<PAGE> 1
UNITED STATES 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: June 30, 1997
Commission file number: 33-24464-NY
IMTEK OFFICE SOLUTIONS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2958856
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
8028 RITCHIE HIGHWAY, SUITE 208, PASADENA, MD. 21122
----------------------------------------------------
(Address of pincipal executive offices)
Registrant's telephone number, including area code (410) 768-9700
--------------
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 .
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 5,000,000 shares as of June
30, 1997
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Registrant's Financial Statements filed herewith begin after
signatures.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Imtek Office Solutions Inc., (the Company), formerly Imtek Corporation,
a development stage company, effectively commenced operations on April 22, 1997
and engages in the retail and wholesale sale of copiers and facsimiles,
servicing of office equipment, rebuilding and rental of high volume copiers and
duplicators, providing commercial printing and duplicating services, and to a
lesser extent, the retail sale of office supplies. The Company provides
servicing of office equipment principally through the use of subcontractors. The
Company operates in the Mid-Atlantic region, consisting of Baltimore, Maryland,
Washington, D.C., Richmond, Virginia, and the Tidewater area of Southern
Virginia.
ACQUISITION AND STOCK ISSUANCE
On April 22, 1997, the shareholders of Sprectrum Equities, Inc.,
(Spectrum) a Delaware Corporation, executed a 400 for 1 reverse stock split.
After the stock split, Spectrum had 625,000 shares of common stock, all one
class, issued and outstanding. Furthermore, on April 22, 1997 Spectrum's
shareholders authorized and approved the acquisition of Imtek Corporation by the
issuance of 4,375,000 shares of Spectrum stock for all 50,000 issued and
authorized shares of Imtek Corporation. Subsequently, the shareholders approved
the corporation's name to be changed to Imtek Office Solutions, Inc. The
acquisition and name change have been reported on Form 8-K of April 22, 1997,
which is hereby incorporated by reference.
2
<PAGE> 3
RESULTS OF OPERATIONS
The Company, as discussed above and reported on Form 8-K, effectively
commenced operations on April 22, 1997. Prior to this date, the Company, and its
predecessor, was a development stage company with no operations. Thus, there is
no comparison to prior quarter financial results of operations, and financial
condition and liquidity.
During the third quarter ended June 30, 1997, the Company generated
gross revenue of $867,535. Approximately 53.7% of gross revenue was derived from
the sale of equipment servicing and supplies. The remaining 46.3% of gross
revenue was derived from the sale, both retail and wholesale, of equipment.
Cost of Goods Sold for the quarter ended June 30, 1997 was $789,979, or
approximately 91% of gross revenue. The Cost of Goods Sold that relate to
equipment servicing was approximately 56.9%, while the Cost of Goods Sold for
equipment sales was approximately 43.1%.
The Company's gross profit for the quarter ended June 30, 1997 was
$77,557, or approximately 8.9% of gross revenue.
General and Administrative, and marketing expenses for the first
quarter of operations was $30,409, or approximately 3.5% of gross revenue. The
Company's Officers and management elected not to receive remuneration during
this period. This election of non-compensation may not be continued in the
future, and thus general and administrative expenses could be increased in
subsequent periods.
Income from operations and before taxes and interest was $47,147, or
approximately 5.4% of gross revenue.
3
<PAGE> 4
During the quarter, the Company received $6,507 in interest income
which was principally derived from retired Notes Receivables. The Company does
not anticipate significant interest income in subsequent periods.
The Company's effective income tax rate for the first quarter of
operations was 29.2%. Because of the tax impact of special transactions and
depending upon the Company's income or loss level in a given period, these rates
may vary dramatically.
The net earnings of the Company for the quarter ended June 30, 1997 was
$37,947, or 4.4% of gross revenue.
The Company anticipates revenue growth in subsequent periods such that
quarter to quarter comparisons may not provide meaningful analysis. The Company
anticipates that the core business of sales and servicing of copiers will
generate growth in line with general economic conditions within the Mid-Atlantic
region. However, the Company anticipates expanding its operations in the
wholesale equipment sales market by means of increased marketing efforts. The
Company believes that it has a thorough understanding of the wholesale market,
with experience and an established network. Additionally, the Company
anticipates the expansion of its services within its copy services operations.
By becoming a cost effective and responsive provider of copier services to
certain business segments, the Company anticipates that it can more fully expand
this component of its operations. Finally, the Company anticipates further
expansion by means of acquisition, which may be funded by either the issuance of
additional capital stock or by long term debt.
4
<PAGE> 5
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities resulted in negative cash flow of
$694,943 during its first quarter of operations. Cash flow of $739,671 was
generated from financing activities, consisting principally of increases in
Paid-in-Capital, which was the result of the issuance of shares for contributed
capital consisting of notes receivable and inventory. The contributed inventory
consisted principally of copiers that were valued at 30% of original cost, which
the Company believes approximates fair market value.
Consistent with the commencement of operations, the Company experienced
increases in certain balance sheet accounts. The negative cash flow from
operations was primarily in response to the increase in accounts receivable and
inventory, with the increase in accounts payable and other liabilities providing
a lesser impact. The Company recognized an increase in accounts receivable, net
of allowance for doubtful accounts, in the amount of $190,595. The inventory
increase of $633,493 is principally in response to the accumulation of both raw
material and finished units of rebuilt equipment, accumulation of adequate parts
and supplies, as anticipated to be consumed under various service contracts, and
the minimal accumulation of office supplies for resale. During the quarter, the
Company expended $33,378 for fixed assets, which are being depreciated over
their estimated useful lives. Additionally, the Company recognized trade
accounts payable of $86,953 at June 30, 1997.
The Company has financed its cash flow requirements from either
operations or through the issuance of capital stock. Currently, the Company has
not entered into a revolving credit arrangement with any financial institution.
However, the Company believes that should external financing become necessary,
it will be able to obtain sufficient resources at market values.
5
<PAGE> 6
Note: Certain statements in Management's Discussion and Analysis of
Results of Operations and Financial Condition are "forward looking statements"
within the meaning of the Private Securities Litigation Act of 1995.
Forward-looking statements are based on various factors and assumptions that
include known and unknown risks and uncertainties, changes in economic
conditions, increases in raw material, subcontract, and labor costs, and general
competitive factors, that may cause actual results to differ materially.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibit No. 27 Financial Data Schedule
(b) There were no reports on Form 8-K during the quarter reported
on.
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.
IMTEK OFFICE SOLUTIONS, INC.
By: /s/EDWIN HIRSCH
------------------------
Edwin Hirsch
President and
Chief Accounting Officer
August 8, 1997
6
<PAGE> 7
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
BALANCE SHEET
================================================================================
ASSETS
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
1997 1996
-------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 11,349 $ --
Accounts receivable (less allowance for
doubtful accounts of $2,000 at
June 30, 1997) - net 190,595 --
Inventory 633,494 --
Other current assets 11,540 --
-------- --------
846,978 --
PROPERTY AND EQUIPMENT - net 33,287 --
INTANGIBLE ASSETS - net 5,148 2,142
-------- --------
$885,413 $ 2,142
======== ========
</TABLE>
================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
================================================================================
LIABILITIES
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
1997 1996
--------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 86,940 $ --
Income taxes payable 15,707 --
--------- ---------
102,647 --
STOCKHOLDERS' EQUITY
Common stock - par value $.000001,
250,000,000 shares authorized,
5,000,000 (243,901,667 at September 30, 1996)
shares issued and outstanding 50 244
Paid in capital 821,484 78,613
Retained earnings (deficit) (38,768) (76,715)
--------- ---------
782,766 2,142
--------- ---------
$ 885,413 $ 2,142
========= =========
</TABLE>
================================================================================
8
<PAGE> 9
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENT OF INCOME FOR THE
THREE MONTHS ENDED
================================================================================
JUNE 30 SEPTEMBER 30
1997 1996
-------- -------------
(UNAUDITED)
SALES $867,535 $ --
COST OF GOODS SOLD 789,979 --
-------- -------
GROSS PROFIT 77,556 --
SELLING AND GENERAL EXPENSE 30,409 --
-------- -------
47,147 --
INTEREST INCOME 6,507 --
-------- -------
INCOME BEFORE INCOME TAXES 53,654 --
INCOME TAXES 15,707 --
-------- -------
NET INCOME $ 37,947 $ --
======== =======
================================================================================
9
<PAGE> 10
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENT OF INCOME FOR THE
================================================================================
NINE
MONTHS ENDED YEAR ENDED
JUNE 30 SEPTEMBER 30
1997 1996
------------ -------------
(UNAUDITED)
SALES $867,535 $ --
COST OF GOODS SOLD 789,979 --
-------- -------
GROSS PROFIT 77,556 --
SELLING AND GENERAL EXPENSE 30,409 --
-------- -------
47,147 --
INTEREST INCOME 6,507 --
-------- -------
INCOME BEFORE INCOME TAXES 53,654 --
INCOME TAXES 15,707 --
-------- -------
NET INCOME $ 37,947 $ --
======== =======
================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENT OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
NINE
MONTHS ENDED YEAR ENDED
JUNE 30 SEPTEMBER 30
1997 1996
--------- ------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 37,947 $ (37,991)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 92 --
Change in assets and liabilities
Increase in accounts receivable (190,595) --
Increase in inventory (633,494) --
Increase in other current assets (11,540) --
Increase in accounts payable 86,940 --
Increase in income taxes payable 15,707 --
--------- ---------
(694,943) (37,991)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (33,379) --
--------- ---------
(33,379) --
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in organization cost (3,000) (2,142)
Increase in paid-in-capital 742,871 922
(Decrease) increase in common stock (200) 198
Proceeds from borrowing -- 39,013
--------- ---------
739,671 37,991
--------- ---------
INCREASE IN CASH 11,349 --
CASH - Beginning -- --
--------- ---------
CASH - Ending $ 11,349 $ --
========= =========
NON-CASH TRANSACTIONS
Debt converted to equity $ -- $ 39,013
========= =========
Stock retired $ (200) $ --
========= =========
Additional paid-in-capital
for acquisition $ 742,871 $ --
========= =========
</TABLE>
================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
COMMON STOCK PAID RETAINED SHARE-
--------------------------------- IN EARNINGS HOLDERS
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance September 30, 1996 $ 243,901,667 $ 244 $ 78,613 $ (76,715) $ 2,142
Contribution to
Paid in Capital -- -- 3,000 -- 3,000
------------- ------------- ------------- ------------- -------------
Balance December 31, 1996 243,901,667 244 81,613 (76,715) 5,142
Stock issued for
services 6,098,333 6 -- -- 6
------------- ------------- ------------- ------------- -------------
Balance March 31, 1997 250,000,000 250 81,613 (76,715) 5,148
1 for 400 share reverse
stock split (249,375,000) (243) -- -- (243)
Exchange of stock for
Imtek Corp. 4,375,000 43 739,871 -- 739,914
Net earnings for the
quarter -- -- -- 37,947 37,947
------------- ------------- ------------- ------------- -------------
Balance June 30, 1997 $ 5,000,000 $ 50 $ 821,484 $ (38,768) $ 782,766
============= ============= ============= ============= =============
</TABLE>
================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
1. NATURE OF BUSINESS
The Company is in the business of selling and servicing copiers,
facsimilies and printers, sales of office supplies, rebuilding and renting
high volume copiers and duplicators and commercial printing and copying.
The Company conducts business in the Baltimore, Washington, DC, Richmond
and Tidewater, Virginia metropolitan areas and grants credit to customers
in those regions.
2. INVENTORY
Inventories consist of copy machines, facsimilies, duplicators and parts
and supplies inventories consist of items used in the maintenance of
office machines and consumable supplies. Inventories are stated at lower
of cost or market using the first-in, first-out (FIFO) method.
3. PROPERTY, PLANT AND EQUIPMENT
The Company provides depreciation for financial statement and income tax
purposes over the estimated useful lives of the fixed assets using the
straight-line method. Expenditures for maintenance and repairs are charged
to income in the period the charge is insurred.
4. ESTIMATES
The preparation of 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 reporting period. Actual results could differ from those
estimates.
5. INTANGIBLE ASSETS
Intangible assets consist of costs incurred to maintain the corporate
charter. These costs are being amortized over five years.
================================================================================
13
<PAGE> 14
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
================================================================================
NOTE A - SUMMARY OF ACCOUNTING POLICIES - CONTINUED
6. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
7. EARNINGS PER SHARE
Primary earnings per share of approximately $0.01 are based on the
weighted average number of shares outstanding.
There is no fully diluted earnings per share because there were no
convertible debentures, stock options or warrants outstanding during the
period.
NOTE B - BUSINESS ACQUISITION
On April 22, 1997, the Company purchased all of the common stock of Imtek
Corporation for 4,375,000 of its common stock in a transaction accounted for as
a pooling of interest. Imtek Corporation was a development stage company, which
began operations on April 23, 1997.
The balance sheet of Imtek Corporation at the date of purchase consisted of:
Assets
Inventory $107,241
Notes receivable 632,430
--------
$739,671
========
Stockholders' equity $739,671
========
================================================================================
14
<PAGE> 15
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
================================================================================
NOTE C - STOCKHOLDERS' EQUITY
On April 21, 1997, the Company effected a reverse split of its common stock from
250,000,000 shares outstanding to 625,000 shares outstanding.
On April 22, 1997, the Company purchased all of outstanding common stock of
Imtek Corporation in exchange for 4,375,000 shares of its common stock.
NOTE D - RELATED PARTY TRANSACTIONS
The Company has a servicing agreement with an entity controlled by certain of
the Company's officers. Under the terms of the agreement, the servicing entity
performs certain maintenance, repair, marketing and administrative tasks for the
Company. The Company rents certain of its facilities from an entity controlled
by officers of the Company on a month-to-month contract. Rent expense for the
quarter ended June 30, 1997, was $12,094 (approximately $6,000 per month).
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE NINE MONTH PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,349
<SECURITIES> 0<F1>
<RECEIVABLES> 190,595
<ALLOWANCES> 2,000
<INVENTORY> 633,494
<CURRENT-ASSETS> 846,978
<PP&E> 33,287
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 885,413
<CURRENT-LIABILITIES> 104,647
<BONDS> 0<F1>
0<F1>
0<F1>
<COMMON> 50
<OTHER-SE> 782,716
<TOTAL-LIABILITY-AND-EQUITY> 885,413
<SALES> 867,535
<TOTAL-REVENUES> 867,535
<CGS> 789,979
<TOTAL-COSTS> 30,409
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 0<F1>
<INCOME-PRETAX> 53,654
<INCOME-TAX> 37,947
<INCOME-CONTINUING> 37,947
<DISCONTINUED> 0<F1>
<EXTRAORDINARY> 0<F1>
<CHANGES> 0<F1>
<NET-INCOME> 37,947
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>AMOUNTS INAPPLICABLE OR NOT DISCLOSED AS A SEPARATE LINE ON THE FINANCIAL
STATEMENTS ARE REPORTED AS 0 HEREIN.
</FN>
</TABLE>
