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 December 31, 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 December 31, 2002: 96,740,210 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, 10, and 11 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
96,740,210 issued and outstanding at February 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>
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
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............................................... 18
Item 6. Exhibits and Reports on Form 8-K................................ 18
Signature Page.................................................. 19
</Table>
3
INTREPID TECHNOLOGY & RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ IN WHOLE DOLLARS EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
DECEMBER 31, June 30,
2002 2002
------------ ------------
UNAUDITED Audited
------------ ------------
ASSETS
Current Assets:
Cash $ 33,722 $ 71,959
Receivables, net of allowance for doubtful
accounts of $0 and $0 respectively 296,293 289,078
Other receivables 100,000 99,863
Other current assets 3,461 --
------------ ------------
Total current assets 433,476 460,900
Equipment, net 31,780 45,861
Goodwill 529,868 436,063
Mining rights 3,273,456 3,273,456
Deferred tax asset 392,934 336,000
Total Assets $ 4,661,514 $ 4,643,065
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 235,438 $ 133,932
Accrued liabilities 175,465 185,444
Deferred compensation 298,032 326,776
Line of credit 198,910 199,779
Long term debt - current portion 25,403 49,807
------------ ------------
Total current liabilities 933,247 895,738
Long term debt -- 11,252
Commitments and contingencies
Shareholders' equity:
Common stock, $.005 par value, 135,000,000 authorized, 96,740,210
and 89,543,609 shares issued and outstanding, respectively 452,375 417,718
Additional paid-in capital 12,051,097 11,983,943
Notes receivable - shareholders (36,900) (36,900)
Retained earnings (deficit) (8,738,305) (8,628,686)
------------ ------------
Total shareholders' equity 3,728,267 3,736,075
------------ ------------
Total Liabilities and Shareholders' Equity $ 4,661,514 $ 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 Six Months Ended
December 31, December 31,
2002 2001 2002 2001
------------- ------------- ------------- -------------
UNAUDITED UNAUDITED Unaudited Unaudited
------------- ------------- ------------- -------------
Revenue $ 517,390 $ -- $ 1,162,503 $ --
Direct operating costs 378,439 -- 980,912 --
------------- ------------- ------------- -------------
Gross profit 138,951 -- 181,590 --
Selling, general and administrative expenses 71,705 212,692 333,738 333,207
------------- ------------- ------------- -------------
Income (loss) from operations 67,246 (212,692) (152,148) (333,207)
Interest revenue -- 1 -- 2
Interest expense (7,618) -- (14,405) --
------------- ------------- ------------- -------------
Net income (loss) before income taxes 59,628 (212,691) (166,553) (333,205)
Provision for income taxes (benefit) 20,870 -- (56,934) --
------------- ------------- ------------- -------------
Net income (loss) $ 38,758 $ (212,691) $ (109,619) $ (333,205)
============= ============= ============= =============
Net income (loss) to common shareholders $ 38,758 $ (212,691) $ (109,619) $ (333,205)
============= ============= ============= =============
Basic earnings (loss) per share $ .00043 $ (.0089) $ (.0012) $ (.0139)
============= ============= ============= =============
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 six months Ended December 31,
2002 2001
-------------- --------------
UNAUDITED Unaudited
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ (109,619) $ (333,205)
Adjustments to reconcile net loss to net cash provided by (used by)
operating
activities:
Depreciation 4,399 343
Amortization 9,079 --
Loss on the sale of assets 11,036
Expenses in exchange for issuance of common stock 76,810 353,512
Changes in assets and liabilities:
Accounts receivable, net (7,215) --
Prepaids and other assets (3,598) --
Deferred tax asset (56,934) --
Accounts payable 101,506 (20,590)
Accrued liabilities (9,979) --
Deferred compensation
(28,744) --
-------------- --------------
Net cash provided by (used by) operating activities (13,259) 60
Cash flows from financing activities:
Increase in merger costs (27,994) --
Common stock proceeds 25,000 --
Purchase of office equipment (3,600) --
Debenture sales 10,000 --
Draw on line of credit (869) --
Payments on notes payable (27,514) --
--------------
Net cash provided by financing activities (24,977) --
Increase (decrease) in cash and cash equivalents (38,237) 60
Cash and cash equivalents at beginning of period 71,959 36
-------------- --------------
Cash and cash equivalents at end of period $ 33,722 $ 96
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid $ 14,405 $ --
Non cash investing and financing transactions
Garnet payable issued for mineral rights -- 150,000
Common stock issued for mineral rights -- 3,723,456
Common stock issued for services, prepaid assets and debt 76,840 303,722
repayments
</Table>
The accompanying notes are an integral part of these financial statements
6
INTREPID TECHNOLOGY & RESOURCES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNAUDITED
($ 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 -- -- -- (148,377)
------------- ------------- ------------- -------------
Balance, September 30, 2002 $ 423,732 $ 12,019,119 $ (36,900) $ (8,777,063)
Common stock issued for services 28,643 31,978 -- --
Net Income -- -- -- 38,758
------------- ------------- ------------- -------------
Balance, December 31, 2002 $ 452,375 $ 12,051,097 $ (36,900) $ (8,738,305)
============= ============= ============= =============
</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. 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.
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 development of the Company's mineral resources (Gold and
Diatomaceous Earth). Individuals from the
8
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 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.
Going Concern Contingency - The Company was profitable in the second quarter of
fiscal year 2003 ending December 31, 2002 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, 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 the financial statements as well as the reported amounts of revenue and
expenses during the reporting
9
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.
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.
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.
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. 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) (000's except per share amounts)
Three Months Ended December 31, Six Months Ended December 31,
-------------------------------- --==----------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Net income / (loss) $ 38 $ (213) $ (110) $ (333)
Weighted average shares outstanding-
Common shares 90,100,530 24,102,800 90,539,207 24,102,800
Basic earnings per share $ .00043 $ (.0089) $ (.0012) $ (.0139)
============== ============== ============== ==============
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)
DECEMBER 31, 2002 Engineering Mining
Services Investments Total
--------------- --------------- ---------------
Revenue $ 1,163 $ -- $ 1,163
Direct costs (981) -- (981)
Gross profit 182 -- 182
SG&A (334) -- (334)
Write down of assets -- -- --
Other (14) -- (14)
Income taxes 57 -- 57
Net loss (110) -- (110)
Total assets $ 1,383 $ 3,279 $ 4,662
=============== =============== ===============
</Table>
<Table>
<Caption>
REPORTED IN $(000)
DECEMBER 31, 2001 Engineering Mining
Services Investments Total
--------------- --------------- ---------------
Revenue $ -- $ -- $ --
Direct costs -- -- --
Gross profit -- -- --
SG&A -- (333) (333)
Other -- -- --
Income taxes -- -- --
Net loss -- (333) (333)
Total assets $ -- $ 3,996 $ 3,996
=============== =============== ===============
</Table>
NOTE 7. EQUIPMENT.
Equipment consists of the following as of December 31, 2002:
<Table>
Computers and software $ 28,902
Furniture 15,488
Other Equipment 1,526
Vehicles 3,000
-----------
Subtotal 48,916
Less accumulated depreciation (17,136)
-----------
Total Equipment, net $ 31,780
===========
</Table>
11
NOTE 8. LINE OF CREDIT.
Revolving Line of Credit - As of December 31, 2002 the Company has an available
line of credit of $200,000 of which $198,910 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 December 31, 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 Dr. 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 9. OPERATING LEASES
The Company leases space in Idaho Falls, Idaho; Missoula, Montana; and
Kennewick, Washington. The Idaho Falls lease is at a monthly rate of $5,210, the
Kennewick lease is at a monthly rate of $1,050 and expires March 31, 2003. The
Idaho Falls lease term expires May 30, 2005.
<Table>
Rent expense for quarter ended December 31, 2002 was: $ 18,305
========
</Table>
Rental expense for the lease terms are as follows:
<Table>
FY2003 $ 61,329
FY2004 64,171
FY2005 67,012
------------
Total $ 192,512
============
</Table>
NOTE 10. INTANGIBLE ASSETS
Intangible assets include the following items: Goodwill recognized on
acquisition of Flourite, 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 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.
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 December 31, 2002, the one-year date had not been
extended.
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 December 2002 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Statement No.148 Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of FASB Statement No. 123.
Statement 148 is effective for years ending after December 15, 2002 and for
quarters beginning after December 15, 2002 and only affects future disclosures.
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.
RESULTS OF OPERATIONS
REVENUE
Revenue for the second quarter of the 2003 fiscal year ended December 31, 2002
decreased slightly to $517,390 compared to $645,113 for the first quarter of
2003, which ended September 30, 2002. The total revenue performance for the
three and six months ended December 31, 2002 of $517,390 and $1,162,503 is an
increase compared to $0 for both the three and six months ended December 31,
2001. This increase was the result of the merger and the engineering services
contracts performed in the first six months of fiscal year 2003.
13
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
Direct operating costs for the quarters ending December 31, 2002 and September
30, 2002, were $378,439 and $980,913 respectively and the Company had no direct
operating costs for the same quarters ended in 2001. These direct operating
costs for the quarters ended December 31, 2002 were a result of the engineering
contracts, and since there was no revenue for the quarters ended December 31,
2001, there were no operating costs.
GROSS PROFIT
The Company had gross profit of $138,951 and $181,590 for the three and six
months ended December 31, 2002, compared to $0 for the same period ended
December 31, 2001.
GENERAL SELLING AND ADMINISTRATIVE EXPENSES
For the three months ended December 31, 2002 general selling and administrative
expenses were $71,705 compared to $212,692 for the same quarter ended December
31, 2001. This 67% decrease in general selling and administrative expenses was
the result of the forgiveness of certain accounts payable or the reduced amount
of accounts payable due to negotiated settlements with certain vendors and
reduced legal and consulting fees previously incurred for the merger and other
cost cutting measures. For the six months ended December 31, 2002, the Company
had general selling and administrative expenses of $333,738, or a .0167%
increase over the $333,207 for the same period ended December 31, 2001. 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 six months ended December
31, 2002 and had $1.00 and $2.00 respectively for the three and six months ended
December 31, 2001.
INTEREST EXPENSE
For the three months ended December 31, 2002 the Company had interest expense of
$7,618 compared to $0 for the same period ending December 31, 2001. For the six
months ended December 31, 2002 the Company had interest expense of $14,405
compared to $0 for the same period ending December 31, 2001. 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, 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 December 31, 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 December 31,
14
2002 of 34.2% or approximately $57,000 on a net loss before income taxes of
$166,553. No income tax benefit was recognized for the same period ended
December 31, 2001, with a net loss of $333,205.
NET INCOME (LOSS)
For the three months ended December 31, 2002 the Company had a net income of
$38,758 compared to a net loss of $212,691 for the same three-month period ended
December 31, 2001. The main reason the Company was profitable in the second
quarter of 2002 was because of the forgiveness of deferred compensation by
employees of the Company. For the six months ended December 31, 2002 the Company
has a net loss of $109,619 compared to $333,205 for the same period ended
December 31, 2001. 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 December 31,
2002, the Company had a working capital of deficit of $499,771 compared to a
deficit of $434,838 for the previous year ending June 30, 2002. The current
ratio at December 31, 2002 was: 46:1 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 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 $198,910 was
outstanding at December 31, 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 December 31, 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 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
15
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.
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.
The Company held its Annual Meeting of Stockholders on December 6, 2002. On the
record date of October 11, 2002 there were 91,473,184 shares of common voting
stock. At the meeting, D. Lynn Smith, William R. Myers, Michael F. LaFleur,
Dennis D. Keiser, and Jacob D. Dustin were elected to serve as directors of the
Company for the next year, the 2003 Stock Option Plan was approved, and the
appointment of Balukoff, Lindstrom & Co., P.A. as independent public accountants
for the year ending June 30, 2003 was ratified.
The voting on such items was as follows:
Election of Directors
<Table>
<Caption>
DIRECTOR'S NAME FOR AGAINST WITHHELD AUTHORITY
- --------------- ---------- --------- ------------------
Dennis D. Keiser 63,146,966 5,924,919 273,217
Jacob D. Dustin 69,345,102 5,651,702
Michael F. LaFleur 69,345,102 5,651,702
William R. Myers 69,345,102 5,651,702
D. Lynn Smith 69,345,102 5,651,702
</Table>
More than 76.9% of all votes were in favor of the elected directors.
(2) The proposal to approve the 2003 Stock Option Plan:
<Table>
<Caption>
FOR AGAINST WITHHELD AUTHORITY
--- ------- ------------------
49,320,079 25,640,391 36,344
</Table>
(3) Ratify Appointment of Independent Auditors of Balukoff, Lindstrom & Co.,
P.A.
<Table>
<Caption>
FOR AGAINST WITHHELD AUTHORITY
--- ------- ------------------
74,916,804 50,000 30,000
</Table>
17
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 no reports on Form 8-K in the second 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>
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.
<Table>
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
-----------------------------------------------------------------
</Table>
19
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
99.3 Certification Pursuant to 18 USC Section 1350
99.4 Certification Pursuant to 18 USC Section 1350
</Table>
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>