-----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, GXtQBDMHK4Pb3M8CsAPKmi9KNey3HnfWMdygiKbaZsHcP7ddR87OSH2/m9BMaINQ ZO9cqeu+xV8tOnSUqdHSLA== 0001127855-04-000199.txt : 20040414 0001127855-04-000199.hdr.sgml : 20040414 20040414154707 ACCESSION NUMBER: 0001127855-04-000199 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELLECTUAL TECHNOLOGY INC CENTRAL INDEX KEY: 0000859914 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 841130227 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-29138 FILM NUMBER: 04733072 BUSINESS ADDRESS: STREET 1: 1040 JOSHUA WAY STREET 2: X CITY: VISTA STATE: CA ZIP: 92081 BUSINESS PHONE: 760-599-8080 MAIL ADDRESS: STREET 1: 1040 JOSHUA WAY STREET 2: X CITY: VISTA STATE: CA ZIP: 92081 FORMER COMPANY: FORMER CONFORMED NAME: BRIDGESTONE CORP DATE OF NAME CHANGE: 19930328 10KSB 1 iti10ksb123103.txt INTELLECTUAL TECHNOLOGY 10KSB, 12.31.03 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB ----------- [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2003 ------------------------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-29138 --------------------------------- INTELLECTUAL TECHNOLOGY, INC. ----------------------------- (Name of Small Business Issuer as specified in its charter) Delaware 84-1130227 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer I.D. No.) Incorporation or Organization) 1040 Joshua Way, Vista, CA 92081-7807 ------------------------------------- (Address of Principal Executive Offices) (Zip Code) (760) 599-8080 -------------- Registrant's Telephone Number, Including Area Code Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.00001 par value Check whether the Registrant: (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 . ----- ----- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosures will be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] The Registrant's revenues for the fiscal year ended December 31, 2003 were $6,620,733. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 19, 2004 was $476,000. For purposes of this computation, it has been assumed that the shares beneficially held by directors and officers of Registrant were "held by affiliates;" this assumption is not to be deemed to be an admission by such persons that they are affiliates of Registrant. As of March 19, 2004, the Registrant had outstanding 9,842,680 shares of Common Stock. Documents incorporated by reference: Specified exhibits listed in Part III of this report are incorporated by reference to the Registrant's Registration Statement No. 33-33092-D, effective April 17, 1990, or to Registrant's Report on Form 8-K dated March 27, 1997. Transitional Small Business Disclosure Format: Yes No X ----- ----- TABLE OF CONTENTS ----------------- Page ---- PART I.......................................................................1 ITEM 1. DESCRIPTION OF BUSINESS.......................................1 ITEM 2. PROPERTIES....................................................4 ITEM 3. LEGAL PROCEEDINGS.............................................4 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........4 PART II......................................................................5 ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS...........................................5 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................5 ITEM 7. FINANCIAL STATEMENTS..........................................7 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...........................8 ITEM 8A. CONTROLS AND PROCEDURES.......................................8 PART III.....................................................................9 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT....9 ITEM 10. EXECUTIVE COMPENSATION.......................................10 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................12 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............13 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.............................13 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.......................15 INDEX TO FINANCIAL STATEMENTS...............................................16 SIGNATURES..................................................................17 (i) PART I ------ ITEM 1. DESCRIPTION OF BUSINESS - -------------------------------- Historical Development. - ----------------------- Image Technology, Inc., a Nevada corporation based in San Diego, California ("ITI Nevada") was formed on April 23, 1992 to engage in the design, manufacture and sale of systems for the automated preparation and dispensing of motor vehicle registration forms and license plate decals. On March 12, 1997, the shareholders of ITI Nevada, in a transaction accounted for as a reverse acquisition, exchanged all of the outstanding common stock of ITI Nevada for 450,000,000 shares of the common stock of Bridgestone Corp., a Delaware corporation. As a result of this transaction, ITI Nevada shareholders acquired collectively a 90% interest in Bridgestone Corp., and ITI Nevada became a wholly owned subsidiary of Bridgestone Corp. Bridgestone Corp., which was formed on December 1, 1989, for the purpose of seeking out and acquiring a business opportunity, had completed a public offering of common stock and warrants in 1990. In April 1997, Bridgestone Corp. changed its name to Intellectual Technology, Inc. and effected a 1 for 50 reverse stock split. References in this report to the Company and to ITI are references to Intellectual Technology, Inc., a Delaware corporation, and its predecessor and wholly owned subsidiary, ITI Nevada, on a consolidated basis. Industry and Company Background - ------------------------------- Vehicle registration services are operated by all 50 U.S. states, the District of Columbia and many foreign jurisdictions. Governments use vehicle registration as a means of collecting revenues and to provide an orderly method of regulating the ownership and transfer of motor vehicles. Management of the Company recognizes that traditional methods of motor vehicle registration have resulted in delays experienced by members of the public, significant personnel and facility costs, the waste of preprinted materials and a generally inefficient disbursement process, as well as significant losses occasioned by fraud and theft. Based upon discussions with law enforcement officials, ITI believes that losses attributable to these problems are in the millions of dollars. As early as 1987, ITI's founders envisioned streamlining the distribution of motor vehicle registrations through the development of an automated, self-service registration printing and dispensing device. From 1987 through 1991, the founders of ITI engaged in market research and product development. In 1992, ITI was formed to continue this process and commercialize the concepts that had been developed. The ITI Printing System and Related Print Media - ----------------------------------------------- The ITI printing system allows for the real time, on-site creation of vehicle registration forms and license decals on blank stock, including the imprinting of the vehicle license plate number on the decal. Materials used in the preparation of vehicle registration or other forms are referred to as "media" (blank roll or sheet paper, decal and printer ribbon). This on-demand printing capability allows the Department of Motor Vehicles ("DMV") to reduce fraud and theft, increase revenue collection, and reduce personnel, inventory, and facility costs as a result of increased efficiencies. The ITI printing system is designed to operate both from stand-alone units in a printer server environment within a DMV office and from self-service terminals (SST's) that can be placed in locations remote from DMV offices. One of the ITI stand-alone printers was patented September 20, 1994. The self-service terminal was patented on November 13, 1990. The Company purchased both of these patents on October 31, 1995. The Company believes that the ITI printing system resolves the problems described above in "Industry and Company Background," in that it prints a vehicle registration with an applied decal on blank stock, thereby eliminating inventory and inventory management, as well as the need to dispose of preprinted stock at year-end. Additionally, it satisfies the security demands of DMV in that it applies the vehicle license plate number to the decal, causing the decal to become significantly less valuable to thieves. The ITI printing system is equipped with software that accounts for all transactions effected through the printer, significantly reducing the likelihood of DMV employee fraud or theft. Finally, when combined with automated teller technology, the ITI printer system is capable of acting as a self-service terminal for motor vehicle registrations, which can be established either in DMV offices or in remote locations, reducing personnel and facilities' costs. None of the Company's products or services 1 requires government approval. The Company is not aware of any existing or probable government regulations that would affect its business. Other Printing Products and Technologies - ---------------------------------------- For some of the Company's contracts, the Company purchased stand-alone printers from the manufacturer. The Company does not own the patents on these printers. ITI furnishes blank paper stock with a blank decal affixed for the printing process. Whether the ITI printing system or other printing technology is employed depends upon the size of registration, the number of decals issued per transaction, the desired speed of printing, and other variables. ITI also provides the software to integrate the printing system with the State's computer system. Marketing and Sales - ------------------- The primary market for the Company's printing systems and services consists of the DMV in each of the 50 U.S. states, the District of Columbia and Canada. The Company believes that its experience working with State Motor Vehicle administrators and the limited number of competitors in this market permit the Company to approach the vehicle registration and renewal market with significant efficiencies. Consequently, the Company markets its products and services through its in-house marketing and sales staff. The Company solicits interest in its products primarily through direct contact with DMV officials. Contracts - --------- In August 1996, ITI entered into an Equipment Lease, Support and Maintenance Agreement (the "Indiana Contract") with the Indiana Bureau of Motor Vehicles Commission (the "BMVC") to implement ITI's printing system solution in Indiana. This contract expires October 31, 2004. In the fourth quarter of 1998, ITI entered into a five-year Agreement with the State of South Dakota to implement ITI's printing system. On April 1, 1999, ITI supplied the equipment and media to process 100% of the annual registrations in South Dakota. This contract expires on March 31, 2004. Effective January 1, 2001, the ITI entered into a Subcontractor Agreement with a contractor for the State of Louisiana Department of Public Safety and Corrections Office of Motor Vehicles. In June 2001, ITI supplied the equipment and media to begin production of 100% of the mail-in vehicle registrations and in September 2001, branch installation began. In 2002, the installation of ITI's equipment statewide was completed. ITI expects this subcontractor agreement to be in effect at least through December 2004. In April 2002, ITI signed a contract with the State of Ohio to supply the equipment and media to begin production of 100% of the mail-in vehicle registrations. This contract expires June 30, 2004, but is subject to annual renewal by the State at the end of each contract year. In March 2002, ITI signed a contract, effective through June 30, 2007, with the State of New Hampshire to produce "Safe Boating Certificate Cards". The State reserves the right to terminate the contract for any reason by giving thirty days written notice. In September 2003, the ITI signed a contract with the State of Nevada to supply the equipment and media to begin production of 100% of the mail-in vehicle registrations and branch decals. This contract expires September 30, 2008. The State reserves the right to terminate the contract for any reason by giving sixty days written notice. 2 For the year ended December 31, 2003, 96% of ITI's total revenues were derived from the above contracts and agreements. The failure to renew contracts with certain states would adversely affect the financial position of ITI. Historically, ITI has generated over 83% if its revenues in the first three quarters of the calendar year due to the registration renewal schedules of the various states. Due to this seasonality of revenue, ITI has in the past four years incurred operating losses in the fourth quarter. Manufacturing and Supply - ------------------------ The Company has used subcontractors to manufacture and supply most components and subassemblies of ITI's printing system. Competition - ----------- The Company has identified the automation of vehicle registrations and registration decal printing as its primary market. Currently there are few competitors targeting this niche market. In addition to motor vehicle registrations, the Company believes its technology is suitable for other types of government issued registrations or certificates. An example of this is the New Hampshire contract mentioned above. The successful fulfillment of existing government contracts and resulting customer satisfaction may allow the Company a competitive advantage in these areas. Research & Development - ---------------------- For the years ended December 31, 2003 and 2002, the Company spent approximately $235,000 and $199,000, respectively on research and development activities. None of these costs were borne directly by customers. Environmental Laws - ------------------ ITI cost of compliance with environmental laws (federal, state, local) is estimated to be insignificant. Employees - --------- ITI has thirteen full-time employees and three part-time employees, excluding directors, of which three are in executive or administrative positions, four are in engineering, R&D or information technology, two are marketing personnel and seven are maintenance personnel, ITI also retains four marketing consultants and three technical consultants. Some of ITI's maintenance services are outsourced to other individuals or companies. No union currently represents any of the ITI's employees, and ITI believes that its relations with its employees are good. Reports to Security Holders - --------------------------- ITI will send an annual report consisting of this Form 10-KSB containing the annual audited financial statements with the notice of annual meeting and proxy statements. ITI is a "reporting company" as defined by the Securities Act of 1933. ITI files quarterly reports on Form 10-QSB and annual reports on Form 10-KSB. The public may read and copy any materials filed by ITI with the Security and Exchange Commission ("SEC") at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. ITI electronically files its reports with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. ITI's web site is http://www.iti4dmv.com. 3 ITEM 2. PROPERTIES - ------------------- ITI occupies 5,948 square feet of office and light industrial space in Vista, California for administrative, customer support, engineering, equipment maintenance and research and development activities. The monthly rental is $4,850, subject to cost of living adjustments and maintenance expenses, through February 2007. ITI also leases approximately 1,875 square feet of office/warehouse space in Carmel, Indiana for maintenance and customer support. The monthly rental is $1,233 per month through October 2004. ITI believes that these facilities are adequate to meet its anticipated needs for the foreseeable future. In the opinion of management, ITI's properties are adequately covered by insurance. ITEM 3. LEGAL PROCEEDINGS - -------------------------- There are no legal proceedings currently pending. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ No matters were submitted to a vote of security holders during the fourth quarter of the calendar year ended December 31, 2003. 4 PART II ------- ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------ The principal market for ITI's common stock is the Over the Counter Bulletin Board. The following table sets forth, for the periods indicated, the range of high and low bid quotations for the Company's common stock as reported by finance.yahoo.com. Quarter Ended High Bid Low Bid ------------- -------- ------- March 31, 2002 $0.09 $0.08 June 30, 2002 $0.19 $0.09 September 30, 2002 $0.25 $0.09 December 31, 2002 $0.09 $0.09 March 31, 2003 $0.09 $0.09 June 30, 2003 $0.17 $0.08 September 30, 2003 $0.35 $0.17 December 31, 2003 $0.40 $0.23 March 31, 2004 $1.01 $0.27 The quotations, which appear above, reflect inter-dealer prices, without retail mark-up, markdown, or commission, and reflect all stock splits. The Company has not paid any dividends on its common stock to date. However, on March 15, 2004, the Company's Board of Directors declared a dividend of $.02 per share payable on April 15, 2004 to stockholders of record as of March 18, 2004. The declaration and payment of dividends in the future, of which there can be no assurance, will be determined by the Board of Directors in light of conditions then existing, including the Company's earnings, financial condition, capital requirements, and other factors. As of April 5, 2004, the Company had approximately 67 shareholders of record, which does not include shareholders whose shares are held in street or nominee names. Equity Compensation Plan Information - ------------------------------------ See "Item 11, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters -Equity Compensation Plan," below. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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. For ease in presenting the financial data, figures have been rounded to the nearest thousand. Plan of Operation - ----------------- In 2004, ITI expects to continue to respond to "Requests For Proposal" from various government agencies. ITI anticipates that the capital requirements of any new contracts and existing debt service will be funded from present cash balances, future cash flows from operations or, if necessary, by borrowing from lenders, with which, ITI has existing or past relationships. ITI does not expect any significant capital requirements from existing contracts in 2004. ITI has committed additional resources in 2004 to complete the design and manufacture of prototypes of a next generation stand-alone printer and self-service terminal. ITI will continue to engage in research and development of additional applications of its products in related areas and new product development and 5 the testing of present products for potential new customers. ITI does not expect to purchase any other significant plant or equipment or make significant changes in the number of employees. Liquidity and Capital Resources - ------------------------------- During the last two fiscal years, the ITI has been able to utilize cash flows from operations to repay debt and fund all new investment in contract costs and equipment. On May 15, 2002 ITI utilized a $400,000 line-of-credit with a bank to prepay the remaining balance of contract cost financing in the amount of $379,000. This line of credit was converted to a 36-month term loan. In 2003, ITI prepaid the remaining $308,000 balance of this term loan. The Company has available a $400,000 line-of-credit with a bank secured by accounts receivable, equipment and general intangibles. However, as of December 31, 2003 and the date of this filing, there was no outstanding balance. The line bears interest at Prime plus 1.25% (with a minimum interest rate of 5.25%) and is subject to renewal in December 2004. The following is a summary of the Company's cash flows from operating, investing, and financing activities: Year Ended December 31, ------------------------------- 2003 2002 -------------- -------------- Operating Activities $ 643,000 $ 908,000 Investing Activities (150,000) (274,000) Financing Activities (339,000) (322,000) Net effect on cash $ 154,000 $ 312,000 ============== ============== Cash flows provided by operations decreased from $908,000 in 2002 to $643,000 in 2003, a decrease of $265,000. Although there was an increase in net income before depreciation and other non-cash charges or credits of $181,000, $500,000 in cash was used for a bid bond deposit. Cash used in investing activities decreased from $274,000 to $150,000, a decrease of $124,000. Investment in contract costs and equipment decreased from $239,000 to $92,000, a decrease of $147,000 due to the capital requirements of new contracts. ITI invested $33,000 in 2002 and $58,000 in 2203 primarily to upgrade computer equipment and replace maintenance vehicles ($38,000 in 2003). Cash used in financing activities in 2003 was $339,000 and $322,000 in 2002 as ITI used cash from operations to continue to pay down long-term debt in excess of new borrowings. Results of Operations - --------------------- For the year ended December 31, 2003 revenues increased from $6,317,000 to $6,621,000, an increase of $304,000. This increase in revenue was primarily due to: (1) the installation phase of the Ohio contract in 2002 versus a full year of operations in 2003-$414,000; (2) Additional revenue from the Nevada contract-$107,000; and (3) reduced by lower revenue from sale of printer equipment-$238,000. Gross profit increased from $2,327,000 (36.8% of sales) to $2,857,000 (43.2% of revenue), an increase of $530,000. The increase in the gross profit percentage was due to lower maintenance costs (17% of revenue in 2003 vs. 19.3% in 2002), lower depreciation (7.9% in 2003 vs. 9.7% in 2002) and lower media costs (30.2% in 2003 vs. 32.1% in 2002). The Company expects that 2004 gross profit margins may decline due to higher anticipated media costs. Overall future gross margins are dependent on the timing and magnitude of new contracts and ITI's ability to control media and maintenance costs for existing contracts. In addition, ITI may have to write off the remaining inventory maintained for any of the States that do not renew their contracts. Operating expenses increased 10% from $1,695,000 in 2002 to $1,858,000 in 2003, an increase of $163,000. Selling, general and administrative expenses increased from $1,444,000 to $1,588,000, an increase of $144,000 or 10%. This is primarily due to: (1) Increase in payroll of $100,000 due the hiring of 6 additional personnel and higher health insurance costs; (2) Consulting services ($57,000); and (3) Increased marketing expenses for product demonstration, attending industry conferences and meeting with state officials-$34,000. Other selling, general and administrative expenses declined by $47,000. Research and development increased from $199,000 (3.2% of sales) in 2002 to $235,000 (3.5% of sales), an increase of $36,000. The Company committed additional resources in 2002 and 2003 to a next generation stand-alone printer and self-service terminal. The Company will continue to engage in research and development of additional applications of its products in related areas and new product development and is expected to at least double its research and development expenses in 2004. The Company maintains on average, at least a three months' supply of media for each contract. The failure of a State to extend a contract or an early contract termination could result in the write-down of inventory left over at the end of the contract period or the write-off of the book value of contract costs and equipment. The Company has no knowledge at this time that these events will occur. If these events do occur, the Company believes that the transition period of replacing contractors will allow reduction of these losses. As of December 31, 2003, the carrying cost of inventory for contracts expiring in 2004 that may not be extended is $873,000. Since contract costs are depreciated over the contract lives, including only known extensions, failure of a state to extend a contract would not result in the premature write off the book value of the contract cost. Effect of Inflation and Foreign Currency Exchange - ------------------------------------------------- The Company has not experienced material unfavorable effects on its results of operations as a result of foreign currency fluctuations or domestic inflation. Critical Accounting Policies - ---------------------------- Financial Reporting Release No. 60, which was recently issued by the SEC, requests companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The SEC indicated that a critical accounting policy is one that is both important to the portrayal of the Company's financial condition and results and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our significant accounting policies are described in Note 1 to the Notes to the Financial Statements included in this Form 10-KSB. Although not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates, we have identified the policies below as critical to our business operations and understanding of our results of operations. Note that the preparation of our 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 reporting period. There can be no assurance that actual results will not differ from those estimates. Property, Equipment and Depreciation - ------------------------------------ Contract costs and equipment have been capitalized, and include the manufactured cost of the printers and other support equipment, SST's, operating software, installation, freight, contract startup costs, and other costs incidental to making the equipment operational. All costs are recovered in the ratio that transactions to date bear to total estimated transactions over the contract terms including renewals. The amount of cost recovery (depreciation) charged to operations in the current period is based on management's estimates of future transactions. ITEM 7. FINANCIAL STATEMENTS - ----------------------------- The financial statements required by this Item are set forth at the pages indicated in Item 13(a) and are incorporated herein by reference. 7 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - -------------------------------------------------------------------------------- FINANCIAL DISCLOSURE - -------------------- The Company's principal independent auditors did not resign or decline to stand for reelection, nor were they dismissed during the Company's two most recent fiscal years. ITEM 8A. CONTROLS AND PROCEDURES - --------------------------------- Based on his evaluation as of a date within 90 days of the filing date of this Annual Report on Form 10-KSB, the principal financial officer of the Company has concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation. 8 PART III -------- ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; - -------------------------------------------------------------------------------- COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT - ------------------------------------------------- Identification of Directors, Executive Officers, and Significant Employees - -------------------------------------------------------------------------- The directors and executive officers of the Company, their ages, and their positions held in the Company are as follows: Name Age Position - ---- --- -------- Walter G. Fuller 62 Director, Chairman of the Board, Chief Executive Officer Nicholas Litchin 75 Director Bradford A. Morrow 48 Director Christopher M. Welch 34 Director Craig Litchin 48 President, Chief Operating Officer, Treasurer, Principal Financial Officer, Principal Accounting Officer George McGill 68 Vice President & Secretary Keith Winn 43 Chief Technology Officer Family Relationships - -------------------- Craig Litchin is the son of Nicholas Litchin. Walter G. Fuller was once married to the maternal aunt of Christopher M. Welch. There are no other family relationships between any directors or executive officers. Business Experience - ------------------- The following is a brief account of the business experience during at least the past five years of each director and executive officer, including his or her principal occupation and employment during that period, and the name and principal business of the organization in which such occupation and employment were carried out. Nicholas Litchin is a director of the Company. He was Chairman of the Board ---------------- of Directors from July 1998 to April 1999. He was Vice Chairman from March 12, 1997 to June 1998, and has been a director of the Company since the formation of Image Technology, Inc., a Nevada corporation and wholly owned subsidiary of the Company, ("Image Technology") in April 1992. Mr. Litchin has been a retired investor since 1991. Walter G. Fuller has been a Director of the Company and Image Technology ---------------- since March 12, 1997 and the formation of Image Technology in 1992, respectively. He was appointed Chairman of the Board and Chief Executive Officer of the Company in August of 2001. He is the President of M&S Steel Co., Inc., an Indiana corporation that is a supplier of structural steel to the construction industry since 1971. Christopher M. Welch was elected Director of the Company in February 1999. -------------------- Mr. Welch was an agent with New York Life from 1995-2000. He attended graduate school during 2001. He is now employed as a staff accountant with Sound Image Inc., a private company in Escondido, CA. Bradford A. Morrow was elected Director in December 2000. He has been the ------------------ Managing Director of Paradigm Capital LLC since the Fall of 1997 ("Paradigm"). Paradigm is involved in private placements, mergers and acquisitions and providing consulting services to emerging companies, primarily software and satellite based technologies. Craig Litchin has been President, Chief Operating Officer, Treasurer, -------------- Principal Financial Officer and Principal Accounting Officer of the Company since November 30, 2000. Mr. Litchin joined the Company as Vice President in 9 July 1997. Prior to that, he served for eight years as Legal Counsel to the Bitove Corporation ("Bitove"). Bitove, a Canadian company, operated several different businesses throughout Canada. George McGill was appointed Vice-President and Secretary of the Company on ------------- August 30, 2000. He is an attorney in private practice in Cardiff, California and has advised the Company since its inception. Mr. McGill has been practicing law since 1961. Keith Winn is the Chief Technology Officer of the Company. Mr. Winn joined ---------- the Company in June 2001. Prior to joining the Company, Mr. Winn was Vice President Technology for EZCertify, a software and Internet company located in Crofton, Maryland. Involvement in Certain Legal Proceedings - ---------------------------------------- No officer, director, significant employee, promoter, or control person of the Company has been involved in any event of the type described in Item 401(d) of Regulation SB during the past five years. Audit Committee Financial Expert - -------------------------------- The Board of Directors has determined that the Company does not currently have someone who meets the definition of an audit committee financial expert. The Company is evaluating potential candidates for Board membership and obtaining someone with the ability to qualify as an audit committee financial expert is a primary goal of the Company. The members of the Audit Committee are Messrs. Morrow and Welch. Code of Ethics - -------------- The Company has adopted a Code of Ethics for Principal Executive Officer and Senior Financial Officers that applies to the Company's Chief Executive Officer and Chief Financial Officer. A copy is filed as an exhibit to this Annual Report on Form 10-KSB. Section 16(a) Beneficial Ownership Reporting Compliance - ------------------------------------------------------- To the Company's knowledge, based solely on its review of filings by directors, officers and beneficial owners of more than 10% of a registered class of the Company's securities under the reporting rules of Section 16(a) (the "Reporting Rules") of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), furnished to the Company during 2003, there were no instances of failure to comply with Section 16(a) during 2003, except for the unintentional failure of Walter G. Fuller to timely file two Form 4s which occurred on February 24, 2004. Mr. Fuller's failure to timely file the Form 4 was related to the fact that he attempted to submit such form as a paper filing, which was not accepted, and had to file it electronically thereafter. ITEM 10. EXECUTIVE COMPENSATION - -------------------------------- Director Compensation - --------------------- Until October 1, 2002, the Company had adopted a policy of paying directors $250 per meeting plus directors fees of $500 per month as employees. Effective October 1, 2002, all directors were treated as independent contractors, but received the same remuneration. Effective December 1, 2003, the directors no longer receive $250 per meeting, but Bradford A. Morrow receives $2,000 per month and the other three directors receive $850 per month. In 2003, and in addition to directors' fees, Bradford A. Morrow received $57,000 in consulting fees. 10 Employment Arrangements - ----------------------- Mr. Keith Winn entered into an employment agreement with the Company to serve as its Chief Technology Officer. This agreement became effective May 1, 2001 and had a term of one year. The agreement automatically renews for an additional year on each anniversary date. The agreement provides for annual compensation of $150,000 and contains termination and severance clauses. The following table presents the aggregate indicated compensation paid by the Company to the named executive officers for the year ended December 31, 2003:
Annual Compensation ------------------------------------------------- Name and Principal Position Year Salary ($) Other Annual Compensation ($) - -------------------------------------- ---- ---------- ----------------------------- Walter G. Fuller 2003 - 7,600(1) CEO and Director 2002 - 6,750(1) 2001 - 7,250(1) Craig Litchin 2003 105,673 - COO and Principal Financial Officer 2002 91,714 - 2001 91,714 - Keith Winn 2003 154,040 - Chief Technology Officer 2002 142,040 - 2001 86,094(2) - - ----------------- (1) Amount reflects director fees. (2) Amount reflects pro-rated salary during 2001.
Stock Option Plan - ----------------- The Board of Directors adopted each of the 1999 Stock Option Grant Plan (the "1999 Plan") and the 2000 Stock Option Plan (the "2000 Plan," and together with the 1999 Plan, the "Plans"). There are 2,500,000 shares of commons stock subject to issuance under the 2000 Plan. However, this amount is reduced by the shares issued upon the exercise of the options issued under the 1999 Plan. The 1999 Plan remains in full effect until no options awarded under such plan remain outstanding. As of December 31, 2003, 5,000 non-qualified options issued under the 1999 Plan remained outstanding. Option Grants and Exercises - --------------------------- No options or stock appreciation rights were granted to the executive officers during 2003. No options granted to the executive officers had been exercised as of December 31, 2003. As of December 31, 2003, there were total options outstanding to purchase 5,000 and 1,712,500 shares of the Company's common stock under the 1999 Plan and the 2000 Plan, respectively. The following table sets forth information about the unexercised options of executive officers for the fiscal year ended December 31, 2003.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options Options at 12-31-03 At 12-31-03 (1) -------------------------------- -------------------------------- Name Exercisable Unexercisable Exercisable Unexercisable - ---------------- --------------- --------------- --------------- --------------- Walter G. Fuller 315,000 0 $7,800 $0 11 Craig Litchin 85,000 0 $2,400 $0 Keith Winn 100,000 50,000 $5,000 $2,500 - ----------------- (1) Based on a closing stock price of $0.30 per share as of December 31, 2003. Securities Authorized For Issuance Under Equity Compensation Plans
The following table sets forth certain information concerning aggregate stock options authorized for issuance under each of the Plans as of December 31, 2003:
EQUITY COMPENSATION PLAN INFORMATION AT DECEMBER 31, 2003 (a) (b) (c) --- --- --- Number of Securities to be Weighted-Average Exercise Number of Securities Remaining Issued Upon Exercise of Price Available for Future Issuance Under Outstanding Options, of Outstanding Plan (Excluding Securities Reflected in Warrants and Rights Options, Warrants and Rights Column (a)) ------------------- ---------------------------- ----------- 2,500,000 $0.32 782,500
Termination of Employment and Change of Control Arrangements - ------------------------------------------------------------ The Company has no termination of employment or change in control arrangements. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The table below sets forth the total number of shares of the Company's outstanding voting stock owned by beneficial owners owning more than 5% and each director and officer of the Company, and by all officers and directors as a group.
Number of Shares Name and Address Owned Beneficially and Percent of of Beneficial Owner Title of Class of Record Class(6) - --------------------------- ------------------ ---------------------- ------------ Beneficial owners owning more than 5% other than management - ----------------------------------------------------------- Sandra K. Leatherman Common Stock 1,601,820 (7) 13.9% 3345 Fosca St. Carlsbad, CA 92009 Kelly Manoccio Common Stock 1,231,610 (8) 10.7% 1027 Orchard Lane Broadview Heights, OH 44147 Beneficial ownership of officers and directors - ---------------------------------------------- Walter G. Fuller Common Stock 2,974,880 (4) 25.7% 217 E. Railroad St. P.O. Box 299 Garrett, IN 46738 Nicholas Litchin Common Stock 1,589,760 (2)(4) 13.8% 6401 Constitution Dr. Ft. Wayne, IN 46804 12 Number of Shares Name and Address Owned Beneficially and Percent of of Beneficial Owner Title of Class of Record Class(6) - --------------------------- ------------------ ---------------------- ------------ Christopher M. Welch Common Stock 1,379,410 (1)(9) 11.9% 920 Sycamore Avenue, #62 Vista, CA 92083 Craig Litchin Common Stock 85,000 (5) .7% c/o 1040 Joshua Way Vista, CA 92083 George E. McGill Common Stock 439,920 (4) 3.8% 120 Birmingham, #240 Cardiff, CA 92007 Bradford A. Morrow Common Stock 130,000 (3) 1.1% 9025 E. Jenan Dr. Scottsdale, AZ 85260 All Officers and Common Stock 6,598,970 57.1% (6) Directors as a Group (6 persons) - ----------------- (1) Includes options to purchase 195,000 common shares under the Company's stock option plan (2) Includes 214,920 shares held of record by L&R Realty, an Indiana general partnership, of which Mr. Litchin is a partner, 699,840 shares held of record by the Litchin Family Partnership, of which Mr. Litchin is a general partner, and 360,000 shares held of record by Mercer Beverage Co., an Ohio corporation, of which Mr. Litchin is the President and of which Mrs. Litchin is a principal shareholder. Mr. Litchin disclaims beneficial ownership of these shares. (3) Includes options to purchase 130,000 common shares under the Company's stock option plan. (4) Includes options to purchase 315,000 common shares under the Company's stock option plan. (5) Includes options to purchase 85,000 common shares under the Company's stock option plan. (6) Adjusted for the effect of 1,717,500 shares issuable upon exercise of outstanding stock options plus 9,842,680 shares outstanding for a total of 11,560,180 shares. (7) Includes 1,601,820 shares held as trustee of the J&S Trust. (8) Includes 465,020 shares held as beneficial owner of the Janice Welch Trust.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- None. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K - ------------------------------------------ (a) Exhibits (1) Financial Statements The Company's financial statements are included herein as required under Item 7 of this Annual Report on Form 10-KSB. See Index to Financial Statements on page [16]. (2) Financial Statement Schedules All financial statement schedules have been omitted since the information is either not applicable or required, or is included in the financial statements or notes thereof. 13 (3) Exhibits 3.1(a) Certificate of Incorporation (Incorporated by reference to Registrant's Registration Statement No. 33-33092-D, effective April 17, 1990.) 3.1(b) Amendment to Certificate of Incorporation (Incorporated by reference to Registrant's Registration on Form 8-A, filed April 10, 1997.) 3.2 Bylaws (Incorporated by reference to Registrant's Registration Statement No. 33-33092-D, effective April 17, 1990.) 4.1 Specimen Stock Certificate (Incorporated by reference to Registrant's Registration Statement No. 33-33092-D, effective April 17, 1990.) 14.1 Code of Ethics for Principal Executive Officer and Senior Financial Officers 21.1 Subsidiaries of Registrant (Incorporated by reference to Registrant's Form 10-KSB for the year ended December 31, 1996.) 24.1 Power of Attorney (incorporated by reference to the signature page to this Annual Report on Form 10-KSB) 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of 2003. 14 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES - ------------------------------------------------ Audit Fees - ---------- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of ITI's annual financial statement and review of financial statements included in ITI's 10-QSB reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements were $24,396 for fiscal year ended 2003 and $34,481 for fiscal year ended 2002. Audit-Related Fees - ------------------ There were no fees for other audit related services for fiscal years 2003 and 2002. Tax Fees - -------- There were no fees for tax compliance, tax advice and tax planning for the fiscal years 2003 and 2002. All Other Fees - -------------- There were no other aggregate fees billed in either of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above. Audit committee and pre-approval policy - --------------------------------------- Two of the members of our board of directors were assigned the duties of an audit committee. Our principal financial officer evaluates and approves in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures. 15 INDEX TO FINANCIAL STATEMENTS ----------------------------- Page ---- Report of Comiskey & Company, P.C., Independent Public Accountants F-1 FINANCIAL STATEMENTS Balance Sheet F-2 Statements of Operations F-3 Statement Stockholders' Equity F-4 Statements of Cash Flows F-5 Notes to Financial Statements F-6 through F-13 16 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTELLECTUAL TECHNOLOGY, INC. By: /s/ Craig Litchin --------------------------------------- Craig Litchin, President, Chief Operating Officer and Principal Financial Officer Date: April 14, 2004 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Craig Litchin his true and lawful attorneys-in-fact and agents, each with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-KSB, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- By: /s/ Craig Litchin President, Chief Operating Officer, April 14, 2004 ------------------------- Treasurer, Principal Financing Craig Litchin Officer, Principal Accounting Officer By: /s/ Nicholas Litchin Director April 14, 2004 ------------------------- Nicholas Litchin By: /s/ George McGill Vice President, Secretary April 14, 2004 ------------------------- George McGill By: /s/ Walter G. Fuller Chief Executive Officer, Chairman April 14, 2004 ------------------------- of the Board, Director Walter G. Fuller By: /s/ Bradford Morrow Director April 14, 2004 ------------------------- Bradford Morrow By: /s/ Christopher M. Welch Director April 14, 2004 ------------------------- Christopher M. Welch 17 Index to Financial Statements INTELLECTUAL TECHNOLOGY, INC. ----------------------------- Page Report of Comiskey & Company, P.C. Independent Public Accountants F-1 Balance Sheet F-2 Statements of Operations F-3 Statement of Stockholders' Equity F-4 Statements of Cash Flows F-5 Notes to Financial Statements F-6 through F-12 F-i Intellectual Technology, Inc. FINANCIAL STATEMENTS December 31, 2003 F-ii REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- We have audited the accompanying balance sheet of Intellectual Technology, Inc. as of December 31, 2003, and the related statements of operations, stockholders' equity, and cash flows for each of the years ended December 31, 2003 and 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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. We believe our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Intellectual Technology, Inc. as of December 31, 2003, and the results of its operations, cash flows, and changes in stockholders' equity for each of the years ended December 31, 2003 and 2002 in conformity with accounting principles generally accepted in the United States of America. Denver, Colorado February 27, 2004 except for Note 10, which is March 16, 2004 PROFESSIONAL CORPORATION F-1
Intellectual Technology Inc. BALANCE SHEET December 31, 2003 ASSETS Current Assets Cash and cash equivalents $ 672,399 Accounts receivable 591,180 Bid bond deposit 500,000 Inventory 1,105,232 Prepaid income taxes 11,341 Prepaid expenses 78,160 ---------------- Total current assets 2,958,312 Property and Equipment Contract equipment 7,425,331 Non-contract equipment - office, warehouse equipment, furniture and vehicles 147,956 ---------------- 7,573,287 Less: accumulated depreciation 7,037,026 ---------------- 536,261 Other Assets Patents and trademark, net of accumulated amortization of $724,923 10,647 Deposits 6,865 ---------------- Total assets $ 3,512,085 ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 485,346 Accrued expenses and interest 76,148 Income taxes payable 98,958 Deferred income tax liabilities 8,000 Due to related party 27,930 ---------------- Total current liabilities 696,382 Long-term Liabilities Deferred income tax liabilities, net of current portion 16,000 Due to related party, net of current portion 98,921 ---------------- 114,921 ---------------- Stockholders' Equity Preferred stock, $0.00001 par value, 1,000,000 shares authorized, no shares issued or outstanding - Common stock, $0.00001 par value, 20,000,000 shares authorized, 9,842,680 shares issued and outstanding 98 Additional paid-in capital 1,154,452 Retained earnings 1,546,232 ---------------- 2,700,782 ---------------- Total liabilities and stockholders' equity $ 3,512,085 ================
The accompanying notes are an integral part of the financial statements. F-2
Intellectual Technology Inc. STATEMENTS OF OPERATIONS For the years ended December 31, 2003 and 2002 2003 2002 ---------------- ---------------- REVENUES Transaction fees $ 6,529,055 $ 5,930,859 Other revenue 91,678 386,098 ---------------- ---------------- Total revenues 6,620,733 6,316,957 COST OF REVENUES Depreciation and amortization - contract costs 526,070 611,426 Insurance 26,188 18,387 Maintenance 1,125,025 1,221,204 Materials 1,925,476 1,758,587 Costs of other revenue 72,557 270,330 Other contract expenses 18,312 49,009 Impairment loss - equipment parts 52,788 22,212 Reduction in provision for contract losses (27,788) (22,212) Property taxes 45,479 60,536 ---------------- ---------------- Total cost of revenues 3,764,107 3,989,479 ---------------- ---------------- Gross profit 2,856,626 2,327,478 OPERATING EXPENSES Depreciation 25,799 16,347 Amortization of patent 9,176 35,214 Selling, general and administrative expenses 1,588,249 1,444,148 Research and development 235,322 199,254 ---------------- ---------------- 1,858,546 1,694,963 ---------------- ---------------- Income from operations 998,080 632,515 OTHER INCOME (EXPENSE) Interest income 7,327 7,077 Loss on sale of property and equipment (2,242) - Interest expense (26,780) (82,218) ---------------- ---------------- Income before income taxes 976,385 557,374 Income tax expense 360,915 197,997 ---------------- ---------------- NET INCOME $ 615,470 $ 359,377 ================ ================ Income per share: (Basic) $ 0.06 $ 0.04 ================ ================ Income per share: (Diluted) $ 0.06 $ 0.04 ================ ================ Weighted average number of shares outstanding - basic 9,842,680 9,842,680 ================ ================ Weighted average number of shares outstanding - diluted 9,913,372 9,842,680 ================ ================
The accompanying notes are an integral part of the financial statements. F-3
Intellectual Technology Inc. STATEMENT OF STOCKHOLDERS' EQUITY For the years ended December 31, 2003 and 2002 Common Stock ------------------------------- Additional Number paid-in Retained of shares Amount capital earnings Totals -------------- -------------- -------------- -------------- -------------- Balances as of January 1, 2002 9,842,680 $ 98 $ 1,154,452 $ 571,385 $ 1,725,935 Net income - - - 359,377 359,377 -------------- -------------- -------------- -------------- -------------- Balances as of December 31, 2002 9,842,680 98 1,154,452 930,762 2,085,312 Net income - - - 615,470 615,470 -------------- -------------- -------------- -------------- -------------- Balances as of December 31, 2003 9,842,680 $ 98 $ 1,154,452 $ 1,546,232 $ 2,700,782 ============== ============== ============== ============== ==============
The accompanying notes are an integral part of the financial statements. F-4
Intellectual Technology Inc. STATEMENTS OF CASH FLOWS For the years ended December 31, 2003 and 2002 2003 2002 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 615,470 $ 359,377 Adjustments to reconcile net income to net cash flows from operating activities Amortization of loan fees - 12,056 Depreciation and amortization 561,045 662,987 Deferred income taxes 51,283 3,256 Decrease in loss reserves (27,788) (22,212) Impairment loss - equipment parts 52,788 22,212 Loss on disposal of property 2,242 - Other adjustments - (1,826) Decrease (increase) in assets Accounts receivable (133,955) (40,050) Bid bond deposit (500,000) - Prepaid expenses and other current assets 5,601 26,414 Prepaid income taxes (6,660) 63,723 Inventory (381,584) 10,683 Deposits (518) - Increase (decrease) in liabilities Accounts payable 304,392 (211,626) Accrued expenses and interest 8,943 17,061 Income taxes payable 91,804 5,597 ---------------- ---------------- Net cash flows from operating activities 643,063 907,652 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property and equipment 500 - Investment in trademark (489) (2,153) Purchases of non-contract equipment (57,834) (32,721) Investment in contract costs and equipment (91,861) (238,888) ---------------- ---------------- Net cash flows from investing activities (149,684) (273,762) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings - 400,000 Debt repayments (339,200) (721,704) ---------------- ---------------- Net cash flows from financing activities (339,200) (321,704) ---------------- ---------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 154,179 312,186 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 518,220 206,034 ---------------- ---------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 672,399 $ 518,220 ================ ================ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 8,650 $ 60,896 ================ ================ Cash paid during the year for income taxes $ 225,340 $ 137,311 ================ ================
The accompanying notes are an integral part of the financial statements. F-5 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 1. Description of Business and Summary of Significant Accounting Policies ---------------------------------------------------------------------- Description of Business ----------------------- Intellectual Technology, Inc. ("ITI," "the Company"), a Delaware corporation, is engaged in the design, manufacture, and sale or lease of printer systems and media for the automated printing of motor vehicle registration forms and license plate decals. The Company's printing systems are currently installed in the states of Indiana, Louisiana, Nevada, Ohio, and South Dakota. These printing systems are designed both as stand-alone units which are used in individual motor vehicle registration offices and mailrooms, and have been incorporated into self-service terminal ("SST") machines. ITI provides equipment, software, media, training, and support for the operation of all installed systems. Principles of Consolidation --------------------------- The accompanying financial statements include Intellectual Technology, Inc. and its wholly owned subsidiary, Image Technology, Inc., a Nevada corporation. There are no inter-company transactions due to the inactivity of Image Technology, Inc. Property, Equipment and Depreciation ------------------------------------ Contract costs and equipment have been capitalized, and include the manufactured cost of the printers and other support equipment, SST's, operating software, installation, freight, contract startup costs, and other costs incidental to making the equipment operational. All costs are recovered in the ratio that transactions to date bear to total estimated transactions over the contract terms including renewals. The amount of cost recovery (depreciation) charged to operations in the current period is based on management's estimates of future transactions. Differences in actual transactions from those estimated by management could materially change the rate of cost recovery charged to operations. Repairs and Maintenance ----------------------- Maintenance costs are expensed as incurred. All costs associated with maintenance contracts are expensed as incurred. Inventory --------- Inventory consists of media (paper, ribbon, and decals) used to produce the motor vehicle registration forms and decals. Inventory is stated at the lower of cost or market on a first-in, first-out basis. Non-contract Equipment ---------------------- Cost of equipment used in operations has been capitalized and is depreciated using the declining balance method over useful lives of 3 to 7 years. F-6 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 1. Description of Business and Summary of Significant Accounting Policies --------------------------------------------------------------------------- (continued) ----------- Intangibles ----------- Patent costs are capitalized, and are amortized over the remaining useful lives of the patents. As of June 30, 2002, the amortization periods of these patents were extended to October 31, 2004, as determined by management, due to the extension of a related contract. Certain costs to obtain debt financing have been deferred and are amortized over the length of the loan using the straight-line method. Research and Development ------------------------ Research and development costs are expensed as incurred. Cash and Equivalents -------------------- For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an initial period of three months or less to be cash equivalents. Significant Concentrations -------------------------- For the year ended December 31, 2003, revenues from three contracts accounted for 87% of total revenues. For the year ended December 31, 2002, revenues from three contracts accounted for 91% of total revenues. As of December 31, 2003, accounts receivable from four customers accounted for approximately 91% of accounts receivable. From time-to-time, the Company maintains cash balances in excess of FDIC insured limits. The amount of such excess at December 31, 2003 was approximately $762,000. Earnings per Share ------------------ Basic earnings per share are computed using the weighted average number of shares outstanding. Fully diluted earnings per share are computed using the treasury stock method as to potential dilutive securities. Fair Value of Financial Instruments ----------------------------------- Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments (none of which are held for trading purposes) approximate the carrying values of such instruments. F-7 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 1. Description of Business and Summary of Significant Accounting Policies --------------------------------------------------------------------------- (continued) ----------- Stock Based Compensation ------------------------ The Company applies Accounting Principles Board No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its plan. Accordingly, no compensation costs were recorded for options issued at prices which reflect no intrinsic value at the grant or modification date. The Company considered the effects of recognizing compensation cost pursuant to the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (SFAS No. 123). Using the Black-Scholes option pricing model, which takes into account the exercise price of the options, expected life, current price of the underlying stock, its expected volatility and dividends, and the risk-free interest rate, net income would have been decreased to the pro forma amounts as follows for the years ending December 31: 2003 2002 ---------------------------- ---------------------------- As Pro As Pro Reported Forma Reported Forma ------------- ------------- -------------- ------------- Net income $ 615,470 $ 603,970 $ 359,377 $ 347,877 ============= ============= ============== ============= Net income per share $ 0.06 $ 0.06 $ 0.04 $ 0.04 ============ ============ ============ ============ There were no options granted or modified in the years ended December 31, 2003 and 2002. However, certain options granted during fiscal year 2001 vested in the years ended December 31, 2003 and 2002. The average fair value of options granted during fiscal 2001 was $0.23. The fair value of options is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 7.0 percent; expected life of 1,825 days; dividend yield percentage of 0%; and volatility of 333%. 2. Working Capital --------------- At December 31, 2003, the working capital of the Company was $2,261,930 and the current ratio was 4.25 to 1. 3. Related Party Transactions -------------------------- As of September 1999, the Company entered into an agreement with a related party, for the purchase of a patent for $130,000 plus accrued interest. For the years ended December 31, 2003 and 2002, $0 and $8,431 of this amount were repaid, and $7,897 and $8,665 were charged to interest expense, respectively. The remainder of the payable, $126,851 plus accrued interest of $9,993, is due in quarterly installments of $5,000, inclusive of interest at 6.61%. The Company has made no payments on the note since the third quarter of 2002. For the year ended December 31, 2002, the Company has a related party receivable totaling $31,887, including interest of $3,602. This amount had been fully offset by an allowance for doubtful account in a prior year. During 2003, the Company determined that the receivable was not collectible as the entity no longer exists and has removed both the receivable and allowance from its records. F-8 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 4. Notes Payable and Long-term Debt -------------------------------- The Company paid in full an installment note with a principal balance of $339,200, accruing interest at 7%, in advance of its maturity. For the year ended December 31, 2003, $13,054 was charged to interest expense, including $5,804 of loan fees. 5. Line-of-Credit -------------- The Company has available a $400,000 line-of-credit with a bank secured by accounts receivable, equipment and general intangibles. The line bears interest at Prime plus 1.25% with a minimum interest rate of 5.25% (5.25% at December 31, 2003) and matures in December 2004. There was no outstanding balance on this line at December 31, 2003. For the year ended December 31, 2003, $5,829 was charged to interest expense, all of which were loan fees. 6. Leases ------ As of December 31, 2003, the Company leases for its own use office space and office equipment under non-cancelable operating leases expiring in the years 2004 to 2007. Future minimum lease payments on non-cancelable operating leases over the next five years are as follows: For the year ended December 31, Amount ------------ ------ 2004 $ 83,033 2005 63,900 2006 62,650 2007 9,400 ------------ $ 218,983 ============ Rent expense for the year ended December 31, 2003 was $84,275. Rent expense is net of $8,500 received in settlement of a lawsuit against a former sublease tenant. Rent expense for the year ended December 31, 2002 was $88,229. 7. Income Taxes ------------ The components of the provision for income taxes are as follows: 2003 2002 ---- ---- Current federal income tax expense $ 269,696 $ 171,418 State and local income taxes currently paid or payable 59,895 39,898 Flow-through credits and other expenses (19,959) (16,575) Increase in deferred tax 51,283 3,256 ---------- ---------- Income tax expense $ 360,915 $ 197,997 ========== ========== F-9 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 7. Income Taxes (continued) ------------------------ The Company also has approximately $55,000 in California Credits for Increasing Research Activities available to offset future California tax. The deferred tax asset and deferred tax liability comprised the following at December 31, 2003: Deferred tax assets Deductible temporary differences $ 2,685 Research and development credits 55,000 Valuation allowance - Research and development credits (43,000) ------------ Total deferred tax assets 14,685 ------------ Deferred tax liabilities Accelerated depreciation of assets 38,685 ------------ Total deferred tax liabilities 38,685 ------------ Net deferred tax liabilities $ 24,000 ============ Reconciliation between statutory federal income tax rate and the effective income tax rates based on income before income taxes and extraordinary items: 2003 2002 ---- ---- Statutory federal income tax rate 34.0% 34.0% Federal income tax credits and other adjustments (1.1%) (2.7%) State income taxes, net of federal tax benefit 4.1% 4.2% ----- ----- Effective income tax rates 37.0% 35.5% ===== ===== 8. Stockholders' Equity -------------------- Preferred Stock --------------- At December 31, 2003, the Company has authorized a total of 1,000,000 preferred shares to be issued in series with rights and privileges to be determined by the Board of Directors. No preferred shares are outstanding, nor have any series of preferred shares been designated. Common Stock ------------ At December 31, 2003, a total of 20,000,000 shares of $0.00001 par value common stock were authorized, and 9,842,680 were issued and outstanding. F-10 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 8. Stockholders' Equity (continued) -------------------------------- Stock Transfer and Exchange with Image Technology, Inc. ------------------------------------------------------- On March 12, 1997, the Company entered into a stock transfer and exchange agreement with Image Technology, Inc. As a result of the transaction, the shareholders of Image Technology, Inc. acquired collectively a 90% interest in the reporting company, with the remaining 10% ownership retained by the original shareholders. The transaction has been accounted for as a recapitalization of the private company, Image Technology, Inc. The accompanying financial statements include the cumulative results of operations of Image Technology, Inc. prior to the acquisition and the cumulative and current results of operations of Intellectual Technology, Inc. and Image Technology, Inc. on a consolidated basis subsequent to the transaction. Stockholders Equity and Comprehensive Income -------------------------------------------- SFAS 130 requires companies to present comprehensive income (consisting primarily of net income items plus other direct equity changes and credits) and its components as part of the basic financial statements. For the year ended December 31, 2003, the Company's financial statements do not contain any changes in equity that are required to be reported separately in comprehensive income. 9. Stock Option Plan ----------------- On December 8, 2000, the directors of Intellectual Technology, Inc. issued options under the 2000 Stock Option Plan ("2000 Plan") consisting of a pool of 2,500,000 stock options. This pool of options will be reduced by the shares issued upon the exercise of the options issued under the 1999 Stock Option Grant Plan ("1999 Plan"). The 1999 Plan will remain in full effect until no options awarded under this plan remain outstanding. As of December 31, 2003, 5,000 non-qualified options issued under the 1999 Plan remain outstanding. A summary of option activity is as follows (all values restated for stock splits):
Weighted Weighted Shares Average Average Under Exercise Options Exercise Option Price Exercisable Price ----------- ----------- ------------ ------------ December 31, 2001 2,032,500 $ 0.32 1,420,000 $ 0.38 Options granted - - - - Previous options vesting - - 447,500 0.19 Options forfeited (315,000) 0.34 (250,000) 0.38 Options exercised - - - - ----------- ----------- ------------ ------------ Options outstanding as of December 31, 2002 1,717,500 $ 0.32 1,617,500 $ 0.33 Options granted - - - - Previous options vesting - - 50,000 0.25 Options forfeited - - - - Options exercised - - - - ----------- ----------- ------------ ------------ Options outstanding as of December 31, 2003 1,717,500 $ 0.32 1,667,500 $ 0.32 =========== =========== ============ ============
F-11 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 Options have exercise prices of $0.38, $0.25, and $0.18. All of the options granted expire at various times over a period of five years from the date of grant in the case of significant shareholders and five years from the date of vest for all others and have the following vesting characteristics: Number of options Vesting period Vested at December 31, 2003 ----------------- -------------- --------------------------- 1,170,000 Immediately 1,170,000 397,500 1 year 397,500 150,000 one-third over each of 3 years 100,000 --------- --------- 1,717,500 1,667,500 ========= ========= F-12 Intellectual Technology, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 2003 10. Subsequent Events ----------------- On March 16, 2004, the Company declared a dividend of $0.02 per share payable to all common shareholders of record as of March 18, 2004. On March 16, 2004, the Board of Directors approved the termination of registration of the Company's Common Stock under Section 12(g) of the Securities Exchange Act of 1934. No timetable has been determined for the termination. F-13 EX-14.1 3 iticodeethics.txt INTELLECTUAL TECHNOLOGY 10KSB, CODE OF ETHICS Exhibit 14.1 INTELLECTUAL TECHNOLOGY, INC. Code of Ethics for ------------------ Principal Executive Officer and Senior Financial Officers --------------------------------------------------------- I. INTRODUCTION ------------ A. Purpose of Code. --------------- Intellectual Technology, Inc. (the "Corporation") is committed to the ----------- highest standards of legal and ethical conduct, including providing full and accurate financial disclosure in compliance with applicable laws, rules and regulations and maintaining its books and records in accordance with applicable accounting policies, laws, rules and regulations. This Code of Ethics for Principal Executive Officer and Senior Financial Officers (this "Code") is designed to set forth particular standards of conduct ---- that the Corporation requires its principal executive officer and its senior financial officers to follow. Any activity by a principal executive officer or senior financial officer of the Corporation contrary to this Code is prohibited and is not within the scope of employment or authority of such persons. B. Persons Subject to this Code. ---------------------------- This Code is applicable to the following Corporation personnel: 1. Principal executive officer 2. Principal financial officer 3. Principal accounting officer 4. Controller; and 5. Other persons performing similar functions as persons in the enumerated positions (individually, a "Covered Person" and collectively, the "Covered Persons"). C. Distribution and Commitment --------------------------- All Covered Persons will be given a copy of this Code. Each Covered Person will be required to certify that each (i) has read and understands the guidelines contained in this Code and (ii) will comply with the terms of this Code. II. COMPLIANCE WITH RULES AND REGULATIONS ------------------------------------- The Corporation is committed to conducting its business in accordance with all applicable laws, rules and regulations and in accordance with the highest standards of business ethics. As a Covered Person, you must not only comply with applicable laws, however. You also have leadership responsibilities that include creating a culture of high ethical standards and commitment to compliance; maintaining a work environment that encourages employees to raise concerns; and promptly addressing employee compliance concerns. 1 III. CONFLICTS OF INTEREST --------------------- A. General Statement. ----------------- All Covered Persons are expected to use good ethical judgment, and to avoid situations that create an actual or potential conflict between the Covered Person's personal interests and the interests of the Corporation. A conflict of interest also exists where the Covered Person's loyalties or actions are divided between the Corporation's interests and those of another, such as a competitor, supplier or customer. Both the fact and the appearance of a conflict should be avoided. Before making any investment, accepting any position or benefits or participating in any transaction or business arrangement that creates or appears to create a conflict of interest, Covered Persons must obtain the written approval of the Audit Committee of the Board of Directors. While it is not feasible to describe all possible conflicts of interest that could develop, the following are some of the more common examples. B. Examples of Conflicts. --------------------- 1. Financial Interest in Another Business. Covered Persons should ---------------------------------------- not have a direct or indirect financial interest in a customer, supplier, competitor or others with whom the Corporation does business. The ownership of less than one percent (1%) of the publicly traded stock of a corporation will not be considered a conflict. 2. Other Employment and Outside Activities. Covered Persons should ---------------------------------------- not work for, become directly or indirectly involved with, or receive compensation of any sort from, a customer, supplier or competitor of the Corporation or others with whom the Corporation does business. Covered Persons should not engage in any activity which may be competitive with or contrary to the interests of the Corporation. 3. Corporate Opportunities. Business opportunities of which Covered ----------------------- Persons learn as a result of employment with the Corporation belong to the Corporation, if within the scope of the Corporation's existing or contemplated business, and should not be taken advantage of for personal gain. IV. DISCLOSURE IN REPORTS --------------------- The Corporation is committed to providing full, fair, accurate, timely and understandable disclosure in reports and documents filed with, or submitted to, the Securities and Exchange Commission and in other public communications made by the Corporation. V. COMPLIANCE WITH THIS CODE ------------------------- If Covered Persons have questions about this Code, advice should be sought from the Audit Committee of the Board of Directors. If a Covered Person knows of or suspects a conflict of interest or a violation of applicable laws or regulations or this Code, the Covered Person must immediately report that information to the Chief Executive Officer or, if the suspected violation concerns the Chief Executive Officer, to the Chairman of the Board. 2 VI. ACCOUNTABILITY; WAIVER OF THIS CODE ----------------------------------- The Board shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of this Code. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to this Code, and may include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits and termination of the individual's employment. The Corporation will waive application of the policies set forth in this Code only when circumstances warrant granting a waiver, and then only in conjunction with any appropriate monitoring of the particular situation. Changes in and waivers of this Code may be made only by the Board of Directors or the Audit Committee of the Board and will be disclosed as required under applicable law and regulations. 3 Intellectual Technology, Inc. CODE OF ETHICS FOR PRINCIPAL EXECUTIVE OFFICER AND SENIOR FINANCIAL OFFICERS RECEIPT AND AGREEMENT OF COMPLIANCE NOTICE OFFICER'S NAME: ------------------------------------------------------------ I have read and understand the Code of Ethics for Principal Executive Officer and Senior Financial Officers of Intellectual Technology, Inc. and hereby acknowledge receipt thereof. I agree to comply with the requirements of such code. ---------------------------------------- Signature ---------------------------------------- Date EX-31.1 4 iticert302ceo.txt INTELLECTUAL TECHNOLOGY 10KSB, CERT 302, CEO Exhibit 31.1 SARBANES-OXLEY ACT SECTION 302 CERTIFICATION -------------------------------------------- OF CHIEF EXECUTIVE OFFICER -------------------------- I, Walter G. Fuller, Chief Executive Officer, certify that: 1. I have reviewed this annual report on Form 10-KSB of Intellectual Technology, Inc. (the "Company"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [RESERVED]; (c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. Date: April 14, 2004 By: /s/ Walter G. Fuller -------------------------------- Walter G. Fuller Chief Executive Officer EX-31.2 5 iticert302cfo.txt INTELLECTUAL TECHNOLOGY 10KSB, CERT 302, CFO Exhibit 31.2 SARBANES-OXLEY ACT SECTION 302 CERTIFICATION -------------------------------------------- OF CHIEF FINANCIAL OFFICER -------------------------- I, Craig Litchin, President, Chief Operating Officer and Principal Financial Officer, certify that: 1. I have reviewed this annual report on Form 10-KSB of Intellectual Technology, Inc. (the "Company"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [RESERVED]; (c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. Date: April 14, 2004 By: /s/ Craig Litchin ---------------------------------- Craig Litchin President, Chief Operating Officer and Principal Financial Officer EX-32.1 6 iticert906ceo.txt INTELLECTUAL TECHNOLOGY 10KSB, CERTI 906, CEO Exhibit 32.1 SARBANES-OXLEY ACT SECTION 906 CERTIFICATION -------------------------------------------- In connection with this annual report on Form 10-KSB of Intellectual Technology, Inc. (the "Company") for the period ended December 31, 2003, I, Walter G. Fuller, Chief Executive Officer, hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: 1. This Form 10-KSB for the period ended December 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in this Form 10-KSB for the period ended December 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 14, 2004 By: /s/ Walter G. Fuller ---------------------------------- Walter G. Fuller Chief Executive Officer EX-32.2 7 iticert906cf0.txt INTELLECTUAL TECHNOLOGY 10KSB, CERT 906, CFO Exhibit 32.2 SARBANES-OXLEY ACT SECTION 906 CERTIFICATION -------------------------------------------- In connection with this annual report on Form 10-KSB of Intellectual Technology, Inc. (the "Company") for the period ended December 31, 2003, I, M. Catherine Wright, Senior Vice President and Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: 1. This Form 10-KSB for the period ended December 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in this Form 10-KSB for the period ended December 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 14, 2004 By: /s/ Craig Litchin ---------------------------------- Craig Litchin President, Chief Operating Officer and Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----