<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended December 31, 1996.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from to .
--------- ----------
Commission file number 0-19817
--------------------------------
INTRANET SOLUTIONS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Chapter)
Minnesota 41-1652566
- ----------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
9625 West 76th Street, Suite 150, Eden Prairie, Minnesota 55344
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(612) 903-2000
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
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 No X
---------- ----------
State number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: At February 6, 1997 there
were 7,501,340 shares of common stock, $0.01 par value outstanding.
Page 1 of 13
<PAGE> 2
INTRANET SOLUTIONS, INC.
Form 10-QSB Index
December 31, 1996
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
December 31,1996 and March 31,1996 3
Consolidated Statements of Operations -
for the three and nine months ended
December 31, 1996 and 1995 4
Consolidated Statements of Cash Flows -
for the three and nine months ended
December 31, 1996 and 1995 5
Notes to Consolidated 6
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II: Other Information
Item 4: Submission of Matters to a Vote of Security-Holders 12
Item 6: Exhibits and Reports on Form 8-K 12
Page 2 of 13
<PAGE> 3
INTRANET SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, MARCH 31,
1996 1996
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $11,268 $37,513
Accounts receivable, net 4,996,776 3,102,394
Note receivable 1,121,973 0
Income taxes receivable 0 70,000
Inventories 546,666 324,523
Prepaid expenses and other current assets 440,887 348,438
--------------- ---------------
Total current assets 7,117,570 3,882,868
PROPERTY AND EQUIPMENT, NET 2,717,195 1,539,318
INTANGIBLE ASSETS, NET 957,850 290,680
DEFERRED INCOME TAXES 749,892 0
--------------- ---------------
$11,542,507 $5,712,866
--------------- ---------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<S> <C> <C>
CURRENT LIABILITIES:
Revolving credit facility $1,236,164 $1,108,098
Convertible promissory notes 0 550,000
Promissory notes payable, net of discount 940,000 0
Current portion of long-term debt 619,932 127,496
Current portion of capital lease obligations 235,672 148,045
Current portion of stock redemption payable 9,500 9,500
Accounts payable 4,140,217 2,701,244
Sales tax payable 103,669 68,147
Accrued expenses 489,930 247,105
--------------- ---------------
Total current liabilities 7,775,084 4,959,635
DEFERRED INCOME TAXES 0 38,000
STOCK REDEMPTION PAYABLE 21,808 30,008
LONG-TERM DEBT, NET OF CURRENT PORTION 824,224 108,341
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 778,880 598,065
Total liabilities 9,399,996 5,734,049
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, $.01 par value, 12,500,000 shares authorized,
7,492,248 and 10,000,000 issued and outstanding, respectively 74,922 10,000
Additional paid-in capital 3,766,354 7,289
Retained earnings (deficit) (1,473,108) (22,265)
Unearned compensation (225,657) (16,207)
--------------- ---------------
Total stockholders' equity (deficiency) 2,142,511 (21,183)
--------------- ---------------
$11,542,507 $5,712,866
=============== ===============
</TABLE>
Page 3 of 13
<PAGE> 4
INTRANET SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
--------------------------------- ----------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
Hardware integration 3,309,953 2,298,872 $7,949,740 $5,431,092
Software, technical services and support 1,580,891 1,080,867 3,819,472 3,367,813
Distribution services 1,192,001 422,873 2,568,365 1,016,456
--------------- ---------------- ---------------- ----------------
Total revenues 6,082,845 3,802,612 14,337,577 9,815,361
--------------- ---------------- ---------------- ----------------
COST OF REVENUES:
Hardware integration 2,802,856 1,919,214 6,661,735 4,487,939
Software, technical services and support 937,701 667,029 2,386,434 2,071,077
Distribution services 977,538 247,349 2,041,564 638,565
--------------- ---------------- ---------------- ----------------
Total cost of revenues 4,718,095 2,833,592 11,089,733 7,197,581
--------------- ---------------- ---------------- ----------------
Gross profit 1,364,750 969,020 3,247,844 2,617,780
--------------- ---------------- ---------------- ----------------
OPERATING EXPENSES:
Sales and marketing 879,640 401,045 2,128,606 1,124,167
General and administrative 905,115 327,438 2,221,103 917,842
Research and development 286,394 133,266 818,381 373,558
Depreciation and amortization 76,440 61,097 197,198 132,399
--------------- ---------------- ---------------- ----------------
Total operating expenses 2,147,589 922,846 5,365,288 2,547,966
--------------- ---------------- ---------------- ----------------
Income (loss) from operations (782,839) 46,174 (2,117,444) 69,814
INTEREST (INCOME) EXPENSE, NET 30,689 64,651 94,206 151,052
--------------- ---------------- ---------------- ----------------
LOSS BEFORE INCOME TAXES (813,528) (18,477) (2,211,650) (81,238)
Provision for (benefit of) income taxes (279,874) (33,000) (760,807) (33,000)
--------------- ---------------- ---------------- ----------------
NET INCOME (LOSS) ($533,654) $14,523 ($1,450,843) ($48,238)
=============== ================ ================ ================
NET LOSS PER COMMON SHARE ($0.07) $0.00 ($0.19) ($0.01)
=============== ================ ================ ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,464,401 7,440,606 7,448,525 7,440,606
=============== ================ ================ ================
</TABLE>
Page 4 of 13
<PAGE> 5
INTRANET SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
---------------------------------- ----------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($533,654) $14,523 (1,450,843) (48,238)
Adjustments to reconcile net income (loss) to
cash flows from operating activities -
Depreciation and amortization 168,643 83,810 398,526 229,131
Stock option compensation earned 8,789 5,864 11,231 5,864
Loss on sale of fixed assets 3,788 0 6,844 0
Changes in operating assets and liabilities (947,438) (94,000) (1,631,595) (421,611)
---------------- ---------------- ---------------- ----------------
Cash flows from operating activities (1,299,872) 10,197 (2,665,837) (234,854)
---------------- ---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from note receivable 636,668 0 795,835 0
Purchases of property and equipment (1,113,992) (214,098) (1,524,884) (344,138)
Purchase of goodwill (725,533) 0 (725,533) 0
Acquisition of covenant-not-to-compete 0 (125,000) 0 (325,000)
---------------- ---------------- ---------------- ----------------
Cash flows from investing activities (1,202,857) (339,098) (1,454,582) (669,138)
---------------- ---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACITIVITES:
Net advances from (payments on) line of credit 39,979 (141,038) 128,066 677,670
Proceeds from long-term debt 1,808,721 550,000 2,308,721 550,000
Payments on long-term debt (50,404) (52,499) (100,402) (94,164)
Proceeds from capital leases 398,342 0 398,342 0
Payments on capital leases (44,691) (30,919) (129,900) (85,992)
Proceeds from issuance of common stock 350,000 0 350,000 0
Repurchase of treasury stock 600 0 (9,400) (150,000)
Sale of common stock, net 1,300 0 30,547 0
Proceeds from reverse merger (Note 3) 0 0 1,118,200 0
---------------- ---------------- ---------------- ----------------
Cash flows from financing activities 2,503,847 325,544 4,094,174 897,514
---------------- ---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN CASH 1,118 (3,357) (26,245) (6,478)
CASH, BEGINNING OF PERIOD 10,150 6,118 37,513 9,239
---------------- ---------------- ---------------- ----------------
CASH, END OF PERIOD $11,268 $2,761 $11,268 $2,761
================ ================ ================ ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest $54,273 $62,726 $178,749 $171,757
Cash paid for income taxes $450 $15,694 $500 $27,674
DETAIL OF CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable ($2,026,831) ($587,864) ($1,894,382) ($842,168)
Income taxes receivable 0 0 70,000 0
Inventories (226,543) (71,283) (222,143) (40,664)
Other current assets (96,743) (78,404) (514,498) (114,156)
Deferred income taxes (214,313) 0 (787,892) 0
Accounts payable 1,252,519 572,709 1,438,973 605,822
Accrued expenses 364,473 70,842 278,347 (30,445)
---------------- ---------------- ---------------- ----------------
Net changes in operating assets and liabilities ($947,438) ($94,000) ($1,631,595) ($421,611)
================ ================ ================ ================
</TABLE>
Page 5 of 13
<PAGE> 6
INTRANET SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(UNAUDITED)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim consolidated financial statements be read in conjunction with the
Company's most recent audited consolidated financial statements and notes
thereto included in the Company's proxy statement dated July 5, 1996 issued in
connection with a special meeting of the shareholders of the company (formerly
known as MacGregor Sports and Fitness Inc.) for the year ended March 31, 1996.
The financial statements presented are those of the surviving entity from the
reverse merger (see note 3). In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations and cash flows
for the interim periods presented have been made. Operating results for the
nine months ended December 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1997.
(2) LOSS PER COMMON SHARE
Primary and fully diluted loss per common share are determined by dividing net
loss by the weighted average number of common shares and common share
equivalents outstanding during each period. Common share equivalents include
the dilutive effects of options and warrants which are assumed to be exercised
or converted into common shares at the beginning of the period. Common stock
equivalents have not been included in the calculation of loss per common share
because the effects would have been anti-dilutive. Primary and fully diluted
loss per share are the same for the periods presented. The effects of reverse
merger (see note 3) and stock-splits (see note 5) have been retroactively
applied.
(3) REVERSE MERGER
On July 31, 1996, the Company closed on a tax-free reorganization pursuant to
an agreement and plan of merger with MacGregor Sports and Fitness, Inc.
(MSF). MSF was a publicly traded non-operating entity. At closing, the
Company's stockholders received approximately 60% of the then outstanding
common stock of MSF in exchange for their common stock. The Company recorded
this transaction and the total consideration of approximately $3,000,000
($1,000,000 in cash and $2,000,000 in the form of a 12 month promissory note)
as an acquisition and recapitalization. Accordingly, historical financial
information is that of the Company as the surviving entity of the reverse
merger.
(4) PROMISSORY NOTES
On July 31, 1996, $550,000 of 10% unsecured Convertible Promissory Notes were
converted into 158,345 shares of common stock, after giving effect to the
reverse stock split (see note 5).
On November 20, 1996, the Company issued a promissory note in the amount of
$267,784 in connection with the acquisition of the LaFountain Corporation (see
note 6). Interest is payable quarterly at a rate of prime plus 1.5%. Principal
payments are payable in two equal installments of $133,892 on March 1, 1997 and
1998.
Page 6 of 13
<PAGE> 7
INTRANET SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(UNAUDITED)
In December, 1996, the Company received investor commitments to purchase
promissory notes issuable by the Company in the aggregate principal amount of
$1.5 million. The promissory notes are issuable at 9% plus 300,000 warrants
with exercise prices of $6.00. After giving effect to the warrants issued in
conjunction with the notes, the effective interest rate is approximately 16%.
The notes mature on December 31, 1997. Interest is payable at maturity and the
warrant exercise prices may adjust to a floor of $4.00 based on the fair market
value of the Company's common stock. At December 31, 1996, $1.0 million of the
promissory notes were issued, of which $750,000 was secured and $250,000 was
issued beneficially to the principal stockholder of the Company.
(5) STOCK SPLITS
On June 2, 1995, the Company declared a 900-for-1 stock split. On November 6,
1995, the Company declared a 21.22-for-1 stock split. On October 15, 1996, the
Company declared a 1-for-4 reverse stock split. The stock splits have been
retroactively reflected in the accompanying consolidated financial statements.
(6) ACQUISITIONS
During the quarter ended December 31, 1996, the Company acquired substantially
all the assets of Lafountain Corporation in Phoenix, Arizona for a total
purchase price of $1,626,118. The purchase price consisted of cash and a
promissory note of $857,784; shares of the Company's common stock valued at
$350,000; and assumption of liabilities of $ 418,334. In addition to the
purchase price, the Company incurred acquisition costs of $58,521. The
transaction has been accounted for using the purchase method of accounting. The
following unaudited proforma financial information for the nine months ended
December 31, 1996 and 1995 give effect to the acquisition as if it occurred
effective April 1, 1995.
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Revenue $16,006,911 $12,034,358
Income (loss) from operations (2,125,796) (12,107)
Net income (loss) (1,470,257) (105,728)
Income (loss) per share ($0.20) ($0.01)
Shares used in per share calculation 7,448,525 7,440,606
</TABLE>
The financial information does purport to represent the results which would
actually have been obtained if the acquisition had been in effect during the
period covered or any future results shich may in fact be realized.
Page 7 of 13
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
IntraNet Solutions, Inc., (the "Company") is a Minneapolis-based
technology company focused on assisting large companies in designing and
implementing open, integrated solutions for managing and distributing
business-critical information contained in documents, across and outside their
enterprises. The Company is divided into three distinct business groups,
including: (i) IntraNet Integration Group, which provides open systems to
assist companies in managing their intellectual capital, including hardware and
software products, as well as system installation, support and training; (ii)
IntraNet Distribution Group, which offers customers various services for
off-site electronic document warehousing, electronic demand publishing and
multiple methods of digital distribution of information and (iii) IntraNet
Professional Services Group, which is involved in product development, project
management and customized software applications.
On July 31, 1996, the Company's predecessor, MacGregor Sports and Fitness,
Inc. ("MSF") and IntraNet Integration Group, Inc., a Minnesota corporation
("IntraNet", formerly known as Technical Publishing Solutions, Inc. ("TPSI"))
closed on a tax-free reorganization pursuant to which IntraNet became a
wholly-owned subsidiary of the Company, and MSF changed its name to IntraNet
Solutions, Inc.. The transaction was accomplished through a tax-free reverse
subsidiary merger whereby IntraNet merged with and into a wholly owned
subsidiary of MSF, with IntraNet as the surviving corporation (the "Merger").
Accordingly, historical financial statements presented are those of the
Company.
Except for the historical information contained herein, certain matters
discussed in this prospectus are forward-looking statements which involve risks
and uncertainties, including, but not limited to, economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices and other factors discussed in the
Company's filing with the Securities and Exchange Commission. Therefore, if,
for any reason, the Company's planned operation requires more capital than
anticipated, revenues do not increase as planned, or operating income is less
than planned, the Company may need additional financing in order to maintain
its operations. There can be no assurances that the Company would be able to
obtain any such required financing, if and when needed, or that such financing,
if obtained, would be on terms and conditions favorable or acceptable, to the
Company.
Page 8 of 13
<PAGE> 9
RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 1995
COMPARED TO THE QUARTER ENDED DECEMBER 31, 1996
REVENUES. Total revenues increased to $6.1 million in 1996 from $3.8
million in 1995, or $2.3 million (60.0%). This increase related primarily to
increases in all revenue product lines including hardware integration of $1.0
million ($2.3 million in 1995 compared to $3.3 million in 1996) software,
technical and support of $500,000 ($1.1 million in 1995 compared to $1.6
million in 1996) and distribution services $800,000 ($400,000 in 1995 and $1.2
million in 1996).
COST OF REVENUES. Cost of hardware integration revenues was $1.9 million
in 1995 and $2.8 million in 1996. Cost of hardware integration revenues as a
percent of hardware integration revenues was 83.5% in 1995 compared to 84.7% in
1996.
Cost of software, technical services, and support revenues was $700,000 in
1995 and $900,000 in 1996. Cost of software, technical services, and support
revenues as a percent of software, technical services, and support revenue was
61.7% in 1995 compared to 59.3% in 1996. Cost of software, technical services,
and support decreased primarily due to the introduction and sale of the
Company's proprietary software product Intra.doc!TM
Cost of distribution services revenue were $200,000 in 1995 compared to
$1.0 million in 1996. Cost of distribution services revenues as a percent of
distribution services revenue was 58.5% in 1995 compared to 82.0% in 1996.
Lower margins on distribution services were primarily due to costs associated
with additional high speed laser and other printing devices and having lower
than optimal capacity utilization. Although no assurances can be made, the
Company believes that revenues created through additional utilization of
capacity will result in increased profit margins.
OPERATING EXPENSES:
SALES AND MARKETING. Sales and marketing expenses were $400,000 in 1995
compared to $900,000 in 1996. Sales and marketing expenses as a percent of
total revenues were 10.6% in 1995 compared to 14.5% in 1996. Sales and
marketing expenses increased as a percent of revenues primarily due to
increases in staffing and marketing programs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$300,000 in 1995 compared to $900,000 in 1996. General and administrative
expenses as a percent of total revenue were 8.6% in 1995 compared to 14.9% in
1996. General and administrative expenses increased primarily due to increases
in staffing, and new facility and distribution services related start-up
costs.
RESEARCH AND DEVELOPMENT. Research and development expenses were $100,000
in 1995 compared to $300,000 in 1996. Research and development expenses as a
percent of total revenue were 3.5% in 1995 and 4.7% in 1996. Total research
and development expenses increased $200,000 in 1996 compared to 1995 due to a
focus on development of proprietary software products.
Page 9 of 13
<PAGE> 10
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1995
COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 1996
REVENUES. Total revenues increased to $14.3 million in 1996 from $9.8
million in 1995, or $4.5 million (46.1%). This increase related primarily to
increases in all revenue product lines including hardware integration of $2.5
million ($5.4 million in 1995 compared to $7.9 million in 1996) software,
technical and support of $500,000($3.3 million in 1995 compared to $3.8 million
in 1996) and distribution services $1.6 million ($1.0 million in 1995 and $2.6
million in 1996).
COST OF REVENUES. Cost of hardware integration revenues was $4.5 million
in 1995 and $6.7 million in 1996. Cost of hardware integration revenues as a
percent of hardware integration revenues was 82.6% in 1995 compared to 83.8% in
1996.
Cost of software, technical services, and support revenues was $2.1
million in 1995 and $2.4 million in 1996. Cost of software, technical
services, and support revenues as a percent of software, technical services,
and support revenue was 61.5% in 1995 compared to 62.5% in 1996.
Cost of distribution services revenue was $600,000 in 1995 compared to
$2.0 million in 1996. Cost of distribution services revenues as a percent of
distribution services revenue was 62.5% in 1995 compared to 79.5% in 1996.
Lower margins on distribution services were primarily due to costs associated
with additional high speed laser and other printing devices and having lower
than optimal capacity utilization. Although no assurances can be made, the
Company believes that revenues created through additional utilization of the
expanded capacity will result in increased profit margins.
OPERATING EXPENSES:
SALES AND MARKETING. Sales and marketing expenses were $1.1 million in
1995 compared to $2.1 million in 1996. Sales and marketing expenses as a
percent of total revenues were 11.5% in 1995 compared to 14.9% in 1996. Sales
and marketing expenses increased as a percent of revenues primarily due to
increases in staffing and marketing programs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$900,000 in 1995 compared to $2.2 million in 1996. General and administrative
expenses as a percent of total revenue were 9.4% in 1995 compared to 15.5% in
1996. General and administrative expenses increased primarily due to increases
in staffing, expenses related to the relocation of corporate headquarters, and
other related new facility and distribution services related start-up costs.
RESEARCH AND DEVELOPMENT. Research and development expenses were $400,000
in 1995 compared to $800,000 in 1996. Research and development expenses as a
percent of total revenue were 3.8% in 1995 and 5.7% in 1996. Total research
and development expenses increased $400,000 in 1996 compared to 1995 due to a
focus on development of proprietary software products.
Page 10 of 13
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES. Since its inception and prior to the
Merger, the Company has funded its operations primarily through revolving
working capital and term loans from banking institutions together with capital
and operating equipment leases. In December 1995, the company issued $550,000
of unsecured convertible promissory notes to a limited number of accredited
investors. The unsecured notes accrued interest rate of 10%, and were
converted into common stock immediately prior to the Merger at a rate of $3.47
per share. In November, 1996, the Company issued a promissory note in the
amount of $267,784 at a rate of prime plus 1.5%. In December, 1996, the Company
issued $1.0 million 9% promissory notes with attached warrants.
As of December 31, 1996 the Company had cash of $11,268. Net cash used in
operating activities for the nine months ended December 31, 1995 was $235,000
compared to net cash used in operations for the nine months ended December 31,
1996 of $2.7 million. Capital expenditures for the nine months ended December
31, 1995 and 1996, including equipment financed with capital lease obligations,
were $344,000 and $1.5 million respectively.
The Company's revolving working capital line of credit allows for
borrowings of up to $2.6 million based on available collateral at the bank's
base lending rate plus 2.5%. At December 31, 1996, the Company had advances of
$1.2 million, which are due on demand. At December 31, 1996, the Company also
had term loans and promissory notes outstanding in the amount of $2.4 million.
The term loans require monthly principal payments of $35,416 plus interest at
the bank's base lending rate plus 2.5%. The note issued in November, 1996
requires equal principal payments of $133,892 on March 1, 1997 and 1998. The
notes issued in December 1996 are at a rate of 9% and mature on December 31,
1997. At December 31, 1996 the Company also had a demand note payable to its
principal stockholder in the amount of $27,500 which accrues interest at a rate
of 12%.
The Company acquired a portion of its distribution services
production equipment with capital lease obligations. These leases require
total monthly payments of $29,899 and carry interest rates between 14.6% and
16.6%. In addition, the Company has also entered into certain operating leases
for facilities and equipment. These leases require total monthly payments of
$52,000 for facilities and $50,000 for production and office equipment. The
Company also has a long-term consulting agreement with a former stockholder
that requires monthly payments of $10,300 through July 2000.
The Company believes that the approximately $3.0 million in gross proceeds
derived from the Merger with MSF, along with its existing bank and private
financing, will meet only its immediate anticipated needs for working capital
and capital expenditures. The Company plans to expand its distribution group
concept to regional centers throughout the United States over the next three
years primarily through acquisitions. The Company also plans to evaluate
several other potential acquisitions, primarily in complimentary software
development areas, which it believes are necessary to expand its presence in
the document management marketplace.
On November 20, 1996, the Company completed the acquisition of
substantially all the assets of LaFountain Corporation, an established,
privately-held custom printing and graphic communications business located in
the southwestern United States, which had revenues of approximately $3.0
million in its most recent fiscal year. The Company believes this strategic
acquisition will give it the opportunity to expand its web-based document
distribution market and its on-demand printing network with an established
operation in the southwest. The acquisition was financed primarily through bank
financing.
Future financings, if needed to pursue such short-term objectives, may
result in dilution to holders of Common Stock. It is anticipated that funds
required for future acquisitions and expansion will be provided from operating
cash flow, the proceeds expected from future debt or equity financings and
proceeds from future borrowings. However, there can be no assurance that
suitable acquisitions candidates will be identified by the Company in the
future, that suitable financing for any such acquisitions or expansion can be
obtained by the Company or that any such acquisitions or expansions will occur.
Page 11 of 13
<PAGE> 12
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal proceedings and,
to the best of its knowledge, its properties are not the subject of any such
proceedings.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On July 30, 1996, the Company held a special Meeting of Shareholders to
consider and vote upon the Merger and five other proposals. The tabulation of
the votes in favor, against and abstaining with regard to the six (6) proposals
is set forth below:
<TABLE>
<CAPTION>
PROPOSAL IN FAVOR AGAINST ABSTAIN
-------- --------- ------- ---------
<S> <C> <C> <C> <C>
1. Sale of Registrant's Assets to Hutch Sports
U.S.A. Inc., (a subsidiary of Roadmaster
Industries, Inc.) 5,241,578 9,900 1,297,852
2. Approval of Merger with IntraNet
Integration Group, Inc. 6,539,530 2,500 7,300
3. Amendment and Restatement of Registrant's
Articles of Incorporation 6,711,605 42,400 20,350
4. Election of Registrant's Directors 6,873,131 7,700 0
5. Adoption of New Registrant Stock Option
Plan and Reservation of 2,500,000 Common
Shares Pursuant to such Plan 6,345,763 134,967 68,600
6. Appointment of Lund Koehler Cox & Co.,
PLLP, as Independent Auditors to
Registrant 8,761,288 77,416 54,295
</TABLE>
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
Page 12 of 13
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTRANET SOLUTIONS, INC.
(the "Registrant" or "Company")
Dated February 12, 1996 By: /s/ Robert F. Olson
----------------------------------
Robert F. Olson
Its: Chief Executive Officer
----------------------------------
(Principal Executive Officer)
Dated February 12, 1996 By: /s/ Jeffrey J. Sjobeck
----------------------------------
Jeffrey J. Sjobeck
Its: Chief Financial Officer
----------------------------------
(Principal Financial Officer)
Page 13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 11,268
<SECURITIES> 0
<RECEIVABLES> 4,996,776
<ALLOWANCES> 0
<INVENTORY> 546,666
<CURRENT-ASSETS> 7,117,570
<PP&E> 2,717,195
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,542,507
<CURRENT-LIABILITIES> 7,775,084
<BONDS> 0
0
0
<COMMON> 74,922
<OTHER-SE> 2,067,589
<TOTAL-LIABILITY-AND-EQUITY> 11,542,507
<SALES> 14,337,577
<TOTAL-REVENUES> 14,337,577
<CGS> 11,089,733
<TOTAL-COSTS> 11,089,733
<OTHER-EXPENSES> 5,365,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,206
<INCOME-PRETAX> (2,211,650)
<INCOME-TAX> (760,807)
<INCOME-CONTINUING> (1,450,843)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,450,843)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
