<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
Commission file number: 33-33092-D
INTELLECTUAL TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1130227
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10639 Roselle Street Suite B San Diego, CA 92121
(Address of principal executive offices)
(619) 552-0001
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes -X- No ---
As of May 19, 1997, 10,000,000 shares of common stock, par value $0.0005 per
share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes --- No -X-
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INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Balance Sheet, March 31, 1997 3
Statements of Operations and
Accumulated Deficit (Unaudited)
for the three months ended
March 31, 1997 4
Statements of Cash Flows (Unaudited)
for the three months
ended March 31, 1997 and 1996 5
Notes to financial statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operations 7-8
PART II. OTHER INFORMATION 8
Signatures 9
2
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Intellectual Technology, Inc.
BALANCE SHEET
March 31, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,537
Accounts receivable 468,069
Deposits 19,949
Inventory 110,717
Prepaid consulting fees 50,000
----------
Total current assets 656,272
PROPERTY AND EQUIPMENT
Vehicle registration equipment 2,535,525
Office and administrative equipment 60,726
--------
2,596,251
Accumulated depreciation 153,358
-------
Total fixed assets, net 2,442,893
OTHER ASSETS
Patent, net of accumulated amortization 3,852,905
Organization costs, net 1,045
Contract acquisition costs, net 85,644
Deferred loan fees 54,667
Deferred NCR contract fees, net 346,813
---------
Total other assets 4,341,074
---------
TOTAL ASSETS $ 7,440,239
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,330,993
Accrued liabilities 98,805
Notes payable - related parties 1,354,140
Notes payable - other 1,163,107
Accrued interest 47,970
-----------
Total current liabilities 3,995,015
OTHER LIABILITIES
Due to related party (net of discount) 3,980,452
STOCKHOLDERS' EQUITY
Preferred stock, $0.00001 par value; 20,000,000 shares
authorized; no shares issued and outstanding -
Common stock, $0.0005 par value; 500,000,000
shares authorized; 10,000,000 shares issued and
outstanding at March 31, 1997. 5,000
Additional paid-in capital 1,185,250
Accumulated deficit (1,725,478)
---------
Total stockholders' equity (535,228)
---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 7,440,239
=========
The accompanying notes are an integral part of the financial statements.
3
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Intellectual Technology, Inc.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
For the three months
ended March 31,
1997 1996
Sales, net $ 612,996 $ -
Cost of sales 308,719 -
---------- --------
Gross profit 304,277 -
OPERATING EXPENSES
Selling, general and administrative
expense 135,521 50,055
Research and development 7,853 19,141
Rent 5,679 -
Interest expense 138,361 54,993
Depreciation and amortization 74,719 69,788
------- -------
Total expenses 362,133 193,977
------- -------
NET LOSS (57,856) (193,977)
Accumulated deficit
Balance, beginning of period (1,667,622) (701,610)
--------- -------
Balance, end of period $(1,725,478) $ (895,587)
========= =======
NET LOSS PER SHARE $ (NIL) $ (NIL)
======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,007,746 9,000,000
========= =========
The accompanying notes are an integral part of the financial statements.
4
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Intellectual Technology, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months
ended March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES $ (499,632) $ (24,094)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in patent costs 161 189
Investment in vehicle registration
equipment, software, and
installation 217,714 -
------- -------
Net cash used by
investing activities (217,875) (189)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 6,900 75,700
New borrowings 975,000 -
Repayment of debt (211,964) -
Loan fees paid (61,500) -
-------- -------
Net cash provided by financing
activities 708,436 75,700
-------- -------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 1,929 51,417
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,608 2,906
-------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 7,537 $ 54,323
======= =======
The accompanying notes are an integral part of the financial statements.
5
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Intellectual Technology, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
1. Management's representation of interim financial information
The accompanying financial statements have been prepared by Intellectual
Technology, Inc. without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations, and management believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements include all of the adjustments which, in the
opinion of management, are necessary to a fair presentation of financial
position and results of operations. All such adjustments are of a normal
and recurring nature.
2. Business combination with Bridgestone Corp.
Effective March 12, 1997, the shareholders of Image Technology, Inc., a
Nevada corporation, ("ITI Nevada") exchanged 100% of the outstanding common
stock of ITI Nevada for 450,000,000 shares of Bridgestone, Corp. in a
transaction accounted for as a reverse acquisition. As a result of this
transaction, the shareholders of ITI Nevada became the majority holders of
Bridgestone Corp.,and ITI Nevada became a wholly owned subsidiary of
Bridgestone Corp. In April, 1997, Bridgestone Corp. changed its name to
Intellectual Technology, Inc. and effected a 1 for 50 reverse stock split.
All share and per share amounts, unless otherwise indicated, reflect this
one for 50 reverse split.
All references to the Company in this document refer to Intellectual
Technology, Inc. and its wholly owned subsidiary, Image Technology, Inc.
The transaction has been accounted for as a recapitalization of the private
company.
3. Development stage activities
Since its inception in 1992, ITI Nevada has been engaged in the research,
development, design and promotion of its products. Until the November,
1996, the Company was a development stage enterprise as defined in SFAS No.
7, having generated virtually no operating revenues from such activities.
4. Significant new borrowings
During the first quarter of 1997, the Company issued the following new
borrowings:
12% promissory note, face amount $150,000,
secured by equipment, inventory, accounts
receivable, tangible and intangible assets,
due April 14, 1997. Default interest rate
is set at 18%. $150,000
15% installment note to NCR, face amount
$500,000, secured by all unencumbered property,
payable monthly at $100,000 through August 1,
1997. This note represents the balance of the
1998. NCR initial phase contract commitment 500,000
22.84% promissory note, face amount $820,000,
secured by pledge of accounts receivable, payable
monthly at $100,000 through November 30, 1997 820,000
8% unsecured advances from related party, payable
on demand 155,400
8% unsecured advances from unrelated party, payable
on demand 5,000
--------
$ 1,630,400
=========
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS
Certain statements contained in this report, including statements concerning
the Company's future cash and financing requirements, and other statements
contained herein regarding matters that are not historical facts, are
forward looking statements; actual results may differ materially from
those anticipated in the forward looking statements.
PLAN OF OPERATIONS
Since its inception in 1992 until the first quarter of 1997, the Company has
been in the development stage and has been engaged primarily in the design,
development and promotion of systems for the automated preparation and
dispensing of motor vehicle registration forms. Effective November 1, 1996,
ITI Nevada entered into an Equipment Lease, Support and Maintenance Agreement
("the Indiana Contract") with the Indiana Bureau of Motor Vehicles Commission
(the "BMVC") which provides for the BMVC to lease from ITI both self-service
terminals and stand alone printers. ITI is required to install an initial
group of 10 self-service terminals and 100 stand-alone printers. The
equipment contained in this initial group is projected to produce a total of
1.4 million vehicle registration transactions annually. The BMVC has also
committed to lease an additional 25 self-service terminals and 195 stand
alone printers, which equipment is to be installed by ITI by November 1, 1997.
The Indiana contract is priced on a per-transaction basis with the Company
receiving between $0.85 and $1.22 per transaction. The contract extends for
a period of three years, subject to an option to renew on the part of the BMVC
for an additional year.
To assist it in performing its obligations under the Indiana Contract, ITI
Nevada entered into a Subcontractor agreement with NCR ("the NCR Agreement")
which requires the Company to provide the printers, printing media,
facilities management, printer installation, billing and self-service
terminal provisioning aspects of the Indiana Contract, while requiring NCR to
provide the self service terminals, program management, software development,
maintenance, and self-service terminal installation ("NCR Services"). The
Company will pay NCR approximately $1,800,000 for its participation in the
initial phase of the Indiana contract (consisting of NCR services to 11
self-service terminals and 100 stand alone printers). The Company will be
billed separately for NCR services with respect to the additional 25
terminals and 195 printers requested by the BMVC. In addition, the Company
will be billed separately on a quarterly basis for maintenance provided by
NCR.
As of March 31, 1997, a total of 0 self service terminals and 96 stand alone
printers had been installed and were operational.
For the remainder of the calendar year, the Company will be concentrating on
the completion of its installation of the remaining 4 self service printers
and 10 self service terminals which are part of the initial phase of the
Indiana contract, as well as installing the 195 additional stand alone
printers and 36 self services terminal called for by the Indiana Contract.
The Company has also entered into an agreement to sell the State of Maryland
a total of 11 stand alone printers and 10 kiosks similar to those provided
under lease to the state of Indiana. The Company continues to pursue
agreements for the sale or lease of its products with other jurisdictions.
The Company may engage in research and development of additional applications
of its products in related areas such as driver records, voter registrations,
tax payments, electronic benefit vouchers, driver's license extensions and
similar areas.
The Company currently has 7 full time employees and one part time employee,
of which four are in administration and two are in marketing. The company
anticipates expanding its marketing and operating personnel later in 1997.
7
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1997, the Company received a total of $506,700 in
revenue from the Indiana contract, representing approximately 415,000
transactions. It has been billed a total of $1.2 million by NCR, of which
$700,000 has been paid and the remaining $500,000 has been converted to a
note which is payable in monthly installments of $100,000 per month. An
additional $600,000 will be payable to NCR prior to November 1, 1997.
In order to sustain the level of capital outlay to continue to deliver stand
alone printers and self service terminals under lease arrangements, to repay
its investment notes and to increase its sales and marketing efforts, the
Company will be required to secure additional financing.
It is anticipated that the additional terminals and printers requested by the
State of Indiana will require approximately $2,600,000 in capital outlay, and
that these costs will generally be payable early in the contract. The
Company will recover these costs on a per-transaction basis over four years.
In addition to obligations to its general creditors and to NCR under the NCR
agreement, the Company has incurred approximately $2.5 million in outstanding
debt financing for its development stage activities through March 31, 1997.
Of this amount, $938,000 is delinquent by the terms of the note instrument.
The Company's monthly cash flow for debt service totals approximately
$215,000.
For the quarter ended March 31 1997, the Company incurred approximately
$144,000 in selling, general and administrative costs. Current expansion
plans in the marketing department would add $50,000 per quarter to this
amount.
The Company purchased its patents from an affiliated entity through the
issuance of debt of $4,000,000. This amount, originally payable in May 1997,
has been extended to May 1, 1999.
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
None
Item 2.Changes in Securities
None
Item 3.Defaults upon Senior Securities
None
Item 4.Submission of Matters to a Vote of Security Holders
None
Item 5.Other Information
None
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule, filed herewith
electronically
(b) Reports on Form 8-K None
8
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 7, 1997 INTELLECTUAL TECHNOLOGY, INC.
BY: /S/ Janice L. Welch
Secretary/Treasurer/Principal
Financial Officer
9
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF LOSS AND ACCUMULATED DEFICIT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10QSB FOR THE QUARTER ENDED MARCH 31, 1997.
</LEGEND>
<S> <C>
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<PERIOD-END> MAR-31-1997
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<DEPRECIATION> 153358
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<CURRENT-LIABILITIES> 3995015
<BONDS> 3980452
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<COMMON> 5000
<OTHER-SE> 1185250
<TOTAL-LIABILITY-AND-EQUITY> 7440239
<SALES> 612996
<TOTAL-REVENUES> 612996
<CGS> 308719
<TOTAL-COSTS> 670852
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> (57856)
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