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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002
Commission File Number 0-31729
INTEGRATED DATA CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2498715
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
625 W. Ridge Pike, Suite C-106, Conshohocken, PA 19428
----------------------------------------------------------
(Address of principal executive offices)
Telephone: (610) 825-6224
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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 February 12, 2003, there were 7,686,044 shares outstanding of the
Registrant's $.001 par value common stock.
1
INTEGRATED DATA CORP.
INDEX TO FORM 10-Q
PAGE(S)
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at
December 31, 2002 (unaudited) and
June 30, 2002 (audited) 3
Consolidated Statements of Operations
for the three months and six months ended
December 31, 2002 and 2001 (unaudited) 4
Consolidated Statement of Stockholders'
Equity (Deficit) for the six months ended
December 31, 2002 (unaudited) 5
Consolidated Statements of Cash Flows
for the six months ended December 31, 2002
and 2001 (unaudited) 6-7
Notes to Consolidated Financial
Statements (unaudited) 8-16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 17-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of
Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
2
PART I. - FINANCIAL STATEMENTS.
INTEGRATED DATA CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars and Shares in Thousands)
Dec. 31, June 30,
2002 2002
----------- ---------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 1 $ 5
Accounts receivable 19 -
Inventory 20 20
Prepaid expenses and other current assets 16 -
--------- ---------
56 25
PROPERTY AND EQUIPMENT, NET 1,342 418
INTANGIBLE ASSETS, NET
Amortizable 4,026 75
Goodwill 434
INVESTMENT IN UNCONSOLIDATED SUSIDIARIES 1,377 8
--------- ---------
TOTAL ASSETS $ 7,235 $ 526
========= =========
CURRENT LIABILITIES
Accounts payable-trade $ 28 $ 23
Accrued expenses and other liabilities 251 -
Short-term borrowings from related parties 910 -
Convertible short-term borrowings 250 -
Post-petition financing - 156
Liabilities subject to compromise - 5,557
--------- ---------
1,439 5,736
LONG-TERM LIABILITIES 872 -
--------- ---------
TOTAL LIABILITIES 2,311 5,736
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
$.001 par value; authorized 300,000 shares;
issued and outstanding, 6,706 shares at
December 31, 2002 and 385 shares at
June 30, 2002 6 -
WARRANTS OUTSTANDING 3,565 5,047
ADDITIONAL PAID-IN-CAPITAL 280,028 271,907
ACCUMULATED DEFICIT (278,675) (282,164)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT 4,924 ( 5,210)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 7,235 $ 526
========= =========
See accompanying notes 3
INTEGRATED DATA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars and Shares in Thousands, Except Per Share Amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- --------------------
2002 2001 2002 2001
--------- --------- --------- ---------
REVENUE $ 25 $ - $ 25 $ -
COST OF REVENUE 6 - 6 -
-------- -------- -------- --------
GROSS PROFIT 19 - 19 -
Depreciation and amortization 122 9 187 17
General and administrative expenses 219 725 325 3,008
(Income) loss from unconsolidated
subsidiary ( 8) - ( 8) 427
-------- -------- -------- --------
LOSS FROM OPERATIONS ( 314) ( 734) ( 485) ( 3,452)
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense - (35) ( 1) (55)
-------- -------- -------- --------
NET LOSS FROM CONTINUING OPERATIONS ( 314) ( 769) ( 486) ( 3,507)
DISCONTINUED OPERATIONS
Loss on disposal - - - ( 100)
-------- -------- -------- --------
NET LOSS BEFORE EXTRAORDINARY GAIN ( 314) ( 769) ( 486) ( 3,607)
EXTRAORDINARY GAIN ON DISCHARGE OF
INDEBTEDNESS 3,635 - 3,975 -
-------- -------- -------- --------
NET INCOME (LOSS) $ 3,321 $( 769) $ 3,489 $( 3,607)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,452 385 918 377
BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE
Net loss from continuing
operations $( 0.22) $( 2.00) $( 0.54) $( 9.30)
Discontinued operations
Loss on disposal - - - ( 0.27)
-------- -------- -------- --------
Net loss before extraordinary
gain ( 0.22) ( 2.00) ( 0.54) ( 9.57)
Extraordinary gain on discharge
of indebtedness 2.50 - 4.33 -
-------- -------- -------- --------
Net income (loss) $ 2.28 $( 2.00) $ 3.79 $( 9.57)
======== ======== ======== ========
See accompanying notes
4
INTEGRATED DATA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
SIX MONTHS ENDED DECEMBER 31, 2002
(Dollars and Shares in Thousands)
COMMON STOCK COMMON
--------------- STOCK
NUMBER WARRANTS ADD'L.
OF OUTSTAN- PAID-IN ACCUMULATED
SHARES AMOUNT DING,NET CAPITAL DEFICIT
------ ------ --------- --------- -----------
BALANCES, JUNE 30, 2002 38,530 $38.5 $ 5,047 $ 271,869 $( 282,164)
Six months ended
December 31, 2002
(unaudited):
Exercise of stock
options 53 - - - -
Common stock warrants
expired - - ( 1,482) 1,482 -
Issuance of shares upon
conversion of debt 3,750 3.8 - 71 -
Reverse stock split
1 for 100 (41,910) (41.9) - 42 -
Issuance of shares upon
conversion of debt 288 .3 - 575 -
Issuance of shares upon
acquisitions 5,995 6.0 - 5,989 -
Net income - - - - 3,489
------ ----- -------- --------- ----------
BALANCES, DECEMBER 31,
2002 (unaudited) 6,706 $ 6.7 $ 3,565 $ 280,028 $( 278,675)
====== ===== ======== ========= ==========
See accompanying notes
5
INTEGRATED DATA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
SIX MONTHS ENDED
DECEMBER 31,
----------------------
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,489 $( 3,607)
Adjustments to reconcile net loss to net
cash flows used in operating activities:
Extraordinary gain on discharge of
indebtedness ( 3,976) -
(Income) loss from unconsolidated subsidiary ( 8) 427
Depreciation and amortization 187 17
Issuance of common stock and common
stock warrants for expenses - 245
Other - ( 163)
Change in current assets and liabilities, net
of effects of acquisition
which increase (decrease) cash:
Accounts receivable ( 20) -
Prepaid expenses and other current assets ( 5) 67
Accounts payable-trade 6 66
Accrued expenses and other current
liabilities ( 229) 2,555
-------- --------
Net cash used in operating activities ( 556) ( 393)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to unconsolidated subsidiary - ( 132)
Proceeds from sale of fixed assets - 19
-------- --------
Net cash used in investing activities - ( 113)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash - 150
Commission on sale of common stock - ( 15)
Short-term borrowings 552 250
-------- --------
Net cash received from financing activities 552 385
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS ( 4) ( 121)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 5 124
-------- --------
CASH AND EQUIVALENTS, END OF PERIOD $ 1 $ 3
======== ========
6
INTEGRATED DATA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
SIX MONTHS ENDED
DECEMBER 31,
----------------------
2002 2001
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period:
Interest $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Conversion of debt into equity $ 650
Issuance of shares upon acquisitions
DataWave Systems, Inc. $ 1,795
Integrated Communication Services, Ltd. $ 4,200
See accompanying notes
7
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 1 - BASIS OF INTERIM PRESENTATION
The accompanying interim period financial statements of Integrated Data Corp.
("IDC" or the "Company") are unaudited, pursuant to certain rules and
regulations of the Securities and Exchange Commission, and include, in the
opinion of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair statement of the results for the periods
indicated, which, however, are not necessarily indicative of results that may
be expected for the full year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations. The financial
statements should be read in conjunction with the financial statements and the
notes thereto included in IDC's June 30, 2002 Form 10-K and other information
included in IDC's Forms 8-Ks and amendments thereto as filed with the
Securities and Exchange Commission.
NOTE 2 - DESCRIPTION OF THE BUSINESS
Integrated Data Corp. is a non-operating U.S. parent company with subsidiaries
in the U.S., United Kingdom and Italy. In this Form 10-Q, the terms "IDC" and
"the Company" are used interchangeably in reference to the parent company
and/or any of its subsidiaries. IDC holds proprietary technology for digital
transmission of data utilizing radio frequencies transmitted by FM radio
stations.
On October 23, 2002, the Company's Plan of Reorganization was approved by the
United States Bankruptcy Court and became effective on November 12, 2002. The
Company continues to operate from its Conshohocken (suburban Philadelphia), PA
headquarters. As part of the Plan of Reorganization, the Company changed its
name from Clariti Telecommunications International, Ltd. to Integrated Data
Corp. and the Delaware Secretary of State accepted this change of the Company's
Certificate of Incorporation, effective November 20, 2002. Also under the
Plan, the Company implemented a reverse stock split converting each 100 shares
into 1 share of IDC common stock.
Additionally, the Company formed C3 Technologies, Inc. a wholly owned
subsidiary and Delaware Company, to manage its technologies and intellectual
property.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year End
- ---------------
The Company's fiscal year ends on June 30. In these financial statements, the
three-month periods ended December 31, 2002 and 2001 are referred to as Fiscal
2Q03 and Fiscal 2Q02, respectively, and the six-month periods ended December
31, 2002 and 2001 are referred to as Fiscal First Half 2003 and Fiscal First
Half 2002, respectively.
8
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Principles of Consolidation and Basis of Presentation
- -----------------------------------------------------
The consolidated financial statements include the accounts of the Company and
all wholly-owned subsidiaries where management control is not deemed to be
temporary. All significant intercompany transactions have been eliminated in
consolidation.
Income Taxes
- ------------
There is no income tax expense (benefit) for income (losses) for the three
month and six-month periods ended December 31, 2002 and 2001 due to the
following:
Current tax expense - availability of net operating loss carryforwards
Current tax benefit - the operating losses cannot be carried back to
earlier years.
Deferred tax benefit - the deferred tax assets were offset by a valuation
allowance required by FASB Statement 109,
"Accounting for Income Taxes." The valuation
allowance is necessary because, according to
criteria established by FASB Statement 109, it is
more likely than not that the deferred tax asset
will not be realized through future taxable income.
Fair Value of Financial Instruments
- -----------------------------------
The Company's financial instruments consist primarily of cash and equivalents,
accounts payable, accrued expenses and short-term borrowings. These balances,
as presented in the balance sheet as of December 31, 2002 and June 30, 2002
approximate their fair value because of their short maturities.
Net Income (Loss) Per Common Share
- ----------------------------------
Net income (loss) per common share is based upon the weighted average number of
common shares outstanding during the period. The treasury stock method is used
to calculate dilutive shares. Such method reduces the number of dilutive
shares by the number of shares purchasable from the proceeds of the options and
warrants assumed to be exercised. Basic and diluted weighted average shares
outstanding for Fiscal 2Q03 and Fiscal 2Q02 were the same because the effect of
using the treasury stock method would be antidilutive.
Recent Accounting Pronouncements
- --------------------------------
In August 2001, SFAS No. Statement 142, "Goodwill and Other Intangible Assets"
("Statement 142") was issued, which is effective for fiscal years beginning
after December 15, 2001. Statement 142 addresses how intangible assets that
are acquired individually or with a group of assets should be accounted for
upon their acquisition and also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
9
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
financial statements. Also, for previously recognized non-goodwill intangible
assets, the useful lives must be reassessed with remaining amortization periods
adjusted accordingly, and reflected as a change in accounting principle. The
adoption of this standard in Fiscal First Half 2003 did not result in any
significant impact on results of operations or financial position of the
Company.
In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("Statement
144"), effective in fiscal years beginning after December 15, 2001, with early
adoption permitted, and in general are to be applied prospectively. Statement
144 establishes a single accounting model for the impairment or disposal of
long-lived assets, including discontinued operations. Statement 144 superseded
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The adoption of this standard in Fiscal First Half 2003 did not
result in any significant impact on its financial position or results of
operations.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" ("Statement 141"), effective for all business
combinations initiated after June 30, 2001. Statement 141 requires all
business combinations to be accounted for under the purchase method. Statement
141 supersedes APB Opinion No. 16, "Business Combinations," and Statement No.
38, "Accounting for Preacquisition Contingencies of Purchased Enterprises."
The Company adopted Statement 141 for its business combinations after June 30,
2001.
The following recently issued accounting pronouncements are currently not
applicable to the Company.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Obligations Associated with the Retirement of Long-Lived
Assets" (Statement 143), effective in fiscal years beginning after June 15,
2002, with early adoption permitted. Statement 143 establishes accounting
standards for the recognition and measurement of an asset retirement obligation
and its associated asset retirement cost. It also provides accounting guidance
for legal obligations associated with the retirement of tangible long-lived
assets.
In April 2002, the Financial Accounting Standards Board issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections (Statement 145), effective in fiscal years
beginning after May 15, 2002.
10
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 4 - MANAGEMENT'S PLANS FOR REORGANIZATION
On April 18, 2002, the Company filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Pennsylvania (case no. 02-
15817(DWS)). The Company managed its properties and operated its business as
"debtor-in-possession" under jurisdiction of the Bankruptcy Court and in
accordance with applicable provisions of the Bankruptcy Code. The Company's
Plan of Reorganization was approved and became effective on November 12, 2002.
The Company plans to continue to develop and utilize its wireless technology in
several communications devices. However, these matters raise substantial doubt
about the Company's ability to continue as a going concern.
The Company's approved Plan of Reorganization with the Bankruptcy Court
detailed plans for settling claims of creditors and restructuring the interests
of its equity holders. The following is a brief summary of the Reorganization
Plan:
1. The Company owed Priority Unsecured Claims as of the filing date of
approximately $86,000. Included in these claims are four former employees
who are owed wages, which accrued during the statutory priority period.
Each of these four individuals had a priority claim in the amount of $4,650.
Additionally, the Company owed certain federal, state and local taxes, which
totaled just in excess of $68,000. As detailed in the Plan, The Company has
paid all Priority Unsecured Claims at 100 cents on the dollar.
2. The Company owed Secured Creditors as of the filing date approximately
$1,345,000. Specifically, the Company owed $858,000 to Ansteed (its largest
shareholder), $250,000 to Pasubio Spa, an Italian joint venture partner, and
$237,000 to Eizen Fineburg & McCarthy, former corporate counsel. The
Reorganization Plan calls for all three secured creditors to receive a
convertible, non-interest bearing, unsecured promissory note for the face
amount owed to them. The principal amount of the note payable to Ansteed
and/or its affiliate also includes any amounts advanced to the Company
during the bankruptcy case and thereafter until December 31, 2002. The notes
payable will mature on December 31, 2005 if not converted earlier. The
notes are convertible at the Company's discretion at the rate of $2.00 per
share (after the planned 100:1 reverse split) for Ansteed, its affiliate and
Pasubio, and at a rate of $10.00 per share (after the planned 100:1 reverse
split) for Eizen Fineburg & McCarthy.
3. The Company owed General Unsecured Creditors approximately $3,782,000 as of
the filing date. An affiliate of Ansteed has agreed to fund the
Reorganization Plan for $300,000 to be used to pay the Administrative costs
totaling approximately $80,000, Priority Unsecured Claims totaling
approximately $86,000 and General Unsecured Claims, in that order. It is
thus estimated that General Unsecured Claims will receive a total of
approximately $134,000. This resulted in a gain on discharge of
indebtedness of approximately $3,635,000.
11
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 4 - MANAGEMENT'S PLANS FOR REORGANIZATION (continued)
4. Existing equity holders, including common stock option and warrant holders,
were subject to a 100:1 reverse split.
The Company's exclusive source of post-petition operating funds were advanced
by Ansteed and/or its affiliate. The Company reached an agreement with them
to continue to advance funds to permit the business to work further toward the
final development of the ClariCAST(TM) FM wireless technology. Since the
inception of the bankruptcy, Ansteed and/or its affiliate have advanced
$703,000 through December 31, 2002.
The Company has chosen to focus its future efforts on development and
commercialization of its patented ClariCAST(TM) FM wireless technology.
Because the Company's technology is still under development, the Company
expects no revenues or operating cash flows in the near term. Future cash
expenditure requirements have been significantly reduced through major
reductions in corporate overhead expenses.
The Company is actively pursuing opportunities to secure additional financing
which, if obtained, is expected to be sufficient to develop and market its
wireless technology. There can be no assurances that such funding will be
generated or available, or if available, on terms acceptable to the Company.
Failure to secure additional financing will have a material adverse impact on
the Company.
RadioNet International, Inc., a wholly owned subsidiary of IDC filed a
voluntary petition for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code
in the U.S. Bankruptcy Court for the Eastern District of
Pennsylvania on May 3, 2002. The company operation has ceased. The company did
not hold any significant assets. The Bankruptcy Court closed the case on
RadioNet International, Inc. on July 12, 2002 and the Company recorded an
extraordinary gain on discharge of indebtedness of approximately $340,000 in
Fiscal First Half 2003.
The consolidated financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts or the amounts of liabilities
that might be necessary should the Company be unable to continue as a going
concern.
12
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 5- ACQUISITIONS
On December 11, 2002, the Company acquired all of the outstanding capital stock
of Integrated Communications Services, Ltd. ("ICS") for 4,200,000 newly issued
shares of the Company's common stock valued at $1.00 per share. The
acquisition was accounted for under the purchase method, and the results of ICS
have been included in the Company's consolidated results effective December 1,
2002. The Company has not finalized the allocation of the purchase price as of
December 31, 2002. An estimation of this allocation was prepared and included
as part of these financial statements. The purchase price has been allocated
as follows: $4,028,803 to license and $171,197 to working capital. Unaudited
pro-forma results have not been presented since the operations of ICS began on
November 1, 2002 and were not significant.
On December 12, 2002, the Company acquired an approximate 41% interest in
DataWave Systems, Inc. for 1,794,900 newly issued shares of the Company's
common stock valued at $1.00 per share. The investment was accounted for under
the equity method of accounting and the Company recorded Goodwill in the amount
of $434,400. Summarized financial information for DataWave as of December 31,
2002 and for the nine months then ended is as follows:
Financial Position
Current assets $ 4,741,000
Non current assets 3,350,000
Current liabilities 4,752,000
Non current liabilities -
Results of Operations
Net sales $ 14,230,000
Operating income 337,000
Net income 351,000
NOTE 6 - UNCONSOLIDATED SUBSIDIARY
Clariti Wireless Messaging filed a voluntary petition for bankruptcy under
Chapter 7 of the U.S. Bankruptcy Code. As a result, the Company's financial
statements for Fiscal 1Q02 reflect Clariti Wireless' results of operations
using the equity method of accounting. The following table presents summary
financial information for Clariti Wireless (dollars in thousands):
Fiscal 1Q02:
Net sales $ -
Expenses $ 427
13
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 7- EXTRAORDINARY GAIN ON DISCHARGE OF INDEBTEDNESS
Extraordinary gain on discharge of indebtedness of the Company and its
consolidated subsidiaries for the three months ended December 31, 2002 consist
of the following (in thousands):
Liabilities subject to compromise $ 5,218
Adjustments to claims ( 19)
Secured Claims (1,345)
Priority Claims ( 85)
General Unsecured Claims ( 134)
-------
Extraordinary gain on discharge
of indebtedness $ 3,635
=======
NOTE 8 - SHORT-TERM BORROWINGS FROM RELATED PARTY
On May 3, 2001, the Company borrowed $750,000 from Ansteed Investment, Ltd.
("Ansteed"), a greater than 5% shareholder, for a period of 61 days. The note
carries interest at the rate of 10% per annum and is secured by substantially
all of the Company's assets. The amount shown on the Company's consolidated
balance sheet as of December 31, 2002 includes $73,000 of accrued interest. In
connection with this loan, the Company granted to Ansteed warrants to purchase
4,000(post reverse split) shares of the Company's common stock at an exercise
price of $95 per share(post reverse split). Such warrants expire on May 3,
2003.
On November 30, 2001, the Company and Ansteed Investment, Ltd. executed a
Forbearance and Amendment Agreement whereby extending the terms of the
repayment of the $750,000 loan amount to March 31, 2002. In addition, the
Forbearance and Amendment Agreement allowed for Ansteed to advance an
additional $20,500 to the Company for legal fees associated with the agreement.
The additional $20,500 also carries interest at the rate of 10% per annum and
was due by March 31, 2002. On March 3, 2002, the Company borrowed an
additional $13,519 from Ansteed Investment, Ltd. for certain expenses, carrying
the same terms as the original note. The Company is in default of this loan.
Ansteed and/or its affiliate have agreed to fund the Company's working capital
requirements through Chapter 11 and until December 31, 2002. The amount funded
as of December 31, 2002 was $703,000. Some of this funding is expected to be
included in the convertible, non-interest bearing, unsecured promissory note(s)
to be issued to Ansteed and/or its affiliate pursuant to the Reorganization
Plan.
14
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 9 - CONVERTIBLE SHORT-TERM BORROWINGS
On July 2, 2001, the Company entered into a Funding Agreement with a third
party pursuant to which the Company borrowed $250,000 (the "Outstanding
Balance"). The Outstanding Balance is secured by a second position security
interest in substantially the same assets as those securing the $750,000 loan
from Ansteed(see Note 7). No interest is due on the Outstanding Balance. The
Outstanding Balance was to be repaid on or before July 2, 2002. Therefore the
Company is in default of the funding agreement. The third party may convert
the Outstanding Balance into shares of the Company's common stock at a
conversion price of $2.00 per share. In connection with this Funding
Agreement, the Company granted to the third party warrants to purchase a total
of 10,000(post reverse split) shares of the Company's common stock exercisable
at $50 per share(post reverse split). These warrants expired on July 2, 2002.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company is, from time to time, during the normal course of its business
operations, subject to various other litigation claims and legal disputes. The
Company expects none to have a material adverse impact on its operations.
However, no assurance can be given that an adverse determination of any claim
or dispute would not have an adverse impact on its operations during any given
period.
NOTE 11 - COMMON STOCK
During Fiscal First Half 2003 certain employees exercised 53,333 shares of its
common stock at an exercise price of $.001 per share. The amount has been
recorded as Common Stock and Additional Paid in Capital.
Effective December 6, 2002, the Company implemented a 1 for 100 shares reverse
stock split of its outstanding stock. The Company's common stock began trading
on a post-split basis at the opening of the stock market on December 6, 2002 on
the OTC Bulletin Board under the new symbol "ITDD."
All references in the consolidated financial statements to common shares, per
share amounts, stock options and warrants have been restated to reflect the
reverse stock split for all periods presented.
NOTE 12 - STOCK OPTIONS
There were no new stock options issued during Fiscal First Half 2003. All
outstanding stock options to purchase the Company's common stock were adjusted
in accordance with their terms to reflect the reverse stock split.
15
INTEGRATED DATA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 13 - WARRANTS
From time to time, the Company may issue warrants to purchase its common stock
to parties other than employees and directors. Warrants may be issued as a
unit with shares of common stock, in connection with borrowings, as an
incentive to help the Company achieve its goals, or in consideration for cash
or services rendered to the Company, or a combination of the above. Cost
associated with warrants issued to other than employees is valued based on the
fair value of the warrants as estimated using the Black-Scholes model.
During Fiscal First Half 2003 the Company did not issue any warrants. Also
during Fiscal First Half 2003, 1,548,000 warrants with exercise prices between
$7.00 and $1,600.00 per share expired without being exercised. The book value
of such expired warrants (approximately $1,482,000) was reclassified from
warrants outstanding to additional paid-in capital.
All outstanding warrants to purchase the Company's common stock were adjusted
in accordance with their terms to reflect the reverse stock split.
16
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Certain information included in this quarterly report may be deemed to include
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, that involve risk and uncertainty, such as our ability to
successfully do any or all of the following:
- Obtain financing for operations and expansion,
- Manage the transition from our former board of directors and management
team to the new board of directors and management team,
- Develop commercially viable applications for the ClariCAST(TM)
technology,
- Obtain access to engineering resources required to complete development
and commercial implementation of potential applications for the
ClariCAST(TM) technology,
- Lease SCA channels from FM radio stations,
- Select and develop partnerships to help market, sell and distribute the
wireless products and services we are attempting to develop,
- Develop a marketing strategy for the wireless products and services we
are attempting to develop,
- Develop manufacturing and distribution channels for the wireless
products and services we are attempting to develop,
- Manage the progress and costs of additional research and development of
the ClariCAST(TM) technology,
- Manage the risks, restrictions and barriers of conducting business
internationally,
- Reduce future operating losses and negative cash flow,
- Compete effectively in the markets we choose to enter
In addition, certain statements may involve risk and uncertainty if they
are preceded by, followed by, or that include the words "intends," "estimates,"
"believes," "expects," "anticipates," "should," "could," or similar
expressions, and other statements contained herein regarding matters that are
not historical facts. Although we believe that our expectations are based on
reasonable assumptions, we can give no assurance that our expectations
will be achieved. The important factors that could cause actual results to
differ materially from those in the forward-looking statements herein (the
"Cautionary Statements") include, without limitation, ability to obtain
funding, ability to reverse operating losses, competition and regulatory
developments, as well as the other risks identified below under "Risk Factors"
and those referenced from time to time in our filings with the Securities and
Exchange Commission. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements. We do not
undertake any obligation to release publicly any revisions to such forward-
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
17
General Operations
- ------------------
The current focus of our business is the development and commercialization
of ClariCAST(TM), our proprietary wireless technology that will support data
and information services to a high-speed digital wireless device.
Recent Events
- -------------
Effective January 14, 2003, the Company agreed to purchase 4,027,381 freely
tradable shares of DataWave Systems, Inc., a Yukon Canadian public company,
which trades on the TSE Venture Exchange with the symbol "DTV" and on the
Nasdaq OTCBB with the symbol "DWVSF." Theses shares when added to 17,949,000
shares acquired in December 2002, bring the Company's total holdings in
DataWave to 21,976,381 shares, which constitutes a majority of 50.072% of the
issued and outstanding shares of DataWave. The newly acquired shares were
purchased in off-market transactions for consideration of 402,738 newly issued
Rule 144 restricted shares of the Company (one share of the Company's common
stock being exchanged for each ten shares of DataWave).
On January 14, 2003, the Company's Board of Directors agreed to exercise its
right to convert three non-interest bearing notes in the respective amounts of
$858,000, $250,000 and $237,000. These notes had been issued to the three
secured creditors in the Company's Chapter 11 Bankruptcy proceedings as of
November 12, 2002, into newly issued restricted shares of common stock of the
Company. The notes in the amount of $858,000 and $250,000 are each convertible
at a price of $2 per share, while the note for $237,000 is convertible at a
price of $10 per share. The transactions have resulted in the issuance of an
aggregate additional 577,577 shares of the Company's common stock. All these
conversion shares in addition to the statutory restriction imposed under Rule
144 of the Securities Act of 1933, are subject to a contractual restriction or
"lock-up" for an additional period of one year after the expiration of the Rule
144 restriction.
Results of Operations
Three Months Ended December 31, 2002 ("Fiscal 2Q03")
vs. Three Months Ended December 31, 2001 ("Fiscal 2Q02")
- --------------------------------------------------------
For Fiscal 2Q03, the Company incurred net income of $3,321,000, or $2.28 per
share, on $25,000 in revenue as compared to a net loss of $769,000, or $2.00
per share, on no revenue in Fiscal 1Q02. Excluding extraordinary gain on
discharge of indebtedness, the Company incurred a net loss of $314,000, or
$0.22 per share, on $25,000 in revenue as compared to a net loss of $769,000,
or $2.00 per share, on no revenue in Fiscal 1Q02.
For Fiscal 1Q03, net loss from continuing operations was $314,000 as compared
to $769,000 in Fiscal 1Q02. The $444,000 reduction in loss from continuing
operations was primarily due to the decrease in general and administrative
expenses offset by an increase in depreciation and amortization expenses. In
addition, the Company operated with limited expenses due to the Chapter 11
proceedings, which extended into Fiscal 2Q03.
General and administrative expenses decreased $506,000, from $725,000 to
$219,000 in Fiscal 2Q03. Fiscal 2Q03 included a decrease in salary expense due
to a reduction in the work force and the elimination of salaries of three key
executives.
18
During the period from December 1998 to May 2001, the Company was also a
significant provider of wire-line telecommunication services through its
interest in several businesses with operations in the United States, United
Kingdom, Europe and Australia. During the year ended June 30, 2001, the
Company divested these business operations, which formed its former business
segment, Telephony/Internet Services. During Fiscal 1Q02 the Company recognized
an additional $100,000 loss on the disposal of one of those businesses.
Six Months Ended December 31, 2002 ("Fiscal Six Months 2003")
v. Six Months Ended December 31, 2001 ("Fiscal Six Months 2002")
- ----------------------------------------------------------------
For the Fiscal Six Months 2003, the Company incurred net income of $3,489,000,
or $3.79 per share, on $25,000 of revenue as compared to a net loss of
$3,607,000, or $9.57 per share, on no revenue for the Fiscal Six Months 2002.
Excluding gain on discharge of indebtedness, the Company incurred a net loss of
$486,000, or $0.54 per share, on $25,000 in revenue in Fiscal Six Months 2003
as compared to a net loss of $3,607,000, or $9.57 per share, on no revenue in
Fiscal Six Months 2002.
The $3,021,000 reduction in loss from continuing operations was primarily
due to a decrease in general and administrative expenses of $2,683,000 from
$3,008,000 to $325,000. Amounts for Fiscal Six Months 2002 include accruals of
$1,301,000 for certain leases, which were in default and legal proceedings,
which have been settled. The Company was forced reduce its work force, which
resulted in a significant reduction in costs.
During the period from December 1998 to May 2001, the Company was also a
significant provider of wire-line telecommunication services through its
interest in several businesses with operations in the United States, United
Kingdom, Europe and Australia. During the year ended June 30, 2001, the
Company divested these business operations, which formed the former business
segment, Telephony/Internet Services. During Fiscal Six Months 2002 the
Company recognized an additional $100,000 loss on the disposal of one of those
businesses.
Liquidity and Capital Resources
- -------------------------------
At December 31, 2002, the Company had a working capital deficit of $1,383,000
(including a cash balance of $1,000) as compared to a working capital deficit
of $5,711,000 (including a cash balance of $5,000) at June 30, 2002. The
working capital increase of $4,328,000 is primarily due to the $3,635,000 in
extraordinary gain on discharge of indebtedness as a result of closing Chapter
11 proceedings and an extraordinary gain on discharge of indebtedness of
$340,000 associated with the closing of the Chapter 7 proceedings for RadioNet
International.
The Company negotiated a Funding Agreement with Ansteed Investment, Ltd. (the
Company's primary secured creditor and its largest shareholder) and an
affiliated company, Cash Card Communications, Ltd. ("C4"), pursuant to which
Ansteed and C4 have agreed to provide limited funding to the Company during and
after Chapter 11 proceedings as well as the funding required to execute the
Plan of Reorganization. In consideration, the Company allowed such advances to
become secured claims of Ansteed and C4. Such advances were limited to minimal
expenses necessary to keep the Company operating.
19
The Company has no firm commitments for funding after December 31, 2002. The
Company has historically relied principally on equity financing to meet its
cash requirements. Company expects to find the process of raising equity
capital extremely difficult. These matters raise substantial doubt about the
ability to continue as a going concern. There can be no assurances that such
funding will be generated or available, or if available, on terms acceptable to
the Company.
20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
April 18, 2002, Clariti Telecommunications International, Ltd. filed a
voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the Eastern District
of Pennsylvania (case number 02-15817(DWS)). The Company managed its
properties and operated as "debtor-in-possession" under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code. The Company filed a Plan of Reorganization dated June 25,
2002 and an Amended Disclosure Statement dated August 7, 2002. The Plan
provided for the optimum payments to creditors within the shortest practical
and realistic period of time giving consideration to the creditors and the
Company's limited resources. The Company's Plan of Reorganization, which was
approved by the Bankruptcy Court on October 23, 2002, became effective on
November 12, 2002. The Company has emerged from Chapter 11 proceedings and
changed its name to Integrated Data Corp.
The Company is, from time to time, during the normal course of its business
operations, subject to various other litigation claims and legal disputes. The
Company expects none to have a material adverse impact on its operations;
however, no assurance can be given that an adverse determination of any claim
or dispute would not have an adverse impact on its operations during any given
period.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Events
None
21
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Officers Statement Pursuant to the Sarbanes-Oxley
Act of 2002
(b) Reports on Form 8-K:
On November 25, 2002, the Company announced that its
Plan of Reorganization was approved by the Bankruptcy
Court and became effective on November 12, 2002.
On December 6, 2002, the Company announced the
implementation of a 1 for 100 reverse stock split of
its outstanding common stock.
On December 11, 2002, the Company announced an
agreement with its lenders to convert $650,000 of
debt into shares of the Company's common stock at a
conversion price $2.00 per share resulting in an
issuance of 325,000 shares. Additionally, the Company
announced an agreement to purchase C4 Services Ltd. for
$4,200,000, paid in shares of the Company's common
stock at a valuation of $1.00 per share.
On December 18, 2002 the Company announced the purchase
of 17,949,000 freely tradable shares of DataWave
Systems, Inc. in exchange for issuing the selling
shareholders an aggregate 1,794,900 shares of the
Company's common stock.
22
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.
Dated: February 19, 2003
INTEGRATED DATA CORP.
(REGISTRANT)
By: /s/Abraham Carmel
--------------------
Abraham Carmel
Chief Executive Officer,
President and Acting Chief
Financial Officer
23
EXHIBIT 99.17
INTEGRATED DATA CORP.
OFFICERS STATEMENT PURSUANT TO
REQUIREMENTS OF SARBANES-OXLEY ACT 0F 2002
Each of the undersigned, the Chief Executive Officer and the Chief Financial
Officer, respectively, of Integrated Data Corp. ("the Company"), pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350,
hereby certifies as follows:
To my knowledge: (1) the periodic report of the Company accompanying this
statement fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. Section 78m or 78o(d); and (2) the
information contained in the periodic report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: February 19, 2003 /s/ Abraham Carmel
---------------------------------------
Abraham Carmel, Chief Executive Officer
Date: February 19, 2003 /s/ Abraham Carmel
---------------------------------------
Abraham Carmel, Chief Financial Officer