SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934
For the Fiscal Year Ended: September 30, 1997
____ Transaction report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 33-24464-NY
IMTEK OFFICE SOLUTIONS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2958856
------------------------ -----------------------------
(State of Incorporation) (IRS Employer Identification)
2111 Van Deman St., Baltimore, MD 21224
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's Telephone No. including area code: (410) 633-5700
--------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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
---- ----
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
There is currently no market for the issuer's stock.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as the latest practicable date. 7,538,361 shares, as of January
7, 1998.
Documents Incorporated by Reference
-----------------------------------
NONE
Imtek Office Solutions, Inc.
Table of Contents
Page No.
--------
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
And Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
Part IV
Item 14, Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Item 1. Business
- -----------------
Introduction
Imtek Office Solutions Inc., (the Company), formerly Spectrum Equities
Inc., effectively commenced operations on April 22, 1997 and engages in the
retail and wholesale of copiers and facsimiles, servicing of office equipment,
rebuilding and rental of high volume copiers and duplicators, providing
commercial printing, duplicating and document outsourcing services, and to a
lesser extent, the retail sale of office supplies. The Company operates in the
Mid-Atlantic region, consisting of Baltimore, Maryland, Washington, D.C.,
Richmond, Virginia, and the Tidewater area of Southeastern Virginia.
History
The Company was organized as a Delaware corporation in 1987 under the
name Vision Capital, Inc. On March 31, 1989, it completed a public offering of
10,000 units at a price of $5.00 each, which units were included in a
registration statement filed with the Securities and Exchange Commission. On May
31, 1990, Vision entered into an agreement of merger with Wilmoth's Color Lab,
Inc., ("Wilmoth"), a Tennessee Corporation, to acquire all of the issued and
outstanding shares of common stock of Wilmoth in exchange for a total of
15,340,000 newly issued shares of Vision common stock, which merger resulted in
a change in the voting control, principal business, and management of Vision. By
September 1, 1990, the merger of Wilmoth into Vision was consummated and Vision
changed its name to Diversified Photographic Industries, Inc., and continued the
operations of Wilmoth, a photo finishing laboratory in Memphis, Tennessee.
Wilmoth conducted operations in that location through the date of the merger.
The Company continued its operations as a photo finishing laboratory, processing
and printing film for commercial photographers and photographic studios ,
including portrait studio operations, up until the time that the Company ceased
operations on March 15, 1992. At that time, the secured creditors foreclosed
upon the principal assets of the Company and the remaining unsecured assets were
sold to United Color Lab, Inc. on August 21, 1992 for the sum of $85,000.00.
From that time the Company has been dormant. The Company filed for
reorganization under Chapter 11 of the Bankruptcy Code in U.S. Bankruptcy Court
for the Northern District of Texas and its Plan of Reorganization was approved
in 1995 and the Company emerged as a corporate shell with no liabilities
relating to its prior business ventures. Subsequently, the Company changed its
name to Spectrum Equities, Inc. on February 26, 1996. In April, 1997, the
Company acquired all of outstanding stock of Imtek Corp.
and changed its name to Imtek Office Solutions, Inc.
The Company is a supplier of equipment, products, technologies and
services used in offices to manage information and documents including copier
and printing systems, integrated computer networking and document management
services. The Company also generates revenues and earnings from merchant banking
and specialty finance activities including equipment leasing, accounts
receivable financing and factoring, and viatical settlements.
Management envisions that the Company will become the preferred single
source provider of office solutions and a leader in select finance and merchant
banking business within certain geographic regions.
Acquisition Strategy
- --------------------
The company intends to expand its business through the strategic
acquisition of companies with similar products and services in additional
geographic areas. Additionally, the Company anticipates acquiring other
companies that would provide the Company with expanded or additional products
and services. Acquisitions of companies with similar product lines and
services, management believes, would benefit from the Company's centralized
management, systems of internal control, additional financing sources, and the
Company's marketing efforts.
Management believes that adequate acquisition opportunities exist.
The Company anticipates that significant acquisitions would be funded
principally from the issuance of capital stock. However, to a lesser extent,
acquisitions may be funded by cash generated from operations of the acquired
company or the issuance of long term debt obligations.
Competition
- -----------
The Company's business is highly competitive with numerous competitors
in its geographic area. The Company is in direct competition with local,
regional and national equipment suppliers and dealers, mass merchandisers, and
to a lesser extent, wholesale buying clubs. Principal areas of competition
focus on quality and response time of after-the-sale service, parts
availability, product capability, rental agreements and financing, and price.
The Company competes with companies that have greater financial strength and
marketing resources.
Customers
- ---------
The Company focuses its office solutions marketing efforts primarily
on small and mid-size businesses, regional offices of large companies,
professional service firms, hospitals, educational institutions and governmental
agencies located in or near the areas where the Company maintains offices. Sales
representatives and sales management are compensated based on a combination of
gross sales revenue and point-of-sale profits. A key element of the Company's
operating philosophy is to provide all sales representatives and managers with
an ongoing program of training and education. These sales education programs
consist of in-house training, manufacturer provided training and other
educational courses and seminars. The Company holds weekly sales meetings to
reinforce the consistent application of its procedures and sales strategies.
Additionally, the Company intends to market its proposed financial
services programs through its existing direct sales force, brokers, print media,
and mass communication media, such as radio.
At September 30, 1997, no one customer accounted for more than 5% of
gross sales.
Vendors and Suppliers
- ---------------------
Products purchased by and distributed by the Company may be acquired
from numerous domestic and international suppliers. The Company has not
experienced, and does not anticipate experiencing, any significant difficulty in
obtaining these products and supplies.
The Company's primary products are photocopiers, facsimile equipment,
computers and office products, technologies and services used in offices to
manage information and documents. Management believes it is in the Company's
best interest to maintain a close working relationship with a number of
equipment manufacturers as to allow the Company to purchase equipment and
related parts and supplies at competitive prices. The inability of the Company
to maintain these key relationships could result in disruptions of Company
operations.
Since the Company's business is dependent upon its vendors and
suppliers, the Company has identified MITA Corporation, the world's third
largest manufacturer of photocopiers and facsimile machines, as its preferred
office equipment vendor. Additionally, the Company has selected JP Richards,
the second largest office supply wholesaler in the U.S., as its primary vendor
of office supplies for resale.
Management believes that these strategic alliances will provide the
Company with sufficient product for
sale at competitive prices.
Employees
- ---------
As of September 30, 1997, the Company employed 72 persons, none of
which were covered by a collective bargaining agreement. Management believes
that its employee relations are good.
The Company relies heavily on its senior management and the loss of
any one of them could have a material adverse effect on the financial condition
of the Company. Additionally, the Company's ability to successfully grow and
implement its strategic acquisition policy, which is extremely important to the
Company and its ongoing operations, would be impaired upon the loss of key
personnel.
Technology
- ----------
The Company believes that the office equipment markets will
continually change with the advent of digital technology, which provides for one
piece of office equipment to directly communicate with another. Management
believes that this technology may result in fewer stand alone units being sold.
Additionally, management believes that this shift to multi-functioning equipment
may result in increased training costs for the Company's service technicians.
The advent of the color photocopier, management believes, will become
a greater component of the Company's sales. The Company anticipates expanding
its efforts and product line in this area, since these color copiers can accept
digital output from computers, thus increasing the functionality of the copier.
Environmental Regulation
- ------------------------
The Company's business and product lines generally do not generate
significant hazardous waste. Federal, state, and local regulations have not
had, and are not expected to have, a material adverse affect upon the Company or
its financial condition.
Forward Looking Information
- ---------------------------
The report includes or incorporates by reference certain statements
which are "forward looking statements" within the meaning of the Private
Securities Litigation Act of 1995. Forward-looking statements are based on
various factors and assumptions that include known and unknown risks and
uncertainties, changes in economic conditions, increases in raw material,
subcontract, labor costs, and general competitive factors may cause actual
results to differ materially.
Item 2. Properties
- -------------------
As of January 7, 1998, the Company leases eight locations from
independent landlords as follows:
Location Square Footage Type of Operation Lease Expiration
- -------------------------------------------------------------------------------
Hampton, VA 11,000 Office Equipment Month to Month
- -------------------------------------------------------------------------------
Virginia Beach, VA 3,500 Office Equipment January 1999
- -------------------------------------------------------------------------------
Washington, DC 3,300 Copy Services April 1999
- -------------------------------------------------------------------------------
Alexandria, VA 3,988 Copy Services Month to Month
- -------------------------------------------------------------------------------
Richmond, VA 2,633 Office Equipment October 1998
- -------------------------------------------------------------------------------
Hopewell, VA 10,000 Office Supplies February 1999
- -------------------------------------------------------------------------------
Baltimore, MD 8,400 Financial Services May 1999
- -------------------------------------------------------------------------------
Lanham, MD 1,500 Warehouse Month to Month
- -------------------------------------------------------------------------------
Baltimore, MD 800 Copy Services December 1999
- -------------------------------------------------------------------------------
Richmond, VA 1,500 Office Equipment January, 1999
- -------------------------------------------------------------------------------
Capitol Heights, MD 2,000 Office Equipment Month to Month
- -------------------------------------------------------------------------------
All buildings are of brick or block construction and management
considers that all properties are well maintained and sufficient for its
operations.
Item 3. Legal Proceedings
- --------------------------
As previously reported, the Company filed a voluntary petition for
reorganization pursuant to Chapter 11
of the Bankruptcy Code on January 5, 1994 with the U.S. Bankruptcy Court for the
Northern District of Texas. Its Plan of Reorganization was approved by the Court
of October 5, 1995.
The Company is not a party to any legal proceedings and management is
unaware of any threatened or pending litigation.
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 year ended September 31, 1997.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- --------------------------------------------------------------------------
Matters
-------
There is no known market for the Company's common stock. As of
January 7, 1998, there were 149 holders of record of the Company's common stock.
The Company has not paid any dividends during 1997, and does not
anticipate paying dividends in the near future.
Item 6. Selected Financial Data
- --------------------------------
The following data have been derived from financial statements that
have been audited by Rosenburg, Rich, Baker, Berman & Company for the year ended
September 30, 1997 and Grant-Schwartz Associates, CPA's, for the years ended
September 30, 1996, 1995, 1994 and 1993 and should be read in conjunction with
such statements appearing herein:
Year Ended September 30, 1997 1996 1995 1994 1993
- ------------------------ ---------- ---------- ---------- ---------- ----------
Sales $2,094,972 -0- -0- -0- -0-
Operating Income $ 72,433 -0- -0- -0- -0-
Net Income (Loss) $ 58,367 -0- -0- -0- -0-
Per Share .02 -0- -0- -0- -0-
Balance Sheet Data
- ------------------
Total Assets 1,007,339 -0- -0- -0- -0-
Stockholders Equity 774,072 (37,991) (616,432) (616,432) (616,432)
The Company was inactive for the years ended September 30, 1993 through 1996.
PART I - FINANCIAL INFORMATION
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
Imtek Office Solutions Inc., (the Company), formerly Spectrum
Equities, Inc. effectively commenced operations on April 22, 1997 engaging in
the retail and wholesale sale of copiers and facsimiles, servicing of office
equipment, rebuilding and rental of high volume copiers and duplicators,
providing commercial printing and duplicating services, and to a lesser extent,
the retail sale of office supplies. The Company provides servicing of office
equipment principally through the use of subcontractors. The Company also
intends on providing specialty finance and merchant banking services. The
Company operates in the Mid-Atlantic region, consisting of Baltimore, Maryland,
Washington, D.C., Richmond, Virginia, and the Tidewater area of Southeastern
Virginia.
ACQUISITION STOCK ISSUANCE
On April 22, 1997, the shareholders of Spectrum Equities, Inc.,
(Spectrum) a Delaware Corporation, executed a 400 for 1 reverse stock split.
After the stock split, Spectrum had 625,161 shares of common stock, all one
class, issued and outstanding. Furthermore, on April 22, 1997 Spectrum's
shareholders authorized and approved the acquisition of Imtek Corporation by the
issuance of 4,374,839 shares of Spectrum stock for all 50,000 issued and
authorized shares of Imtek Corporation. Subsequently, the shareholders approved
the corporation's name to be changed to Imtek Office Solutions, Inc. The
acquisition and name change have been reported on Form 8-K of April 22, 1997,
which is hereby incorporated by reference.
RESULTS OF OPERATIONS
The Company, as discussed above and reported on Form 8-K, effectively
commenced operations on April 22, 1997. Prior to this date, the Companys'
predecessor, Imtek Corporation, was a development stage company with no
operations.
During the year ended September 30, 1997, the Company generated gross
revenue of $2,094,972. Approximately 33.6% of gross revenue was derived from
the sale of equipment servicing and supplies. The remaining 66.4% of gross
revenue was derived from the sale, both retail and wholesale, of equipment.
Cost of goods sold for the year ended September 30 1997 was
$1,868,703, or approximately 89.2% of gross revenue. The cost of goods sold
that relate to equipment servicing was 656,439 (35.1% of cost of goods sold),
while the cost of goods sold for equipment sales was approximately $1,212,264
(64.9% of cost of goods sold).
The Company's gross profit for the year ended September 30, 1997 was
$226,264, or approximately 10.8% of gross revenue.
General and Administrative, and selling expenses for the year was
$153,836, or approximately 7.3% of gross revenue. The Company's Officers
elected not to receive or defer remuneration during this period. This election
of non-compensation may not be continued in the future, and thus general and
administrative expenses could increase in subsequent periods.
Income from operations and before taxes and interest was $72,433, or
approximately 3.5% of gross revenue.
During the year, the Company received $6,534 in interest income which
was principally derived from notes receivables. The Company does not anticipate
significant interest income in subsequent periods.
The Company's effective income tax rate for the year was 26.1%.
Because of the tax impact of special transactions and depending upon the
Company's income or loss level in a given period, these rates may vary
dramatically.
The net earnings of the Company for the year ended September 30, 1997
was $58,367, or 2.8% of gross revenue.
The Company anticipates revenue growth in subsequent periods such that
period to period comparisons may not provide meaningful analysis. The Company
anticipates that the core business of sales and servicing if copiers will
generate growth in line with general economic conditions within the Mid-Atlantic
region. However, the Company anticipates expanding its operations in the
wholesale equipment sales market by means of increased marketing efforts. The
Company believes that it has a thorough understanding of the wholesale market,
with experience and an established network. Additionally, the Company
anticipates the expansion of its services with its
copy services operations. By becoming a cost effective and responsive provider
of copier services to certain business segments, the Company anticipates that it
can more fully expand this component of its operations. The Company also intends
to generate substantial future revenues and earnings from merchant banking and
specialty finance services including equipment leasing, accounts receivable
financing and factoring , and viatical settlements.
The Board of Directors of the Company have authorized the issuance of
a $7,500,000, 9% convertible preferred stock through a private placement
memorandum. As of January 7, 1998 this offering memorandum was not yet complete
and the offering was not open. The Company anticipates further expansion by
means of acquisition, which may be funded by either the issuance of additional
capital stock, long term debt, or use of the proceeds generated from the private
placement memorandum.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities resulted in positive cash flow of
$105,631 for the year. Cash flow of $75,740 was used in investing activities,
consisting of the purchase of equipment ($35,740) and the down payment on
certain computer software ($40,000). In April, 1997 the Company issued 4,374,839
shares of common stock to acquire Imtek Corporation. The value of the assets
acquired were $710,563, which consisted of inventory ($353,954) and accounts
receivable ($356,609).
Consistent with the commencement of operations, the Company
experienced fluctuations in certain balance sheet accounts. The cash flow from
operations was primarily in response to net earnings and the decrease in
accounts receivable and inventory, with the increase in accounts payable and
other liabilities providing a lesser impact. The Company recognized an decrease
in accounts receivable, net of allowance for doubtful accounts, over the amount
purchased from Imtek Corporation, of $36,210. The inventory decreased $131,950
from the amount purchased from Imtek Corporation. During the year, the Company
expended $35,740 for fixed assets, which are being depreciated over their
estimated useful lives. Additionally, the company recognized total trade
accounts payable of $154,875 at September 30,1997.
The Company has financed its cash flow requirements from either
operations or through the issuance of capital stock and to a lesser extent,
short-term credit arrangements through related parties, see item 13. As of
January 7, 1998, the Company has not entered into a revolving credit arrangement
with any financial institutions. The Company believes that should external
financing become necessary, it will be able to obtain sufficient resources
at market values.
Item 9. Changes in and Disagreements With Accounting and Financial Disclosures
- ------------------------------------------------------------------------------
In October, 1997, the Company dismissed Grant - Schwartz Associates,
CPA's, the independent accountant engaged to audit the Company's financial
statements for at least the fiscal years ended September 30, 1996 and 1995 as
reported on Form 8-K dated October 24, 1997, which is hereby incorporated by
reference. This decision was approved by the Company's Board of Directors. There
were no disagreements between the Company and Grant -Schwartz Associates, CPA's
on any matter of accounting principles or practices, financial disclosure or
Auditing scope of procedure.
The accountants report issued by Grant - Schwartz Associates for the
years ended September 30, 1996 and 1995 dated October 15, 1996 and May 16, 1996
respectively were qualified as to "going concern".
On October 24, 1997, the Company appointed Rosenberg, Rich , Baker,
Berman and Company as its new accountants as reported on Form 8-K dated October
24, 1997, which is hereby incorporated by reference.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The directors, executive officers and key management employees of the Company
are:
Name Age Position
- ------------------ --- -------------------------------------------------------------------------
Edwin C. Hirsch 49 Chairman of the Board of Directors, President and Chief Executive Officer
Michael L. Lowe 42 Director, Chief Operating Officer
Robert J. Brown 52 Director, Senior Vice President
Brad C, Thompson 41 Director, Chief Financial Officer
Andrew J. Walter 34 Director, Senior Vice President
Robert W. Hoover 51 Director, Executive Vice President
EDWIN C, HIRSCH, JR., has been the Company's Chief Executive Officer
and Chairman of the Board since April 1997. From August 1995 through the
October, 1997, Mr. Hirsch was the President of CMS, Inc. From 1990 through
1996, Mr. Hirsch served as the President of Reptech, a US-China joint venture
company specializing in the
production and sale of high-energy magnets. Mr. Hirsch currently serves as a
member on Reptech's Board of Directors and is a member of the State of
Maryland's Sister Committee - China. From 1984 through 1989, Mr. Hirsch was a
principal in Commonwealth Financial Associates, a merchant banking company.Mr.
Hirsch holds a BS in Engineering from the U.S. Military Academy at West Point.
After completing his military obligation he began his professional career in
sales and sales management with IBM and Commercial Credit Company.
MICHAEL L. LOWE, has been the Company's Chief Operating Officer since
April 1997. From 1991 through 1995 Mr, Lowe was a senior manager and Divisional
Vice President at Danka Business Systems. After graduating from West Liberty
College he began his professional career in sales and management positions with
Northwestern Insurance prior to starting-up a Canon photocopier business in
Charleston, West Virginia.
ROBERT J. BROWN, has served as a Senior Vice President since April
1997. Mr. Brown currently serves as finance committee chairman of the Anne
Arundel County Economic Development Corporation. From 1983 through October,l
1997, Mr. Brown owned and managed several equipment leasing and financial
services companies, including American Banking Services which managed equipment
lease portfolios for the RTC and banks. From 1967 through 1982, Mr. Brown was
employed by Commercial Credit Company where he held a variety of credit,
marketing and portfolio management positions. Mr. Brown is a graduate of the
University of Baltimore.
ROBERT W. HOOVER, is the Company's Executive Vice President and
responsible for the Company's strategic planning and business development. From
1995 through September 1997, Mr. Hoover was the President of Beneficial
Assistance, Inc., which was acquired by the Company in October, 1997. From 1984
through 1994, Mr. Hoover was a principal in the merchant banking firm of
Commonwealth Financial Services, where he served as the company's president.
From 1977 through 1983, Mr. Hoover was employee by the Commercial Credit Company
where he held a variety of senior positions. Mr. Hoover holds a BA degree from
the University of Maryland.
ANDREW J. WALTER, Senior Vice President. From 1994 Mr. Walter was a
principal in Beneficial Assistance, Inc., which was acquired by the Company in
October 1997. Previously, he was a principal in several
insurance brokerage companies.
BRAD C. THOMPSON, CPA, has been the Company's Chief Financial Officer
since October 1997. From 1993 until September 30, 1997, Mr. Thompson was a
senior partner with the accounting firm of Schiller, Holinsky and Gardyn. From
1980 through 1993, Mr. Thompson was a senior manager with the international
accounting firm of Grant Thornton. Mr. Thompson is a 1978 graduate of Loyola
College in Baltimore.
All directors hold office until the next annual meeting of
shareholders of the Company and until their successors are elected and
qualified. Officers hold office until the first meeting of directors following
the annual meeting of shareholders and until their successors are elected and
qualified, subject to earlier removal by the Board of Directors.
Misters Hoover, Walter, and Thompson were elected officers and
directors of the Company, and have agreed to serve in such capacity, effective
October 1, 1997.
Item 11. Executive Compensation
- ---------------------------------
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATIONS
AWARDS PAYOUTS
(A) (B) (C) (D) (E) (F) (G) (H) (I)
NAME OTHER RESTRTED. SECURTS. LTIP ALL
AND SALARY ANNUAL STOCK UNDER-LYING PAYOUTS OTHER
PRINCIPAL YEAR ($) BONUS COMPEN- AWARDS OPTIONS/ COMPEN-
POSITION SATION ($) ($) SAR (#) SATION
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
EDWIN C. 1997 - - - - - - -
HIRSCH,
CEO
(1) Employment began October 1, 1997
The Company intends to compensate officers during the fiscal year 1998 at an
annual salary of $110,000 for Edwin Hirsch and $100,000 for Robert J. Brown,
Michael L. Lowe, Andrew J. Walter, Robert W. Hoover and Brad C. Thompson.
Item 12. Security Ownerships of Certain Beneficial Owners and Management
- -------------------------------------------------------------------------
The following table shows the amount of common stock owned as of
January 7, 1998 by each director, and by all directors and officers as a group
consisting of six persons. Each individual has beneficial ownership of the
shares and each individual has sole voting and investment power with respect to
the number of shares beneficially owned. In addition, the table also shows
those persons or entities which beneficially was known to own more than 5% of
the outstanding common stock as of January 7, 1998.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownerships Class
Edwin C. Hirsch, CEO, Director 1,043,000 shares 13.84
704 Severnside Ave.
Severna Park, MD 21146
Michael L. Lowe, COO, Director 463,325 shares 6.15
12205 Renwich Ct.
Glen Allen, VA 23060
Robert J. Brown, V.P., Director 1,043,000 shares 13.84
1210 Lorene Dr.
Pasadena, MD 21122
Brad C. Thompson, CFO, Director 123,000 shares 1.63
8348 Fairwood Ct.
Pasadena, MD 21122
Andrew J. Walter, VP, Director 369,500 shares 4.90
11851 Drawbridge Rd.
Princess Anne, MD 21853
Robert W Hoover, EVP, Director 179,000 shares 2.37
2593 Lawnside Rd.
Timonium, MD 21093
All officers and directors as a group 3,220,825 shares 42.73
(6 Persons)
Walega Family, L.P. 602,303 shares 7.99
1510 N. Colonial Ct.
Arlington, VA 22209
Bison Financial, LLC 875,000 shares 11.61
915 Stubblefield Lane
Baltimore, MD 21201
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The company has a servicing agreement with CMS Holdings, Inc. (CMS),
an entity owned 50% by Edwin Hirsch and 50% by Robert J. Brown, officers and
directors of the registrant. Under terms of the agreement, CMS performed
certain maintenance, repair marketing and administrative tasks for the Company.
The Company paid $937,771 for these services during the year ended September 30,
1997. This contract was terminated October 1, 1997.
During the course of the year, the Company had advanced funds to CMS.
CMS entered into an unsecured demand note receivable ( $20,466 outstanding at
September 30, 1997) to the Company which bears interest at 10%, payable
quarterly.
The Company also used the trade credit facilities of CMS throughout
the year. At September 30, 1997, the Company owed CMS $73,063. The Company
purchased approximately $225,000 worth of supplies and equipment during the year
under this arrangement.
The Company purchased certain equipment for resale through AmeriLease,
Inc. (AI), a company owned equally by Edwin Hirsch, Robert J. Brown, Robert W.
Hoover and Andrew J. Walter, officers and directors of the Company. Equipment
purchased under this arrangement amounted to $105,047 during the year. The
company owed AI $22,368 at September 30, 1997.
On June 1997, the Company entered into a lease with AI for three high
volume Xerox copiers. These copiers are rented by the Company on a month to
month basis with a thirty day notification required to terminate the lease.
Monthly lease payments are computed based upon $.01 per copy. Equipment rent
expense under this agreement was $7,674 for the t\year ended September 30, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report.
(1) Financial Statements
The following financial statements of the Registrant are included
herewith:
(i) Balance Sheets as of September 30, 1997 and 1996
(ii) Statements of Income for the years ended September 30, 1997,
1996 and 1995
(iii)Statements of Shareholder's Equity for the period from
September 30, 1995 to September 30, 1997
(iv) Statements of Cash Flows for the years ended September 30,
1997, 1996 and 1995
(v) Notes to Financial Statements
(vi) Independent Auditors' Report
(2) Financial Statement Schedules - None
(3) Exhibits
The following exhibits are incorporated by this reference to Registrant's
Registration Statement on Form S-18, File No. 33-244464-NY:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.0 Certificate of Incorporation of the Registrant
2.1 Bylaws of the Registrant
The following exhibits are incorporated by reference to Registrant's report on
Form 8-K reporting event of April 22, 2997:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1 Certificate of Amendment to
Certificate of Incorporation
2 Acquisition Agreement with
Shareholders of Imtek Corporation
The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 MITA Dealer LVC Sales Agreement between Imtek
Corporation and MITA Copystar America, Inc. dated
November 26, 1997
10.2 MITA Dealer Agreement for Special Products between
MITA Copystar America, Inc. dated November 26, 1997
10.3 MITA Dealer Agreement for Business Facsimile Equipment
between MITA Copystar America, Inc. and Imtek Corporation
dated November 26, 1997
10.4 MITA Dealer HVC Sales Agreement between MITA Copystar
America, Inc. and Imtek Corporation dated November 26, 1997
10.5 MITA Customer Assurance (MCA) Dealer Agreement between
MITA Copystar America, Inc. and Imtek Corporation dated
November 26, 1997
10.6 MITA Dealer Agreement for Integrated Document Imaging
Equipment between MITA Copystar America, Inc. and
Imtek Corporation dated November 26, 1997
11 Computation of Net Income per Share
21 Subsidiaries
23.1 Consent of Independent Auditor
27 Financial Data Schedule
(b) Reports on Form 8-K - There were no reports on Form 8-K for the quarter
ended September 30, 1997.
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
INDEX TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
Page
Independent Auditors' Report................................... 1
Financial Statements
Balance Sheets............................................ 2
Statements of Income...................................... 3
Statements of Shareholders' Equity........................ 4
Statements of Cash Flows.................................. 5-6
Notes to the Financial Statements......................... 7-11
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
BALANCE SHEETS
September 30,
-------------------------
1997 1996
---------- ----------
Assets
Current Assets
Cash $ 29,118 $ -
Accounts receivable (less allowance
for doubtful accounts of $4,000) 393,062 -
Inventory 485,661 -
Notes receivable - related parties 20,466 -
Notes receivable - other 5,075 -
Deposit on equipment 40,000 -
---------- ----------
Total current assets 973,382 -
Property and Equipment - at cost 35,740 -
Less: Accumulated depreciation 1,783 -
---------- ----------
33,957 -
Intangible assets - net - 2,142
---------- ----------
Total assets $1,007,339 $ 2,142
========== ==========
Liabilities
Current Liabilities
Accounts payable - trade $ 81,825 $ -
Accounts payable - related party 73,063 -
Accrued expenses 35,411 -
Income taxes payable 20,600 -
Notes payable - related party 22,368 -
---------- ----------
Total liabilities 233,267 -
Stockholders' Equity
Common stock - par value $.000001,
shares authorized 250,000,000
shares issued and outstanding
5,000,000 (243,901,667 at September
30, 1996) 5 244
Paid in capital 792,415 78,613
Retained deficit (18,348) (76,715)
---------- ----------
Total stockholders' equity 774,072 2,142
---------- ----------
Total liabilities and stockholders'
equity $1,007,339 $ 2,142
========== ==========
See notes to the financial statements.
2
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENTS OF INCOME
Year Ended September 30,
------------------------------------------------
1997 1996 1995
------------ ------------ ------------
Sales
Equipment and supplies $ 1,390,606 $ - $ -
Services 704,366 - -
------------ ------------ ------------
2,094,972 - -
Cost of Sales
Equipment and Supplies 1,212,264 - -
Services 656,439 - -
------------ ------------ ------------
Total Cost of Sales 1,868,703 - -
------------ ------------ ------------
Gross Profit 226,269 - -
Selling and general expense 153,836 - -
------------ ------------ ------------
72,433 - -
Interest income 6,534 - -
------------ ------------ ------------
Income before income taxes 78,967 - -
Income taxes 20,600 - -
------------ ------------ ------------
Net Income $ 58,367 $ - $ -
============ ============ ============
Net Income Per Share
Primary $ 0.02 $ - $ -
============ ============ ============
Fully Diluted $ 0.02 $ - $ -
============ ============ ============
Weighted Average Shares Outstanding $ 2,447,916 $181,157,501 $ 19,275,000
============ ============ ============
See notes to the financial statements.
3
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock
----------------------------- Paid In Retained Shareholders
Shares Amount Capital Deficit Equity
------------- ------------- ------------- ------------- -------------
Balance September 30, 1995 19,275,000 $ 19,275 $ 19,449 $ (76,715) $ (37,991)
Retired shares (12,323,500)
Shares issued by court order 38,725,167
Change in par value of common stock to $.000001 (19,229) 19,229
Sale of common stock 178,075,000 178 178
Sale of common stock 13,950,000 14 14
Conversion of loans payable to paid in capital 39,013 39,013
Sale of its common stock 6,200,000 6 6
Contribution to paid in capital 922 922
------------- ------------- ------------- ------------- -------------
Balance September 30, 1996 243,901,667 $ 244 $ 78,613 $ (76,715) $ 2,142
Additional shares issued of common stock 6,098,333 6 2,994 - 3,000
1 for 400 share reverse stock split (249,375,000) (249) 249 - -
Exchange of stock for Imtek Corp. Stock 4,375,000 4 710,559 - 710,563
Net income for the year - - - 58,367 58,367
------------- ------------- ------------- ------------- -------------
Balance September 30, 1997 5,000,000 $ 5 $ 792,415 $ (18,348) $ 774,072
============= ============= ============= ============= =============
See notes to the financial statements.
4
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENTS OF CASH FLOWS
Year Ended September 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
Cash Flows From Operating Activities
Net Income $ 58,367 $ - $ -
Adjustments to Reconcile Net Earnings to Net Cash
Provided (Used) by Operating Activities:
Depreciation and amortization 3,925 - -
Changes in Assets and Liabilities
Increase in accounts receivable (36,210) - -
Increase in inventory (131,950) - -
Increase (Decrease) in accounts payable 154,888 (37,991) -
Increase in accrued expenses 35,411 - -
Increase in income taxes payable 20,600 - -
------------ ------------ ------------
Net cash provided (used) by operating activities 105,031 (37,991) -
------------ ------------ ------------
Cash Flows From Investing Activities -
Cash paid for property and equipment (35,740) - -
Cash deposit paid (40,000) - -
------------ ------------ ------------
Net cash (used) by investing activities (75,740) - -
Cash Flows From Financing Activities
Cash paid for intangible asset - (2,142) -
Cash paid for paid in capital 2,994 922 -
Cash received for issuance in common stock 6 198 -
Proceeds from borrowing 22,368 39,013 -
Notes receivable advances (25,541) - -
------------ ------------ ------------
Net cash (used) provided by financing activities (173) 37,991 -
------------ ------------ ------------
Increase In Cash 29,118 - -
Cash - Beginning - - -
------------ ------------ ------------
Cash - Ending $ 29,118 $ - $ -
============ ============ ============
See notes to financial statements.
5
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
STATEMENTS OF CASH FLOWS
CONTINUED
Non-Cash Transactions
- ---------------------
During the year ended September 30, 1996, $39,013 of outstanding debt was
converted to additional paid in capital.
During the year ended September 30, 1997, $249 was transferred from common stock
to additional paid in capital as a result of the 1 for 400 share reverse stock
split.
Also the Company issued 4,375,000 shares of stock in exchange for the adjusted
assets of Imtek Corporation as follows:
Inventory $ 353,954
Accounts Receivable 356,609
----------
$ 710,563
==========
See notes to the financial statements.
6
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
1. NATURE OF BUSINESS
The Company is in the business of selling and servicing copiers, facsimiles
and printers, sales of office supplies, rebuilding and renting high volume
copiers and duplicators and commercial printing and copying. The Company
conducts business in the Baltimore, Washington, DC, Richmond and Tidewater,
Virginia metropolitan areas and grants credit to customers in those regions.
The Company changed its name from Spectrum Equities, Inc. to Imtek Office
Solutions, Inc. during 1997.
2. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
3. INVENTORY
Inventories consist of copy machines, facsimiles, duplicators and parts and
supplies used in the maintenance of office machines and consumable supplies.
Inventories are stated at lower of cost or market using the first-in, first-
out (FIFO) method.
4. PROPERTY, PLANT AND EQUIPMENT
The Company provides depreciation for financial statement and income tax
purposes over the estimated useful lives of the fixed assets using the
straight-line method. Expenditures for maintenance and repairs are charged to
income in the period the charge is incurred. Depreciation expense for the
year was $1,783.
The annual rates of depreciation range from 2.5% for buildings, 10.00% for
machinery and equipment, and 10% to 33.33% for furniture, fixtures and
transportation equipment. These rates correspond to useful lives that range
from 40 years for buildings, 10 years for machinery and equipment, and from 3
to 10 years for furniture and transportation equipment.
5. INTANGIBLE ASSETS
Intangible assets consisted of costs incurred to maintain the corporate
charter for 1995 and 1996, a period when the Company did not have operations.
The Company recommenced operations in April, 1997 and expensed $2,142 the
unamortized portion of these costs.
6. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES- (continued)
- ----------------------------------------------------
7. INCOME TAXES
The Company provides for income taxes based upon income reported for
financial reporting purposes. For the year end September 30, 1997 there were
no charges to expenses or earnings which differed as to the timing of their
reporting for income tax purposes.
8. EARNINGS PER SHARE
Primary earnings per share of approximately $0.02 are based on the weighted
average number of shares outstanding.
There is no fully diluted earnings per share because there were no
convertible debentures, stock options or warrants outstanding during that
period.
NOTE B - BUSINESS ACQUISITION
- -----------------------------
On April 22, 1997, the Company purchased all of the common stock of Imtek
Corporation for 4,375,000 of its common stock in a transaction accounted for as
a pooling of interest. Imtek Corporation was a development stage company, which
was incorporated on April 1, 1997.
The balance sheet of Imtek Corporation consisted of:
Assets
Inventory $ 353,954
Trade Notes receivable 356,609
----------
$ 710,563
==========
NOTE C - NOTES RECEIVABLE
- -------------------------
The Company advanced monies to CMS Holdings, Inc. (CMS) an entity controlled by
certain of the Company's officers. These funds were advanced in anticipation of
performance in connection with a service agreement entered into by the Company
and CMS (see footnote G). This note of $20,466 is unsecured, due on demand with
interest at an annual rate of 10%, receivable quarterly.
The other notes receivable is unsecured and due on demand with interest at an
annual rate of 10%.
NOTE D - ACCOUNTS PAYABLE - RELATED PARTY
- -----------------------------------------
The Company used the trade credit facilities of CMS Holdings, Inc. an entity
owned by certain of the Companys' officers. The balance payable at September 30,
1997 was $73,063.
8
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
NOTE E - LEASES
- ---------------
The Company conducts its operations in leased facilities. These facilities are
leased on a month to month basis at an aggregate monthly rental of approximately
$5,400. Total rent expenses for facilities for the year ended September 30, 1997
was $28,371.
In June 1997, the Company entered into a lease agreement for three high volume
Xerox copiers from a related party. These copiers are rented on a month to month
basis with a thirty day notification period required to terminate the lease.
Monthly lease payments are computed based upon $.01 per copy. Equipment lease
expense for the year ended September 30, 1997 was $7,674.
NOTE F - STOCKHOLDERS' EQUITY
- -----------------------------
On April 21, 1997 the Company effected a reverse split of its common stock from
250,000,000 shares outstanding to 625,000 shares outstanding.
On April 22, 1997, the Company purchased all of outstanding shares of the common
stock of Imtek Corporation in exchange for 4,375,000 shares of its common stock.
NOTE G - RELATED PARTY TRANSACTIONS
- -----------------------------------
The Company has a servicing agreement with CMS Holdings, Inc. (CMS) an entity
controlled by certain of the Company's officers. Under the terms of the
agreement, the servicing entity performs certain maintenance, repair, marketing
and administrative tasks for the Company. Total service expense for the year to
CMS was approximately $977,000. This contract was terminated October 1, 1997.
The Company also engaged in business transactions with Amerilease, a company
owned by certain of the Company's officers. The total expense for the year to
Amerilease was approximately $107,000.
NOTE H - DEPENDANCE ON MAJOR VENDORS
- ------------------------------------
The Company purchased copiers, facsimiles and other office equipment primarily
from one manufacturer. The cost of the equipment purchased from this
manufacturer was approximately $744,000.
NOTE I - SUBSEQUENT EVENTS
- --------------------------
In November 1997 the Company's Board of Directors approved the issuance of a
private placement memorandum for an offering of up to $7,500,000 in convertible
preferred stock. The Company intends to use most of the proceeds to finance
acquisitions.
In October 1997, the Company acquired 100% interest in three other corporations
in a stock for stock exchange and purchased certain assets of two others.
The Company exchanged 1,000,000 shares of its common stock for all of the
outstanding common stock of Thompson Business Products, Inc. (Thompson).
Thompson is a financial services company specializing in viatical settlements.
The Company exchanged 465,000 shares of its common stock for all the outstanding
common stock of Office Supply Lines Holding, Inc. (OSLHI). OSLHI is a retailer
of office supplies.
9
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
The Company exchanged 1,010,611 shares of its common stock for all the
outstanding common stock of Capital Prepress Holdings, Inc. (CPHI). CPHI is a
provider of digital imaging services.
Summary financial data is set forth below:
Thompson OSLHI CPHI
----------- --------- ---------
Total Assets $ 90,000 $ 25,000 $ 30,000
Total Liabilities - - -
Equity $ 90,000 $ 25,000 $ 20,000
The Company acquired certain assets of two office equipment retailers, Richmond
Business Systems, Inc. (RBS) and Bohanon Business Systems, Inc. (BBS).
Summary financial data is set forth below:
RBS BBS
--------- ---------
Assets Purchased
Accounts Receivable $ 17,000 $ 17,000
Inventory 11,000 12,000
Furniture & Fixtures 9,500 5,000
--------- ---------
$ 37,500 $ 34,000
========= =========
Purchase Funded By:
Cash $ 37,500 $ -
Trade Payable Assumed - 27,000
Note Payable - 7,000
--------- ---------
$ 37,500 $ 34,000
========= =========
In November, 1997 the Company acquired 100% interest in GLS Holdings, Inc.,
(GLS) a provider of copy litigation support services. The Company exchanged
56,250 shares of its common stock for all of the common stock of GLS.
Summary financial data is set forth below:
Assets $ 35,000
Net worth $ 35,000
10
IMTEK OFFICE SOLUTIONS, INC.
(FORMERLY SPECTRUM EQUITIES, INC.)
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
In November, 1997 the Company acquired the inventory of Office Supply Line, Inc.
(OSL) for $237,000. The Company paid $75,000 cash, assumed $70,000 in trade
payables and issued a note for $92,000 payable in installments of $9,626
including interest at an annual rate of 10%. This note matures August 1998.
During the year the Company paid a deposit of $40,000 towards the purchase of
computer software. Subsequent to the financial statement date, the Company has
paid an additional amount of approximately $60,000 for computer hardware. The
above systems are expected to give the Company greater communication
capabilities among its locations.
11
Independent Auditors' Report
To the Board of Directors and Stockholders of
Imtek Office Solutions, Inc.
We have audited the accompanying balance sheet of Imtek Office Solutions, Inc.
as of September 30, 1997 and the related statements of income, shareholders'
equity and cash flows for the year then ended. 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 audit. The financial
statements of Imtek Office Solutions, Inc. as of September 30, 1996 and 1995
were audited by other auditors whose report on those statements dated October
15, 1996 included an explanatory paragraph that described the financial
statements as having been prepared assuming that the Company will continue as a
going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Imtek Office Solutions, Inc.
as of September 30, 1997, and the results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Bridgewater, New Jersey
December 19, 1997
1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMTEK OFFICE SOLUTIONS, INC.
January 22, 1998 By: /s/ EDWIN C. HIRSCH
------------------------------------
Edwin C. Hirsch, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Edwin C. Hirsch Chairman (Principal Executive
- ------------------------- Officer), President and Director January 22, 1998
Edwin C. Hirsch
/s/ Brad C. Thompson Chief Financial Officer (Principal
- ------------------------- Financial Officer) and Director January 22, 1998
Brad C. Thompson
/s/ Michael J. Lowe Director January 22, 1998
- -------------------------
Michael J. Lowe
/s/ Robert J. Brown Director January 22, 1998
- -------------------------
Robert J. Brown
/s/ Andrew J. Walter Director January 22, 1998
- -------------------------
Andrew J. Walter
/s/ Robert W. Hoover Director January 22, 1998
- -------------------------
Robert W. Hoover