-----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, MPdo5JSWsZgAZYc/bao2h6pilrGlxBgm2c7Zz4XAFutEUvlH3V67qYU5VA+cyVcO XVL8sxUEUh+ye5gpUdAumA== 0001005477-96-000241.txt : 19960830 0001005477-96-000241.hdr.sgml : 19960830 ACCESSION NUMBER: 0001005477-96-000241 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION MANAGEMENT TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000824578 STANDARD INDUSTRIAL CLASSIFICATION: 8744 IRS NUMBER: 581722085 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16753 FILM NUMBER: 96614980 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 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-QSB ---------- Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended: June 30, 1996 Commission File No. 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 Identification No.) incorporation or organization) 130 Cedar Street, Fourth Floor, New York, New York 10006 (Address of principal executive offices) (Zip Code) (212) 306-6100 (Registrant's telephone number, including area code) --------------------- Indicate by checkmark 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|_| As of August 5, 1996, registrant had outstanding 4,979,773 shares of Class A Common Stock. Traditional Small Business Disclosure Format (check one) Yes |X| No|_| Information Management Technologies Corporation FORM 10-QSB FOR QUARTER ENDED JUNE 30, 1996 INDEX PART I - FINANCIAL INFORMATION Item 1. Financial Statements (a) Balance Sheets as of June 30, 1996 (Unaudited) and March 31, 1996. (b) Statements of Operations (Unaudited) for the three months ended June 30, 1996 and 1995. (c) Statements of Cash Flows (Unaudited) for the three months ended June 30, 1996 and 1995. (d) Notes to Financial Statements. Item 2. Management's Discussion and Analysis or plan of operation PART II - OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None filed with this report. (b) Reports on Form 8-K (1) Report on Form 8-K filed on April 11, 1996. (2) Report on Form 8-K filed on April 25, 1996. (3) Report on Form 8-K filed on May 15, 1996. (4) Report on Form 8-K/A filed on July 25, 1996. Information Management Technologies Corporation PART I. FINANCIAL INFORMATION Item 1. Financial Statements BALANCE SHEETS June 30, March 31, 1996 1996 ---------- ---------- SSETS (unaudited) CURRENT ASSETS Cash and cash equivalents $ -- $2,011,560 Accounts receivable, less allowance for doubtful accounts of $61,783 and $104,500 at June 30, 1996 and March 31, 1996, respectively 1,554,660 1,406,731 Inventory 448,056 303,133 Prepaid expenses and other 834,919 972,214 ---------- ---------- Total current assets 2,837,635 4,693,638 ---------- ---------- PROPERTY AND EQUIPMENT - AT COST Production equipment 5,389,034 5,102,268 Software 298,153 295,128 Furniture and fixtures 399,899 399,899 Leasehold improvements 483,356 461,089 Computer equipment 1,114,080 1,101,323 ---------- ---------- 7,684,522 7,359,707 Less accumulated depreciation and amortization 5,116,890 5,013,249 ---------- ---------- Property and equipment, net 2,567,632 2,346,458 ---------- ---------- OTHER ASSETS Deposits and other assets 474,639 347,636 Investment in INSCI Corp. 378,637 379,057 ---------- ---------- Total other assets 853,276 726,693 ---------- ---------- $6,258,543 7,766,789 ========== ========== The accompanying notes are an integral part of these statements. Information Management Technologies Corporation BALANCE SHEETS (continued)
June 30, March 31, 1996 1996 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT) (unaudited) CURRENT LIABILITIES Bank overdraft $ 195,035 $ 0 Bank credit facility -- $ 640,056 Current debt 240,545 431,975 Current maturities of long-term debt -- 497,328 Current maturities of long-term capital lease obligations 289,652 333,728 Accounts payable 1,179,303 1,455,015 Accrued salaries 63,225 156,007 Deferred revenue 128,430 129,090 Other accrued liabilities 779,863 1,457,798 ------------ ------------ Total current liabilities 2,876,053 5,100,997 ------------ ------------ LONG-TERM DEBT, less current maturities 1,639,379 2,793,329 ACCRUED RENT 368,494 368,494 CAPITAL LEASE OBLIGATIONS, less current maturities 590,507 362,279 ------------ ------------ Total long-term liabilities 2,598,380 3,524,102 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) 12% Preferred Stock - authorized 3,000,000 shares at $1.00 par value; 2,295,330 and 2,026,580 shares issued and outstanding at June 30, 1996 and March 31, 1996, respectively 2,295,330 2,026,580 Class A common stock authorized 100,000,000 shares of $.04 par value; 4,819,925 and 3,535,078 shares issued and outstanding at June 30, 1996 and March 31, 1996 respectively 192,797 141,403 Additional paid-in capital 29,880,392 28,658,530 Accumulated deficit (31,584,409) (31,684,823) ------------ ------------ Total stockholders' equity (deficit) 784,110 (858,310) ------------ ------------ $ 6,258,543 $ 7,766,789 ============ ============
The accompanying notes are an integral part of these statements. Information Management Technologies Corporation STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended June 30 ------------------------- 1996 1995 ----------- ----------- Sales $ 2,606,118 $ 3,439,760 Cost of sales 1,755,063 2,234,760 ----------- ----------- Gross profit 851,055 1,205,000 Selling, general and administrative expenses 678,200 1,226,741 ----------- ----------- Operating income [loss] 172,855 (21,741) Interest expense, net 97,521 142,489 ----------- ----------- Income (loss) from continuing operation before equity in net income (loss) of INSCI Corp. 75,334 (164,230) Equity in net income (loss) of INSCI Corp. 25,080 (1,654,971) ----------- ----------- Income (loss) from continuing operation 100,414 (1,819,201) Loss from discontinued operation 0 (20,874) ----------- ----------- Net income [loss] $ 100,414 $(1,840,075) =========== =========== Income (loss) per share continuing operations .03 (.65) =========== =========== Loss per share discontinued operations $ 0 (.01) =========== =========== Weighted average number of shares outstanding for each period 3,937,684 2,781,382 ----------- -----------
The accompanying notes are an integral part of these statements. Information Management Technologies Corporation STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended June 30, 1996 1995 ------------- -------- Cash flows from operating activities Net income (loss) $ 100,414 $(1,840,075) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 103,642 77,491 Amortization of loan fees 32,963 Accretion interest on current debt 38,750 Equity in net (income) loss of INSCI Corp. (25,080) 1,654,971 Provision for doubtful accounts (43,717) (5,814) Changes in operating assets and liabilities: Accounts receivable (104,214) 89,094 Inventory (144,910) 37,416 Prepaid expenses, deposits and other assets 10,281 25,843 Accounts payable and accrued liabilities (1,047,088) (223,778) ----------- ----------- Net cash (used in) provided by operating activities (1,150,672) (113,139) ----------- ----------- Cash flows from investing activities: Capital expenditures (96,588) (146,484) Repayment by INSCI Corp. 25,500 1,000,000 Net cash (used in) provided by investing activities (71,088) 853,516 ----------- ----------- Cash flows from financing activities: Repayment of revolving credit facility, net $ (640,056) $ (485,898) Financings from overdrafts 195,035 59,251 Payments of other debt (300,702) -- Payments of long-term debt -- (26,383) Payments on capital lease obligations (44,077) (135,904) Payment of stock issuance costs -- (151,443) ----------- ----------- Net cash used in financing activities (789,800) (740,377) ----------- ----------- Net increase (decrease) in cash (2,011,560) 0 Cash at beginning of year 2,011,560 0 ----------- ----------- Cash at end of period $ 0 $ 0 =========== ===========
Information Management Technologies Corporation NOTES TO FINANCIAL STATEMENTS June 30, 1996 ORGANIZATION Information Management Technologies Corporation (the "Company"), a Delaware corporation, was incorporated in 1986. The Company provides information facilities management services primarily to financial and other service industries which are characterized by substantial information processing, communications and document administration requirements. The Company's customer base consists primarily of major financial, manufacturing, legal, accounting and other medium to large service organizations which are principally located in New York City and the surrounding metropolitan area (New Jersey, Southeast Connecticut and Westchester County, New York). The Company, through a strategic alliance with a New York City based technology provider has begun to service clients in Pennsylvania, the midwest and Europe. As of June 30, 1996, the Company maintains a 38% ownership interest in INSCI Corp., a Massachusetts based developer of computer software. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended March 31, 1997. For further information, refer to the financial statements and footnotes therto included in the Company's annual report on Form 10-K for the year ended March 31, 1996. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: 1. Revenue Recognition Revenues from the Company's services are recognized as the services are performed or upon shipment. 2. Income (Loss) Per Share Income (loss) per share has been calculated on the basis of weighted average number of shares outstanding during the period after giving retroactive effect to the reverse stock split. The effect on income (loss) per share of stock options and warrants outstanding is antidulutive and has not been included in the calculation of weighted average number of shares outstanding. 3. Investment in INSCI Corp. The Company reports INSCI's results from operations on the equity method of accounting. The financial statements as of June 30, 1995 (unaudited) have been restated to record the Company's investment in its former majority owned subsidiary INSCI Corp. under the equity method of accounting. INSCI Corp. had been previously recorded on a consolidated basis. Information Management Technologies Corporation NOTES TO FINANCIAL STATEMENTS (continued) June 30, 1996 INVESTMENT IN INSCI CORP. At June 30, 1996, the Company has a 38% ownership interest in INSCI Corp., a Massachusetts based developer of computer software, which is accounted for under the equity method of accounting. INSCI's financial position as of June 30, 1996 and 1995 and the results of operations for the three months ended June 30, 1996 and 1995 are set forth below:(000's) June 30, 1996 June 30, 1995 ------------- ------------- Net sales $ 2,936 $ 841 Net income (loss) 66 (1,687) Current assets 2,494 1,725 Other assets 2,392 1,981 ------- ------- Total assets $ 4,886 $ 3,706 ======= ======= Current liabilities 2,136 2,007 Long term debt 44 16 8% redeemable preferred stock -- -- Stockholders' equity 2,706 1,683 ------- ------- $ 4,886 $ 3,706 ======= ======= Total Liabilities and Stockholders' Equity As of June 30, 1995 and for the three months then ended, the Company had a majority ownership interest in INSCI, and thereby reported their results on a consolidated basis. Presentation of the June 1995 financial statements have been restated to give effect to accounting for INSCI on the equity method. The market value of INSCI stock as of June 30, 1996 is approximately $9,400,000. Information Management Technologies Corporation NOTES TO FINANCIAL STATEMENTS (continued) June 30, 1996 CONTINGENCIES SEC Investigation On September 30, 1992, the Company and INSCI the Company's former majority owned subsidiary, reached an agreement with the SEC to conclude and settle the SEC's informal investigation of the Company and INSCI. The Company and INSCI, without admitting or denying any of the allegations made by the SEC in its complaint, and without a trial or final adjudication of the allegations made in the SEC's complaint, consented to the entry of an order enjoining the Company and INSCI from future violations of certain provisions of the Federal securities laws and the rules and regulations thereunder. The settlement may adversely affect the Company and INSCI and restrict the Company's and INSCI's ability to raise funds from persons located in certain significant states. The impact of these restrictions may be to prevent the Company and INSCI from conducting future public offerings or private placements. On June 29, 1995, subsequent to the Company filing its annual report on Form 10-K for the year ended March 31, 1995, which was filed with the Commission on June 27, 1995, the Company's special counsel obtained a copy of a private order of investigation from the Securities and Exchange Commission ("Commission"). The Commission has issued an order of investigation of the Company and INSCI Corp. and/or its former officers and directors during the period March 1993 and continuing until April 13, 1995. The order of investigation inquiring into whether the Company and its then officers and directors engaged in violations of rule 10b-5 of the Securities Exchange Act of 1934 (the "Exchange Act"), failed to file annual reports and other information as required by the rules and regulations of the Commission in violation of Section 13 (a) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13, and failed to maintain proper books and records in violation of section 13(b)(2) of the Exchange Act or falsified or caused to be falsified books and records of the Companies in violation of section 13(b)(2)(a), Rule 13b 2-1, and Rule 13b 2-2 of the Exchange Act. On July 26, 1995, the Company was further notified by its special counsel that the Commission had issued subpoenas to the Company for the Company's records related to the engagement and subsequent resignation in October 1994 of the Company's then independent certified public accountants, Coopers and Lybrand LLP ("Coopers"). Following the resignation, the Company filed a report on Form 8-K disclosing certain accounting questions brought to the attention of Coopers by the Company relating to adjustments made in the Company's financial statements for the quarter ended September 30, 1994. The Company subsequently reviewed these questions and in the Company's opinion concluded that such matters were accounted for in the proper periods. The Company is unaware of any violations with respect to annual reports or other information disclosed by the Company during the period stated in the order. The Company cannot predict, however the outcome of the Commission's investigation and whether such investigation will result in any type of formal enforcement action against the Company and INSCI and/or any of its officers and directors, or, if so, whether any such action would have an adverse effect on the Company and INSCI. An adverse outcome may result in the payment by the Company and INSCI of potential fines and penalties, restrict the Company's ability to obtain additional required financing, and may result in the delisting of the Company's securities from the NASDAQ stock market. In addition, the Company is currently under a consent order relating to a prior Commission investigation. If the Company is found to have violated the existing Commission consent order, the Company and/or its officers and directors may be subject to sanctions for civil and criminal contempt and fines and/or penalties. Information Management Technologies Corporation NOTES TO FINANCIAL STATEMENTS (continued) June 30, 1996 Employee Benefit Plans From time to time, the Company had not made employee contribution payments to the trustee of its employee benefit plans at the time such contributions were due. Also, in the past the Company has not always made employee contributions to the plans concurrent with the deduction of these contributions from payroll. However, beginning in the fiscal year ended March 31, 1992, management believes that the Company has made employee contributions on a current basis. The Company was notified by regulatory authorities on January 7, 1994, that certain required regulatory filings made in connection with the employee benefit plans lacked requisite financial information. The Company received correspondence from the U.S. Department of Labor stating the Department's intent to assess a penalty against the Company in the amount of $50,000 for one of the years in question. The issues regarding contributions to its employee benefit plans and regulatory filings for the plans may subject the Company to certain tax, penalty and/or interest payments. In January 1996, the Company implemented a 401(k) plan covering all eligible employees. Contributions to the plan are based on a discretionary matching contribution of the employee's deferred compensation. Employee contributions are limited to 15% of salary. There were no employer contributions to the plan for the year ended March 31, 1996. Registration Rights The Company has granted to the holders of certain warrants and shares of the Company's securities without cost demand and "piggyback" registration rights with respect to the underlying stock of the securities issued, or issuable. Compliance with these registration rights may involve substantial expense to the Company. Other In November 1995 the Company entered into an agreement with Corporate Relations Group ("CRG") to provide promotional, shareholder and brokerage communications services. The agreement was for a period of 3 years, and the Company agreed to pay CRG the sum of $300,000 or 171,000 shares of free trading Class A Common Stock, in addition to 500,000 options to purchase 500,000 shares of Class A Common Stock for $1.75 per share to $3.06 per share for a period of 5 years. The Company elected to pay CRG by issuing 171,000 shares of Class A Common Stock. Subsequent to the agreement, the Company borrowed 92,250 shares of Class A freely traded Common Stock from a number of shareholders in the Company. The Company's agreement for the repayment of the borrowed shares involved the Company making payment of interest at 10% per annum in addition to the return of the borrowed shares and an additional (1) one share of Class A Common Stock for each (10) ten shares borrowed by the Company (an aggregate of 9,250 shares). The Company further agreed to grant cost free registration rights to each lender for the additional shares and interest as a result of the loan transaction. Information Management Technologies Corporation NOTES TO FINANCIAL STATEMENTS (continued) June 30, 1996 The Company will use its best efforts to file a registration statement for all of the borrowed shares plus interest and the additional 9,250 shares on or before September 30, 1996. CRG has asserted a claim for the balance of 78,750 shares of Class A Common Stock, and the Company has disputed the claim based upon the Company's position that CRG has not performed under its agreement with the Company. SUBSEQUENT EVENT On July 11 and July 22, 1996, Infinity Investors notified the Company of its election to convert the remaining $825,150 in outstanding convertible debentures issued to Infinity into an aggregate of 803,886 shares of the Company's Class A common stock. The conversion increases the company's equity by $825,150 which enables the Company to be in compliance with the capital requirements of NASDAQ. INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION PRO-FORMA BALANCE SHEET June 30, 1996 June 30, 1996 As Reported Pro-forma Pro-forma ----------- --------- --------- Assets $ 6,258,543 $ 6,258,543 ============ ============ Current liabilities 2,876,053 2,876,053 Long term liabilities 2,598,380 (825,150) 1,773,230 Stockholders equity Preferred stock 2,295,330 2,295,330 Class A common shares 192,797 33,006 225,803 Additional paid in capital 29,880,392 792,144 30,672,536 ------------ ------------ Accumulated deficit (31,584,409) (31,584,409) ------------ ------------ Total shareholders equity 784,110 825,150 1,609,260 ------------ ------------ ------------ $ 6,258,543 $ -- $ 6,258,543 ============ ============ ============ Information Management Technologies Corporation Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Comparison of Results of Operations The following table sets forth, for the periods indicated, the percentage relationship that certain items in the Company's consolidated results of operations bear to sales: Three Months Ended June 30, ------------------ 1996 1995 ---- ---- Sales 100% 100% Cost of sales 67 70 ---- ---- Gross profit 33 30 Selling, general and administrative expenses 26 31 Operating income (loss) 7 (1) Interest expense, net 4 4 ---- ---- Income (loss) from continuing operations before equity in net 3 (5) income (loss) of INSCI Equity in net income (loss) of INSCI Corp. -- (48) ---- ---- Income (loss) from continuing operation 3 (53) Income (loss) from discontinued operation -- 1 ---- ---- Net income (loss) 3% (54)% ==== ==== Three Months Ended June 30, 1996 as compared to the Three Months Ended June 30, 1995: For the three months ended June 30, 1996, the Company reported sales of $2,606,000 a decrease of $834,000 or 24% from sales of $3,440,000 for the three months ended June 30, 1995. The decrease in sales is primarily attributable to the Company's decision not to renew certain facility management agreements as they come due because competitive pricing has reduced operating margins below the Company's required minimum operating margins. As of June 30, 1996, there were six (6) facility management agreements in effect compared to nine (9) facility management agreements for the period ended June 30, 1995. Sales from facility management agreements were $302,000 or 12% of sales for the period ended June 30, 1996, a decrease of $640,000 or 68% from sales of $942,000 or 27% of sales for the period ended June 30, 1995. Sales in the Company's Regional Service Center ("RSC") division were $2,008,000 or 77% of sales as of June 30, 1996, a decrease of $101,000 or 5% from sales of $2,109,000 or 61% of sales for the period ended June 30, 1995. Sales in the Company's litigation duplication division were $296,000 or 11% a decrease of $93,000 or 24% from sales of $389,000 or 11% for the three months ended June 30, 1995. Information Management Technologies Corporation Cost of sales for the three months ended June 30, 1996, were $1,755,000 or 67% of sales compared to $2,423,000 or 70% of sales for the three months ended June 30, 1995, a decrease of $668,000 or 28%. The decrease is attributable to overall decreased staffing related to the expiration of several facility management agreements of $312,000 as well as a decrease of the cost of materials and supplies of $328,000. Selling, general and administrative expenses for the three months ended June 30, 1996, were $678,000 or 26% a decrease of $361,00 or 35% from $1,039,000 or 31% as the Company continued to reduce its operating overhead. Interest expense for the three months ended June 30, 1996 was $98,000 or 4% compared to $142,000 or 4% a decrease of $44,000 or 31% as the Company realized savings from the early termination of its revolving credit facility during the first quarter of fiscal 1997. Information Management Technologies Corporation Liquidity and Capital Resources The Company's cash flows are summarized below for the periods indicated: Three Months Ended June 30, ------------------------------ 1996 1995 ----------- ----------- Operating Activities $(1,151,000) $ (113,000) Investing Activities $ (71,000) $ 854,000 Financing Activities $ (789,000) $ (741,000) ----------- ----------- Increase (decrease) in Cash $(2,011,000) $ 0 =========== =========== During the first quarter ended June 30, 1996 cash used in operating activities amounted to $1,151,000 and is attributable to: A decrease in accounts payable and other accrued liabilities of $1,047,000 and a net increase in accounts receivable of $104,000 and inventory supplies of $145,000 partially offset by a decrease in cost of sales and selling, general and administrative expenses. Cash used in investing activities amounted to $71,000 primarily attributable to the purchase of capital expenditures as the Company continues to address its operating constraints as it continues to grow its core research report printing business. Cash used in financing activities amounted to $789,000 and is principally attributable to the Company's repayment of the outstanding balances of its revolving credit facility and term loans with BNY Financial Corp. As of June 30, 1996 the Company had a working capital deficiency of $38,000 compared to a working capital deficiency of $407,000 at June 30, 1995. Inflation The Company has not experienced significant increases due to inflation in either the cost of merchandise or the operating expenses. Although inflation has not been a significant factor to date, there can be no assurance that it will not be in the future. Information Management Technologies Corporation PART II. OTHER INFORMATION Item 1. Legal Proceedings On September 30, 1992, the Company and INSCI, the Company's then majority owned subsidiary, reached an agreement with the Securities and Exchange Commission ("SEC") to conclude and settle the SEC's informal investigation of the Company and INSCI. The Company and INSCI, without admitting or denying any of the allegations made by the SEC in its complaint, and without a trial or final adjudication of the allegations made in the SEC's complaint, consented to the entry of an order enjoining the Company and INSCI from future violations of certain provisions of the Federal securities laws and the rules and regulations thereunder. The settlement may adversely affect the Company and INSCI and restrict the Company's and INSCI's ability to raise funds from persons located in certain significant states. The impact of these restrictions may be to prevent the Company and INSCI from conducting future public offerings or private placements. The Company and INSCI may be subject to contempt of court or other sanctions if the Company or INSCI, at any time in the future, engages in actions that are deemed to violate the consent judgment and the injunctions. The Company was notified by regulatory authorities on January 7, 1994, that certain required regulatory filings made in connection with the employee benefit plans lacked requisite financial information. The Company received correspondence from the U.S. Department of Labor stating the Department's intent to assess a penalty against the Company in the amount of $50,000 for one of the years in question. On June 29, 1995, the Company's special counsel obtained a copy of a private order of investigation from the Securities and Exchange Commission, ("Commission"). The Commission had issued an order of investigation of the Company and its former majority owned subsidiary, INSCI Corp. which the Company maintains a 38% ownership and/or its former officers and directors during the period March 1993 and continuing until April 13, 1995. The order of investigation inquiring into whether the Company and its then officers and directors engaged in violations of rule 10b-5 of the Securities Exchange Act of 1934 (the "Exchange Act"), failed to file annual reports and other information as required by the rules and regulations of the Commission in violation of Section 13 (a) of the Exchange Act and Rules 12b-20, 13a-11 and 13a-13, and failed to maintain proper books and records in violation of section 13(b)(2) of the Exchange Act or falsified or caused to be falsified books and records of the Companies in violation of section 13(b)(2)(a), Rule 13b 2-1, and Rule 13b 2-2 of the Exchange Act. On July 26, 1995, the Company was further notified by its special counsel that the Commission had issued subpoenas to the Company for the Company's records related to the engagement and subsequent resignation in October 1994 of the Company's then independent certified public accountants, Coopers and Lybrand LLP ("Coopers"). Following the resignation, the Company filed a report on Form 8-K disclosing certain accounting questions brought to the attention of Coopers by the Company relating to adjustments made in the Company's financial statements for the quarter ended September 30, 1994. The Company subsequently reviewed these questions and in the Company's opinion concluded that such matters were accounted for in the proper periods. The Company is unaware of any violations with respect to annual reports or other information disclosed by the Company during the time period stated in the order. The Company cannot predict, however the outcome of the Commission's investigation and whether such investigation will result in any type of formal enforcement action against the Company and INSCI and/or any of its former officers and directors, or, if so, whether any such action would have an adverse effect on the Company and INSCI. An adverse outcome may result in the payment by the Company and INSCI of potential fines and penalties, restrict the Company's ability to obtain additional required financing, and may result in the delisting of the Company's securities from the NASDAQ stock market. In addition, as described above, the Company is currently under a consent order relating to a prior Commission Investigation. If the Company is found to have violated the existing Commission consent order, the Company and/or its officers and directors may be subject to sanctions for civil and criminal contempt and fines and/or penalties. In November 1995 the Company entered into an agreement with Corporate Relations Group ("CRG") for it to provide promotional, shareholder and brokerage communications services. The agreement is for a period of 3 years, and the Company agreed to pay CRG the sum of $300,000 or 171,000 shares of free trading Class A Common Stock, in addition to 500,000 options to purchase 500,000 shares of Class A Common Stock for prices ranging from $1.75 per share to $3.06 per share for a period of 5 years. Subsequent to the agreement, the Company borrowed 92,250 shares of Class A freely traded Common Stock from a number of shareholders in the Company. The Company's agreement for the repayment of the borrowed shares involved the Company making payment of interest at 10% per annum in addition to the return of the borrowed shares and an additional (1) one share of Class A Common Stock for each (10) ten shares borrowed by the Company (an aggregate of 9,250 shares). The Company further agreed to grant cost free registration rights to each lender for the additional shares and interest as a result of the loan transaction. CRG has asserted a claim for the balance of 78,750 shares of Class A Common Stock, and the Company has disputed the claim based upon the Company's contention that CRG has not performed under its agreement with the Company. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. No exhibits are being filed with this report. (b) Reports on Form 8-K. (1) A report on Form 8-K dated April 11, 1996 reporting the early termination of the Company's revolving credit facility with BNY Financial was filed with the Commission. (2) A report on Form 8-K dated April 25, 1996 was filed announcing the appointment of new officers. (3) A report on Form 8-K was filed by the Company dated on May 15, 1996 reporting the conversion by Infinity Investors of a portion of the Company's 6% Convertible Debentures. (4) A report on Form 8-K/A was filed by the Company dated July 25, 1996 updating the original conversion of the Company's 6% Convertible Debentures by Infinity Investors. Information Management Technologies Corporation 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 President and Chief Financial Officer Dated August _______, 1996 -----END PRIVACY-ENHANCED MESSAGE-----