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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
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Commission file number 0-12535
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1MAGE SOFTWARE, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 84-0866294
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
6486 SOUTH QUEBEC STREET, ENGLEWOOD, COLORADO 80111
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(Address of principal executive offices)
(303) 773-1424
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former Fiscal year, if changed since last
report)
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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OF STOCK NO. SHARES OUTSTANDING DATE
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Common 1,902,257 April 21, 1995
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1MAGE SOFTWARE, INC.
INDEX
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 3
Consolidated Statements of Operations - for three months
ended March 31, 1995 and March 31, 1994 4
Consolidated Statements of Cash Flows - for three months
ended March 31, 1995 and March 31, 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Items 1-6 8
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1MAGE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 601,216 $ 648,714
Trade accounts receivable, net 1,376,274 1,504,517
Current portion of notes receivable 78,255 79,608
Inventory, at lower of cost or market 58,086 57,981
Prepaid expenses 116,031 140,267
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Total current assets 2,229,862 2,431,087
Property and equipment, net 267,707 259,972
Deferred computer software development costs, net 681,499 679,430
Purchased computer software, net 56,250 81,710
Notes receivable, excluding current portion 97,601 100,653
Investment in affiliate 50,000 0
Other assets 27,317 25,549
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TOTAL ASSETS $ 3,410,236 $ 3,578,401
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt:
Related parties $ 35,039 $ 98,548
Capital lease obligations 19,805 26,828
Other 50,000 0
Trade accounts payable 483,976 392,451
Line of credit 0 45,850
Accrued expenses and other liabilities 263,452 487,718
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Total current liabilities 852,272 1,051,395
Capital lease obligations 30,459 32,808
Other long-term obligations 50,000 0
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Total liabilities $ 932,731 $ 1,084,203
Shareholders' Equity:
Common Stock, par value $.004 - 10,000,000 shares
authorized; shares outstanding:
1995 - 1,897,327; 1994 - 1,892,272 7,585 7,569
Additional Paid-In Capital 6,618,801 6,590,507
Accumulated Deficit (4,113,149) (4,068,146)
Treasury stock (35,732) (35,732)
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Total shareholders' equity $ 2,477,505 $ 2,494,198
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,410,236 $ 3,578,401
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1MAGE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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<CAPTION>
THREE MONTHS ENDED MARCH 31,
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1995 1994
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<S> <C> <C>
Revenue:
System sales and software licenses $ 1,082,166 $ 574,775
Services and other 116,808 67,116
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Total revenue 1,198,974 641,891
Cost of Revenue:
System sales and software licenses 570,783 415,390
Services and other 200,424 91,590
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Total cost of revenue 771,207 506,980
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Gross Profit 427,767 134,911
Operating Expenses:
Selling, general & administrative 474,673 306,355
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Income (Loss) from Operations (46,906) (171,444)
Other Income (Expense):
Interest income 5,582 1,438
Interest expense (3,679) (9,170)
Other 0 7,281
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Total other income (expense) 1,903 (451)
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Income (Loss) Before Income Taxes (45,003) (171,895)
Provision for Income Taxes 0 0
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Net Income (Loss) $ (45,003) $ (171,895)
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Earnings (Loss) Per Common Share $ (.02) $ (0.10)
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Weighted average number of shares outstanding 1,897,164 1,637,510
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1MAGE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
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1995 1994
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Cash Flows from Operating Activities:
Net income (loss) $ (45,003) $ (171,895)
Adjustments to reconcile net income to
net cash provided by (used for) operating activities:
Depreciation and amortization 128,455 116,219
Allowance for doubtful accounts 6,500 0
Issuance of stock for services 19,198 15,000
Changes in operating assets/liabilities:
Receivables 128,243 241,423
Inventory (105) 248
Prepaid expenses 22,468 14,244
Other assets 0 (12,392)
Accounts payable 91,525 (71,038)
Income taxes payable (27,658) 0
Accrued liabilities (196,608) 16,207
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Net cash provided by operating activities 127,015 148,016
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Cash Flows from Investing Activities:
Purchase of fixed assets (27,364) (3,157)
Additions to capitalized software (85,435) (84,260)
Investment in affiliate (50,000) 0
Proceeds from notes receivable 4,405 30,532
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Net cash used in investing activities (158,394) (56,885)
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Cash Flows used in Financing Activities:
Advances on line of credit 50,000 108,000
Repayment of line of credit (95,850) (109,362)
Issuance of convertible notes 100,000 0
Repayment of long-term debt (70,269) (89,594)
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Net cash used in financing activities (16,119) (90,956)
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Increase (Decrease) in cash (47,498) 175
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Cash and cash equivalents, beginning of period 648,714 8,528
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Cash and cash equivalents, end of period $ 601,216 $ 8,703
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1MAGE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GENERAL:
Management has elected to omit substantially all notes to the unaudited interim
financial statements. Reference should be made to the Company's annual report
on Form 10-K for the year ended December, 31, 1994, as this report incorporates
the Notes to the Company's year end financial statements.
UNAUDITED INTERIM INFORMATION:
The unaudited interim financial statements contain all necessary adjustments
(consisting of only normal recurring adjustments) which, in the opinion of
Management, are necessary for a fair statement of the results for interim period
presented. The result of operations for the interim periods presented are not
necessarily indicative of those expected for the year.
REVENUE RECOGNITION:
Revenue from the sale of software licenses and computer equipment and existing
application software packages is recognized when the software and computer
equipment are shipped to the customer, remaining vendor obligations are
insignificant, there are not significant uncertainties about customer acceptance
and collectibility is probable. Revenue from related services, including
installation and software modifications, is recognized upon performance of
services.
INCOME TAXES:
Income Taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of depreciation, capitalized
software development cost and allowance for doubtful accounts for financial and
income tax reporting. The Company currently has substantial net operating loss,
research credit and investment tax credit carryforwards.
INCOME/LOSS PER SHARE:
Income loss per share is computed by dividing net income (loss), after deducting
dividends on preferred shares, by the weighted average number of common and
equivalent shares. Common stock equivalents were not included in the weighted
average number of shares outstanding for loss periods as their effect was anti-
dilutive. Fully diluted earnings per share are either anti-dilutive or not
materially different from primary earnings per share.
COMMON STOCK:
On March 10, 1993, the Board of Directors approved a 4-for-1 reverse stock split
of the Company's common stock effective March 24, 1993. On May 17, 1993, the
shareholders of the Company's common stock ratified the reverse stock split and
approved an amendment to the Articles of Incorporation to reduce the number of
authorized shares of common stock to 10,000,000 and change the par value to
$.004. All references in the accompanying financial statements as to the number
of common shares and per share amounts have been restated to reflect the reverse
stock split and the amendment.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 VERSUS MARCH 31,
1994
1MAGE Software, Inc.'s (the "Company") revenue of $1,198,974 for the first
quarter of 1995 was 87% higher than the $641,891 reported for the same period a
year ago. For the three months ended March 31, 1995, the Company posted a net
loss of ($45,003) versus a net loss of ($171,895) for the same period in 1994.
The net loss per share for the three months ended March 31, 1995 was ($.02)
compared with a net loss per share of ($.10) for the three months ended March
31, 1994. The Company attributes the more favorable 1995 revenue results to a
300% increase in software sales for the comparable periods. The Company's
subsidiary, Information Solutions, Inc., met with intense competition in the
transportation marketplace, and as a result, gross profit on hardware sales
decreased 48% for the comparable quarters. The consolidated Company's gross
profit of $427,767 for the quarter ended March 31, 1995 was 217% greater than
the $134,911 earned during the same period one year ago. Selling, general and
administrative expenses of $474,673 for the quarter ended March 31, 1995 were
$168,318 greater than $306,355 reported for the same quarter in 1994. This
increase was primarily due to a revised corporate strategy that mandated
expanding the managerial and technical staff of the Company, and its subsidiary.
In addition, marketing efforts for 1MAGE -TM- were expanded, thereby increasing
advertising and promotion costs.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995, cash on hand decreased $47,498 from $648,714 at December
31, 1994; the net decrease in working capital was $2,102. Repayments of long-
term debt used cash of $70,269, additions to capitalized software used cash of
$85,435, while cash from operations provided $127,015. The Company had working
capital at March 31, 1995 of $1,377,590, as compared to $1,379,692 at December
31, 1994. Shareholders' equity at the end of the first quarter of 1995 was
$2,477,505 versus $2,494,198 as of December 31, 1994.
The Company's internal sources of liquidity are revenues from operations and
cash on hand. On April 21, 1995, there were no borrowings on the Company's
revolving line of credit.
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PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings Inapplicable
ITEM 2. Changes in Securities Inapplicable
ITEM 3. Defaults upon Senior Securities Inapplicable
ITEM 4. Submission of Matters to a vote of Security Holders Inapplicable
ITEM 5. Other Information Inapplicable
ITEM 6. Exhibits and Reports on Form 8-K
There were no reports on Form 8-K filed with the Securities and Exchange
Commission for the quarter ended March 31, 1995.
EXHIBIT NO. DESCRIPTION
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27. Financial Data Schedule
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.
1MAGE SOFTWARE, INC.
(REGISTRANT)
Date: May 11, 1995 \s\ David R. DeYoung
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David R. DeYoung
President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 601,216
<SECURITIES> 0
<RECEIVABLES> 1,700,736
<ALLOWANCES> 148,606
<INVENTORY> 58,086
<CURRENT-ASSETS> 2,229,862
<PP&E> 682,589
<DEPRECIATION> 414,882
<TOTAL-ASSETS> 3,410,236
<CURRENT-LIABILITIES> 852,252
<BONDS> 80,459
<COMMON> 7,585
0
0
<OTHER-SE> 2,469,920
<TOTAL-LIABILITY-AND-EQUITY> 3,410,236
<SALES> 0
<TOTAL-REVENUES> 1,198,974
<CGS> 771,207
<TOTAL-COSTS> 175,218
<OTHER-EXPENSES> 299,455
<LOSS-PROVISION> 6,500
<INTEREST-EXPENSE> 3,679
<INCOME-PRETAX> (45,003)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,003)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
