UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For quarter ended: November 30, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-29019
INTERACTIVE MARKETING TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 22-3617931
(State of incorporation) (I.R.S. Employer Identification No.)
3575 Cahuenga Boulevard West, Suite 390
Hollywood, California 90068
(Address of principal executive offices)
Issuer's telephone number, including area code: (323) 874-4484
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 [ ]
As of January 17, 2002, the registrant had a total of 13,823,667 shares of
common stock issued and outstanding.
PART I. FINANCIAL INFORMATION
--------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
The financial information set forth below with respect to our statements
of operations for the three and nine month periods ended November 30, 2001 and
2000 is unaudited. This financial information, in the opinion of management,
includes all adjustments consisting of normal recurring entries necessary for
the fair presentation of such data. The results of operations for the three
months ended November 30, 2001, are not necessarily indicative of results to
be expected for any subsequent period.
2
Interactive Marketing Technology
Balance Sheets as of
November 30, 2001 and February 28, 2001
(Unaudited) (Audited)
November 30, February 28,
2001 2001
------------- -------------
Current assets:
Cash $ - $ 16,007
Accounts receivable 1,516 5,481
Inventories 12,972 67,817
Employee advances 30,000 1,500
Prepaids 7,565 88,412
------------- -------------
Total current assets 52,053 179,217
------------- -------------
Property, Plant and Equipment, net of
accumulated depreciation of $36,204 as
of November, 2001 and $19,163 as of
February 28, 2001 61,065 78,105
Intangible Assets, net of accumulated
amortization of $75,108 as of
November 30, 2001 and $54,624 as of
February 28, 2001 61,452 81,936
Master Audio Recordings - 250,000
Capitalized Production Costs, net of
accumulated amortization of $90,601
as of November 30, 2001 and $0 as of
February 28, 2001 53,605 139,166
Other long term assets 61,484 61,968
------------- -------------
237,606 611,175
------------- -------------
$ 289,659 $ 790,392
============= =============
Current liabilities:
Accounts payable $ 202,654 $ 165,079
Bank Overdraft 339 -
Accrued expenses 336,714 106,856
Related party note payable 257,000 126,000
Net liabilities from discontinued operations 1,218,591 1,075,258
------------- -------------
Total current liabilities 2,015,298 1,473,193
------------- -------------
Shareholder deficit:
Common Stock, Par .001, 60,000,000 shares
authorized, 13,823,667 and 15,873,667 shares
issued and outstanding as of November 30,
2001 and February 28, 2001, respectively 13,824 15,874
Paid in capital 2,351,016 2,454,216
Officer Advances (71,500) -
Accumulated deficit (4,018,979) (3,152,891)
------------- -------------
(1,725,639) (682,801)
------------- -------------
$ 289,659 $ 790,392
============= =============
See Notes to Consolidated Financial Statements
3
Interactive Marketing Technology
Statements of Operations
(Unaudited) (Unaudited)
Nine months ended Three months ended
November 30, November 30,
2001 2000 2001 2000
------------- ------------- ------------- -------------
<s> <c> <c> <c> <c>
Net sales $ 52,231 $ 203 $ - $ -
Cost of sales 50,000 1,043 - -
------------- ------------- ------------- -------------
Gross profit 2,231 (840) - -
Operating expenses:
Payroll and related 219,439 199,066 89,650 91,912
Depreciation and amortization 128,126 29,565 51,337 11,184
Selling, general and administration 324,845 497,679 (5,618) 140,012
Loss on disposal of master
audio recordings 90,000 350,000 - 350,000
------------- ------------- ------------- -------------
762,410 1,076,310 135,369 593,108
------------- ------------- ------------- -------------
Loss from operations (760,179) (1,077,150) (135,369) (593,108)
------------- ------------- ------------- -------------
Other income (expense):
Other income 3,226 - (19,126) -
Interest income 1,045 - - -
Interest expense (2,083) (4,243) - (1,100)
------------- ------------- ------------- -------------
2,188 (4,243) (19,126) (1,100)
------------- ------------- ------------- -------------
Loss from continuing operations
before income tax provision (757,991) (1,081,393) (154,494) (594,208)
Income tax provision 800 - - -
------------- ------------- ------------- -------------
Loss from continuing operations (758,791) (1,081,393) (154,494) (594,208)
Discontinued operations:
Income (loss) from discontinued
operations (107,297) (623,747) 1,953 (714,426)
------------- ------------- ------------- -------------
Net loss $ (866,088) $ (1,705,140) $ (152,541) $ (1,308,634)
============= ============= ============= =============
Earnings Per Share Basic (0.05) (0.07) (0.01) (0.04)
============= ============= ============= =============
EPS-discontinued operations (0.01) (0.04) 0.00 (0.04)
============= ============= ============= =============
Weighted Average Number of Shares 14,777,849 14,540,125 13,823,667 15,963,250
============= ============= ============= =============
See Notes to Consolidated Financial Statements
4
Interactive Marketing Technology
Statements of Cash Flows
For the nine months ended November 30, 2000 and 2001
(Unaudited) (Unaudited)
November 30, November 30,
2001 2000
-------------- --------------
<s> <c> <c>
Cash flows from operating activities:
Net loss $ (866,088) $ (1,081,393)
Adjustments to reconcile net loss to net cash used in
continuing operating activities:
Depreciation and amortization 128,126 29,565
Estimated fair market value of options granted to employees 54,750 75,000
Loss on disposal of master recordings 90,000 350,000
Impairment loss on inventory - -
Changes in continuing operating assets and liabilities:
Decrease (increase) in accounts receivable 3,965 -
Decrease (increase) in inventories (73,941) -
Decrease (increase) in prepaid expenses 12,125 21,934
Decrease (increase) in deposits and other assets 484 (331,642)
Increase (decrease) in accounts payable and accrued expenses 267,772 68,260
Increase (decrease) in advances from/to Plumbers Secret, LLC - 777,428
Increase (decrease) in other liabilities - (9,318)
-------------- --------------
Net cash used in continuing operating activities (382,806) (100,166)
Net cash provided by (used in) discontinued operations 272,119 (135,382)
-------------- --------------
(110,688) (235,548)
-------------- --------------
Cash flows from investing activities:
Cash paid for capitalized production costs 63,681 -
Purchase of fixed assets - (79,538)
-------------- --------------
Net cash provided by (used in) investing activities 63,681 (79,538)
Cash flows from continuing financing activities:
Loans from stockholders 44,000 251,000
Principal payments on notes payable (13,000) (176,000)
-------------- --------------
Net cash provided by (used in) continuing financing activities 31,000 75,000
-------------- --------------
Net increase (decrease) in cash from continuing operations (16,007) (240,086)
Cash at beginning of period 16,007 252,266
-------------- --------------
Cash at end of period $ - $ 12,180
============== ==============
Supplemental Disclosure of cash flow information-
Interest paid $ 2,083 $ 4,243
============== ==============
Income taxes paid $ 800 $ -
============== ==============
Non Cash Transaction
- --------------------
The Company exchanged 2,000,000 common shares for $250,000 of Master Audio Recordings in fiscal
2001 and reversed in fiscal 2002.
A Shareholder personally advance to employees $100,000. This transaction was recorded to
shareholder loan and employee advances as of November 30, 2001.
See Notes to Consolidated Financial Statements.
5
INTERACTIVE MARKETING TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization and Operations
- ---------------------------
Interactive Marketing Technology, Inc. ("Interactive" or the "Company"),
a Nevada corporation, was formed on April 21, 1998. The Company's wholly
owned subsidiary is IMT's Plumber, Inc., which was formed February 4, 1999.
Since inception, the Company's principal business activity has been produce,
market and sell a licensed product called The Plumber's Secret, which was
discontinued during fiscal 2001 (see Note 3). The Company intends on
introducing new products in fiscal 2002 in a direct response and retail sales
environment. The Company continues to be involved in negotiations to obtain
licensing agreements for new products.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of IMT's
Plumber, Inc., a wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Going Concern
- -------------
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the
normal course of business. The Company has negative working capital of
$1,993,245 and an accumulated deficit of $4,018,979 at November 30, 2001, and
a history of losses from operations through November 30, 2001, among other
matters, which raise substantial doubt about its ability to continue as a
going concern. The Company intends to fund operations through sales of new
products and debt and equity financing arrangements which management believes
may be insufficient to fund its capital expenditures, working capital and
other cash requirements for the fiscal year ending February 28, 2002.
Therefore, the Company will be required to seek additional funds to finance
its long-term operations. The successful outcome of future activities cannot
be determined at this time and there is no assurance that if achieved, the
Company will have sufficient funds to execute its intended business plan or
generate positive operating results.
The financial statements do not include any adjustments related to
recoverability and classification of assets carrying amounts (including the
realizability of long-lived assets under SFAS 121) or the amount and
classification of liabilities that might result should the Company be unable
to continue as a going concern.
Risks and Uncertainties
- ------------------------
The Company operates in a highly competitive consumer product
environment that is subject to intense competition, government regulation and
rapid change. The Company's operations are subject to significant risk and
uncertainties including financial, operational and other risks associated with
the business, including the potential risk of business failure.
6
INTERACTIVE MARKETING TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES,
continued
Capitalized Production Costs
- ----------------------------
Capitalized production costs include the filming, editing and other film
producing costs for various product infomercials which are used for cable
network viewing audiences. These costs are of a direct response nature and are
therefore capitalized and amortized over the period during which benefits are
expected to be earned, which is estimated to be one year. Capitalized
production costs at February 28, 2001 was $139,166 and $53,605 at November 30,
2001. Amortization expense for the period ended November 30, 2001 was
$90,601.
Long-Lived Assets
- -----------------
The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of," which requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In accordance
with the provisions of SFAS 121, the Company regularly reviews long-lived
assets and intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. Based on its analysis, management determined that no impairment
existed at November 30, 2001. There can be no assurance, however, that market
conditions will not change or demands for the Company's services or products
will continue which could result in impairment on long-lived assets in the
future.
Revenue Recognition
- -------------------
The Company records sales when goods are shipped to the customer.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition," which outlines the
basic criteria that must be met to recognize revenue and provides guidance for
presentation of revenue and for disclosure related to revenue recognition
policies in financial statements filed with the Securities and Exchange
Commission. The effective date of this pronouncement was the fourth quarter
of the fiscal year beginning after December 15, 1999. The adoption of SAB 101
did not have a material impact on the Company's financial position and results
of operations.
Warranty
- ---------
The Company provides a warranty of thirty days to direct response
customers and no warranty for sales to retail centers.
7
INTERACTIVE MARKETING TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES,
continued
Estimated future warranty obligations related to certain products and
services are provided by charges to operations in the period in which the
related revenue is recognized. The Company has no warranty reserve at
November 30, 2001 and February 28, 2001.
Earnings Per Share
- ------------------
The Company has adopted Statement of Financial Accounting Standards No.
128 ("SFAS 128"), "Earnings Per Share." Under SFAS 128, basic earnings per
share is computed by dividing income available to common shareholders by the
weighted average number of shares assumed to be outstanding during the period
of computation. Diluted earnings per share is computed similar to basic
earnings per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares
were dilutive. Because the Company has incurred net losses, basic and diluted
loss per share are the same as additional potential common shares would be
anti-dilutive.
Segments of Business
- --------------------
The Company has adopted Statement of Financial Accounting Standards No.
131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information
about segments of their business in their annual financial statements and
requires them to report selected segment information in their quarterly
reports issued to shareholders. It also requires entity-wide disclosures
about the products and services an entity provides, the material countries in
which it holds assets and reports revenues and its major customers. The
Company currently operates in one segment, as disclosed in the accompanying
consolidated statement of operations.
Derivative Instruments
- -----------------------
The Company has adopted Financial Accounting Standards No. 133 ("SFAS
133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on the balance sheet at their fair value. This
statement, as amended by SFAS 137 and 138, is effective for financial
statements for all fiscal quarters of fiscal years beginning after June 15,
2000. The Company's adoption of this standard did not have a material impact
on the Company's results of operations, financial position or cash flows, as
it currently does not engage in any derivative or hedging activities.
New Accounting Pronouncements
- ------------------------------
In July 2001, FASB issued SFAS No. 141, "Business Combinations," which is
effective for business combinations initiated after June 30, 2001. SFAS No.
141 eliminates the pooling of interest method of accounting for business
combinations and requires that all business combinations occurring on or after
July 1, 2001 are accounted for under the purchase method. The Company does not
expect SFAS No. 141 to have a material impact on its financial statements.
8
INTERACTIVE MARKETING TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES,
continued
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after
December 15, 2001. Early adoption is permitted for entities with fiscal years
beginning after March 15, 2001, provided that the first interim financial
statements have not been previously issued. SFAS No. 142 addresses how
intangible assets that are acquired individually or with a group of other
assets should be accounted for in the financial statements upon their
acquisition and after they have been initially recognized in the financial
statements. SFAS No. 142 requires that goodwill and intangible assets that
have indefinite useful lives not be amortized but rather be tested at least
annually for impairment, and intangible assets that have finite useful lives
be amortized over their useful lives. SFAS No. 142 provides specific guidance
for testing goodwill and intangible assets that will not be amortized for
impairment. In addition, SFAS No. 142 expands the disclosure requirements
about goodwill and other intangible assets in the years subsequent to their
acquisition. Impairment losses for goodwill and indefinite-life intangible
assets that arise due to the initial application of SFAS No. 142 are to be
reported as resulting from a change in accounting principle. However, goodwill
and intangible assets acquired after June 30, 2001 will be subject immediately
to the provisions of SFAS No. 142. The Company does not expect SFAS No. 142 to
have a material effect on its financial statements.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of intangible long-lived assets and
the associated asset retirement costs and is effective for fiscal years
beginning after June 15, 2001. The Company does not expect SFAS No. 143 to
have a material impact on its financial statements.
Reclassifications
- -----------------
Certain reclassifications were made to prior period amounts, enabling
them to conform to current period presentation.
NOTE 2 - STOCKHOLDERS' EQUITY
Pursuant to APB 25, the Company recognized compensation expense
relating to a granting of options to an employee in fiscal year 2001 totaling
$54,750 in the consolidated statement of operations during the period ended
November 30, 2001.
In July 2001, the Company obtained and retired 50,000 shares of common
stock from two shareholders. No value was assigned to this transaction since
the shares were returned for non performance under specific agreements with
these shareholders.
In July 2001, the Company retired 2,000,000 shares of common stock with
an estimated fair market value of $160,000, based on the closing bid price on
the date of the exchange, for the return of the Master Audio Recordings with a
net book value of $250,000, resulting in the Company recognizing a loss on
disposal of the Master Audio Recording in the amount of $90,000 in the
accompanying Statement of Operations.
9
INTERACTIVE MARKETING TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
NOTE 3 - DISCONTINUED OPERATIONS
In November 2000, the Company's management decided to refocus all of its
marketing efforts on new product lines and to abandon its efforts of selling
the Plumber's Secret product line to retailers. The results of operations of
the product line have been reported separately as discontinued operations.
Income (loss) from discontinued operations was approximately $(107,297) and
$(623,747) for the nine months ended November 30, 2001 and 2000,
respectively. Income (loss) from discontinued operations was approximately
$1,953 and $(714,426) for the three months ended November 30, 2001 and 2000,
respectively. Prior year financial statements for the first and second
quarters of 2000 have been restated on the financial statements for the first
and second quarters of 2001 to present the operations of the Plumber's Secret
product line as a discontinued operation. During the nine month period ended
November 30, 2001, the Company recognized an impairment loss on inventory from
discontinued operations of $128,786.
For financial reporting purposes, the assets and liabilities of the
discontinued operations have been recorded at their estimated net realizable
value under the caption "Net liabilities from discontinued operations" in the
accompanying balance sheet at November 30, 2001 and February 28, 2001 and are
comprised of the following:
November 30, February 28,
2001 2001
------------ ---------------
Assets:
Inventory $ 73,475 $ 202,261
Liabilities:
Accounts payable 193,511 178,779
Accrued liabilities 133,555 133,740
Accrued royalties 540,000 540,000
Promotional allowances 425,000 425,000
------------ --------------
Total liabilities 1,292,066 1,277,519
------------ --------------
Net liabilities from
discontinued operations $ 1,218,591 $ 1,075,258
============ ==============
NOTE 4 COOPERATIVE VENTURE
In June 2001 the Company entered into a cooperative venture with a director.
The director advanced $60,000 to the Company for the venture which has been
recorded in related party notes payable in the accompanying balance sheet, to
produce a television spot for the marketing of the Prime Healthcare Benefits
Plan. Net revenues from the sales of this product will be split equally until
the director has been repaid his $60,000 advance. After he has received
$60,000, then the director will receive 10% of the net revenues and the
Company will receive 90% of net revenues. The agreement will continue until
the Company no longer markets the Healthcare Plan.
10
INTERACTIVE MARKETING TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
NOTE 5 EMPLOYEE ADVANCES
A director and shareholder of the Company advanced funds directly from
his personal accounts to the employees of the Company. These transactions are
received as a loan from stockholder and employee advances. For the nine
months ended November 30, 2001, these transactions totaled $100,000.
11
References in this quarterly report to "Interactive Marketing" "we,"
"us," and "our" refer to Interactive Marketing Technology, Inc.
FORWARD LOOKING STATEMENTS
This Form 10Q-SB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10Q-SB that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Interactive Marketing's control. These factors include but are not limited to
economic conditions generally and in the industries in which Interactive
Marketing may participate; competition within Interactive Marketing's chosen
industry, including competition from much larger competitors; technological
advances and failure by Interactive Marketing to successfully develop business
relationship.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
In November 2000 management shifted our marketing efforts to new product
lines and discontinued the Plumbers Secret product line. As a result, we have
recognized a loss from discontinued operations in our financial statements for
the 2002 fiscal year. Management expects revenues from the new products to
satisfy a portion of our working capital needs in the short term; however, we
must obtain debt and equity financing to continue long term operations.
Management has explored financing sources, but has not entered into any
agreements for financing at this time. During the third quarter of 2002 we
have relied on loans from management and other shareholders to finance our
operations.
IMT's Plumber, Inc. In February 1999 IMT's Plumber, Inc., our wholly
owned subsidiary, became a member of The Plumber's Secret L.L.C. The
Plumber's Secret L.L.C. was formed to market our product, the Plumbers Secret.
The other member of the limited liability company was B.V.T.V., Inc., which
employed Bob Vila to advertise and promote the product in an infomercial. For
the fiscal years 2001 and 2000, The Plumber's Secret L.L.C. incurred losses
from operations totaling $161,474 and $423,325, respectively. Due to the
discontinuance of the Plumbers Secret product line we have classified all
remaining assets and liabilities from The Plumber's Secret L.L.C. in net
liabilities from discontinued operations in our consolidated financial
statements.
Results of Operations
Our fiscal year ends February 28 (or February 29) and the following
discussions are based on the consolidated financial statements of Interactive
Marketing and our wholly owned subsidiary IMT's Plumber, Inc., reflecting its
50.01% members' interest in the Plumbers Secret, L.L.C. We recorded no sales
from continuing operations for the 2002 three month period ended November 30,
2001, and sales of $52,231 for the nine month period ended November 30, 2001.
The $52,231 sales reflect the sale of our product inventory to Thane
International in the first quarter of fiscal year 2002. As the result of
adjustments to our financial statements for the discontinued operations
related to the Plumbers Secret product line, we posted minimal sales of $203
for the 2001 nine month period and no sales for the three month period ended
November 30, 2000.
Total operating expenses for the 2002 three and nine month periods
decreased compared to the 2001 three and nine month periods. This decrease
was primarily the result of a $350,000 loss adjustment applied to the 2001
third quarter related to the disposal of master audio recordings and decreases
in selling, general and administrative expenses for the 2002 periods.
12
For the 2002 third quarter we recorded $19,126 other expense compared to
$1,100 other expense for the 2001 third quarter. The $19,126 other expense
was primarily the result of accounting adjustments related to inventory and
liabilities. We recorded total other income of $2,188 for the 2002 nine month
period compared to other expense of $4,243 for the 2001 nine month period.
Our loss from continuing operations decreased $322,602 for the 2002 nine
month period compared to the 2001 nine month period and decreased $439,714 for
the 2002 third quarter compared to the 2001 third quarter. We recorded losses
from discontinued operations of $107,297 for the 2002 nine month period
compared to $623,747 for the 2001 nine month period and recorded income from
discontinued operations of $1,953 for the 2002 third quarter and a loss from
discontinued operations of $714,426 for the 2001 third quarter. Our net loss
decreased $839,052 in the 2002 nine month period compared to the 2001 nine
month period and decreased $1,156,093 for the 2002 third quarter compared to
the 2001 third quarter. As a result, our loss per share decreased to $0.06
for the 2002 nine month period and $0.01 for the 2002 third quarter.
Management continues to seek new products, as well as financing;
however, it believes the following factors may adversely affect our business,
financial condition, operating results and/or cash flows.
. We need additional financing in order to carry out our business plan
and management cannot assure that we will be successful in obtaining
such financing.
. We must obtain new products and customers at reasonable costs, retain
customers and encourage repeat purchases.
. Sales from our products are unproven and some of our products are yet
to be tested in the retail environment.
Liquidity and Capital Resources
As of November 30, 2001, our total current assets decreased to $52,053
from $179,217 at the year ended February 28, 2001. Total current liabilities
increased to $2,015,298 compared to $1,473,193 at the year end. Accrued
expenses, net liabilities from discontinued operations and notes payable to
related parties were primarily the cause of the increase in total current
liabilities. We had a negative working capital of $1,963,245 and an
accumulated deficit of $4,018,979 at November 30, 2001, and a history of
losses from operations. These factors, among others, raise substantial doubt
about our ability to continue as a going concern.
We have no plans to purchase significant equipment or make other capital
expenditures within the next twelve months. Our principal commitments consist
of office leases, royalty and profit-share obligations. As of the fiscal year
ended February 28, 2001, our monthly lease commitment for our office space was
approximately $5,400, with future minimum annual lease payments of $250,000
through 2005.
According to the terms of our marketing agreements with various product
owners we are obligated to share profits and/or pay royalties on any products
we sell. We sold our product inventory to Thane International, Inc. in the
first quarter of 2002 and our agreement with Thane provides that Thane pay
directly to product owners any royalties owed to the product owners based on
previous agreements between Interactive Marketing and the product owners. As
of November 30, 2001, we had outstanding royalty obligations of $540,000
related to the Plumbers Secret and our management continues to negotiate a
settlement of this obligation.
For the 2002 nine month period net cash used in continuing operations
was $382,806 compared to $100,166 net cash used in continuing operations for
the 2001 nine month period. Net cash provided by investing activities for the
2002 nine month period was $63,681, which was primarily funding received from
our cooperative agreement with Mr. Johnny Bench, described below. Net cash
used in investing activities for the 2001 nine month period was $79,538 and
was related to the purchase of property and equipment. Net cash provided by
financing activities for the 2002 nine month period was $31,000 compared to
$75,000 for the 2001 nine month period. Loans from officers and other
shareholders of $44,000 for the 2002 nine month period and $251,000 for the
2001 nine month period provided the majority of financing. In addition,
during the 2002 nine month period our President, Sandy A. Lang, has advanced
$100,000 from his personal accounts to our employees.
13
Management intends to increase sales by the marketing of new products.
In June 2001 we entered into a cooperative venture with Johnny Bench, our
director, to produce a television spot for the marketing of our Prime
Healthcare Benefits Plan. Management believes the $60,000 in funding provided
to us under the agreement by Mr. Bench will allow Interactive Marketing to
launch the sale of this product. Net revenues from the sales of this product
will be split equally by Mr. Bench and Interactive Marketing until Mr. Bench
has received $60,000. After he has received $60,000, then Mr. Bench will
receive 10% of the net revenues and Interactive Marketing will receive 90% of
net revenues. The agreement will continue until we no longer market the
Healthcare Plan.
Management intends to fund operations through additional debt and equity
financing. Management contemplates that such capital may be provided by
private placements of our common stock or debt financing from related parties.
We intend to complete private placements, if any, pursuant to exemptions
provided by federal and state securities laws. The purchasers and manner of
issuance will be determined according to our financial needs and the available
exemptions. We do not currently intend to make a public offering of our
stock. We also note that if we issue more shares of our common stock our
shareholders may experience dilution in the value of the common stock they
hold.
Management continues to investigate the availability, source and terms
for external debt financing. At this time we have not entered into any
agreement with any third parties regarding such financing. We cannot assure
that funds will be available from any source, or, if available, that we will
be able to obtain the funds on terms agreeable to us. Also, the acquisition
of funding through the issuance of debt could result in a substantial portion
of our cash flows from operations being dedicated to the payment of principal
and interest on the indebtedness, and could render us more vulnerable to
competitive and economic downturns.
PART II. OTHER INFORMATION
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ITEM 5: OTHER INFORMATION
In January 2002 our board of directors determined it would be in our
best interest to change auditors and the board recommended and approved such
action. On January 16, 2002, we dismissed Corbin & Wertz, Certified Public
Accountants, as our independent auditors and engaged Chisholm & Associates,
Certified Public Accountants, as our new independent auditors. We engaged
Corbin & Wertz in April 2001 and it audited our financials statements for the
year ended February 28, 2001. Corbin & Wertz's report, dated May 21, 2001,
for the 2001 fiscal year was modified in its reference to the uncertainty of
Interactive Marketing's ability to continue as a going concern. Except for
this modification, the report did not contain an adverse opinion, disclaimer
of opinion, nor was it qualified or modified as to uncertainty, audit scope or
accounting principles. In connection with its audit for the 2001 fiscal year
and any subsequent interim period preceding the date of dismissal, there were
no disagreements with Corbin & Wertz on any matter regarding accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
During the two most recent fiscal years and through January 16, 2002, we
had not consulted with Chisholm & Associates regarding the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on our financial
statements, and neither a written report was provided to us nor oral advice
was provided that Chisholm & Associates concluded was an important factor
considered by us in reaching a decision as to an accounting, auditing or
financial reporting issue. Nor have we consulted with Chisholm & Associates
as to any matter that was either the subject of a disagreement or a reportable
event with our former accountant.
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Part II: Exhibits.
Exhibit # Description
3.1 Articles of Incorporation, as amended (Incorporated by reference
to Exhibit 3.1 to Form 10-QSB, filed October 22, 2001)
3.2 Bylaws of Interactive Marketing (Incorporated by reference to
Exhibit 2.3 to Interactive Marketing's Form 10-SB, as amended,
filed January 19, 2000)
10.1 Lease Agreement between E.P. Investments and Interactive Marketing,
dated May 10, 1999 (Incorporated by reference to Exhibit 6.1 to
Interactive Marketing's Form 10-SB, as amended, filed January 19,
2000)
10.2 Operating Agreement of The Plumbers Secret LLC, as amended, dated
March 16, 1999 (Incorporated by reference to Exhibit 6.3 to
Interactive Marketing's Form 10-SB, as amended, filed January 19,
2000)
10.3 Exclusive Manufacturing & Marketing Agreement between Interactive
Marketing and Thane International, Inc., dated January 16, 2001.
(Incorporated by reference to Exhibit 10.1 to Form 10-QSB, filed
January 22, 2001)
10.4 Cooperative Venture Agreement between Interactive Marketing and
Johnny Bench, dated June 15, 2001 (Incorporated by reference to
Exhibit 10.5 to Form 10-QSB, filed October 22, 2001)
16.1 Letter of agreement from Corbin & Wertz
(b) Reports on Form 8-K.
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERACTIVE MARKETING TECHNOLOGY, INC.
Date: 1-21-02 By /s/ Sandy Lang
------------------------------------------
Sandy A. Lang, President, CEO and
Chairman of the Board
Date: 1-21-02 By /s/ Martin Goldrod
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Martin Goldrod, Secretary and Director