UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT #1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For quarterly period ended September 30, 2002
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 September 30, 2002: 90,138,887 shares
outstanding of a total 135,000,000 authorized.
EXPLANATORY STATEMENT
The Registrant, Intrepid Technology & Resources, Inc., (the "Company"), received
a letter from the Securities and Exchange Commission dated April 14, 2003. The
Commission made comments and requested clarification of items in the
Consolidated Financial Statements and Supplementary Data, Notes to the financial
statements.
Based on these comments, the Company amended the financial statements, and Notes
3, and 9 of Part 1 Item 1 of its Form 10-QSB/A to include clarifications of
those items in conjunction with a response letter filed with the Commission on
June 13, 2003.
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
90,138,887 issued and outstanding at November 14, 2002
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>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets.............................................. 4
Statements of Operations.................................... 5
Statements of Cash Flows.................................... 6
Statement of Changes in Stockholders' Equity................ 7
Notes to Unaudited Financial Statements..................... 8
Item 2. Management's Discussion and Analysis........................ 13
Results of Operations....................................... 14
Overview.................................................... 15
Discussion of Financial Results............................. 15
Financial Condition......................................... 15
Liquidity................................................... 15
Capital Requirements........................................ 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>
SEPTEMBER 30, June 30,
2002 2002
------------- ------------
ASSETS
Current Assets:
Cash $ 45,124 $ 71,959
Receivables, net of allowance for doubtful
accounts of $0 and $0 respectively 244,256 289,078
Other receivables 100,000 99,863
Other current assets 1,162 --
------------ ------------
Total current assets 390,542 460,900
Equipment, net 43,400 45,861
Goodwill 522,309 526,848
Mining rights 3,273,456 3, 273,456
Deferred tax asset 413,803 336,000
Total Assets $ 4,643,510 $ 4,643,065
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 176,240 $ 133,932
Accrued liabilities 173,274 185,444
Deferred compensation 380,804 326,776
Line of credit 198,618 199,779
Long term debt - current portion 11,730 49,807
------------ ------------
Total current liabilities 940,666 895,738
Long term debt 44,746 11,252
Commitments and contingencies
Shareholders' equity:
Common stock, $.005 par value, 135,000,000 authorized, 85,473,184
and 89,543,609 shares issued and outstanding, respectively 423,732 417,718
Additional paid-in capital 12,019,119 11,983,943
Notes receivable - shareholders (36,900) (36,900)
Retained earnings (deficit) (8,747,853) (8,628,686)
------------ ------------
Total shareholders' equity 3,658,098 3,736,075
------------ ------------
Total Liabilities and Shareholders' Equity $ 4,643,510 $ 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 Quarter Ended
September 30,
2002 2001
---------- ----------
Revenue $ 645,113 $ --
Direct operating costs 573,264 --
---------- ----------
Gross profit 71,849 --
Selling, general and administrative expenses 262,033 120,515
---------- ----------
Income (loss) from operations (190,184) (120,515)
Interest revenue -- 1
Interest expense (6,787) --
Net loss before income taxes (196,971) (120,514)
Provision for income taxes (benefit) (77,804) --
---------- ----------
Net loss $ (119,167) $ (120,514)
========== ==========
Net loss to common shareholders $ (119,167) $ (120,514)
========== ==========
Basic earnings (loss) per share $ (.0013) $ (.005)
========== ==========
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 Quarter Ended September 30,
2002 2001
------------ ------------
Cash flows from operating activities:
Net loss $ (119,167) $ (872,042)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 2,461 47,779
Amortization 4,539
Expenses in exchange for issuance of common stock 41,190 --
Loss on sale of land -- 453
Changes in assets and liabilities:
Accounts receivable, net 44,822 --
Prepaids and other assets (1,299) --
Deferred tax asset (77,804) --
Accounts payable 42,308 181,859
Accrued liabilities (13,331) --
Deferred compensation 54,028 --
------------ ------------
Net cash used by operating activities (22,253) (641,951)
Cash flows from investing activities:
Sale of land -- 73,397
Purchases of property -- (153,409)
------------ ------------
Net cash used in investing activities -- (80,012)
Cash flows from financing activities:
Common stock proceeds -- 711,231
Proceeds from borrowings -- 46,103
Loan repayments -- (33,355)
Payments on notes payable (4,582) --
------------ ------------
Net cash provided by financing activities 4,582 723,979
Decrease in cash and cash equivalents (26,835) 2,016
Cash and cash equivalents at beginning of period 71,959 --
------------ ------------
Cash and cash equivalents at end of period $ 45,124 $ 2,016
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid $ 6,787 $ --
Non cash investing and financing transactions
Expenses in exchange for common stock 35,190 --
Payment of accrued expenses with common stock 6,000 --
</Table>
The accompanying notes are an integral part of these financial statements
6
INTREPID TECHNOLOGY & RESOURCES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ IN WHOLE DOLLARS EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
ADDITIONAL RETAINED
COMMON PAID-IN NOTE EARNINGS
STOCK CAPITAL RECEIVABLE (DEFICIT)
--------- ----------- ----------- -----------
Balance, July 1, 2002 $ 417,718 $11,983,943 $ (36,900) $(8,628,686)
Common stock issued for services 6,014 35,176 -- --
Net Loss -- -- -- (119,167)
--------- ----------- ----------- -----------
Balance, June 30, 2002 $ 423,732 $12,019,119 $ (36,900) $(8,747,853)
========= =========== =========== ===========
</Table>
The accompanying notes are an integral part of these financial statements
7
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. This cadre of experts will significantly enhance our
knowledge base relative to Engineering design contracts, design of Ethanol
facilities, selection of hydropower sites, construction of power plants and
other project activities.
The Engineering Services Division brings together a team of engineers and
construction management personnel to create a true "design-build-operate"
capability. Past projects have utilized our mechanical, electrical, civil, and
environmental registered professional engineers to create world-class designs.
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 ranging from the Department of Energy to
small municipalities to the Bureau of Land Management. In less than two years,
the Company has grown to more than 25 employees with estimated annual revenue of
$1.8 million. The engineering and construction management capabilities are now
deployed to offices in Idaho Falls, Idaho; Kennewick, Washington; and Los
Alamos, New Mexico.
The Engineering Services Division is project and task-oriented and has a 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 Division is charged with
alternative and renewable energy facility development and operations as well as
the development and management of the Company's mineral assets.
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 operate, if necessary, Ethanol facilities which will be built in
Southern Idaho and surrounding States. This Division will draw upon the
expertise that resides in both the Science and Technology Services Division and
the Engineering Service Division, which together, with the Program Management
skill of this Division will allow for a complete package of skills necessary to
put in place Ethanol facilities around Idaho and the West.
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
8
development of the Company's mineral resources (Gold and Diatomaceous Earth).
Individuals from the Services Divisions are drawn upon to provide the necessary
talents required to allow this Division to function.
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.
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, officers,
and board of directors. 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 are
recognized as services are performed. The Company has recorded unbilled revenue
for work performed but not billed as of September 30, 2002.
Equipment - Property and equipment are recorded at cost and depreciated on
straight-line and declining balance methods over estimated useful lives. Lease
obligations for which the Company assumes or retains substantially all the
property rights and risks of ownership are capitalized. Replacements and major
repairs of property and equipment are capitalized and retirements are made when
the useful life has been exhausted.
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.
Going Concern Contingency - The Company 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, goodwill 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. Management is in the process of obtaining additional financing and is
attempting to either sell or develop 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
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
9
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 and the valuation allowance for deferred taxes. It is
reasonably possible that these estimates may change from time to time and actual
results could differ from those estimates.
Credit Risk Concentration - The Company maintains most of its cash with US Bank
in Idaho Falls, Idaho. 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.
NOTE 4. EARNING PER COMMON SHARE
Basic earnings per share are computed based on net income and the weighted
average number of common shares outstanding. The Company does not have any
securities that would cause diluted earnings per share.
<Table>
<Caption>
(000's except per share amounts)
Quarters Ended September 30,
----------------------------
2002 2001
------------ ------------
Net loss $ (148) $ (121)
Weighted average shares outstanding-
Common shares 89,896,344 24,102,800
Basic earnings per share $ (.0017) $ (.0050)
============ ============
Diluted earnings per share $ -- $ --
============ ============
</Table>
10
NOTE 5. OPERATING SEGMENTS
The Company operates with two segments, Engineering Services and Mining
Investments. These segments have been determined by evaluating the Company's
internal reporting structure and nature of services offered. The Engineering
Services Division 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 Mining Investments 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)
SEPTEMBER 30, 2002 Engineering Mining
Services Investments Total
------------ ------------ ------------
Revenue $ 645 $ -- $ 645
Direct costs
(602) -- (602)
Gross profit 43
-- 43
SG&A (262)
-- (262)
Write down of assets -- -- --
Other (7) -- (7)
Income taxes 78
-- 78
Net loss (148)
-- (148)
Total assets $ 1,365 $ 3,279 $ 4,644
============ ============ ============
</Table>
<Table>
<Caption>
REPORTED IN $(000)
SEPTEMBER 30, 2001 Engineering Mining
Services Investments Total
------------ ------------ ------------
Revenue $ -- $ -- $ --
Direct costs -- -- --
Gross profit -- -- --
SG&A -- (77) (77)
Other -- -- --
Income taxes -- -- --
Net loss
-- (77) (77)
Total assets $ -- $ 2 $ 2
============ ============ ============
</Table>
NOTE 6. EQUIPMENT.
Equipment consists of the following as of September 30, 2002:
<Table>
Computers $ 18,064
Testing equipment 15,550
Furniture 12,443
Vehicles 16,621
------------
Subtotal 62,678
Less accumulated depreciation (19,278)
------------
Total Equipment, net $ 43,400
============
</Table>
11
NOTE 7. LINE OF CREDIT.
Revolving Line of Credit - As of September 2002, the Company has an available
line of credit of $200,000 of which $198,618 was outstanding. The line of credit
bears interest at the prime rate plus two percent and expires March 29, 2003.
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: Donald Kenoyer (Vice
President), Jacob Dustin (Vice President), S. Scott Francis, Gary Mecham, and
David Roth. As of September 30, 2002 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 Mr. Kenoyer ($9,600)
and Mr. Dustin ($18,582). 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 8. OPERATING LEASES
The Company leases space in Idaho Falls, Idaho; Missoula, Montana; and
Kenniwick, Washington. The Idaho Falls lease is at a monthly rate of $4,972, the
Kenniwick lease is at a monthly rate of $1,000. The Idaho Falls lease term only
runs through May 31, 2005.
Rent expense for quarter ended September 30, 2002 was: $ 17,916
========
Rental expense for the lease terms are as follows:
2003 $ 59,664
2004 59,664
2005 54,692
--------
2006 $174,020
========
NOTE 9. 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.
Goodwill and in process research and development intangible assets were
recognized on the acquisition of Intrepid Engineering Services and Western
Technology Management Inc., was approximately $6,368,000, 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 in
process research and development and wrote down the goodwill by approximately
$5,949,000. 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. Once extraction begins the rights will be amortized on
the depletion method based on the estimated amount of ore reserves.
12
NOTE 10. 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 September 30, 2002, the one-year date had been extended
to December 23, 2002.
The Company entered into an agreement for the purchase of the Lead King Lode
mining claim and the Henry Grant and James Hartford Lode mining claim for the
price of $150,000 to be paid within 30 days of the date of the agreement, August
23, 2001. The agreement was subsequently modified to an option to purchase on
March 18, 2002. The option exercise date was set at June 30, 2002 for $150,000
payable by August 25, 2002. On June 28, 2002, the Board of Directors voted to
let the option expire without action.
NOTE 11. NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 146, Accounting for Costs Associated with Exit or
Disposal Activities. Financial Accounting Standard 146 modifies previous
guidance on the accounting and reporting for costs associated with exit or
disposal activities. Financial Accounting Standard 146 is effective for exit or
disposals activities that are initiated after December 31, 2002. The company
does not expect Financial Accounting Standard 146 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 have 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.
13
RESULTS OF OPERATIONS
REVENUE
Revenue for the first quarter ended September 30, 2002, increased to $645,113
compared to $0 for the same period of 2001. This dramatic increase was the
result of the merger and the engineering services contracts performed in the
first quarter of fiscal year 2003.
Throughout calendar year 2002, the Company has managed an engineering services
agreement with Idaho National Engineering and Environmental Laboratory ("INEEL")
at Idaho Falls, Idaho, which constituted the majority of the Company's revenue.
In 2002, 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 and Fluor Federal Services, Inc., each provided
more than ten percent of the total revenue recognized by the Company.
DIRECT OPERATING COSTS
For the quarter ending September 30, 2002, the Company had direct operating
costs of $602,474 in support of the engineering services. For the same quarter
ended September 30, 2001, the Company had no direct operating costs.
GROSS PROFIT
The Company had gross profit of $71,849 for the year quarter ended September 30,
2002, compared to $0 for the same period ended September 30, 2001.
GENERAL SELLING AND ADMINISTRATIVE EXPENSES
For the first quarter ended September 30, 2002, the Company had general selling
and administrative expenses of $262,033. For the same quarter ended September
30, 2001, the Company had general selling and administrative expenses of
$120,515. In the first quarter of fiscal year 2003, general selling and
administrative expenses included: consulting fees paid of $35,000, which was
paid in S-8 stock. Other material expenses include payroll and payroll taxes of
$49,950, legal and accounting fees of $79,033, rent expense of 30,149 and other
operating expenses of $67,901.
INTEREST REVENUE
The Company had no interest revenue for the first quarter ended September 30,
2002, compared to $1 for the same period ended September 30, 2001.
INTEREST EXPENSE
The Company had interest expense for the first quarter ended September 30, 2002,
of $6,787 compared to $0 for the same period ending September 30, 2001. The
interest expense was for interest paid on the 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, amount of losses not deductible and the change valuation
allowance taken against the deferred tax asset. The net operating loss carry
forward of approximately $1,600,000 at September 30, 2002, 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 1,504,000 in 2022. The Company is
reflecting an income tax benefit at September 30,
14
2002 of 34.5% or $77,804 on a net loss before income taxes of $226,181. No
income tax benefit was recognized for the same period ended September 30, 2001,
with a net loss of $120,514.
NET LOSS
The Company realized a net loss of $148,377 and $120,514 for the first quarters
ended September 30, 2002 and 2001 respectively. In 2002, the majority of the
loss was attributed to the ongoing merger costs and heavy general and
administrative costs, which totaled $262,033. 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 September 30,
2002, the Company had a working capital of deficit of $558,260 compared to a
deficit of $434,838 for the previous year ending June 30, 2002. The current
ratio at September 30, 2002 was: .42:1 and .51:1 at June 30, 2002. This rise in
the deficit in working capital can be attributed to a) continued accumulation of
deferred pay for 5 key employees; b) cumulative impact of employee summer
vacations (i.e. reduction in "invoiceable" hours results in corresponding
reduced revenue to offset accumulating debt during this period); c) costs
associated with preparation of major engineering design/services proposal that
required the services of an outside consultant; and d) additional legal and
auditing costs related to preparation of the FY 2002 annual audit and SEC Form
10-K (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 new contracts, and prospects for
bringing on line these alternative energy projects that its current efforts for
borrowing 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 $198,618 was
outstanding at September 30, 2002. The line of credit bears interest at the
prime rate plus two percent and expires March 29, 2003. The credit is secured by
all business assets and personally guaranteed by the principals of the Company.
As of September 30, 2002, 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 following are
shareholder creditors to the company: The loans from Mr. Kenoyer of $9,600 and
Mr. Dustin of $18,582 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 March 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 no issuance
of the debenture notes.
15
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. It is believed that this ready asset could also shore up
potential borrowing opportunities. 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.
According to Industrial Minerals Association, the demand for diatomaceous earth
used for filtering consumption liquids such as beer and soft drinks is growing
at a rate of three to four percent per year. The Company feels that the nature
of this Southwestern Idaho deposit presents quite an opportunity to either
pursue new product development or to sell this asset and provide working capital
for the ethanol production, and hydroelectric projects it continues to focus on.
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
ongoing operations generated by engineering services. The source of funding for
proprietary design and potential acquisitions will be made by outside capital
resources.
Seasonal Changes -The Company's operating revenue is generally not affected by
seasonal changes nor is it lower in the winter months, nor increases in the
warmer summer months.
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 four reports on Form 8-K in the first
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
99.3 Certification Pursuant to 18 USC Section 1350
99.4 Certification Pursuant to 18 USC Section 1350
</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
</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: June 13, 2003 By: /s/ Dr. Dennis D. Keiser,
Chief Executive Officer & President
----------------------------------------
Date: June 13, 2003 By: /s/ Dr. Jacob D. Dustin, Vice President,
Secretary, and Treasurer
----------------------------------------
19
EXHIBIT INDEX
<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
99.3 Certification Pursuant to 18 USC Section 1350
99.4 Certification Pursuant to 18 USC Section 1350
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
</Table>