-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TbApKYZSe0vLDwKA8MiPFTbTEX09qmC/oj1h6Iq4ZpficRI3w74lCz5IDl85uQFR 55dhEeDYWFsYt76j2a54Eg== 0000909012-99-000457.txt : 19990817 0000909012-99-000457.hdr.sgml : 19990817 ACCESSION NUMBER: 0000909012-99-000457 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION MANAGEMENT TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000824578 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-FACILITIES SUPPORT MANAGEMENT SERVICES [8744] IRS NUMBER: 581722085 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16753 FILM NUMBER: 99692680 BUSINESS ADDRESS: STREET 1: 130 CEDAR ST 4TH FLR CITY: NEW YORK STATE: NY ZIP: 10006 BUSINESS PHONE: 2123066100 MAIL ADDRESS: STREET 1: 130 CEDAR STREET CITY: NEW YORK STATE: NY ZIP: 10006 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q - -------------------------------------------------------------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR TRANSITION PERIOD FROM __________ TO __________ - -------------------------------------------------------------------------------- COMMISSION FILE NUMBER: 0-16753 - -------------------------------------------------------------------------------- INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) - -------------------------------------------------------------------------------- - ------------------------------------------ -------------------------------- DELAWARE 58-1722085 - ------------------------------------------ -------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) - ------------------------------------------ -------------------------------- - ------------------------------------------------ ------------------------------- 130 CEDAR STREET, FOURTH FLOOR, NEW YORK, NY 10006 - ------------------------------------------------ ------------------------------- (Address of Principal Executive Offices) (Zip Code) - ------------------------------------------------ ------------------------------- - -------------------------------------------------------------------------------- (212) 306-6100 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- N/A - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] ----- ----- At August 10, 1999, the Registrant had outstanding 16,715,692 shares of Class A Common Stock. IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ INDEX ---------- PAGE ---------- - -------------------------------------------------------------------------------- PART I FINANCIAL INFORMATION - -------------------------------------------------------------------------------- ITEM 1 CONSOLIDATED FINANCIAL STATEMENTS 1 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF 17 FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- PART II OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 1 LEGAL PROCEEDINGS 24 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 26 SIGNATURES 28 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ PART I FINANCIAL INFORMATION - -------------------------------------------------------------------------------- ITEM 1. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -------- PAGE -------- Consolidated Balance Sheets as of June 30, 1999 and March 31, 1999 2 Consolidated Statements of Operations for the Three Months Ended June 30, 1999 and 1998 4 Consolidated Statements of Cash Flows for the Three Months Ended June 30, 1999 and 1998 5 Consolidated Notes to Financial Statements 6 1 - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS Information Management Technologies Corporation and Subsidiaries - --------------------------------------------------------------------------------
June 30, March 31, - ------------------------------------------------------------------------------------- 1999 1999 - ------------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash - restricted $ 225,511 $ 225,511 Accounts receivable, net of allowance for doubtful accounts of $221,000 and $225,000 at June 30, 1999 and March 31, 1999, respectively 3,540,643 3,426,055 Inventory 360,929 648,524 Prepaid expenses and other current assets 118,368 124,252 ----------- ----------- Total current assets 4,245,451 4,424,342 ----------- ----------- Property and equipment - at cost Production equipment 6,372,489 6,342,871 Computer software applications 782,329 782,329 Furniture and fixtures 488,069 488,069 Leasehold improvements 771,278 771,278 Computer equipment 902,836 902,836 ----------- ----------- 9,317,001 9,287,383 Less: Accumulated depreciation and amortization 5,121,771 4,796,973 ----------- ----------- Net property and equipment 4,195,230 4,490,410 ----------- ----------- Other assets: Cash - restricted 233,019 228,671 Investment in INSCI Corp. 418,840 1,117,332 Goodwill, net of accumulated amortization and impairment of $5,958,284 and $5,945,781 at June 30, 1999 and March 31, 716,891 729,394 1999, respectively Deposits and other 269,329 282,737 ----------- ----------- Total other assets 1,638,078 2,358,134 ----------- ----------- $10,078,759 $11,272,886 ==================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. -2- - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS Information Management Technologies Corporation and Subsidiaries - --------------------------------------------------------------------------------
June 30, March 31, - --------------------------------------------------------------------------------------------- 1999 1999 - --------------------------------------------------------------------------------------------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) Current liabilities: Cash overdraft $ 363,492 $ 413,449 Loan payable - bank 2,125,941 1,845,639 Current maturities of long-term debt 4,232,365 4,260,405 Current maturities of long-term capital lease obligations 315,634 310,184 Accounts payable 2,660,544 2,374,702 Due to related party 54,412 112,249 Accrued salaries 122,929 198,304 Accrued expenses and other current liabilities 1,333,694 962,170 ------------ ------------ Total current liabilities 11,209,011 10,477,102 ------------ ------------ Long-term debt, less current maturities 2,218,811 2,465,257 Capital lease obligations, less current maturities 240,072 319,637 Deferred rent 323,150 332,630 Convertible obligations 4,000,000 4,990,800 Stockholders' equity (deficiency): 12% convertible preferred stock Authorized - 3,000,000 shares at $1.00 par value; 463,673 shares issued and outstanding at June 30, 1999 and March 31, 1999, respectively; ($463,673 of aggregate liquidation value as of June 30, 1999 and March 31, 1999, respectively) 463,673 463,673 Class "A" common stock and capital in excess of $.04 par value: Authorized - 100,000,000 shares; 16,715,692 and 15,497,647 shares issued and outstanding at June 30, 1999 and March 31, 1999, respectively 35,256,747 35,094,747 Accumulated comprehensive income 417,689 681,300 Accumulated deficit (44,050,395) (43,552,260) ------------ ------------ Total stockholders' equity (deficiency) (7,912,285) (7,312,540) ------------ ------------ $ 10,078,759 $ 11,272,886 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. -3- - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS Information Management Technologies Corporation and Subsidiaries For the Three Months Ended June 30, 1999 and 1998 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 1999 1998 (Unaudited) Revenues $ 4,530,429 $ 2,754,668 Cost of sales 3,742,061 1,696,811 ------------ ------------ Gross profit 788,368 1,057,857 ------------ ------------ Operating expenses: Selling, general and administrative 1,765,640 991,527 Amortization of goodwill 12,503 -- ------------ ------------ Total operating expenses 1,778,143 991,527 ------------ ------------ Income (loss) from operations (989,775) 66,330 Other (income) expenses: Interest expense, net 259,601 59,848 Gain from the sale of INSCI Corp. stock (1,192,270) -- ------------ ------------ Net other (income) expenses (932,669) 59,848 ------------ ------------ Net income (loss) (57,104) 6,482 Preferred stock dividends 10,200 61,380 ------------ ------------ Net loss applicable to common stockholders $ (67,304) $ (54,898) ============ ============ Loss per share: Basic $ (0.00) $ (0.01) Diluted $ (0.00) $ (0.01) Shares used in computing loss per share: Basic 15,632,985 5,789,846 Diluted 15,632,985 5,789,846 STATEMENT OF COMPREHENSIVE INCOME: Comprehensive income (loss): Net income (loss): $ (57,104) $ 6,482 Other comprehensive income (INSCI Corp. stock): Proceeds from sale (1,196,260) -- Gain on sale 369,082 -- Unrealized gain 132,736 -- ------------ ------------ $ (751,546) $ 6,482 ============ ============
-4- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS Information Management Technologies Corporation and Subsidiaries - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED JUNE 30, 1999 1998 - ----------------------------------------------------------------------------------------------------- (Unaudited) Cash flows from operating activities: Net income (loss) $ (57,104) $ 6,482 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 324,798 246,016 Amortization of goodwill 12,503 -- Amortization of consulting fees 36,254 27,639 Property-in-kind interest paid on convertible debt -- 24,000 Gain from the sale of INSCI Corp. stock (1,192,270) -- Provision for doubtful accounts 138,421 19,916 Deferred rent (9,480) (5,582) Changes in assets and liabilities, net of effects of purchased businesses: Accounts receivable (253,011) (213,049) Inventory 287,595 (101,049) Prepaid expenses and other current assets (30,370) (85,162) Deposits and other assets 13,408 (25,926) Accounts payable 285,842 272,071 Accrued salaries (75,375) (66,331) Accrued expenses and current liabilities 374,890 79,381 Due from/to related parties (57,837) -- ----------- ----------- Net cash (used in) provided by in operating activities (201,735) 178,406 ----------- ----------- Cash flows from investing activities: Capital expenditures (29,618) (156,120) Proceeds from the sale of INSCI Corp. stock 545,260 -- (Increase) decrease in due from affiliate -- (80) Net increase in due from affiliate -- 22,500 ----------- ----------- Net cash provided by (used in) investing activities 515,642 (133,700) ----------- ----------- Cash flows from financing activities: Financing from cash overdraft (49,957) 118,780 Net borrowings (repayments) under bank credit facility 280,302 23,882 Repayments of long-term debt (274,486) (84,842) Payments of capital lease obligations (74,115) (102,526) Payment on convertible obligations (200,000) -- Interest from restricted certificate of deposit account used to repay capital lease obligations 4,348 -- ----------- ----------- Net cash used in financing activities (313,908) (44,706) ----------- ----------- Net decrease in cash and cash equivalents -- -- Cash and cash equivalents of beginning of year -- -- ----------- ----------- Cash, end of period $ -- $ -- ====================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. -5- - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS Information Management Technologies Corporation and Subsidiaries - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED JUNE 30, 1999 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest $ 125,800 $ 59,848 - -------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES During the three months ended June 30, 1999, the Company exchanged 177,997 shares of INSCI Class A common stock and 1,218,045 shares of Imtech Class A common stock in full satisfaction of $600,000 in principal and $213,000 in accrued interest of the Company's 12% secured promissory notes. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5(a) - -------------------------------------------------------------------------------- IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ THE COMPANY - ----------- Information Management Technologies Corporation (referred to as "IMTECH") was incorporated in 1986 in the State of Delaware. IMTECH provides graphic communications to financial institutions such as banks and brokerage firms, as well as to medium and large service organizations within such industries as accounting, law and finance. The Company's core business is the production and subsequent distribution of time sensitive printed financial research, financial reports and marketing materials. In addition, the Company provides facility management services, which include mail room and copy center management. The Company's customer base is principally located in New York City and the surrounding metropolitan area, such as New Jersey, Southeast Connecticut and Westchester County. IMTECH also services clients in Pennsylvania, the Midwest, and as a result of a strategic alliance with a London based service provider, in Europe as well. On July 24, 1998, IMTECH consummated its acquisition of KRL Litho, Inc. d/b/a "The Skillcraft Group" ("Skillcraft"). Skillcraft, like IMTECH, provides graphic communications services including financial research report printing, commercial printing, graphic arts design and fulfillment services to financial and commercial organizations located primarily in the New York Metropolitan area. Skillcraft's production equipment is complementary to that of its parent, IMTECH. In addition, IMTECH, on November 13, 1998 consummated its acquisition of RDS, Research Distribution Services, Inc. ("RDS") subject to certain post closing matters which have not as yet been completed. RDS provides intelligent fulfillment and distribution services to the research report production industry. IMTECH and its three wholly owned subsidiaries, Halcon Acquisition Corp. ("Halcon"), Skillcraft and RDS (collectively known as the "Company") operate as separate divisions under a new organization known as SkillTech Global Graphics & Communications, Inc. ("SkillTech"). Halcon is a holding Company and has no active operations. Hereafter, IMTECH, Skillcraft and RDS collectively may be referred to as the "Company" or "SkillTech". The Company's graphic communications services include digital communications, two and four color digital printing, intelligent inserting, high volume duplication, graphic design, electronic publishing, document fulfillment, micrographics, data processing, as well as bindery and distribution services. The Company's printing and distribution services are generally performed at IMTECH, the South Printing Facility known as "SkillTech South" and at Skillcraft, the North Printing Facility known as "SkillTech North", both located in downtown New York City. The facilities management services include independent, on-site management of client systems for providing document duplication, distribution and mailroom management. The Company holds a 1% ownership interest in INSCI Corp. ("INSCI") at June 30, 1999. PRINCIPLES OF CONSOLIDATION. The financial statements include the accounts of IMTECH and its wholly owned subsidiaries, Skillcraft, RDS and Halcon. All significant intercompany transactions and balances have been eliminated. 6 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ BASIS OF PRESENTATION AND MANAGEMENTS PLANS - ------------------------------------------- The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate the continuation of the Company as a going concern. However, the Company has sustained substantial losses in the current quarter and the last two years and has experienced a deficiency in cash flows from operations in each of its last three years. The Company had a working capital deficiency of approximately $6,968,000 as of June 30, 1999. Management has begun to evaluate opportunities to obtain additional financing to provide sufficient working capital and other resources to meet current obligations as they become due. In addition, management has taken certain measures to leverage the strength of the combined companies. However, there can be no assurances that the Company will be successful in implementing measures that will be successful. As a first step to implementing its business plan, IMTECH completed the acquisitions of KRL Litho, Inc. (also known as "Skillcraft") and RDS, Research Distribution Services, Inc. ("RDS"). The acquisitions have increased the revenue base of the organization as a whole and have also expanded the Company's production capabilities to provide economies of scale and efficiencies that now allow SkillTech to maximize profits while offering its clients a variety of solutions to their research report production requirements. However, because of the deterioration of the acquired Skillcraft business, the Company has experienced a severe downturn in its business. In January 1999, management undertook certain measures to begin leveraging the strength of the combined companies, and at the same time address its declining business at Skillcraft. Accordingly, management has consolidated and streamlined the operations of the organization's daytime (first) shifts. Additionally, the Company was able to obtain certain concessions from its unions to adjust other production shifts to minimize the amount of overtime costs incurred without affecting workloads during peak production periods. Management also scaled back and eliminated certain professional services, which were utilized during the integration of the personnel of IMTECH, Skillcraft and RDS immediately following the acquisitions. The Company undertook the termination of employees who served similar roles in the respective companies to reflect the downturn in work. The Company also eliminated or scaled back certain other public relation, professional and technology related agreements. The Company's Chairman and CEO, Matti Kon, and its President and CFO, Joseph Gitto, reduced their compensation arrangements by 25%, or $50,000 each per annum. Members of the Company's senior management agreed to concessions of 10% of their annual compensation. In addition, the Company suspended interest payments to certain investor groups. The Company's management believes that it is improbable to maintain all of these concessions for an extended period. The Company is exploring various financial alternatives, including a capital infusion, and has retained a financial advisor to assist the Company in evaluating financial strategies or alternatives. Management believes that because of the severe downturn in its business, directly attributable to the Skillcraft decline in business, the Company will not be able to attain profitability with two operating locations and believes that the improvement in its gross profits achieved in fiscal 1999 will begin to deteriorate as the company has to support increasing idle capacity. If the Company is unable to secure the financing required to consolidate its operations and curtail its losses and protect its profit margins, the Company may be forced to find an acquirer for the business or pursue other remedies to protect its assets. During the year ended March 31, 1999, MTB Bank, the Company's main lender, amended its credit arrangement with IMTECH to include the eligible trade accounts receivable of Skillcraft and increased the borrowing base of the credit line to $2,500,000, subject to a $750,000 reserve against eligible receivables. 7 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------ The following is a summary of the significant accounting policies that have been applied on a consistent basis in the preparation of the accompanying financial statements: 1. REVENUE RECOGNITION ------------------- Revenue is recorded when services are performed or at the time the products are delivered to customers. 2. RESTRICTED CASH --------------- At June 30, 1999 the Company had $458,530 in a Certificate of Deposit account ("CD") with a bank. The CD is maintained as collateral for the Company's obligation under a lease for production equipment. According to the terms of the CD, the funds may be drawn by the Company in accordance with the following schedule: ---------------------------------------------- Available Maturity Date for Release ---------------------------------------------- September 30, 1999 $ 225,511 September 30, 2000 233,019 ------------ Total cash - restricted 458,530 Less: Current portion 225,511 ------------ Cash - restricted - long-term $ 233,019 =========== ---------------------------------------------- 3. INVENTORY --------- Inventory consists primarily of paper, toner and inks, and is stated at the lower of cost or market(cost being determined on a first in, first out basis). 4. PROPERTY AND EQUIPMENT ---------------------- Expenditures for capital assets are recorded at cost. Depreciation of capital assets is provided to relate the cost of the depreciable assets to operations over their estimated useful service lives. In that connection, production equipment, computer hardware and software and furniture and fixtures are depreciated by the straight-line method over estimated useful lives ranging from five to seven years. Leasehold improvements are amortized by the straight-line method over the lesser of the lease term or estimated useful lives of the improvements. Major additions and betterments are capitalized and repairs and maintenance are charged to operations in the period incurred. At the time of disposal of any property and equipment, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized in the current period's operations. 8 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ------------------------------------------------------ 5. DEFERRED FINANCING COSTS ------------------------ Costs incurred to secure financing arrangements are included in deposits and other assets on the balance sheet. The costs are amortized over the life of the related credit facilities, which range from 11 to 110 months. 6. CONCENTRATION OF CREDIT RISK ---------------------------- Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company maintains cash balances at various banks and places its temporary cash investments in a money market fund with one financial institution. Accounts at the banks and financial institution are insured by the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC) up to $100,000 and $500,000, respectively. The Company performs ongoing credit evaluations of its customers and records reserves for potentially uncollectible accounts receivable which are deemed credit risks as determined by management. The Company generally does not require collateral for its accounts receivable. Accounts receivable consist of geographically and industry dispersed customers. 7. USE OF ESTIMATES ---------------- The preparation of the 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 period. Actual results could differ from those estimates. 8. LONG-LIVED ASSETS ----------------- The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. 9. GOODWILL -------- In connection with the acquisition of RDS, IMTECH recorded goodwill resulting from the excess of the purchase price over the fair value of net assets acquired. Goodwill is amortized on a straight-line basis over an estimated life of fifteen (15) years. 10. RECLASSIFICATION ---------------- Certain prior year amounts have been reclassified to conform to the fiscal 2000 presentation. 9 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ INVESTMENT IN INSCI CORP. - ------------------------- The Company at June 30, 1999 held a 1% ownership interest (investment) in INSCI, its former majority-owned subsidiary. The investment is accounted for under the "Securities Available For Sale" method as promulgated by SFAS No. 115. As a result, the investment is carried at fair market value. During the first quarter of fiscal 2000, the Company sold or exchanged in settlement of debt, 334,495 shares of INSCI stock (details of exchange fully described on page 11 under "12% Mandatory Convertible Secured Promissory Notes"). ------------------------------------ ------------- ------------ JUNE 30, MARCH 31, 1999 1999 ------------------------------------ ------------- ------------ Number of shares held 96,535 436,032 Cost basis of shares held $ 1,151 $ 5,201 Market value of shares, $418,810 $1,117,332 Unrealized gain $417,659 $1,112,131 ------------------------------------ ------------- ---------- At June 30, 1999, all of the shares of INSCI Corp. stock referred to above were pledged as collateral securing the Company's outstanding obligations under its credit arrangement with MTB Bank (66,535 shares) and other pledge obligations (30,000 shares), respectively. LOAN PAYABLE - BANK - ------------------- The Company maintains a secured credit arrangement with MTB Bank (the "Bank") which expires in October 1999. Under the provisions of the credit arrangement, the Company can borrow up to 80% of the eligible accounts receivable of IMTECH and Skillcraft and 35% of the eligible paper inventory of IMTECH (up to a maximum of $50,000), both of which in the aggregate cannot exceed a total of $2,500,000 (including $250,000 in outstanding letters of credit) at any one time. The Bank, as part of the increase in the credit agreement has made available under the borrowing formula 80% of eligible accounts receivable less a reserve of $750,000. All outstanding obligations under the arrangement bear interest at the bank's prime rate (8% at June 30, 1999) plus two percent (2%). At June 30, 1999, the Company was indebted to the Bank for outstanding obligations totaling approximately $2,126,000. In conjunction with the execution of the credit arrangement, the Company entered into a security agreement, which grants the Bank a security interest in substantially all of the assets of IMTECH and Skillcraft as collateral for all indebtedness outstanding under the arrangement. IMTECH, Skillcraft and RDS have executed cross-corporate guarantees. IMTECH has issued an aggregate of 50,000 warrants to the Bank which entitles it to purchase 50,000 shares of IMTECH Class A common stock at prices ranging from $1.00 to $1.81 per share, exercisable until November 2000.The credit arrangement contains a minimum tangible net worth ("net worth") covenant of $2,000,000 as of March 31, 1999 for a period of six months until September 30, 1999, which has been waived. 10 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ 12% MANDATORY CONVERTIBLE SECURED PROMISSORY NOTES - -------------------------------------------------- In connection with a February 1997 private placement, IMTECH issued convertible secured promissory notes in exchange for proceeds of $1,000,000. The notes bear interest at a per annum rate of 12%, which at the option of management, can either be paid in cash or in the Company's Class A common stock. The notes were secured initially by a pledge of 500,000 shares of INSCI Corp. stock. The Company had the right, under the pledge agreement, to receive the return of 100,000 shares of the pledged stock in the event it became required in order for IMTECH to obtain a credit line or enter into a lease/purchase agreement for equipment. In November 1997, the Company exercised that right and received the return of 66,535 shares of INSCI Corp. stock, which were used to pledge as collateral for the outstanding obligations under the credit arrangement with MTB Bank. In addition, in November 1997, the Company received the return of 33,968 shares of INSCI Corp. stock which were sold pursuant to Rule 144, and the proceeds were used to purchase equipment. In addition, the Company pledged 30,000 shares to a financial advisor to the Company. At March 31, 1999, 369,497 shares of INSCI Corp. stock remained as collateral which were pledged against the notes. In May 1999, the Company was notified by one of the convertible note holders that pursuant to the default provisions of the note agreement, because of the Company's continued delisting from the NASDAQSM SmallCap Stock Market, the Company was in default on its notes. As such, the noteholders accelerated their right to repayment of principal and interest by forcing the liquidation of the underlying shares of INSCI stock pledged as collateral. The Company sold 156,498 shares of the INSCI stock and exchanged an additional 177,997 shares of INSCI stock in full satisfaction of the principal ($600,000) and accrued interest ($51,000). In addition, the Company issued 1,218,045 shares of IMTECH Class A common stock to satisfy the remaining accrued interest of $162,000. 12% SUBORDINATED MANDATORY CONVERTIBLE DEBENTURES - ------------------------------------------------- To finance part of the acquisition funding for the purchase of Skillcraft, on July 24, 1998, IMTECH issued 12% subordinated convertible debentures (the "Debentures") in the aggregate amount of $4,000,000. The Debentures are convertible into shares of IMTECH Class A Common Stock and bear interest at a rate of 12% per annum in addition to providing debenture holders 10% of consolidated profits for a period of five (5) years commencing from the date of closing of the acquisition. The Debentures have an automatic mandatory conversion at the expiration of the 5-year term. RELATED PARTY TRANSACTIONS - -------------------------- IMTECH is party to a consulting agreement with Blitz Systems, Inc. ("Blitz"), a company owned 100% by the Chief Executive Officer of the Company, which expires in October 1999. Blitz is a computer systems consulting firm specializing in developing total business solutions for business management systems. Blitz's responsibilities under the contract are to reengineer, reorganize and run the day-to-day operations of Skilltech's data processing department and provide custom programming (WOTS etc.) and support for these programs at a cost of $59,000 per month. More specifically, Blitz provides extensive technical support for many of the organization's clients on-site and is responsible for analyzing, designing and developing customized database systems as required by management. 11 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ COMMITMENTS AND CONTINGENCIES - ----------------------------- EMPLOYEE BENEFIT PLANS - ---------------------- The Company sponsors a 401(k) plan covering all eligible employees (personnel with twelve consecutive months of service). Employer contributions to the plan are based on the discretion of management. Employees can elect to contribute up to a maximum of 15% of their salaries to the plan. Since its inception, IMTECH has not made any contributions to the plan, matching or otherwise. EMPLOYMENT AGREEMENTS - --------------------- In December 1996, the Board of Directors appointed Matti Kon as the Company's Chief Executive Officer. Consequently, the Company entered into an employment agreement subsequently amended which provides for a base annual salary of $250,000 plus an incentive bonus equal to 20% of operating income, up to a maximum of $500,000. The agreement had an initial one-year term and awarded Mr. Kon 500,000 options to purchase 500,000 shares of the Company's Class A Common Stock at an exercise price of $1.18 per share as a signing bonus. The options vested after one year of service and expire in December 1999. The agreement further provides that Mr. Kon has the right to devote his time and attention to his other business interests. In January 1998, the Board of Directors elected to renew Mr. Kon's contract and extend his options for an additional two-year period through December 1999. Consequently, Mr. Kon was awarded an additional 500,000 options to purchase 500,000 shares of the Company's Class A Common stock at $1.18 per share. The additional 500,000 options vested after the completion of Mr. Kon's second year of service and are exercisable until December 31, 1999. The Company has entered into an employment agreement with Mr. Joseph Gitto, its President and Chief Financial Officer. The agreement, as amended in July 1997, expires in December 1999 and provides for an annual base salary of $180,000. In addition, Mr. Gitto is entitled to an incentive bonus equal to 15% of operating income, up to a maximum of $150,000. At the time of the original agreement, Mr. Gitto was awarded 600,000 options to purchase 600,000 shares of the Company's Class A Common stock at exercise prices ranging from $1.25 to $1.88 per share. The options vest over a three-year period and expire in April 2000. As noted previously, Messrs. Kon and Gitto have agreed to reductions in their compensation of $50,000 respectively effective March 1999. OTHER - ----- In November 1995, IMTECH entered into a three year service agreement with Corporate Relations Group, Inc. ("CRG"), whereby CRG was to provide IMTECH with promotional and brokerage communication services. As consideration for its services, IMTECH was to pay CRG the sum of $300,000 or 171,000 shares of its free trading Class A Common Stock plus 500,000 options to purchase 500,000 shares of its Class A Common Stock at exercise prices ranging from $1.75 to $3.06 per share for a period of five years. IMTECH elected to pay CRG by issuing 171,000 shares of Class A Common Stock. Initially, IMTECH delivered to CRG 92,250 shares of the freely traded Class A Common Stock, which it borrowed from a number of shareholders. IMTECH repaid the shareholders by making cash interest payments at a rate of 10% per annum, in addition to making cash payments for the borrowed shares. The balance of the 78,750 shares was not remitted to CRG. CRG has asserted a claim for the balance of the shares. IMTECH has disputed the claim based upon the position that CRG did not perform under the provisions of the service contract. 12 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ COMMITMENTS AND CONTINGENCIES (CONTINUED) - ----------------------------------------- OTHER (CONTINUED) - ----------------- While the Company has not commenced legal action to recover the shares of stock and/or monetary and/or punitive damages from CRG, the Company is considering the cost of commencing an action as related to the chances of a monetary recovery from CRG. The Company agreed under various agreements with convertible security holders to file a registration statement on Form S-3 for their underlying shares of Class A Common Stock. Since the Company withdrew its registration statement (and amendments thereto), it is possible the holders of these securities may assert a claim against the Company based on the Company's failure to comply with the registration requirements. The Company is currently negotiating with its landlord to reduce its rent covering the South Printing Facility. The landlord has claimed certain defaults by the Company in its lease. In addition, the landlord has requested that the Company post a letter of credit in the amount of $100,000 with a financial institution for additional rent security. There are no assurances that the Company will be successful in its attempts to re-negotiate its lease and reduce its monthly rent obligation, or resolve the claim of additional rent by the landlord. The Company was advised by the NASDAQ Stock Market, Inc. ("NASDAQSM") that it no longer meets the current NASDAQSM listing requirements for continued listing on the NASDAQSM SmallCap Stock Market. Continued inclusion on the NASDAQSM SmallCap Stock Market generally requires that (i) the Company maintains at least $2,000,000 in tangible net assets; or (ii) $35,000,000 in market capitalization; or (iii) net income of at least $500,000 in two of the three prior years. Additionally, the Company is required to maintain at least 500,000 shares in the public float valued at $1,000,000 or more, a minimum common stock bid price of $1.00, at least two active market makers, and at least 300 shareholders of its stock. On the close of business, January 14, 1999, the Company received notification from NASDAQSM that it was not in compliance with the tangible net assets and dollar price listing rules and therefore decided to relocate the Company's securities from its SmallCap stock market to the over-the-counter market on the NASD's "Electronic Bulletin Board". As a result, the liquidity of the Company's securities could be impaired, not only in the number of securities which could be bought and sold, but also through delays in the timing of transactions, reduction in security analysis and the news media's coverage of the Company and lower prices for the Company's securities than might otherwise be attained. Harold Russell ("Russell") has filed an action in the New York State Supreme Court against the Company, claiming the aggregate sum of $3,750,000, in addition to interest and attorney's fees, alleging that the Company has made no payments pursuant to the installment promissory note issued to Russell as a result of the purchase of Skillcraft by IMTECH. The Company is contesting the action filed by Russell as the promissory note issued by the Company to Russell is being held in escrow and subject to escrow agreement. Additionally, the Company has denied that he is entitled to the sum claimed by him based upon the claim of fraud and misrepresentation with respect to the purchase of his stock ownership in Skillcraft. Additionally, Russell has served a notice of intent to arbitrate, before the American Arbitration Association, asserting a claim that the Company and Halcon Acquisition Corp. ("Halcon"), a wholly owned subsidiary of the Company, violated his employment agreement by terminating his employment. The Company's subsidiary, Halcon, terminated his employment agreement based upon allegations of fraud in the inducement by Russell in entering into the employment agreement which was related to the acquisition of the Skillcraft shares of stock from Mr. Russell. 13 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ COMMITMENTS AND CONTINGENCIES (CONTINUED) - ----------------------------------------- OTHER (CONTINUED) - ----------------- The Company filed an action in the New York State Supreme Court (New York County) against Russell. The action is for damages sustained by the Company as a result of alleged fraud and intentional misrepresentation with respect to the purchase of stock from Mr. Russell on July 24, 1998, wherein the Company purchased all of the issued and outstanding common stock of Skillcraft. The Company has claimed compensatory and punitive damages in the sum of $12,500,000 and $10,000,000, respectively. An additional claim for recission and damages has also been asserted against Russell. Russell is contesting the Company claims and denies the allegations asserted by the Company. Russell has made a motion to dismiss the Company's complaint and the Company is awaiting the Court's Decision. Harold Russell's Motion for Summary of Judgement in the New York State Supreme Court action against the Company for the sum of $3,750,000 has been denied by the Court and the action dismissed. However, the Court granted Mr. Russell Judgment in the sum of $234,000 on a separate Promissory Note issued by the Company for monies advanced by Russell. The Company is considering an appeal of the Judgement. Additionally, the State Court lifted the stay of arbitration, which enables Mr. Russell to proceed with his arbitration claim filed with the American Arbitration Association, wherein he claims that Halcon Acquisition Corp. and the Company are responsible for breach of his Employment Agreement based, upon alleged wrongful termination. The Company and Halcon are contesting Mr. Russell's claims with respect to the termination of his employment and the Company anticipates that it will proceed to the arbitration hearing with Mr. Russell. The New York State Supreme Court granted Mr. Russell's motion to Dismiss the Company's Complaint based upon claims of fraud and misrepresentation against Mr. Russell with respect to the July 24, 1998 Stock Purchase Agreement. The Company had claimed compensatory and punitive damages, as well as a claim for rescission. The Company is appealing the Court's decision with respect to the dismissal of the action. In May of 1999, a Company known as Amplicon, Inc. ("Amplicon") commenced an action against the Company in the United States District Court for the Southern District of New York alleging violation of an equipment lease by and between Amplicon and the Company. The Company leased a Heidelberg Four Color Quick Master Printing Press and related equipment by executing a lease/purchase agreement with Amplicon. The Amplicon claim is that the Company is obligated to pay the sum of $345,405, the balance of the payments due under the lease and, in addition, is required to agree with Amplicon on the termination of the lease as to the purchase price for the equipment. The Company secured all payments under the lease by posting a standby letter of credit in favor of Amplicon guaranteeing that all payments under the lease were to be made. Additionally, Amplicon commenced an action to obtain an order of seizure of the equipment claiming that Amplicon is entitled to possession of the leased equipment, and that in the event of default in payments, Amplicon can proceed to recover possession of the equipment. The Company is contesting the matter as the Company has asserted its answer to the complaint in that the lease is subject to an arbitration provision and, that representatives of Amplicon misrepresented to the Company and committed acts of fraud by their misrepresentation in having the Company execute a lease agreement which was inconsistent with the written lease proposal provided by Amplicon to the Company prior to the execution of the lease purchase agreement. The action is currently pending before the Court. The Company completed a private placement offering under Regulation D on July 24, 1998 for the sum of $4,000,000. The offering involved the issuance of a 12% convertible debenture which provided for the right of the holder of the debenture, in addition to receiving interest payments, to receive 10% of the profits of the Skillcraft division of the Company. The term of the convertible 14 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ COMMITMENTS AND CONTINGENCIES (CONTINUED) - ----------------------------------------- OTHER (CONTINUED) - ----------------- debenture is for a period of five years with the right of the holder to convert the debenture into shares of Class A common stock of the Company, at any time during the term of the debenture. The right of conversion granted to the holder the right to convert the note into either 40% of the issued and outstanding Class A common stock for the conversion within the first year or up to 70% of the issued and outstanding Class A common stock thereafter. In April 1999, the holders of the promissory note declared the Company in default of nonpayment of monetary interest during the first year of the note, and it is the Company's position that based upon the terms and conditions of the promissory note, the principal ($4,000,000) of the note as per the terms of the note is payable in shares of Class A common stock of the Company. As of the current date, the holders of the notes have not taken any action with respect to their notice of default. The Company issued a promissory note to Harry Markovits, a former director of the Company. The balance due on the promissory note is approximately $133,000. Mr. Markovits passed away in April of 1998 and the note was transferred to his estate. The estate has asserted a claim for the sum of $133,000 plus interest due and that the Company has defaulted in payment of the note. Additionally, the agreement with Mr. Markovits required that the Company deliver to him 50,000 shares of the common stock of INSCI Corp., which is held in escrow. Mr. Markovits was further granted a subordinate UCC lien on the assets of the Company to secure the repayment of the promissory note. The lien granted to Mr. Markovits is a lien subordinated to the Company's principal lender, MTB Bank. In August 1999, the Landlord, at 480 Canal Street Premises (Trinity Church), commenced an action in the New York Civil Court to reclaim possession of the Canal Street Premises from KRL Litho, Inc. d/b/a Skillcraft, based upon non-payment of rent for the Premises. The Landlord and Tenant proceeding was settled with Trinity Church by entering into a Stipulation of Settlement, providing for a Judgment against Skillcraft for the sum of $113,725, in addition to the Judgment granting possession of the Premises to Trinity Church. Both the monetary Judgment and the Judgment of Possession of the Premises, as per the terms of the Stipulation, have been stayed pending payments being made to Trinity Church, pursuant to the terms of the Stipulation of Settlement. In the event of a default in payment which is uncured, Trinity Church may proceed with the money Judgment, crediting all payments made, and obtain possession of the Canal Street Premises. The Company has entered into a Settlement Agreement with Press Room Union Welfare Trust Fund, representing workers at the Canal Street Premises, wherein the Company agreed that it would make weekly payments against the $130,553 due to the Union. As part of the Settlement Agreement, the Company provided a Confession of Judgment for the sum due, less any amount paid by the Company. 15 The Company is dependent upon its financing arrangements with MTB Bank, its secured lender, in addition to GE Capital Corp., its secured equipment lender. In the event that either MTB Bank or GE Capital Corp. discontinues the credit accommodation with the Company, the Company may be unable to obtain other credit or lending facilities and may be compelled to discontinue the operation of its business. In the further event that the primary vendors that are supplying goods and services to the Company do not continue to do so by continuing the afford credit to the Company, the Company me be unable to find new sources of supply to enable the Company to continue its business. SUBSEQUENT EVENTS - ----------------- Robert Sachs, a principal shareholder of the Company, requested to be appointed to the Board of Directors of the Company. The Board resolved to appoint Mr. Sachs to the Board, and shortly after he agreed to serve on the Board, Mr. Sachs resigned from the Board. [THIS SPACE INTENTIONALLY LEFT BLANK] 16 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- COMPARISON OF RESULTS OF OPERATIONS - ----------------------------------- The following schedule sets forth the percentage relationship of significant items of the Company's results of operations to revenues: --------------------- FOR THE THREE MONTHS ENDED JUNE 30, --------------------- 1999 1998 --------------------- ------------------------------------------------------------- Revenues 100% 100% Cost of sales 83 62 ---------------------------------------------- ------ ------- Gross profit 17 38 Selling, general and administrative 38 36 ---------------------------------------------- ------ ------- Income (loss) from operations (21) 2 Other expenses: Interest expense, net 5 2 Gain from Sale of INSCI Corp. Stock (26) -- ---------------------------------------------- ------ ------- Net loss (1) -- Preferred stock dividends -- 2 ---------------------------------------------- ------ ------- Net loss applicable to common stockholders (1)% (2)% ============================================== ====== ======== 17 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- THREE MONTHS ENDED 6/30/99 AS COMPARED TO THE THREE MONTHS ENDED 6/30/98 - ------------------------------------------------------------------------ During the quarter ended June 30, 1999 (First Quarter Fiscal 2000), the Company generated consolidated revenues of approximately $4,530,000 compared to revenues of approximately $2,755,000 in the prior year period. The increase in revenues, $1,775,000 or 64% is attributable to the Company's acquisition of its wholly owned subsidiaries, Skillcraft and RDS, in the second quarter of fiscal 1999. IMTECH reported $1,920,000 or 42% of consolidated revenues, a decrease of $835,000 or 30% from revenues of $2,755,000 in the prior year period. Skillcraft reported revenues of $2,486,000 or 55% of consolidated revenues and RDS reported revenues of $124,000 or 3% of consolidated revenues. The decrease in revenues at the IMTECH facility is mostly attributable to workflow management decisions to produce larger print jobs at the Skillcraft facility. The Company's consolidated cost of sales were $3,742,00 or 83% of revenues for the quarter ended June 30, 1999; an increase of $2,045,000 or 120% from cost of sales of $1,697,000 or 62% in the quarter ended June 30, 1998. The increase of the consolidated cost of sales is attributed to the Company's acquisition of its wholly owned subsidiaries, Skillcraft and RDS, during the second quarter of fiscal 1999. The cost of sales of the acquired companies contributed $2,433,000 or 65% of the total cost. The net increase in consolidated cost of sales was offset by a decrease in cost of sales at IMTECH of $388,000 or 23% to cost of sales of $1,309,000 or 68% of sales for the quarter ended June 30, 1999 compared to cost of sales of $1,697,000 or 62% for the quarter ended June 30, 1998. In the quarter ended June 30, 1999, the Company reported consolidated gross profit of $788,000 or 17% compared to gross profit of $1,058,000 or 38% in the quarter ended June 30, 1998. For the quarter ended June 30, 1999, IMTECH reported gross profit of $611,000 or 32% of IMTECH sales, a decrease of $447,000 or 42% as compared to gross profit of $1,058,000 or 38% of IMTECH sales, in the quarter ended June 30, 1998. Skillcraft reported gross profits of $177,000 or 7% of Skillcraft revenues for the quarter ended June 30, 1999. The diminishing margins at Skillcraft are due to the deterioration of business acquired in the Skillcraft acquisition which was due to the loss of large commercial accounts and certain profitable financial clients. (See details in legal proceedings and liquidity analysis). Gross profits at RDS were $34,000 or 27% of RDS revenues. Consolidating operating expenses were $1,778,000 or 38% of consolidated revenues for the quarter ended June 30, 1999, an increase of $787,000 or 79% from operating expenses of $992,000 or 36% in the quarter ended June 30, 1998. Selling, General and Administrative expenses ("SG&A") for the quarter ended June 30, 1999 were $1,766,000 or 38% of consolidated revenues. SG&A expenses at the Company's acquired wholly owned subsidiaries contributed to $1,087,000 or 62% of consolidated SG&A expense. SG&A expenses at IMTECH were $678,000 or 38% of IMTECH sales for the quarter ended June 30, 1999, a decrease of $314,000 or 32% from SG&A expenses of $992,000 or 36% of IMTECH sales in the quarter ended June 30, 1998. During the quarter ended June 30,1999, the Company recorded amortization of goodwill of approximately $13,000 related to the acquisition of RDS during fiscal 1999. 18 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- THREE MONTHS ENDED 6/30/99 AS COMPARED TO THE THREE MONTHS ENDED 6/30/98 - ------------------------------------------------------------------------ (CONTINUED) - ----------- Consolidated interest expense for the quarter ended June 30, 1999 was approximately $260,000 or 6% of consolidated revenues, an increase of $200,000 from interest expense of $60,000 or 2% in the quarter ended June 30, 1998. The increase in interest expense is attributable to interest costs incurred as a result of increased borrowing under a credit arrangement with MTB Bank, as well as interest accrued on the Company's 12% subordinated convertible debentures issued in connection with the July 1998 acquisition of Skillcraft. During the quarter ended June 30, 1999, the Company sold or exchanged shares of INSCI stock to redeem the principal and interest on the Company's 12% convertible notes issued in February 1997. The Company recorded a gain of approximately $1,192,000 or 26% from the transaction. (See Convertible Securities footnote on page 11 for details). During the quarter ended June 30, 1999, the Company recorded a dividend of $10,200 on its 12% preferred stock. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The schedule below sets forth the Company's cash flow activities for the three months ended June 30, 1999 and 1998: -------------------------- FOR THE THREE MONTHS ENDED JUNE 30, -------------------------- 1999 1998 -------------------------- ---------------------------------------- Operating activities $(202,000) $ 178,000 Investing activities 516,000 (134,000) Financing activities (314,000) (44,000) ---------------------------------------- ----------------------- Decrease in cash and cash equivalents $ -- $ -- ======================================== ======================= 19 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) - ------------------------------------------- OPERATION ACTIVITIES - -------------------- During the three months ended June 30, 1999, the Company used cash of $202,000 in operations. This use of cash is attributable to losses incurred at the Company's wholly owned subsidiary Skillcraft. These uses of cash from operating losses were partially offset by an increase of payables and a decrease in inventory levels. INVESTING ACTIVITIES - -------------------- During the three months ended June 30, 1999, the Company realized net cash from investing activities of $516,000. These proceeds were primarily attributable to the sale of INSCI stock, which was used to satisfy the Company's obligation to its 12% convertible note holders which had declared the Company in default of the note agreements in May 1999. FINANCING ACTIVITIES - -------------------- During the three months ended June 30, 1999, the Company had a use of cash of $314,000 from financing activities. This use of cash is attributable to the repayment of approximately $599,000 in debt offset by increased bank borrowing of $280,000. CAPITAL RESOURCES - ----------------- As of June 30, 1999 the Company had a working capital deficiency of approximately $6,968,000. In November 1997, IMTECH entered into a secured credit arrangement with MTB Bank (the "Bank"). Under the credit arrangement, IMTECH is allowed to borrow up to 80% of eligible accounts receivable and 35% of eligible paper inventory (up to a maximum of $50,000), both of which in the aggregate cannot exceed a total of $1,500,000 (including $250,000 in outstanding letters of credit) at any one time. The agreement was subsequently amended in August 1998 to include the acquisition of Skillcraft. The amended agreement increased the company's borrowing capacity to $2,500,000. MTB, as part of the increase in the credit agreement has made available under the borrowing formula, 80% of eligible accounts receivable less a reserve of $750,000. IMTECH's management is constantly focused on investing its capital and labor in its production infrastructure by introducing cutting edge technology in conjunction with investments in state-of-the-art production equipment. These efforts are designed to streamline the IMTECH operations and enable it to service its clients economically and more efficiently, as well as to broaden the scope of services it offers. In addition, IMTECH has embarked on an extensive marketing campaign to create an awareness in the financial research community. However, the changing environment of the financial research printing industry requires that IMTECH take certain measures to ensure its ability to stay competitive and continue to build a business platform for future growth. Over the past year, IMTECH has been witness to the merger of many of its clients. These mergers have created a perception in the financial research printing industry that a larger printer is needed to meet the resulting printing demand. The creation of these larger combined entities, along with the 20 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) - ------------------------------------------- emergence of the presence of European banks in the U.S. brokerage industry, has created a need to establish a global presence to remain competitive. In response to these evolving market conditions, on July 24, 1998, IMTECH acquired all of the issued and outstanding common stock of KRL Litho, Inc., d/b/a The Skillcraft Group ("Skillcraft") for a price of approximately $8,772,000, which consisted of a purchase price of $9,000,000 less working capital adjustments of $228,000. Skillcraft provides graphic communications services including financial research report printing, commercial printing, graphics arts design and various fulfillment services to financial and commercial organizations located primarily in the New York Metropolitan area. In addition, on November 13, 1998, IMTECH acquired all of the issued and outstanding common stock of RDS Research Distribution Services, Inc. ("RDS") for a purchase price of $1,060,000. RDS is a New York based provider of intelligent fulfillment and distribution services to the research report production industry. The acquisitions of both Skillcraft and RDS provide a business platform capable of protecting IMTECH against declines of market share in the printing industry, and establishes a basis for continued future growth. IMTECH and its two wholly owned subsidiaries, Skillcraft and RDS (collectively known as the "Company"), operate as separate divisions doing business as Skilltech Global Graphics and Communications, "SkillTech". By creating a new organization that can provide complete financial research and commercial printing services, the Company believed it would be more competitive in its existing markets and would expand its production capabilities to create new products and market opportunities. In addition, Skillcraft's affiliation with a London based printer would assist the Company in establishing a global presence. IMTECH paid approximately $4,772,000 at the Skillcraft closing and issued promissory notes to its sellers in the aggregate amount of $4,000,000 payable in forty (40) equal monthly installments of $100,000, commencing in November 1998. The funds for the $4,772,000 down payment were raised through a private placement completed by IMTECH whereby it issued 12% subordinated convertible debentures for the aggregate amount of $4,000,000, and executing a secured promissory note for proceeds of $1,300,000 borrowed from General Electric Capital Corporation ("GE"). For the net assets of RDS, IMTECH paid $36,000 of the required $60,000 at closing and issued a promissory note to the seller of RDS in the amount of $1,000,000, payable in forty (40) equal monthly installments of $25,000 scheduled to commence in December 1998. The Company as of June 30,1999 has not remitted the remaining $24,000 due at closing and has not made any payments toward its note obligation on the RDS purchase. Excess funds raised over the minimum down payments required at the closing of the acquisitions were used for the immediate working capital requirements of the combined organization. The Company is continuing to identify and pursue additional potential acquisition candidates to respond to the changing environment of the financial research printing industry. Industry mergers have created a perception in the financial research printing industry that larger printers are needed to meet the resulting printing demands. The creation of the combined larger entities coupled with the price-cutting by competitors to garner more market share has contributed toward IMTECH's past operating difficulties. 21 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATIOn AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) - ------------------------------------------- In January 1999, management undertook certain measures to address losses incurred from the deterioration of business at the Skillcraft facility as a result of the alleged fraud and misrepresentation by Russell in the conveyance of Skillcraft. Despite these operating difficulties the Company tried to begin leveraging the strengths of the combined companies. Accordingly, management has consolidated and streamlined the operations of the organization's daytime (first) shifts. Additionally, the Company was able to obtain certain concessions from its unions to adjust other production shifts to minimize the amount of overtime costs incurred without affecting workloads during peak production periods. Management has also scaled back and eliminated certain professional consulting services, which were utilized during the integration of the personnel of IMTECH, Skillcraft and RDS immediately following the acquisitions. In addition, the Company undertook the termination of employees who served similar roles in the respective companies to reflect the severe decline in sales. The Company also eliminated or scaled back certain other public relation, professional and technology related agreements. The Company's Chairman and CEO, Matti Kon, and its President and CFO, Joseph Gitto, reduced their compensation arrangements by $50,000 each per annum. Members of the Company's senior management agreed to concessions of 10% of their annual compensation. The Company has suspended interest payments to certain investor groups. The Company's management believes that it is improbable to maintain all of these concessions for an extended period. The Company is exploring various financial alternatives, including a capital infusion and has retained a financial advisor to assist the Company in evaluating financial strategies or alternatives. Management believes that due to the severe downturn in its business, directly attributable to the allegations against Mr. Russell, the Company will not be able to attain profitability with two operating locations and believes that the improvement in its gross profits achieved in fiscal 1999 will begin to deteriorate as the Company has to support increasing idle capacity. If the Company is unable to secure the financing required to consolidate its operations and curtail its losses and protect its profit margins, the Company may be forced to find an acquirer for the business or pursue other remedies. NEW ACCOUNTING STANDARDS - ------------------------ During the fiscal year ended March 31, 1999, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes new standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. INFLATION - --------- The Company has not experienced significant increases in the prices of materials or in the payment of operating expenses as a result of inflation. Although inflation has not been a significant factor to date, there can be no assurances that it will not be in the future. 22 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- YEAR 2000 COMPUTER SOFTWARE CONVERSION - -------------------------------------- The Company relies on numerous computer programs in its day- to- day business. Older computer programs use only two digits to identify a year in its date field. As a result, when the Company has to identify the year 2000, the computer will think it means the year 1900 and the operation attempting to be performed may fail or crash resulting in the potential interference in the operations of the Company's business. The Company has implemented procedures to safeguard against the Year 2000 conversion problem. The cost of the implementation of the Year 2000 safeguards was not material to the Company as a whole. In addition, the Company has had communications with all of its major customers and suppliers to determine the extent to which the Company's interface systems are vulnerable to any failure by third parties to upgrade their own software. The Company believes that its large customers and suppliers are addressing the issues and will timely adjust their systems. However, if such modifications are not made by its vendors or customers, or are not completed in a timely manner, the Company's operations could adversely be affected. FORWARD LOOKING INFORMATION - --------------------------- This Form 10-Q report contains "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's expectations, estimates, projections and assumptions. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," and variations of such words and similar expressions are intended to identify such forward looking statements which include, but are not limited to, projections of revenues, earnings and cash flows. These forward looking statements are subject to risks and uncertainties which could cause the Company's actual results or performance to differ materially from those expressed or implied in such statements. These risks and uncertainties include, but are not limited to, the following: the Company's successful execution of internal performance plans; performance issues with key suppliers; subcontractors and business partners; legal proceedings; product demand and market acceptance risks; the effect of economic conditions; the impact of competitive products and pricing; product development; commercialization and technological difficulties; and capacity and supply constraints or difficulties. 23 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ PART II OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 1. LEGAL PROCEEDINGS - -------------------------------------------------------------------------------- In November 1995, IMTECH entered into a three year service agreement with Corporate Relations Group, Inc. ("CRG"), whereby CRG was to provide IMTECH with promotional and brokerage communication services. As consideration for its services, IMTECH was to pay CRG the sum of $300,000 or 171,000 shares of its free trading Class A Common Stock plus 500,000 options to purchase 500,000 shares of its Class A Common Stock at exercise prices ranging from $1.75 to $3.06 per share for a period of five years. IMTECH elected to pay CRG by issuing 171,000 shares of Class A Common Stock. Initially, IMTECH delivered to CRG 92,250 shares of the freely traded Class A Common Stock, which it borrowed from a number of shareholders. IMTECH repaid the shareholders by making cash interest payments at a rate of 10% per annum, in addition to making cash payments for the borrowed shares. The balance of the 78,750 shares was not remitted to CRG. CRG has asserted a claim for the balance of the shares. IMTECH has disputed the claim based upon the position that CRG did not perform under the provisions of the service contract. While the Company has not commenced legal action to recover the shares of stock and/or monetary and/or punitive damages from CRG, the Company is considering the cost of commencing an action as related to the chances of a monetary recovery from CRG as it understands that CRG has been the subject of a regulatory inquiry concerning the conduct of its business. The Company agreed under various agreements with convertible security holders to file a registration statement on Form S-3 for their underlying shares of Class A Common Stock. Since the Company withdrew its registration statement (and amendments thereto), it is possible the holders of these securities may assert a claim against the Company based on the Company's failure to comply with the registration requirements. Harold Russell ("Russell") has filed an action in the New York State Supreme Court against the Company, claiming the aggregate sum of $3,750,000, in addition to interest and attorney's fees, alleging that the Company has made no payments pursuant to the installment promissory note issued to Russell as a result of the purchase of Skillcraft by IMTECH. The Company is contesting the action filed by Russell as the promissory note issued by the Company to Russell is being held in escrow and subject to escrow agreement. Additionally, the Company has denied that he is entitled to the sum claimed by him based upon the claim of fraud and misrepresentation with respect to the purchase of his stock ownership in Skillcraft. Russell has served a notice of intent to arbitrate before the American Arbitration Association, asserting a claim that the Company and Halcon Acquisition Corp., a wholly owned subsidiary of the Company, violated his employment agreement by terminating his employment. The Company's subsidiary, Halcon, terminated his employment agreement based upon allegations of fraud in the inducement by Russell in entering into the employment agreement which was related to the acquisition of the Skillcraft shares of stock from Mr. Russell. The Company filed an action in the New York State Supreme Court (New York County) against Russell. The action is for damages sustained by the Company as a result of alleged fraud and intentional misrepresentation with respect to the purchase of stock from Mr. Russell on July 24, 1998, wherein the Company purchased all of the issued and outstanding common stock of Skillcraft. The Company has claimed compensatory and punitive damages in the sum of $12,500,000 and $10,000,000, respectively. An additional 24 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 1. LEGAL PROCEEDINGS (CONTINUED) - -------------------------------------------------------------------------------- claim for rescission and damages has also been asserted against Russell. Russell is contesting the Company claims and denies the allegations asserted by the Company. Harold Russell's Motion for Summary of Judgement in the New York State Supreme Court action against the Company for the sum of $3,750,000 has been denied by the Court and the action dismissed. However, the Court granted Mr. Russell Judgment in the sum of $234,000 on a separate Promissory Note issued by the Company for monies advanced by Russell. The Company is considering an appeal of the Judgement. Additionally, the State Court lifted the stay of arbitration, which enables Mr. Russell to proceed with his arbitration claim filed with the American Arbitration Association, wherein he claims that Halcon Acquisition Corp. and the Company are responsible for breach of his Employment Agreement based upon alleged wrongful termination. The Company and Halcon are contesting Mr. Russell's claims with respect to the termination of his employment and the Company anticipates that it will proceed to the arbitration hearing with Mr. Russell. The New York State Supreme Court granted Mr. Russell's motion to Dismiss the Company's Complaint based upon claims of fraud and misrepresentation against Mr. Russell with respect to the July 24, 1998 Stock Purchase Agreement. The Company had claimed compensatory and punitive damages, as well as a claim for rescission. The Company is appealing the Court's decision with respect to the dismissal of the action. On May of 1999, a Company known as Amplicon, Inc. ("Amplicon") commenced an action against the Company in the United States District Court for the Southern District of New York alleging violation of an equipment lease by and between Amplicon and the Company. The Company leased a Heidelberg Four Color Quick Master Printing Press and related equipment by executing a lease/purchase agreement with Amplicon. The Amplicon claim is that the Company is obligated to pay the sum of $345,405, the balance of the payments due under the lease and, in addition, is required to agree with Amplicon on the termination of the lease as to the purchase price for the equipment. The Company secured all payments under the lease by posting a standby letter of credit in favor of Amplicon guaranteeing that all payments under the lease were to be made. Additionally, Amplicon commenced an action to obtain an order of seizure of the equipment claiming that Amplicon is entitled to possession of the leased equipment, and that in the event of default in payments, Amplicon can proceed to recover possession of the equipment. The Company is contesting the matter as the Company has asserted its answer to the complaint in that the lease is subject to an arbitration provision and, in addition, that representatives of Amplicon misrepresented to the Company and committed acts of fraud by their misrepresentation in having the Company execute a lease agreement which was inconsistent with the written lease proposal provided by Amplicon to the Company prior to the execution of the lease purchase agreement. The action is currently pending before the Court. The Company completed a private placement offering under Regulation D on July 24, 1998 for the sum of $4,000,000. The offering involved the issuance of an 12% convertible debenture, which provided for the right of the holder of the debenture, in addition to receiving interest payments, to also receive 10% of the profits of the Company. The term of the convertible debenture is for a period of five years with the right of the holder to convert the debenture into shares of Class A common stock of the Company, at any time during the term of the debenture. The right of conversion granted to the holder the right to convert the note into either 40% of the issued and outstanding Class A common stock for the conversion within the first year or up to 70% of the issued and outstanding Class A common stock thereafter. In April, 1999, the holders of the 25 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- ITEM 1. LEGAL PROCEEDINGS (CONTINUED) - -------------------------------------------------------------------------------- promissory note declared the Company in default of nonpayment of monetary interest during the first year of the note, and it is the Company's position that based upon the terms and conditions of the promissory note, the principal ($4,000,000) of the note as per the terms of the note is payable in shares of Class A common stock of the Company. As of the current date, the holders of the notes have not taken any action with respect to their notice of default. The Company issued a promissory note to Harry Markovits, a former director of the Company. The balance due on the promissory note is approximately $133,000. Mr. Markovits passed away in April of 1998 and the note was transferred to his estate. The estate has asserted a claim for the sum of $133,000 plus interest due and that the Company has defaulted in payment of the note. Additionally, the agreement with Mr. Markovits required that the Company deliver to him 50,000 shares of the common stock of a Company known as INSCI Corp.,which is currently held in escrow. Mr. Markovits was further granted a subordinate UCC lien on the assets of the Company to secure the repayment of the promissory note. The lien granted to Mr. Markovits is a lien subordinated to the Company's principal lender, MTB Bank. In August 1999, the Landlord, at 480 Canal Street Premises (Trinity Church), commenced an action in the New York Civil Court to reclaim possession of the Canal Street Premises from KRL Litho, Inc. d/b/a Skillcraft, based upon non-payment of rent for the Premises. The Landlord and Tenant proceeding was settled with Trinity Church by entering into a Stipulation of Settlement, providing for a Judgment against Skillcraft for the sum of $113,725, in addition to the Judgment granting possession of the Premises to Trinity Church. Both the monetary Judgment and the Judgment of Possession of the Premises, as per the terms of the Stipulation, have been stayed pending payments being made to Trinity Church, pursuant to the terms of the Stipulation of Settlement. In the event of a default in payment which is uncured, Trinity Church may proceed with the money Judgment, crediting all payments made, and obtain possession of the Canal Street Premises. The Company has entered into a Settlement Agreement with Press Room Union Welfare Trust Fund, representing workers at the Canal Street Premises, wherein the Company agreed that it would make weekly payments against the $130,553 due to the Union. As part of the Settlement Agreement, the Company provided a Confession of Judgment for the sum due, less any amount paid by the Company. - -------------------------------------------------------------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------------- [a] EXHIBITS -------- 1) Financial Data Schedule as of and for the three months ended June 30, 1999. [b] REPORTS ON FORM 8-K During the period between April 1, 1999 and August 14, 1999, the Company did not file any 8K reports with the Commission. 26 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION By:_____________________________________ Joseph A. Gitto Jr., President and Chief Financial Officer DATED: NEW YORK, NEW YORK AUGUST 14, 1999 27 IMTECH ================================================================================ INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 ================================================================================ SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION BY: /S/ JOSEPH A. GITTO, JR. ----------------------------- JOSEPH A. GITTO JR., PRESIDENT AND CHIEF FINANCIAL OFFICER DATED: NEW YORK, NEW YORK AUGUST 14, 1999 28 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS MAR-31-1999 APR-04-1999 JUN-30-1999 0 0 3,761,354 220,711 360,929 4,245,451 9,317,001 5,121,771 10,078,759 11,209,011 0 35,256,747 0 463,673 (44,050,395) 10,078,759 4,530,429 4,530,429 3,742,061 1,778,143 (932,669) 138,421 0 (57,104) 0 (57,104) 0 0 0 (57,104) (0.00) (0.00)
-----END PRIVACY-ENHANCED MESSAGE-----