SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB/A
Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
For the Quarter Ended Commission File
August 31, 1996 Number 0-19796
INTERACTIVE TECHNOLOGIES CORPORATION, INC.
(Exact name of registrant as specified in charter)
Wyoming 98-0120805
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
102 South Harbor City Boulevard
Melbourne, Florida 32901
(address of Principal Executive Offices)
407-953-4811
(Registrant's telephone number including area code)
Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the exchange Act 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 __________
The Registrant has 11,866,491 shares of common stock, par value $0.01 per
share issued and outstanding as of August 31, 1996.
Traditional Small Business Disclosure Format
Yes _____X_____ No __________
<PAGE>
Interactive Technologies Corporation, Inc.
Table of Contents
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements 2-9
Balance Sheet as of August 31, 1996
Statement of Operations for the three
months ended August 31, 1996 and August 31, 1995
Statement of Cash Flows for the three
months ended August 31, 1996 and August 31, 1995
Item 2. Management's Discussion and Analysis and 10-12
Plan of Operations
PART II - OTHER INFORMATION 13
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Interactive Technologies Corporation, Incorporated
Balance Sheets
For the Three Months Ended August 31, 1996
Assets
August 31,
1996
-----------------------------
(unaudited)
-----------------------------
Current Assets:
Cash $ 14,695
Accounts receivable, trade 24,167
Prepaid expenses and other assets 15,593
-----------------------------
54,455
Total current assets -----------------------------
Property and equipment, at cost, net of
$13,138 of accumulated depreciation 101,692
-----------------------------
Other Assets:
Organizational costs, net of $1,734 of
accumulated amortization 2,266
Investment in Subsidiary-SNT 314,899
License rights, net of $294,334 of
accumulated amortization 670,666
Proprietary software and
trademark, net of $289,877
of accumulated amortization 5,121,165
-----------------------------
6,108,996
-----------------------------
Total Assets $ 6,265,143
=============================
Accompanying notes are an integral part of the financial statements.
2
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Interactive Technologies Corporation, Incorporated
Balance Sheets
For the Three Months Ended August 31, 1996
Liabilities and Stockholders'Equity
-----------------------------------
August 31,
1996
-----------------------------
(unaudited)
-----------------------------
Current Liabilities:
Accounts payable, trade $ 225,023
Accrued Expenses
Related Parties -
Others 77,683
Contract of sale deposit 500,000
Loans Payable
Related Parties
Others 252,462
Current portion of long-term liabilities 171,227
-----------------------------
Total current liabilities 1,226,395
-----------------------------
Long-term liabilities:
License rights payable 499,573
Capital lease obligation -
Convertible debentures payable 800,000
-----------------------------
1,299,573
Commitments and contingencies:
Stockholders' equity:
Common Stock $.01 par value;
12,500,000 shares authorized,
11,866,491 issued and outstanding 118,665
Paid-in capital in excess of par 8,796,652
Accumulated Deficit (5,176,142)
-----------------------------
3,739,175
-----------------------------
$ 6,265,143
=============================
Accompanying notes are an integral part of the financial statements.
3
<PAGE>
Interactive Technologies Corporation, Incorporated
Statements of Operations
For the Three Months Ended August 31, 1996 and 1995
August 31, August 31,
1996 1995
---------------------- ----------------------
(unaudited) (unaudited)
---------------------- ----------------------
Revenue $ 12,835 $ -
---------------------- ----------------------
Operating expenses:
Depreciation 5,403 -
Amortization 240,809 -
General and administrative 658,175 21,544
Interest expense:
Interest-Related parties - 20,525
Other - -
---------------------- ----------------------
904,387 41,570
---------------------- ----------------------
Net Loss for Period (891,552) (41,570)
Loss before income taxes (891,552) (41,570)
Provision for income taxes - -
---------------------- ----------------------
Net Loss $ (891,552) $ (41,570)
====================== ======================
Net loss per share
Primary $ 0.08 $ 0.01
Diluted $ 0.08 $ 0.01
Accompanying notes are an integral part of the financial statements.
4
<PAGE>
Interactive Technologies Corporation, Incorporated
Statement of Cash Flows
For the Three Months Ended August 31, 1996 and 1995
August 31, August 31,
1996 1995
------------------ -------------------
(unaudited) (unaudited)
------------------ -------------------
Net Loss $ (41,570)
------------------ -------------------
Cash flows from operating activities:
Cash flow from Operating Activities:
Cash received from customers $ 19,232
Cash paid to employees (204,084)
Cash paid to suppliers (388,845)
Interest paid:
Stockholder
Others (909)
Taxes paid -
------------------ -------------------
Net cash used in operating activities $(574,607)
------------------ -------------------
Cash flows from investing activities:
Purchase of property and equipment (664)
Capitalized software development
reduction 50,000
------------------ -------------------
Net cash used in investing
activities 49,336
------------------ -------------------
Cash flows from financing activities:
Issuance of convertible debentures 300,000
Common stock issued for cash 61,602
Promissory notes issued 252,462
Contract of sale deposits received 98,099
License rights payment (232,000)
------------------ -------------------
Net cash provided by financing
activities 480,163
------------------ -------------------
Change in current assets and liabilities 33,025
Net decrease in cash (45,108) (8,545)
Cash at beginning of period 63,114 11,745
------------------ -------------------
Cash at end of period $ 18,003 $ 3,200
================== ===================
Accompanying notes are an integral part of the financial statements.
5
<PAGE>
Interactive Technologies Corporation, Inc.
Statement of Cash Flows
For the Three Months Ended August 31, 1996 and 1995
Reconciliation of Net Income to Net Cash
Used in Operating Activities
August 31, August 31,
1996 1996
-------------------- -------------------
(unaudited) (unaudited)
-------------------- -------------------
Net loss $ (891,552) $(41,570)
-------------------- ------------------
Adjustments to reconcile net
loss to net cash used in
operating activities:
Amortization 240,809
Depreciation 5,403
Increase in accounts receivable (7,214)
Increase in Investment in subsidiary (222,204)
Increase in prepaid expenses (8,275)
Decrease in accounts payable (138,250)
Increase in accrued expenses 102,619
Stock issued for supplies and services 344,057
-------------------
Total adjustments 316,945
-------------------- -------------------
Net cash used in operating
activities $(574,607) $(41,570)
==================== ===================
Accompanying notes are an integral part of the financial statements.
6
<PAGE>
INTERACTIVE TECHNOLOGIES CORPORATION, INC
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Interactive Technologies Corporation, Inc. (the Company) was incorporated in
the state of Wyoming on August 8, 1991. On October 20, 1995, the Company
entered into a reverse acquisition transaction, described below, with
Syneractive, Inc. (SI). SI was incorporated in the state of Florida on August
31, 1995. Prior to October 20, 1995, the Company was engaged primarily in the
business of exploiting its rights under a license granted by CST
Entertainment Imaging, Inc. The license gave the Company the exclusive right
to colorize black-and-white film and videotape, including black-and-white
theatrical films and television programs, which were originally produced for
distribution primarily within European countries. However, the Company
abandoned the business of exploiting the license (see Note 3) on October 18,
1995 as a result of being unable to realize any revenue from the license. SI,
which was acquired in a reverse acquisition, obtained license rights from the
Federal Communications Commission to operate interactive and data service
systems in the Charleston - North Charleston, SC and Melbourne -
Titusville-Palm Bay, Florida metropolitan areas.
Syneractive, Inc. also acquired proprietary software and a trademark known as
Rebate TV, which is a marketing and sales medium for a wide variety of
products and services. Advertisers on Rebate TV will offer substantial
rebates to the network's viewers through a unique interactive rebate program.
Touch-tone phones will initially interact the network to secure earned
rebates, and later the network will be accessed via wireless digital
communications networks currently under development. The Rebate TV operations
commenced April 15, 1996 and serves customers in the eastern United States.
Management expects exploitation of the FCC licenses to commence in 1997. They
intend to hire the necessary management personnel, raise additional capital
and generate profitable operations needed to continue its existence.
Syneractive, Inc. was dissolved on October 30, 1995.
Reverse acquisition
-------------------
On October 1, 1995, the Company issued 5,700,000 shares of common stock to
its current sole director and officer in exchange for the net assets of SI.
After the issuance of such stock, the current director and officer
effectively controlled the Company, holding approximately 50.1% of the
outstanding common stock.
Prior to the reverse acquisition, the current sole director and officer of
the Company owned all of the outstanding common stock of SI. Accordingly, the
reverse acquisition has been accounted for at the historical cost of the
assets acquired.
Consolidated principles
-----------------------
On April 9, 1996 the Company formed a wholly owned subsidiary, Satellite
Network Television (SNT), by issuing 1,000,000 common stock shares to ITC.
SNT operates television studios, a post production facility and
satellite links. It will produce commercials, infomericals, business videos,
commercial programming, and remote broadcasts for both the Company's
Rebate TV operations and for outside customers. Until SNT has operations
the Company will not consolidate this subsidiary and reflect an investment
in subsidiary in its balance sheet.
The accompanying financial statements include the general accounts of
the Company and accordingly do not include the financial statements of
SNT. At balance sheet date no continuing operation had been initiated by
SNT and the Company was considering disposition of this subsidiary.
Basis of Presentation
---------------------
The financial information presented as of any date other than May 31 has
been prepared from the books and records without audit. The accompanying
financial statements have been prepared in accordance with the instructions
to Form 10QSB and do not include all of the information and the footnotes
7
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INTERACTIVE TECHNOLOGIES CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS
required by generally accepted accounting principals for complete
statements. In the opinion of management, all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of such
financial statements, have been included.
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended May 31, 1996
contained in the Company's 10KSB Annual Report.
Management 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.
Earnings per share
------------------
Primary and fully diluted earnings per share amounts are based upon
11,816,787 for August 31, 1996 and 5,689,544 for August 31, 1995, weighted
average shares of common stock and common stock equivalents outstanding. No
effect has been given to the assumed exercise of stock options and warrants
and convertible debentures as the effect would be antidilutive.
2. COMMITMENTS AND CONTINGENCIES
License fees payable
--------------------
The Company, through SI, has acquired licenses from the Federal
Communications Commission to operate interactive video and data service
systems in various metropolitan statistical areas (Note 1). The license
rights are payable interest only, at 7.7 percent for two years with principal
and interest payable monthly over the remaining three years of the licenses.
Interest has been accrued from the date the license was formally issued.
During the quarter, the Company has paid $232,000 to the FCC for the
remaining balance due on the Charleston-North Charleston, South Carolina
license.
3. CONVERTIBLE DEBENTURES
During the quarter ended August 31, 1996, the Company issued $300,000 of 8%
convertible debentures maturing July, 2001. The bonds are convertible into
shares of the company's common stock at conversion prices of $4.00. In the
event that the Company becomes a private company, the lenders have the right
to immediately require redemption at a rate of 10% of par in the first year
the Company becomes private plus an additional 1% for each year to
redemption.
8
<PAGE>
INTERACTIVE TECHNOLOGIES CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES
The Company used the accrual method of accounting for tax and financial
reporting purposes. At August 31, 1996, the Company had net operating loss
carryforwards for financial and tax reporting purposes of approximately
$5,600,000. These carryforwards expire through the year 2010, and are further
subject to the provisions of Internal Revenue Code Section 382.
Pursuant to Statement of Financial Accounting Standards No. 109, the Company
has recognized a deferred tax asset attributable to the net operating loss
carryover, net of a deferred tax liability related to amortization timing
differences, in the amount of $1,907,259 which has been fully offset by a
valuation allowance in the same amount.
9
<PAGE>
Item 2. Management's Discussion and Analysis and Plan of Operations
PROGRAM MARKET EXPANSION
The Company's roll out plan provides for Rebate TV(TM) to open in the Atlanta
market following the Orlando market. The Company has hired a General Manager
for the Atlanta office who began with the Company on April 1, 1996. The
Company's plan also includes the completion of an interface for Interactive
Video and Data Services (IVDS) return links during the next 12 months.
Overall, during the next 18-36 months, the Company's plan calls for the
market expansion of Rebate TV(TM). The program is scheduled to expand into 25
of the top national markets within three years from the date of first
broadcast. The Company expects to hire as many as 50 additional employees
over the next 24 months to support the operation of this programming and to
continue to develop and refine the programming as the Company adds markets
for these services.
PROGRAM DEVELOPMENT
The Company's research and development efforts consumed the technical efforts
of the Company from October 1995 through the airing of Rebate TV(TM) on April
15, 1996, and involved two basic areas: the television programming for the
shows, and the data management and computer interface development efforts for
the interaction with the retailers and the consumers. None of this expense
will be borne directly by the retailers or the consumers, but will be
recouped through profits as the Company expands its markets.
Development of Rebate TV(TM) basic programming by ITC was accomplished during
the past fiscal year with Century III at Universal Studios, Florida.
Established in 1976, Century III has serviced a widely diverse client base
with high production values utilizing the latest and finest in production and
post-production hardware. This includes local, regional, national and
international projects for all four broadcast television networks, national
cable networks such as Nickelodeon and HBO, major independent producers,
advertising agencies and major corporate and governmental organizations such
as Digital Equipment Corporation, Harris Corporation, General Electric, NCR,
AT&T, Kodak, Polaroid, Walt Disney World, Harcourt Brace Jovanovich, FPL
Group, Westinghouse, McDonnell Douglas, Martin Marietta, Rebok, International
and NASA. The creative director for Rebate TV(TM) is Michael Hamilton who has
designed, directed and produced such television series as "Magnum P.I.,
"Simon & Simon", "Wings" and "The Twilight Zone". His commercial experience
includes such clients as Cadillac(TM), Texaco, Coca Cola(TM), Heineken,
American Airlines, Donna Karan, Elizabeth Arden, QVC, Business Technology
Management and the Family Channel.
The computer development efforts related to Rebate TV(TM) were done at the
Company's engineering offices in Melbourne, Florida, where the hardware and
software designs and specifications were developed, tested and implemented
during the last fiscal year, to:
o manage the large amounts of data and transactions involved in
collecting and verifying sales information from the Rebate TV(TM)
retailers;
o calculate the rebates, record the credits, and issue the checks to the
consumer;
o accommodate and record the telephone rebate requests, and provide
automated participation information to the public.
ITC looks to Rebate TV(TM) to attract its share of the Communications
Industry end-user market estimated to be $189.3 billion by 1998. Interactive
digital media is projected to remain the fastest growing category in the
industry.1
Internet Access. ITC's Internet home pages for use with Rebate TV(TM) allow
viewers to access the program's data base through the Internet. It allows
them to view the status of their accounts, enter vendor rebate claims, and
later will allow viewers to access a variety of products and services
associated with Rebate TV(TM) which the Company expects to include. The
Company's home page is located at http://www.INET-USA.com/RTV.
10
<PAGE>
Network operations. ITC is in development and production of its own
television channel and is scheduled to distribute its Rebate TV(TM) video
programming in this format to customers. The Company's distribution plan
currently provides for distribution of this programming started in the
central Florida markets to expand from there. Overall, during the next 18-36
months, the Company's plan calls for the Rebate TV(TM) to expand into 25 of
the top national markets within three years from the date of first broadcast.
The Company expects to hire as many as 50 additional employees over the next
24 months to support the operation of this programming and to continue to
develop and refine the programming as the Company adds markets for these
services. The Company currently maintains a sales office in Atlanta, GA, and
has announced a on-air date for that market of January 6, 1997.
Satellite Network Television (SNT). The company formed Satellite Network
Television, Inc. (SNT) a Nevada corporation, to operate its facilities in
Princeton, New Jersey. These facilities consist of three basic segments:
Studio Operations: Complete studio and control room facilities
including studio cameras, XY lighting, preset
lighting board and recording facilities.
Post Production : Equipped Video and audio edit rooms for on and off
line edits. 3-D Graphics and Paintbox edit rooms,
voice over and audio facilities and control
equipment.
Satellite Links : Fully redundant C band and Ku band satellite
uplinks and downlinks with support and playback
equipment.
These facilities were acquired to provide the Company the ability to
completely produce and distribute its own programming in-house. However, the
Company operates this facility as a full-service studio and broadcast
facility available to the business community and realizes revenues from
providing contract services from its facilities and from remote sports and
general subject broadcasts. (These include such services as video
conferencing, and television and video program production for educational,
commercial and corporate videos.) The Company began major renovations to
these facilities in May, 1996, and has been operating at a reduced level
during renovations. The renovations are currently scheduled to be complete in
October of 1996.
Interactive Video and Data Services. As part of ITC's commitment to the
evolution of interactive television, its Federal Communications Commission
Interactive Video and Data Services (IVDS) radio station licenses in the
Charleston-North Charleston, SC, and Melbourne-Titusville-Palm Bay, FL
service areas represent an additional enhancement to the Company's
programming distribution. These licenses have a duration of an initial five
years, and are renewable if all conditions of the license are met. IVDS, a
two way communications system, will allow viewers to take an active role in
systems delivered through broadcast television, cable television, wireless
cable, direct broadcast satellite or other future television delivery
methods. IVDS is regulated as a personal radio service under the rules of the
FCC which has allocated spectrum in the 218-219 MHz range for its use. IVDS
systems are designed to operate with a hand-held remote control device that
controls the interactive set top device on the subscriber's television set. A
viewer would interact with the TV station through a radio signal using an
IVDS frequency.
The Company has purchased equipment for its Charleston-North Charleston, SC
license, which is in storage in Melbourne, Florida until the Company is ready
for installation in Charleston. The Company has under contract the sale of
90% of this ownership of this license and equipment and has reserved rights
to provide programming to this license area when it is in operation.
The Company is reviewing alternative uses and equipment proposals for its
Melbourne-Titusville-Palm Bay, FL license and expects to proceed to install a
system for this license within the next 24 - 36 months.
1.The Veronicas,Shudder & Associates Communications Industry Forecast,July 1994
----------------------------------------------------------------------------
11
<PAGE>
Although ITC will run its Rebate TV(TM) and other programs on its own service
area systems, the programs it develops are intended for use on various
interactive delivery systems and are not specific to Interactive Video and
Data Services systems. They are marketed to all of these various delivery
systems. For broadcast of Rebate TV(TM) programming the Company currently
uses and plans to use standard video media distribution methods such as
cable, broadcast stations, wireless cable and direct broadcast satellite.
Although the Company has designed its programs to utilize an IVDS return link
(a "return link" is the method by which data is sent from the consumer or
viewer back to the originator of the program), they are also designed to
accommodate other return links such as the telephone. The Company has
purchased equipment and software to provide a telephone return link as an
interim return link for its own license areas as well as other areas where it
is providing programming, to be utilized where IVDS is not available; until
the installation an operation of the IVDS equipment as a return link is
completed as well as for use with non subscribers to IVDS.
Intellectual Content. The Company has developed a plan for the accumulation
and sale of intellectual content. This content takes several forms, including
completed television and video programming, both developed and produced by
the Company and by third parties; property rights to written scripts and
publications for the purpose of producing or having produced television or
motion picture products; and program ideas, concepts and designs.
This plan commenced during May 1996. In addition to the Rebate TV(TM)
programs, the company has filed and had accepted Trademark applications with
the United States Patent and Trademark Office for "Rebate TV" and for "DEAL!
DEALS! DEALS!" (a direct shopping program which the Company has produced).
The Company has produced in conjunction with Nightwing Entertainment Group,
Inc./Petsville USA a series of direct sale pet product shows which it expects
to air during the 4th calendar quarter of 1996 and beyond.
The Company has acquired movie and television rights for one year to Special
Treatment a novel currently in print.
The Company has in addition under this plan a number of projects under
consideration and review. To date, revenue from these activities has been
limited to the Rebate TV(TM) television program, and to a limited showing
of its DEAL! DEALS! DEALS! program.There is associated with each of these
shows and projects a lead time or advance period necessary for development
and scheduling. In addition, the company may elect to sell outright or
resell any of these properties.
The Company does not expect to receive material revenues from these projects
other than Rebate TV(TM) program until calendar year 1997. The Company
believes that it can meet its cash requirements during the second quarter of
the fiscal year, but expects to require additional funds over the next 12
months for the expansion and addition of markets for its products and
operations. Although the Company has no written commitments for additional
funds, it believes that it can raise additional cash required from private
sources.
12
<PAGE>
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:
Item 6. Exhibits and Reports on Form 8-K None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Interactive Technologies Corporation, Inc.
By: /s/ Perry Douglas West
-------------------------------------------
Perry Douglas West, Chief Executive Officer
Dated:
14
<PAGE>
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