UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(Y) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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.
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(Exact name of registrant as specified in its charter)
COLORADO 84-0866294
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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 Y 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
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Common 2,142,845 May 1, 1998
Exhibit Index Begins on Page 8
1MAGE SOFTWARE, INC.
INDEX
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Page
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Part I. Financial Information
Item 1 Financial Statements
Balance Sheets -March 31, 1998, and December 31, 1997 3
Statements of Operations -for three months ended
March 31, 1998 and March 31, 1997 4
Statements of Cash Flows -for three months ended
March 31, 1998 and March 31, 1997 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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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1MAGE SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1998 1997
- --------------------------------------- ----------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 61,389 $ 256,793
Trade accounts receivable, net 492,504 267,902
Inventory, at lower of cost or market 94,648 93,723
Prepaid expenses 7,147 7,673
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Total current assets 655,688 626,091
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Property and equipment, net 139,220 162,410
Deferred computer software development
costs, net 801,007 813,625
Other assets 48,334 47,511
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TOTAL ASSETS $ 1,644,249 $ 1,649,637
=========== ===========
Liabilities and Shareholders' Equity
- ---------------------------------------
Current Liabilities:
Current portion of long-term debt:
Other $ 0 $ 0
Capital lease obligations 8,645 12,186
Trade accounts payable 206,992 191,538
Line of credit 150,000 150,000
Accrued expenses and other liabilities 209,621 229,595
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Total current liabilities 575,258 583,319
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Long-term obligations:
Capital lease obligations 8,198 8,850
Other 150,000 150,000
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Total liabilities 733,456 742,169
Shareholders' equity:
Common stock, $.004 par value -
10,000,000 shares authorized;
shares outstanding:
1998 - 2,142,845;
1997 - 2,142,845 8,571 8,571
Additional paid-in capital 6,845,100 6,845,100
Accumulated deficit (5,942,878) (5,946,203)
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Total shareholders' equity 910,793 907,468
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,644,249 $ 1,649,637
=========== ===========
</TABLE>
1MAGE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenue:
System sales $ 110,580 $ 318,653
Services and annual fees 332,414 212,865
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Total revenue 442,994 531,518
Cost of Revenue:
System sales 27,123 139,540
Services and other 154,103 161,386
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Total Cost of Revenue 181,226 300,926
Gross Profit: 261,768 230,592
% of Revenue 59.1% 43.4%
Operating Expenses:
Selling, general and administrative 252,088 336,125
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Total Operating Expenses 252,088 336,125
INCOME (LOSS) FROM OPERATIONS 9,680 (105,533)
Other Income (Expense):
Interest expense (8,570) (8,529)
Interest income 1,938 3,378
Other 275 2,168
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Total other income (expense) (6,357) (2,983)
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Income (Loss) Before Income Taxes 3,323 (108,516)
Provision for Income Taxes -- --
Net Income (Loss) $ 3,323 $ (108,516)
=========== ===========
Earnings (Loss) per Common Share $ 0.00 $ (0.05)
=========== ===========
Weighted Average Number of Common
Shares Outstanding 2,142,845 2,147,563
=========== ===========
</TABLE>
1MAGE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 3,323 $ (108,516)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 88,290 104,223
Issuance of stock for services 0 7,688
Changes in operating assets and
liabilities:
Receivables (224,602) (101,846)
Inventory (925) 1,247
Prepaid expenses (823) 0
Accounts payable 15,454 93,980
Accrued liabilities (23,514) 11,795
----------- -----------
Net cash provided (used) by operating
activities (142,797) 8,571
Cash Flows from Investing Activities:
Purchase of fixed assets 0 (383)
Increase in capitalized software (52,482) (95,765)
Increase in other assets 526 (21,913)
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Net cash provided by (used for)
investing activities (51,956) (118,061)
Cash Flows from Financing Activities:
Repayment of line of credit -- --
Additions to line of credit -- --
Repayment of long-term debt (652) --
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Net cash provided by financing
activities (652) --
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Increase (Decrease) in cash and cash
equivalents (195,405) (109,490)
Cash and cash equivalents, beginning of period 256,793 266,599
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Cash and cash equivalents, end of period $ 61,388 $ 157,109
=========== ===========
</TABLE>
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, 1997 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 anti-dilutive. Fully
diluted earnings per share are either anti-dilutive or not materially
different from primary earnings per share.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1998 VERSUS MARCH
31, 1997
1MAGE Software, Inc. (the "Company") reported revenue of $442,994 for the
first quarter of 1998, as compared to $531,518 for the same period a year
ago. Gross profit, however, was $261,768 or 59% of revenue for the first
quarter of 1998, as compared to $230,592 or 43% of revenue for the first
quarter of 1997. For the three months ended March 31, 1998, the Company
posted net income of $3,323 ($.00 per share) versus a net loss of
$(108,516) ($.05 per share) for the same period in 1997. The increase in
revenue is the result of a 56% increase in services and annual fees,
coupled with a 65% decrease in system sales. Gross profit varies
according to the specific components of revenue. In addition, selling,
general and administrative ("SG&A") expenses decreased 25% for the quarter
ended March 31, 1998, reflecting management's concerted efforts to match
SG&A expenses with services and annual fees.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, cash on hand decreased $195,405 from $256,793 at
December 31,1997. Accounts receivable, however, increased $224,602 over
year-end 1997 levels. As a result, by April 24, 1998, cash on hand had
improved to approximately $200,000. Software development used cash of
$52,482 as research and development costs were incurred in order to
continually enhance the document imaging software product offerings.
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 10, 1998 and
bears interest at Prime +1% and is secured by the Company's notes and
accounts receivable and a certificate of deposit for $25,000. On April
24, 1998, there was $120,000 outstanding against the line of credit.
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
There were no reports filed on Form 8-K for the quarter ended March 31,
1998.
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.
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(Registrant)
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Date: 5/6/98 /s/ Mary Anne DeYoung
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Mary Anne DeYoung
Chief Financial Officer
Exhibit Index
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Exhibit Method of Filing
- --------- ----------------
27 Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 61,388
<SECURITIES> 0
<RECEIVABLES> 513,353
<ALLOWANCES> 20,849
<INVENTORY> 94,648
<CURRENT-ASSETS> 655,688
<PP&E> 864,017
<DEPRECIATION> 724,795
<TOTAL-ASSETS> 1,644,249
<CURRENT-LIABILITIES> 575,259
<BONDS> 0
0
0
<COMMON> 8,571
<OTHER-SE> 910,792
<TOTAL-LIABILITY-AND-EQUITY> 1,644,249
<SALES> 442,994
<TOTAL-REVENUES> 442,994
<CGS> 181,226
<TOTAL-COSTS> 252,088
<OTHER-EXPENSES> (1,946)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,570
<INCOME-PRETAX> 3,323
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,323
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
