-----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, BOcfq+6/p03s1uAg23ZwPgMLk8eM5uz4vvsaXbDBM82o4mBAvezo0P8Qf0a0MgEn ykMZHajCv2+sPeq3sK7+iw== 0001013993-98-000017.txt : 19980518 0001013993-98-000017.hdr.sgml : 19980518 ACCESSION NUMBER: 0001013993-98-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELLECTUAL TECHNOLOGY INC CENTRAL INDEX KEY: 0000859914 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 841130227 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-29138 FILM NUMBER: 98626061 BUSINESS ADDRESS: STREET 1: 10639 ROSELLE STREET STREET 2: SUITE B CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 619-552-00 MAIL ADDRESS: STREET 1: 303 EAST 17TH AVE STREET 2: STE 800 CITY: DENVER STATE: CO ZIP: 80203 FORMER COMPANY: FORMER CONFORMED NAME: BRIDGESTONE CORP DATE OF NAME CHANGE: 19930328 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1998 Commission file number: 33-33092-D INTELLECTUAL TECHNOLOGY, INC. (Exact name of small business issuer as specified in its charter) Delaware 84-1130227 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10639 Roselle Street Suite B San Diego, CA 92121 (Address of principal executive offices) (619) 552-0001 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes -X- No --- As of May 14, 1998, 10,000,000 shares of common stock, par value $0.00001 per share, were outstanding. Transitional Small Business Disclosure Format (check one): Yes --- No -X- INDEX Page Number PART I. FINANCIAL INFORMATION Item I. Financial Statements Balance Sheet, March 31, 1998 3 Statements of Operations and Accumulated Deficit (Unaudited) for the three months ended March 31, 1998 4 Statements of Cash Flows (Unaudited) for the three months ended March 31, 1998 and 1997 5 Notes to financial statements 6 Item 2. Management's Discussion and Analysis or Plan of Operations 7-8 PART II. OTHER INFORMATION 8 Signatures 9 2 Intellectual Technology, Inc. BALANCE SHEET March 31, 1998 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 411,148 Accounts receivable 613,358 Deposits 62,167 Inventory 109,221 Prepaid expenses 66,926 ---------- Total current assets 1,262,820 PROPERTY AND EQUIPMENT Contract equipment 4,567,373 Office equipment 23,471 Equipment - non contract 58,613 -------- 4,649,457 Accumulated depreciation 1,475,630 ------- Total property and equipment 3,173,827 OTHER ASSETS Patent, net of accumulated amortization 3,587,859 of $677,294 Organization costs, net of amortization 1,567 of $483 Deposits 12,940 --------- Total other assets 3,602,366 --------- TOTAL ASSETS $ 8,039,013 ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 786,449 Accrued expenses 247,473 Notes payable - related parties 55,466 Notes payable - other 38,000 Current portion of long term debt 2,330,598 Accrued interest 325,971 ----------- Total current liabilities 3,783,957 OTHER LIABILITIES Long term debt (net of current portion) 1,505,970 Due to related party 3,998,000 ---------- Total other liabilities 5,503,970 STOCKHOLDERS' EQUITY Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding - Common stock, $0.00001 par value; 20,000,000 shares authorized; 10,000,000 shares issued and outstanding 100 Additional paid-in capital 1,186,250 Accumulated deficit (2,435,264) ---------- Total stockholders' equity (1,248,914) --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,039,013 ========= The accompanying notes are an integral part of the financial statements. 3 Intellectual Technology, Inc. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (Unaudited) For the three months ended March 31, 1998 1997 Sales, net $ 1,729,709 $ 612,996 Cost of sales 966,310 308,719 ---------- -------- Gross profit 763,399 304,277 OPERATING EXPENSES Selling, general and administrative 286,265 135,521 Research and development 58,529 7,853 Other operating expenses 91,146 80,398 ------- ------- Total operating expenses 435,940 223,772 ------- ------- Income from operations 327,459 80,505 NON-OPERATING INCOME AND EXPENSES Interest income (1,014) - Interest expense, including amortization of loan fees 223,075 138,361 --------- -------- Total non-operating expenses 222,061 138,361 Net income (loss) before income tax 105,398 (57,856) Income taxes 5,883 - -------- -------- NET INCOME (LOSS) 99,515 (57,856) Accumulated deficit Balance, beginning of period (2,534,779) (1,667,622) ---------- ---------- Balance, end of period $(2,435,264) $(1,725,478) ========== ========== NET INCOME (LOSS) PER SHARE $ 0.01 $ (NIL) ======= ======= WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,000,000 9,007,746 ========= ========= The accompanying notes are an integral part of the financial statements. 4 Intellectual Technology, Inc. STATEMENTS OF CASH FLOWS (Unaudited) For the three months ended March 31, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES $ 969,170 $(488,632) CASH FLOWS FROM INVESTING ACTIVITIES Investment in patent costs (1,260) (161) Purchase of non-contract equipment (1,880) - Investment on contract costs and equipment (304,560) (217,714) ------- ------- Net cash used by investing activities (307,700) (217,875) CASH FLOWS FROM FINANCING ACTIVITIES Additional paid in capital - 6,900 New borrowings - 975,000 Repayment of debt (654,562) (211,964) Loan costs - (61,500) -------- ------- Net cash provided (used) by financing activities (654,562) 708,436 -------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 6,908 1,929 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 404,240 5,608 -------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $411,148 $ 7,537 ======= ======= The accompanying notes are an integral part of the financial statements. 5 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS March 31, 1998 (Unaudited) 1. Management's representation of interim financial information The accompanying financial statements have been prepared by Intellectual Technology, Inc. without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments which, in the opinion of management, are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS Certain statements contained in this report, including statements concerning the Company's future cash and financing requirements, and other statements contained herein regarding matters that are not historical facts, are forward looking statements; actual results may differ materially from those anticipated in the forward looking statements. The Company's revenues through March 31, 1998 have been generated from (1) lease of printers and self service terminals for the automated preparation and dispensing of motor vihicle registration forms and license plate declas for the State of Indiana; and (2) lease of printer equipment for the automated prepara- tion and dispensing of drivers' licenses for the State of New Hampshire. During the quarter ended March 31, 1997, the Company had installed cumulatively 96 stand alone printers and I self service terminal. As of March 31, 1998 the Company had installed comulatively 275 stand alone printers and 17 self service terminals. As a result, revenues from the Indiana contract increased from $506,000 to $1,660,000 and gross profit increased from $304,000 to $763,000. Cost of revenues, as a percentage of sales increased from 50% to 54%. The increase in cost percentage was due mainly to a price decrease as a result of the State of Indiana leasing more equipment. Selling expenses, general and administrative expenses increased from $135,000 to $286,000, an increase of $151,000 or 111%. Payroll accounted for $114,000 of this increase due to two new executive employees, raises and higher employee insurance. Legal and accounting increased $20,000 due to the merger with Bridgestone, Corp. a public company, in March 1997 and the cost of complying with SEC requirements. Research and development costs increased from $8,000 to $58,000 as a result of development of a new printer. The Company expects to spend another $370,000 in R & D costs for the remainder of the calendar year. The Company will engage in research and development of additional applications of its products in related areas such as driver records and license extensions, voter registrations, tax payments, electronic benefit vouchers, hunting and fishing licenses, and similar areas. Interest expense increased from $138,000 to $223,000 reflecting the increased financing of the equipment leased to the State of Indiana. The net income of $100,000 for the three months ended March 31, 1998 represents a $158,000 improvement from the 1997 first quarter net loss of $58,000. March 31, 1998 is the first quarter in the Company's history that was profitable. This is a result of the Company pricessing virtually all of the State of Indiana's motor vehicle registrations for the first quarter of 1998. The Company's equipment was used to process 1,954,000 transactions in the first quarter 1998 and it is anticipated that another 4,000,000 transactions will be processed for the remainder of the year as follows: 2nd quarter 1,600,000 3rd quarter 1,700,000 4th quarter 700,000 To date the Company has invested $4.6 million in the Indiana contract equipment and expects to spend another $1.1 million by the end of the calendar year primarily for the installation of the remaining 19 self service terminals. The Company anticipates that existing financing sources will continue to be available to fund its capital expenditures. For the remainder of the calendar year, the company will focus its efforts on: Completing the installation of the remaining self service terminals in Indiana Expanding the Company's sales and marketing staff and increasing its marketing efforts to obtain contracts for the sale and/or lease of its equip- ment to additional jurisdictions. Obtaining the equity capital necessary to pay off the debt associated with patent acquisitions and cure working capital deficiencies. LIQUIDITY AND CAPITAL RESOURCES Cash flow privided by operations was $969,000 for the first quarter 1998 versus $488,000 used by operations in the first quarter 1997, an improvement of $1,457,000. All of the cash used by operations in the first quarter 1997 was the result of the financing of contract costs and the reduction of accounts payable related to those costs. The Company is financing the Indiana contract costs over the initial contract term which expires October 31, 1999 and the net cash flow after debt service will not be sufficient to meet its operating expenses. The Company will have to secure other forms of debt or equity financing to meet its cash flow needs. Since the Company anticipates that the Indiana contract will be renewed at that time for at least another one year term, management believes that other sources of financing will be available especially if the company secures contracts with other states. No new borrowings for the first quarter 1998 occurred versus $975,000 in new borrowings in first quarter 1997. The Company expects to borrow ar least $1,200,000 for the remainder of the year to finance the balance of the contract equipment costs. Current debt service is $240 thousand per month at 13.05% interest through November 1999. PART II. OTHER INFORMATION Item 1.Legal Proceedings None Item 2.Changes in Securities None Item 3.Defaults upon Senior Securities None Item 4.Submission of Matters to a Vote of Security Holders None Item 5.Other Information None Item 6.Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule, filed herewith electronically (b) Reports on Form 8-K None 8 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 15, 1998 INTELLECTUAL TECHNOLOGY, INC. BY: /S/ Christ M. Rousseff Chairman, Chief Executive Officer 9 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENTS OF LOSS AND ACCUMULATED DEFICIT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10QSB FOR THE QUARTER ENDED MARCH 31, 1998. 3-MOS DEC-31-1998 MAR-31-1998 411,148 0 613,358 0 109,221 1,262,820 4,649,457 1,475,630 8,039,013 3,783,957 3,998,000 0 0 100 (1,249,014) 8,039,013 1,729,709 1,730,723 966,310 1,625,325 0 0 223,075 105,395 99,515 99,515 0 0 0 99,515 0.01 0.01
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