FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the quarterly period ended 3/31/2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from ------ to --------.
1MAGE SOFTWARE, INC.
Exact name of Registrant as specific in its charter)
0-12535
(Commission File Number)
Colorado 84-0866294
(State of Incorporation) (IRS Employer Identification Numbers)
6025 S. QUEBEC ST. SUITE 300 ENGLEWOOD CO 80111 (303) 694-9180
(Address of principal executive offices) (Registrants telephone
number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE NONE
(Title of Class) (Name of Exchange)
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock - $.004 par value
(Title of Class)
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 ( )
As of April 21, 2000, there were 3,141,804 shares of the Registrant's
common stock outstanding.
Exhibit Index begins on Page 8
TABLE OF CONTENTS
PART I. Financial Information
Item 1 Financial Statements
Balance Sheets -March 31, 2000, and December 31, 1999 3
Statements of Income -for three months
ended March 31, 2000 and March 31, 1999 4
Statements of Cash Flows -for three months
ended March 31, 2000 and March 31, 1999 5
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
1MAGE SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 316,334 $ 253,930
Receivables:
Trade (less allowance:
2000,$10,024;1999,$10,000) 305,597 204,107
Related parties 1,875 1,635
Inventory 46,526 49,207
Prepaid expenses and other
current assets 18,645 13,428
---------- ----------
Total current assets 688,977 522,307
PROPERTY AND EQUIPMENT, at cost, net 64,700 69,263
OTHER ASSETS:
Software development costs, net 770,519 771,919
Other 100 100
---------- ----------
TOTAL ASSETS $1,524,296 $1,363,589
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 168,235 $ 168,235
Current portion of capital
lease obligations 3,085 3,857
Deferred revenue 202,426 210,000
Accounts payable 174,922 209,882
Accrued liabilities 110,983 116,647
---------- ----------
Total current liabilities 659,651 708,621
LONG-TERM OBLIGATIONS:
Capital lease obligations --- 521
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.004 par
value - 10,000,000 shares
authorized; shares
outstanding: 2000 - 3,141,804;
1999 - 2,642,493 12,567 10,569
Additional paid-in capital 7,235,919 7,189,091
Accumulated deficit (6,383,841) (6,545,315)
----------- -----------
Total shareholders' equity 864,645 654,345
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,524,296 $1,363,589
========== ==========
See Notes to Condensed Financial Statements
</TABLE>
1MAGE SOFTWARE, INC.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- ------------
REVENUE
<S> <C> <C>
System sales and software licenses $ 222,348 $ 107,127
Services and annual fees 401,845 379,660
---------- ----------
Total revenue 624,193 486,787
---------- ----------
COST OF REVENUE:
System sales and software licenses 18,677 27,435
Services and annual fees 158,866 184,679
---------- ----------
Total cost of revenue 177,543 212,114
---------- ----------
GROSS PROFIT 446,650 274,673
% of Revenue 72% 56%
OPERATING EXPENSES:
Selling, general & administrative 282,948 255,423
---------- ----------
INCOME FROM OPERATIONS 163,702 19,250
---------- ----------
OTHER INCOME/(EXPENSE):
Interest income 2,300 3,545
Other --- 165
Interest expense (4,529) (9,718)
---------- ---------
Total other income(expense) (2,229) (6,008)
---------- ---------
INCOME BEFORE INCOME TAXES $ 161,473 $ 13,242
PROVISION FOR INCOME TAXES --- ---
---------- ---------
NET INCOME $ 161,473 $ 13,242
========== ==========
INCOME PER COMMON SHARE:
Basic: $ 0.06 $ 0.01
============= ===========
Diluted $ 0.05 $ 0.00
============= ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 2,787,194 2,221,699
=========== ==========
Diluted 3,158,115 2,771,712
=========== ==========
See Notes to Condensed Financial Statements
</TABLE>
1MAGE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 161,473 $ 13,242
Adjustments to reconcile earnings
to net cash provided by operating
activities: Depreciation and
amortization 89,643 94,354
Issuance of stock options for services (18,046) ----
Changes in assets and liabilities:
Receivables (101,730) 141,696
Inventory 2,681 (406)
Prepaid expenses and other assets (5,217) 26,554
Accounts payable (34,960) (90,947)
Accrued liabilities (13,339) 27,704
----------- ---------
Net cash provided by operating
activities 80,505 212,197
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,730) (14,300)
Additions to capitalized software (77,950) (70,781)
Increase in other assets ---- (26,554)
----------- ---------
Net cash used for investing activities (83,680) (111,635)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to line of credit --- ---
Repayment of line of credit --- (71,131)
Proceeds from exercise of Common Stock options 66,872 ---
Repayment of long-term obligations (1,293) (1,074)
----------- ---------
Net cash provided by (used for) financing
activities 65,579 (72,205)
----------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 62,404 28,357
CASH AND CASH EQUIVALENTS, beginning
of period 253,930 229,671
----------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 316,334 $ 258,028
=========== ==========
See Notes to Condensed Financial Statements
</TABLE>
1MAGE SOFTWARE, INC.
NOTES TO INTERIM 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, 1999 as this
report incorporates the Notes to the Company's year-end financial
statements. The condensed balance sheet of the Company as of December 31,
1999 has been derived from the audited balance sheet of the Company as of
that date.
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. Maintenance
revenue is recognized ratably over the maintenance period.
INCOME TAXES The Company follows the liability method of accounting for
income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109. Under this method, deferred income taxes are
recorded based upon differences between the financial reporting and tax
bases of assets and liabilities and are measured using enacted tax rates
and laws that will be in effect when the underlying assets or liabilities
are received or settled.
The Company has recorded a full valuation allowance against all deferred
tax assets due to the uncertainty of ultimate realizability.
INCOME PER SHARE -Income per share is computed by dividing net income by
the weighted average number of common and equivalent shares outstanding
during the period. Outstanding stock options are treated as common stock
equivalents for purposes of computing diluted earnings per share
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 VERSUS
MARCH 31, 1999
1mage Software, Inc. (the "Company") reported revenue of $624,193 for the
first quarter of 2000, an increase of 28% over $486,787 posted for the
same period a year ago. Gross profit was 72% of revenue in 2000, versus
56% in 1999, primarily due to the increase in high-margin software
revenue. Software sales of $208,000 were up 121% over last year, an
increase of $114,000. Services and annual fees comprised 64% of total
revenue for the first quarter and have increased $22,185 (6%) over the
same quarter last year. Revenue from services and recurring annual fees
of $401,845 was $118,197 (or 142%) greater than selling, general and
administrative ("SG&A") expenses for the first quarter of 2000. SG&A
expenses increased 11% or $27,525 over the prior quarter. The Company
posted first quarter 2000 net earnings of $161,473 or $.06 per share, as
compared to net earnings of $13,242, or $.01 per share, for the same
quarter last year.
The Company added new resellers and business partners during the first
quarter of 2000 in the Utilities and Higher Education markets in order to
expand sales via indirect channels.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, cash on hand increased $62,404 from $253,930 at
December 31, 1999, primarily due to proceeds received from the exercise of
Common Stock options. The Company continues to add new features to its
software product offerings and used cash of $77,950 for additions to
capitalized software.
On February 24, 2000, the Company renewed its $200,000 line of credit
agreement with a bank. There were no borrowings against the line of
credit at April 10, 2000.
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's line of
credit expires February 24, 2001 and bears interest at prime plus 1.5% and
is secured by the Company's accounts and general intangibles.
FORWARD LOOKING STATEMENTS
Some of the statements made herein are not historical facts and may be
considered "forward looking statements." All forward-looking statements
are, of course, subject to varying levels of uncertainty. In particular,
statements which suggest or predict future events or state the Company's
expectations or assumptions as to future events may prove to be partially
or entirely inaccurate, depending on any of a variety of factors, such as
adverse economic conditions, new technological developments, competitive
developments, competitive pressures, changes in the management, personnel,
financial condition or business objectives of one or more of the Company's
customers, increased governmental regulation or other actions affecting
the Company or its customers as well as other factors.
PART II: OTHER INFORMATION
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<CAPTION>
<S> <C> <C>
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
</TABLE>
(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, 2000.
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: 5/12/00 /s/ Mary Anne DeYoung
-------------------------------------
Mary Anne DeYoung
Chief Financial Officer
Exhibit Index
Exhibit Method of Filing
- ------- ----------------
27 Financial Data Schedule Filed electronically herewith
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 316,334
<SECURITIES> 0
<RECEIVABLES> 322,472
<ALLOWANCES> 10,024
<INVENTORY> 46,526
<CURRENT-ASSETS> 688,977
<PP&E> 663,638
<DEPRECIATION> 598,938
<TOTAL-ASSETS> 1,524,296
<CURRENT-LIABILITIES> 659,651
<BONDS> 0
0
0
<COMMON> 12,567
<OTHER-SE> 864,645
<TOTAL-LIABILITY-AND-EQUITY> 1,524,296
<SALES> 624,193
<TOTAL-REVENUES> 624,193
<CGS> 177,543
<TOTAL-COSTS> 282,948
<OTHER-EXPENSES> (2,300)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,529
<INCOME-PRETAX> 161,473
<INCOME-TAX> 0
<INCOME-CONTINUING> 161,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161,473
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.05
</TABLE>
