UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For quarterly period ended March 31, 2003
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number: 000-30065
INTREPID TECHNOLOGY & RESOURCES, INC.
-------------------------------------
Fka IRON MASK MINING CO.
------------------------
(exact name of registrant as specified in its charter)
IDAHO
-----
(State or other jurisdiction of incorporation or organization)
501 West Broadway, Suite 200, Idaho Falls, ID 82304
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (208) 529-5337
Indicate by check mark whether the registrant: (1) has filed all reports
required by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ] The number of shares of the
Registrant's Common Stock, as of March 31, 2003: 90,250,210 shares outstanding
of a total 135,000,000 authorized.
OFFICERS
Dr. Dennis D. Keiser, Chief Executive Officer & President
Dr. Jacob D. Dustin, Vice President, Secretary and Treasurer
DIRECTORS
Dr. Dennis D. Keiser, Chief Executive Officer & President
Chairman of the Board
Dr. Jacob D. Dustin, Vice President, Secretary and Treasurer
Michael F. LaFleur, Board Member
William R. Myers, Board Member
D. Lynn Smith, Board Member
COMMON STOCK
Par value .005
135,000,000 authorized
90,285,210 issued and outstanding at May 14, 2003
Intrepid Technology & Resources, Inc.'s common stock trades on the Bulletin
Board under the symbol IESV.
FINANCIAL REPORTS
A copy of Intrepid Technology & Resources, Inc.'s Financial Reports, filed with
the Securities and Exchange Commission, may be obtained by writing to:
Intrepid Technology & Resources, Inc.
501 West Broadway
Suite 200
Idaho Falls, Idaho 83402
www.intrepid21.com
or at: The Securities and Exchange Commission office, Public Reference Room 450
Fifth Street, N.W., Washington
D.C. 20549 or at the SEC web site address (http:// www.sec.gov)
TRANSFER AGENT
Columbia Stock Transfer Company
PO Box 2196
Coeur d'Alene, Idaho 83816-2196
Phone: 208-664-3544
Fax: 208-664-3543
Email: columbia5183@cs.com
AUDITOR
Balukoff, Lindstrom & Co., P.A.
877 West Main Street, Suite 805
Boise, Idaho 83702
208-344-7150
2
TABLE OF CONTENTS
<Table>
<Caption>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets........................................................................... 4
Statements of Operations................................................................. 5
Statements of Cash Flows................................................................. 6
Statement of Changes in Shareholders' Equity............................................. 7
Notes to Unaudited Financial Statements.................................................. 8
Item 2. Management's Discussion and Analysis..................................................... 13
Results of Operations.................................................................... 13
Liquidity................................................................................ 15
Capital Requirements..................................................................... 15
Item 3. Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................ 17
Item 2. Changes in Securities.................................................................... 17
Item 3. Defaults Upon Senior Securities.......................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders...................................... 17
Item 5. Other Information........................................................................ 17
Item 6. Exhibits and Reports on Form 8-K......................................................... 17
Signature Page........................................................................... 19
</Table>
3
INTREPID TECHNOLOGY & RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ IN WHOLE DOLLARS EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
MARCH 31, June 30,
2003 2002
---------- ----------
UNAUDITED Audited
---------- ----------
ASSETS
Current Assets:
Cash $ 9,683 $ 71,959
Receivables, net of allowance for doubtful
accounts of $0 and $0 respectively 284,980 289,078
Other receivables 24,714 99,863
Other current assets 4,461 --
---------- ----------
Total current assets 323,838 460,900
Equipment, net 29,521 45,861
Goodwill 523,929 526,848
Mining rights 3,273,456 3,273,456
Deferred tax asset 385,543 336,000
---------- ----------
Total Assets $4,536,287 $4,643,065
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 173,225 $ 133,932
Accrued liabilities 144,643 185,444
Deferred compensation 198,031 326,776
Line of credit 198,704 199,779
Long term debt - current portion 78,590 49,807
---------- ----------
Total current liabilities 793,193 895,738
Long term debt -- 11,252
Commitments and contingencies
Shareholders' equity:
Common stock, $.005 par value, 135,000,000 authorized, 90,250,210
and 89,543,609 shares issued and outstanding, respectively 452,925 447,718
Additional paid-in capital 12,051,647 11,983,943
Notes receivable - shareholders (36,900) (36,900)
Treasury stock -- (30,000)
Retained earnings (deficit) (8,724,578) (8,628,686)
---------- ----------
Total shareholders' equity 3,754,346 3,736,075
---------- ----------
Total Liabilities and Shareholders' Equity $4,536,287 $4,643,065
========== ==========
</Table>
The accompanying notes are an integral part of these financial statements.
4
INTREPID TECHNOLOGY & RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN WHOLE DOLLARS EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
UNAUDITED UNAUDITED Unaudited Unaudited
------------- ------------- ------------- -------------
Revenue $ 585,367 $ -- $ 1,747,870 $ --
Direct operating costs 451,257 -- 1,432,170 --
------------- ------------- ------------- -------------
Gross profit 134,110 -- 315,700 --
Write down of intangible assets 5,910,650 5,910,650
Selling, general and administrative expenses 101,293 775,887 435,031 1,109,094
------------- ------------- ------------- -------------
Income (loss) from operations 32,817 (6,686,537) (119,331) (7,019,744)
Interest revenue -- 10 -- 12
Interest expense (11,700) -- (26,105) --
------------- ------------- ------------- -------------
Net income (loss) before income taxes 21,117 (6,686,527) (145,436) (7,019,732)
Provision for income taxes (benefit) 7,391 -- (49,543) --
------------- ------------- ------------- -------------
Net income (loss) $ 13,726 $ (6,686,527) $ (95,893) $ (7,019,732)
============= ============= ============= =============
Net income (loss) to common shareholders $ 13,726 $ (6,686,527) $ (95,893) $ (7,019,732)
============= ============= ============= =============
Basic earnings (loss) per share $ .00015 $ (.13) $ (.0011) $ (.1439)
============= ============= ============= =============
Diluted earnings per share $ -- $ -- $ -- $ --
============= ============= ============= =============
Dividends paid per common share $ -- $ -- $ -- $ --
============= ============= ============= =============
</Table>
The accompanying notes are an integral part of these financial statements
5
INTREPID TECHNOLOGY & RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN WHOLE DOLLARS EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
For the nine months Ended March 31,
--------------------------------------
2003 2002
----------------- -----------------
UNAUDITED Unaudited
----------------- -----------------
Cash flows from operating activities:
Net income (loss) $ (95,893) $ (7,019,732)
Adjustments to reconcile net loss to net cash provided by (used
by) operating activities:
Depreciation 6,658 343
Amortization 15,018 1
Loss on the sale of assets 11,036
Expenses in exchange for issuance of common stock 77,910 1,404,040
Write down of assets -- 5,910,650
Changes in assets and liabilities:
Accounts receivable, net (20,614) (389,061)
Prepaids and other assets (4,601) --
Deferred tax asset (49,543) --
Accounts payable 39,293 67,146
Accrued liabilities (40,800) (6,613)
Deferred compensation (28,744) --
----------------- -----------------
Net cash provided by (used by) operating activities (90,280) (33,226)
Cash Flow from Investing Activities
Acquisition cost (27,994) (42,161)
Purchase of Property and Equipment (3,600) (1,886)
----------------- -----------------
Net Cash (Used) provided by Investing Activities -- (44,047)
Cash flows from financing activities:
Common stock proceeds 25,000 191,390
Loans to related parties -- 3,680
Debenture sales 10,000 --
Net payment on line of credit (1,074) --
Payments on notes payable (27,514) --
Additional notes payable 53,187 --
----------------- -----------------
Net cash provided by financing activities (28,005) 195,070
Increase (decrease) in cash and cash equivalents (62,276) 117,797
Cash and cash equivalents at beginning of period 71,959 36
----------------- -----------------
Cash and cash equivalents at end of period $ 9,683 $ 117,833
================= =================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid $ 18,552 $ --
Non cash investing and financing transactions
Garnet payable issued for mineral rights -- 150,000
Common stock issued for mineral rights -- 3,723,456
Assets acquired above cash received from merger -- 6,131,810
Common stock issued for services, prepaid assets and debt
repayments 86,052 303,722
</Table>
The accompanying notes are an integral part of these financial statements
6
INTREPID TECHNOLOGY & RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
UNAUDITED
($ IN WHOLE DOLLARS EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
ADDITIONAL RETAINED
COMMON PAID-IN NOTE TREASURY EARNINGS
STOCK CAPITAL RECEIVABLE STOCK (DEFICIT)
------------ ------------ ------------ ------------ ------------
Balance, July 1, 2002 $ 447,718 $ 11,983,943 $ (36,900) $ (30,000) $ (8,628,686)
Common stock issued for services 6,014 35,176 -- -- --
Net Loss -- -- -- -- (148,377)
------------ ------------ ------------ ------------ ------------
Balance, September 30, 2002 $ 453,732 $ 12,019,119 $ (36,900) $ (30,000) $ (8,777,063)
Common stock issued for services 28,643 31,978 -- -- --
Net Income -- -- -- -- 38,758
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2002 $ 482,375 $ 12,051,097 $ (36,900) $ (30,000) $ (8,738,305)
============ ============ ============ ============ ============
Common stock issued for services and (29,450) 550 -- 30,000 --
reclassification of treasury stock
Net Income -- -- -- -- 13,727
------------ ------------ ------------ ------------ ------------
Balance, March 31, 2003 $ 452,925 $ 12,051,647 $ (36,900) $ -- $ (8,724,578)
============ ============ ============ ============ ============
</Table>
The accompanying notes are an integral part of these financial statements
7
INTREPID TECHNOLOGY & RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Pursuant to the rules and regulations of the Securities and Exchange Commission,
the Company has prepared the accompanying unaudited financial statements.
Certain information and footnote disclosures have been condensed or omitted
pursuant to Generally Accepted Accounting Principles ("GAAP"). In the opinion of
management, all adjustments and disclosures necessary for a fair presentation of
these financial statements have been included. These financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's 2002 Annual Report on Form 10-KSB for the year ended June 30,
2002, as filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
NOTE 2. DESCRIPTION OF BUSINESS
Intrepid Technology and Resources, Inc, ("The Company"), ("an Idaho
Corporation") is a renewable and alternative energy development and operating
company with strengths in management, engineering, science and technology, and
mining. The Company has built management focus in four areas: Science and
Technology Services, Engineering Services, Ethanol Production, and Renewable
Energy and Natural Resources.
Science and Technology Services (a Division) is a collection of nationally
recognized experts in various Scientific and Engineering disciplines that have
consulting arrangements with the Company to provide expert advice on an as
needed basis. Over 200 such experts have made arrangements to consult with the
Company in a host of areas--Nuclear Science, Renewable Energy, Material Science,
Mining, Construction Management, Soil Science, Crop Management, Process
Engineering to name a few.
The Engineering Services Division brings together a team of professionally
registered engineers and highly experienced construction management personnel to
create a true "design-build-operate" capability. The Company follows the design
phase with full project management support including cost and schedule controls,
construction management, and startup operations to a diverse customer base
including the federal government and private commercial and industrial clients.
In less than two years, the Company has grown to more than 25 employees with
estimated annual revenue in excess of $2 million.
Ethanol Production (a Division) is the largest focus area for future business
development. The primary functions of this Division is to site, permit, design,
build and if necessary operate Ethanol facilities which will be built in
Southern Idaho and surrounding States.
Renewable Energy and Natural Resources (a Division) is similar in function to
the Ethanol Production Division except that it is focused on Renewable Energy
and Natural Resources as future business development activities. Renewable
Energy activities such as Hydropower, Wind Energy, Geothermal, and energy from
industrial and animal waste are evaluated. Additionally, this Division has
responsibilities for development of the Company's mineral resources (Gold and
Diatomaceous Earth).
Development Activities. The primary purpose of the Company is to obtain, permit
and develop favorable properties for alternative/renewable energy production and
provide the associated engineering design and construction management services
required to support the construction and operation of the related facilities.
Secondarily, the Company will continue to expand its engineering services "work
for others" base to generate additional revenue to augment working capital
requirements in support of its alternative and renewable energy efforts. The
realization of profits are dependent upon successful execution of that business
model and inducing larger companies or private investors to purchase these
"turn-key" alternative/renewable energy generation/production facilities;
increasing the number and value of "work for others" services contracts; and the
sale of mineral assets.
8
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying financial statements are prepared
on a consolidated basis. The consolidated financial statements include the
accounts of the Company after the elimination of all significant inter-company
balances and transactions. The Company's fiscal year-end is June 30.
Reclassification - Certain reclassifications have been made to prior year
financial statements to conform to the current year presentation.
Cash and Cash Equivalents - For the purpose of the statement of cash flows, the
Company considers all highly liquid debt instruments with maturity of three
months or less to be cash equivalents.
Notes Payable - The Company has various notes payable to individuals and
officers. The Company has incurred additional expenses with outside consultants
and has paid a portion of those obligations with the issuance of common stock
under the rules provided for S-8 issuances.
Revenue Recognition - The Company's revenue is derived mainly from contracts for
its engineering consulting and other services. Revenue from these contracts is
recognized as services are performed. The Company has recorded unbilled revenue
for work performed but not billed as of December 31, 2002.
Equipment - Property and equipment are recorded at cost and depreciated on
straight-line method over estimated useful lives. Replacements and major repairs
of property and equipment are capitalized and retirements are made when the
useful life has been exhausted. Minor components and parts are charged to
expense as incurred.
Commitments - The Company has various commitments for notes payable to
shareholders and officers of the Company, a banking line of credit with US Bank,
all of which the Company believes it has properly accounted for or has made
proper accruals to meet these obligations in the future.
Notes Receivable - As of March 31, 2002, the Company had non interest bearing
notes receivable from employees totaling $36,900 for the purchase of the
Company's common shares and is recorded in the equity section of the balance
sheet. The notes are from employees:
<Table>
Gary Mecham $6,900
David Roth $6,900
Scott Francis $6,900
Don Dustin $6,900
Shaun Dustin $6,900
Lynn Higgins $2,400
</Table>
Going Concern Contingency - The Company was profitable in the second and third
quarter of fiscal year ending June 30, 2003 but incurred significant losses
during the first quarter of 2003, ending September 30, 2002 and for the year
ended June 30, 2002 due primarily to the write down of mining rights, research
and development, and extensive general and administration costs as a result of
the merger activities. The Company's ability to continue as a Going Concern is
dependent on ongoing operations, obtaining additional financing and development
or sale of the existing mining rights. Management has obtained additional
engineering contracts and is in the process of obtaining additional financing as
well as attempting to determine the best way in which to capitalize on the
mining rights. However, there can be no assurance that these plans will be
successful.
Use of Estimates - The preparation of financial statements in conformity with
U.S. Generally Accepted Accounting Principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenue and
expenses during the reporting period. The Company used significant estimates in
the accompanying consolidated financial statements primarily related to the
valuation of mining rights. It is reasonably possible that these estimates may
change from time to time and actual results could differ from those estimates.
9
Credit Risk Concentration - The Company maintains most of its cash with US Bank
Billings, Montana. Substantially all of the cash balances are insured and are
not collateral for other obligations. Concentrations of credit risk with respect
to accounts receivable are believed to be limited due to the number,
diversification and character of the obligors and the Company's credit
evaluation process. Typically, the Company has not required customers to provide
collateral for such obligations.
Income Taxes - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between financial and income tax
reporting as follows:
1. The basis of property, plant and equipment, for financial reporting
exceeds its tax basis by the amount of accelerated depreciation
recorded for tax purposes in excess of straight-line and other
depreciation recorded for book purposes.
2. Net operating loss carryforwards to be used to offset any future net
income.
Deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled.
NOTE 4. OPERATING SEGMENTS
The Company operates with two segments, Engineering Services and Operations.
These segments have been determined by evaluating the Company's internal
reporting structure and nature of services offered. The Engineering Services
segment provides project and task-oriented, highly experienced professionally
registered staff providing expertise across a broad range of engineering
disciplines and covering all phases of project planning, design, management and
execution. The Operations segment is charged with alternative and renewable
energy facility development and operations as well as the development and
management of the Company's mineral assets.
Inter-company transactions have been eliminated from the segment information and
are not significant between segments. Summarized financial information
concerning the Company's reportable segments is shown in the following table:
<Table>
<Caption>
REPORTED IN $(000)
MARCH 31, 2003 Engineering
Services Operations Total
----------- ----------- -----------
Revenue $ 1,748 $ -- $ 1,748
Direct costs (1432) -- (1,432)
Gross profit 316 -- 316
SG&A (435) -- (435)
Write down of assets -- -- --
Other (26) -- (26)
Income taxes 50 -- 50
Net loss (95) -- (95)
----------- ----------- -----------
Total assets $ 1,263 $ 3,273 $ 4,536
=========== =========== ===========
</Table>
<Table>
<Caption>
REPORTED IN $(000)
MARCH 31, 2002 Engineering
Services Operations Total
----------- ----------- -----------
Revenue $ -- $ -- $ --
Direct costs -- -- --
Gross profit -- -- --
SG&A (56) (720) (776)
Write down of assets (5,910) (5,910)
Other -- -- --
Income taxes -- -- --
----------- ----------- -----------
Net loss $ (56) $ (6,630) $ (6,686)
=========== =========== ===========
Total assets $ 1,181 $ 3,873 $ 5,055
=========== =========== ===========
</Table>
10
NOTE 5. EQUIPMENT.
<Table>
Equipment consists of the following as of March 31, 2003:
Computers and software $ 28,902
Furniture 15,488
Other Equipment 1,526
Vehicles 3,000
--------
Subtotal 48,916
Less accumulated depreciation (19,395)
--------
Total Equipment, net $ 29,521
========
</Table>
NOTE 6. LINE OF CREDIT.
Revolving Line of Credit - As of March 31, 2003 the Company has an available
line of credit of $200,000 of which $198,704 was outstanding. The line of credit
bears interest at the prime rate plus two percent and expires March 29, 2004.
The credit is secured by all business assets and personally guaranteed by the
principals of the Company. The following employees of the Company have given
unlimited personal guarantees of the line of credit: Dennis Keiser (President),
Jacob Dustin (Vice President), Donald Kenoyer, S. Scott Francis, Gary Mecham,
and David Roth. As of March 31, 2003 the line of credit was in good standing.
Shareholder Notes - The shareholders who are also officers, employees or
directors and have personally lent money to the Company are Dr. Dustin ($42,243)
and Mr. Kenoyer ($20,370). The notes are unsecured demand notes that accrue
interest at an annual rate of 10 percent. It is not anticipated by the Company
that the notes will be called in the next year.
NOTE 7. OPERATING LEASES
The Company leases space in Idaho Falls, Idaho and Kennewick, Washington. The
Idaho Falls lease is at a monthly rate of $5,210, and expires May 30, 2005. The
Kennewick lease is at a monthly rate of $1,050 and expires March 31, 2003. The
Kennewick lease will not be renewed.
<Table>
Rent expense for quarter ended March 31, 2003 was: $ 22,450
=========
Rental expense for the lease terms are as follows:
FY2003 $ 61,329
FY2004 64,171
FY2005 67,012
---------
Total $ 192,512
=========
</Table>
NOTE 8. INTANGIBLE ASSETS
Intangible assets include the following items: Goodwill recognized on
acquisition of Florite, Inc., by the Company of $15,895. This goodwill was
initially amortized on a straight-line basis over a 15-year period. As required
by Statement of Financial Accounting Standards 142 goodwill is no longer
amortized as of January 1, 2002, but evaluated on an annual basis and written
down if a significant impairment occurs. During the second quarter of fiscal
year 2003 the Company returned all assets and associated debt back to the
original owners of Flourite, Inc. in exchange for the forgiveness of the note to
Flourite Inc. owners. As a result of the transaction the goodwill of $15,895 was
written off.
As of March 25, 2002 goodwill, research and development recognized on the
acquisition of Intrepid Engineering Services and Western Technology Management
Inc., was approximately $6,364,000, the amount in excess of the fair value of
the assets received was recorded based on the share price and the number of
shares issued. Management evaluated the fair value of the underlying assets and
determined the majority of the goodwill related to research and development and
wrote down the research and
11
development by approximately $5,944,000. This amount has been included in the
write down of assets line item in the statement of operations for the 4th
quarter ending June 30, 2002.
Mineral rights valued at $3,273,456 were purchased in exchange for common stock
of the Company. No amortization is currently expensed since extraction of the
minerals has not started. The mineral rights have a proven gold reserve. Once
extraction begins the rights will be amortized on the depletion method based on
the estimated amount of ore reserves.
NOTE 9. TREASURY STOCK
Previously recorded treasury stock of $30,000 was reclassified and reflects
properly the common stock outstanding.
NOTE 10. STOCK OPTIONS
The Company has a stock option plan, which allows officers, directors, employees
and consultants of the company to receive non-qualified and incentive stock
options. The Company awarded 300,000 stock options to directors during the
quarter ended December 31, 2002 with an exercise price of $.01. During the
quarter ended December 31, 2002, the Company awarded 10,340,000 stock options
with an exercise price of $.01 to employees. These options will become vested at
a rate of 100 percent each year for and expire in five years from the grant
date. There were no options granted for the quarter ending March 31, 2003. As
of March 31, 2003, 14,660,000 shares of stock were available for future option
grants.
The Company accounts for its stock options under Accounting Principles Board
(APB) Opinion No. 25 using the intrinsic value method. In accordance with
Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, pro-forma net income, stock-based
compensation expense, and earnings per share using the fair value method are
stated as follows:
<Table>
<Caption>
Three Months Ended March 31, Nine Months Ended March 31,
--------------------------------- ----------------------------------
2003 2002 2003 2002
--------------- --------------- --------------- ---------------
Net income / (loss) $ 13,276 $ (6,686,527) $ (95,893) $ (7,019,732)
Deduct: Stock based employee
Compensation expense determined under fair
value based method, net of tax -- -- (114,055) --
Pro forma net income / (loss) $ 13,276 $ (6,686,527) $ (209,948) $ (7,019,732)
Basic earnings per share as recorded $ .00015 $ (.013) $ (.0011) $ (.1439)
=============== =============== =============== ===============
Basic earnings per share pro forma $ .00015 $ (.013) $ (.00241) $ (.1439)
=============== =============== =============== ===============
</Table>
NOTE 11. CONTINGENT LIABILITY AND OTHER MINERAL RIGHTS
The Company entered into an agreement for the purchase of other various mineral
rights for the price of $3,273,456 to be paid by the issuance of 16,367,280
shares of common stock of the Company, with a deemed value of $ 0.20 per share,
subject to adjustment. Per the agreement "If, within one (1) year after the
execution of this agreement the publicly traded shares of Iron Mask are not
trading at $ 0.20 or more per share the high price for the public sale of such
shares on the anniversary date of the Agreement shall become the deemed value
per share. Additional shares of the common stock of Iron Mask will be issued to
the end that the total number of shares on the date of this Agreement, shall
equal $ 3,273,456." As of March 31, 2003, the one-year date had not been
extended. The Company believes that because the shares reached $.20 within the
period no additional shares are required to be issued. The prior owners contend
this share price is to be $.20 on the anniversary date.
12
NOTE 12. NEW ACCOUNTING PRONOUNCEMENTS
In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 145, Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections. FAS 145 is
effective immediately and is not expected to have a material effect upon the
Company.
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 146, Accounting for Costs Associated with Exit or
Disposal Activities. FAS 146 modifies previous guidance on the accounting and
reporting for costs associated with exit or disposal activities. FAS 146 is
effective for exit or disposals activities that are initiated after December 31,
2002. The company does not expect FAS 146 to have a material effect on the
financial statements.
In April 2003 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Statement No. 149 Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. Statement 149 is effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The company does not expect
Statement 149 to have a material effect on the financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements that involve known
and unknown risks and uncertainties which may cause actual results in future
periods to differ materially from those indicated herein as a result of a number
of factors, including, but not limited to, those set forth under "Factors That
May Affect Future Results," Notes to the Consolidated Financial Statements, Part
I, Item 1., Legal Proceedings, and the discussion below. When the Company uses
words like "may," "believes," "expects," "anticipates," "should," "estimate,"
"project," "plan," their opposites and similar expressions, the Company is
making forward-looking statements. These expressions are most often used in
statements relating to business plans, strategies, anticipated benefits or
projections about the anticipated revenues, earnings or other aspects of our
operating results. We make these statements in an effort to keep stockholders
and the public informed about our business and has based them on our current
expectations about future events. Such statements should be viewed with caution.
These statements are not guarantees of future performance or events. As noted
elsewhere in this report, all phases of our business are subject to
uncertainties, risks and other influences, many of which the Company has no
control over. Additionally, any of these factors, either alone or taken
together, could have a material adverse effect on the Company and could change
whether any forward-looking statement ultimately turns out to be true. The
Company undertakes no obligation to publicly release updates or revisions to
these statements. The following discussion should be read in conjunction with
audited consolidated financial statements and the notes filed thereto on Form
10-KSB with the U.S. Securities and Exchange Commission for the year ending June
30, 2002.
RESULTS OF OPERATIONS
REVENUE
Revenue for the third quarter of the 2003 fiscal year ended March 31, 2003
increased slightly to $585,367 compared to $517,390 for the second quarter of
2003, which ended December 31, 2002. The total revenue performance for the three
and nine months ended March 31, 2003 of $585,367 and $1,747,870 is an increase
compared to $10 and $12 for both the three and nine months ended March 31, 2002.
This increase was the result of the merger and the engineering services
contracts performed in the first nine months of fiscal year 2003.
Throughout calendar year 2002, and the first three months of 2003, the Company
has managed several engineering services contracts with Idaho National
Engineering and Environmental Laboratory ("INEEL") at Idaho Falls, Idaho, which
constituted the majority of the Company's revenue. In 2002, and 2003, the
Company's other primary customers were: Fluor Federal Services, Inc., Duratek,
Argonne National Laboratory West, the Bureau of Land Management and the State of
Idaho. INEEL provided more than ten percent of the total revenue recognized by
the Company.
13
DIRECT OPERATING COSTS
Direct operating costs for the quarters ending March 31, 2003, December 31,
2002, and September 30, 2002, were $451,257, $378,439 and $980,913 respectively
and the Company had no direct operating costs for the same quarters ended in
2002. The direct operating costs for the nine months ended March 31, 2003 were a
result of the engineering contracts, and since there was no revenue for the
quarters ended March 31, 2002, there were no operating costs. The increase is
from the merged operations that did not occur until late in the third quarter of
2002.
GROSS PROFIT
The Company had gross profit of $134,110 and $315,700 for the three and nine
months ended March 31, 2003 compared to $0 for the same period ended March 31,
2002. The increase is from the merged operations that did not occur until late
in the third quarter of 2002.
GENERAL SELLING AND ADMINISTRATIVE EXPENSES
For the three months ended March 31, 2003 general selling and administrative
expenses were $101,293 compared to $775,886 for the same quarter ended March 31,
2002. This 87% decrease in general selling and administrative expenses was the
result of reduced legal and consulting fees previously incurred for the merger,
consulting contracts for 2002 were not carried into 2003 and other cost cutting
measures. For the nine months ended March 31, 2003, the Company had general
selling and administrative expenses of $435,031, or a .61 decrease over the
$1,109,094 for the same period ended March 31, 2002. The Company was encumbered
with a large amount of general selling and administrative expenses for
settlement of the merger. These merger costs included attorney fees, consultant
and accounting fees and certain surveys and assessments. The greater majority of
these merger costs have now been paid and settled and the Company expects the
future general selling and administrative expenses to be related to current
business.
INTEREST REVENUE
The Company had no interest revenue for the three and nine months ended March
31, 2003 and had $1.00 and $2.00 respectively for the three and nine months
ended March 31, 2002.
INTEREST EXPENSE
For the three months ended March 31, 2003 the Company had interest expense of
$11,700 compared to $0 for the same period ending March 31, 2002. For the nine
months ended March 31, 2003 the Company had interest expense of $26,105 compared
to $0 for the same period ending March 31, 2002. The interest expense was for
interest paid on the bank line of credit and 10% interest accrued on notes
payable to officers and directors of the Company.
INCOME TAXES
The effective tax rate is different from the statutory rate as a result of the
NOL carryforwards and amount of losses not deductible.. The net operating loss
carry forward of approximately $1,600,000 at March 31, 2003, and begins to
expire in the year 2019. The amount of net operating loss carry forward expires
$7,000 in 2019, $89,000 in 2020, $77,000 in 2021 and 927,000 in 2022. The
Company is reflecting an income tax expense at March 31, 2003 of 35% or
approximately $7,400 on a net income before income taxes of $21,117. No income
tax benefit was recognized for the same period ended March 31, 2002, with a net
loss of $7,019,732 due to the write-down of the research and development costs.
14
NET INCOME (LOSS)
For the three months ended March 31, 2003 the Company had a net income of
$13,726 compared to a net loss of $6,686,527 for the same three-month period
ended March 31, 2002. The main reason the Company was profitable in the third
quarter was because of the continuing engineering contracts and lower general
and administrative expenses compared to prior periods. For the nine months ended
March 31, 2003 the Company has a net loss of $95,893 compared to the loss of
$7,019,732 for the same period ended March 31, 2002. For the nine months ended
March 31, 2003, the majority of the loss was attributed to the ongoing merger
costs and heavy general and administrative costs, which totaled $435,031. The
loss for 2002 related to the wrie down of research and development costs from
the acquisition. The Company believes that with the majority of these merger
costs and assets now written down and absorbed losses, the future will provide a
more positive opportunity to generate revenue and cash flow and be profitable.
CAPITAL RESOURCES AND LIQUIDITY
The Company will make reasonable efforts to meet cash flow demands from ongoing
operations however, the Company believes that it will be necessary to supplement
the cash flow from operations with the use of outside resources such as bank
borrowings on the line of credit, additional loans, and possibly investment
capital by issuance of debenture notes and preferred stock. As of March 31, 2003
the Company had a working capital deficit of $469,355 compared to a deficit of
$434,838 for the previous year ending June 30, 2002. The current ratio at March
31, 2003 was: .41:1 and .51:1 at June 30, 2002. This increase in the deficit in
working capital can be attributed to a) cumulative impact of employee summer
vacations (i.e. reduction in "invoiceable" hours results in corresponding
reduced revenue to offset accumulating debt during this period); b) costs
associated with preparation of major engineering design/services proposal that
required the services of an outside consultant; and c) additional legal and
auditing costs related to preparation of the FY 2002 annual audit and SEC Form
10-KSB (a result of consolidating the financials of the three companies involved
in the March 2002 merger). The Company has had ongoing capital-intensive
engineering projects and continues to search for new investment capital through
private preferred stock and debenture bonds to fund the start up of alternative
energy projects. The Company believes that, with the addition of new engineering
services contracts and prospects for bringing on line new alternative energy
projects, it will be able to meet obligations as they become due. The Company is
also taking active measures to speed up the collection of its current accounts
receivable, while no receivables appear to be uncollectible.
The Company has an available line of credit of $200,000 of which $198,704 was
outstanding at March 31, 2003. The line of credit bears interest at the prime
rate plus two percent and expires March 29, 2004. The credit is secured by all
business assets and personally guaranteed by the principals of the Company. As
of March 31, 2003 the line of credit was in good standing. The Company also has
shareholder notes payable from certain officers, employees or directors. The
notes are unsecured demand notes. It is not anticipated by the Company that the
notes will be called in the next year. The shareholder creditor loans to the
company of $20,370 from Mr. Kenoyer and of $42,243 from Mr. Dustin accrue
interest at an annual rate of 10 percent payable on demand.
In September 2002, the Company entered into an agreement with, a capital
investment company that has encouraged outside investors to invest in the
Company through the issuance of debenture notes. These notes are to be in
$10,000 denomination and have certain conversion rights for common stock of the
Company if the Company has not fulfilled the repayment obligation by November
2003. The funds derived from the debenture notes are to be used for repayment of
some current obligations, but will mainly be used for the start-up of new
capital intensive projects like that of ethanol manufacturing and possibly
alternative energy source contracts. At the date of this filing there has been
one issuance of a $10,000 debenture note.
Access to Capital - Over the next twelve months the Company believes that it
will be necessary to supplement the cash flow from operations with the use of
outside resources such as bank borrowings on the line of credit, additional
loans, and possibly investment capital by issuance of debenture notes or
preferred stock. In addition to these efforts to provide working capital for the
Company, it may sell its owned mineral rights in Garnett, Montana for gold
assets only. An independent licensed geological report verifies 455,000 ounces
of recoverable gold. The Company will consider reasonable offers to sell these
mineral rights in Garnett, Montana and also rights to the Diatomaceous Earth
(DE) Asset in southern Idaho.
15
Material Commitments for Capital Expenditures - The Company has no outstanding
commitments at this time, though anticipates purchase of engineering design
hardware and software, additional computers, and office furniture to expand its
operations. The Company also intends to purchase a proprietary process design
for ethanol production, and continues to study certain potential acquisitions of
a hydroelectric development company. Negotiations regarding hydroelectric
acquisitions have not been completed and, therefore, no commitments have been
made at this point. Source of funding for office-related expenses will come from
revenues generated by engineering services. The source of funding for
proprietary design and potential acquisitions will be outside capital resources.
Seasonal Changes - The Company's operating revenue is generally not affected by
seasonal changes.
ITEM 3. CONTROLS AND PROCEDURES
(a) Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), within 90 days of the filing date of this
report. Based on this evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures are
effective in alerting them on a timely basis to material information relating to
our Company (including its consolidated subsidiaries) required to be included in
our reports filed or submitted under the Exchange Act.
(b) There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a) above.
16
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits
(b) Two exhibits are filed as part of this report.
(c) The Company filed one report on Form 8-K in the third quarter of 2003
1. Exhibits
<Table>
<Caption>
Exhibit Incorporated by Reference from
No. Description Registrant's
- ------- ----------- ------------------------------
3.1 Articles of Incorporation. Form 10SB Registration March 22, 2000
3.2 Bylaws. Form 10SB Registration March 22, 2000
3.3 Amended Articles of Incorporation. Form 10SB Registration March 22, 2000
3.4 Amended Articles of Incorporation. Form 10SB Registration March 22, 2000
4.1 Specimen Stock Certificate. Form 10SB Registration March 22, 2000
10.1 Yellow Pines Resources Agreement. Form 10SB Registration March 22, 2000
10.2 American Diatomite Agreement. Form 10SB Registration March 22, 2000
10.3 American Diatomite Agreement. Form 10-KSB October 20, 2000
10.4 Agreement to Sell and Purchase Mineral Reserves, Real Property and
Shares of Common Stock Form 10-KSB October 15, 2001
10.5 Addendum to Agreement to Sell and Purchase Mineral Reserves, Real
Property and Shares of Common Stock Form 10-KSB October 15, 2001
99.1 Certification pursuant to Sarbanes-Oxley Act by Chairman and Chief
Executive Officer
99.2 Certification pursuant to Sarbanes-Oxley Act by Vice-President,
Secretary and Treasurer
</Table>
17
\
REPORTS ON FORM 8-K
<Table>
10.6 Iron Mask Mining Company merger agreement with Intrepid Engineering
Company and Western Technology and Management, Inc. Form 8-K April 8, 2002
Intrepid Technology and Resources, Inc. change of certifying
accountants Form 8-K May 24, 2002
Amendment to report pro forma financial information on merger filed
on Form 8-K April 8, 2002 Form 8-K/A June 11, 2002
Amendment, Item 7. Letter from accountant and Company correspondence Form 8-K/A June 20, 2002
Resignation of Registrant's Directors and change in management Form 8-K July 8, 2002
Resignation of Registrant's Directors Form 8-K August 21, 2002
Amendment to Form 8-K filed on May 24, 2002 for change of certifying
accountants. Correction letter of predecessor accountant. Form 8-K/A September 10, 2002
Election of Lynn Smith to the Board of Directors and Chairman of the
Audit Committee Form 8-K September 13, 2002
Letters of Notice to Cure a Default whereby a deed was not
transferred for mineral rights purchased in the Iron Mask Mining Form 8-K February 6, 2003
Company merger
</Table>
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTREPID TECHNOLOGY & RESOURCES, INC.
(Registrant)
Date: May 14, 2003 By: /s/ DR. DENNIS D. KEISER, Chief
-----------------------------------
Executive Officer & President
-----------------------------------
Date: May 14, 2003 By: /s/ DR. JACOB D. DUSTIN, Vice
-----------------------------------
President, Secretary, and Treasurer
-----------------------------------
19
CERTIFICATION
I, Dr. Dennis D. Keiser, President and Chief Executive Officer of Intrepid
Technology & Resources, Inc., (the "Company"), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Intrepid Technology &
Resources, Inc;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 13, 2003
/s/ DR. DENNIS D. KEISER
- -----------------------------------------
Dennis D. Keiser
President and Chief Executive Officer
20
CERTIFICATION
I, Dr. Jacob D. Dustin, Vice President, Secretary, and Treasurer of Intrepid
Technology & Resources Inc., (the "Company"), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Intrepid Technology &
Resources, Inc;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 13, 2003
/s/ DR. JACOB D. DUSTIN
- ---------------------------------------------
Jacob D. Dustin
Vice President, Secretary, and Treasurer
21
INDEX TO EXHIBITS
<Table>
<Caption>
Exhibit Incorporated by Reference from
No. Description Registrant's
- ------- ----------- ------------------------------
3.1 Articles of Incorporation. Form 10SB Registration March 22, 2000
3.2 Bylaws. Form 10SB Registration March 22, 2000
3.3 Amended Articles of Incorporation. Form 10SB Registration March 22, 2000
3.4 Amended Articles of Incorporation. Form 10SB Registration March 22, 2000
4.1 Specimen Stock Certificate. Form 10SB Registration March 22, 2000
10.1 Yellow Pines Resources Agreement. Form 10SB Registration March 22, 2000
10.2 American Diatomite Agreement. Form 10SB Registration March 22, 2000
10.3 American Diatomite Agreement. Form 10-KSB October 20, 2000
10.4 Agreement to Sell and Purchase Mineral Reserves, Real Property and
Shares of Common Stock Form 10-KSB October 15, 2001
10.5 Addendum to Agreement to Sell and Purchase Mineral Reserves, Real
Property and Shares of Common Stock Form 10-KSB October 15, 2001
99.1 Certification pursuant to Sarbanes-Oxley Act by Chairman and Chief
Executive Officer
99.2 Certification pursuant to Sarbanes-Oxley Act by Vice-President,
Secretary and Treasurer
</Table>
<Table>
10.6 Iron Mask Mining Company merger agreement with Intrepid Engineering
Company and Western Technology and Management, Inc. Form 8-K April 8, 2002
Intrepid Technology and Resources, Inc. change of certifying
accountants Form 8-K May 24, 2002
Amendment to report pro forma financial information on merger filed
on Form 8-K April 8, 2002 Form 8-K/A June 11, 2002
Amendment, Item 7. Letter from accountant and Company correspondence Form 8-K/A June 20, 2002
Resignation of Registrant's Directors and change in management Form 8-K July 8, 2002
Resignation of Registrant's Directors Form 8-K August 21, 2002
Amendment to Form 8-K filed on May 24, 2002 for change of certifying
accountants. Correction letter of predecessor accountant. Form 8-K/A September 10, 2002
Election of Lynn Smith to the Board of Directors and Chairman of the
Audit Committee Form 8-K September 13, 2002
Letters of Notice to Cure a Default whereby a deed was not transferred
for mineral rights purchased in the Iron Mask Mining Company merger Form 8-K February 6, 2003
</Table>