-----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, NfA57Ob6HYJnZ8FsOlmGVeMMUjSJB+wVXna1a3TFc4wqPMfIhdxrh/wfe1e5APUe 3ZGVu9YUUiBzDp2IQBe4lQ== 0001013993-98-000034.txt : 19980820 0001013993-98-000034.hdr.sgml : 19980820 ACCESSION NUMBER: 0001013993-98-000034 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980819 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: 98694467 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: June 30, 1998 Commission file number: 0-29138 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 August 19, 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, June 30, 1998 3 Statements of Operations and Accumulated Deficit (Unaudited) for the three and six month periods ended June 30, 1998 and 1997 4 Statements of Cash Flows (Unaudited) for the six months ended June 30, 1998 and 1997 5 Notes to financial statements 6 Item 2. Management's Discussion and Analysis or Plan of Operations 7-9 PART II. OTHER INFORMATION 10 Signatures 11 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Intellectual Technology, Inc. BALANCE SHEET June 30, 1998 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 185,488 Accounts receivable 524,037 Inventory 108,023 Prepaid expenses 60,314 ---------- Total current assets 877,862 PROPERTY AND EQUIPMENT Vehicle registration equipment 4,689,991 Office and administrative equipment 82,707 --------- 4,772,698 Accumulated depreciation 2,017,994 --------- Total fixed assets, net 2,754,704 OTHER ASSETS Patent, net of accumulated amortization 3,519,541 Organization costs, net 1,465 Deposits 12,240 --------- Total other assets 3,533,246 --------- TOTAL ASSETS $ 7,165,812 ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 237,066 Accrued liabilities 241,923 Notes payable - related parties 47,276 Current portion of long-term debt 2,552,638 Accrued interest 407,838 ----------- Total current liabilities 3,486,741 OTHER LIABILITIES Patent purchase payable 3,997,000 Long-term debt, net of current portion 938,321 ----------- 4,935,321 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 at June 30, 1998. 100 Additional paid-in capital 1,186,250 Accumulated deficit (2,442,600) --------- Total stockholders' equity (1,256,250) --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,165,812 ========= The accompanying notes are an integral part of the financial statements. 3 Intellectual Technology, Inc. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (Unaudited) For the quarter ended For the six months ended June 30, June 30, June 30, June 30, 1998 1997 1998 1997 --------- --------- ---------- --------- SALES $1,467,638 $ 748,247 $ 3,197,347 $1,361,243 COST OF SALES Materials cost 131,749 186,737 287,613 276,492 Depreciation and amortization 536,560 170,973 1,193,572 344,373 Maintenance, other cost of sales 139,717 36,444 293,151 82,008 --------- -------- --------- --------- Total cost of sales 808,026 394,154 1,774,336 702,873 --------- -------- ---------- --------- GROSS PROFIT 659,612 354,093 1,423,011 658,370 OPERATING EXPENSES Selling, general & administrative 301,332 256,190 593,445 397,390 Research & development 73,212 12,244 131,741 20,097 Depreciation and amortization 76,424 87,316 161,722 162,035 --------- -------- --------- -------- 450,968 355,750 886,908 579,522 --------- -------- --------- -------- Income (loss) from operations 208,644 (1,657) 536,103 78,848 OTHER (INCOME) EXPENSE Interest (1,457) - (2,471) - Interest expense and amortization of loan costs 210,554 177,447 433,629 315,808 --------- -------- --------- -------- 209,097 177,447 431,158 315,808 --------- -------- --------- -------- Net income (loss) before income taxes (453) (179,104) 104,945 (236,960) Income taxes 6,883 800 12,766 800 --------- -------- --------- -------- NET INCOME (LOSS) (7,336) (179,904) 92,179 (237,760) Accumulated deficit Balance, beginning of period (2,435,264) (1,725,478) (2,534,779) (1,667,622) --------- --------- --------- --------- Balance, end of period (2,442,600) (1,905,382) (2,442,600) (1,905,382) ========= ========= ========= ========= NET INCOME (LOSS) PER SHARE (NIL) (0.02) 0.01 (0.03) ========= ========== ========== ========= WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,000,000 10,000,000 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 six months ended June 30, 1998 1997 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES $ 1,172,584 $ (936,713) CASH FLOWS FROM INVESTING ACTIVITIES Investment in patents & other assets (3,460) (8,812) Investment in non-contract equipment (2,504) (4,129) Investment in contract costs & equipment (338,011) (486,428) -------- -------- Net cash used by investing activities (343,975) (499,369) CASH FLOWS FROM FINANCING ACTIVITIES Capital contributions - 3,000 New borrowings 250,000 3,619,390 Repayment of debt (1,297,361) (586,812) Repayment of related party debt - (1,376,495) Loan costs - (66,500) --------- --------- Net cash provided (used) by financing activities (1,047,361) 1,592,583 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (218,752) 156,501 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 404,240 5,608 -------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 185,488 $ 162,109 ========= ========= The accompanying notes are an integral part of the financial statements. 5 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS June 30, 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. These financial statements should be read in conjunction with the audited financial statements at December 31, 1997. 2. Significant post year end financing During April, 1998, the Company borrowed $250,000 to finance contract costs under the same terms and conditions as previous loans under its product financing arrangement. 6 Item 2. 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 June 30, 1998 have been generated from: (1) lease of printers and self service terminals for the automated preparation and dispensing of motor vehicle registration forms and license plate decals; and (2) lease of printer equipment for the automated preparation and dispensing of drivers' licenses. For the quarter ended June 30, total revenue increased from $748,000 in 1997 to $1,468,000 in 1998. For the six months ended June 30, total revenue increased from $1,361,000 in 1997 to $3,197,000 in 1998, an increase of 135%. For the quarter ended June 30, gross profit increased from $354,000 in 1997 to $660,000 in 1998. For the six months ended June 30, gross profit increased from $658,000 in 1997 to $1,423,000 in 1998, and increase of 116%. Selling, general and administrative expenses for the six months ended June 30 increased from $397,000 in 1997 to $593,000 in 1998, an increase of $196,000 or 49%. Payroll increased from $250,000 to $393,000 due to new employees, raises and higher employee insurance. Marketing expenses increased from $61,000 to $95,000 as the Company increased its efforts to obtain more contracts. General and administrative expenses for the second quarter of 1998 were $301,000 versus $292,000 for the first quarter of 1998, an increase of 3%. Research and development cost increased from $20,000 in 1997 to $132,000 in 1998 as a result of development of new products. The Company expects to spend another $260,000 in research and development 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. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATION (continued) Interest expense increased from $316,000 in 1997 to $434,000 in 1998 reflecting increased equipment financing. Net income of $92,000 for the six months ended June 30, 1998 represents a $330,000 improvement from 1997 and the loss of $7,000 for the quarter is a $173,000 improvement from the second quarter of 1997 loss of $180,000. This is a result of the Company processing virtually all of the State of Indiana's motor vehicle registrations for the first half of 1998. The Company's equipment was used to process 3,590,000 transactions in the first half of 1998 versus 824,000 in the first six months of 1997 and it is anticipated that another 2,400,000 will be processed for the remainder of the year as follows: 3rd quarter 1,700,000 4th quarter 700,000 For the remainder of the calendar year, the Company will focus its efforts on: Completing the installation of the remaining 19 self service terminals in Indiana. Expanding its sales and marketing efforts to obtain contracts for the sale and/or lease of its equipment to additional jurisdictions. Obtaining the equity capital necessary to pay off the debt associated with patent acquisitions and cure working capital deficiencies. New product development. Extension of the Indiana contract. The Company currently has 11 full time employees and one part time employee, of which three are in administration, two in marketing, and seven in operations / R&D. The company may further expand its marketing and operating personnel in 1998. LIQUIDITY AND CAPITAL RESOURCES Cash flow provided by operations was $1,172,000 for the six months ended June 30, 1998 versus $936,000 used by operations in the six months ended June 30, 1997, an improvement of 2,108,000. All of the cash used by operations in the first six months of 1997 was the result of the financing of contract costs and the reduction of accounts payable related to those costs. 8 The Company is financing the Indiana contract costs over the initial contract term which expires October 31, 1999 and the net cash flows 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. Management believes that other sources of financing will be available especially if the Company obtains contracts with other states. During the second quarter of 1998, the Company borrowed $250,000 to finance contract costs. The Company expects to borrow at least $1,000,000 through the second quarter of 1999 to finance additional equipment costs. In addition, the Company has committed to spend and needs to obtain financing of $1,100,000 for new printer equipment for use in other states. Current debt service is $241,000 per month at 13.05% interest through November 30, 1999. 9 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 10 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: August 19, 1998 INTELLECTUAL TECHNOLOGY, INC. BY: /S/ Janice L. Welch Secretary/Treasurer/Principal Financial Officer 11 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 JUNE 30, 1998. 3-MOS DEC-31-1998 JUN-30-1998 185488 0 524037 0 108023 877862 4772698 (2017994) 71658126 3486741 0 0 0 100 (1256350) 7165812 1467638 1467638 808026 1258994 0 0 210554 (453) 6883 (7336) 0 0 0 (7336) (.001) (.001)
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