SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934:
FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934: FOR
TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 0-16753
- --------------------------------------------------------------------------------
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
- ------------------------------------ ----------------------------------------
DELAWARE 58-1722085
- ------------------------------------ ----------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
- ------------------------------------ ----------------------------------------
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130 CEDAR STREET, FOURTH FLOOR, NEW YORK, NY 10006
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(Address of Principal Executive Offices) (Zip Code)
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(212) 306-6100
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(Registrant's Telephone Number, Including Area Code)
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N/A
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At February 16, 1999, the Registrant had outstanding 8,439,363 shares
of Class A common stock.
<PAGE>
IMTECH
================================================================================
INDEX
PAGE
- ----------------------- --------------------------------------------------------
PART I FINANCIAL INFORMATION
- ----------------------- --------------------------------------------------------
ITEM 1 Financial Statements 1
ITEM 2 Management's Discussion and Analysis of 17
Financial Condition and Results of Operations
- ----------------------- --------------------------------------------------------
PART II OTHER INFORMATION
- ----------------------- --------------------------------------------------------
ITEM 1 Legal Proceedings 26
ITEM 6 Exhibits and Reports on Form 8-K 28
Signatures 29
<PAGE>
IMTECH
================================================================================
PART I
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
-----------
PAGE
-----------
Balance Sheets as of December 31, 1998 and March 31, 1998 2
Statements of Operations for the Three Months
and Nine Months Ended December 31, 1998 and 1997 4
Statements of Cash Flows for the Nine Months
Ended December 31, 1998 and 1997 5
Notes to Financial Statements 7
1
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1998
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 254 $ --
Cash - restricted 191,341 126,068
Accounts receivable, net of allowance for
doubtful accounts of $19,100 at December
31, 1998 and $99,200 at March 31, 1998 4,475,581 1,302,212
Inventory 885,209 230,144
Due from related parties -- 73,875
Prepaid expenses and other current assets 394,548 231,615
----------- ---------
Total current assets 5,946,933 1,963,914
----------- ---------
Property and equipment - at cost:
Production equipment 5,476,588 3,314,525
Computer software applications 837,329 439,676
Furniture and fixtures 485,155 359,490
Leasehold improvements 771,278 679,975
Computer equipment 896,684 713,871
----------- ---------
8,467,034 5,507,537
Less: Accumulated depreciation and amortization 4,369,629 2,395,999
----------- ---------
Net property and equipment 4,097,405 3,111,538
----------- ---------
Other assets:
Cash - restricted 252,691 378,202
Investment in INSCI Corp. 599,544 436,032
Goodwill, net of accumulated amortization 7,140,745 --
Deposits and other 511,661 356,689
----------- ---------
Total other assets 8,504,641 1,170,923
----------- ---------
$18,548,979 $6,246,375
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
BALANCE SHEETS
(CONCLUDED)
DECEMBER 31, 1998 AND MARCH 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------------- -----------------
(Unaudited)
Current liabilities:
<S> <C> <C>
Cash overdraft $ 484,093 $ 90,417
Loan payable - bank 1,598,419 --
Current maturities of long-term debt 1,681,129 266,925
Current maturities of long-term capital lease obligations 301,183 363,795
Accounts payable 2,993,617 1,606,549
Accrued salaries 192,664 138,865
Accrued expenses and other current liabilities 1,107,898 583,586
------------ ------------
Total current liabilities 8,359,003 3,050,137
------------ ------------
Loan payable - bank -- 925,975
Long-term debt, less current maturities 4,352,567 21,607
Capital lease obligations, less current maturities 400,556 614,354
Deferred rent 342,109 365,351
12% convertible secured promissory notes 956,800 884,800
12% subordinated mandatory convertible debentures 4,000,000 --
Commitments and contingencies
Stockholders' equity:
12% convertible preferred stock:
Authorized - 3,000,000 shares at $1.00 par value;
1,507,798 and 2,660,733 shares issued and
outstanding at December 31, 1998 and March
31, 1998, respectively ($1,507,798 and $2,660,733
of aggregate liquidation value as of December 31,
1998 and March 31, 1998, respectively) 1,507,798 2,660,733
Class "A" common stock:
Authorized - 100,000,000 shares at $.04 par value;
8,439,363 and 5,789,846 shares issued and outstanding
at December 31, 1998 and March 31, 1998, respectively 337,575 231,594
Additional paid-in capital 33,214,421 32,040,227
Accumulated other comprehensive income 594,343 430,831
Accumulated deficit (35,516,193) (34,979,234)
------------ ------------
Total stockholders' equity 137,944 384,151
------------ ------------
$ 18,548,979 $ 6,246,375
============ ============
</TABLE>
The accompanying notes are an itnegral part of these financial statements.
3
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
------------------------------ ----------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 6,111,801 $ 2,553,116 $ 13,270,823 $ 7,215,462
Cost of sales
4,564,725 1,569,357 9,227,633 5,281,416
------------ ------------ ------------ ------------
Gross profit 1,547,076 983,759 4,043,190 1,934,046
Operating expenses:
Selling, general and administrative 1,554,524 1,264,859 3,885,043 2,567,707
Amortization of goodwill 109,643 -- 178,584 --
------------ ------------ ------------ ------------
Total operating expenses 1,664,167 1,264,859 4,063,627 2,567,707
------------ ------------ ------------ ------------
Loss from operations (117,091) (281,100) (20,437) (633,661)
Other (income) expenses:
Interest expense, net 282,153 88,230 536,243 177,013
Interest amortization of beneficial
conversion feature attached to 12%
convertible secured promissory notes -- -- -- 444,444
Gain from the sale of INSCI Corp. stock -- (181,555) -- (240,785)
------------ ------------ ------------ ------------
Net other (income) expenses 282,153 (93,325) 536,243 380,672
------------ ------------ ------------ ------------
Net loss (399,244) (187,775) (556,680) (1,014,333)
Preferred stock dividends 10,230 64,380 132,990 193,140
------------ ------------ ------------ ------------
Net loss applicable to common stockholders $ (409,474) $ (252,155) $ (689,670) $ (1,207,473)
============ ============ ============ ============
Basic and diluted loss per share applicable
to common stockholders $ (0.06) $ (0.05) $ (0.10) $ (0.22)
============ ============ ============ ============
Weighted average number of shares
outstanding 7,026,287 5,579,552 7,026,287 5,579,552
============ ============ ============ ============
STATEMENT OF COMPREHENSIVE LOSS:
Comprehensive loss:
Net loss $ (399,244) $ (187,775) $ (556,680) $ (1,014,333)
Other comprehensive loss: Unrealized gain
(loss) on INSCI Corp. stock 218,016 (45,590) 163,512 (747,494)
------------ ------------ ------------ ------------
$ (181,228) $ (233,365) $ (393,168) $ (1,761,827)
============ ============ ============ ============
4
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (556,680) $(1,014,333)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 872,827 383,040
Amortization of intangible assets 205,251 --
Amortization of consulting fees 143,647 57,500
Non-employee compensation expense from stock options
granted during the period 145,750 --
Amortization of beneficial conversion feature related to
convertible debt -- 444,444
Property-in-kind interest paid on convertible debt 72,000 61,500
Gain from the sale of INSCI Corp. stock -- (240,785)
Provision for doubtful accounts (56,254) 51,183
Deferred rent (23,242) (11,744)
Changes in assets and liabilities, net of effects from the
purchase of KRL Litho, Inc. and RDS Research
Distribution Services, Inc.:
Accounts receivable (303,820) (238,319)
Inventory (455,819) (163,088)
Prepaid expenses and other current assets (217,663) (160,278)
Deposits and other assets (81,718) (37,432)
Accounts payable 330,873 397,417
Accrued salaries (57,565) (66,053)
Other accrued expenses and current liabilities (552,024) 144,429
Due from/to related parties 71,905 22,354
----------- -----------
Net cash used in operating activities (462,532) (370,165)
----------- -----------
Cash flows from investing activities:
Capital expenditures (688,346) (510,799)
Payments for the purchase of KRL Litho, Inc., and
RDS Research Distribution Services, Inc., net of cash acquired (4,476,255) --
Proceeds from the sale of INSCI Corp. stock -- 279,932
----------- -----------
Net cash used in investing activities (5,164,601) (230,867)
----------- -----------
Cash flows from financing activities:
Financing from cash overdraft 393,676 --
Net borrowings under bank credit facility 672,444 624,941
Proceeds from the issuance of long-term debt 4,000,000 90,000
Proceeds from long-term debt borrowings 1,300,000 --
Repayments of long-term debt (434,073) (429,430)
Payments of capital lease obligations (304,660) (238,036)
----------- -----------
Net cash provided by financing activities 5,627,387 47,475
----------- -----------
Net increase (decrease) in cash and cash equivalents 254 (553,557)
Cash and cash equivalents, beginning of year -- 1,228,819
----------- -----------
Cash and cash equivalents, end of period $ 254 $ 675,262
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
(CONCLUDED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<S> <C> <C> <C> <C> <C> <C>
Cash paid during the period for:
Interest $479,786 $188,361
======== ========
Income taxes $ 2,533 $ --
======== ========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
- ---------------------------------------------------------------------
DURING THE NINE MONTHS ENDED DECEMBER 31, 1998:
-----------------------------------------------
* The Company negotiated with a key vendor to convert $110,763 of trade
payables into an interest bearing installment promissory note.
* The Company issued property-in-kind dividends on its 12% convertible
preferred stock in the amount of $132,990.
* The Company paid property-in-kind interest of $72,000 on the
outstanding 12% convertible secured promissory notes.
* The Company incurred a capital lease obligation of $28,250.
* The Company issued 110,000 stock options valued at $145,750 in
connection with a one year public relations service contract.
* The Company purchased all of the capital stock of KRL Litho, Inc. for
$8,771,978 by placing a cash down payment of $4,771,978 and issuing two
installment promissory notes totaling $4,000,000.
* The Company purchased all of the capital stock of RDS Research
Distributions Services, Inc. for $1,060,000 by placing a cash down
payment of $60,000 and issuing an installment promissory note of
$1,000,000 for the balance.
* The Company converted 1,285,925 shares of its 12% convertible preferred
stock into 2,649,517 shares of Class A common stock at a 30% discount
to the 20-day average trading market price of the Class A common stock
prior to the date of conversion.
DURING THE NINE MONTHS ENDED DECEMBER 31, 1997:
-----------------------------------------------
* The Company negotiated with a key vendor to convert $111,692 of trade
payables into an interest bearing installment promissory note.
* 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.
* The Company issued property-in-kind dividends on its 12% convertible
preferred stock in the amount of $193,140.
* The Company paid property-in-kind interest of $61,500 on the
outstanding 12% convertible secured promissory notes.
* The Company incurred capital lease obligations of $461,000.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
THE COMPANY
- -----------
1. OPERATIONS
----------
Information Management Technologies Corporation (referred to as
"IMTECH") 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. IMTECH's core business is the
production and subsequent distribution of time sensitive printed financial
research, financial reports and marketing materials. In addition, IMTECH
provides facility management services which include mail room and copy center
management. IMTECH's customer base is principally located in New York City and
the surrounding metropolitan area, such as New Jersey, Southeast Connecticut and
Westchester County. IMTECH also services clients in Pennsylvania, the Midwest,
and as a result of strategic alliance with a London based service provider, in
Europe as well. The alliance allows IMTECH to offer its clients a smooth process
of receiving and managing data for print production.
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. In
addition, on November 13, 1998, IMTECH acquired all of the issued and
outstanding common stock of RDS Research Distribution Services, Inc. ("RDS") for
a purchase price of $1,060,000. RDS provides intelligent fulfillment and
distribution services to the research report production industry. The business
combination is accounted for under the Purchase Method of accounting as
promulgated by Accounting Principles Bulletin Opinion No. 16, "Business
Combinations". IMTECH, Skillcraft and RDS (collectively known as the "Company")
will operate as separate divisions under a new organization known as Skilltech
Global Graphics and Communications, Inc. ("SKILLTECH").
IMTECH holds a 6% ownership interest in INSCI Corp. ("INSCI") at
December 31, 1998. The investment in INSCI is accounted for under the
"Securities Available For Sale" method as promulgated by Statement of Financial
Accounting Standards ("SFAS") No. 115.
2. BASIS OF PRESENTATION
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") established
for interim financial information. Accordingly, they do not include all of the
information and disclosures required by GAAP for complete financial statements.
Management believes however that all of the adjustments considered necessary for
a fair presentation have been included. Operating results for the nine months
ended December 31, 1998 are not necessarily indicative of the results that may
be expected for the fiscal year ended March 31, 1999. For further information,
refer to the financial statements and disclosures thereto included in the
Company's annual report on Form 10-K for the year ended March 31, 1998.
The accompanying unaudited consolidated financial statements as of and
for the nine months ended December 31, 1998 include the accounts of IMTECH and
its wholly-owned subsidiaries, Skillcraft and RDS. Consequently, all material
intercompany accounts and transactions have been eliminated.
7
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------
The following is a summary of the significant accounting policies that
have been applied on a consistent basis in the preparation of the accompanying
financial statements:
1. REVENUE RECOGNITION
-------------------
Revenue is recorded when services are performed or upon delivery of the
product.
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 cash deposited in liquid
asset and equity funds with financial institutions.
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 operations.
5. GOODWILL
--------
In connection with the acquisitions of Skillcraft and RDS, IMTECH recorded
goodwill as a result of the excess of the purchase price over the net
assets acquired. The goodwill is amortized over an estimated life of
fifteen (15) years.
6. DEFERRED FINANCING COSTS
------------------------
Costs incurred to secure financing arrangements are included in deposits
and other assets in the balance sheets. The costs are amortized over the
life of the related credit facilities, which range from 9 to 110 months.
8
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ------------------------------------------------------
7. CONCENTRATION OF CREDIT RISK
----------------------------
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of cash and accounts
receivable. The Company maintains cash balances at various banks and places
its temporary cash investments in liquid asset and equity funds with two
financial institutions. Accounts at the banks and financial institutions
are insured by the Federal Deposit Insurance Corporation (FDIC) and the
Securities Investor Protection Corporation (SIPC) up to $100,000 and
$500,000, respectively.
The Company performs ongoing credit evaluations of its customers and
records reserves for potentially uncollectible accounts receivable which
are deemed credit risks as determined by management. The Company generally
does not require collateral for its accounts receivable. Accounts
receivable consist of geographically and industry dispersed customers.
8. 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.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The Company's financial instruments consist of cash, trade receivables and
payables and debt instruments. The carrying amount of cash and short-term
instruments approximates their fair values because of the relatively short
period of time between the origination of the instruments and their
expected realization. The carrying amount of the debt is based on the
current market interest rates being paid, and as a result, it approximates
fair value.
10. IMPAIRMENT OF LONG-LIVED ASSETS
-------------------------------
In the event that facts and circumstances indicate that the cost of an
asset may be impaired, an evaluation of recoverability would be performed.
If an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market is required.
11. RECLASSIFICATION
----------------
Certain 1997 amounts have been reclassified to conform to the 1998
presentation. Accordingly, preferred stock dividends of $64,380 and
$193,140 issued for the three and nine months ended December 31, 1997,
respectively, have been reclassified separately on the face of the
statement of operations. Such amounts were previously classified as
interest expense. The reclassification has no effect on the presentation of
the Company's financial position or loss per share applicable to common
stockholders for the periods presented.
9
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ------------------------------------------------------
12. LOSS PER SHARE
--------------
The Company calculates loss per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS
No. 128 replaces the presentation of primary EPS with a presentation of
basic EPS and, if applicable, diluted EPS. The effect on loss per share of
the Company's outstanding stock options and warrants, convertible
debentures and notes and preferred stock is antidilutive for all periods
presented and therefore not included in the calculation of the
weighted-average number of shares outstanding.
13. NEW FINANCIAL ACCOUNTING STANDARDS
----------------------------------
During the nine months ended December 31, 1998, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes new standards for reporting
comprehensive income and its components.
INVESTMENT IN INSCI CORP.
- -------------------------
IMTECH holds a 6% ownership interest (investment) in INSCI, its former
majority-owned subsidiary. The investment is accounted for under the "Securities
Available For Sale" method as promulgated by SFAS No. 115. As a result, the
investment is carried at fair market value.
At December 31, 1998 and March 31, 1998, the carrying value and
estimated fair market value of IMTECH's investment in INSCI is as follows:
<TABLE>
<CAPTION>
--------------- --------------
December 31, March 31,
1998 1998
--------------- --------------
<S> <C> <C>
Shares 436,032 436,032
--------------- --------------
Cost basis $ 5,201 $ 5,201
--------------- --------------
Market value $ 599,544 $ 436,032
--------------- --------------
Unrealized gain $ 594,343 $ 430,831
--------------- --------------
</TABLE>
At December 31, 1998 and March 31, 1998, 369,497 and 66,535 shares of
INSCI Corp. stock are pledged as collateral against the outstanding 12%
convertible secured promissory notes payable and the Company's obligations under
its credit arrangement with MTB Bank, respectively.
10
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
LOAN PAYABLE - BANK
- -------------------
The Company maintains a secured credit arrangement with MTB Bank (the
"Bank") which expires in October 1999. Under the provisions of the credit
arrangement, 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 $2,500,000 (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 (7.75% at December
31, 1998) plus two percent (2%). At December 31, 1998, the Company was indebted
to the Bank for outstanding obligations totaling approximately $1,598,000. 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 and Skillcraft as collateral for all
indebtedness outstanding under the arrangement.
IMTECH has issued an aggregate of 50,000 warrants to the Bank which
entitles MTB to purchase 50,000 shares of IMTECH Class A Common stock at prices
ranging from $1.00 to $1.81 per share, exercisable until November 2000.
The credit arrangement contains a minimum tangible net worth ("net
worth") covenant of $2,000,000, which has been waived by the Bank until March
31, 1999.
LONG-TERM DEBT
- --------------
To finance part of the acquisition funding for the purchase of
Skillcraft, on July 24, 1998, IMTECH issued 12% subordinated convertible
debentures (the "Debentures") in the aggregate amount of $4,000,000. 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 consolidated 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, which could
allow them to convert their holdings into 20 to 70% of the then outstanding
common stock during the first twelve months of the placement. 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.
In addition to issuing the 12% Debentures, on July 24, 1998, IMTECH
borrowed the sum of $1,300,000 from General Electric Capital Corporation. The
loan is evidenced by a promissory note payable in sixty (60) equal monthly
installments of approximately $28,000 including interest at a rate of 10.9%
through June 2003. The loan is secured by a first lien and security interest in
certain production equipment of both IMTECH and Skillcraft.
IMTECH paid for the acquisitions of both Skillcraft and RDS by
remitting aggregate cash down payments totaling $4,831,978 at closing and
issuing three (3) promissory notes to the sellers in the aggregate amount of
$5,000,000. The sellers' notes are payable in forty (40) equal monthly
installments totaling $125,000 which includes interest imputed at a rate of
10.5% commencing in October 1998 and continuing through March 2002.
11
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
RELATED PARTY TRANSACTIONS
- --------------------------
IMTECH is party to a consulting agreement with Blitz Systems, Inc.
("Blitz"), a company owned 100% by the Chief Executive Officer ("CEO") of
IMTECH, which expires in October 1999. Blitz is a computer systems consulting
firm specializing in developing total business solutions for business
management systems. Blitz's responsibilities under the contract are to
reengineer, reorganize and run the day-to-day operations of SKILLTECH's data
processing department at a cost of approximately $50,000 per month. More
specifically, Blitz provides extensive technical support for many of the
organization's clients on-site and is responsible for analyzing, designing and
developing customized database systems as required by management.
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 the shareholders. The
Preferred Stock received by debenture holders provided for the payment of
dividends at 12% per annum in addition to the right to convert a share of
Preferred Stock into a share of Class A common stock of the Company at 70% of
the 20-day average trading market price of the Company's Class A common stock at
the time of the conversion. Additionally, preferred stockholders were granted
cost-free registration rights with respect to the underlying shares of Class A
common stock.
The terms of the Preferred Stock further provided that holders could
only convert a percentage of the aggregate of their Preferred Stock until April
20, 1998 and, thereafter, for a period of 180 days until October 31, 1998,
holders of the Preferred Stock had a right to convert 100% of their Preferred
Stock which was not yet converted into shares of Class A common stock. As of
December 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.
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 been
declared effective. The Company has instructed its attorney to withdraw the
Registration Statement as the underlying securities which are the subject of
Registration are believed to be exempted under Rule 144 and/or 144(k) of
the Securities Act of 1933.
As a result of a change in the Rule 144 and 144(k) exemption
regulations, the preferred stockholders could 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. On October 15, 1998 seven
preferred stockholders who qualified for the exemption under Rule 144(k) elected
to convert their shares of preferred stock. As a result, the Company converted
1,285,925 shares of the Preferred Stock into 2,649,517 shares of IMTECH Class A
common stock at a 30% discount to the 20-day average trading market price of the
Class A stock up to the date of conversion.
12
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
12% CONVERTIBLE PREFERRED STOCK (CONTINUED)
- -------------------------------------------
Five holders of the preferred stock have agreed not to convert their
preferred shares at this time in accordance with a Stand Still Agreement (the
"Stand Still"). For agreeing to the Stand Still, the preferred holders will
accrue interest at a rate of 12% for an additional eighteen (18) months through
March 15, 2000. The interest will be paid quarterly in shares of the Company's
Class A Common stock. In addition, these preferred holders received from the
Company the number of Class A common stock options (the "options") equal to one
half (1/2) of the amount of preferred shares owned. The options have an exercise
price of $2.00 and are exercisable for a period of five (5) years.
Currently, their remains eight holders of the preferred stock who did
not elect to convert their shares nor accept the Stand Still option. In those
cases, the holders may be able to sell their underlying shares of Class A common
stock, upon conversion, pursuant to Rule 144 and/or 144(k) of the Securities Act
of 1933.
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, the Company has not made any contributions to the plan.
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
- ---------------------
The Company employs the services of Mr. Matti Kon as the Company's
Chief Executive Officer under an employment agreement which provides for a base
annual salary of $250,000 plus an incentive bonus equal to 20% of operating
income, up to a maximum of $500,000. The agreement had an initial one year term
and awarded Mr. Kon 500,000 options to purchase 500,000 shares of IMTECH'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 2002. The
agreement further provides that Mr. Kon has the right to devote his time and
attention to his other business interests. In January 1998, the Board of
Directors renewed Mr. Kon's contract for an additional five year period through
November 2002. 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 vested after the completion of Mr. Kon's
second year of service and are exercisable until November 2002.
13
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
COMMITMENTS AND CONTINGENCIES (CONTINUED)
- -----------------------------------------
EMPLOYMENT AGREEMENTS (CONTINUED)
- ---------------------------------
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 November 2002 and provides for an annual base salary of
$180,000. In addition, Mr. Gitto is entitled to an incentive bonus equal to 15%
of operating income, up to a maximum of $150,000. At the time of the original
agreement, Mr. Gitto was awarded 600,000 options to purchase 600,000 shares of
the IMTECH'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 November
2002.
In connection with the purchase of Skillcraft, IMTECH entered into
employment agreements with two key employees; Mr. Harold Russell ("Mr.
Russell"), former principal and President of Skillcraft, and Mr. Jeffrey Craugh
("Mr. Craugh"), Senior Vice President of Sales with the Skillcraft Division. Mr.
Russell's contract extends for a term of forty-three (43) months through January
2002 and grants him an annual base salary of $250,000. In addition, Mr. Russell
was granted 100,000 options to purchase 100,000 shares of the Company's Class A
Common stock at an exercise price of $.9625 per share. The options are
exercisable over a forty-three month period and expire on July 23, 2001. (See
details regarding subsequent termination of Mr. Russell's employment by the
Company in "Commitments and Contingencies-Other" on page 15). Mr. Craugh's
employment agreement extends for a period of forty-three months through January
2002. As base compensation under his contract, Mr. Craugh is entitled to receive
commissions on the Company's net sales equal to 8% of the first $1,000,000 and
10% of all net sales in excess of $1,000,000. In addition, Mr. Craugh was
awarded 300,000 options to purchase 300,000 shares of the Company's Class A
Common stock at an exercise price of $.9625 per share. The options are
exercisable over a forty-three month period and expire on July 23, 2001.
The Company has also entered in employment agreements with other
individuals considered to be key employees of the Skillcraft Division. The
contracts extend for three years and awarded the individuals an aggregate of
80,000 options to purchase 80,000 shares of the Company's Class A Common stock
at an exercise price of $.8325 per share. The options vest over a three year
period and expire in September 2001.
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. 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 considering instituting
legal action to recover the shares of stock and to seek punitive damages from
CRG.
14
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
COMMITMENTS AND CONTINGENCIES (CONTINUED)
- -----------------------------------------
OTHER (CONTINUED)
- -----------------
In August 1998, IMTECH entered into a one year service agreement with a
company known as Barry Kaplan Associates ("BKA"). According to the terms of the
agreement, BKA is to provide IMTECH with financial public relations services
related to promoting the Company and its stock. As consideration for their
services under the agreement, BKA will receive a monthly fee of $5,000, plus
pre-approved out-of-pocket expenses. In addition, BKA was granted 110,000
options to purchase 110,000 shares of the Company's Class A Common stock at an
exercise price of $1.25 per share for a period of two years commencing September
1, 1998. During the nine months ended December 31, 1998, the Company incurred a
non-cash charge to operations of approximately $146,000 representing
non-employee compensation resulting from the grant of options to BKA.
The Company has agreed to use its best efforts to file a registration
statement for certain convertible security holders for their underlying shares
of Class A Common Stock. While the Company has filed a registration statement on
Form S-3 (and amendments thereto) with the Securities and Exchange Commission
("SEC") as was required under various agreements with convertible security
holders, it is possible the holders of these securities may assert a claim
against the Company based on the Company's failure to timely comply with the
registration requirements for certain convertible security holders.
The Company is currently negotiating with its landlord to reduce its
rent covering the Regional Service Center facility. The landlord has claimed
certain defaults by the Company in its lease. In addition, the landlord has
requested that the Company post a letter of credit in the amount of $100,000
with a financial institution for additional rent security. There are no
assurances that the Company will be successful in its attempts to re-negotiate
its lease and reduce its monthly rent obligation, or resolve the claim of
additional rent by the landlord.
On November 12, 1998, the Company filed an action in the New York State
Supreme Court (of New York County) against Mr. Harold Russell ("Mr. Russell"),
the former principal owner of Skillcraft. The action is for damages suffered by
the Company as a result of fraud and intentional misrepresentation with respect
to the Stock Purchase Agreement dated July 24, 1998, wherein IMTECH purchased
all of the issued and outstanding common stock of Skillcraft. The Company has
claimed compensatory and punitive damages in the sum of $12,500,000 and
$10,000,000, respectively. An additional claim for recission and damages has
also been asserted against Mr. Russell. As a result of the information
discovered which led to the claim made against Mr. Russell, the Company
terminated his employment agreement. Mr. Russell is contesting the Company's
claims and denies the allegations asserted by the Company. Mr. Russell has made
a motion to dismiss the Company's complaint and the action is awaiting the
Court's Decision.
15
<PAGE>
IMTECH
================================================================================
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
COMMITMENTS AND CONTINGENCIES (CONTINUED)
- -----------------------------------------
OTHER (CONTINUED)
- -----------------
Mr. Russell has filed an action in the New York State Supreme Court
against the Company, claiming the aggregate sum of approximately $3,750,000, in
addition to interest and attorney's fees, alleging that the Company has made no
payments pursuant to the installment promissory note issued to Mr. Russell as a
result of the purchase of Skillcraft by IMTECH. The Company is contesting the
action filed by Mr. Russell and has denied that he is entitled to the sum
claimed by him based upon the claim of fraud and misrepresentation with respect
to the purchase of his stock ownership in Skillcraft. Motions before the court
by both the Company and Mr. Russell are currently pending.
Additionally, Mr. Russell has served an intent to arbitrate, before the
American Arbitration Association, a claim that the Company and Halcon
Acquisition Corp. ("Halcon"), a wholly-owned subsidiary of the Company, violated
his employment agreement by terminating his employment. The Company's
subsidiary, Halcon, terminated his employment agreement based upon allegations
of fraud by Mr. Russell in entering into the employment agreement which was
related to the acquisition of Skillcraft from Mr. Russell. The Company has filed
a motion to stay the arbitration based upon technical and other grounds and it's
awaiting the Court's decision.
On January 29, 1999, Investment Annuity of Robert Sachs, New Nibco,
Inc., Nibco Nevada, Inc., RHS Corp., and Robert Sachs ("Sachs") commenced an
action in the US District Court in the Southern District of New York against the
Company alleging that they are holders of 12% Redeemable Convertible Preferred
Stock issued by the Company and that under the terms of the Preferred Stock they
have a right to convert their shares of Preferred Stock into shares of the
Company's Class A common stock. In that regard, the Sachs claim alleges that the
Company should have issued 5,605,559 shares of common stock to the holders of
the Preferred Stock as a result of the exercise of their conversion rights as
opposed to the 1,593,291 shares of Class A common stock issued by the Company.
The Company has not yet interposed an answer to the complaint and intends to
contest the action as it is the Company's position that it has complied with
the conversion terms of the Preferred Stock and that the Sachs action does not
have merit.
16
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
COMPARISON OF RESULTS OF OPERATIONS
- -----------------------------------
The following schedule sets forth the percentage relationship of
significant items of the Company's results of operations to revenues:
<TABLE>
<CAPTION>
----------------------------- -------------
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
----------------------------- -------------
1998 1997 1998 1997
--------------- ----------------
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Cost of sales 75 61 70 73
---- ---- ---- ---
Gross profit 25 39 30 27
Operating expenses 27 50 30 36
---- ---- ---- ---
Loss from operations (2) (11) -- (9)
Other (income) expenses:
Interest expense, net 5 3 4 2
Interest amortization of beneficial
conversion feature attached to 12%
convertible secured promissory notes -- -- -- 6
Gain from the sale of INSCI Corp. stock -- (7) -- (3)
---- ---- ---- ----
Net loss (7) (7) (4) (14)
Preferred stock dividends -- 3 1 3
---- ---- ---- ----
Net loss applicable to common stockholders (7)% (10)% (5)% (17)%
---- ---- ---- ----
</TABLE>
17
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED 12/31/98 AS COMPARED TO THE THREE MONTHS ENDED 12/31/97
- --------------------------------------------------------------------------
During the three months ended December 31, 1998, the Company generated
consolidated revenues of approximately $6,112,000, of which IMTECH reported
approximately $2,460,000 (40% of consolidated revenues) Skillcraft reported
approximately $3,509,000, (57% of consolidated revenues) and RDS generated
approximately $143,000 of revenues, which represented 3% of consolidated
revenues. Revenues in total for the three months ended December 31, 1998
increased by approximately $3,559,000 (or by 139%) as compared to total revenues
reported for the same period last fiscal year of approximately $2,553,000. The
inclusion of Skillcraft's printing facility operations, as of July 24, 1998,
attributed $3,509,000 (or 99%) to the increase while RDS accounted for
approximately $143,000 (or 4%) of the increase since its acquisition by IMTECH
on November 13, 1998. IMTECH's Regional Service Center ("RSC") and Facilities
Management ("FACM") Divisions experienced declines in their revenues totaling
approximately $93,000 when compared to revenues for the three months
ended December 31, 1997. IMTECH's RSC Division accounted for approximately
$2,321,000 (or 38%) of consolidated revenues reported for the three months ended
December 31, 1998; a decrease of 3% from revenues of approximately $2,390,000
(94% of 1997 revenues) reported by the RSC Division for the three months ended
December 31, 1997.
The Company's FACM Division generated revenues approximately $139,000
(2% of total revenues) for the three months ended December 31, 1998; a decrease
of $24,000 (or 15%) when compared to revenues reported for the same period last
fiscal year of approximately $163,000 (6% of total 1997 revenues). The decrease
in FACM Division revenues is a result of management's decision not to renew
certain FACM contracts as a result of competitive pricing which reduced
operating margins below management's requirements.
The Company's consolidated cost of sales for the three months ended
December 31, 1998 increased approximately $2,996,000 (or 191%) to 4,565,000
(which represents 75% of total revenues) from cost of sales of $1,569,000 (which
represented 61% of total 1997 revenues) reported for the three months ended
December 31, 1997. IMTECH's cost of sales increased approximately $77,000 (or
2%) while its wholly-owned subsidiaries, Skillcraft and RDS, contributed
approximately $2,919,000 to the increase in consolidated cost of sales since
their acquisitions by IMTECH.
The Company incurred consolidated operating expenses of approximately
$1,664,000 (which represents 27% of total revenues) for the three months ended
December 31, 1998; an increase of $399,000 (or 32%) from operating expenses of
approximately $1,265,000 (50% of 1997 revenues) reported for the three months
ended December 31, 1997. Without the inclusion of the operating expenses of both
Skillcraft and RDS, which totaled approximately $655,000 and represents 11% of
consolidated 1998 revenues, IMTECH's operating expenses experienced a decline of
approximately $366,000 when compared to operating expenses recorded during the
same period last fiscal year. Offsetting that decrease was a charge to
operations for the three months ended December 31, 1998 of approximately
$110,000 (2% of revenues) which represents the amortization of the goodwill that
resulted from the Skillcraft and RDS purchase acquisitions. In addition, the
Company incurred one time charges of approximately $110,000 and $90,000 related
to the termination of Mr. Russell's employment and the relocation of the
equipment of RDS, respectively.
18
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED 12/31/98 AS COMPARED TO THE THREE MONTHS ENDED 12/31/97
- --------------------------------------------------------------------------
(CONTINUED)
- -----------
Consolidated interest expense reported for the three months ended
December 31, 1998 amounted to approximately $282,000 (5% of total 1998
revenues). In total, interest expense increased $194,000 during the three months
ended December 31, 1998 as compared to interest expense of approximately $88,000
(3% of 1997 revenues) reported for the same period during last fiscal year.
Interest expense incurred by Skillcraft of approximately $19,000 contributed in
part to the increase. However, IMTECH's interest expense increased $175,000 to
approximately $263,000 from 1997 to 1998. The increase in interest expense for
the combined organization was attributable in part to the interest costs
incurred as a result of increased borrowings under a credit arrangement with MTB
Bank which commenced in November 1997 for IMTECH, and later included Skillcraft
in August of 1998. In addition, IMTECH incurred interest expense of $120,000 for
the three months ended December 31, 1998 which accrued on the 12% subordinated
convertible debentures issued in connection with a July 1998 private placement.
A charge of approximately $53,000 was also incurred during the three months
ended December 31, 1998 which represented interest on notes payable to vendors
and to the sellers of both Skillcraft and RDS.
During the three months ended December 31, 1997, IMTECH sold 33,435
shares of stock in INSCI Corp., its former wholly-owned subsidiary, to provide a
source of working capital for investment in new production equipment. As a
result of the transaction, IMTECH recognized a gain from the sale of
approximately $182,000 (which represented 7% of 1997 revenues).
19
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
NINE MONTHS ENDED 12/31/98 AS COMPARED TO THE NINE MONTHS ENDED 12/31/97
- ------------------------------------------------------------------------
For the nine months ended December 31, 1998, the Company generated
consolidated revenues of approximately $13,271,000 of which IMTECH reported
approximately $7,718,000 (58% of consolidated revenues), Skillcraft reported
approximately $5,410,000 (41% of consolidated revenues) and RDS generated
approximately $143,000, which represented 1% of consolidated revenues. Revenues
in total for the nine months ended December 31, 1998 increased by approximately
$6,055,000 (or by 84%) as compared to total revenues reported for the same
period last fiscal year of approximately $7,215,000. The inclusion of
Skillcraft's printing operations, since July 24, 1998, attributed approximately
$5,410,000 (or 89%) to the increase while IMTECH's Regional Service Center
("RSC") Division accounted for $811,000 (or 13%) of the increase. In addition,
the inclusion of RDS' revenues, since its acquisition on November 13, 1998 by
IMTECH, of approximately $143,000 also contributed to the overall increase.
IMTECH's RSC Division accounted for approximately $7,279,000 (or 55%) of
consolidated revenues reported for the nine months ended December 31, 1998; an
increase of 13% from revenues of approximately $6,468,000 (90% of 1997 revenues)
reported by the RSC Division for the nine months ended December 31, 1997.
The net increase in revenues generated by Skillcraft, RDS and IMTECH's
RSC Division were offset by decreases in revenues from the Litigation
Duplication ("LIT DUP") Division of approximately $163,000 and the Facilities
Management ("FACM") Division of $146,000. The LIT DUP Division was shut down
last year as management continued to eliminate ancillary production services
that required the expenditure of both resources and capital which it believed
could be deployed more efficiently in the Company's core business. The Company's
FACM Division generated revenues of approximately $439,000 (3% of total
revenues) for the nine months ended December 31, 1998; a decrease of $146,000
(or 25%) when compared to revenues reported for the same period last fiscal year
of approximately $585,000 (8% of total 1997 revenues). The decrease in FACM
Division revenues is a result of management's decision not to renew certain FACM
contracts as a result of competitive pricing which reduced operating margins
below management's requirements.
The Company's consolidated cost of sales for the nine months ended
December 31, 1998 increased approximately $3,947,000 (or 75%) to $9,228,000
(which represents 70% of total revenues) from cost of sales of $5,281,000 (which
represented 73% of total 1997 revenues) reported for the nine months ended
December 31, 1997. A majority of the increase in consolidated cost of sales is
attributed to the inclusion of IMTECH's wholly-owned subsidiaries, Skillcraft
and RDS, (which were acquired during the current year), totaling approximately
$4,164,000. The net increase in consolidated cost of sales was offset by a
decrease in the cost of sales of IMTECH reported for the nine months ended
December 31, 1998 of approximately $217,000 (or 4%) from the cost of sales
reported for the nine months ended December 31, 1997 of $5,281,000. The decrease
in the cost of sales reported by IMTECH is primarily attributable to cost
savings realized from the reduction of IMTECH's labor force and related costs
when compared to the same period during last fiscal year.
20
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
NINE MONTHS ENDED 12/31/98 AS COMPARED TO THE NINE MONTHS ENDED 12/31/97
- ------------------------------------------------------------------------
(CONTINUED)
- -----------
Consolidated operating expenses incurred for the nine months ended
December 31, 1998 amounted to approximately $4,064,000 (which represents 31% of
total revenues); an increase of $1,496,000 (or 58%) from operating expenses of
approximately $2,568,000 (36% of 1997 revenues) reported for the nine months
ended December 31, 1997. Both Skillcraft and RDS contributed a total of
approximately $1,009,000 (or 67%) of operating expenses to the increase. The
majority of the increase in IMTECH's operating expenses from 1997 to 1998 of
approximately $487,000 is the result of a significant investment by management
in technology and human resources, in addition to rolling out an extensive
marketing campaign. The changing environment of the financial research printing
industry required that IMTECH take measures to improve its infrastructure,
introduce cutting edge technology into its production capabilities and create an
awareness of IMTECH's capabilities, as well as to ensure the ability to stay
competitive and establish a platform for future growth as dictated by the
industry. During the nine months ended December 31, 1998, IMTECH incurred
non-cash charges to operations of approximately $179,000 for the amortization of
goodwill which resulted from the purchase acquisitions of both Skillcraft and
RDS, and $146,000 for non-employee compensation related to the grant of stock
options for services.
Consolidated interest expense reported for the nine months ended
December 31, 1998 amounted to approximately $536,000 (4% of total December 1998
revenues). In total, interest expense increased $359,000 during the nine months
ended December 31, 1998 as compared to interest expense of approximately
$177,000 (2% of 1997 revenues) reported for the same period during last fiscal
year. Interest expense incurred by Skillcraft of approximately $35,000
contributed in part to the increase. However, IMTECH's interest expense
increased $324,000 to approximately $501,000 from 1997 to 1998. The increase in
interest expense for the combined organization was attributable to the interest
costs incurred as a result of increased borrowings under a credit arrangement
with MTB Bank which commenced in November 1997 for IMTECH, and later included
Skillcraft in August of 1998. In addition, IMTECH incurred interest expense of
$208,000 for the nine months ended December 31, 1998 which accrued on the 12%
subordinated convertible debentures issued in connection with a July 1998
private placement. A charge of approximately $92,000 was also incurred during
the nine months ended December 31, 1998 which represented interest on notes
payable to vendors and to the sellers of both Skillcraft and RDS.
In May 1997, the Company exchanged shares of stock in INSCI Corp.
("INSCI"), its former majority owned subsidiary, for the repayment of certain
debt. In addition, during fiscal quarter ended December 31, 1997, the IMTECH
sold 33,435 shares of stock in INSCI which provided a source of funds for the
Company to obtain certain production equipment. In the aggregate, the Company
recognized a gain of approximately $241,100 (3% of total revenues) as a result
of the transactions for the nine months ended December 31, 1997.
To comply with the Securities and Exchange Commission position
announced in March 1997 regarding the accounting for the beneficial conversion
feature attached to certain convertible debt instruments, IMTECH recorded an
interest charge of approximately $444,000 (6% of total 1997 revenues) for the
nine months ended December 31, 1997.
21
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The schedule below sets forth the Company's cash flow activities for the nine
months ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
----------------------------------
FOR THE NINE MONTHS ENDED
DECEMBER 31,
----------------------------------
1998 1997
- -------------------------------------------------------------- -----------------
<S> <C> <C>
Operating activities $ (463,000) $ (370,000)
Investing activities (5,164,000) (231,000)
Financing activities 5,627,000 47,000
- ------------------------------------------------ ------------- --- -------------
Decrease in cash and cash equivalents $ - $ (554,000)
- ------------------------------------------------ ------------- --- -------------
</TABLE>
OPERATIONS
During the nine months ended December 31, 1998, the Company generated
income from operations before depreciation and amortization of approximately
$852,000.
INVESTING ACTIVITIES
Net cash used as a result of investing activities amounted to
approximately $5,164,000 for the nine months ended December 31, 1998, and is
primarily attributable to cash used for capital expenditures of approximately
$688,000 and aggregate payments of approximately $4,983,000 for the purchase of
both Skillcraft and RDS, net of approximately $507,000 of cash acquired in the
acquisitions.
FINANCING ACTIVITIES
During the nine months ended December 31, 1998, the Company generated
net cash from financing activities of approximately $5,627,000, which was a
result in part to the following:
* The Company borrowing net proceeds of approximately $672,000 from MTB Bank
under its current credit arrangement;
* The utilization of a bank overdraft of approximately $394,000;
* The receipt of proceeds totaling $4,000,000 from the issuance of 12%
convertible secured debentures issued in connection with a July 1998
private placement;
* The receipt of proceeds of $1,300,000 from GE Capital Corporation in the
form of a term loan;
* Cash in the aggregate of approximately $739,000 was used to repay capital
lease obligations of approximately $305,000 and other long-term debt
obligations of approximately $434,000.
22
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IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- -------------------------------------------
CAPITAL RESOURCES
As of December 31, 1998, the Company had a working capital deficiency
of approximately $2,412,000.
In November 1997, IMTECH entered into a secured credit arrangement with
MTB Bank (the "Bank"). Under the credit arrangement, IMTECH is allowed to borrow
up to 80% of eligible accounts receivable and 35% of eligible paper inventory
(up to a maximum of $50,000), both of which in the aggregate cannot exceed a
total of $1,500,000 (including $250,000 in outstanding letters of credit) at any
one time.
The Company filed a form S-3 Registration Statement in accordance with
the Securities Act of 1933 on December 23, 1997 (amended on January 14, 1998 and
May 14, 1998). The statement covers the subsequent resale or offer for sale of
all of the Company's outstanding Class A Common stock (not eligible under Rule
144) and all other shares issuable upon exercise or conversion of certain
options, warrants, convertible debt and preferred stock. Upon exercise of any
options or warrants covered in the registration, the Company will receive
proceeds to be used for working capital purposes. The Company is considering
withdrawing the Registration Statement as the securities which are the subject
of Registration may be exempted under Rule 144 and/or 144(k) of the Securities
Act of 1933.
IMTECH's management is constantly focused on investing its capital and
human resources in its production infrastructure by introducing cutting edge
technology in conjunction with investments in state-of-the-art production
equipment. These efforts are designed to stream line the IMTECH operations and
enable it to service its clients economically and more efficiently, as well as,
to broaden the scope of services it offers. In addition, IMTECH has embarked on
an extensive marketing campaign to create an awareness in the financial research
community. However, the changing environment of the financial research printing
industry requires that IMTECH take certain measures to ensure its ability to
stay competitive and continue to build a business platform for future growth.
Over the past several months, IMTECH has been witness to the merger of many of
its clients. These mergers have created a perception in the financial research
printing industry that a larger printer is a needed to meet the resulting
printing demand. The creation of these larger combined entities, along with the
emergence of the presence of European banks in the U.S. brokerage industry, has
created a need to establish a global presence to remain competitive.
In response to these evolving market conditions, on July 24, 1998,
IMTECH acquired all of the issued and outstanding common stock of KRL Litho,
Inc., d/b/a The Skillcraft Group ("Skillcraft") for a 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. In addition, on November 13, 1998, IMTECH
acquired all of the issued and outstanding common stock of RDS Research
Distribution Services, Inc. ("RDS") for a purchase price of $1,060,000. RDS is a
New York based provider of intelligent fulfillment and distribution services to
the research report production industry. The acquisitions of both Skillcraft and
RDS provide a business platform capable of protecting IMTECH against declines of
market share in the printing industry, and establishes a basis for continued
future growth. IMTECH , Skillcraft and RDS (collectively known as the "Company")
will operate as separate divisions under a new organization known as Skilltech
Global Graphics and Communications, Inc. ("SKILLTECH"). By creating a new
organization that can provide complete financial research and commercial
printing services, the Company is now more competitive in its existing markets
and has expanded its production capabilities to create new products and market
opportunities. In addition, Skillcraft's affiliation with a London based printer
will assist the Company in establishing a global presence.
23
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IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- -------------------------------------------
CAPITAL RESOURCES (CONTINUED)
IMTECH paid $5,000,000 at the Skillcraft closing and issued promissory
notes to its sellers in the aggregate amount of $4,000,000 payable in forty (40)
equal monthly installments of $100,000, commencing in October 1998. The funds
for the $5,000,000 down payment were raised through a private placement
completed by IMTECH whereby it issued 12% subordinated convertible debentures
(the "Debentures") for the aggregate amount of $4,000,000, and executing a
secured promissory note for proceeds of $1,300,000 borrowed from General
Electric Capital Corporation ("GE"). For the net assets of RDS, IMTECH paid
$60,000 at closing and issued a promissory note to the seller of RDS in the
amount of $1,000,000, payable in forty (40) equal monthly installments of
$25,000 commencing in December 1998. Excess funds raised over the minimum down
payments required at the closing of the acquisitions were used for the immediate
working capital requirements of the combined organization.
The Company is continuing to identify and pursue additional potential
acquisition candidates to respond to the changing environment of the financial
research printing industry. Industry mergers have created a perception in the
financial research printing industry that larger printers are needed to meet the
resulting printing demands. The creation of the combined larger entities coupled
with the price cutting by competitors to garner more market share has
contributed toward IMTECH's past operating difficulties. Therefore, management
believes that the creation of SKILLTECH and its current plan to perform
additional key acquisitions, such as RDS, will help the Company survive the
changing market conditions, respond to the client mergers and remain competitive
within the industry.
In January 1999, management undertook certain measures to begin
leveraging the strength of the combined companies. Accordingly, management has
consolidated and streamlined the operations of the organization's daytime
(first) shifts. Additionally, the Company was able to obtain certain concessions
from its Unions to adjust other production shifts to minimize the amount of
overtime costs incurred without affecting workloads during peak production
periods. Management has also scaled back and eliminated certain professional
services which were utilized during the integration of the personnel of IMTECH,
Skillcraft and RDS immediately following the acquisitions. Management believes
that the cost reductions resulting from the above will result in a monthly cost
savings of approximately $75,000.
In August 1998, and as a result of the acquisition of Skillcraft by
IMTECH, MTB Bank amended its credit arrangement with the Company to include the
eligible trade accounts receivable of Skillcraft and increase the maximum
borrowing line by $1,000,000 to $2,500,000.
NEW ACCOUNTING STANDARDS
- ------------------------
During the nine months ended December 31, 1998, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes new standards for reporting and
displaying comprehensive income and its components in a financial statement that
is displayed with the same prominence as other financial statements.
INFLATION
- ---------
The Company has not experienced significant increases in the prices of
materials or in the payment of operating expenses as a result of inflation.
Although inflation has not been a significant factor to date, there can be no
assurances that it will not be in the future.
24
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------------------------------------------------------
YEAR 2000 COMPUTER SOFTWARE CONVERSION
- --------------------------------------
The Company relies on numerous computer programs in its day to day
business. Older computer programs use only two digits to identify a year in its
date field. As a result, when the Company has to identify the year 2000, the
computer will think its means the year 1900 and the operation attempting to be
performed may fail or crash resulting in the potential interference in the
operations of the Company's business. The Company has formulated plans to
safeguard against the year 2000 conversion problem. The cost of the
implementation of the year 2000 safeguards will not be material to the Company.
In addition, the Company has had communications with all of its major
customers and suppliers to determine the extent to which the Company's interface
systems are vulnerable to any failure by third parties to upgrade their own
software. The Company believes that its large customers and suppliers are
addressing the issues and will timely adjust their systems. However, if such
modifications are not made by its vendors or customers, or are not completed in
a timely manner, the Company's operations could adversely be affected.
FORWARD LOOKING INFORMATION
- ---------------------------
This Form 10-Q report contains "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward
looking statements are based on management's expectations, estimates,
projections and assumptions. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates," and variations of such words and similar
expressions are intended to identify such forward looking statements which
include, but are not limited to, projections of revenues, earnings and cash
flows. 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.
25
<PAGE>
IMTECH
================================================================================
PART II
OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
In November 1995, IMTECH 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 its
free trading class A Common Stock plus 500,000 options to purchase 500,000
shares of its Class A Common Stock at exercise prices ranging from $1.75 To
$3.06 per share for a period of five years. IMTECH elected to pay CRG by issuing
171,000 shares of Class A Common Stock. Initially, IMTECH delivered to CRG
92,250 shares of the freely traded Class A Common Stock which it borrowed from a
number of shareholders. IMTECH repaid the shareholders by making cash interest
payments at a rate of 10% per annum, in addition to making cash payments for the
borrowed shares. The balance of the 78,750 shares were not remitted to CRG. CRG
has asserted a claim for the balance of the shares. IMTECH has disputed the
claim based upon the position that CRG did not perform under the provisions of
the service contract. IMTECH is currently considering instituting legal action
to recover the stock and to seek punitive damages from CRG.
The Company was advised by the NASDAQ Stock Market, inc. ("NASDAQ(sm)")
that it 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 is required to 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. On the close of business, January 14, 1999, the
company received notification from NASDAQ(sm) that it was not in compliance with
the tangible net assets and dollar price listing rules and therefore decided to
relocate the Company's securities from its SmallCap stock market to the over-the
counter market on the NASD's "Electronic Bulletin Board". As a result, 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.
On November 12, 9998, the Company filed an action in the New York State
Supreme Court (of New York County) against Mr. Harold Russell ("Mr. Russell"),
the former principal owner of Skillcraft. The action is for damages suffered by
the Company as a result of fraud and intentional misrepresentation with respect
to the Stock Purchase Agreement dated July 24, 1998, wherein IMTECH purchased
all of the issued and outstanding common stock of Skillcraft. The Company has
claimed compensatory and punitive damages in the sum of $12,500,000 and
$10,000,000 respectively. An additional claim for recission and damages has also
been asserted against Mr. Russell. As a result of the information discovered
which led to the claim made against Mr. Russell, the Company terminated his
employment agreement. Mr. Russell is contesting the Company's claims and denies
the allegations asserted by the Company. Mr. Russell has made a motion to
dismiss the Company's complaint and the action is awaiting the Court's decision.
Mr. Russell has filed an action in the New York State Supreme Court against
the Company, claiming the aggregate sum of approximately $3,750,000, in addition
to interest and attorney's fees, alleging that the Company has made no payments
pursuant to the installment promissory note issued to Mr. Russell as a result of
the purchase of Skillcraft by IMTECH. The Company is contesting the action filed
by Mr. Russell and has denied that he is entitled to the sum claimed by him
based upon the claim of fraud and misrepresentation with respect to the purchase
of his stock ownership in Skillcraft. Motions before the court by both the
Company and Mr. Russell are currently pending.
26
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS (Continued)
- --------------------------------------------------------------------------------
Additionally, Mr. Russell has served an intent to arbitrate, before the
American Arbitration Association, a claim that the Company and Halcon
Acquisition Corp. ("Halcon"), a wholly-owned subsidiary of the Company,
violated his employment agreement by terminating his employment. The Company's
subsidiary, Halcon, terminated his employment agreement based upon allegations
of fraud by Mr. Russell in entering into the employment agreement which was
related to the acquisition of Skillcraft from Mr. Russell. The Company has filed
a motion to stay the arbitration based upon technical and other grounds and it
is awaiting the Court's decision.
On January 29, 1999, Investment Annuity of Robert Sachs, New Nibco, Inc.,
Nibco Nevada, Inc., RHS Corp., and Robert Sachs ("Sachs") commenced an action
in the US District Court in the Southern District of New York against the
Company alleging that they are holders of 12% Redeemable Convertible Preferred
Stock issued by the Company and that under the terms of the Preferred Stock they
have a right to convert their shares of Preferred Stock into shares of the
Company's Class A common stock. In that regard, the Sachs claim alleges that the
Company should have issued 5,605,559 shares of common stock to the holders of
the Preferred Stock as a result of the exercise of their conversion rights as
opposed to the 1,593,291 shares of Class A common stock issued by the Company.
The Company has not yet interposed an answer to the complaint and intends to
contest the action as it is the Company's position that it has complied with the
conversion terms of the Preferred Stock and that the Sachs action does not have
merit.
27
<PAGE>
IMTECH
================================================================================
- --------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
[A] EXHIBITS
- --- --------
1) Financial Data Schedule as of and for the nine months ended December
31, 1998.
[B] REPORTS ON FORM 8-K
- --- -------------------
During the period between April 1, 1998 and February 16, 1999, the Company
filed with the Commission reports on Form 8-K as follows:
1) A report on Form 8-K/A, dated June 18, 1998, was filed with the
Commission supplementing the Form 8-K, dated March 20, 1997 reporting
the terms of the 12% Secured Convertible Promissory Notes issued by the
Company.
2) A report on Form 8-K, dated July 24 , 1998, was filed with the
Commission reporting the acquisition by IMTECH of all of the issued and
outstanding common stock of KRL Litho, Inc. (d/b/a the Skillcraft
Group).
3) A report on Form 8-K, dated July 24 , 1998, was filed with the
Commission reporting the completion of outside financing in the form of
$4,000,000 of 12% convertible debentures and a $1,300,000 equipment
financing arrangement with GE Capital.
4) A report of Form 8-K, dated August 13, 1998, was filed with the
Commission reporting an amendment to the Company's credit facility with
MTB Bank.
5) A report on Form 8-K/A, dated September 30, 1998, was filed with the
Commission supplementing the Form 8-K, dated July 24, 1998 reporting
the acquisition by IMTECH of all of the issued and outstanding common
stock of KRL Litho, Inc.
6) A report on Form 8-K, dated November 13, 1998, was filed with the
Commission reporting the acquisition by IMTECH of all of the issued and
outstanding common stock of RDS Research Distribution Services, Inc.
7) A report on Form 8-K/A, dated January 27, 1999, was filed with the
Commission supplementing the Form 8-K, dated November 13, 1998
reporting the acquisition by IMTECH of all of the issued and
outstanding common stock of RDS Research Distribution Services, Inc.
28
<PAGE>
IMTECH
================================================================================
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INFORMATION MANAGEMENT TECHNOLOGIES
CORPORATION
BY:/s/ MATTI KON
___________________________________
Matti Kon,
Chief Executive Officer
BY: /s/ JOSEPH A. GITTO, JR.
__________________________________
Joseph A. Gitto, Jr.,
Chief Financial Officer
DATED: NEW YORK, NEW YORK
FEBRUARY 12, 1999
29
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