UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the quarterly period ended December 31, 2003 |
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the transition period from ____________ to ________________ |
Commission File No.: 0-22693
InfoTech USA, Inc.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
11-2889809 (I.R.S. Employer Identification No.) |
7 Kingsbridge Road, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (973) 227-8772
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of shares outstanding of each class of our common equity as of February 9, 2004 is as follows:
| Class of Common Stock Common Stock, par value $.01 per share |
Number of Shares 4,895,998 |
TABLE OF CONTENTS
| Item | Description | Page |
| PART I – FINANCIAL INFORMATION |
| 1. | Financial Statements |
| Consolidated Condensed Balance Sheets - December 31, 2003 (unaudited) and September 30, 2003 |
3 |
| Consolidated Condensed Statements of Operations - Three Months Ended December 31, 2003 and 2002 (unaudited) |
4 |
| Consolidated Condensed Statement of Stockholders' Equity - Three Months Ended December 31, 2003 (unaudited) |
5 |
| Consolidated Condensed Statements of Cash Flows - Three Months Ended December 31, 2003 and 2002 (unaudited) |
6 |
| Notes to Consolidated Condensed Financial Statements (unaudited) | 7 |
| 2. | Management's Discussion and Analysis of Financial Condition |
| and Results of Operations | 9 |
| 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 |
| 4. | Controls and Procedures | 12 |
| PART II - OTHER INFORMATION |
| 6. | Exhibits and Reports on Form 8-K | 12 |
| SIGNATURE | 13 | |
| EXHIBITS | 13 | |
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| INFOTECH USA, INC. AND
SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS |
| (In thousands, except par value) |
| Assets | |||||
| December 31, 2003 | September 30, 2003 | ||||
| (Unaudited) | |||||
| Current Assets Cash and cash equivalents |
$ 651 | $ 855 | |||
| Accounts receivable, net of allowance for doubtful accounts of $113 | 3,210 | 2,955 | |||
| Inventories | 170 | 120 | |||
| Note receivable - Parent Company | 1,000 | 1,013 | |||
| Deferred tax assets | 65 | 44 | |||
| Other current assets | 436 | 283 | |||
| Total Current Assets | 5,532 | 5,270 | |||
| Property, equipment and improvements, net | 297 | 325 | |||
| Goodwill, net | 2,154 | 2,154 | |||
| Other assets | 1,655 | 1,619 | |||
| Total Assets | $ 9,638 | $ 9,368 | |||
| Liabilities and Stockholders' Equity | |||||
| Current Liabilities | |||||
| Current maturities of capital lease obligation | $ 15 | $ 21 | |||
| Amounts due to Parent Company | 111 | 105 | |||
| Accounts payable | 873 | 146 | |||
| Accrued expenses and other liabilities | 1,156 | 1,502 | |||
| Total Liabilities | 2,155 | 1,774 | |||
| Commitments and Contingencies Stockholders' Equity | |||||
| Preferred shares: | |||||
| Authorized 5,000 shares, no par value; none issued | – | – | |||
| Common shares: | |||||
| Authorized 80,000 shares of $.01 par value; 5,757 shares issued; 4,896 shares outstanding | 58 | 58 | |||
| Additional paid-in capital | 6,653 | 6,653 | |||
| Retained earnings | 1,690 | 1,801 | |||
| Treasury stock (861 shares, carried at cost) | (918 | ) | (918 | ) | |
| Total Stockholders' Equity | 7,483 | 7,594 | |||
| Total Liabilities and Stockholders' Equity | $ 9,638 | $ 9,368 | |||
| See the accompanying notes to consolidated condensed financial statements. | 3 |
| INFOTECH USA, INC. AND SUBSIDIARIES |
| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
| (In thousands, except
per share data) (Unaudited) |
| For the Three Months Ended December 31, |
|||||
| 2003 | 2002 | ||||
| Revenue: Product revenue |
$ 2,920 | $ 2,386 | |||
| Service revenue | 807 | 494 | |||
| Total revenue | 3,727 | 2,880 | |||
| Cost of sales: | |||||
| Cost of products sold | 2,487 | 1,967 | |||
| Cost of services sold | 540 | 269 | |||
| Total cost of products and services sold | 3,027 | 2,236 | |||
| Gross profit | 700 | 644 | |||
| Selling, general and administrative expenses | 855 | 942 | |||
| Depreciation and amortization | 46 | 57 | |||
| Loss from operations | (201 | ) | (355 | ) | |
| Other expense (income) | 6 | (2 | ) | ||
| Interest (income) expense | (40 | ) | 7 | ||
| Loss before income tax benefit | (167 | ) | (360 | ) | |
| Income tax benefit | (56 | ) | (141 | ) | |
| Net loss applicable to common stockholders | $ (111 | ) | $ (219 | ) | |
| Net loss per common share – basic | $ (0.02 | ) | $ (0.04 | ) | |
| Weighted average number of common | |||||
| shares outstanding – basic | 4,896 | 4,896 | |||
| See the accompanying notes to consolidated condensed financial statements. | 4 |
| INFOTECH USA, INC. AND SUBSIDIARIES |
| CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY For the Three Months Ended December 31, 2003 |
| (In thousands, except share data) (Unaudited) |
| Preferred Stock |
Common Stock |
Additional Paid-In |
Retained | Treasury Stock |
Total Stockholders' |
||||||||||||||
| Number | Amount | Number | Amount | Capital | Earnings | Number | Amount | Equity | |||||||||||
| Balance, September 30, 2003 | – | $ – | 5,757 | $ 58 | $ 6,653 | $ 1,801 | (861 | ) | $ (918 | ) | $ 7,594 | ||||||||
| Net loss | – | – | – | – | – | (111 | ) | – | – | (111 | ) | ||||||||
| Balance, December 31, 2003 | – | $ – | 5,757 | $ 58 | $ 6,653 | $ 1,690 | (861 | ) | $ (918 | ) | $ 7,483 | ||||||||
| See the accompanying notes to consolidated condensed financial statements. | 5 |
| INFOTECH USA, INC. AND SUBSIDIARIES |
| CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS |
| (In thousands) (Unaudited) |
| For the Three Months Ended December 31, |
|||||
| 2003 | 2002 | ||||
| Cash flows from operating activities Net loss |
$ (111 | ) | $ (219 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities | |||||
| Depreciation and amortization | 46 | 57 | |||
| Deferred income taxes | (56 | ) | (141 | ) | |
| Changes in operating assets and liabilities: | |||||
| Increase in accounts receivable | (255 | ) | (181 | ) | |
| (Increase) decrease in inventories | (50 | ) | 41 | ||
| Increase in other current assets | (153 | ) | (168 | ) | |
| Increase in other assets | (1 | ) | – | ||
| Increase (decrease) in accounts payable and accrued expenses | 381 | (212 | ) | ||
| Net cash used in operating activities | (199 | ) | (823 | ) | |
| Cash flows from investing activities | |||||
| Capital expenditures | (24 | ) | (6 | ) | |
| Payments received on notes receivable - other | – | 18 | |||
| Payments received on loan to Parent Company | 13 | – | |||
| Proceeds from disposition of property and equipment | 6 | – | |||
| Net cash (used in) provided by investing activities | (5 | ) | 12 | ||
| Cash flows from financing activities | |||||
| Payments on capital lease obligation | (6 | ) | (5 | ) | |
| Net borrowings on Parent Company line of credit | 6 | 19 | |||
| Net cash provided by financing activities | – | 14 | |||
| Net decrease in cash and cash equivalents | (204 | ) | (797 | ) | |
| Cash and cash equivalents - beginning of period | 855 | 3,398 | |||
| Cash and cash equivalents - end of period | $ 651 | $ 2,601 | |||
| See the accompanying notes to consolidated condensed financial statements. | 6 |
| INFOTECH USA, INC. AND SUBSIDIARIES |
| NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS |
| (In thousands, except share and per share data) |
| (Unaudited) |
In the opinion of management, the accompanying unaudited consolidated condensed financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of InfoTech USA, Inc. (the “Company”) and its wholly-owned subsidiaries, as of December 31, 2003, their results of operations and cash flows for the three months ended December 31, 2003 and 2002 and their changes in stockholders’ equity for the three months ended December 31, 2003. Information included in the consolidated condensed balance sheet as of September 30, 2003 has been derived from the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K/A for the year ended September 30, 2003 (the “10-K/A”) previously filed with the Securities and Exchange Commission (the “SEC”). Pursuant to the rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these consolidated condensed financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and the other information in the 10-K/A.
The consolidated results of operations for the three months ended December 31, 2003 are not necessarily indicative of the results to be expected for the full year ending September 30, 2004.
The financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Inventories at December 31, 2003 and September 30, 2003 consist of:
| December 31, 2003 |
September 30, 2003 |
||||
| Finished goods | $ 209 | $ 159 | |||
| Allowance for excess and obsolescence | (39) | (39) | |||
| $ 170 | $ 120 | ||||
As further explained in Note 1 to the Company’s audited financial statements included in the 10-K/A previously filed with the SEC, the Company presents basic net income (loss) per share and, if appropriate, diluted net income per share in accordance with the provisions of Statement of Financial Accounting Standards No. 128, ” Earnings per Share”.
Since the Company had net losses for the three months ended December 31, 2003 and 2002, the assumed effects of the exercise of employee stock options for the purchase of 4,070 and 4,670 common shares at December 31, 2003 and 2002, respectively, and warrants for the purchase of 300 common shares at $0.5775 per share outstanding at December 31, 2003 and 2002 would have been anti-dilutive.
The Company continues to measure compensation cost related to stock options issued to employees using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting For Stock Issued To Employees.” The Company has adopted the disclosure-only provisions of Statement of Financial
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| INFOTECH USA, INC. AND SUBSIDIARIES |
| NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS |
| (In thousands, except share and per share data) |
| (Unaudited) |
Accounting Standards No. 123 (“SFAS 123”), “Accounting For Stock-Based Compensation.” Accordingly, no earned or unearned compensation cost was recognized in the accompanying consolidated condensed financial statements for the stock options granted by the Company to its employees since all of those options have been granted at exercise prices that equaled or exceeded the market value at the date of grant. The Company’s historical net loss and net loss per common share and pro forma net loss and net loss per common share assuming compensation cost had been determined in 2003 and 2002 based on the fair value at the grant date for all awards by the Company consistent with the provisions of SFAS 123 are set forth below:
| Three Months Ended December 31, |
|||||
| 2003 | 2002 | ||||
| Net loss - as reported | $ (111 | ) | $ (219 | ) | |
| Deduct total stock-based employee compensation expense | |||||
| determined under a fair value based method for all | |||||
| awards, net of related tax effects | (23 | ) | (23 | ) | |
| Net loss - pro forma | $ (134 | ) | $ (242 | ) | |
| Net loss per share: | |||||
| Basic - as reported | $ (0.0 | 2) | $ (0.0 | 4) | |
| Basic - pro forma | $ (0.0 | 3) | $ (0.0 | 5) | |
On June 27, 2003, the Company loaned $1.0 million to its majority stockholder, Applied Digital Solutions, Inc. (“Applied Digital”). Under the terms of the loan, interest, which accrues at an annual rate of 16%, is due and payable on a monthly basis beginning July 31, 2003. The principal amount of the loan and any unpaid interest is due on or before June 30, 2004. As collateral for the loan, Applied Digital pledged 750,000 shares of common stock of Digital Angel Corporation (“Digital Angel”), a majority-owned subsidiary of Applied Digital. As of December 31, 2003, the market value of the shares of stock of Digital Angel was approximately $3,555,000 based on the closing price of Digital Angel’s common stock.
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This discussion should be read in conjunction with the accompanying consolidated condensed financial statements and related notes in Item 1 of this report as well as our Annual Report on Form 10-K/A for the year ended September 30, 2003. Certain statements made in this report may contain forward-looking statements. For a description of risks and uncertainties relating to such forward-looking statements, see the Forward-Looking Statements and Associated Risk section later in this Item.
We are a Delaware corporation incorporated in 1997. Through our two wholly-owned subsidiaries, Information Technology Services, Inc. and InfoTech USA, we are a full service provider of information technology, or IT, services and products in the New York City metropolitan area and in New Jersey. We specialize in tailoring our approach to the individual customer needs. Doing business as “InfoTech”, we provide IT consulting, networking, remote access, procurement, storage area networks, deployment, integration and migration services. We also provide on-going system and network maintenance services.
We operate in a highly competitive industry, which in turn places constant pressures on maintaining gross profit margins. Many of our sales are high volume equipment sales, which produce lower than average gross profit margins, but are often accompanied by a service arrangement, which yields higher than average gross profit margins.
The following table sets forth, for the periods indicated, the percentage relationship to total revenue of certain items in our consolidated condensed statements of operations.
| Relationship to Revenue | |||||||
| Three Months Ended December 31, |
|||||||
| 2003 | 2002 | ||||||
| % | % | ||||||
| Product revenue | 78.3 | 82.8 | |||||
| Service revenue | 21.7 | 17.2 | |||||
| Total revenue | 100.0 | 100.0 | |||||
| Cost of products sold | 66.7 | 68.3 | |||||
| Cost of services sold | 14.5 | 9.3 | |||||
| Total cost of products and services sold | 81.2 | 77.6 | |||||
| Gross profit | 18.8 | 22.4 | |||||
| Selling, general and administrative expenses | 23.0 | 32.7 | |||||
| Depreciation and amortization | 1.2 | 2.0 | |||||
| Loss from operations | 5.4 | 12.3 | |||||
| Other expense | 0.2 | – | |||||
| Interest (income) expense | (1.1 | ) | 0.2 | ||||
| Loss before income tax benefit | 4.5 | 12.5 | |||||
| Income tax benefit | 1.5 | 4.9 | |||||
| Net loss applicable to common stockholders | 3.0 | 7.6 | |||||
Three Months Ended
December 31, 2003 Compared to the Three Months Ended December 31, 2002
(in $'000 unless otherwise noted)
Sales for the first quarter of fiscal year 2004 increased 29.4%, or $847, to $3,727 from $2,880 in the first quarter of fiscal year 2003. The increase in revenue was primarily a result of improved market conditions and our focus on higher-end, Intel-based products, which provided us with more opportunity to sell related technical services. Product sales increased by $534, or 22.4%, to $2,920 from $2,386, while service sales increased $313, or 63.3%,
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from $494 in the first quarter of 2003. With the IT market conditions improving and our continued focus on higher-end, Intel-based products, we expect sales volumes to continue to increase during the current fiscal year.
Gross profit increased by 8.7%, or $56, in the first quarter of fiscal year 2004 to $700 from $644 in the same quarter last year. The increase in gross profit was primarily due to the overall increase in revenue. Total gross margin decreased however, from 22.4% in the first quarter of 2003 to 18.8% in 2004. Both product and service gross margin decreased from the first quarter of last year. Product margin fell from 17.6% in the first quarter of 2003 to 14.8% in the first quarter of 2004, while service gross margin fell from 45.5% in 2003 to 33.1% in 2004. The drop in gross margin in the first quarter of 2004 compared to the corresponding period for 2003 was due to a combination of competitive pressures forcing product margins down and the underutilization of technicians and engineers forcing service margins down. Despite the results of the first quarter, we expect the service margins to improve this fiscal year due to the improving IT market conditions and our focus on higher end products and related services. We anticipate these factors will result in a higher utilization rate of our technicians and engineers.
Selling, general and administrative expenses decreased $87, or 9.2%, to $855 for the first quarter of 2004, compared to $942 in 2003. The reduction in expense was primarily due to reductions in our workforce. The reductions were offset by an accrual made in connection with pending legal proceedings. During the current fiscal year, as market conditions improve, our management and administrative staff is expected to be sufficient, however we may need to add additional personnel in the sales and technical areas of the business as sales volume dictates.
Depreciation and amortization expense for first quarter of 2004 decreased $11, or 19.3%, from $57 in the first quarter of 2003 to $46 in fiscal year 2004. The decrease was primarily a result of certain assets being fully depreciated as of the end of fiscal year 2003.
Interest income in the first quarter of 2004 was $40 compared to interest expense of $7 in 2003. The interest income was earned as a result of the June 2003 loan made to our majority stockholder, Applied Digital.
Our net loss for the first quarter of 2004 decreased 49.3%, or $108, to $111 from $219 in the first quarter of 2003.
Our current ratio at December 31, 2003 was 2.57 compared to 2.97 at September 30, 2003. Working capital at December 31, 2003 was $3,377 down from $3,496 at September 30, 2003, a decrease of $119.
Cash used in operating activities in the first three months of fiscal year 2004 was $199 compared to cash used in operating activities in the first three months of fiscal year 2003 of $823. The cash used in operating activities during the three months ended December 31, 2003 was primarily a result of our net loss and an increase in accounts receivable and other current assets. The effects of these factors were somewhat offset by an increase in accounts payable and accrued expenses. The cash used in operating activities during the three months ended December 31, 2002 was a result of our net loss, an increase in accounts receivable, an increase in other current assets and a decrease in accounts payable and accrued expenses.
Cash used in investing activities was $5 for the first three months of fiscal 2004 compared to cash provided by investing activities of $12 for the same period last year. Cash used in investing activities of $5 for the three months ended December 31, 2003 was primarily a result of capital expenditures, which was somewhat offset by an interest payment made on the short term loan made to our majority stockholder, Applied Digital. The cash provided by investing activities of $12 in the three months ended December 31, 2002 was primarily a result of payments on other notes receivable, offset, in part, by capital expenditures.
We had no cash provided by financing activities for the three months ended December 31, 2003. Cash provided by financing activities was $14 for the three months ended December 31, 2002 resulting primarily from net borrowings on our Parent Company’s line of credit offset by payments made on our capital lease obligation.
Our business activities are capital intensive and, consequently, we finance our accounts receivable and inventory. Failure to obtain adequate product financing on a timely basis could have a material adverse affect on our business, results of operations, financial condition and cash flows. Our current financing agreement with IBM Credit LLC provides financing on inventory purchases up to $2,500. Borrowing for purchases is based upon 75% of all eligible receivables due within 90 days and up to 100% of all eligible inventories. IBM Credit may grant temporary increases, thereby increasing the line of credit in order to accommodate high volume sale opportunities. Interest for balances not paid within the interest free period provided in the agreements accrues at prime plus 4.4%.
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Borrowings under the financing arrangement described above amounted to $839 and $469 at December 31, 2003 and September 30, 2003, respectively, and are included in either accounts payable or accrued expenses and other liabilities.
On September 5, 2003 we received a letter from IBM Credit constituting their formal notice of termination of our agreement. The effective date of such termination will be March 10, 2004. We are currently in the process of securing other financing and expect to replace our line of credit prior to the termination date set by IBM Credit. To date we have contacted the major lenders and providers of floorplan financing arrangements within the IT industry, as well as other asset based lenders, and we are currently reviewing several alternatives.
We believe that our present financing arrangements with IBM Credit, current cash position, expected replacement of the IBM Credit facility and the repayment of the loan made to Applied Digital Solutions will provide us with sufficient capital to fund our operations and capital expenditures through at least December 31, 2004. Our long-term capital needs may require additional sources of credit. There can be no assurances that we will be successful in our ability to negotiate a replacement for the IBM Credit financing needed to fund our operations in the coming year, nor are there any assurances that we will be successful in negotiating additional sources of credit for our long-term capital needs. Our inability to have continuous access to such financing at reasonable costs may materially and adversely impact our financial condition, results of operations and cash flows. In addition, we cannot provide any assurance that we will be successful in defending against the allegations raised against us by our former president, chief executive officer and chief operating officer and current director, Anat Ebenstein, a description of which is provided under Part I, Item 3 – Legal Proceedings in our Annual Report on Form 10-K for the year ended September 30, 2003. An unfavorable outcome in that action, however, may result in a material adverse effect on our liquidity, financial position or results of operations.
Certain statements in this report, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. We intend that such forward-looking statements be subject to the safe harbors created thereby. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the ability to retain key personnel; the continued development of our technical, sales, marketing and management capabilities; relationships with and dependence on third-party suppliers; anticipated competition; uncertainties relating to economic conditions where we operate; uncertainties relating to government and regulatory policies; uncertainties relating to customer plans and commitments; rapid technological developments and obsolescence in the industries in which we operate and compete; potential performance issues with suppliers and customers; governmental export and import policies; global trade policies; worldwide political stability and economic growth; the highly competitive environment in which we operate; potential entry of new, well-capitalized competitors into our markets; our ability to maintain available sources of financing; and changes in our capital structure and cost of capital. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.
We presently do not use any derivative financial instruments to hedge our exposure to adverse fluctuations in interest rates, foreign exchange rates, fluctuations in commodity prices or other market risks, nor do we invest in speculative financial instruments. For InfoTech USA, borrowings under the financing agreement with IBM Credit are at zero percent interest for the first 30 days, thereafter the interest rate is the prime rate plus 4.4%. Our interest income is sensitive to changes in the general level of U. S. interest rates, particularly since the majority of our investments are in short-term investments.
Due to the nature of our borrowings and our short-term investments, we have concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required.
As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and
11
procedures with respect to the information generated for use in our reporting system. Based upon, and as of the date of that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms.
Subsequent to the filing of our Annual Report on Form 10-K with the Securities and Exchange Commission on December 23, 2003, we learned of an inadvertent omission of certain outstanding stock options as of September 30, 2003 from the disclosures contained in the notes to our consolidated financial statements. We filed an amendment to our Annual Report on Form 10-K/A with the Securities and Exchange Commission on January 28, 2004. As a result of this omission, we revised our disclosure controls and procedures and internal control over financial reporting to prevent such an error from occurring in the future. Except as noted, there were no other changes in our internal control over financial reporting during the quarter ended December 31, 2003 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
It should be noted that our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
| (a) |
Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in
Regulation S-K). |
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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.
| INFOTECH USA, INC. |
| Dated: February 13, 2004 | By: | /s/ J.Robert Patterson |
| J. Robert Patterson Vice President, Chief Financial Officer, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer) |
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| Exhibit Number |
Description |
| 3.1 | Amended and Restated Certificate of Incorporation dated April 21, 1997 (incorporated by reference to Exhibit 3.1 to the registrant's Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003) |
| 3.2 | Certificate of Amendment of Certificate of Incorporation dated March 22, 2002 (incorporated by reference to Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003) |
| 3.3 | Certificate of Amendment of Certificate of Incorporation dated April 9, 2003 (incorporated by reference to Exhibit 3.3 to the registrant's Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003) |
| 3.4 | Amended and Restated By-Laws (incorporated by reference to Exhibit 3.4 to the registrant's Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003) |
| 31.1 | Certification by Chief Executive Officer of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification by Chief Financial Officer of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification by Chief Executive Officer of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification by Chief Financial Officer of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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