a February 1997 private placement, the Company issued
convertible secured promissory notes in exchange for proceeds of $1,000,000
(of which $900,000 was received during fiscal year ended March 31, 1997 and
the balance of $100,000 was received in May 1997). The notes bear interest
at a per annum rate of 12%, which at the option of IMTECH, can either be
paid in cash or in the Company's Class A common stock. The notes are
secured by a pledge of 500,000 shares of INSCI Corp. stock. The Company had
the right, under the pledge agreement, to receive the return of 100,000
shares of the pledged stock in the event it became required in order for
IMTECH to obtain a credit line or enter into a lease/purchase agreement for
equipment. In November 1997, the Company exercised that right and received
the return of 66,535 shares of INSCI Corp. stock which were used to pledge
as collateral for the outstanding obligations under the credit arrangement
with MTB Bank (See Note D). In addition, in November 1997, the Company
received the return of 33,435 shares of INSCI Corp. stock which were sold
pursuant to Rule 144, and the proceeds were used to purchase equipment.
Therefore, at March 31, 1998, 369,497 shares of INSCI Corp. stock remain as
collateral pledged against the notes.
F-17
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE F - LONG-TERM DEBT (Continued)
[2] (Continued)
The notes can be converted into Class A common stock of the Company at a 40%
discount to the previous five day average closing price, prior to
conversion, subject to certain conversion limitations as set forth in the
placement memorandum. The right of conversion permits the holders to
convert up to a maximum of 10% of their note holdings in any month for a
period of three years from the effective date of registration for the
shares of Class A common stock underlying the notes. In December 1997, the
Company filed a Form S-3 Registration Statement in accordance with the
Securities Act of 1933, which was amended in January 1998 and again on May
14, 1998 (See Note O). The notes will be automatically converted at the end
of the three year conversion period. In addition, each $1.00 principal
amount of the notes entitles the holders to one warrant to purchase one
share of IMTECH's Class A common stock at a 40% discount to the previous
five day average closing price prior to the conversion of the warrants.
Paid-in-kind interest charged to operations for the year ended March 31,
1998 and 1997 amounted to $94,800 and $9,000, respectively. In August 1997
the Company exchanged 117,000 shares of INSCI Corp. stock for the repayment
of $200,000 of principal, plus interest, of the convertible secured
promissory notes.
[3] In an Emerging Issues Task Force ("EITF") meeting sponsored by the
Financial Accounting Standards Board, held on March 13, 1997, the
Securities and Exchange Commission ("SEC") announced their position on the
accounting for the issuance of convertible debt securities with a
nondetachable conversion feature that is "in-the-money" at the date of
issue. Those securities are usually convertible into common stock at the
lower of a conversion rate fixed at the date of issue or a fixed discount
to the common stock's market price at the date of conversion, creating a
"beneficial conversion feature". The SEC's position is that the beneficial
conversion feature should be recognized and measured by allocating a
portion of the proceeds equal to the intrinsic value of that feature to
additional paid-in capital. The amount is calculated at the date of issue
as the difference between the conversion price and the fair value of the
common stock into which the security is convertible. The discount resulting
from the allocation of the proceeds, in effect, increases the interest rate
of the security and should therefore be amortized as a charge to interest
expense over the period from the date the security is issued to the date it
first becomes convertible. The beneficial conversion feature of the
convertible secured promissory notes above is accounted for as additional
interest expense, and as a result, such interest charged to operations for
the years ended March 31, 1998 and 1997 amounted to approximately $444,000
and $89,000, respectively.
As of March 31, 1998, maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
------------------
Year Ending
March 31,
------------------
<S> <C>
1999 $ 266,925
2000 21,607
2001 -
2002 884,800
------------
$ 1,173,332
------------
</TABLE>
F-18
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE G - RELATED PARTY TRANSACTIONS
DUE FROM (TO) AFFILIATES
IMTECH is party to a consulting agreement with Blitz Systems, Inc.
("Blitz"), a company owned 100% by the Chief Executive Officer of IMTECH. Blitz
is a computer systems consulting firm specializing in developing total business
solutions for all business management systems. During the year ended March 31,
1998, the Company renewed the agreement for an additional year (November 1, 1997
through October 31, 1998), at a cost to IMTECH of $40,000 per month. Blitz's
responsibilities under the contract are to reengineer, reorganize and run the
day-to-day operations of IMTECH's data processing department. 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. Fees paid to Blitz under the
contract, which include costs for systems hardware and software, for the years
ended March 31, 1998 and 1997 amounted to approximately $602,000 and $489,000,
respectively.
In December 1996, IMTECH provided Blitz with a loan in the amount of
$250,000. On April 30, 1997, Blitz commenced payment of the loan on an
installment basis over a forty-eight month period at $6,162 per month including
interest at 8.5%, through March 2001.
During the fiscal year ended March 31, 1998, IMTECH performed printing
services for Blitz which amounted to approximately $101,000 of revenues. At
March 31, 1998, the $101,000 remains unpaid.
The Company is party to a service agreement with Research Distribution
Services, Inc. ("RDS"), a company in which the CEO of IMTECH is the majority
stockholder with controlling interest. Under the agreement, RDS is to provide
mailing list database management, fulfillment, mailing and related services to
IMTECH for a period of one year (January 1, 1998 through December 31, 1998) at a
monthly minimum cost of $22,500 (based on minimum average fulfillment levels as
stipulated in the agreement). Total fees under the agreement charged to
operations for the years ended March 31, 1998 and 1997 amounted to $270,288 and
$67,500, respectively. At March 31, 1998, total fees unpaid and owed to RDS by
IMTECH amounted to $255,213.
OTHER
In September 1997, the Company received proceeds of $125,000 as a
result of a loan from an individual who performed consulting services for
IMTECH, and was also a member of the Board of Directors. The loan, which was
paid in full in November 1997 plus accrued interest of $2,792, was unsecured and
bore interest at a per annum rate of 12%.
The same individual, in January 1998, loaned IMTECH the sum of $200,000
for working capital purposes. The loan is evidenced by an unsecured promissory
note which bears interest at 12% per annum. In addition, the Company sold this
individual 50,000 shares of INSCI Corp. stock for proceeds of $50,000, also used
for working capital purposes. In March 1998, the individual resigned his
position as a member of the Board of Directors.
F-19
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE H - CAPITAL LEASE OBLIGATIONS
The Company is the lessee of various high speed duplicating equipment
under noncancellable capital leases expiring in various years through 2002. The
assets and liabilities under the capital leases are recorded at the lower of the
present value of the minimum lease payments (based on interest rates ranging
from 9% to 26%) or the fair value of the assets. The assets are depreciated over
the lower of their related lease terms or their estimated productive lives (See
Note B-4). At March 31, 1998 and 1997, the book value of the equipment under
capital leases was approximately $1,309,000 and $901,000, respectively.
Minimum future lease payments under capital leases as of March 31, 1998
and for each of the next five years and in the aggregate are as follows:
<TABLE>
<CAPTION>
----------------------------
Year Ending
March 31,
----------------------------
<S> <C>
1999 $ 469,251
2000 360,911
2001 243,274
2002 96,675
2003 22,501
------------
Total minimum lease payments 1,192,612
Less: Amount representing interest 214,463
Less: Current portion 363,795
------------
Present value of long-term capital lease obligations $ 614,354
------------
</TABLE>
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>
---------------------------------- --- ------------
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>
F-20
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE I - OPERATING LEASE
The Company leases its executive and regional service center facilities
(approximately 32,000 square feet) in a building located at 130 Cedar Street in
New York City, under a noncancellable lease expiring in July 2003. The rental
payments under the lease are subject to annual cost of living and maintenance
increases. Rent expense charged to operations for the years ended March 31,
1998, 1997 and 1996 amounted to approximately $500,000, $494,000 and $629,000,
respectively. In June 1995, the Company renegotiated the terms of the lease for
130 Cedar Street to reflect the return of 20,000 square feet of previously
occupied space. A lease buyout agreement was executed which required IMTECH to
pay a fixed fee of approximately $377,000 in full satisfaction of the previously
leased space.
Generally accepted accounting principles require that rental payments
under a noncancellable lease with scheduled rent increases be recognized on a
straight-line basis over the lease term. As a result, rent expense has been
increased or decreased for the years ended March 31, 1998, 1997 and 1996 to
reflect the difference between the actual rent paid versus the rent expense
adjusted for the straight-lined rent. Consequently, deferred rent of
approximately $365,000 and $383,000 representing pro-rata future payments is
reflected in the accompanying balance sheets as of March 31, 1998 and 1997,
respectively.
Minimum future rental payments under the noncancellable operating lease
as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
-------------------------
For the Year Ending
March 31,
-------------------------
<S> <C>
1999 $ 512,000
2000 528,000
2001 544,600
2002 561,800
2003 579,800
2004 195,300
------------
$ 2,921,500
------------
</TABLE>
NOTE J - INCOME TAXES
Deferred income tax assets and liabilities are computed as the
difference between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
F-21
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE J - INCOME TAXES (Continued)
At March 31, 1998, the Company has net operating loss carryforwards
("N.O.L.'s") totaling $16,111,000 available to offset future federal and state
taxable income through 2013 as follows:
<TABLE>
<CAPTION>
--------------- ------------
N.O.L.'s Expiring
--------------- ------------
March 31,
<S> <C> <C>
1989 $ 2,398,000 2004
1990 2,405,000 2005
1991 1,407,000 2006
1992 1,628,000 2007
1995 1,188,000 2010
1996 4,502,000 2011
1998 2,583,000 2013
---------------
$ 16,111,000
---------------
---------------
</TABLE>
The Tax Reform Act of 1986 enacted a complex set of regulations
limiting the utilization of net operating loss carryforwards to offset future
taxable income following a corporate "ownership change." The Company's ability
to utilize its net operating loss carryforwards would, in general, be limited if
there is a change in ownership in excess of fifty percent (50%). Although the
Company has not performed a detailed study, it does not believe that an
ownership change has taken place.
In 1997 the Company utilized approximately $446,000 of N.O.L.'s to
reduce taxable income to zero. Accordingly, the Company did not record a
provision for income taxes for the year ended March 31, 1997. The tax benefits
resulting from the N.O.L.'s have been fully reserved because the likelihood of
their realization could not be determined.
NOTE K - COMMON STOCK
In May 1995, with the approval of its shareholders, the Company
recorded a four-for-one reverse stock split of IMTECH's Class A common stock. In
addition, the shareholders approved an increase in the par value of the Class A
common stock from $.01 to $.04. The number of shares authorized under the
Company's stock option plans, as stated in Note M, decreased. Accordingly, all
references to the number of shares outstanding have been adjusted for all of the
periods presented to give effect to the aforementioned reverse stock split.
In November 1995, the Company entered into a loan arrangement with a
foreign entity known as Fondo De Adquisciones E Inversiones Internationales XL,
S.A. ("Fondo"), whereby Fondo loaned IMTECH the sum of $250,000, which bore
interest at a per annum rate of 15%, in exchange for a convertible subordinated
debenture. In December 1995, in accordance with the terms of the loan agreement,
Fondo converted the debenture into shares of the Company's Class A common stock
at a per share price of $.875. As a result of the conversion, 285,750 shares of
IMTECH Class A common stock were issued under Regulation "S" of the Securities
Act.
F-22
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE K - COMMON STOCK (Continued)
In January 1996, holders of options issued as a result of a January
1995 loan-option agreement exercised 125,000 options to purchase 125,000 shares
of the Company's Class A common stock at an exercise price of $.04 per share.
In January 1996, the Company sold 200,000 shares of its Class A common
stock for total proceeds of $250,000 ($1.25 per share price), to a company known
as C.A. Opportunidad S.A. under the rules of Regulation "S" of the Securities
Act.
In March 1996, the Company issued a two year 6% convertible debenture
in exchange for $2,100,000. The debenture was issued to a company called
Infinity Investors Ltd. ("Infinity"), under Regulation "S" of the Securities
Act, and it entitled Infinity to convert the debenture principal plus accrued
interest into Class A common stock of the Company at a 30% discount to the
market based on a five day average trading price at the time of conversion.
During the fiscal year ended March 31, 1997, the debenture was completely
converted, and as a result, the Company issued 1,833,643 shares of Class A
common stock at an average per share price of $1.15.
During the fiscal year ended March 31, 1997, the Company issued
60,000 shares of its Class A common stock in exchange for promotional services
valued at $50,400.
In March 1998, one holder of the Company's 12% convertible preferred
stock elected to convert his shares of preferred stock. As a result, the Company
issued 210,294 shares of Class A common stock at a conversion price of $.6825
per share (which according to the terms of the preferred stock offering,
represents 70% of the average closing price of the Class A common stock for the
twenty days prior to the date of conversion).
NOTE L - 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
interest 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.
F-23
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE L - 12% CONVERTIBLE PREFERRED STOCK (Continued)
As of March 31, 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.
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; however, the registration has not yet been
declared effective.
Additionally, as a result of the change in the Rule 144 and 144(k)
exemption regulations, the preferred stockholders 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 23
preferred stockholders qualified for the exemption under Rule 144(k) and on
March 15, 1998, that holder elected to convert his shares of preferred stock.
NOTE M - STOCK OPTIONS
NON-QUALIFIED STOCK OPTION PLAN
In August 1987, the Board of Directors approved and adopted a
Non-Qualified Stock Option ("NQSO") Plan. Under the NQSO Plan, individuals
determined to be key persons on whom the Company relies for the successful
conduct of its business, as determined by the Compensation Committee (the
"Committee"), are granted options to purchase IMTECH's Class A Common Stock.
There are 4,000,000 shares reserved for grant under the NQSO Plan.
The exercise prices of the options granted under the NQSO Plan, which
are determined by the Committee in its sole discretion, may not be less than the
par value of the shares, or fifty percent of the fair market value of the shares
on the dates of grant. The Committee also determines the time periods during
which the NQSO's may be exercised, although in no event shall any NQSO's have an
expiration date later than ten (10) years from the date of its grant. As of
March 31, 1998, options to acquire a total of 2,331,933 shares of Class A Common
Stock were outstanding or approved for grant under the NQSO Plan, at exercise
prices ranging from $.74 to $9.88 per share.
INCENTIVE STOCK OPTION PLAN
In August of 1987, the Board of Directors adopted the Company's
Incentive Stock Option ("ISO") Plan. The ISO Plan allows the Company to grant to
employees determined to be key personnel by management, incentive stock options
under the guidelines of Section 422 of the Internal Revenue Code. The Plan is
available to all of the Company's employees, including officers and employee
directors, and is intended to be used by management to attract and retain key
employees.
F-24
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE M - STOCK OPTIONS (Continued)
INCENTIVE STOCK OPTION PLAN (Continued)
The ISO Plan is administered by the Committee, who establishes the terms of the
options granted including their exercise prices, the dates of grant and number
of shares subject to options. The exercise prices of all of the options granted
under the ISO Plan must be equal to no less than the fair market value of the
Class A Common Stock on the date of grant, and the terms of the options may not
exceed ten years. 3,000,000 shares of IMTECH Class A Common Stock are reserved
under the ISO Plan for grant.
For any employee/stockholder who may own more than 10% of the Company's
outstanding voting shares, the exercise price of options received under the ISO
Plan must be at least equal to 110% of the fair market value of the Class A
Common Stock on the date of grant, and the term of the options must not exceed
ten years. As of March 31, 1998, options to purchase 2,333,750 shares of
IMTECH's Class A common stock were outstanding and approved for grant under the
ISO Plan at exercise prices ranging from $1.18 to $6.75 per share.
DIRECTORS OPTION PLAN
In October 1988, the Board of Directors adopted the Directors Option
("DO") plan, which was authorized by the stockholders on December 19, 1988, and
was subsequently amended in October 1992. The purpose of the DO plan is to help
IMTECH retain the services of qualified non-officer or non-employee directors,
who are considered essential to the business progress of the Company. Under the
DO plan, options are granted only on the date of the annual stockholders'
meeting held once every calendar year. A total of 1,500,000 shares of the
Company's Class A common stock has been reserved for grant under the DO plan. At
March 31, 1998, there were no options outstanding under the DO plan.
[The Remainder of This Page Is Intentionally Left Blank]
F-25
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE M - STOCK OPTIONS (Continued)
The following summarizes the activity of the stock options for the three years
ended March 31, 1998 (in ,000):
<TABLE>
<CAPTION>
------------------------ ------------------------- --------------------------
NQSO ISO DO
------------------------ ------------------------- --------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Options Price Per Options Price Per Options Price Per
Share Share Share
(,000) ($) (,000) ($) (,000) ($)
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at April 1, 1995 221 9.43 468 4.28 15 3.13
Granted 1,219 2.21 801 2.36 - -
Canceled - - - - - -
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
Outstanding at March 31, 1996 1,440 3.32 1,269 3.07 15 3.13
Granted 350 1.68 1,125 1.24 - -
Canceled - - (125) 1.88 (15) 3.13
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
Outstanding at March 31, 1997 1,790 3.00 2,269 2.23 - -
Granted 1,255 1.12 500 1.18 - -
Canceled (713) 4.33 (435) 4.25 - -
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
Outstanding at March 31, 1998 2,332 1.58 2,334 1.63 - -
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
Exercisable at March 31, 1998 1,688 1.52 1,684 1.52 - -
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
Weighted average fair value of
options granted during the $ .17 $ .03 -
year
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
Weighted average remaining
life of options granted 5 years 2 years -
during the year
- ------------------------------------- ---------- ------------- ----------- ------------- ----------- --------------
</TABLE>
STOCK-BASED COMPENSATION
During the fiscal year ended March 31, 1997, the Company adopted SFAS
No. 123, "Accounting for Stock-Based Compensation". The pronouncement requires
entities to recognize as compensation expense over the vesting period the fair
value of stock-based awards on the date of grant. Alternatively SFAS No. 123
allows entities to continue to apply the provisions of APB No. 25 and provide
pro forma net income and pro forma income (loss) per share disclosures for
employee stock option grants made from 1995 forward as if the fair-valued-based
method defined in SFAS No. 123 had been applied.
F-26
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE M - STOCK OPTIONS (Continued)
STOCK-BASED COMPENSATION (Continued)
The Company has elected to adopt the disclosure-only provisions of SFAS No. 123,
and as described above, continues to apply APB No. 25 to account for stock
options. Accordingly, compensation expense is recognized for stock options
granted only to the extent that the quoted market price of the Company's Class A
common stock on the date of grant exceeds the exercise price of the options.
During the fiscal year ended March 31, 1998, the Company granted a total of
1,255,000 of stock options under the NQSO Plan to non-employees. As a result,
non-employee compensation expense of approximately $62,000 was charged to
operations during 1998. In addition, during 1998, the Company granted a total of
500,000 stock options under the ISO Plan, all granted with exercise prices equal
to the quoted market price of the Class A common stock on the date of grant.
Had compensation expense been determined as provided in SFAS No. 123
for stock options using the Black-Scholes option pricing model, the pro forma
effect would have been:
<TABLE>
<CAPTION>
------------------------------------------------
For the Years Ended March 31,
------------------------------------------------
1998 1997 1996
--------------- ---------------- ---------------
<S> <C> <C> <C>
Net income (loss) applicable to common shares - as reported $ (2,583,028) $ 188,617 $ (5,578,514)
Net income (loss) applicable to common shares - pro forma (2,740,613) (560,483) (6,059,414)
Net income (loss) per common share - as reported (.46) .04 (1.77)
Net income (loss) per common share - pro forma (.49) (.11) (1.93)
--------------------------------------------------------------- --------------- ---------------- ---------------
</TABLE>
The fair value of each option grant is calculated using the following
weighted average assumptions:
<TABLE>
<CAPTION>
-------------------------------------------
For the Years Ended March 31,
-------------------------------------------
1998 1997 1996
-------------- ------------- --------------
<S> <C> <C> <C>
Expected life (in years) 5 5 5
Interest rate 5.83% 6.01% 5.86%
Volatility 36.13% 287% 286%
Dividend yield - - -
</TABLE>
NOTE N - MAJOR CUSTOMERS
During the years ended March 31, 1998, 1997 and 1996, sales to the two
largest customers of the Company accounted for approximately 40%, 38% and 39% of
total revenues, respectively. At March 31, 1998, 1997 and 1996, the two largest
customers of the Company had accounts receivable balances in the aggregate of
approximately $441,000, $156,000 and $120,000, respectively.
F-27
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE O - 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.
EMPLOYMENT AGREEMENTS
In December 1996, the Board of Directors appointed Matti Kon as the
Company's Chief Executive Officer. Consequently, the Company entered into an
employment agreement with Mr. Kon which provides for a base annual salary of
$200,000 plus an incentive bonus equal to 20% of operating income, up to a
maximum of $500,000. The agreement had an initial one year term and awarded Mr.
Kon 500,000 options to purchase 500,000 shares of the Company's Class A common
stock at an exercise price of $1.18 per share as a signing bonus. The options
vested after one year of service and expire in December 1998. 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 for an additional two year period through December
1999. 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 are exercisable for one year following that date.
The Company has entered into an employment agreement with Mr. Joseph
Gitto, its President and Chief Financial Officer. The agreement, as amended in
July 1997, expires in December 1999 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 April
2000.
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 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.
F-28
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE O - COMMITMENTS AND CONTINGENCIES (Continued)
OTHER (Continued)
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.
NOTE P - EARNINGS (LOSS) PER SHARE
In December 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share". Under SFAS No. 128 public
companies and entities with complex capital structures are required to present
basic and diluted EPS on the face of the income statement. SFAS No. 128 replaces
the presentation of primary EPS with a presentation of basic EPS and, if
applicable, diluted EPS. Basic EPS excludes dilution and is computed by dividing
income available to Class A Common stockholders by the weighted-average number
of Class A Common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
Class A Common stock are exercised or converted and the resulting additional
shares are dilutive (their inclusion decreases the amount of EPS). The effect on
earnings (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 Class A Common shares outstanding.
NOTE Q - DISCONTINUED OPERATIONS
During the fiscal year ended March 31, 1995, the Company discontinued
its Litigation Support Services division, which generated sales of approximately
$1,563,000 and recorded a net loss of approximately $1,773,000 for that year.
The discontinued division wound down its operations during the fiscal year ended
March 31, 1996, and as a result, the Company recorded a final charge of
approximately $391,000 to write off the remaining assets.
NOTE R - OTHER COSTS
In the third quarter of fiscal year ended March 31, 1997, management
adopted a formal plan to restructure IMTECH's work force and redeploy the
operating assets of the Company. Management's intentions were to make the
Company operate more efficiently and remain competitive in the research printing
market. In accordance with the restructuring plan, the Company recorded a charge
of $550,000 for the year ended March 31, 1997 to account for the costs incurred
to reorganize the work force and redeploy the production equipment, summarized
as follows:
F-29
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information Management Technologies Corporation
("IMTECH")
Notes to Financial Statements
March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE R - OTHER COSTS (Continued)
<TABLE>
<CAPTION>
------------------------------------- -------------
<S> <C>
Severance payments $ 259,000
Payroll taxes and benefits 77,000
Consulting fees 131,000
Asset redeployment costs 83,000
----------
$ 550,000
----------
------------------------------------- -------------
</TABLE>
NOTE S - PROPOSED ACQUISITION
The Company has signed a letter of intent to purchase 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.
F-30
<PAGE>
Information Management Technologies Corporation
("IMTECH")
Schedule II
Valuation and Qualifying Accounts
For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
---------- --------- --------- --------- ---------
Additions
-------------------------
[1] [2]
Balance at Charged to Charged to Deductions- Balance
Description Beginning Costs and Other Describe at
of Year Expenses Accounts- End of Year
Describe
- ------------------------------------ -------- -------- ---------- -------- --------
[a]
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended March 31, 1998 $ 36,800 $ 82,373 $ -- $ 20,009 $ 99,164
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
Year ended March 31, 1997 $104,500 $ 34,660 $ -- $102,360 $ 36,800
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
Year ended March 31, 1996 $ 56,385 $209,850 $ -- $161,735 $104,500
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
Accumulated amortization of cost in excess of net assets acquired:
Year ended March 31, 1998 $ -- $ -- $ -- $ -- $ --
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
Year ended March 31, 1997 $255,059 $ -- $ -- $255,059 $ --
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
Year ended March 31, 1996 $255,059 $ -- $ -- $ -- $255,059
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
</TABLE>
[a] Represents amounts written off during the year.
F-31
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
The following exhibits are filed as part of, or incorporated by
reference into, this report on Form 10-K, as indicated below (footnote
explanations are at end of index):
3.1 Certificate of Incorporation of the Company, as filed on December 24,
1986, amended October 16, 1987, amended July 20, 1989 and as amended
December 14, 1989.(11)
3.2 Certificate of Incorporation of the Company as amended June 13, 1995
and amended June 28, 1995.(20)
3.3 Certificate of Incorporation of the Company as amended November 30,
1995.(46)
3.4 Bylaws of the Company.(1)
4.1 Unit Purchase Option for 46,300 units, dated April 6, 1988, issued to
D.H. Blair & Co., Inc.(8)
4.2 Unit Purchase Option for 32,000 units, dated April 5, 1988, issued to
Parliament Hill Capital Corp.(8)
4.3 Unit Purchase Option for 500 units, dated April 6, 1988, issued to
David Nachamie.(8)
4.4 Unit Purchase Option for 500 units, dated April 6, 1988, issued to
Vincent Coakley.(8)
4.5 Unit Purchase Option for 500 units, dated April 6, 1988, issued to
Michael Siciliano.(8)
4.6 Unit Purchase Option for 200 units, dated April 6, 1988, issued to
Allison Brown.(8)
4.7 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and
the Warrant Agent, dated April 6, 1988.(8)
4.8 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc.
and the Warrant Agent, dated February 23, 1989.(9)
4.9 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc. and
the Warrant Agent, dated May 22, 1990.(11)
4.10 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc.
and the Warrant Agent, dated August 16, 1990.(12)
4.11 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc.
and the Warrant Agent, dated March 25, 1991.(16)
4.12 Form of Convertible Subordinated Debenture issued in connection with
the Company's private placement completed in November 1991.(17)
4.13 Form of Convertible Subordinated Note issued in connection with INSCI
Corp. private placement completed in June 1992.(17)
4.14 Warrant Agreement by and among the Company, D.H. Blair & Co., Inc.
and the Warrant Agent, dated February 1, 1993 as amended by
Supplemental Agreement to Amend Warrant Agreement, dated June 27,
1993.(18)
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
4.15 Loan Option Agreement, dated January 17, 1995, issued to Shor
Yeshev.(20)
4.16 Loan Option Agreement, dated January 17, 1995, issued to Raquel
Grunwald.(20)
4.17 Loan Option Agreement, dated January 17, 1995, issued to Lou
Gurman.(20)
4.18 Loan Option Agreement, dated January 17, 1995, issued to Dynamic
Control.(20)
4.20 Extension of expiration date and repricing of Class A and Class B
Warrants (65)
4.19 Loan Option Agreement, dated January 17, 1995, issued to Dr. Rona
Krinick.(20)
9.1 Voting Agreement between D.H. Blair & Co., Inc. and Pierce Lowrey,
Jr. dated February 23, 1989 accompanied by a schedule of seven other
substantially identical agreements reflecting parties' names and amount
of securities subject to the agreements.(10)
9.2 Voting Agreement between D.H. Blair & Co., Inc. and Gerald E.
Dorsey.(18)
9.3 Voting Agreement between the Company and Pierce Lowrey, Jr.(19)
10.1 Employment Agreement dated as of September 1, 1987 between the Company
and Pierce Lowrey, Jr.(1)
10.2 Escrow Agreement by and among the Company, the existing stockholders,
and the Escrow Agent.(8)
10.3 Amended and Restated 1987 Incentive Stock Option Plan.(10)
10.4 Amended and Restated 1987 Non-Qualified Stock Option Plan.(8)
10.5 Sublease dated September 7, 1988, between the Company and Kidder,
Peabody & Co., Inc. for the Company's facilities at 130 Cedar Street,
New York, NY with lease attached thereto.(10)
10.6 Lease dated November 2, 1988, between the Company and Carol Gaynor,
Marguerite K. Lewis and William A. Goldstein, as Trustees for
additional facilities at 130 Cedar Street, New York, N.Y.(10)
10.7 Lease dated August 19, 1987, between the Company and California State
Teacher's Retirement System for the Company's facilities at Six
Piedmont Center, Suite 100, Atlanta, Georgia.(1)
10.8 Form of Facilities Management Agreement.(1)
10.9 Form of Service Agreement.(1)
10.10 Employment Agreement dated January 1, 1988 between the Company and
Ronald A. Bibbo.(3)
10.11 Non-Compete Agreement September 3, 1986 by and among Datacopi, Inc.,
NCR Corporation, and Pierce L. Lowrey, Jr.(2)
10.12 Line of Credit for the Company with the Robinson-Humphrey Company,
Inc.(2)
10.13 Agreement for sale of 150,000 shares of Class B Common Stock between
the Company and Pierce Lowrey, Jr.(2)
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
10.14 Subscription Agreement for Ronald A. Bibbo.(2)
10.15 Cease and Desist Agreement between the Company and Independent Printing
Company, Inc.(3)
10.16 Settlement Agreement between the Company and Mathias & Carr, Inc.(3)
10.17 Line of Credit for the Company with the First National Bank of
Atlanta.(3)
10.18 March 31, 1988 accrued salary waiver between Pierce Lowrey, Jr. and the
Company.(7)
10.19 Letter Agreement between the Company and D.H. Blair & Co., Inc.
regarding merger and acquisition consulting services, dated April
13, 1988.(8)
10.20 Consulting Agreement between the Company and D.H. Blair & Co., Inc.
dated April 13, 1988.(8)
10.21 Facilities Management Agreement dated June 6, 1988 by and between the
Company and Manufacturers Hanover Trust Company, with Addendum thereto,
dated July 1988.(8)
10.22 Facilities Management Agreement, dated September 7, 1988, by and
between the Company and Kidder, Peabody & Co., Inc., and related
agreements and documents.(8)
10.23 Directors Option Plan.(10)
10.24 Employment Agreement, dated May 1, 1988, between the Company and Ray
Miller, with attachments and exhibits.(10)
10.25 Stock Option Agreement, dated May 1, 1988, between the Company and Ray
L. Miller.(10)
10.26 Agency Agreement, dated January 30, 1989, between the Company and D.H.
Blair & Co., Inc.(10)
10.27 Unit Purchase Option for 2.55 Private Placement units, dated February
23, 1989, issued to D.H. Blair & Co., Inc.(10)
10.28 May 1, 1989 letter regarding salary waiver from Pierce Lowrey, Jr. to
the Company.(10)
10.29 Assignment Agreement, dated May 24, 1989 between the Company and Pierce
Lowrey Jr. regarding assignment of claims against Ronald A.
Bibbo.(10)
10.30 Asset Purchase Agreement, dated May 5, 1989, between Jon Rothenberg &
Associates and the Company, with related documents and
agreements.(10)
10.31 Promissory Note in the original principal amount of $100,000 dated June
9, 1989 payable by the Company to Pierce Lowrey, Jr.(10)
10.32 Commitment Letter, dated July 17, 1989, from Pierce Lowrey, Jr. to
the Company with respect to additional loans to the Company.(10)
10.33 Employment Agreement, dated December 15, 1989, between the Company and
John Hoffman.(11)
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
10.34 Credit Agreement, dated August 1, 1989, as amended, by and between the
Company and State Street Bank and Trust Company.(11)
10.35 $750,000 Loan Commitment, Master Note and Security Agreement by and
between Pierce Lowrey, Jr. and the Company, dated March 1, 1990.(11)
10.36 Asset Purchase Agreement by and between Imtech Optical Systems, Inc.
and Acctex Information Systems, Inc., dated December 29, 1989.(11)
10.37 Distribution Agreement between the Company and the Vault Company dated,
June 25, 1990.(13)
10.38 Letter Agreement, dated May 15, 1990 from D.H. Blair & Co., Inc. to
the Company regarding amendment to Unit Purchase Option ,dated
February 23, 1989.(14)
10.39 Letter Agreement between the Company and D.H. Blair & Co., Inc.
regarding 1990 Bridge Loan, dated May 22, 1990.(14)
10.40 Form of 12% Subordinated Promissory Note issued in connection with 1990
Bridge Loan.(1)
10.41 Asset Purchase Agreement between the Company and IMTECH Atlanta,
Inc.(15)
10.42 Form of Subordinated Promissory Note issued in connection with the
Company's private placement completed in February 1991.(16)
10.43 Accounts Financing Agreement [Security Agreement] (with Supplements)
and $100,000 Term Notes between the Company and Congress Financial
Corporation, dated May 3, 1991, and $500,000 Letter of Credit from the
First National Bank of Atlanta, dated May 2, 1991.(16)
10.44 Warrant Agreements between the Company and Pierce Lowrey, Jr. dated
February 1, 1991, February 5, 1991 and February 28, 1991 for 425,000
shares, 125,000 shares and 153,000 shares, respectively.(16)
10.45 Share Purchase Option for 243,750 shares of Class A Common Stock,
dated April 26, 1991, between the Company and D.H. Blair & Co.,
Inc.(16)
10.46 Form of Share Purchase Option issued in connection with INSCI Corp.
private placement in July 1991.(17)
10.47 Form of Warrant issued in connection with INSCI Corp. private placement
completed in January 1992.(17)
10.48 Form of Unit Exchange Agreement issued in connection with INSCI Corp.
private placement completed in January 1992.(17)
10.49 Form of Warrant issued in connection with INSCI Corp. private placement
completed in June 1992.(17)
10.50 Consulting Agreement, dated March 8, 1993, by and between INSCI Corp.
and the Raymond Group, Inc.(18)
10.51 Lease Agreement, dated May 31, 1993, by and between INSCI Corp. and
Connecticut General Life Insurance Company.(18)
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
10.52 Settlement Agreement with the SEC, dated September 30, 1992.(18)
10.53 Consulting Agreement by and between the Company and Edward I. Rosen,
dated April 1, 1993.(18)
10.54 First Amendment to Director's Stock Option Plan, dated October 20,
1992.(18)
10.55 Lease Agreement between the Company and A.J. Goldstein & Co., Inc. for
premises located at 130 Cedar Street, New York, New York 1006, dated
October 7, 1993.(17)
10.56 Loan Agreement (and supplemental documentation) between BNY
Financial Corp., the Company, INSCI Corp. and Imtech Litigation
Support Systems, Inc.(32)
10.57 INSCI Corp. 1992 Stock Option Plan.(28)
10.58 INSCI Corp. 1992 Directors Option Plan.(28)
10.59 INSCI Corp. 1992 Advisory Committee Plan.(28)
10.60 INSCI Corp. Accounts Financing Agreement between INSCI Corp. and
Congress Financial Corporation, and related documents.(28)
10.61 INSCI Corp. Form of 1991 Option.(28)
10.62 INSCI Corp. Form of 1992 Warrants.(28)
10.63 INSCI Corp. Form of 1992 Convertible Subordinated Notes.(28)
10.64 INSCI Corp. Form of 1992 Contingent Warrants.(28)
10.75 INSCI Corp. Form of 1993 Warrant - Version A.(30)
10.76 INSCI Corp. Form of 1993 Release Agreement.(30)
10.77 INSCI Corp. Form of Management Agreement between INSCI Corp. and
IMTECH.(28)
10.78 INSCI Corp. Form of Tax Sharing Agreement between INSCI Corp. and
IMTECH.(28)
10.79 Form of Indemnification Agreement with INSCI Corp.'s Directors.(28)
10.80 Marketing Associate Solution Alliance Agreement between UNISYS Corp.
and INSCI Corp.(28)
10.81 Data General Value Added Reseller Discount Purchase Agreement.(28)
10.82 Data General Optical Systems and Software Agreement.(28)
10.83 Distribution Agreement between Fiserv CIR, Inc. and INSCI Corp.(28)
10.84 Lease Agreement relating to INSCI Corp.'s White Plains, NY
headquarters.(29)
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
10.85 Forms of Customer License Agreements used by INSCI Corp.(29)
10.86 Forms of Employee Confidentiality Agreements used by INSCI Corp.(29)
10.87 Nondisclosure and Noncompetition Agreement between INSCI Corp., the
Company and Mason Grisby.(29)
10.88 Form of 1993 Warrant; Version B.(30)
10.89 Employment Agreement between INSCI Corp. and John L. Gillis.(30)
10.90 Employment Agreement between INSCI Corp. and Kris Canekeratne.(30)
10.91 Form of 1993 Exchange Agreement and Investor Suitability
Representations.(30)
10.92 Form of 1993 Conversion Agreement.(30)
10.93 Waivers by Congress Financial Corp.(30)
10.94 License Agreement between Bull HN Information Systems, Inc. and INSCI
Corp.(30)
10.95 Preferred stock Subscription Agreement between INSCI Corp. and the
Company relating to preferred stock.(19)
10.96 Business Partner Agreement between International Business Machines
Corp. and INSCI Corp.(32)
10.97 Waiver by BNY Financial Corp.(31)
10.98 Stock Escrow Agreement between INSCI Corp., the Company and First
Union National Bank of North Carolina (as escrow agent).(32)
10.99 Promissory Note and Security Agreement in favor of INSCI Corp. from
John L. Gillis and Sandra Gillis, in the original principal amount of
$150,000.(19)
10.100 Stock Pledge Agreement by John L. Gillis and Sandra Gillis, in favor of
INSCI Corp.(19)
10.101 April 1993 Private Placement term sheet and exhibits.(19)
10.102 December 1993 Litigation Support Systems, Inc. Private Placement
documents.(19)
10.103 Consulting Agreement between the Company and Boulder Financial Group,
Ltd.(19)
10.104 Amendment to loan Agreement between BNY Financial Corp. and
Registrant.(19)
10.105 Amendment to Loan Agreement between NY Financial Corp. and
Registrant.(19)
10.106 BNY Agreement with Registrant.(20)
10.107 Preferred Stock Redemption Agreement.(20)
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
10.108 Employment Agreement between IMTECH and Christopher D. Holbrook.(34)
10.109 Employment Agreement between IMTECH and Joseph A. Gitto, Jr.(34)
10.110 Lease Agreement relating to INSCI's Westborough, Massachusetts
heaquarters.(44)
10.111 Employment Agreement with Jack Steinkrauss.(44)
10.112 Employment Agreement with John Gillis.(44)
10.113 Employment Agreement with Kris Canckeratne.44)
10.114 Agreement for system purchase by Northern Trust Company.(44)
10.115 Technology and Reseller Agreement with Elixir Technology.(20)
10.116 Private Placement term sheet for offering of 90 day 10% subordinated
notes repayable in cash or shares of the Company's proposed 10%
convertible preferred stock.(20)
10.117 First Amendments to Private Placement term sheet and exhibits.(20)
10.118 Copy of modification of lease executed by the Company and A.J.
Goldstein & Co., Inc.(45)
10.119 Form of Subordinated Convertible Debenture Exchange Agreement for 12%
convertible preferred stock.(51)
10.120 Agreement between the Company and the Corporate Relations Group for the
Company's corporate and stockholder public relations.(52)
10.121 Form of Agreement by and between the Company and a shareholder with
respect to a loan of stock.(53)
10.122 Form of Subscription Agreement for 12% subordinated convertible
debentures.(54)
10.123 Offshore Convertible Debenture Subscription Agreement between the
Company and Infinity Investors, Ltd. and related agreement between the
Company and Alpine Capital Partners, Inc.(60)(62)
10.124 Termination of Asset-Based Financing Agreement with BNY Financial
Corp.(56)
10.125 Form of Subscription Agreement with J. Michael Reisert, Inc.(63)
10.126 Employment Agreement with Mr. Matti Kon.(66)
10.127 12% Convertible Secured Promissory Note Private Placement Term Sheet
with exhibits.(64)
10.128 Credit arrangement with MTB Bank.(70)
10.129 Amendment to employment agreement with Mr. Matti Kon
10.130 Amendment to employment agreement with Mr. Joseph A. Gitto
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
13.1 The Company's Annual Report to Security Holders for the year ended
March 31, 1993.(22)
13.2 Form 10-Q for the quarter ended June 30, 1993.(23)
13.3 Form 10-Q for the quarter ended September 30, 1993.(24)
13.4 Form 10-Q for the quarter ended December 31, 1993.(25)
13.5 Form 10-Q)A (Amendment No. 1) for the quarter ended December 31,
1993.(26)
13.6 Proxy Statement for the Company's 1993 Annual Shareholders'
Meeting.(27)
13.7 Form 10-Q for the quarter ended June 30, 1994.(35)
13.8 Form 10-Q for the quarter ended September 30, 1994.(36)
13.9 Form 10-Q for the quarter ended December 31, 1994.(37)
13.10 Form 10-Q for the quarter ended June 30, 1995.(47)
13.11 Form 10-Q for the quarter ended September 30, 1995.(48)
13.12 Form 10-Q for the quarter ended December 31, 1995.(49)
13.13 Form 10-Q for the quarter ended June 30, 1996.(57)
13.14 Form 10-Q for the quarter ended September 30, 1996.(58)
13.15 Form 10-Q for the quarter ended December 31, 1996.(59)
13.16 Form 10-Q for the quarter ended June 30, 1997.(67)
13.17 Form 10-Q for the quarter ended September 30, 1997.(68)
13.18 Form 10-Q for the quarter ended December 31, 1997.(69)
16.1 Letter regarding dismissal of independent certified public
accountant.(38)
16.2 Letter regarding engagement of new independent certified public
accountant.(39)
16.3 Letter regarding resignation of independent certified public
accountant.(38)
16.4 Letter regarding potential prior period adjustment.(41)
16.5 Letter regarding engagement of new independent certified public
accountant.(42)
21.1 List of subsidiaries.(20)
22.1 Proxy Statement for the Company's 1994 Annual Shareholders'
Meeting.(43)
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
22.2 Proxy Statement for the Company's 1995 Annual Shareholders'
Meeting.(50)
24.1 Powers of Attorney.(20)
27.1 Financial data schedule
(1) Incorporated herein by reference to the Exhibit with the same
description to the Company's Registration Statement on Form S-1, File
No. 33-18245, as filed with the Securities and Exchange Commission on
October 30, 1987.
(2) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 1 to the Company's Registration Statement
of Form S-1, File No. 33-18245, as filed with the Securities and
Exchange Commission on February 29, 1988.
(3) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 2 to the Company's Registration Statement
of Form S-1, File No. 33-18245, as filed with the Securities and
Exchange Commission on March 15, 1988.
(4) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 3 to the Company's Registration Statement
of Form S-1, File No. 33-18245, as filed with the Securities and
Exchange Commission on March 23, 1988.
(5) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 4 to the Company's Registration Statement
of Form S-1, File No. 33-18245, as filed with the Securities and
Exchange Commission on March 24, 1988.
(6) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 5 to the Company's Registration Statement
of Form S-1, File No. 33-18245, as filed with the Securities and
Exchange Commission on March 25, 1988.
(7) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 6 to the Company's Registration Statement
of Form S-1, File No. 33-18245, as filed with the Securities and
Exchange Commission on April 5, 1988.
(8) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 10-K for the fiscal year
ended July 31, 1988.
(9) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1989.
(10) Incorporated herein by reference to the Exhibit with the same
description to the Company's Transition Report on Form 10-K for the
eight month period ended March 31, 1989.
(11) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 10-K for the fiscal year
ended March 31, 1990.
(12) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990.
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(13) Incorporated herein by reference to the Exhibit with the same
description to the Company's Registration Statement of Form S-1, File
No. 33-36185, as filed with the Securities and Exchange Commission on
August 2, 1990.
(14) Incorporated herein by reference to the Exhibit with the same
description to Amendment No. 1 to the Company's Registration Statement
of Form S-1, File No. 33-36185, as filed with the Securities and
Exchange Commission on October 18, 1990.
(15) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 8-K, dated December 6,
1990.
(16) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 10-K for the fiscal year
ended March 31, 1991.
(17) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 10-K for the fiscal year
ended March 31, 1992.
(18) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 10-K for the fiscal year
ended March 31, 1993.
(19) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 10-K for the fiscal year
ended March 31, 1994.
(20) Incorporated herein by reference to the Exhibit with the same
description to the Company's Report on Form 10-K for the fiscal year
ended March 31, 1995.
(21) Filed with this report.
(22) Incorporated by reference herein to the Company's Annual Report to
Security Holders for the year ended March 31, 1993 as filed with the
Commission.
(23) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993.
(24) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
(25) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993.
(26) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q/A
(Amendment No. 1) for the quarter ended December 31, 1993.
(27) Incorporated herein by reference to the Exhibit with the same
description to the Proxy Statement for the Company's 1993 Annual
Shareholders' Meeting as filed with the Commission.
(28) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1,
File No. 33-54558, as filed with the Securities and Exchange
Commission on November 13, 1993.
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(29) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1, File
No. 33-54558, as filed with the Securities and Exchange Commission on
December 2, 1993.
(30) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1, File
No. 33-54558, as filed with the Securities and Exchange Commission on
February 2, 1994.
(31) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1, File
No. 33-54558, as filed with the Securities and Exchange Commission on
March 15, 1994.
(32) Incorporated herein by reference to the Exhibit with the same
description of the INSCI Corp. Registration Statement of Form S-1, File
No. 33-54558, as filed with the Securities and Exchange Commission on
March 25, 1994.
(33) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated January 17,
1995.
(34) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated March 3, 1995.
(35) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.
(36) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994.
(37) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994.
(38) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated August 9, 1994.
(39) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated
August 15, 1994.
(40) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated November 1,
1994.
(41) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated November 14,
1994.
(42) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated December 21,
1994.
(43) Incorporated herein by reference to the Exhibit with the same
description of the Company's Definitive Proxy Statement for the 1994
Annual Shareholders' Meeting, as filed with the Commission.
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(44) Incorporated herein by reference to the Exhibit with the same
description as filed by INSCI Corp. the majority owned subsidiary of
the Registrant.
(45) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated July 14, 1995.
(46) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated November 30,
1995.
(47) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.
(48) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
(49) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995.
(50) Incorporated herein by reference to the Exhibit with the same
description of the Company's Definitive Proxy Statement for the 1995
Annual Shareholders' Meeting, as filed with the Commission.
(51) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated September 22,
1995.
(52) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated October 24,
1995.
(53) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated January 3, 1996.
(54) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated January 22,
1996.
(55) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated March 6, 1996.
(56) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated April 11, 1996.
(57) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
(58) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.
(59) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996.
(60) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated April 25, 1996.
<PAGE>
IMTECH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(61) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K/A (Amendment No. 1),
dated July 25, 1996.
(62) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated September 16,
1996.
(63) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated December 5,
1996.
(64) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated March 20, 1997.
(65) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated April 22, 1997.
(66) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K/A, dated January 3,
1997.
(67) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
(68) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
(69) Incorporated herein by reference to the Exhibit with the same
description to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1997.
(70) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K, dated November 13,
1997.
(71) Incorporated herein by reference to the Exhibit with the same
description of the Company's report on Form 8-K/A, dated June 18, 1998.
<PAGE>
EXHIBIT 10.129
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT to Agreement dated December 5, 1996, by and between INFORMATION
MANAGEMENT TECHNOLOGIES CORPORATION (hereinafter referred to as "EMPLOYER"
and/or "IMTECH") and MATTI KON, residing at 211 Madison Avenue, Apt. 24-B, New
York, New York 10016 (hereinafter referred to as "EMPLOYEE").
WITNESSETH:
----------
WHEREAS, the parties have entered into and Employment Agreement dated
October 28, 1996; and
WHEREAS, the parties are desirous of amending and supplementing the
Agreement; and
WHEREAS, the Amendment has been ratified by the Board of Directors of
EMPLOYER; and
WHEREAS, the parties are further desirous of expressing their rights and
responsibilities with respect to said Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL
COVENANTS AND CONDITIONS HEREINAFTER SET
FORTH, THE PARTIES AGREE AS FOLLOWS:
1
<PAGE>
FIRST: It is understood and agreed that the Agreement dated
December 5, 1996, annexed hereto and made a part hereof, is ratified, and that
the within Amendment has been approved by the Board of Directors of EMPLOYER.
SECOND: The term of the above-mentioned Employment Agreement is
extended from December 5, 1997 until December 5, 1999, or for an additional
period of two (2) years.
THIRD: In the event that the Employment Agreement and/or Amendment is
terminated prior to December 5, 1999, as a result of a change in job title
and/or job description from EMPLOYEE's current position as Chief Executive
Officer of EMPLOYER or, in the further event that EMPLOYEE is terminated,
directly or indirectly, without cause by EMPLOYER, then in that event, it is
understood and agreed that EMPLOYEE will be entitled to be paid a minimum of
one year's salary compensation, or the sum of $200,000. Additionally, EMPLOYEE
reserves the right to put to EMPLOYER all vested but unexercised stock options
granted and issued to EMPLOYEE at $.33 per option with the condition that the
five day trading market average price of the Company's stock as traded on
NASDAQ is a minimum of $.33 higher than that of the exercise price of the
EMPLOYEE's option.
In the event that EMPLOYEE elects to utilize the put option
granted to him, EMPLOYEE will be provided to afford ten days' written notice to
2
<PAGE>
EMPLOYER on his right to put the options to EMPLOYER. EMPLOYER agrees to make
payment within 60 days from the date that the put option is exercise by
EMPLOYEE.
FOURTH: EMPLOYER acknowledges that the EMPLOYEE's services are
valuable to EMPLOYER, and that EMPLOYER will take the necessary action to
report the within Amendment to EMPLOYEE's contract by a filing of said
information with the Securities and Exchange Commission on a Form 8-K Report.
FIFTH: Additionally, EMPLOYER agrees to pay to, or for EMPLOYEE,
all medical and life insurance benefits currently paid to and/or on behalf of
EMPLOYEE for a period of 18 months from the date of EMPLOYEE's termination or
severance from EMPLOYER. Employer further agrees to pay to employee,] the
housing allowance currently paid to employer for a period of one (1) year
from termination.
SIXTH: In the event of any dispute concerning the within Amendment,
then and in that event, EMPLOYER and EMPLOYEE agree that each will abide by
the rules, regulations and decisions as made by a single arbitrator at the
American Arbitration Association in the City, State and County of New York.
SEVENTH: The within Amendment may not be changed, modified or
altered, without being executed by the parties, and the parties agree that
the within will be governed by the Laws of the State of New York.
EIGHTH: The parties acknowledge that counsel for EMPLOYER has been
requested to prepare the within Amendment, and that EMPLOYEE has consulted
with counsel of his own choice prior to entering into the within Amendment.
3
<PAGE>
In the event of notice is required, it shall be made as follows:
If to EMPLOYER, at
Information Management Technologies Corporation
130 Cedar Street
New York, NY 10006
If to EMPLOYEE, at
211 Madison Avenue, Apt. 24-B
New York, New York 10016
IN WITNESS WHEREOF, the parties have set their hands and seals on
the day, month and year first above written:
INFORMATION MANAGEMENT
TECHNOLOGIES CORPORATION
By: /s/ Joseph Gitto
--------------------------
Joseph Gitto
/s/ Matti Kon
--------------------------
MATTI KON
The within Amendment has been approved by the Board of Directors of
EMPLOYER.
/s/ Joseph Gitto
----------------------------
JOSEPH GITTO
/s/ Harry Markovits
------------------------------
HARRY MARKOVITS
4
<PAGE>
EXHIBIT 10.130
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT to Agreement dated October 28, 1996, by and between
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION (hereinafter referred to as
"EMPLOYER" and/or "IMTECH") and JOSEPH GITTO, residing at 78 Stuart Avenue,
Malverne, New York 11565 (hereinafter referred to as "EMPLOYEE").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties have entered into and Employment Agreement dated
October 28, 1996; and
WHEREAS, the parties are desirous of amending and supplementing the
Agreement; and
WHEREAS, the Amendment has been ratified by the Board of Directors of
EMPLOYER; and
WHEREAS, the parties are further desirous of expressing their rights
and responsibilities with respect to said Amendment.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL
COVENANTS AND CONDITIONS HEREINAFTER SET FORTH, THE
PARTIES AGREE AS FOLLOWS:
FIRST: It is understood and agreed that the Agreement dated
October 28, 1996, annexed hereto and made a part hereof, is ratified, and
that the within Amendment has been approved by the Board of Directors of
EMPLOYER.
SECOND: The term of the above-mentioned Employment Agreement is
extended from October 28, 1996 until December 5, 1999, or for an additional
period of two (2) years.
THIRD: In the event that the Employment Agreement and/or Amendment is
1
<PAGE>
terminated prior to December 5, 1999, as a result of a change in job title
and/or description from EMPLOYEE's current position as President of
EMPLOYER or, in the further event that EMPLOYEE is terminated, directly or
indirectly, without cause by EMPLOYER, as a result of a merger, acquisition
or change in control of the EMPLOYER, then in that event, it is understood
and agreed that EMPLOYEE will be entitled to be paid a minimum of one year's
salary compensation, or the sum of $180,000. Additionally, EMPLOYEE reserves
the right to put to EMPLOYER all vested but unexercised stock options
granted and issued to EMPLOYEE at $.33 per option with the condition that the
five day trading market average price of the Company's stock as traded on
NASDAQ is a minimum of $.33 higher than that of the exercise price of the
EMPLOYEE's option.
In the event that EMPLOYEE elects to utilize the put option
granted to him, EMPLOYEE will be provided to afford ten days' written notice
to EMPLOYER on his right to put the options to EMPLOYER. EMPLOYER agrees to
make payment within 60 days from the date that the put option is exercised
by EMPLOYEE.
FOURTH: EMPLOYER acknowledges that EMPLOYEE's services are valuable
to EMPLOYER, and that EMPLOYER will take the necessary action to report the
within Amendment to EMPLOYEE's contract by a filing of said information with
the Securities and Exchange Commission on a Form 8-K Report.
FIFTH: Additionally, EMPLOYER agrees to pay to, or for EMPLOYEE,
all medical and life insurance benefits currently paid to and/or on behalf of
EMPLOYEE for a period of 18 months from the date of EMPLOYEE's termination or
severance from EMPLOYER.
SIXTH: In the event of any dispute concerning the within Amendment,
then and in that event, EMPLOYER and EMPLOYEE agree that each will abide by
the rules, regulations and decisions as made by a single arbitrator at the
American Arbitration Association in the City, State
2
<PAGE>
and County of New York.
SEVENTH: The within Amendment may not be changed, modified or
altered, without being executed by the parties, and the parties agree that
the within will be governed by the Laws of the State of New York.
EIGHTH: The parties acknowledge that counsel for EMPLOYER has been
requested to prepare the within Amendment, and that EMPLOYEE has consulted
with counsel of his own choice prior to entering into the within Amendment.
In the event of notice is required, it shall be made as follows:
If to EMPLOYER, at
Information Management Technologies Corporation
130 Cedar Street
New York, NY 10006
If to EMPLOYEE, at
78 Stuart Avenue
Malverne, New York 11565
IN WITNESS WHEREOF, the parties have set their hands and seals on the
day, month and year first above written.
INFORMATION MANAGEMENT
TECHNOLOGIES CORPORATION
By: /s/ MATTI KON, CEO
---------------------------
/s/ JOSEPH GITTO
---------------------------
JOSEPH GITTO
The within Amendment has been approved by the Board of Directors
of EMPLOYER.
/s/ MATTI KON
---------------------------
MATTI KON
/s/ Harry Markovits
---------------------------
HARRY MARKOVITS
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,401,376
<ALLOWANCES> 99,164
<INVENTORY> 230,144
<CURRENT-ASSETS> 2,219,127
<PP&E> 5,507,537
<DEPRECIATION> 2,395,999
<TOTAL-ASSETS> 6,501,588
<CURRENT-LIABILITIES> 3,305,350
<BONDS> 906,407
2,660,733
0
<COMMON> 231,594
<OTHER-SE> (2,508,176)
<TOTAL-LIABILITY-AND-EQUITY> 6,501,588
<SALES> 9,488,340
<TOTAL-REVENUES> 9,488,340
<CGS> 7,323,641
<TOTAL-COSTS> 7,323,641
<OTHER-EXPENSES> 4,037,474
<LOSS-PROVISION> 68,143
<INTEREST-EXPENSE> 444,444
<INCOME-PRETAX> (2,583,028)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,583,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,583,028)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
