<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ x ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO _____________
Commission File Number 1-12909
INTERNATIONAL COMPUTEX, INC.
(Exact name of small business issuer as specified in its charter)
GEORGIA 58-1938206
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5500 INTERSTATE NORTH PARKWAY, SUITE 507
ATLANTA, GA 30328
(Address of principal executive offices)
(770) 953-1464
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ] No [ x ]
As of June 10, 1997, there were 3,250,000 shares of common stock, $0.001 par
value, outstanding.
Transitional Small Business Disclosure Format
(Check one):
Yes [ ] No [ x ]
1
<PAGE>
INTERNATIONAL COMPUTEX, INC.
INDEX
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets
December 31, 1996 and March 31, 1997
Statements of Income
Three Months Ended March 31, 1996 and March 31, 1997
Statements of Cash Flows
Three Months Ended March 31, 1996 and March 31, 1997
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL COMPUTEX, INC.
BALANCE SHEETS
December 31 March 31
1996 1997
----------- ----------
ASSETS
Current assets
Cash $ 119,750 $1,182,003
Accounts receivable, net 1,020,319 1,459,066
Prepaid expenses 13,738 20,707
---------- ----------
Total current assets 1,153,807 2,661,776
Property and equipment, net 168,178 268,118
Other assets 299,026 646,913
---------- ----------
$1,621,011 $3,576,807
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 45,260 $ 65,103
Accrued expenses 80,522
Current portion of
long-term debt 4,189 4,100
---------- ----------
Total current liabilities 49,449 149,725
---------- ----------
Long-term liabilities
Senior debentures 1,115,000
Long-term debt, net of
current portion 18,935 18,009
---------- ----------
Total long-term liabilities 18,935 1,133,009
---------- ----------
Total liabilities 68,384 1,282,734
---------- ----------
Stockholders' equity
Common stock, $.001 par value,
20,000,000 shares authorized;
2,125,000 shares issued and
outstanding 2,125 2,125
Retained earnings 1,550,502 2,291,948
---------- ----------
Total stockholders' equity 1,552,627 2,294,073
---------- ----------
$1,621,011 $3,576,807
========== ==========
See accompanying notes to financial statements.
3
<PAGE>
INTERNATIONAL COMPUTEX, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months ended March 31,
1996 1997
<S> <C> <C>
Revenues $ 811,328 $1,358,319
---------- ----------
Expenses
Operating 510,694 536,880
Non-cash charge for compensation 442,382
General and administrative 58,727 69,789
---------- ----------
569,421 1,049,051
---------- ----------
Income from operations 241,907 309,268
Other income/(expense) 0 (32,374)
---------- ----------
Net income - historical 241,907 276,894
Pro forma provision for income
taxes [Note 2] 91,199 104,389
---------- ----------
Pro forma net income $ 150,708 $ 172,505
---------- ----------
Pro forma earnings per share $ 0.06 $ 0.07
---------- ----------
Weighted average shares
outstanding 2,357,836 2,357,836
========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
INTERNATIONAL COMPUTEX, INC.
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1997
<S> <C> <C>
Cash flows from operating activities
Net Income $ 241,907 $ 276,894
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 5,880 25,200
Non-cash charge: options 442,382
Non-cash charge: warrants 22,170
Provision for bad debt 23,826
Changes in assets and liabilities
Decrease [Increase] in accounts
receivable 128,531 (438,748)
Decrease [Increase] in prepaid
expenses (6,969)
Decrease [Increase] in miscellaneous
assets (6,229)
Increase [Decrease] in accounts
payable (11,964) 100,364
---------- ----------
Total adjustments 146,273 138,170
---------- ----------
Net cash provided by
operating activities 388,180 415,064
---------- ----------
Cash flows from investing activities
Acquisition of property and equipment (115,240)
Software development costs capitalized (129,380)
---------- ----------
Net cash used by investing
activities 0 (244,620)
---------- ----------
Cash flows from financing activities
Principal payments on long-term debt (1,014)
Deferred offering costs (222,177)
Senior secured debentures 1,115,000
---------- ----------
Net cash provided by
financing activities 0 891,809
---------- ----------
Net increase [decrease]
in cash 388,180 1,062,253
Cash, Beginning of period 80,969 119,750
---------- ----------
Cash, end of period $ 469,149 $1,182,003
---------- ----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
INTERNATIONAL COMPUTEX, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
International CompuTex, Inc. (the "Company") in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1996
included in the Company's Registration Statement on Form SB-2 (File No. 333-
21647), as amended (the "Registration Statement"). The financial information
included herein is unaudited; however, the information reflects all adjustments
that are, in the opinion of management, necessary to a fair presentation of the
financial position, results of operations, and cash flows for the interim
periods. Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
2. INCOME TAXES
The Company had elected to be treated as an S Corporation pursuant to the
Internal Revenue Code for federal and state income tax purposes. The income of
an S Corporation is taxable to the individual stockholders. Such income is
distributable to the stockholders without any further tax consequences. The
stockholders revoked the S Corporation status on April 30, 1997, immediately
prior to the closing of the Company's initial public offering (see Note 4,
Termination of S Corporation Status), and the Company will be taxable as a C
Corporation from that date forward. A pro forma provision for income taxes has
been presented which represents income taxes which would have been provided had
the Company operated as a C Corporation.
3. SENIOR DEBENTURES
In January 1997, the Company received proceeds from the sale of Senior
Debentures in the amount of $1,115,000. Interest accrued at 6% per annum,
payable semi-annually, and the principal amount was due in January 2000. The
Company was required to prepay the Senior Debentures in whole, without penalty,
if the Company received at least $5,000,000 gross proceeds from a public
offering or private placement of its common stock. Purchasers of the Senior
Debentures received Warrants from the stockholders of the Company to purchase
117,368 shares of common stock held by these stockholders at 60% of the public
offering price. As a result of the Company's initial public offering (see Note
5, Subsequent Events), the Company prepaid the Senior Debentures principal with
accrued interest of $19,795 in whole on May 5, 1997, and the stockholders issued
117,368 Warrants at an exercise price of $5.70 per share, or 60% of the Initial
Public Offering price of $9.50 per share.
4. TERMINATION OF S CORPORATION STATUS
On April 30, 1997, the Company's shareholders, in accordance with the Company's
S Corporation Termination, Tax Allocation and Indemnification Agreement (the
"Agreement") dated March 24, 1997, elected to terminate the Company's status as
a S corporation, and the Company became subject to federal and state income
taxes. In accordance with the Agreement, $2,418,765 was distributed to the S
Corporation stockholders in May 1997 by an assignment of accounts receivable and
cash equaling the Company's Accumulated Adjusted Account as of April 30, 1997.
5. SUBSEQUENT EVENTS
The Company completed its initial public offering of 1,125,000 shares of Common
Stock at $9.50 per share on May 5, 1997. Net proceeds to the Company amounted
to approximately $9,100,000.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion and analysis of financial condition and results of operations
should be read in conjunction with the unaudited financial statements and the
related disclosures included elsewhere herein and Management's Discussion and
Analysis of Financial Condition and Results of Operations included as part of
the Company's Registration Statement on Form SB-2 (Registration No. 333-21647)
(the "Registration Statement"), as declared effective by the Securities and
Exchange Commission on April 29, 1997.
The discussion in this Report contains forward looking statements which are
subject to substantial risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in this section and elsewhere in this Report, and the risks discussed
in the "Risk Factors" section in the Registration Statement.
OVERVIEW
International CompuTex, Inc. ("ICI" or the "Company") is a software technology
company that develops, markets and supports enterprise-wide client/server
solutions. The Company provides consulting and implementation services for the
engineering and manufacturing industries in the area of information
classification and management ("ICAM"). ICAM is a software technology that
serves a dual function. The first function is the ability to read and classify
information based on attributes with which end-users are familiar. The second
function allows for the maintenance and retrieval of this information. From the
time of its incorporation in 1991 through mid-1996, all Company revenues
resulted from computer software-related services with a primary focus in the
area of Product Data Management ("PDM") software applications. Among other
applications, ICAM is one of the major components of a PDM solution. PDM is a
system of software applications, used principally by manufacturing and design
companies, which allow management and control of product-related data from
development and design stages through the manufacturing and post-production
marketing phases of a product. Throughout its history, ICI has provided a wide
variety of services to IBM, including product development and, on a subcontract
basis, customer installation, implementation and customization services relating
to IBM's PDM product, ProductManager.
ICI currently derives the great majority of its revenues from consulting and
implementation services rendered directly to IBM or as a subcontractor to IBM
customers. The Company has recently brought to market ItemQuest, a proprietary
object-oriented classification and search tool that allows users to search,
select and re-use product data design and manufacturing information based on
engineering and manufacturing attributes. ItemQuest, which has the flexibility
to be integrated into existing software or to operate as a stand-alone system,
enables manufacturers to reduce product development costs and shorten time to
market, factors which increase their competitiveness. Management believes that
the basis for the Company's next stage of growth will be the development,
delivery, support and evolution of ItemQuest. While the Company is experienced
in software development as part of custom development contracts, it has no
previous experience in the distribution and maintenance of its own product. To
be successful with ItemQuest, Management believes that the Company must invest
in and develop a strategy for distribution, customer service, maintenance,
pricing, marketing and sales. Functions including training and defect support
must be developed, staffed and maintained.
ICI began development work on ItemQuest in April 1995. In the last quarter of
1996, the Company began generating ItemQuest revenues from four customers in a
"controlled availability program". The product became generally available in
April 1997. Management anticipates that substantial service revenues will be
generated by customer implementation and customization of ItemQuest, as well as
from ItemQuest license fees. There can be no assurance, however, that the
efforts to develop and market ItemQuest will be successful. Furthermore, if
the development and marketing of ItemQuest is successful, there can be no
assurance as to when ItemQuest revenue will represent a substantial portion of
the Company's revenues.
7
<PAGE>
RESULTS OF OPERATIONS
Revenues
Revenues increased 67% from $811,328 for the first quarter ended March 31, 1996
to $1,358,319 for the same period in 1997, reflecting continued growth in the
Company's revenues from software services. This increase in operating revenues
was due primarily to the increase in demand for ICI's software services,
particularly related to product development efforts for IBM's ProductManager,
and the increase in billing volume generated by additional personnel hired to
provide those services. All of the Company's revenues in first quarter 1996
were from software services. In first quarter 1997, $80,000 of the total
revenues came from license fees paid under the ItemQuest controlled availability
program. The Company's business continued to be heavily reliant on IBM, with
71% of first quarter 1997 revenues, or $962,982, compared to 75% of first
quarter 1996 revenues, or $605,494, for services to IBM or related to IBM's
ProductManager software product. Management's objectives for the remainder of
1997 and future years are twofold: 1) decrease reliance on IBM as a source of
revenues; and 2) increase ItemQuest revenues as a percentage of total revenues.
The Company currently intends to allocate out of the proceeds of its initial
public offering $800,000 to marketing and sales and $2,000,000 to product
development in order to implement a comprehensive marketing and development plan
for ItemQuest. The new technologies to be developed include, among other areas,
Internet and World Wide Web capabilities and technological improvements that
help to position ItemQuest in market segments in addition to the PDM market.
Operating Expenses
Operating expenses were $510,694 in first quarter 1996 compared to $979,262 in
first quarter 1997, an increase of 92%. Included in 1997 results was a non-
recurring non-cash charge for compensation of $442,382 resulting from stock
options granted to employees in January 1997. Without the non-cash charge,
operating expenses would have been $536,880, or an increase of 5% compared to
first quarter 1996. The largest portion of operating expenses in both periods
was payroll related expenses. In first quarter 1996, these expenses were
$345,443, or 68% of operating expenses. In first quarter 1997, payroll related
expenses, including the non-cash charge, were $890,865, or 91% of total
operating expenses. Without the non-cash charge, payroll related expenses were
$448,483, or 84% of the total. After payroll related expenses, the largest
expense was rent, increasing 27% from $16,873 in first quarter 1996 to $21,379
in first quarter 1997 as a result of opening the Charlotte office. Travel, bad
debt expense and contract labor expense decreased an aggregate of $101,040 from
first quarter 1996 to first quarter 1997, partially offsetting payroll related
and rent increases.
General and Administrative Expenses
General and administrative expenses increased 19% to $69,789 in first quarter
1997 from $58,727 in first quarter 1996. This increase was due to growth in
personnel and business activity and the opening of the Charlotte office in March
1996 that increased demand for general and administrative services.
Other Income/(Expense)
Other expenses increased from $0 in first quarter 1996 to $32,374 in first
quarter 1997 reflecting the net amount of interest income and interest expense.
Interest income was $3,176 in first quarter 1997, and interest expense was
$35,550. Included in the interest expense amount was a non-cash charge of
$22,170 that was a result of warrants issued by the Company's original
stockholders in connection with the Company's Senior Debentures. The Company
determined that the warrants issued in connection with the Senior Debentures had
a fair market value of $2.72 per warrant or an aggregate of $319,241, based upon
117,368 warrants granted. The first quarter 1997 non-cash charge represents the
proportionate amount of the charge attributed to that period. As a result of
the Company's initial public offering, the Senior Debentures were prepaid in May
1997, and the balance of the non-cash charge ($297,071) will be recognized in
second quarter 1997. This value ascribed to the warrants will be deemed to be a
contribution to capital by the original stockholders of the Company and treated
as additional interest paid to the holders of the Senior Debentures.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The primary source of the Company's cash through 1996 was operations. In
January 1997, the Company issued an aggregate of $1,115,000 in Senior Debentures
that significantly affected the composition of the Company's cash flow in first
quarter 1997 compared to first quarter 1996.
Net cash from operations increased 7% to $415,064 in first quarter 1997 compared
to $388,180 in first quarter 1996. This increase was significantly lower than
the 67% increase in revenues for the same comparable period due primarily to an
increase of $438,748 in accounts receivable from March 31, 1996 to March 31,
1997.
The net increase in cash for first quarter 1997 was $1,062,253 compared to a net
increase of $388,180 in first quarter 1996. Although net cash flows from
operations for the two periods were similar, cash flows from investing and
financing activities changed considerably. In first quarter 1997, net cash used
by investing activities increased to $244,620 compared to $0 in first quarter
1996. This investment was made in property and equipment ($115,240) and
software development ($129,380). Cash flows from financing activities increased
to $891,809 in 1997 compared to $0 in 1996. The Senior Debentures provided
$1,115,000 in cash flow which was offset partially by $222,177 of deferred
offering costs for the debentures and the Company's initial public offering and
reduction of long term debt principal of $1,014.
Subsequent to March 31, 1997, the Company's initial public offering provided
approximately $9,100,000 in cash proceeds to the Company in May 1997. Upon
receipt of the offering proceeds and after such proceeds are applied as
described in "Use of Proceeds" in the Registration Statement, the Company's
Management anticipates that it will have adequate cash to fund operations for at
least the next twenty-four months, although these funds may not be adequate to
fully implement the Company's long-term expansion plans.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On January 19, 1997, the stockholders of the Company voted unanimously to amend
the Articles of Incorporation of the Company to establish the par value of the
Company's Common Stock at $.001 per share.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Pro Forma Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
10
<PAGE>
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.
INTERNATIONAL COMPUTEX, INC.
By: /s/ Haim E. Dahan
--------------------------
Haim E. Dahan
Chief Executive Officer
And Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
June 10, 1997
11
<PAGE>
EXHIBIT 11.1
INTERNATIONAL COMPUTEX, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Net income 150,708 172,505
Weighted average number
of common and common equivalent
shares are as follows:
Weighted average common
shares outstanding 2,125,000 2,125,000
Shares issued from assumed exercise
of common stock equivalents (1) 232,836 232,836
--------- ---------
Weighted average number
of common and common equivalent
shares outstanding 2,357,836 2,357,836
========= =========
Per share data:
Net income $ .06 $ .07
========= =========
</TABLE>
(1) Shares issued from assumed exercise of common stock equivalents include the
number of incremental shares which would result from applying the
treasury stock method.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,182,003
<SECURITIES> 0
<RECEIVABLES> 1,459,066
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,661,776
<PP&E> 341,991
<DEPRECIATION> 73,873
<TOTAL-ASSETS> 3,576,807
<CURRENT-LIABILITIES> 149,725
<BONDS> 1,115,000
0
0
<COMMON> 2,125
<OTHER-SE> 2,291,948
<TOTAL-LIABILITY-AND-EQUITY> 3,576,807
<SALES> 1,358,319
<TOTAL-REVENUES> 1,358,319
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,049,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,374
<INCOME-PRETAX> 276,894
<INCOME-TAX> 104,389
<INCOME-CONTINUING> 172,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 172,505
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
