UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
SECOND AMENDMENT TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
MARCH 12, 1997
-----------------------------------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
INTELLECTUAL TECHNOLOGY, INC.
----------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-33092-D 84-1130227
-------------------- -------------- -----------------
STATE OR OTHER COMMISSION FILE IRS EMPLOYER
JURISDICTION OF NUMBER IDENTIFICATION NO.
INCORPORATION
10639 ROSELLE STREET, SUITE B, SAN DIEGO, CA. 92121
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ADDRESS OF PRINCIPAL EXECUTIVE OFFICES (ZIP CODE)
(619) 552-0001
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
BRIDGESTONE CORP.
----------------------------------------------------
FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On March 12, 1997, the registrant completed a reverse acquisition of
Image Technology, Inc., which acquisition was previously reported on
Form 8K.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
See item 1 above.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING PUBLIC ACCOUNTANT
Not applicable
ITEM 5. OTHER EVENTS
Not applicable
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not applicable
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements of Businesses Acquired - Image Technology, Inc.
Independent Auditor's Report
Balance sheets, December 31, 1996 and 1995
Statement of Income and Retained Earnings (Deficit) for the
years ended December 31, 1996 and 1995
Statement of Cash Flows for the years ended December 31,
1996 and 1995
Notes to Financial Statements for the years ended December 31,
1996 and 1995
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable
2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Image Technology, Inc.
I have audited the accompanying balance sheets of Image Technology, Inc., (a
Nevada corporation) as of December 31, 1996 and 1995 and the related
statements of income and retained earnings (deficit) and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Image Technology, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully discussed in Note A
to the financial statements, the Company has incurred repeated operating
losses resulting in working capital deficiencies, and certain of its current
obligations are in default by their terms. The Company has not yet secured
sufficient additional financing to fulfill its obligations under its contract
with the State of Indiana. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans with
respect to these matters are also disclosed in Note A. These financial
statements do not include any adjustments which might result from the outcome
of this uncertainty.
Charles W. Butman
Certified Public Accountant
San Marcos, CA
May 23, 1997
3
<PAGE>
Image Technology, Inc.
Balance Sheet
December 31, 1996 and 1995
ASSETS
1996 1995
---------- ----------
Current assets:
Cash $ 5,608 $ 2,906
Accounts receivable 49,111 0
Inventories (Note A) 67,886 0
Prepaid expenses 12,343 4,692
---------- ----------
Total current assets 134,948 7,598
Fixed assets (Note A):
Equipment, non-contract 54,414 0
Office equipment & leasehold improvements 6,312 0
Contract equipment (Note I) 2,317,810 0
Less-accumulated depreciation (10,031) 0
---------- ----------
Total fixed assets 2,368,505 0
Intangible and other assets:
Patents, net (Notes A & B) 3,922,532 4,198,629
Organization costs, net 1,102 1,150
Note receivable related part, net (Note C) 0 178,584
New Hampshire contract, net (Notes A & C) 107,574 0
Deferred loan costs, net (Note A) 19,375 0
Deferred contract costs, net (Note A) 359,830 0
Deferred income taxes (Note E) 0 0
---------- ----------
Total intangible and other assets 4,410,413 4,378,363
---------- ----------
Total assets $ 6,913,866 $ 4,385,961
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,646,334 $ 2,676
Accrued expenses 106,358 48,991
Note payable (Note H) 188,107 0
Notes payable - related parties (Note I) 1,566,104 500,000
Accrued interest payable 18,926 0
---------- ----------
Total current liabilities 3,525,829 551,667
Due to related party (net of imputed
Interest (Note B) 3,922,309 3,698,107
Stockholders' equity:
Common stock (Notes D & K) 2,500 2,500
Additional paid in capital (Note K) 1,130,850 835,297
Retained earnings (deficit) (1,667,622) (701,610)
---------- ----------
Total stockholders equity (534,272) 136,187
---------- ----------
Total liabilities and stockholders' equity $ 6,913,866 $ 4,385,961
========== ==========
See accompanying notes and Independent Auditor's Report
4
<PAGE>
Image Technology, Inc.
Statement of Income and Retained Earnings (Deficit)
For the years ended December 31, 1996 and 1995
1996 1995
---------- ----------
Sales
Indiana Contract $ 22,550 $ 0
New Hampshire Contract 48,672 0
---------- ----------
71,222 0
Costs of Sales,
Material cost 25,093 0
Maintenance 10,732 0
Depreciation and amortization (Note A) 21,362 0
---------- ----------
Total cost of sales 57,187 0
---------- ----------
Gross profit 14,035 0
---------- ----------
Operating expenses:
Marketing 113,701 15,206
General & Administrative 69,805 31,908
Payroll 198,249 35,315
Research & development (Note A) 34,936 3,573
Interest expense 24,652 0
Interest-imputed-amortization (Note B) 224,202 36,101
Loan costs - amortization (Note A) 30,625 0
Depreciation (Note A) 3,876 0
Amortization (Note A) 279,201 46,526
---------- ----------
Total Operating Expenses 979,247 168,629
---------- ----------
Income (loss) from operations (965,212) (168,629)
Other (expense):
Loss on Note receivable 0 (461,202)
---------- ----------
Net (loss) before income taxes (965,212) (629,831)
Income taxes (Note E) 800 800
---------- ----------
Net (loss) (966,012) (630,631)
Retained earnings (deficit) beginning of year (701,610) (70,979)
---------- ----------
Retained earnings (deficit) end of year $(1,667,622)$ (701,610)
========== ==========
See accompanying notes and Independent Auditor's Report
5
<PAGE>
Image Technology, Inc.
Statements of Cash Flows
For the years ended December 31, 1996 and 1995
1996 1995
---------- ----------
Cash flows (used) in operating activities:
Net (loss) $ (966,012)$ (630,631)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities:
Depreciation & amortization (Note A) 559,266 82,627
Loss on note receivable (Note C) 0 461,202
(Increase) decrease in:
Accounts receivable (49,111) 0
Inventory (67,886) 0
Prepaid expenses (7,651) (4,692)
Notes receivable 56,382 (11,190)
Increase (decrease) in:
Accounts payable 1,643,658 2,672
Accrued expenses & interest 76,293 30,419
---------- ----------
Total adjustments 2,210,951 561,038
---------- ----------
Net cash provided (used) by operating activities 1,244,939 (69,593)
---------- ----------
Cash flows from investing activities:
Purchase of patents (3,056) (5,041) 0
Purchase of non-contract equipment (60,726) 0
Investment in contract costs & equipment (2,678,219) 0
---------- ----------
Net cash (used) by investing activities (2,742,001) (5,041) 0
---------- ----------
Cash flows from financing activities:
Additional paid in capital 295,553 77,300
New borrowings 1,254,211 0
Loan costs (50,000) 0
---------- ----------
Net cash provided by financing activities 1,499,764 77,300
---------- ----------
Net increase in cash 2,702 2,666
Cash - beginning of year 2,906 240
---------- ----------
Cash - end of year (Note G) $ 5,608 $ 2,906
========== ==========
See accompanying notes and Independent Auditor's Report
6
<PAGE>
Image Technology, Inc.
Notes to Financial Statements
For the years ended December 31, 1996 and 1995
Note A - Summary of Significant Accounting Policies
===================================================
Nature of Operations
- --------------------
Image Technology, Inc. ("ITI" or "the Company"), a Nevada corporation based in
San Diego, California was incorporated on April 23, 1992 to engage in the
design, manufacture and sale of lease of printers (the ITI 2101A printing
system) for the automated preparation and dispensing of motor vehicle
registration forms and license plate decals. This printing system is designed
as a stand alone unit (printer) or it may be incorporated with a self service
terminal (SST). All of the Company's equipment is manufactured by
subcontractors
Effective November 1, 1996, the Company 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 stand alone printers and SST's. ITI is required to
install initial phase of 96 printers 11 SST's. The BMVC has also committed to
lease an additional 195 printers and 25 SST's to be installed no later than
November 1, 1997. Revenue from this contract first began to be generated in
December, 1996. The Contract is for a period of three years subject to an
option to renew on the part of the BMVC for an additional year.
The Company is required under the Contract to provide the media required to
print the registrations and decals, manage the project and maintain the
equipment.
Through December 31, 1996, the Company had incurred approximately $2.7 million
in contract cost. The Company anticipates incurring another $3.1 million to
complete the installation of both phases and to pay for up front maintenance
and management costs.
Basis of presentation & Going Concern discussion
- ------------------------------------------------
From its inception until October 31, 1996, the Company had devoted the
majority of its resources to the development of its technology, surveys of
potential markets, analysis of available facilities, labor, supplies,
advertising data, travel and other necessary expenses for securing prospective
suppliers, customers, and salaries and fees for consultants and other
professional services. The Company was a "Development Stage Company" as
defined by Statement No. 7 of the Financial Accounting Standards Board
until November 1, 1996.
7
<PAGE>
Through December 31, 1996, there have been minimal revenues which has
resulted in recurring losses from operations and working capital deficiencies.
The accompanying financial statements have been prepared assuming that ITI
will continue as a going concern. $188,107 of secured debt is in default with
the lender. Its ability to continue its operations is dependent upon its
ability to successfully attract sufficient additional debt, equity or other
third-party financing to complete the Indiana Contract. Management has signed
a memorandum of understanding with a major corporation to co-market and sell
its technology and is currently negotiating with investment bankers to raise
equity capital and/or other forms of financing, as well as negotiating for the
settlement of certain liabilities on favorable terms. While management
believes that its efforts will be successful, there is no assurance that
everything can be achieved. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts or classification of liabilities
that might result from the outcome of this uncertainty.
Contract equipment & Deferred contract costs
- --------------------------------------------
Contract equipment includes the manufactured cost of the printers and SST's
including installation, freight & packaging, initial contract start-up costs,
and other costs incidental to making the equipment operational. Also included
in the cost is $700,000 for software for the SST's paid to a major
subcontractor. Deferred contract costs in the amount of $360,409 for project
management and other services through November 1, 1999 have been capitalized
and amortized over the period in which the services are rendered.
Depreciation & amortization of contract costs and the use of estimates
- ----------------------------------------------------------------------
Management has structured it's pricing and expects to recover its total
estimated contract cost based upon the expected volume of the registrations
for the contract period of 3 years plus the renewal option (1 year).
Significant changes in the estimated number of transactions may occur
throughout the remaining term of the contract. Actual results may differ from
these estimates, which may materially affect the financial statements.
Contract costs excluding the media, project management and maintenance are
being depreciated on a per transaction basis based upon the expected
registration volume from November 1, 1996 through October 31, 2000.
Depreciation included in Cost of Sales for the year ended December 31, 1996 is
$6,155. Of this amount, $701 is depreciation of the software which leaves a
book value of $699,299 at December 31, 1996. This method of depreciation will
result in the contract costs and equipment being fully depreciated by October
31, 2000.
Deferred contract costs (project management) is being amortized on a per
transaction basis based upon the expected registration volume from November 1,
1996 through October 31, 1999. Amortization included in Cost of Sales for the
year ended December 31, 1996 is $579.
8
<PAGE>
Maintenance costs are charged to operations as incurred and prorated over the
maintenance contract period.
Inventories
- -----------
Inventories represent the media (tag stock paper, ribbon and decals) used to
produce the motor vehicle registration and driver's license forms and decals.
Inventories are stated at the lower of cost or market determined on the first-
in, first-out method.
Depreciation of non-contract equipment and office equipment
- -----------------------------------------------------------
Other fixed assets are being depreciated on a double declining balance method
(except leasehold improvements - straight line) assuming no salvage value as
follows:
Useful 1996
Description Cost Life Depreciation
- ----------- --------- ------ ------------
Non-contract equipment
(demos, test equip) $54,000 3 yrs $3,000
Warehouse equipment 414 7 yrs 59
Office equipment 3,347 5 yrs 669
Leasehold improvements 2,965 5 yrs 148
--------- ----------
Total $60,726 $3,876
========= ==========
Amortization
- ------------
The Company has capitalized certain costs directly associated with obtaining
the patents for its technology. These costs are being amortized over their
remaining life at November 1, 1995 based upon a 17-year life from the date of
issue.
In accordance with SFAS 13, the New Hampshire contract cost is being
amortized over the remaining contract period which expires March 31, 1998.
Amortization included in Cost of Sales for the year ended December 31, 1996
Is $14,628.
Deferred loan costs are being amortized over the length of the loan.
A summary of amortization is as follows:
1996
Description Cost Amortization
- ----------- --------- ------------
New Hampshire contract $122,202 $ 14,628
Imputed interest 337,994 224,202
Deferred loan costs 50,000 30,625
Patents 4,248,211 279,153
Organization costs 1,150 48
9
<PAGE>
Research and development costs
- ------------------------------
Research and development costs are charged to expense as incurred.
Note B - Patent licensing agreement and $4,000,000 Due to related party
=======================================================================
In 1992, the Company loaned $575,568 to American Registration Systems, Inc.
("ARS"), a corporation formerly owned by a current officer of ITI. In October
1995 ARS executed a purchase and sale agreement whereby the Company purchased
certain patents for a down payment of $575,568, representing payment of the
above loan, and a balance due May 1, 1999 of $4,000,000 for a total purchase
price of $4,575,568. No interest is due under this agreement until May 31,
1997. Interest in the amount of $337,994 has been imputed from October 31,
1995 until May 1, 1997 which reduced the purchase price to $4,237,574.
Interest at 8% per annum accrues from May 1, 1997.
Note C - Note Receivable - AIMS, Inc. and New Hampshire Contract
================================================================
In 1993, the Company loaned $639,786 to American Identification Management
Systems, Inc. ("AIMS"), a corporation formerly owned by a current officer of
ITI. November 1996, the Company acquired the equipment owned by AIMS and a
contract with the State of New Hampshire to produce photographic driver's
licenses. This contract expires in March 1998. The estimated present value
of this contract and the collectible amount of the note was estimated to be
$178,584 at December 31, 1995. Accordingly, the Company made an allowance for
bad debt as of December 31, 1995 in the amount of $461,202. In 1996 as
partial satisfaction of the note receivable, ITI received cash in excess of
the amount of liabilities assumed related to the contract in the amount of
$77,798 which reduced the carrying value of the contract to $122,202.
Note D - Common Stock
=====================
Common stock is at stated value. There are 25,000 shares authorized, issued
and outstanding.
Note E - Income Taxes
=====================
The Company has Federal net operating loss carryforwards totaling $725,000
which expire in 2010 and 2011. The tax benefit of these losses has been
computed at a 34% tax rate. Income tax expense consists of $800 for minimum
California Franchise Taxes for each of the years ended December 31, 1996 and
1995.
10
<PAGE>
The components of the Company's deferred tax assets and liabilities are as
follows:
Deferred tax assets 1996 1995
- ------------------ ---------- ----------
Non-benefited net operating loss carryforwards $246,000 $158,000
Other deductible temporary differences 361,000 80,000
Less - valuation allowance (567,000) (238,000)
---------- ----------
Total deferred tax assets 0 0
========== ==========
Total deferred tax liabilities 0 0
========== ==========
Note F - Current vulnerability due to concentrations
====================================================
The majority of the Company's revenues will be from the Indiana Contract. Of
the $5.8 million estimated contract cost, $3.5 million has been subcontracted
with one company. The company relies primarily on one source for each of the
major printer and SST assembly operations (i.e. purchase of printer parts, SST
enclosures, assembly, installation, etc.) Alternate sources may not be
available for some or all of these suppliers and/or subcontractors.
Note G - Statement of Cash Flows disclosures
============================================
The amount of interest paid in 1996 and 1995 was $55,726 and $0, respectively.
Income taxes paid in 1996 and 1995 were $800 each year. Cash represents
demand deposits with banks.
Note H - Note Payable
=====================
The note payable in the amount of $188,107 was due February 1, 1997,
bears interest at 12% which increases to 18% on February 1, 1997. It is
secured by 100 printers. As of the date of this report it is in default.
Note I - Notes Payable - related parties
========================================
Notes payable - related parties consist of the following:
Note payable to stockholder officer, unsecured,
due January 31, 1997, bearing interest at 12% $650,000
A demand note payable to a trust of which
stockholder officers are trustees, unsecured,
bearing interest at 8% 200,704
A note payable to a trust of which stockholder
officers are trustees, unsecured, due
December 20, 1996, bearing interest at 8% 155,400
11
<PAGE>
A demand note payable to a related party,
unsecured, bearing interest at 8% 60,000
A note payable to a stockholder officer, payable
upon obtaining equity funding, no interest 500,000
----------
Total $ 1,566,104
==========
Note J - Lease Commitment
=========================
The Company conducts its operations from a 3,503 square foot facility that is
leased under a 5 year operating lease expiring in September 2001. The minimum
annual rental under this lease is $22,716.
Note K - Subsequent event - business combination with Bridgestone Corp.
=======================================================================
Effective March 12, 1997, the shareholders of Image Technology, Inc. exchanged
100% of the outstanding common stock of ITI for 450,000,000 shares of
Bridgestone Corp., a Delaware corporation based in Denver, Colorado in a
transaction accounted for as a reverse acquisition. As a result of this
transaction, the shareholders of ITI became 90% owners of Bridgestone Corp.
and ITI 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 split. This transaction has not been recorded as
of December 31, 1996. The effect on the future financial position of ITI will
be a charge to operations of $50,000 an increase in paid in capital of
$47,500, and an increase in common stock of $2,500. Bridgestone Corp. has
been a development stage company since its inception. In connection with
this merger, 17.3% of the total outstanding stock of Bridgestone Corp. was
transferred from the stockholders of ITI to various employees, consultants and
lenders. The value of this stock could not be ascertained to have any
material market value at this time and therefore has not been recorded.
12
<PAGE>
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 hereunto duly authorized.
INTELLECTUAL TECHNOLOGY, INC.
BY: /S/ Janice Welch
Secretary/Treasurer/Principal Financial Officer
Dated: May 27, 1997
13
<PAGE>
<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 8-K/A FOR THE YEAR ENDED DECEMBER 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1996
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<PP&E> 2378536
<DEPRECIATION> 10031
<TOTAL-ASSETS> 6913866
<CURRENT-LIABILITIES> 3525829
<BONDS> 3922309
0
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<CGS> 32668
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<INCOME-PRETAX> (965212)
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