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, 1997
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 number 0-12535
1MAGE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-0866294
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
6486 South Quebec Street, Englewood, Colorado 80111
(Address of principal executive officers)
(303) 773-1424
(Registrant's telephone number, including area code)
N/A
(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 -----
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
Common 2,147,563 May 9, 1997
Page 1 of 10
Exhibit Index Begins on Page 9
1MAGE SOFTWARE, INC.
INDEX
Part I. Financial Information Page
Item 1 Financial Statements
Balance Sheets March 31, 1997, and December 31, 1996 . . . . . .3
Statements of Operations for three months ended March 31, 1997
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . .4
Statements of Cash Flows for three months ended March 31, 1997
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . .5
Notes to Financial Statements. . . . . . . . . . . . . . . . . .6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . .7
Part II. Other Information
Items 1-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . .8
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
1MAGE SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, 1997 December 31, 1996
- ------------------------------------- -------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 157,109 $ 266,599
Trade accounts receivable, net 642,337 540,491
Inventory, at lower of cost or market 102,985 104,232
Prepaid expenses 46,727 24,814
----------- -----------
Total Current Assets 949,158 936,136
----------- -----------
Property and equipment, net 215,777 244,617
Deferred computer software development
costs, net 810,130 789,365
Other assets 49,232 48,203
----------- -----------
TOTAL ASSETS $ 2,024,297 $ 2,018,321
=========== ===========
Liabilities and Shareholders' Equity
- ------------------------------------------
Current Liabilities:
Current portion of longterm debt:
Other $ 150,000 $ 150,000
Capital lease obligations 9,895 12,983
Trade accounts payable 319,321 225,341
Line of credit 150,000 150,000
Accrued expenses and other liabilities 254,094 232,729
----------- -----------
Total current liabilities 883,310 771,053
----------- -----------
Long-term obligations:
Capital lease obligations 8,489 8,489
Other - -
----------- -----------
Total liabilities 891,799 779,542
Shareholders' equity:
Common stock, $.004 par value -
10,000,000 shares authorized;
shares outstanding: 1997 - 2,147,563;
1995 - 1,938,726 8,590 8,590
Additional paid-in capital 6,853,346 6,850,533
Notes receivable for common stock (149,400) (149,400)
Accumulated deficit (5,580,038) (5,470,944)
----------- -----------
Total shareholders' equity 1,132,498 1,238,779
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 2,024,297 $ 2,018,321
=========== ===========
</TABLE>
Page 3
1MAGE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
---------- ----------
<S> <C> <C>
Revenue:
System sales $ 318,653 $ 176,389
Services and annual fees 212,865 208,347
---------- ----------
Total revenue 531,518 384,736
Cost of Revenue:
System sales 139,540 36,033
Services and other 161,386 180,998
---------- ----------
Total Cost of Revenue 300,926 217,031
Gross Profit: 230,592 167,705
% of Revenue 43.4% 43.6%
Operating Expenses:
Selling, general and administrative 336,125 307,133
---------- ----------
Total Operating Expenses 336,125 307,133
INCOME (LOSS) FROM OPERATIONS (105,533) (139,428)
Other Income (Expense):
Equity in earnings/(loss) of affiliate - (5,039)
Interest expense (8,529) (6,961)
Interest income 3,378 3,792
Other 2,168 119,638
---------- ----------
Total other income (expense) (2,983) 111,430
---------- ----------
Income (Loss) Before Income Taxes (108,516) (27,998)
Provision for Income Taxes - -
---------- ----------
Net Income (Loss) $ (108,516) $ (27,998)
========== ==========
Earnings (Loss) per Common Share $ (0.05) $ (0.01)
========== ==========
Weighted Average Number of Common
Shares Outstanding 2,147,563 1,897,164
========== ==========
</TABLE>
Page 4
1MAGE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (108,516) $ (27,998)
Adjustments to reconcile net income
(loss) to net cash provided
by (used for) operating activities:
Depreciation and amortization 104,223 89,233
Equity in (earnings) loss of
affiliate - 5,039
Issuance of stock for services 7,688 7,485
Changes in operating assets and
liabilities:
Receivables (101,846) 109,341
Inventory 1,247 -
Prepaid expenses - 3,046
Accounts payable 93,980 (68,733)
Accrued liabilities 11,795 (49,824)
---------- ----------
Net cash provided (used) by operating
activities 8,571 7,589
Cash Flows from Investing Activities:
Purchase of fixed assets (383) (6,494)
Increase in capitalized software (95,765) (59,590)
Increase in other assets (21,913) (47,551)
---------- ----------
Net cash provided by (used for)
investing activities (118,061) (113,635)
Cash Flows from Financing Activities:
Repayment of line of credit - (2,979)
Additions to line of credit - 5,450
Repayment of longterm debt - (2,693)
---------- ----------
Net cash provided by financing
activities - (222)
---------- ----------
Increase (Decrease) in cash and cash
equivalents (109,490) (46,268)
Cash and cash equivalents,
beginning of period 266,599 345,852
---------- ----------
Cash and cash equivalents,
end of period $ 157,109 $ 299,584
========== ==========
</TABLE>
Page 5
1MAGE SOFTWARE, INC.
Notes to 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, 1996 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 the interim periods presented. The results 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, 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 no 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
carry forwards.
INCOME/LOSS PER SHARE:
Income (Loss) per share is computed by dividing net income (loss) 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 antidilutive. Fully
diluted earnings per share are either antidilutive or not materially
different from primary earnings per share.
Page 6
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations for three months ended March 31, 1997 versus March
31, 1996
1MAGE Software, Inc.'s (the "Company") revenue of $531,518 for the first
quarter of 1997 was 38% greater than $384,736 reported for the same period
a year ago. For the three months ended March 31, 1997, the Company posted
a net loss of $(108,516) or $(.05) per share versus a net loss of
$(27,998) or $(.01) per share for the same period in 1996. The increase in
revenue is primarily due to a year over year increase of $135,002 in
hardware revenue, resulting from enduser sales recognized in the first
quarter of 1997. Gross profit as a percent of revenue showed virtually no
change for the comparable periods. Selling, general and administrative
expenses increased 9% for the quarter ended March 31, 1997 primarily due
to increased costs associated with the hiring of a national sales manager.
A onetime recovery of a bad debt in first quarter 1996 ($110,838 "Other
Income") was the most significant change in quarter over quarter results,
as this did not recur in first quarter 1997.
Liquidity and Capital Resources
As of March 31, 1997, cash on hand decreased $109,490 from $266,599 at
December 31,1996. Additions to capitalized software used cash of $95,765
as research and development costs were incurred in order to continually
enhance the document imaging software product offerings. Current
liabilities include a $150,000 note payable to the same related party as
the note receivable for common stock that is shown in the Stockholder
Equity section of the Balance Sheet.
The Company's financial resources include cash on hand, revenues from
operations, and management of funds available on its revolving line of
credit. In the Company's judgment, sufficient financial resources are
available to meet current working capital needs. The Company has a
$150,000 revolving line of credit which expires September 5, 1997 and
bears interest at Prime +1% and is secured by the Company's notes and
accounts receivable. On April 25, 1997, there was $120,000 outstanding
against the line of credit.
Page 7
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
(A) Exhibit Table
27 Financial Data Schedule
(B) Reports on Form 8-K
Page 8
There were no reports filed on Form 8-K for the quarter ended March 31,
1997.
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)
/s/ Mary Anne DeYoung
Date: 5/13/97 Mary Anne DeYoung
Chief Financial Officer
Exhibit Index
Exhibit 27 Method of Filing
27 Financial Data Schedule Filed herewith electronically
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 157,109
<SECURITIES> 0
<RECEIVABLES> 733,288
<ALLOWANCES> 90,951
<INVENTORY> 102,985
<CURRENT-ASSETS> 949,158
<PP&E> 842,790
<DEPRECIATION> 627,011
<TOTAL-ASSETS> 2,024,297
<CURRENT-LIABILITIES> 883,310
<BONDS> 0
0
0
<COMMON> 8,590
<OTHER-SE> 1,123,908
<TOTAL-LIABILITY-AND-EQUITY> 2,024,297
<SALES> 531,518
<TOTAL-REVENUES> 531,518
<CGS> 300,926
<TOTAL-COSTS> 336,125
<OTHER-EXPENSES> (5,546)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,529
<INCOME-PRETAX> (108,516)
<INCOME-TAX> 0
<INCOME-CONTINUING> (108,516)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (108,516)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
