U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-10416
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INFODATA SYSTEMS INC.
(Exact name of small business issuer as specified in its charter)
12150 Monument Drive, Suite 400, Fairfax, Virginia 22033
(Address of registrant's principal executive office)
(703) 934-5205
(Registrant's telephone number)
Virginia 16-0954695
(State of Incorporation) (I.R.S. Employer
Identification No.)
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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 and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of common stock outstanding as of May 1, 1996 was 732,834
Transitional Small Business Disclosure Format; Yes [ ] No [X]
<PAGE>
INFODATA SYSTEMS INC. AND SUBSIDIARIES
INDEX
Page(s)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995 3
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 4-5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements
March 31, 1996 and 1995 7
Item 2. Management's Discussion and Analysis 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1
INFODATA SYSTEMS INC. AND SUBSIDIARIES
<TABLE>
Condensed Consolidated Statements of Operations
(Dollar Amounts in Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenues......................................... $2,493 $1,713
Cost of revenues................................. 1,668 1,000
------- -------
Gross profit..................................... 825 713
------- -------
Operating expenses
Research and development......................... 57 69
Selling, general and administrative.............. 645 664
------- -------
702 733
------- -------
Operating income (loss):......................... 123 (20)
Interest income.................................. 20 31
Interest expense................................. (4) (7)
------- -------
Income before income taxes....................... 139 4
Provision for income taxes....................... 3 -
------- -------
Net income....................................... $ 136 $ 4
======= =======
Preferred dividends.............................. (30) (30)
Income (loss) applicable to common shares $ 106 $ (26)
======= =======
Per share data (primary and fully diluted):
Net income (loss) per common share.......... $ .12 $ (.04)
======= =======
Weighted average shares outstanding............. 924 706
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
INFODATA SYSTEMS INC. AND SUBSIDIARIES
<TABLE>
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $1,855 $1,476
Short term investments.......................... 11 33
Accounts receivable, net of allowance of
$30 in 1996 and 1995.......................... 2,162 1,901
Prepaid royalties............................... 14 18
Other current assets............................ 195 146
Total current assets........................ 4,237 3,574
Property and equipment, at cost:
Furniture and equipment......................... 2,106 2,046
Less accumulated depreciation and amortization.. (1,696) (1,633)
------- -------
410 413
Goodwill, net....................................... 269 264
Other assets........................................ 64 68
Software development costs, net..................... 115 126
------- -------
Total assets........................................ $5,095 $4,445
======= =======
</TABLE>
4
<PAGE>
INFODATA SYSTEMS INC. AND SUBSIDIARIES
<TABLE>
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations......... $ 85 $ 106
Accounts payable..................................... 761 335
Current portion of note payable...................... --- 2
Accrued expenses..................................... 737 677
Deferred revenue ................................... 1,437 1,171
Preferred dividend payable........................... --- 30
Current portion of deferred rent..................... 33 33
------- -------
Total current liabilities............................ 3,053 2,354
------- -------
Capital lease obligations............................ 64 82
Deferred revenue..................................... 70 192
Deferred rent........................................ 37 52
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Total liabilities ................................... 3,224 2,680
------- -------
Shareholders' equity:
Preferred stock...................................... 132 132
Common stock......................................... 26 22
Additional paid-in capital........................... 8,761 8,078
Accumulated deficit.................................. (7,048) (6,467)
------- -------
Total shareholders' equity........................... 1,871 1,765
------- -------
Total liabilities and shareholders' equity........... $5,095 $4,445
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
5
<PAGE>
INFODATA SYSTEMS INC. AND SUBSIDIARIES
<TABLE>
Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $ 136 $ 4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 63 68
Software amortization........................ 11 113
Goodwill and other intangible amortization.... 11 --
Other......................................... (4) --
Changes in operating assets and liabilities:
Accounts receivable........................... (261) 627
Prepaid royalties and other current assets.... (45) 10
Accounts payable.............................. 395 (49)
Accrued expenses.............................. 58 (129)
Deferred revenue.............................. 144 (11)
Deferred rent................................. (14) (8)
------- -------
Net cash provided by operating activities.. 494 625
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Software development costs capitalized........ -- (3)
Purchases of property and equipment, net...... (25) (19)
Business acquisition.......................... (12) --
Proceeds from maturity of short term
investments.................................. 21 --
------- -------
Net cash used in investing activities...... (16) (22)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations......... (38) (39)
Payments of notes payable..................... (2) (14)
Preferred stock dividends..................... (59) (30)
Issuance of common stock...................... -- 6
------- -------
Net cash used in financing activities......... (99) (77)
------- -------
Net increase in cash and cash equivalents..... 379 526
------- -------
Cash and cash equivalents at beginning of
period...................................... 1,476 1,695
------- -------
Cash and cash equivalents at end of period.... $1,855 $2,221
======= =======
</TABLE>
6
<PAGE>
INFODATA SYSTEMS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE A-- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 1996, are not necessarily indicative of the results for
the year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1995.
NOTE B--LINE OF CREDIT
The Company maintains a $500,000 line of credit with a bank from which no
borrowings were made during the quarter ended March 31, 1996 and no balance is
currently outstanding. The line of credit has been extended through June 1996
while the Company renegotiates the terms of the agreement to provide a larger
line of credit.
NOTE C--COMMON STOCK DIVIDEND
On March 15, 1996, the board of directors declared a one for six common stock
dividend payable to shareholders of record as of April 17, 1996 to be
distributed on May 17, 1996. Accordingly, the fair market value (based upon
quoted market prices, as adjusted) of the additional 122,000 shares issuable,
which totalled $687,032, was charged to accumulated deficit and the respective
amount credited to common stock and additional-paid-in-capital. The number of
shares outstanding, the weighted average shares outstanding and the earnings
(loss) per share for all periods are presented after giving effect to the
stock dividend.
NOTE D--SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense was $4,000 and $7,000 and cash paid for income
taxes was $ -0- and $9,000 for the periods ended March 31, 1996 and 1995,
respectively.
7
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
REVENUES
Revenues for the three months ended March 31, 1996 totaled $2,493,000,
representing an increase of $780,000 (46%) over the three months ended March
31, 1995. For the same period, client/server related revenues totaled
$1,210,000, representing an increase of $895,000 (284%). This increase is
primarily due to revenues related to the Merex acquisition, including a large
new client/server contract that was substantially completed in the first
quarter. The Company acquired the assets of Merex Inc. during the fourth
quarter of 1995. In addition to having a positive impact on total revenues,
the Merex acquisition had a positive impact on operating income during the
first quarter of 1996.
Overall, INQUIRE/Text related revenues decreased $115,000 (8%) for the three
months ended March 31, 1996 as compared to 1995, although product license fees
increased during the period. The Company expects that INQUIRE/Text related
revenues will continue to decline over time
GROSS PROFIT
Gross profit increased to $825,000 (33%) from $713,000 (42%) at March 31, 1996
and 1995, respectively. The increase was due primarily to the completion of a
high margin firm fixed price contract and an increase in revenues from
INQUIRE/Text product license fees. The decline in gross margin percentage is
due in part to the previously mentioned large new client/server contract that
was bid with a low margin to expedite the Company's penetration of the
client/server market. In the fourth quarter of 1995, the Company changed its
methodology for overhead allocation to more accurately reflect certain
indirect costs of revenues which resulted in a reclassification of the first
quarter 1995 statement of operations from a gross profit of 34% to a revised
42%, but had no effect on operating income.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense was $57,000 and $69,000 for the quarters
ended March 31, 1996 and 1995, respectively. The Company believes that
research and development expense is likely to increase for the remainder of
1996 and beyond as new products are developed.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $645,000 and $664,000 for
the quarters ended March 31, 1996 and 1995, respectively. Due to the increase
in revenues mentioned above, these expenses, as a percent of total revenue,
decreased from 39% to 26% for the quarters ended March 31, 1995 and 1996,
respectively. All of the costs of integrating the Merex acquisition were
recognized in 1995.
INTEREST INCOME AND EXPENSE
Interest income was $20,000 and $31,000 for the quarters ended March 31, 1996
and 1995, respectively. The decrease was primarily due to lower interest rates
and a lower average balance of cash and cash equivalents during the first
quarter 1996 over the same period in 1995. The company invested only in short
term, highly liquid money market instruments. Interest expense decreased to
$4,000 for the first quarter 1996 from $7,000 for the first quarter of 1995.
The expense is primarily related to certain capital equipment leases which
expire through 1998.
8
NET INCOME
As a result of the above, the Company reported net income of $136,000 for the
three months ended March 31, 1996 as compared to $4,000 for the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had $1,866,000 in cash and short term
investments compared to $1,509,000 as of December 31, 1995
At March 31, 1996, the Company had working capital of $1,184,000, as compared
to working capital of $1,220,000 at December 31, 1995. The decrease in working
capital was due to the movement of deferred revenue from long term to current
and the purchase of fixed assets which primarily consisted of personal
computers and servers.
The Company maintains a $500,000 line of credit with a bank from which no
borrowings were made during the quarter ended March 31, 1996 and no balance is
currently outstanding. The line of credit has been extended through June 1996
while the company renegotiates the terms of the agreement to provide a larger
line of credit (see Note B to the Condensed Consolidated Financial Statements
contained elsewhere in this report).
Net cash flow from operating activities for the three months ended March 31,
1996 was sufficient to fund the operations of the business. Based upon the
expectation of future revenues from the Company's existing products and
services, management believes that available and projected resources will be
sufficient to meet its working capital requirements for the foreseeable
future.
During the first quarter of 1996, the Company declared a one for six stock
dividend payable to shareholders of record as of April 17, 1996 (see Note C to
the Condensed Consolidated Financial Statements contained elsewhere in this
report).
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended March 31, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INFODATA SYSTEMS INC.
BY: /s/Harry Kaplowitz
----------------------
Date: May 6, 1996 Harry Kaplowitz
President
11
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<NAME> INFODATA SYSTEMS INC
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
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0
132
<COMMON> 26
<OTHER-SE> 1713
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