-----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, NXxprRikdC5/AbxwWyowPeN5nu4ygOtCLwR6tDNnWU0vQtaI1BC7/MGC4LeXtTVj H3nfN0pG/ZqDvVi7VdLA/g== 0001047469-98-036020.txt : 19981001 0001047469-98-036020.hdr.sgml : 19981001 ACCESSION NUMBER: 0001047469-98-036020 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980930 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980930 SROS: NASD 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: 8-K/A SEC ACT: SEC FILE NUMBER: 000-16753 FILM NUMBER: 98718360 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 8-K/A 1 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A AMENDMENT NO. 1 TO FORM 8-K (DATED JULY 24, 1998) PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------------------------------------------------- SEPTEMBER 30, 1998 --------------------------------------------------------------- Date of Report (Date of earliest event reported) --------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) - -------------------------------------------------------------------------------- ------------------------------------------ DELAWARE ------------------------------------------ (State or Other Jurisdiction of Incorporation) ------------------------------------------ - -------------------------------- ----------------------------- 01-6753 58-1722085 - -------------------------------- ----------------------------- (Commission File Number) (IRS Employer Identification No.) - -------------------------------- ----------------------------- - ---------------------------------------- ----------------------------- 130 CEDAR STREET, NEW YORK, NY 10006 - ---------------------------------------- ----------------------------- (Address of Principal Executive Offices) (Zip Code) - ---------------------------------------- ----------------------------- ---------------------------------------------------- (212) 306-6100 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) ---------------------------------------------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS The Registrant supplements its Form 8-K (dated July 24, 1998) filed on July 31, 1998 regarding its July 24, 1998 acquisition of all of the issued and outstanding common stock of the company known as KRL Litho, Inc. d/b/a The Skillcraft Group ("KRL") from Mr. Harold Russell and Mr. Jeffrey Craugh. The Company incorporates by reference the 8-K filing dated July 24, 1998 (filed on July 31, 1998) as well as the financial statements and exhibits annexed hereto. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (A) FINANCIAL STATEMENTS (1) Audited financial statements of KRL Litho, Inc. as of and For the Fiscal Year Ended December 31, 1997 (2) Audited financial statements of KRL Litho, Inc. as of and For the Six Months Ended June 30, 1998 (B) EXHIBITS (1) Consolidated Pro Forma Condensed Balance Sheet as of March 31, 1998 (2) Consolidated Pro Forma Condensed Statement of Operations For the Fiscal Year Ended March 31, 1998 (3) Summary of Pro Forma Adjustments For the Fiscal Year Ended March 31, 1998 (4) Consolidated Pro Forma Condensed Balance Sheet as of June 30, 1998 (5) Consolidated Pro Forma Condensed Statement of Operations For the Three Months Ended June 30, 1998 (6) Summary of Pro Forma Adjustments For the Three Months Ended June 30, 1998 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: New York, New York September 30, 1998 INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION ------------------------------------- (Registrant) /s/ Joseph Gitto ------------------------------------- Joseph Gitto, President and Chief Financial Officer KRL LITHO, INC. FINANCIAL STATEMENTS DECEMBER 31, 1997 KRL LITHO, INC. FINANCIAL STATEMENTS INDEX PAGE Independent Auditor's Report 1 Balance Sheet as of December 31, 1997 and 1996 2 Statement of Income and Retained Earnings for the Years Ended December 31, 1997 and 1996 3 Statement of Cash Flows for the Years Ended December 31, 1997 and 1996 4 Notes to Financial Statements 5 [LETTERHEAD OF HOWARD B. JACOBSON, C.P.A., P.C.] REPORT OF INDEPENDENT AUDITOR ----------------------------- Board of Directors KRL Litho, Inc. New York, New York I have audited the accompanying balance sheets of KRL Litho, Inc. as of December 31, 1997 and 1996, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of KRL Litho, Inc. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ Howard B. Jacobson, C.P.A., P.C. Bayside, New York April 24, 1998 KRL LITHO, INC. BALANCE SHEET DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents (Notes 2A, 2G and 2H) $ 281,427 $ 861,400 Accounts receivable, net of allowance for doubtful accounts of $207,277 in 1997 (Notes 2G and 3) 2,377,140 949,017 Inventory (Notes 2B and 3) 269,200 182,000 Other current assets 36,252 28,699 ----------- ----------- Total current assets 2,964,019 2,021,116 ----------- ----------- PROPERTY AND EQUIPMENT - AT COST: (NOTES 2C AND 4) Production - machinery and equipment 1,178,007 749,750 Production - computers and software 300,615 34,134 Leasehold improvements 62,641 -0- Office equipment and fixtures 112,206 112,206 ----------- ----------- Total property and equipment 1,653,469 896,090 Less accumulated depreciation and amortization 793,606 547,745 ----------- ----------- Net property and equipment 859,863 348,345 ----------- ----------- Intangible assets net of accumulated amortization (Note 2D) 33,889 -0- ----------- ----------- TOTAL ASSETS $ 3,857,771 $ 2,369,461 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Loan payable - bank (Note 3) $ 181,649 $ -0- Equipment notes payable (Note 4) 168,438 76,013 Accounts payable 691,795 656,201 Income taxes payable (Note 6) 45,853 80,972 Accrued expenses and other current liabilities 431,852 183,920 ----------- ----------- Total current liabilities 1,519,587 997,106 ----------- ----------- Equipment notes payable (Note 4) 456,383 184,440 Loan payable - stockholder (Note 5) 150,000 -0- ----------- ----------- Total long-term liabilities 606,383 184,440 ----------- ----------- COMMITMENTS AND CONTINGENCIES (NOTE 7) STOCKHOLDER'S EQUITY: Common stock, no par value Authorized 200 shares Issued and outstanding 10 shares 10,000 10,000 Retained earnings 1,721,801 1,177,915 ----------- ----------- Total stockholder's equity 1,731,801 1,187,915 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,857,771 $ 2,369,461 =========== ===========
The Auditor's report and accompanying notes are an integral part of these financial statements. -2- KRL LITHO, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996 ------------ ----------- Revenues (Note 2E) $ 13,773,284 $ 9,228,208 Cost of sales 9,261,574 5,995,636 ------------ ----------- Gross profit 4,511,710 3,232,572 Selling, general and administrative expenses 3,211,121 2,109,222 ------------ ----------- Income from operations 1,300,589 1,123,350 Interest expense, net 21,493 16,101 ------------ ----------- Income before provision for income taxes 1,279,096 1,107,249 Provision for income taxes (Note 6) 133,008 101,496 ------------ ----------- Net income 1,146,088 1,005,753 Distributions to stockholder (602,202) (192,707) Retained earnings - beginning of year 1,177,915 364,869 ------------ ----------- Retained earnings - end of year $ 1,721,801 $ 1,177,915 ============ ===========
The Auditor's report and accompanying notes are an integral part of these financial statements. -3- KRL LITHO, INC. STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,146,088 $ 1,005,753 Adjustments to reconcile: Depreciation and amortization 251,972 149,575 Accounts receivable (1,428,123) 94,886 Inventory (87,200) 6,600 Other current assets (7,553) 47,095 Accounts payable 35,594 (369,103) Accrued expenses and other current liabilities 212,813 37,586 ------------ ----------- Net cash provided by operating activities 123,591 972,392 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment (757,379) (63,489) Increase in intangible assets (40,000) -0- ------------ ----------- Net cash applied to investing activities (797,379) (63,489) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank loan, less repayments 181,649 -0- Additional equipment notes, less repayments 364,368 (54,639) Additional stockholder loans, less repayments 150,000 (25,531) Distributions to stockholder (602,202) (192,707) Repayment of loans to related company -0- (100,000) ------------ ----------- Net cash provided by (applied to) financing activities 93,815 (372,877) ------------ ----------- Net change in cash and cash equivalents (579,973) 536,026 Cash and cash equivalents at beginning of year 861,400 325,374 ------------ ----------- Cash and cash equivalents at end of year $ 281,427 $ 861,400 ============ =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest expense $ 38,956 $ 33,974 ============ =========== Income taxes $ 205,386 $ 41,810 ============ ===========
SUPPLEMENTAL DISCLOSURES ON NON-CASH INVESTING AND FINANCING ACTIVITIES During the year ended December 31, 1997, the Company incurred equipment notes payable in the amount of $591,648. The Auditor's report and accompanying notes are an integral part of these financial statements. -4- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 1 - THE COMPANY KRL Litho, Inc. (the "Company") was organized in New York State in June, 1989. The Company provides high quality multi-color printing services to commercial organizations located primarily in the New York Metropolitan area. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. CASH AND CASH EQUIVALENTS For the purposes of reporting cash flows, the Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. Cash equivalents are carried at cost plus accrued interest which approximates fair market value. At December 31, 1997 and 1996, cash equivalents included funds deposited in certificates of deposit with a bank and a liquid asset account with a financial institution. B. INVENTORY Inventory consists primarily of paper, toner and inks and is stated at the lower of cost, determined on the first-in, first-out (FIFO) method, or market. C. PROPERTY AND EQUIPMENT Depreciation of capital assets is provided to relate the cost of these assets to operations over their estimated useful lives. Management is of the opinion that asset values decline rapidly and has therefore elected to use the double declining balance method of depreciation for production equipment, computer hardware and software, and furniture and fixtures, over estimated useful lives ranging from five to seven years. Leasehold improvements are depreciated using the straight line method over the remaining term of the lease. Repairs and maintenance are charged to operations in the period incurred, and major repairs and improvements which significantly extend the lives of the assets are capitalized, and depreciated over their estimated useful lives. When assets are retired or disposed the cost and accumulated depreciation or amortization are removed from the accounts, and any gain or loss is recognized in the current period's earnings. D. INTANGIBLE ASSETS Intangible assets consist of goodwill and a non-compete agreement and are amortized over 15 years and 5 years respectively. -5- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. REVENUES Revenue is recorded when services are performed or upon delivery of finished product. F. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. G. 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 and certificates of deposit at one bank and cash equivalents in a liquid asset account 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 on going credit evaluations of its customers and records reserves for potentially uncollectible accounts receivable. Accounts receivable consist mainly of customers within the Company's geographic area. H. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and trade receivables and payables. The carrying amount of cash and short-term instruments approximates their fair values because of the relatively short period of time between the origination of the instruments and their expected realization. I. IMPAIRMENT OF LONG-LIVED ASSETS In the event that facts and circumstances indicate that the cost of an asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to market or discounted cash flow value is required. No such write-downs were required for the years ended December 31, 1997 and 1996. -6- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 3 - BANK NOTE PAYABLE In March 1997, the Company entered into a one year credit arrangement with a bank. According to the terms of the credit arrangement, the Company can borrow up to a maximum of $200,000 under a revolving line of credit (the "line"). All outstanding obligations under the line bear interest at the bank's prime rate plus one percent (1%) and are collateralized by the Company's accounts receivable, inventory and a personal guarantee by the sole stockholder. At December 31, 1997, the Company was indebted to the bank for outstanding obligations under the line in the amount of $181,649. Interest charged to operations for the year ended December 31, 1997 amounted to $9,004. NOTE 4 - EQUIPMENT NOTES PAYABLE Equipment notes payable represent obligations secured by certain equipment having aggregate book values at December 31, 1997 and 1996 in the amounts of $570,427 and $247,641 respectively. The notes are payable in monthly installments, including interest at rates ranging from 8.9% to 11.5%, in the aggregate amounts of $20,588 and $8,378 for 1997 and 1996 respectively. The notes expire at varying dates through August, 2002. Future maturities of equipment notes payable for each of the next five years, and in the aggregate, are as follows: Year ending December 31, 1998 $ 219,265 1999 191,479 2000 173,860 2001 113,509 2002 44,359 ---------- Note repayments 742,472 Less: amount representing interest 117,651 Less: current portion 168,438 ---------- Net long-term portion $ 456,383 ========== NOTE 5 - STOCKHOLDER'S LOANS The loan payable to the sole stockholder represents unsecured advances made to the Company which bear interest at the prime rate. -7- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 NOTE 6 - INCOME TAXES The Company's stockholder has elected, under the provisions of the Internal Revenue Code, to have the Company taxed as a subchapter "S" corporation. Under these provisions there is no federal income tax paid by the corporation. The Company's income (or loss) is passed through directly to the stockholder and taxed on the stockholder's personal income tax return. Accordingly, there is no provision for federal income taxes. The provision for income taxes for the years ended December 31, 1997 and 1996 consist of state and local taxes. NOTE 7 - COMMITMENTS AND CONTINGENCIES A. OPERATING LEASE The Company operates its office, sales, production and manufacturing facilities within leased premises in New York City, New York. The lease term is ten years which expires August 31, 2002. The lease includes annual escalations for real estate taxes and operating expenses based on the Consumer Price Index. There are no specified renewal terms. Future minimum annual rentals excluding escalations over the lease term are as follows: Year ending December 31, 1998 $ 253,750 1999 253,750 2000 253,750 2001 253,750 2002 169,167 ----------- Total $ 1,184,167 =========== B. EMPLOYEE BENEFIT PLANS The Company has a qualified defined contribution profit sharing plan which covers employees not included under the collective bargaining agreements in effect with the printing industry unions. The benefit is based on years of service and compensation. The plan is entirely subjective and the Company can contribute an amount ranging form 0% to 15% of compensation per annum. The cost for the plan years ending December 31, 1997 and 1996 was $55,000 and $54,000 respectively. The Company also has collective bargaining agreements with several local printing industry unions. At December 31, 1997 the contracts had expired and negotiations to renew the contracts were in progress. The Company anticipates the contract provisions to be settled shortly. The Company continues to pay union benefits at the prior contract rate and anticipates only minor changes. No provision has been made in these financial statements for the effects of new union contracts. -8- KRL LITHO, INC. FINANCIAL STATEMENTS JUNE 30, 1998 KRL LITHO, INC. FINANCIAL STATEMENTS INDEX PAGE Report of Independent Auditor 1 Balance Sheet as of June 30, 1998 2 Statement of Income and Retained Earnings for the Six Months Ended June 30, 1998 3 Statement of Cash Flows for the Six Months Ended June 30, 1998 4 Notes to Financial Statements 5 [LETTERHEAD OF HOWARD B. JACOBSON, C.P.A., P.C.] REPORT OF INDEPENDENT AUDITOR Board of Directors KRL Litho, Inc. New York, New York I have audited the accompanying balance sheet of KRL Litho, Inc. as of June 30, 1998, and the related statements of income and retained earnings, and cash flows for the six months then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of KRL Litho, Inc. as of June 30, 1998, and the results of its operations and its cash flows for the six months then ended, in conformity with generally accepted accounting principles. /s/ Howard B. Jacobson, C.P.A., P.C. Bayside, New York July 24, 1998 KRL LITHO, INC. BALANCE SHEET JUNE 30, 1998
ASSETS 1998 ----------- CURRENT ASSETS: Cash and cash equivalents (Notes 2A, 2G and 2H) $ 419,455 Accounts receivable, net of allowance for doubtful accounts in the amount of $207,277 (Notes 2G and 3) 2,414,784 Inventory (Notes 2B and 3) 199,246 Other current assets 73,267 ----------- Total current assets 3,106,752 PROPERTY AND EQUIPMENT - AT COST: (NOTES 2C AND 4) Production - machinery and equipment 1,202,626 Production - computers and software 314,528 Leasehold improvements 62,641 Office equipment and fixtures 113,841 ----------- Total property and equipment 1,693,636 Less accumulated depreciation and amortization 952,230 ----------- Net property and equipment 741,406 ----------- Intangible assets net of accumulated amortization (Note 2D) 30,222 ----------- TOTAL ASSETS $ 3,878,380 =========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Loan payable - bank (Note 3) $ 348,868 Equipment notes payable (Note 4) 179,587 Accounts payable 627,131 Income taxes payable (Note 6) 18,512 Accrued expenses and other current liabilities 491,157 ----------- Total current liabilities 1,665,255 ----------- Equipment notes payable (Note 4) 349,194 Loan payable - stockholder (Note 5) 150,000 ----------- Total long-term liabilities 499,194 ----------- COMMITMENTS AND CONTINGENCIES (NOTE 7) STOCKHOLDER'S EQUITY: Common stock, no par value Authorized 200 shares Issued and outstanding 10 shares 10,000 Retained earnings 1,703,931 ----------- Total stockholder's equity 1,713,931 ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,878,380 ===========
The Auditor's report and accompanying notes are an integral part of these financial statements. -2- KRL LITHO, INC. STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 1998 1998 ----------- Revenues (Note 2E) $ 6,988,058 Cost of sales 5,184,408 ----------- Gross profit 1,803,650 Selling, general and administrative expenses 1,569,718 ----------- Income from operations 233,932 Interest expense, net 33,345 ----------- Income before provision for income taxes 200,587 Provision for income taxes (Note 6) 18,512 ----------- Net income 182,075 Distributions to stockholder (199,945) Retained earnings - beginning of period 1,721,801 ----------- Retained earnings - end of period $ 1,703,931 =========== The Auditor's report and accompanying notes are an integral part of these financial statements. -3- KRL LITHO, INC. STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998
1998 ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 182,075 Adjustments to reconcile: Depreciation and amortization 162,292 Accounts receivable (37,644) Inventory 69,954 Other current assets (37,015) Accounts payable (64,664) Accrued expenses and other current liabilities 31,964 ----------- Net cash provided by operating activities 306,962 ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment (40,167) Net cash applied to investing activities (40,167) ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank loan, less repayments 167,219 Equipment note repayments (96,041) Distributions to stockholder (199,945) ----------- Net cash applied to financing activities (128,767) ----------- Net change in cash and cash equivalents 138,028 Cash and cash equivalents at beginning of period 281,427 ----------- Cash and cash equivalents at end of period $ 419,455 =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest expense $ 39,784 =========== Income taxes $ 85,414 ===========
SUPPLEMENTAL DISCLOSURES ON NON-CASH INVESTING AND FINANCING ACTIVITIES None The Auditor's report and accompanying notes are an integral part of these financial statements. -4- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 1 - THE COMPANY KRL Litho, Inc. (the "Company") was organized in New York State in June, 1989. The Company provides high quality multi-color printing services to commercial organizations located primarily in the New York Metropolitan area. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. CASH AND CASH EQUIVALENTS For the purposes of reporting cash flows, the Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. Cash equivalents are carried at cost plus accrued interest which approximates fair market value. At June 30, 1998 cash equivalents included funds deposited in certificates of deposit with a bank and a liquid asset account with a financial institution. B. INVENTORY Inventory consists primarily of paper, toner and ink and is stated at the lower of cost, determined on the first-in, first-out (FIFO) method, or market. C. PROPERTY AND EQUIPMENT Depreciation of capital assets is provided to relate the cost of these assets to operations over their estimated useful lives. Management is of the opinion that asset values decline rapidly and has therefore elected to use the double declining balance method of depreciation for production equipment, computer hardware and software, and furniture and fixtures, over estimated useful lives ranging from five to seven years. Leasehold improvements are depreciated using the straight line method over the remaining term of the lease. Repairs and maintenance are charged to operations in the period incurred. Major repairs and improvements which significantly extend the lives of the assets are capitalized, and depreciated over their estimated useful lives. When assets are retired or disposed the cost and accumulated depreciation or amortization are removed from the accounts, and any gain or loss is recognized in the current period's earnings. D. INTANGIBLE ASSETS Intangible assets consist of goodwill and a non-compete agreement and are amortized over 15 years and 5 years respectively. -5- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. REVENUES Revenue is recorded when services are performed or upon delivery of finished product. F. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. G. 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 and certificates of deposit at one bank and cash equivalents in a liquid asset account with one financial institution. Accounts at the bank 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 on going credit evaluations of its customers and records reserves for potentially uncollectible accounts receivable. Accounts receivable consist mainly of customers within the Company's geographic area. H. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and trade receivables and payables. The carrying amount of cash and short-term instruments approximates their fair values because of the relatively short period of time between the origination of the instruments and their expected realization. I. IMPAIRMENT OF LONG-LIVED ASSETS In the event that facts and circumstances indicate that the cost of an asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to market or discounted cash flow value is required. No write-downs were required for the six months ended June 30, 1998. -6- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 3 - BANK NOTE PAYABLE In March 1998, the Company renewed a one year credit arrangement with a bank. According to the terms of the credit arrangement, the Company can borrow up to a maximum of $400,000 under a revolving line of credit (the "line"). All outstanding obligations under the line bear interest at the bank's prime rate plus one percent (1%) and are collateralized by the Company's accounts receivable, inventory and a personal guarantee by the sole stockholder. At June 30, 1998, the Company was indebted to the bank for outstanding obligations under the line in the amount of $348,869. Interest charged to operations for the six months ended June 30, 1998 amounted to $12,299. See Note 8 - Subsequent Events. NOTE 4 - EQUIPMENT NOTES PAYABLE Equipment notes payable represent obligations secured by certain equipment having aggregate book values at June 30, 1998 in the amounts of $418,467. The notes are payable in monthly installments, including interest at rates ranging from 8.9% to 11.5%, in the aggregate amount of $15,957. The notes expire at varying dates through August, 2002. Future maturities of equipment notes payable in the aggregate, are as follows: Year ending December 31, 1998 (six months) $ 95,740 1999 191,479 2000 173,860 2001 113,509 2002 44,359 ---------- Note repayments 618,947 Less: amount representing interest 90,166 Less: current portion 179,587 ---------- Net long-term portion $ 349,194 ========== NOTE 5 - STOCKHOLDER'S LOANS The loan payable to the sole stockholder represents unsecured advances made to the Company which bear interest at the prime rate. NOTE 6 - INCOME TAXES The Company's stockholder has elected, under the provisions of the Internal Revenue Code, to have the Company taxed as a subchapter "S" corporation. Under these provisions there is no federal income tax paid by the corporation. The Company's income (or loss) is passed through directly to the stockholder and taxed on the stockholder's personal income tax return. Accordingly, there is no provision for federal income taxes. The provision for income taxes for the six months ended June 30, 1998 consists of state and local taxes. -7- KRL LITHO, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 7 - COMMITMENTS AND CONTINGENCIES A. OPERATING LEASE The Company operates its office, sales, production and manufacturing facilities within leased premises in New York City, New York. The lease term is ten years which expires August 31, 2002. The lease includes annual escalations for real estate taxes and operating expenses based on the Consumer Price Index. There are no specified renewal terms. Future minimum annual rentals excluding escalations over the lease term are as follows: Year ending December 31, 1998 (six months) $ 126,875 1999 253,750 2000 253,750 2001 253,750 2002 169,167 ----------- Total $ 1,057,292 =========== B. EMPLOYEE BENEFIT PLANS The Company has a qualified defined contribution profit sharing plan which covers employees not included under the collective bargaining agreements in effect with the printing industry unions. The benefit is based on years of service and compensation. The plan is entirely subjective and the Company can contribute an amount ranging form 0% to 15% of compensation per annum. There was no contribution for the six months ended June 30, 1998. The Company also has collective bargaining agreements with several local printing industry unions. At December 31, 1997 the contracts had expired and negotiations to renew the contracts began. At June 30, 1998 negotiations for certain contracts remain in progress. The Company anticipates the contract provisions to be settled shortly. The Company continues to pay union benefits at the prior contract rate and anticipates only minor changes. No provision has been made in these financial statements for the effects of new union contracts. NOTE 8 - SUBSEQUENT EVENTS On July 24, 1998 all of the Company's issued and outstanding common stock was purchased by Halcon Acquisition Corp., a wholly owned subsidiary of Information Management Technologies Corporation. The Company's former sole stockholder will continue in his present position as the chief executive officer of KRL Litho, Inc., as will the Company's other top managers. As part of the stock purchase agreement the Company is required to satisfy its outstanding obligations under the bank line of credit. -8- EX-1 2 PRO FORMA CONDENSED BALANCE SHEET Exhibit (1) IMTECH CORP. PRO FORMA CONDENSED BALANCE SHEET MARCH 31, 1998 (Unaudited)
Historical Pro Forma Adj. Pro Forma Statements Adjustments Ref. Results ------------ ------------ ---- ------------ [1] [2] ASSETS Current assets: Cash and cash equivalents $ 281,427 $ 2,269,832 A) $ 2,551,259 Accounts receivable, net 3,679,352 201,293 B) 3,880,645 Other current assets 1,222,367 - 1,222,367 ------------ ------------ ------------ Total current assets 5,183,146 2,471,125 7,654,271 ------------ ------------ ------------ Property and equipment - at cost 7,161,006 340,928 C) 7,501,934 Less: Accumulated depreciation and amortization 3,189,605 48,704 D) 3,238,309 ------------ ------------ ------------ Net property and equipment 3,971,401 292,224 4,263,625 ------------ ------------ ------------ Goodwill, net of accumulated amortization - 5,695,059 E) 5,695,059 Other assets 1,204,812 607,853 F) 1,812,665 ------------ ------------ ------------ $ 10,359,359 $ 9,066,261 $ 19,425,620 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,298,344 $ (5,707) B) $ 2,292,637 Other current liabilities 2,526,593 342,866 G) 2,869,459 ------------ ------------ ------------ Total current liabilities 4,824,937 337,159 5,162,096 ------------ ------------ ------------ Long-term debt 2,533,670 1,159,651 H) 3,693,321 Sellers' notes payable - 3,400,000 I) 3,400,000 Convertible debt 884,800 4,000,000 J) 4,884,800 ------------ ------------ ------------ Total long-term obligations 3,418,470 8,559,651 11,978,121 ------------ ------------ ------------ Stockholders' equity: 12% convertible preferred stock 2,660,733 - 2,660,733 Additional paid-in capital 32,040,227 - 32,040,227 Accumulated deficit (33,257,433) 179,451 K) (33,077,982) Other stockholder's equity 672,425 (10,000) L) 662,425 ------------ ------------ ------------ Total stockholders' equity 2,115,952 169,451 2,285,403 ------------ ------------ ------------ $ 10,359,359 $ 9,066,261 $ 19,425,620 ============ ============ ============
- --------------------------- [1] Consolidated Balance Sheet amounts of IMTECH Corp. as of March 31, 1998 and and its wholly-owned subsidiary KRL Litho, Inc. as of December 31, 1997. [2] See Summary of Pro Forma Adjustments for the Fiscal Year Ended March 31, 1998 on Exhibit 3. EX-2 3 CONSOLIDATED PRO FORMA CONDENSED STMT. OF OPERERAT Exhibit (2) IMTECH CORP. CONSOLIDATED PRO FORMA CONDENSED STATEMENT OF OPERATIONS MARCH 31, 1998 (Unaudited)
Historical Pro Forma Adj. Pro Forma Statements Adjustments Ref. Results ------------ ------------ ---- ------------ [1] [2] Revenues $ 23,261,624 $ - $ 23,261,624 Cost of sales 16,585,215 (2,046,296) M) 14,538,919 ------------ ------------ ------------ Gross profit 6,676,409 2,046,296 8,722,705 Operating expenses 6,970,810 (732,000) N) 6,238,810 Interest expense, net 739,372 605,464 O) 1,344,836 Amortization of goodwill - 406,790 E) 406,790 ------------ ------------ ------------ Income (loss) from continuing operations (1,033,773) 1,766,042 732,269 Loss from discontinued operations - 600,000 M) 600,000 ------------ ------------ ------------ Income (loss) before income taxes (1,033,773) 1,166,042 132,269 Provision for income taxes 133,008 (133,008) G) - ------------ ------------ ------------ Net income (loss) (1,166,781) 1,299,050 132,269 Preferred stock dividends 270,159 - 270,159 Distributions to stockholder 602,202 (602,202) A) - ------------ ------------ ------------ Net income (loss) applicable to common stockholders $ (2,039,142) $ 1,901,252 $ (137,890) ============ ============ ============ Basic and diluted earnings per share applicable to common stockholders $ (0.36) $ (0.02) ============ ============ Weighted average number of shares outstanding 5,589,483 5,589,483 ============ ============
- ------------------------------- [1] Includes the Consolidated Results of Operations of IMTECH Corp. For the Fiscal Year Ended March 31, 1998 and its wholly-owned subsidiary KRL Litho, Inc. For the Fiscal Year Ended December 31, 1997. [2] See Summary of Pro Forma Adjustments for the Fiscal Year Ended March 31, 1998 on Exhibit 3. EX-3 4 SUMMARY OF PRO FORMA ADJUSTMENTS (3/31/98) Exhibit (3) SUMMARY OF PRO FORMA ADJUSTMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 1998
- --------- -------------------------------------------------------------------------- ------------- Adj. Description of Adjustment Amount Ref. - --------- -------------------------------------------------------------------------- ------------- A) Cash savings from a decrease in the salary paid to the former President 350,000 and majority stockholder of KRL Cash savings from the add-back of distributions paid to the majority 602,202 stockholder of KRL Cash savings from the cancellation of a fulfillment services contract 270,000 Excess cash from the acquisition financing 343,511 One year's interest payable to GE Capital Corp., who provided a portion (125,464) of the acquisition financing Cost savings realized as a result of efficiencies gained as if the acquisition had taken place in the prior fiscal year: Purchases of raw materials 975,000 Overtime wages 250,000 Professional fees and insurance costs 175,000 Interest paid on 12% convertible debentures issued in connection with (480,000) acquisition financing Reclassification of cash overdraft balances (90,417) ------------- 2,269,832 ============= B) Elimination of intercompany receivable and payable balances (5,707) Adjustment to decrease reserve for losses from accounts receivable on the books and records of KRL 207,000 ------------- 201,293 ============= C) Bump-up in fixed assets to fair market value as a result of an allocation of the excess of the purchase price over the net assets of KRL acquired 340,928 ============= D) Depreciation adjustment for bump-up in fixed assets noted in adjustment C. above 48,704 ============= E) Goodwill arising from the purchase of net assets of KRL 6,101,849 Amortization of the goodwill (406,790) ============= 5,695,059 ============= F) Deferred interest portion of the notes payable to the sellers of KRL 607,853 ============= EXHIBIT (3) SUMMARY OF PRO FORMA ADJUSTMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 1998 (CONTINUED) - --------- -------------------------------------------------------------------------- ------------- Adj. Description of Adjustment Amount Ref. - --------- -------------------------------------------------------------------------- ------------- G) Current portion of term loan payable to GE Capital Corp., who provided 140,349 a portion of the acquisition funding Current portion of the notes payable to the sellers of KRL 600,000 Income tax savings resulting from the utilization of the existing Net (133,008) Operating Losses Carryforwards of the Registrant Payment to release tax liens of the Registrant made upon closing of the (174,058) KRL acquisition Reclassification of cash overdraft balances (See A. above) (90,417) ============= 342,866 ============= H) Long-term portion of the term loan payable to GE Capital Corp., who provided a portion of the acquisition financing 1,159,651 ============= I) Long-term portion of the notes payable to the sellers of KRL 3,400,000 ============= J) 12% convertible debentures issued in connection with a private offering; the proceeds of which were used to finance a portion of the acquisition of KRL 4,000,000 ============= K) Elimination of the retained earnings of KRL in accordance with the Generally Accepted Accounting Principles which govern the accounting treatment of a business combination accounted for as a Purchase (1,721,801) Net effect on accumulated deficit of the pro forma adjustments herein 1,901,252 ============= 179,451 ============= L) Elimination of the common stock of KRL in accordance with K. above (10,000) ============= EXHIBIT (3) SUMMARY OF PRO FORMA ADJUSTMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 1998 (CONCLUDED) - --------- -------------------------------------------------------------------------- ------------- Adj. Description of Adjustment Amount Ref. - --------- -------------------------------------------------------------------------- ------------- M) One year's depreciation adjustment for the bump-up in fixed assets as noted in adjustment C. above 48,704 Loss from the discontinuation of a division of KRL (600,000) Cost savings realized as a result of efficiencies gained as if the acquisition had taken place in the prior fiscal year: Purchases of raw materials (975,000) Overtime wages (250,000) Cancellation of a fulfillment services contract (See A. above) (270,000) ============= (2,046,296) ============= N) Cost savings realized as a result of the acquisition, as noted in A. and M. above: Decrease in the salary of the former President and majority stockholder of KRL (350,000) Professional fees and insurance costs (175,000) Adjustment to decrease reserve for losses from accounts receivable as noted in adjustment B. above (207,000) ------------- (732,000) ============= O) Interest expense accrued on the debt issued for the financing related to the acquisition: Interest on the 12% convertible debentures 480,000 Interest on the term loan payable to GE Capital Corp. 125,464 ============= 605,464 =============
EX-4 5 CONS. PRO FORMA CONDENSED BAL. SHEET Exhibit (4) IMTECH CORP. CONSOLIDATED PRO FORMA CONDENSED BALANCE SHEET JUNE 30, 1998 (Unaudited)
Historical Pro Forma Adj. Pro Forma Statements Adjustments Ref. Results ------------ ------------ ---- ------------ [1] [2] ASSETS Current assets: Cash and cash equivalents $ 2,551,259 $ 84,390 A) $ 2,635,649 Accounts receivable, net 3,880,645 (89,505) B) 3,791,140 Other current assets 1,222,367 - 1,222,367 ------------ ------------ ------------ Total current assets 7,654,271 (5,115) 7,649,156 ------------ ------------ ------------ Property and equipment - at cost 7,501,934 - 7,501,934 Less: Accumulated depreciation and amortization 3,238,309 12,176 C) 3,250,485 ------------ ------------ ------------ Net property and equipment 4,263,625 (12,176) 4,251,449 ------------ ------------ ------------ Goodwill, net of accumulated amortization 5,695,059 (101,697) D) 5,593,362 Other assets 1,812,665 - 1,812,665 ------------ ------------ ------------ $ 19,425,620 $ (118,988) $ 19,306,632 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,292,637 $ (89,505) B) $ 2,203,132 Other current liabilities 2,869,459 - 2,869,459 ------------ ------------ ------------ Total current liabilities 5,162,096 (89,505) 5,072,591 ------------ ------------ ------------ Long-term debt 3,693,321 - 3,693,321 Sellers' notes payable 3,400,000 - 3,400,000 Convertible debt 4,884,800 - 4,884,800 ------------ ------------ ------------ Total long-term obligations 11,978,121 - 11,978,121 ------------ ------------ ------------ Stockholders' equity: 12% convertible preferred stock 2,660,733 - 2,660,733 Additional paid-in capital 32,040,227 - 32,040,227 Accumulated deficit (33,077,982) (29,483) F) (33,107,465) Other stockholder's equity 662,425 - 662,425 ------------ ------------ ------------ Total stockholders' equity 2,285,403 (29,483) 2,255,920 ------------ ------------ ------------ $ 19,425,620 $ (118,988) $ 19,306,632 ============ ============ ============
[1] Consolidated Pro Forma Balance Sheet amounts of IMTECH Corp. and its wholly-owned subsidiary KRL Litho, Inc. as of March 31, 1998. (See Exhibit 1.) [2] See Summary of Pro Forma Adjustments For the Three Months Ended June 30, 1998 on Exhibit 6. EX-5 6 CONS. PRO FORMA CONDENSED STATEMENT OF OPERATION Exhibit (5) IMTECH CORP. CONSOLIDATED PRO FORMA CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 (Unaudited)
Historical Pro Forma Adj. Pro Forma Statements Adjustments Ref. Results ------------ ------------ ---- ------------ [1] [2] Revenues $ 6,286,405 $ - $ 6,286,405 Cost of sales 4,208,541 (144,824) G) 4,063,717 ------------ ------------ ------------ Gross profit 2,077,864 144,824 2,222,688 Operating expenses 1,883,948 (67,000) H) 1,816,948 Interest expense, net 94,325 139,610 I) 233,935 Amortization of goodwill - 101,697 D) 101,697 ------------ ------------ ------------ Income from continuing operations 99,591 (29,483) 70,108 Loss from discontinued operations - - - ------------ ------------ ------------ Net income (loss) 99,591 (29,483) 70,108 Preferred stock dividends 61,380 - 61,380 ------------ ------------ ------------ Net income (loss) applicable to common stockholders $ 38,211 $ (29,483) $ 8,728 ============ ============ ============ Basic and diluted earnings per share applicable to common stockholders $ 0.007 $ 0.002 ============ ============ Weighted average number of shares outstanding 5,789,846 5,789,846 ============ ============
- --------------------------- [1] Includes the Consolidated Results of Operations of IMTECH Corp. and its wholly-owned subsidiary KRL Litho, Inc. For the Three Months Ended June 30, 1998. [2] See Summary of Pro Forma Adjustments For the Three Months Ended June 30, 1998 on Exhibit 6. EX-6 7 SUMMARY OF PRO FORMA ADJUSTMENTS Exhibit (6) SUMMARY OF PRO FORMA ADJUSTMENTS FOR THE THREE MONTHS ENDED JUNE 30, 1998
- --------- -------------------------------------------------------------------------- ------------- Adj. Description of Adjustment Amount Ref. - --------- -------------------------------------------------------------------------- ------------- A) Cash savings from a decrease in the salary paid to the former President 6,500 and majority stockholder of KRL Cash savings from the cancellation of a fulfillment services contract 67,500 Interest payable to GE Capital Corp., who provided a portion of the (19,610) acquisition financing Cost savings realized as a result of efficiencies gained as if the acquisition had taken place in the prior fiscal year: Purchases of raw materials 27,000 Overtime wages 62,500 Professional fees and insurance costs 60,500 Interest paid on 12% convertible debentures issued in connection with acquisition financing (120,000) ------------- 84,390 ============= B) Elimination of intercompany receivable and payable balances 89,505 ============= C) Depreciation adjustment for bump-up in fixed assets to fair market value resulting from the excess of the purchased price over the net assets acquired of KRL 12,176 ============= D) Amortization of the goodwill 101,697 ============= F) Net effect on accumulated deficit of the pro forma adjustments herein (29,483) ============= G) Depreciation adjustment for the bump-up in fixed assets as noted in adjustment C. above 12,176 Cost savings realized for the three months ended June 30, 1998 as a result of efficiencies gained as if the acquisition had taken place in the prior fiscal year: Purchases of raw materials (27,000) Overtime wages (62,500) Cancellation of a fulfillment services contract (See A. above) (67,500) ============= (144,824) ============= Exhibit (6) SUMMARY OF PRO FORMA ADJUSTMENTS FOR THE THREE MONTHS ENDED JUNE 30, 1998 (CONCLUDED) - --------- -------------------------------------------------------------------------- ------------- Adj. Description of Adjustment Amount Ref. - --------- -------------------------------------------------------------------------- ------------- H) Cost savings realized as a result of the acquisition, as noted in A. and M. above: Decrease in the salary of the former President and majority stockholder of KRL (6,500) Professional fees and insurance costs (60,500) ============= (67,000) ============= I) Interest expense accrued on the debt issued for the financing related to the acquisition: Interest on the 12% convertible debentures 120,000 Interest on the term loan payable to GE Capital Corp. 19,610 ============= 139,610 =============
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