All of our revenue is derived from U.S.-based customers.
During 2004, three customers, Hackensack University Medical Center, GAF Material Corporation and IBM Corporation, accounted for 28%, 17% and 8% of our total revenue, respectively. During 2003, three customers, Hackensack University Medical Center, GAF Material Corporation and Centenary College, accounted for 21%, 18% and 12% of our total revenue, respectively. All of our top three customers for 2004 continue to be active customers. However, the loss of significant orders from these three customers or our failure to receive orders from existing or new customers on a continuous basis in the future may have a material adverse effect on our results of operations or financial condition.
Strategy
InfoTech has been in the business of delivering state-of-the-art IT solutions since 1980, and we have built extensive expertise in the IT arena. As emerging technologies redefine business models every day, we seek to help businesses identify cutting edge technology solutions that will give them a competitive edge. We maintain a solution-based approach aimed at enabling our customers to solve specific business problems, improve efficiency, reduce costs and improve security. We believe our dedication to the development of strategic alliances with providers of high-end products and services, combined with the continuous development for our highly skilled, certified personnel, gives us the ability to help any business plan for the integration, implementation, and support of these evolving technologies today and in the
future.
Market
We primarily target small to medium-sized businesses. We also continue to focus on expanding the relationships we have with larger customers and on searching for new opportunities in the Fortune 1000 market. We believe the area for the greatest potential growth will continue to be the small to medium-sized customers. We believe these customers are less likely to have the expertise necessary to address their IT needs. We continue to identify those companies that will benefit from our solution-based model and to target those industries in which we have previously been successful, including educational institutions, the legal and financial community, medical facilities, manufacturers and New York City governmental agencies. Geographically, we continue to focus on the New York City metropolitan area.
Services
As a full service IT provider, we offer a wide variety of IT services and products that we tailor for the unique IT needs of our customers. From the most basic installation to the most complex enterprise network implementation, our goal is to provide a turnkey solution to today’s IT needs.
The following descriptions highlight the primary services we offer:
Server Consolidation:
We offer a wide range of file server installation services designed to meet each client’s unique office automation environment. Our implementation services provide the customer with a choice of service plans ranging from a basic file server set up and testing to more complex high availability IT environments.
LAN/WAN Consulting Services:
We provide many network and system design services including specifications needs, requests for proposals, development and distribution evaluation, hardware selection, application and system needs analysis, infrastructure design, disaster recovery planning and contingency planning services, migration services, consolidation strategies and IT technology transfer.
Messaging and Collaboration Services:
Our electronic messaging and collaboration services give our customers the needed expertise in designing and upgrading electronic communication systems. Electronic messaging now means creating, storing and sharing documents and workflow within one reliable, secure system.
Asset Acquisition and Management:
InfoTech provides a virtually transparent supply chain for the procurement of cutting edge information technology assets. We believe our total acquisition and support model is one of the most flexible and cost-effective models in the industry since we are able to partner with multiple, high-end technology distributors.
Call Center:
We offer basic hardware and software support services on an as needed and fixed price basis enabling our customers to choose the amount of support required to ensure optimum IT usability.
On-site support:
We offer the on-site support expertise of technicians and network and systems engineers with real-world expertise ranging from desktop configuration to multi-site, multi-platform enterprise network deployment. Planned on-site services can be arranged to assist with existing or planned network and systems initiatives such as upgrades, network operating system and data migrations, network infrastructure deployment, server integration and remote communication deployment.
Warranty & Maintenance Support:
As an authorized service provider for Hewlett Packard, IBM, Lexmark and other manufacturers, we provide warranty support services for installed systems and network computing environments. We honor the manufacturers’ warranties during the manufacturers’ warranty periods. Our maintenance agreements provide complete coverage for customers’ systems and network infrastructure environments, from server-based technologies, communications devices and management tools to desktop computers and all associated peripherals.
Partners
InfoTech is a certified business partner of many of today’s leading information technology manufacturers. We are authorized to market products from Citrix, Cisco, Hewlett Packard, IBM, Lexmark, Microsoft, 3Com, and VM Ware.
Growth Strategy
Our strategy is to be a leading provider of integrated IT services and products that add significant and measurable business value to small to medium-sized companies, Global 1000 companies and other organizations. The following are the key elements of our strategy:
Leverage Existing Customers
We must continue to satisfy our existing customers. A strong track record of delivering high quality integrated IT products and services with each customer often increases the amount, scope and sophistication of the engagements we enter into with our customers. This record reinforces our growing reputation as an innovative provider of integrated IT solutions. We also believe that maintaining a reputation for delivering innovative business and technology strategy, and high customer satisfaction, will increase our ability to attract new customers through increased revenues and strong references.
We believe that our expertise in specific industry groups and industry-specific solutions considerably enhances our ability to help companies gain competitive advantages. In each of our industry groups, we employ industry
experts, pursue targeted sales and marketing, develop industry-specific offerings and capitalize on referrals from existing customers. We will continue to emphasize this focus and will seek to expand the scope of our industry expertise.
Hire and Retain Skilled Professionals
We believe our ability to deliver sophisticated IT solutions distinguishes us from other professional services providers. To deliver these services, we must continue hiring and retaining skilled professionals in all disciplines and fostering collaboration among them.
We have a dedicated organizational development team that initiates and oversees the training and development of our professionals. Key organizational development initiatives include a comprehensive orientation and training program for all new employees. Under this program, we provide ongoing technical and project management training as well as career path management and guidance. We are committed to recruiting and hiring quality professionals and to maintaining a culture that motivates our staff while cultivating collaboration and retention. In 2004, we hired two new sales engineers, each with several years of IT experience.
Evolving Methodology
We believe that continued evolution of our methodology will strengthen our competitive position. We enhance our methodology by incorporating best practices identified over numerous engagements. Through a continuous improvement program of standardized and comprehensive project launches and project-end review sessions, we continually update project methodologies in real-time. Additionally, trend analyses of project reviews and customer satisfaction surveys provide valuable feedback for process improvements. As a result of this approach, our customers benefit from our cumulative experience. We will continue to enhance our process by updating the methodologies used to deliver high quality solutions to customers on time and on budget.
Strategic Alliances
We believe our relationships with leading technology partners provide increased visibility and sales opportunities. We currently maintain strategic partnerships and alliances with Cisco, Citrix, Hewlett Packard, IBM, Microsoft, 3Com, and VM Ware.
Sales and Marketing
Our sales and marketing team continues to grow and develop. In the past year, we hired two sales engineers, and more recently added a VP of Technology and Business Development who will be directing the sales engineers and implementation teams in all facets. Our sales force continues to complete manufacturer’s authorization programs to give them the needed expertise in a continually changing environment. The completion of the training programs by our sales force has enabled our company to gain new manufacturer’s certifications required to sell the higher-end product lines we are pursuing in our overall strategy. For example, we have earned the Cisco Premier Certified Partner level qualifying us to sell high-end connectivity products and the HP EVA SAN Certification enabling us to sell ente
rprise storage area networks. More recently we completed the VMware certification, enabling us to reach into larger enterprise customers looking to downsize from mainframes to more economical blade servers.
Additionally, we will continue to co-sponsor quarterly marketing campaigns with our technology partners. We have scheduled several events for the next two quarters with VMware, Citrix, HP and Lexmark designed to reach new customers. Additionally, we continue to use our website and our marketing brochures to promote our company and its services. Our marketing brochures have been very successful in promoting the InfoTech brand and have brought a higher level of professionalism to our sales and marketing team.
Competition
We compete in a highly competitive market with IT products and solutions providers that vary greatly in their size and technical expertise. Our primary competitors are Alphanet, AMC Computers, Delta Computec Inc, Ergonomic Group, En Pointe Technologies, Inc., Gotham, Vicom, Inc. and Westwood Computers. Additionally, we expect to face further competition from new market entrants and possible alliances between competitors in the future.
Certain of our current and potential competitors have greater financial, technical, marketing and other resources than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in
customer requirements or to devote greater resources to the development, promotion and sales of their services than us. No assurance can be given that we will be able to compete successfully against current and future competitors.
Our ability to compete successfully depends on a number of factors such as breadth of product and service offerings, sales and marketing efforts, pricing, quality and reliability of services, technical personnel and other support capabilities. While there can be no assurance that we will be able to continue to compete successfully with existing or new competition, we believe that we currently compete favorably due to our size and our focus on certain industry markets. InfoTech competes in one of the world’s largest IT markets, the New York City metropolitan area. Our total market share is less than 1%, and we focus primarily on small to medium-sized businesses in a few specific industries. Being a small company and focusing on few specific industries gives us a competitive advantage in the following ways:
· We are a relatively small company, and, as a result, we believe we are more easily able to adapt to individual customer needs allowing us to tailor our product and service delivery in a way that serves them best.
· Being relatively small also enables us to foster close, long-term relationships with our customers across all levels of their organization.
· Focusing on a few specific industries provides us with a better understanding of the needs of customers in those industries.
· We believe we have developed an excellent reputation in the specific industries in which we compete. This reputation provides us with referral business as well as strong, relevant reference accounts when pursuing new clients in those industries.
EMPLOYEES
As of December 21, 2004, we employed 31 full-time employees and 3 part-time employees. We have no collective bargaining agreements and believe our relations with our employees are good.
BACKLOG
Customers typically do not place recurring “long-term” orders with us, resulting in a limited order backlog at any point in time. Our backlog was approximately $890,000 and $640,000 at December 15, 2004 and 2003, respectively. Given the lack of recurring orders from existing customers, our failure to receive orders from existing or new customers on a continuous basis in the future would have a material adverse effect on our financial condition, results of operations and cash flows.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
Federal, state, and local laws or regulations which have been enacted or adopted regulating the discharge of materials into the environment have not had, and under present conditions we do not foresee that they will have, a material adverse effect on our capital expenditures, earnings, cash flows or our competitive position. We will continue to monitor our operations with respect to potential environmental issues, including changes in legally mandated standards.
AVAILABLE INFORMATION
Our internet address is www.infotechusa.com. Our internet address is included in this Annual Report on Form 10-K as an inactive textual reference only. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report. We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. We make available free of charge our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished, as required by Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, through our w
ebsite as soon as reasonably practicable after we electronically file such material with or furnish it to the Commission. You may access these filings via the hyperlink to the Commission’s website that we provide on our website.
We lease 458 square feet of general office space in New York City at an annual rental of $63,000 pursuant to a one-year lease. This lease expires on October 31, 2005. This location adequately serves our needs and is approximately 95% utilized.
We lease 9,661 square feet of general office space in Fairfield, New Jersey at an annual rental of $157,000 pursuant to a five and a half year lease. This lease expires on December 27, 2005. This location adequately serves our needs and is approximately 75% utilized.
On October 22, 2002, Anat Ebenstein, our former President, Chief Executive Officer and director, filed a complaint against us, Applied Digital and certain officers and directors in connection with the termination of her employment. The complaint filed in the Superior Court of New Jersey, Mercer County, seeks compensatory and punitive damages arising from an alleged improper termination. The action is currently in the final stages of a negotiated settlement and is not expected to go to trial. However, we cannot provide any assurance that we will be successful in our attempts to negotiate a favorable settlement, and, if the case proceeds to trial, we cannot provide any assurance that we will be successful in defending against these allegations. We believe that a portion of any ultimate damages may be covered under o
ur employment practices liability insurance. As of September 30, 2004, we have accrued the full amount of the insurance deductible of $250,000. An unfavorable outcome in this action, however, may result in a material adverse effect on our liquidity, financial position or results of operations.
We are not subject to any environmental or governmental proceedings.
No matters were submitted to a vote of our stockholders during the fourth quarter of fiscal 2004.
PART II
Our common stock trades on the over-the-counter bulletin board under the symbol “IFTH”. The following table shows, for the periods indicated, the high and low bid quotations per share of the common stock based on published financial sources. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| |
|
High |
|
Low |
|
| |
2003 |
|
|
|
|
| |
First Quarter |
$ 0.41 |
|
$ 0.16 |
|
| |
Second Quarter |
0.27 |
|
0.13 |
|
| |
Third Quarter |
0.36 |
|
0.13 |
|
| |
Fourth Quarter |
0.27 |
|
0.17 |
|
| |
2004 |
|
|
|
|
| |
First Quarter |
$ 0.30 |
|
$ 0.18 |
|
| |
Second Quarter |
0.33 |
|
0.21 |
|
| |
Third Quarter |
0.45 |
|
0.25 |
|
| |
Fourth Quarter |
0.44 |
|
0.34 |
|
Dividends
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The decision whether to apply legally available funds to the payment of dividends on our common stock may be made by our Board of Directors from time to time in the exercise of its business judgment. Our financing agreement with Wells Fargo contains restrictions on our ability to declare and pay dividends.
Holders
As of December 21, 2004, there were 54 holders of record of our common stock. We believe that there are a substantially greater number of beneficial owners of shares of our common stock.
The selected consolidated financial data set forth below, insofar as they relate to the five years ended September 30, 2004, are derived from, and are qualified by reference to, our audited consolidated financial statements and should be read in conjunction with those consolidated financial statements and the notes thereto. The selected consolidated financial data as of September 30, 2000, 2001 and 2002 and for the years ended September 30, 2000 and 2001 are derived from audited consolidated financial statements not included herein. Results for past periods are not necessarily indicative of results that may be expected for future periods.
|
Consolidated Statement of |
|
For the Year Ended September 30, |
|
|
Operations Data: |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |