FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the fiscal year ended 12/31/99
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 specified 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) (Registrant's 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 ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy statements or
any amendment of this Form 10-K. ----
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 10, 2000: $7,326,414.
As of March 10, 2000, there were 3,042,302 shares of the Registrant's
Common Stock outstanding.
Exhibit Index begins on Page 40
TABLE OF CONTENTS
PART I
1. Business................................................. 3
2. Properties............................................... 8
3. Legal Proceedings........................................ 8
4. Submission of Matters to a Vote of Security Holders...... 8
PART II
5. Market for Registrant's Common Equity and Related
Stockholders Matters..................................... 9
6. Selected Financial Data................................. 10
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 11
8. Financial Statements and Supplementary Data............. 13
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 34
PART III
10. Directors and Executive Officers of the Registrant...... 35
11. Executive Compensation.................................. 36
12. Security Ownership of Certain Beneficial Owners and
Management.............................................. 39
13. Certain Relationships and Related Transactions.......... 39
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................. 40
PART I
ITEM 1. BUSINESS
INTRODUCTION
1mage Software, Inc., (the "Company") develops and markets a software
product called 1MAGE(R), a UNIX, Linux, and Windows NT(TM)-based
electronic document image management and retrieval system. Electronic
imaging systems like 1MAGE allow any paper document to be converted to
electronic form for magnetic storage. Magnetic storage drastically
reduces the physical space needed for paper-based filing systems and
offers computer access to handwritten or non-computer generated documents
within seconds, a dramatic improvement over traditional paper filing
systems. The software has the ability to file, route, track, archive and
manage the flow of incoming and outgoing documents throughout an
organization. Using an open, client/server architecture design, 1MAGE
provides a comprehensive solution for scanning, indexing, storing and
retrieving document images so that they may be viewed, printed, faxed and
e-mailed.
Today's workplace is dramatically changing with the advent of affordable
electronic document imaging. During 1999, the Company concentrated its
efforts on selling production document imaging software to its niche
market, users of MultiValue Relational Data Base Management Systems
("RDBMS"). The Company also continued to make progress toward its goal of
establishing a broad based Value Added Reseller ("VAR") network for its
imaging software. In addition to VARs, the Company seeks to partner with
software developers and other businesses which provide software to their
targeted vertical markets.
IMAGING SOFTWARE MARKET
The Company targets its market through VARs, systems integrators, and
other companies which market complementary software or other products.
1MAGE software has an established presence in a multitude of industries,
including manufacturing, health care, oil and gas, universities,
government, public safety, retail distribution, and transportation. In
addition to direct sales, the Company has contracts in place with VARs for
local government, manufacturing, retail automobile dealerships, health
care, oil and gas, and is actively seeking to expand its independent sales
network.
The Company offers a comprehensive reseller program which provides,
in the context of a cooperative marketing effort, a broad range of sales,
marketing, and technical support. The program includes technical training
and assistance, marketing communications, sales training and assistance,
excellent support and training, lead referral services, customized product
literature, and a discounted demonstration/development system.
PRODUCTS
As noted above, the Company's principal product is 1MAGEr, its
proprietary document imaging software package. The Company is continually
enhancing this product in order to improve its performance and expand its
possible uses.
1MAGE(R) DOCUMENT Management - 1MAGE is a powerful electronic image
management system created for UNIX, Linux and Windows NT(TM) based Multi-
Value RDBMS computer systems. It provides a comprehensive solution for
the scanning, indexing, storage and retrieval of images and is designed to
file, route, track, archive, and manage an organization's incoming and
outgoing documents.
Add-on modules to 1MAGE(R) include the following:
o SCAN for scanning and pre-indexing
o 1FAX for inbound and outbound fax and cover sheet management
o 1COLD for Computer Output to Laser Disk (character data) management
o 1FORM for business form template administration
o 1RENDITION for merging spooled data with images
o 1WORKFLOW for electronically moving a document from one task to
another
o 1OCR/OMR for automatic indexing and data capture via optical and mark
character recognition
o 1SUITE for bringing images to Windows-based PC clients
o 1SERVER for accessing documents via the Internet
o 1VIEW for using standard browsers to access images over the Internet
The 1MAGE product line is in a stable, yet growth-oriented, development
stage. Supporting the Company's product line is open systems technology.
This product technology consists of the following:
o Open Systems compliant with UNIX and Linux Operating Systems, Windows
NT(TM), CCITT Group 4 Compression, TIFF, JPEG, PCX, PCL, or HPGL file
formats. The server software (1MAGE) operates on UNIX, Linux and
Windows NT servers; supporting clients include Microsoft Windows,
Windows NT workstations, and X-Windows.
o Device connectivity via Ethernet or token ring networks using TCP/IP
communication protocol.
o Compatibility with SCO UNIX, IBM AIX, HP-UX, DG-UX, and Intel-based
Red Hat Linux and Windows NT
o Recognition technology and scanning tasks run on Microsoft Windows
95, 98, or NT.
o UniVerse(TM) and UniData MultiValue relational database software from
Informix Software, Inc.
1MAGE includes several distinguishing features: the ability to use
many different types of workstations or terminals, the ability to quickly
and easily integrate with the existing MultiValue RDBMS and IBM AS/400
business application software using application program interfaces (APIs),
and the ability to handle the needs of companies of all sizes
economically. Through the use of the UNIX, Linux and Windows NT operating
systems and open systems technology, the Company can offer an imaging
solution to its customers at a very reasonable cost.
During 1999, sales of 1MAGE software licenses (excluding annual
license fees) accounted for $637,820 (35% of total revenue); in 1998,
revenue from sales of software licenses accounted for $867,927 (40% of
total revenue). 1MAGE utilizes the popular UNIX, Linux and Windows NT
operating systems and Informix Software, Inc.'s uniVerse and uniData's
relational database software. The Company utilizes open systems
technology, making its software transportable to numerous hardware
products from varying manufacturers. Because of the number of
manufacturers using the UNIX, Linux and Windows NT operating systems and
the MultiValue RDBMS, customers are rarely restricted in their choice of
hardware manufacturers.
The Company also markets peripheral products such as scanners and
jukeboxes, although this aspect of the Company's business has been de-
emphasized in recent years. Because computer hardware and peripheral
products are purchased as needed to fill customer orders, no inventory is
maintained. Hardware is generally shipped directly from the manufacturer
to the customer. The Company purchases computer and peripheral products
at discounts which range from 10% to 40% of the manufacturer's list price,
depending on the manufacturer and the volume of products sold, and retains
a portion of that discount as profit. In 1999, revenue from hardware
sales accounted for $150,008 (8%) of the Company's total revenue, as
compared to $191,778 (8%) of total revenue for 1998.
SERVICES AND ANNUAL FEES
The Company licenses its 1MAGE software to its customers and charges
an annual license fee which must be paid to continue receiving support for
the use of the software. During 1999 and 1998, annual license fees
accounted for $751,712 and $771,044, respectively, of the Company's net
sales. The Company believes recurring annual license fees from new and
existing customers will contribute to the long-term stability of the
Company. The Company also provides installation services and technical
support to its customers. Technical support includes training, consulting
services and other ongoing support. For the years ended December 31, 1999
and 1998, the revenues from these services accounted for $266,808 and
$320,543, or 15% of the Company's net sales in both years. The Company
does not provide service for hardware; rather, service for computer
hardware sold by the Company is provided directly by the manufacturer.
MARKETING AND DISTRIBUTION
To date, the Company has signed VAR agreements with eight resellers
in a variety of industries, including an international application service
provider located in South Africa. Under the reseller program, the Company
provides its imaging product, 1MAGE, to independent software integrators
(resellers), who in turn market 1MAGE products to each of their individual
markets. The Company's overall marketing objective is to support the
current resellers and to continue to enroll new software integrators in
the reseller program. The Company provides training aids, user
instruction manuals and other documentation, and a newsletter to keep its
resellers, as well as prospective resellers and customers, informed of new
product applications and developments.
The Company also markets 1MAGE through its direct sales force. The
Company's current direct sales efforts are focused on entities that
utilize the MultiValue RDBMS software. Its general strategy is to (1)
help its customers define the goals for their system, (2) provide the
means of achieving those goals through its document management software
and appropriately configured computer hardware, and (3) help assure the
ongoing success of this collaborative process by providing continuing
support, including on-site personnel training and classroom educational
programs.
CUSTOMERS
The Company sells its 1MAGE software to businesses in a wide variety
of industries and markets, facilitated through the use of VARs.
During the years 1999 and 1998, the Company generated 29% and 28%,
respectively of its revenue from one customer, Reynolds & Reynolds
("Reynolds"). Reynolds is a Fortune 500 company headquartered in Dayton,
Ohio. In May 1994, the Company signed a software license agreement with
Reynolds for the exclusive right to sublicense certain modules of 1MAGE
(without payment of further license fees to the Company) to businesses
primarily engaged in retail sales of new or used automobiles, trucks, or
tractors. In 1994, the Company signed an engineering and maintenance
agreement with Reynolds for the purpose of developing and providing new
products, enhancements, maintenance, consulting, and programming services
on an ongoing basis. License fees are paid to the Company for certain
modules and features subsequently available in newer releases of 1MAGE.
These features include the Company's 1SUITE products. Management believes
that the loss of this customer would have a significantly adverse impact
on the Company. Management does not believe that there is a substantial
risk of any such loss in the foreseeable future.
SOURCES OF SUPPLY
In conjunction with the sale of its own proprietary software
products, 1mage Software, Inc. sells a variety of third party vendors'
software to its customers which complement 1MAGE and create an integrated
software product. The amount and type of third party software provided to
a given customer depends on that customer's needs, its planned uses for
the imaging software and the configuration of its hardware and other
software. The Company believes this combination of technologies provides
the most advanced and cost-effective software product family.
A limited number of manufacturers account for a majority of 1mage
Software's hardware sales. Should one hardware system be unavailable for
any reason, however, a substitute system will likely be acceptable to the
customer because the software marketed by the Company functions on all of
the hardware systems that it distributes.
The Company has an Independent Software Vendor (ISV) agreement
directly with Hewlett-Packard Company (HP) for remarketing its software on
HP platforms. The current dealer agreement with Informix Software, Inc.
to remarket their proprietary database software runs through May 15, 2000.
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS
The Company's current focus on offering its proprietary imaging
software to a broader range of customers, through its emerging MultiValue
VAR network and its direct sales force, is expected to lessen the
historical quarterly fluctuations in the Company's operating results.
Nevertheless, large sales or groups of sales of 1MAGE licenses may cause
significant variances in quarterly results which may be difficult to
predict.
The Company's sales cycle, which generally commences at the time a
prospective customer issues a request for proposal or otherwise
demonstrates a serious interest in purchasing a system or software license
and ends upon execution of a sales contract or software license, typically
ranges from four to nine months. Operating results could vary from period
to period as a result of the length of the sales cycle, the timing of
individual system sales, VARs' performance and conditions in the target
markets and the economy in general.
TRADE SECRET AND COPYRIGHT LAWS
The Company regards its software as proprietary and relies for
protection upon trade secret and copyright laws and non-disclosure
agreements with its employees as well as restrictions on disclosure and
transferability contained in its software license agreements with its
customers. Despite these restrictions, it may be possible for competitors
or customers to copy aspects of the Company's products or obtain
information that the Company regards as proprietary. Furthermore, there
can be no assurance that others will not independently develop software
products similar to those developed or planned by the Company. Although
the Company believes its software does not infringe on the proprietary
rights of others and has not received any notice of claimed infringement,
it is possible that portions of the software marketed by the Company could
be claimed to infringe on existing proprietary rights. In the unlikely
event that any such infringements are found to exist, there can be no
assurance that any necessary licenses or rights could be obtained, or
could be obtained on terms satisfactory to the Company. Further, in such
event, the Company could be required to modify the infringing software.
There can be no assurance that the Company would be able to do so in a
timely manner, upon acceptable terms and conditions, or at all; the
failure to do so could have a material adverse effect on the Company.
BACKLOG
As a practical matter, the Company's business has evolved to the
point where the Company has minimal backlog at any given point in time.
With respect to software license sales, because there is no time delay
between receipt of an order and delivery of the software, electronically
or otherwise, there is effectively no backlog. For hardware, because of
direct delivery of the hardware by the manufacturer, hardware sales have
such short lead times that unfilled firm orders seldom, if ever, build up
to significant levels.
The Company normally receives a deposit of between 25% and 50% of the
hardware and software price when an order is placed. This deposit may or
may not be returned upon cancellation, depending on the circumstances of
the cancellation.
COMPETITION
The Company experiences competition in its business from competitors
who target one or more of the same markets or market segments as the
Company. Software and systems that perform many of the same functions as
the Company's systems and software are readily available from a number of
competitors of the Company, some of which are larger and have greater
financial, technical, marketing and other resources than the Company. The
Company believes that the principal factors affecting a prospective
customer's choice of a system are the database it uses, performance,
service and price. The Company believes that usage of the popular UNIX
and Linux operating systems and the MultiValue RDBMS has strengthened the
Company's competitive position by making the Company's software compatible
with more types of hardware and with the MultiValue application software
offered by MultiValue software developers and system integrators. The
Company further believes that its principal advantage over its competitors
is the Company's utilization of a UNIX, Linux and Windows NT-based open
systems architecture and the MultiValue RDBMS which can be offered at
lower prices.
LIMITED MARKETS
The reseller program targets complementary markets and allows the
Company to draw from a variety of industries with respect to its imaging
software products. As noted above, the Company's strategy has been to
expand the domestic and international markets for its imaging software by
engaging VARs for various industries and markets.
The Company's experience has been that economic downturns or
increased competitive pressures in its niche markets sometimes result in
reduction or deferral of capital expenditures by potential customers.
While such adverse conditions can sometimes lead to opportunities as
potential customers downsize to smaller, more cost-efficient computer
systems or replace custom designed systems that require higher levels of
support and maintenance, the Company believes that a strong national
economy is important to the success of its sales efforts.
PRODUCT DEVELOPMENT
The computer industry is characterized by rapid technological changes
in both software and hardware. In order to maintain the usefulness of its
products and their compatibility with future hardware and software, the
Company must continually modify and enhance its products. The Company
capitalizes software development costs once technological feasibility is
established. During 1999 and 1998, the Company spent $302,267 and
$295,267, respectively, for computer software development.
EMPLOYEES
As of March 30, 2000, the Company employed nineteen (19) persons,
seventeen (17) of whom serve on a full-time basis and two (2) on a part-
time basis. Responsibilities are divided as follows: eight (8) persons in
sales and marketing, nine (9) in technical support and programming
functions, and two (2) in administrative positions.
Because the competition for skilled employees in the computer
industry is intense, the Company provides incentive compensation packages
to many of its employees, including its executive officers. The Company's
chief executive officer, David R. DeYoung, receives a quarterly bonus
equal to 5% of the Company's pretax profits. (See "Executive
Compensation") The Company's chief financial officer receives a quarterly
bonus equal to 4% of the Company's pretax profits. Sales personnel
receive a commission based upon sales. The Company has a policy of
encouraging the effort and loyalty of all of its employees by making all
employees eligible for the grant of stock options under its Equity
Incentive Plan, subject to vesting schedules. The Company believes that
these incentive programs are important in attracting and retaining skilled
personnel. The future success of the Company will depend in large part
upon the quality of its employees and the efforts they expend on behalf of
the Company.
None of the Company's employees are represented by a labor union, and
the Company has experienced no work stoppage. The Company believes that
its employee relations are good.
ITEM 2. PROPERTIES
The Company's executive offices consist of approximately 4,181 square
feet at Plaza Quebec, 6025 South Quebec Street, Suite 300, Englewood,
Colorado, 80111 and are occupied pursuant to a sublease agreement between
the Company and Communications World International, Inc. with monthly
rental payments of $6,794. The term of the sublease commenced February 1,
1999 and will terminate on July 31, 2003. The landlord is responsible for
property taxes, utilities, janitorial services, repairs, and maintenance.
The Company believes that its facilities and equipment are in good
condition and satisfactory for their present uses.
ITEM 3. LEGAL PROCEEDINGS
There were no material pending legal proceedings to which the Company
was a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders
through the solicitation of proxies or otherwise during the fourth quarter
of the Company's calendar year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's Common Stock is quoted in the OTC Bulletin Board under
the symbol ISOL. The following table sets forth, for the fiscal quarters
indicated, the high and low bid prices per share for the Common Stock as
reported on the OTC Bulletin Board.
<TABLE>
<COLUMN>
1998
High Low
---- ---
<S> <C> <C>
- -------------------------------------------
First Quarter $ .63 $ .25
- -------------------------------------------
Second Quarter 2.31 .28
- -------------------------------------------
Third Quarter 3.13 .81
- -------------------------------------------
Fourth Quarter 1.91 .34
- -------------------------------------------
</TABLE>
<TABLE>
<COLUMN>
1999
High Low
---- ---
<S> <C> <C>
- -------------------------------------------
First Quarter $ .97 $ .53
- -------------------------------------------
Second Quarter 2.03 .97
- -------------------------------------------
Third Quarter 1.56 .94
- -------------------------------------------
Fourth Quarter 1.22 .66
- -------------------------------------------
</TABLE>
These quotations reflect interdealer prices, without retail mark-up,
mark down or commission and may not necessarily represent actual
transactions.
On March 24, 2000, the closing bid price per share for the Common
Stock was $2.56 as reported on OTC:BB. On this same date, there were
approximately 873 holders of record of the Common Stock.
DIVIDENDS
The Company has never declared or paid cash dividends on its Common
Stock and has no present intention to do so. For the foreseeable future,
any earnings will be retained to finance the development and expansion of
the Company's business. The declaration and payment of future dividends
will be determined by the Company's Board of Directors in light of
conditions then existing, including the Company's earnings, financial
condition and capital requirements.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, for the periods indicated, selected
financial data of the Company. This table should be read in conjunction
with the financial statements and notes included in Item 8 of this Form 10-
K and the section entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition" following this section.
<TABLE>
<COLUMN>
CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------
In thousands, except for 1999 1998 1997 1996 1995
per share data:
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $1,806 $2,151 $1,809 $2,005 $2,908
Cost of Sales 987 935 918 905 2,149
Gross Profit 819 1,216 891 1,100 759
Selling, General & Administrative
expenses 1,163 1,097 1,363 1,280 1,959
Income (Loss) before Income Taxes (365) 5 (479) (91)
(1,328)
Net Income (Loss) (367) 2 (484) (96)
(1,320)
Net Income (loss) Per Share (.16) .00 (0.23) (0.05)
(0.69)
Weighted Average Number of
Outstanding Shares 2,330 2,173 2,146 2,055 1,912
- -------------------------------------------------------------------------
<COLUMN>
CONSOLIDATED BALANCE SHEETS YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------
In thousands: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working Capital $ (186) $ 196 $ 43 $ 165 $ 398
Total Assets 1,364 1,710 1,602 1,980 1,972
Long Term Obligations 1 154 159 8 171
Total Stockholders Equity 654 922 860 1,200 1,296
- -------------------------------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31,
1998.
The Company's net sales of $1,806,348 for the year ended December 31, 1999
were $345,000 (16%) lower than $2,151,451 reported for the same period a
year earlier. The decrease in revenue is attributable to extremely slow
software sales in the fourth quarter, as customers held back purchases of
new technology in anticipation of Y2K problems. Revenue for the first
nine months of 1999 was slightly ahead of the comparable period in 1998.
While total revenue does not reflect the number of systems sold, the
Company licensed 213 1MAGE software systems to a single reseller during
1999, as compared to 90 in 1998, an increase of 136%. Due to a licensing
arrangement signed back in 1994, minimal royalty payments are due for
these systems. Software sales to resellers increased $64,000 (22%) over
the year earlier, as the Company recognized first-time revenue from new
resellers. Total revenue from resellers comprised 36% of total revenue for
1999, compared to 34% of total revenue in 1998.
Gross profit decreased $398,000 (33%) as a result of lower revenue from
software sales in 1999. Revenue from services and annual fees of
$1,018,520 was $144,000 less than total selling, general & administrative
("SG&A") expenses of $1,163,000 in 1999. It remains an important goal for
the Company to have all SG&A expense covered by services and recurring
annual fees so the net effective margin on revenue from software sales can
be very high. SG&A expenses increased $66,000 (6%) for the twelve months
ended December 31, 1999, as a result of slight increases in sales and
marketing efforts. Loss from operations in 1999 was ($343,978), as
compared to income from operations of $120,045 (excluding merger costs) in
1998. Net loss of ($367,193) or ($.16) per share were reported for the
year ended December 31, 1999, versus net income of $2,380 or ($.00) per
share for the same period in 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31,
1997.
The Company's net sales of $2,151,451 for the year ended December 31, 1998
were $343,000 (19%) higher than $1,808,791 reported for the same period a
year earlier, primarily due to a $394,000 increase in software sales.
Software sales to resellers increased $170,000 (141%) over the year
earlier, while software sales to end-users increased $224,000 (64%) over
1997. Total revenue from resellers comprised 34% of total revenue for
1998, compared to 22% of total revenue in 1997. Gross profit increased
$326,000 (37%) as a result of greater revenue from software sales in 1998.
Revenue from services and annual fees of $1,092,000 was $5,000 lower than
total selling, general & administrative ("SG&A") expenses of $1,097,000 in
1998. By contrast, the Company was $355,000 short of matching these
revenue and expense categories in 1997. It remains an important goal for
the Company to have all SG&A expense covered by services and recurring
annual fees so the net effective margin on revenue from software sales can
be very high. Hardware revenue comprised 8% of total revenue for the
current year versus 18% of total revenue for the year earlier. SG&A
expenses were down $267,000 (20%) for the twelve months ended December
31, 1998, due to cuts across the board. This decrease would have been
even greater, and the Company's profitability enhanced, was it not for a
one-time charge of $85,277 in connection with a canceled merger
transaction. Income from operations in 1998 was $120,045, as compared to
a net loss from operations of ($472,490)-- an improvement of $592,000.
Net earnings of $2,380 or $.00 per share were reported for the year ended
December 31, 1998, versus a net loss of ($484,083) or ($.23) per share
for the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased $49,259 during the
twelve months ended December 31, 1999, primarily due to the redemption of
a $25,000 certificate of deposit and $66,070 received as proceeds from the
exercise of employee stock options. Cash of $302,747 was used for
software development costs incurred to develop a new desktop client, for
the design of new Internet features, and for porting our software to the
Linux operating system. The Company had working capital of ($186,314) on
December 31, 1999.
The Company's internal sources of liquidity are revenues from
operations and cash on hand. The Company receives most of its revenues
for software licenses and system sales upon installation and does not
maintain inventory balances. The Company has a $200,000 revolving line of
credit. The loan is collateralized by all accounts and general
intangibles of the Company. Borrowings outstanding under the line of
credit at March 10, 2000 were $168,235.
The Company has no material commitments for capital expenditures for
2000.
Management believes that inflation has not had a material impact on
its results of operations to date.
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.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
1mage Software, Inc.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 14
BALANCE SHEETS - December 31, 1999 and 1998 16
STATEMENTS OF OPERATIONS - For the Years Ended
December 31, 1999, 1998 and 1997 17
STATEMENTS OF SHAREHOLDERS' EQUITY - For the
Years Ended December 31, 1999, 1998 and 1997 17
STATEMENTS OF CASH FLOWS - For the Years Ended
December 31, 1999, 1998 and 1997 19
NOTES TO FINANCIAL STATEMENTS 21
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES 32
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS 34
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
1mage Software, Inc.
Englewood, Colorado
We have audited the accompanying balance sheets of 1mage Software, Inc. as
of December 31, 1999 and 1998, and the related statements of operations,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of 1mage Software, Inc.
as of December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended December
31, 1999, in conformity with generally accepted accounting principles.
As discussed in Note 10, in 1999 the Company changed its method of
accounting for maintenance agreements by retroactively restating prior
years' financial statements.
/s/ BAIRD, KURTZ & DOBSON
BAIRD, KURTZ & DOBSON
Denver, Colorado
February 4, 2000, except for Note 4 as to
which the date is February 24, 2000
1mage Software, Inc.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS (Restated -
Note 10)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 253,930 $ 204,671
Certificate of deposit - 25,000
Receivables:
Trade (less allowance:1999,
$10,000;1998,$15,000) 204,107 526,684
Related parties 1,635 7,141
Inventory 49,207 55,804
Prepaid expenses and other
current assets 13,428 9,721
---------- ----------
Total current assets 522,307 829,021
PROPERTY AND EQUIPMENT, at cost, net 69,263 93,831
OTHER ASSETS:
Software development costs, net 771,919 786,572
Other 100 100
---------- ----------
TOTAL ASSETS $1,363,589 $1,709,524
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 168,235 $ 150,000
Current portion of capital
lease obligations 3,857 4,610
Deferred revenue 210,000 215,000
Accounts payable 209,882 292,883
Accrued liabilities 116,647 157,614
---------- ----------
Total current liabilities 708,621 820,107
LONG-TERM OBLIGATIONS:
Convertible notes payable
to related parties - 150,000
Capital lease obligations 521 4,379
SHAREHOLDERS' EQUITY:
Common stock, $.004 par
value - 10,000,000 shares
authorized; shares
outstanding: 1999 - 2,642,493;
1998 - 2,203,019 10,569 8,811
Additional paid-in capital 7,189,091 6,904,247
Accumulated deficit (6,545,213) (6,178,020)
----------- -----------
Total shareholders' equity 654,447 735,038
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,363,589 $1,709,524
========== ==========
</TABLE>
See notes to financial statements.
1mage Software, Inc.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUE:
System sales and
software licenses 787,828 1,059,864 800,754
Services and annual fees 1,018,520 1,091,587 1,008,037
--------- --------- ---------
Total revenue 1,806,348 2,151,451 1,808,791
--------- --------- ---------
COST OF REVENUE:
System sales and
software licenses 596,128 608,895 603,781
Services and annual fees 391,277 325,963 314,207
--------- --------- ---------
Total cost of revenue 987,405 934,858 917,988
--------- --------- ---------
GROSS PROFIT 818,943 1,216,593 890,803
OPERATING EXPENSES:
Selling, general &
administrative 1,162,921 1,096,548 1,363,293
--------- --------- ---------
INCOME/(LOSS) FROM OPERATIONS (343,978) 120,045 (472,490)
---------- -------- ----------
OTHER INCOME/(EXPENSE):
Interest income 9,665 5,724 24,742
Canceled merger costs - (85,277) -
Interest expense (32,140) (34,046) (33,231)
Other 1,760 (1,566) 1,896
---------- --------- ----------
Total other income
(expense) (20,715) (115,165) (31,335)
---------- --------- ----------
INCOME/(LOSS) BEFORE
INCOME TAXES (364,693) 4,880 (479,083)
PROVISION FOR
INCOME TAXES 2,500 2,500 5,000
---------- -------- ----------
NET INCOME/(LOSS) $(367,193) 2,380 $(484,083)
========== ======== ==========
BASIC AND DILUTED INCOME
(LOSS) PER COMMON SHARE $ (.16) 0.00 $ (0.23)
========== ========= ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,329,818 2,172,932 2,146,331
========= ======== =========
</TABLE>
See notes to financial statements.
1mage Software, Inc.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In
Shares Amount Capital
------- ------ -----------
<S> <C> <C> <C>
Balances, January 1, 1997
(Restated - Note 10) 2,147,563 $8,590 $6,850,533
Cancellation of common stock
related to employee
termination (10,000) (40) (11,210)
Exercise of incentive
stock options 4,811 19 5,382
Payment of note
received for common stock - - -
Issuance of common
stock for services 471 2 395
Net loss - - -
--------- ------
- ----------
Balances, December 31, 1997
(Restated - Note 10) 2,142,845 8,571
6,845,100
Exercise of incentive
stock options 60,174 240 59,147
Net income - - -
--------- - ------
- ----------
Balances, December 31, 1998
(Restated - Note 10) 2,203,019 8,811
6,904,247
Conversion of notes
payable into
common stock 326,474 1,306 201,180
Exercise of incentive
stock options 113,000 452 65,618
Issuance of
non-qualified
stock options - - 18,046
Net loss - - -
--------- ------ ----------
Balances,
December 31, 1999 2,642,493 $10,569
$7,189,091
========= =======
==========
</TABLE>
<TABLE>
<CAPTION>
Notes Accum.
Receivable Deficit Total
---------- -------- -------
<S> <C> <C> <C>
Balances, January 1, 1997
(Restated - Note 10) $(149,400) $(5,696,317) $1,013,406
Cancellation of common stock
related to employee
termination - - (11,250)
Exercise of incentive
stock options - - 5,401
Payment of note
received for common stock 149,400 - 149,400
Issuance of common
stock for services - - 397
Net loss - (484,083) (484,083)
------- ------------ ----------
Balances, December 31, 1997
(Restated - Note 10) - (6,180,400) 673,271
Exercise of incentive
stock options - - 59,387
Net income - 2,380 2,380
------- ------------ ----------
Balances, December 31, 1998
(Restated - Note 10) - $(6,178,020) 735,038
Conversion of notes
payable into
common stock - - 202,486
Exercise of incentive
stock options - - 66,070
Issuance of
non-qualified
stock options - - 18,046
Net loss - (367,193) (367,193)
------- ------------ ----------
Balances,
December 31, 1999 $ - $ (6,545,213) $ 654,447
======= ============ ==========
</TABLE)
See notes to financial statements.
1mage Software, Inc.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings/(loss) $(367,193) $ 2,380 $(484,083)
Adjustments to reconcile
earnings/(loss) to net cash
provided by operating activities:
Depreciation and amortization 367,838 398,806 408,652
Issuance of stock options
for services 18,046 - 398
Cancellation of stock issued
for services - - (11,250)
Gain on sale of property and
equipment - - (117)
Changes in assets
and liabilities:
Receivables 328,083 (265,923) 272,589
Inventory 6,597 37,919 10,509
Prepaid expenses
and other assets (3,707) (2,048) 25,965
Accounts payable (83,001) 101,345 (33,803)
Accrued liabilities and
deferred income 6,519 (43,667) (3,134)
Net cash provided by
operating activities ---------- --------- ---------
273,182 228,812 185,726
========== ======== =========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment (25,870) (7,908) (7,856)
Additions to capitalized
software (302,747) (295,266) (329,095)
Payments from notes
receivable - - 149,400
Redemption of
certificate of deposit 25,000 - -
Increase in other assets - (100) 692
-------- --------- ---------
Net cash used for
investing activities (303,617) (303,274) (186,859)
========= ========= ========
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to line
of credit 68,235 60,000 176,158
Repayment of line of credit (50,000) (60,000) (176,158)
Repayment of long-term
obligations (4,611) (12,047) (14,073)
Proceeds from exercise
of common stock options 66,070 59,387 5,400
-------- -------- ---------
Net cash provided
by financing activities 79,694 47,340 (8,673)
======== ======== =========
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 49,259 (27,122) (9,806)
CASH AND CASH EQUIVALENTS,
beginning of year 204,671 231,793 241,599
--------- --------- ---------
CASH AND CASH EQUIVALENTS,
end of year $ 253,930 $204,671 $231,793
========= ========= =========
See notes to financial statements
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $15,820 $16,204 $18,358
======= ======= =======
Income taxes paid $ 2,500 $ 2,500 $ 5,000
======= ======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Acquisition of property
and equipment by
assuming capital lease
obligations $ - $ - $13,637
======== ======= =======
</TABLE>
1mage Software, Inc.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Organization and Nature of Business - 1mage Software, Inc. (the "Company")
was incorporated in Colorado in December 1981.
The Company develops and markets a UNIX, Linux and Windows NT-based
electronic document image management and retrieval system. The Company
earns the majority of its revenues in the United States.
Cash Equivalents - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to
be cash equivalents.
Inventories consist of finished goods and are stated at the lower of cost
(specific identification method) or market (net realizable value).
Property and Equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful
lives (generally five years) of the assets or the lease term, if shorter.
The Company capitalizes all expenditures for property and equipment in
excess of $500.
Software Development Costs are capitalized when technological feasibility
is established. Such costs are stated at the lower of unamortized cost or
net realizable value. Amortization is computed using either the straight-
line method based on estimated economic lives of the products (five years)
or the ratio that current product revenues bear to the total of current
and anticipated future product revenues, whichever is greater.
It is reasonably possible that those estimates of anticipated future gross
revenues, the remaining estimated economic life of the products, or both
will be reduced significantly in the near term due to competitive
pressure. As a result, the carrying amount of the capitalized software
costs may be reduced materially in the near term. The amounts capitalized
for the years ended December 31, 1999, 1998 and 1997 were $302,747,
$295,266, and $329,095, respectively. Amortization of these costs totaled
$317,400, $322,319, and $304,835, respectively. The net realizable value
of such capitalized costs is reviewed by management on a periodic basis,
and costs in excess of net realizable value, if any, are charged to
operations.
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.
The Company performs credit evaluations of its customers' financial
condition and generally does not require collateral. The Company retains a
security interest in the equipment and software sold until they are paid
in full. Receivables are generally due within 30 days, with those
customers not meeting those requirements being subject to stricter credit
policies. Credit losses to customers have generally been within
management's expectations.
One customer accounted for 29% of 1999 revenues. Two different customers
accounted for 11% and 10% of accounts receivable at December 31, 1999.
One customer accounted for 28% of 1998 revenues. Two different customers
accounted for 42% and 15% of accounts receivable at December 31, 1998.
One customer accounted for 12% of 1997 revenues. Three different
customers accounted for 20%, 17% and 11% of accounts receivable at
December 31, 1997.
Earnings (Loss) per Share is computed by dividing net income (loss) by the
weighted average number of common and equivalent shares outstanding during
the year. The potential dilution from common stock equivalents is not
material. Fully diluted earnings per share are either anti-dilutive or
not materially different from primary earnings per share.
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.
Estimates -The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting periods. Actual results could differ from
those estimates.
Reclassification -The Company has reclassified certain amounts from prior
years to conform with the current year presentation. These
reclassifications had no effect on net income.
2. PROPERTY AND EQUIPMENT
----------------------
Property and equipment at December 31 consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Equipment $606,333 $710,437
Furniture 43,313 73,278
Leasehold improvements 8,262 -
-------- --------
657,908 783,715
Less: accumulated depreciation (588,645) (689,884)
-------- --------
$ 69,263 $ 93,831
======== ========
</TABLE>
3. ACCRUED LIABILITIES
-------------------
Accrued liabilities at December 31 consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Sales tax payable $ 38,465 $ 36,329
Accounting and audit fees 21,000 23,500
Accrued compensation 9,773 24,069
Accrued interest- related party - 37,512
Other 47,409 36,204
-------- --------
$116,647 $157,814
======== ========
</TABLE>
4. LINE OF CREDIT
--------------
The Company has a $200,000 revolving bank line of credit which is due
February 24, 2000 and bears interest at prime plus 1.5% (total rate of
9.25% at December 31, 1999) and is collateralized by all accounts and
general intangibles of the Company. Total borrowings outstanding under
the line of credit were $168,235 and $150,000 at December 31, 1999 and
1998, respectively. This line of credit was renewed for another year on
February 24, 2000.
5. CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES
--------------------------------------------
Convertible notes payable to related parties (stockholders) at December
31, consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
10% notes payable, due February 18, 2000 $ -- $100,000
10% notes payable, due February 18, 2000 -- 50,000
-------- --------
Total convertible notes payable $ -- $150,000
======== ========
</TABLE>
The principal amount of $150,000 and interest of $54,046 were converted
into 326,474 shares of common stock at $.625 per common share during 1999.
Interest expense for the years ended December 31, 1999, 1998, and 1997 was
$32,140, $34,046, and $33,231, and includes amounts to related parties of
$16,321, $17,842, and $15,000, respectively.
6. SHAREHOLDERS' EQUITY
--------------------
Stock Compensation Plans
------------------------
At December 31, 1999, the Company has three stock-based compensation
plans, which are described below. The Company applies Accounting
Principles Board (APB) Opinion 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized. Had compensation cost for the Company's three stock-based
compensation plans been determined based on the fair value at the
dates of awards under those plans consistent with the method of FASB
Statement 123, the Company's net loss and loss per share would have
been as indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income (loss):
As reported $(367,193) $ 2,380 $(484,083)
Pro forma $(518,211) $(127,196) $(640,800)
Loss per common share:
As reported $ (0.16) $ 0.00 $ 0.23
Pro forma $ (0.22) $ (0.06) $ (0.30)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions for grants in 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Dividend Yield 0% 0% 0%
Expected Volatility 144% 151% 91%
Risk-Free Interest Rate 6.00% 6.00% 6.00%
Expected Lives 8.7 years 8.9 years 3.8 years
</TABLE>
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are freely transferable. In addition, option
valuation models require the input of highly subjective assumptions,
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide
a reliable single measure of the fair value of its employee stock
options.
1996 Equity Incentive Plan
--------------------------
In September 1996, the Board of Directors authorized 1,000,000 shares
of common stock for issuance under its 1996 Equity Incentive Plan
("1996 Plan") as incentive or non-qualified stock options. The
Company grants non-qualified and incentive stock options and
restricted stock to officers and directors who are employees of the
Company.
The options are granted to purchase common stock at the fair market
value on the grant date or at other prices as determined by the Board
of Directors. The option-vesting period is determined at the time of
each grant, and all options expire two to ten years from the grant
date.
A summary of the 1996 Plan stock option activity follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Weighted
Value Avg.
Outstanding Per Exercise
Shares Share Total Price
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, January 1, 1997 90,000 $.44 $ 39,375 $.44
Granted 185,000 $.44-$1.47 91,844 .50
-------- -------- --------
Balances, December 31,
1997 275,000 131,219 .48
Canceled (235,000) $.63-$1.25 (175,003) .74
Granted 413,000 $.34-$.78 239,702 .58
-------- -------- --------
Balances, December 31,
1998 453,000 195,918 .43
Granted 375,000 $.33-$1.29 233,100 .62
-------- -------- --------
Balances, December 31,
1999 828,000 $429,018 $.52
======== ======== ========
- -------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options under
the plan at December 31, 1999.
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- -------- ---------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
0.33 to 0.44 460,000 7.7 years 0.39 405,000 0.40
0.63 to 0.84 358,000 9.2 years 0.66 166,000 0.67
1.28 to 2.06 10,000 7.7 years 1.33 10,000 1.33
</TABLE>
At December 31, 1999, options for 581,000 shares were exercisable
under the 1996 Plan. There were 172,000 shares available for future
grant.
The weighted-average fair value of options granted during the year
totaled $.65, $.36, and $.34, per share for the years ended December
31, 1999, 1998 and 1997 respectively.
1994 Stock Option and Grant Plan
--------------------------------
In April 1994, the Company authorized 700,000 shares of common stock
for issuance under its 1994 Stock Option and Grant Plan ("1994 Plan")
to employees, consultants, advisors, and independent contractors.
The options are granted to purchase common stock at the fair market
value on the date of grant or at other prices as determined by the
Board of Directors ("the Board"). Options issued under the 1994 Plan
become exercisable in one or more installments during its term and
the right to exercise may be cumulative, as determined by the Board.
Options expire as determined by the Board, but not more than 10 years
after the date of grant.
Details of activity under the 1994 Plan are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Weighted
Value Avg.
Per Exercise
Stock Options Outstanding Share Total Price
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, January 1, 1997 84,495 $.77-$1.12 77,201 $.91
Granted 255,807 $.63-$1.44 169,814 .66
Canceled (54,316) $.63-$1.19 (52,350) (.96)
Exercised (4,811) $1.06-$1.19 (5,401) (1.12)
-------- ---------------------
Balances, December 31,
1997 281,175 189,264 .67
Granted 200,500 $.34 68,972 .34
Canceled (50,000) $.63-$.88 (33,100) (.66)
Exercised (10,174) $.63-$1.44 (9,388) (.92)
-------- ---------------------
Balances, December 31,
1998 421,501 215,748 .51
Granted 104,000 $.66 68,245 .66
Canceled (13,501) $.34-$1.44 (7,956) (.59)
Exercised (113,000) $.34-$.78 (66,070) (.58)
-------- ---------------------
Balances, December 31,
1999 399,000 $ 209,967 $.53
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Weighted
Average
Grant Exercise
Stock Grants Price Total Price
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, January 1, 1997 92,695 $149,100 $1.61
Granted 471 $.84 397 .84
Canceled (10,000) $1.13 (11,250) (1.13)
-------- ---------------------
Balances, December 31,
1997 83,166 138,247 1.66
Granted/Canceled -- -- -- --
-------- ---------------------
Balances, December 31,
1998 83,166 138,247 1.66
Granted/Canceled -- -- -- --
-------- ---------------------
Balances, December 31,
1999 83,166 $ 138,247 $1.66
- -------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options under the
plan at December 31, 1999.
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- -------- ---------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
0.33 to 0.44 163,000 6.7 years 0.34 64,250 0.34
0.63 to 0.84 231,000 5.8 years 0.64 151,000 0.63
1.28 to 2.06 5,000 0.8 years 1.28 5,000 1.28
</TABLE>
The weighted-average fair value of options granted during the year
totaled $.64, $.33, and $.38, per share for the years ended December
31, 1999, 1998 and 1997, respectively.
At December 31, 1999, options to purchase 220,250 shares of common
stock were exercisable and 7,849 shares were available for future
grant.
1993 Stock Option Plan
----------------------
In May 1994, the Company authorized 235,000 shares of common
stock for issuance under its 1993 Stock Option Plan ("1993 Plan") as
incentive or non-qualified stock options. The Company grants non-
qualified stock options to officers, directors, employees and
consultants. Incentive stock options may be granted to employees.
The options are granted to purchase common stock at the fair market
value on the grant date or at other prices as determined by the Board
of Directors. The option-vesting period is determined at the time
of each grant, and all options expire two to ten years from the grant
date.
A summary of the 1993 Plan stock option activity follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Weighted
Value Avg.
Outstanding Per Exercise
Shares Share Total Price
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, January 1, 1997 299,275 $.77-$1.37 $ 251,950 $1.10
Granted 16,000 $.63 10,000 .63
-------- ---------------------
Balances, December 31,
1997 245,275 261,950 1.07
Canceled (236,275) $.63-$1.81 (254,231) 1.08
Granted 230,675 $.34-$.44 100,593 .44
-------- ---------------------
Balances, December 31,
1998 239,675 108,312 .45
Canceled/Granted -- -- --
-------- ---------------------
Balances, December 31,
1999 239,675 $ 108,312 $.45
- -------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options under
the plan at December 31, 1999.
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- -------- ---------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
0.33 to 0.44 230,675 5.8 years 0.44 228,050 0.44
0.63 to 0.84 8,000 7.0 years 0.75 8,000 0.84
1.28 to 2.06 1,000 6.0 years 1.72 1,000 2.06
</TABLE>
The weighted-average fair value of options granted during the year
totaled $.39 and $.56 for the years ended December 31, 1998 and 1997,
respectively.
At December 31, 1999, options for 237,050 shares were exercisable
under the 1993 Plan. There were options for 3,500 shares available
for grant.
Common Stock Warrants
---------------------
On January 28, 1994, the Board of Directors granted 100,000 warrants
to an officer to purchase shares of common stock at an exercise price
of $1.5625 per share, expiring on January 31, 1999. In January 1998,
these warrants were repriced to $.44 per share and the term was
extended until January 28, 2004.
Common Stock Reserved
---------------------
Common stock reserved at December 31, 1999 was as follows:
1996 Equity Incentive Plan 1,000,000
1994 Stock Option and Grant Plan 406,849
1993 Stock Option Plan 243,175
Warrants 150,000
----------
1,800,024
==========
7. INCOME TAXES
------------
The provisions for income taxes for the years ended December 31,
consists of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Current: 1999 1998 1997
------------------------
Federal $ -- $ -- $ --
State 2,500 2,500 5,000
------- ------- -------
Total current 2,500 2,500 5,000
------- ------- -------
Deferred:
Federal -- -- --
State -- -- --
------- ------- -------
Total deferred -- -- --
------- ------- -------
$2,500 $ 2,500 $ 5,000
======= ======= =======
</TABLE>
The following is a reconciliation of statutory federal income taxes
to the actual provision for income taxes:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal income taxes at statutory
rate $ (124,845) $ 1,659 $ (162,888)
Increase in taxes resulting from
state income taxes (16,380) (107) (21,559)
Increase (decrease) in deferred tax
asset valuation allowance 76,000 (20,000) 262,000
Expiration of business tax credits 61,000 30,000 --
Other, net 6,725 (9,266) (72,553)
--------- -------- --------
Provision for income taxes $ 2,500 $ 2,500 $ 5,000
========= ======== ========
</TABLE>
The components of the net deferred tax liability recognized in the
accompanying balance sheets are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Deferred tax liability $ 1,000 $ 3,000
Deferred tax asset (2,418,000) (2,359,000)
Valuation allowance 2,417,000 2,356,000
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The types of temporary differences between the tax bases of assets
and liabilities and their financial reporting amounts that give rise
to a significant portion of the deferred tax asset and their
approximate tax effects are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Future income (deductions):
Net operating loss $ (2,234,000) $ (2,086,000)
Allowance for doubtful accounts (4,000) (6,000)
General business tax credits (135,000) (211,000)
Depreciation (30,000) (43,000)
Stock Options (12,000) (5,000)
Other (2,000) (5,000)
------------ ------------
$ (2,417,000) $ (2,356,000)
============ ============
</TABLE>
The Company has net operating loss carry forwards for federal income
tax purposes of approximately $5,729,000. General business tax
credits carry forwards of approximately $135,000 are available to
reduce future federal income taxes. These carry forwards expire on
varying dates from 2000 through 2012.
8. EMPLOYEE BENEFIT PLAN
---------------------
The Company has a Cash or Deferred Profit Sharing Plan ("the 401(k)
Plan"). The 401(k) Plan is designed to qualify under Section 401(k)
of the Internal Revenue Code and allows the Company to make
discretionary contributions as determined by the Company's Board of
Directors. For the years ended December 31, 1999, 1998, and 1997,
the Company contributed $2,476, $1,289, and $1,683 to the 401(k)
Plan.
9. COMMITMENTS AND CONTINGENCIES
-----------------------------
At December 31, 1999, and 1998, equipment with a net book value of
$7,635 and $10,362, net of accumulated amortization of $6,002 and
$3,275, respectively, has been leased under capital leases.
The Company leases its executive offices under a noncancelable
operating lease which expires in July 2003.
Future minimum payments for lease obligations are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
2000 $ 4,535 $ 81,530
2001 81,530
2002 81,530
2003 47,559
-------- --------
Total minimum lease payments 4,535 292,149
=========
Amount representing interest (157)
========
Present value of min. lease payments 4,378
Current portion (3,857)
========
Long-term portion $ 521
========
</TABLE>
The Company has bonus agreements with certain officers which provide for
quarterly bonuses of 5% and 4% of the Company's pre-tax profits. The
Company expensed bonuses of $1,312, $9,536 and, $0 under these agreements
for the years ended December 31, 1999, 1998 and 1997, respectively.
10. PRIOR PERIOD ADJUSTMENT
In prior years, the Company recognized certain revenue from maintenance
agreements when invoiced. During 1999 the Company retroactively changed
its method to record revenue from maintenance agreements ratably over the
term of the agreement. This restatement resulted in the following changes
to accumulated deficit as of December 31, 1998 and 1997. This change had
no effect on the statements of operations for the years ended December 31,
1998 and 1997.
<TABLE>
<CAPTION>
ACCUM. DEFICIT NET INCOME (LOSS)
------------- -----------------
<S> <C> <C>
As previously reported,
December 31, 1997 $(5,993,714) $(484,083)
Correction for years
ended prior to December 31, 1997 (186,686)
------------ ----------
As adjusted, December 31, 1997 $(6,180,400) $(484,083)
============ ==========
As previously reported,
December 31, 1998 $(5,991,334) $ 2,380
Correction for years
ended prior to December 31, 1998 (186,686)
------------ ----------
As adjusted, December 31, 1998 $ (6,178,020) $ 2,380
============ ==========
</TABLE>
11. FINANCIAL INSTRUMENTS
All financial instruments are held for purposes other than trading. The
following methods and assumptions were used to estimate the fair value of
each financial instrument for which it is practicable to estimate that
value:
Cash And Cash Equivalents
The carrying amount approximates fair value because of the short maturity
of those instruments.
Debt
The fair value of the Company's debt is estimated based on borrowing rates
currently available to the Company for bank loans with similar terms and
maturities.
The estimated fair values of the Company's financial instruments at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 253,930 $ 253,930
Receivables $ 205,742 $ 205,742
LIABILITIES
Accounts payable $ 209,882 $ 209,882
Line of credit $ 168,235 $ 168,235
</TABLE>
The estimated fair values of the Company's financial instruments at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 204,671 $ 204,671
Certificate of deposit $ 25,000 $ 25,000
Receivables (including $27,817
from related parties) $ 533,825 $ 533,825
LIABILITIES
Accounts payable $ 292,883 $ 292,883
Line of credit $ 150,000 $ 150,000
Convertible notes payable
to related parties $ 150,000 $ 150,000
</TABLE>
12. SEGMENT INFORMATION
The Company operates in one industry segment consisting of the development
and marketing of electronic document image management and retrieval
systems. The Company's technologies are managed as one segment because it
offers similar products in similar markets and the factors determining
strategic decisions are comparable for all products and markets.
Sales to foreign markets totaled $102,831, $35,003, and $30,768 for the
years ending December 31, 1999, 1998, and 1997, respectively.
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders of
1mage Software, Inc.
Englewood, Colorado
In connection with our audit of the financial statements of 1mage
Software, Inc. for each of the three years in the period ended December
31, 1999, we have also audited the following financial statement schedule.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits of the basic financial statements.
The schedule is presented for purposes of complying with the Securities
and Exchange Commission's rules and regulations and is not a required part
of the financial statements.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required
to be included herein.
/s/ Baird, Kurtz & Dobson
Baird, Kurtz & Dobson
Denver, Colorado
February 4, 2000
1mage Software, Inc.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
<S> <C> <C> <C> <C>
For the Year Ended
December 31, 1999:
Allowance for
Doubtful Accounts $15,000 $39,485 $44,485 $10,000
For the Year Ended
December 31, 1998
Allowance for
Doubtful Accounts $20,000 $41,984 $46,984 $15,000
For the Year Ended
December 31, 1997
Allowance for
Doubtful Accounts $90,952 $68,681 $139,633 $20,000
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Our former independent accounting firm, Cribari & Gustafson LLP, was
merged into Baird, Kurtz & Dobson effective September 1, 1999. There
were no disagreements with accountants on accounting and financial
disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information concerning the Company's
Executive Officers and Directors:
<TABLE>
<CAPTION>
FIRST YEAR
AS EXECUTIVE
OFFICER OR POSITION
NAME AGE DIRECTOR WITH COMPANY
- ---- --- ---------- ------------
<S> <C> <C> <C>
David R. DeYoung 55 1981 President, Chief Executive
Officer and Director
Robert Wiegand II 53 1992 Secretary and Director
Mary Anne De Young 46 1994 Treasurer, Chief Financial
Officer, Asst. Secretary and Director
Richard A. Knapp 54 1997 Director
</TABLE>
DAVID R. DEYOUNG - CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
Mr. DeYoung has been President, Chief Executive Officer and a
Director of the Company since its formation in 1981. He served in similar
capacities with the Company's predecessor corporation from 1979 to 1981.
During 1979, Mr. DeYoung was employed by ESCOM/Mountain States, a Prime
dealer, as Vice President of Sales. From 1972 to 1979, Mr. DeYoung was
employed by NCR Corporation and, during part of that time, was a District
Manager in the division of Commercial, Industrial, Medical, Educational
and Governmental systems. He holds a Bachelor of Science Degree in
Business Administration and Computer Science from California State
Polytechnic University. Mr. DeYoung is the spouse of Mary Anne DeYoung.
ROBERT WIEGAND II - SECRETARY AND DIRECTOR
Mr. Wiegand was elected to the Board of Directors in July 1992. Mr.
Wiegand was appointed to the office of Secretary of the Company on March
1, 1994. Mr. Wiegand is presently a lawyer in private practice. From
January 15, 1992 to December 26, 1992, he was Vice-President of
Administration for Rose Manufacturing Co., a privately held manufacturer
of safety equipment based in Englewood, Colorado. Mr. Wiegand has
practiced law for 23 years, and prior to joining Rose Manufacturing, was
special counsel with Pendleton & Sabian, P.C., a law firm in Denver. Mr.
Wiegand graduated Phi Beta Kappa from the Tulane University of Louisiana
in 1970 and went on to receive a law degree and was admitted to practice
in Louisiana in 1972 and Colorado in 1977. Since 1976, Mr. Wiegand's
practice has been limited to securities offerings, estate planning,
business organizations and tax law. In addition to membership in six bar
Associations, Mr. Wiegand has been admitted to practice before the U.S.
District Court (Colorado and ED-Louisiana) and before the U.S. Court of
Appeals (5th Circuit).
MARY ANNE DEYOUNG - TREASURER, CHIEF FINANCIAL OFFICER, ASSISTANT
SECRETARY AND DIRECTOR
Ms. DeYoung was elected to the Board of Directors in April 1996. Ms.
DeYoung was elected Treasurer, Chief Financial Officer and Assistant
Secretary on December 15, 1994. Ms. DeYoung has served as Vice President,
Finance and Administration since July 1986. Ms. DeYoung joined the
Company as Controller in April 1981. From 1975 to 1981, Ms. DeYoung was a
systems analyst with Arthur Andersen LLP, a financial analyst, and an
independent financial consultant. Ms. DeYoung holds a Bachelor of Science
Degree in Accounting from the University of Santa Clara. Ms. DeYoung is
the spouse of David R. DeYoung.
RICHARD A. KNAPP - DIRECTOR
Mr. Knapp was elected to the Board of Directors in May 1997. Mr.
Knapp is currently the President and CEO of Lease Capital Corporation and
has served in that capacity since 1990. From 1984 until 1990, Mr. Knapp
was a regional manager for both Paccom Leasing Corporation and Security
Pacific Business Finance. In total, Mr. Knapp has been associated with
the banking/finance industry for nearly thirty years. He holds a Bachelor
of Science degree in Finance from the University of Arizona.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the executive compensation of the
Company's Chief Executive Officer for each of the Company's last three
fiscal years. There were no other Executive Officers serving at the end
of the last fiscal year whose compensation was greater than $100,000.
<TABLE>
<CAPTION>
ANNUAL LONG TERM ALL OTHER
COMPENSATION* COMPENSATION** COMPENSATION
------------- -------------- ------------
SALARY BONUS AWARDS ***
------ ------ -------------- ------------
NAME AND SECURITIES
PRINCIPAL UNDERLYING
POSITION YEAR ($) ($) OPTIONS (#) ($)
- ---------- ---- ------ ------ ------------ ------------
<C> <C> <C> <C> <C> <C>
David R. DeYoung 1999 132,053 730 60,000 4,812
President, CEO 1998 129,820 4,817 432,375 5,772
1997 129,820 --- 94,000 7,982
</TABLE>
* Mr. DeYoung did not receive additional compensation other than noted
above, the aggregate amount of which was the lesser of either $50,000 or
10% of the total of his annual salary and bonus.
** For 1998, includes 337,375 stock options which were repriced to fair
market value on January 15, 1998.
*** Includes insurance premiums paid by the Company for term life and
disability insurance, as well as premiums paid for a key-man life
insurance policy which has the death benefit assigned to the Company
and the cash value of the policy intended to accrue for the benefit of Mr.
DeYoung.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the information concerning individual
grants of stock options during the last fiscal year to the named
<TABLE>
<CAPTION>
Individual Grants
-----------------
% of Total
Number of Options of
Securities Granted to
Underlying Employees Exercise
Options in Fiscal of Base Price Expiration
Name Granted (#) Year ($/Share) Date
- ---- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
D.R. DeYoung 60,000 12.5% .6562 12/09/09
- ------------ ---------- ---------- ------------- ----------
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning each exercise
of stock options during the last fiscal year by the named Executive
Officer and the fiscal year-end value of unexercised options:
<TABLE>
<CAPTION>
Number of Value of
securities unexercised
underlying in-the-money
Shares unexercised options at
acquired on Value options at fiscal year-end
Name exercise (#) Realized ($) fiscal year-end ($)*
- ---- ------------ ------------ --------------- ----------------
Exercisable/ Exercisable/
unexercisable unexercisable
-------------- -------------
<C> <C> <C> <C> <C>
D.R. DeYoung 0 $0 492,375 / 0 $847,808 / 0
- -------------------------------------------------------------------------
*Based upon the fair market value of the Common Stock on December 31, 1999
of $2.09, being the closing price as quoted on the OTC:BB.
</TABLE>
EMPLOYMENT CONTRACT
Mr. DeYoung, the Company's President and Chief Executive Officer, is
employed pursuant to a three-year employment contract between the Company
and Mr. DeYoung, which expires on October 31, 2002. Since November 1,
1999, the compensation of Mr. DeYoung has been established under the terms
of this employment contract. The contract calls for an annual base
salary, in an amount determined annually by the Board of Directors,
payable semi-monthly, plus expenses and normal fringe benefits. Mr.
DeYoung earns a bonus of 5% of the Company's pretax earnings, calculated
on a quarterly basis. An annual bonus may be paid to Mr. DeYoung based on
the performance of the Company and at the discretion of the Board of
Directors. Mr. DeYoung's employment contract provides that should his
employment be terminated for any reason other than for cause, he is
entitled to a cash severance package equal to one year's cash
compensation. In addition, Mr. DeYoung is entitled to receive a grant of
a sufficient number of ten-year options as are necessary to permit him to
retain the same percentage of beneficial ownership interest in the Company
as he held on December 16, 1996. These grants would be made from the
Company's Equity Incentive Plan at the fair market value of the common
stock on the date of grant.
Ms. DeYoung, the Company's Vice President of Finance and Chief
Financial Officer, is employed pursuant to a three-year employment
contract between the Company and Ms. DeYoung which was effective September
1, 1999. Her compensation is established under the terms of this
employment contract. The contract calls for an annual base salary,
expenses, normal fringe benefits, as well as a bonus equal to 4% of the
Company's pretax earnings, calculated on a quarterly basis. In addition,
Ms. DeYoung's employment contract provides that should her employment be
terminated for any reason other than for cause, she is entitled to a cash
severance package equal to one year's cash compensation.
COMPENSATION OF DIRECTORS
The Company currently pays non-employee Directors $1,000 per quarter
plus specific hourly fees for special meetings or additional
participation. Pursuant to the 1996 Stock Option Plan (the "1996 Plan"),
members of the compensation committee of the Board of Directors are
automatically granted an option on the last trading day in June to
purchase 4,000 shares of Common Stock at 100% of the fair market value on
such date. On June 30, 1999 each member of the compensation committee
received an automatic grant to purchase 4,000 shares of common stock at
$1.29, the fair market value on that date. In addition to the automatic
grants, the Company granted each non-employee director 6,000 stock options
to purchase shares of common stock at $0.6562 per share, the fair market
value on December 7, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth the number of shares of Common Stock owned
be each Executive Officer and Director of the Company, by all persons
known to the Company to be the beneficial owner of more than 5% of any
class of the Company's voting securities, and by all Executive Officers
and Directors as a group. Unless otherwise noted, the share ownership
specified in the following table represents both record and beneficial
ownership as of March 30, 2000.
<TABLE>
<CAPTION>
Name and Address Beneficial
of Beneficial Owner Ownership(1) Percent of Class
- ------------------- ------------ ----------------
<S> <C> <C>
David R. DeYoung 739,591(2),(3) 22.5%
6025 So. Quebec Street #300
Englewood, Colorado 80111
Robert Wiegand II 71,500(4) 2.3%
5261 SO. Quebec Street #200
Greenwood Village, Colorado 80111
Mary Anne DeYoung 255,301(5) 7.9%
6025 So. Quebec Street #300
Englewood, Colorado 80111
Richard A. Knapp 13,500(6) 0.4%
900 W. Castleton Rd., #120
Castle Rock, Colorado 80104
Spencer D. Lehman 280,606 9.2%
1250 4th Street
Santa Monica, California 90401
John G. Mazza 302,937 10.0%
6613 Zumirez Drive
Malibu, California 90265
All Executive Officers and
Directors as a Group - 4 persons 1,079,892(7) 30.6%
</TABLE>
(1) Beneficial owners are believed to have sole voting and investment
power with respect to the shares shown unless otherwise indicated.
(2) Includes: 238,000 options to purchase Common Stock. See EXECUTIVE
COMPENSATION - Employment Contract.
(3) Excludes: any shares attributable to Mr. DeYoung's right under his
employment contract to maintain his proportional ownership of the
Company under certain circumstances. See EXECUTIVE COMPENSATION -
Employment Contract.
(4) Includes 49,500 options to purchase Common Stock
(5) Includes 184,800 options to purchase Common Stock
(6) Consists of 13,500 options to purchase Common Stock
(7) Includes 485,800 options to purchase Common Stock
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no related transactions for the year ended December 31,
1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See Financial Statement Index on Page 13
2. Financial Statement Schedules
See Financial Statement Index on Page 13
3. List of Exhibits
Exhibit Number Description and Incorporation by Reference
3.1* - Restated Articles of Incorporation of the
Company, as amended.
3.2* - Bylaws of the Company, as amended.
3.3* - Articles of Amendment to the Articles of
Incorporation of the Company dated April 18, 1991
3.4** - Articles of Amendment to the Articles of
Incorporation dated May 21, 1993.
3.4** - Articles of Amendment to the Articles of
Incorporation dated June 28, 1994.
4.1******* - Form 1994 Class A Warrant issued to
David R. DeYoung dated February 1, 1995.
4.2******* - Form of Warrant to Purchase Shares of
Common Stock issued to each of Copeland Consulting
Group, Inc. and Transition Partners, Limited dated
December 16, 1996.
4.3******* - Form of Two-Year Warrant to Purchase
Shares of Common Stock dated August 14, 1997.
4.4******* - Form of Six-Month Warrant to Purchase
Shares of Common Stock dated August 14, 1997.
4.5******* - Consulting Agreement between the
Company and BurchMont Equities Group, Inc. dated July
28, 1997
10.5* - UniVerseT Distributor Agreement between
Ardent Software, Inc. and the Company dated May 15,
1991
10.14 - President Employment Agreement between
David R. DeYoung and the Company dated November 1,
1999.
10.15 - Chief Financial Officer Employment
Agreement between Mary Anne DeYoung and the Company
dated September 1, 1999.
10.21* - Independent Software Vendor Agreement
dated December 12, 1991 between Data General
Corporation and the Company.
10.22**** - Software License Agreement between
Reynolds+Reynolds and the Company. This exhibit is
subject to a grant of confidential treatment filed
separately with the Securities and Exchange
Commission.
10.23*** - 1994 Stock Option and Grant Plan.
10.24** - 1993 Stock Option Plan.
10.25****** - Equity Incentive Plan
23 - Consent of Baird, Kurtz and Dobson
27 - Financial Data Schedule
See Index to Financial Statements on Page 13
* Filed as an Exhibit to Form S-1 Registration Statement No. 33-
44717, on December 23, 1991.
** Filed as an Exhibit to Form S-8 Registration Statement No. 33-
86760, on November 29, 1994
*** Filed as an Exhibit to Form S-8 Registration Statement No. 33-
78096, on April 22, 1994.
**** Filed as an Exhibit to Form 10-K for the period ended
December 31, 1994.
****** Filed as an Exhibit to Form S-8 Registration Statement No.
333-3078, on July 3, 1997.
******* Filed as an Exhibit to Form S-3 Registration Statement No.
333-35265, on September 10, 1997.
There were no reports filed on Form 8-K for the quarter ended December 31,
1999.
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.
1MAGE SOFTWARE, INC.
By: /s/ David R. DeYoung Date: March 30, 2000
---------------------------- --------------
David R. DeYoung
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
By: /s/ David R. DeYoung Date: March 30, 2000
------------------------------ --------------
David R. DeYoung, President
and Principal Chief Executive Officer
By: /s/ Robert Wiegand, II Date: March 30, 2000
------------------------------ --------------
Robert Wiegand, II
Director and Secretary
By: /s/ Mary Anne DeYoung Date: March 30, 2000
------------------------------ --------------
Mary Anne DeYoung
Vice President, Finance
Principal and Accounting Officer
By: /s/ Richard A. Knapp Date: March 30, 2000
------------------------------ --------------
Richard A. Knapp
Director
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
1mage Software, Inc.
Englewood, Colorado
We consent to the incorporation by reference in Form S-3 (SEC File
No. 333-35265) and Form S-8 (SEC File No's. 33-78096, 33-86760 and 333-
30787) of our report dated February 4, 2000, relating to the balance
sheets of 1mage Software, Inc. as of December 31, 1999 and 1998, and the
related statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1999, as included
in this Form 10-K.
/s/ Baird, Kurtz & Dobson
Denver, Colorado.
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 253,930
<SECURITIES> 0
<RECEIVABLES> 215,742
<ALLOWANCES> 10,000
<INVENTORY> 49,207
<CURRENT-ASSETS> 522,307
<PP&E> 649,647
<DEPRECIATION> 580,384
<TOTAL-ASSETS> 1,363,589
<CURRENT-LIABILITIES> 708,621
<BONDS> 0
0
0
<COMMON> 10,569
<OTHER-SE> 921,724
<TOTAL-LIABILITY-AND-EQUITY> 1,363,589
<SALES> 1,806,348
<TOTAL-REVENUES> 1,806,348
<CGS> 987,405
<TOTAL-COSTS> 1,162,921
<OTHER-EXPENSES> (1,760)
<LOSS-PROVISION> 39,485
<INTEREST-EXPENSE> 32,140
<INCOME-PRETAX> (364,693)
<INCOME-TAX> 2,500
<INCOME-CONTINUING> (367,193)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (367,193)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
1MAGE SOFTWARE, INC.
DAVID R. DEYOUNG
EMPLOYMENT AGREEMENT
1 NOVEMBER 1999
This agreement made as of the 1st day of November, 1999, by and between
1MAGE Software, Inc., (ISI), located at 6025 S. Quebec St. Englewood,
Colorado and David R. DeYoung (Employee).
RECITALS
WHEREAS, ISI desires to assure itself of the service of Employee and to
that end desires to enter into a contract of employment with him, upon the
terms and
conditions herein set forth and
WHEREAS, Employee is desirous of entering into such a contract of
employment on the terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth, the parties hereto agree as follows:
1. EMPLOYMENT. ISI hereby employs Employee and the Employee hereby
accepts employment upon the terms and conditions hereinafter set forth.
Although ISI may not and does not legally bind itself that Employee shall
have the title of President and CEO, the Board which has authorized this
Agreement has elected him to that office to serve in accordance with the
Company's Bylaws, and it is the present intention of the Board to retain
and continue him in that position.
2. TERM. Subject to the provisions for termination as hereinafter
provided, the term of this Agreement shall begin on the date of this
Agreement and shall terminate on October 31, 2002. This Agreement can
thereafter be modified annually by mutual consent of both parties.
3. COMPENSATION.
a. SALARY. For all services rendered by this Agreement, Company
will pay Employee an annual salary of One Hundred Thirty Eight Thousand
Dollars ($138,000), such salary to be paid in equal amounts in accordance
with ISI's payroll policy. This salary may be adjusted from time to time
by mutual agreement on the basis of the value of Employee's services to
Company and for unusual absences from duty because of illness, accident,
or time spent in other activities on leaves of absence; and any such
adjustments may increase or decrease said annual salary.
b. BONUS. Employee will be paid a quarterly bonus based on the
financial performance of the Company. This bonus will be paid at the rate
of 5% of the Company's accumulative pre-tax profit. The bonus will be
adjusted for bonus amounts paid in prior quarters of the same fiscal year.
An additional, annual bonus may be paid to the Employee, based on the
performance of the Company and at the discretion of the Board of
Directors.
c. INCENTIVE OPTIONS. Upon the authorization of this agreement, the
Board will grant Employee options to purchase 60,000 shares under the
current equity incentive plan, with the strike price being the FMV of the
stock as of the date of grant. The options are to vest immediately.
d. PRE-EMPTIVE OPTIONS. The Board shall grant a sufficient number
of ten year options to the Employee under the Equity Incentive Plan or
otherwise as are necessary to permit him to retain the same percentage of
beneficial ownership interest in ISI as he held on December 31, 1998.
4. EXPENSES. ISI shall reimburse Employee for all business expenses
incurred in pursuit of the business of ISI, upon presentation by the
Employee from time to time of an itemized account of such expenditures in
accordance with the standard policies of ISI.
5. VACATION. Employee shall be entitled each year to a vacation of six
weeks, which shall be taken on a pre-scheduled basis.
6. FRINGE BENEFITS. ISI shall pay for the Employee in the regular fringe
benefit plan available to ISI employees, including medical, disability,
and life insurance. Benefits incurred during the previous term of the
previous Employment Agreement will not be reduced by this Agreement.
7. EXTENT OF SERVICES. Employee shall devote his time, attention and
energies to managing ISI and shall not during the term of this Agreement
be engaged in any other business activity whether or not such business
activity is pursued for gain, profit, or other pecuniary advantage; but
this shall not be construed as preventing the Employee from investing his
assets in such form or manner as will not require substantial service on
the part of the Employee in the operation of the affairs of the companies
in which investments are made.
8. DUTY OF LOYALTY. During the term of employment under this Agreement
and thereafter, Employee will neither disclose any confidential
information as to ISI nor at any time remove or retain without Company's
express consent any figures, calculations, letters, papers, or other
confidential information of any type or description. Furthermore, Employee
binds himself to the terms of the ISI standard agreement relating to
protection of trade secrets.
9. DEATH DURING EMPLOYMENT. Should Employee die during the term of his
employment, ISI shall pay to the estate of the Employee the compensation,
which would otherwise be payable to the Employee for six months after the
date on which his death occurs. In addition, all bonuses earned prior to
Employee's date of death shall be paid to Employee's estate.
10. TERMINATION OTHER THAN BY DEATH.
a. Employment under this Agreement will terminate for reasons other
than death of Employee upon the first of the following events to occur:
i. in the absence of any breach, upon not less than sixty
(60) days' written notice by either party to the other party or
ii. upon not less than three (3) days' written notice by the
non-breaching party to the other party upon any breach of any of the
obligations provided herein.
b. For purposes of clause 10.a.ii,
i. breach by Employee will include, but not be limited to:
failure to perform duties or refusal to obey legal direction or
instruction of the Board, substance abuse (including any use of an
illegal substance), dishonesty, acts of moral turpitude, fraud,
defalcation, and illegal acts and
ii. breach by Company will include, but not be limited to:
failure to pay Employee as agreed and knowingly issuing illegal
instructions or directions to Employee.
11. RIGHTS UPON TERMINATION.
a. In the event employment under this Agreement is terminated:
i. by the Company pursuant to the terms of clause 10.a.i, or
by Employee pursuant to clause 10.a.ii, the Company will pay Employee
as liquidated damages the greater of (A) that pro rata portion
remaining under this Agreement based on Employee's annual salary as
set out herein or (B) one year's cash compensation (salary and bonus)
or
ii. by Employee pursuant to the terms of clause 10.a.i, above,
or by the Company pursuant to clause 10.a.ii, above, the Company will
pay Employee that pro rata portion of Employee's annual salary up to
and including the date of termination of employment.
b. For all purposes of this section 11, the term "salary" will
include accrued and un-forfeited but unpaid vacation, but exclude unused
sick leave. In any event, reimbursable expenses will be paid up through
the date of termination in accordance with the provisions of paragraph 4,
above.
c. In the circumstances of clause 11.a.i,
i. all incentive compensation and bonus compensation
established by a written plan is to continue through the full term of
employment under this Agreement and
ii. the Employee shall receive immediate vesting of any and all
outstanding options and warrants, which shall remain exercisable by
Employee for a period of twelve months from the effective date of
termination. In the circumstances of clause 11.a.ii, all incentive
and bonus compensation is to terminate as of the first day of the
month following the date of termination.
d. Notwithstanding the foregoing, should termination occur within
two years of a change in control of ISI, such termination will be treated
as having been by the Company pursuant to the terms of clause 10.a.i,
regardless of the actual circumstances of termination.
e. Termination pursuant to Section 12 will be treated as having
been by the Employee pursuant to the terms of clause 10.a.i, regardless of
the actual circumstances of termination.
12. DISABILITY. Should Employee become Disabled during the term of
employment, Employee's base salary and other benefits shall continue at
the same rate and in the same manner as on the date of such disability.
Should Employee remain disabled for six consecutive months, the Company,
at its option, may thereafter, upon written notice to Employee or
Employee's personal representative, terminate the employment, subject,
however, to Employee's right to receive disability benefits under the
Company's general employee disability insurance policy and under any
supplemental disability policy provided to Employee. If Employee receives
any disability payments from any insurance policies paid for by the
Company, the annual base salary, the severance amount, and bonuses due to
Employee hereunder shall be reduced by the amount of any payments received
by Employee from such disability insurance policies.
13. NOTICES. Any notice required or permitted to this Agreement must be
in writing and delivered by certified US mail to the parties of this
Agreement.
14. WAIVER OF BREACH. The waiver by ISI of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a
waiver of any subsequent breach by the Employee.
15. ASSIGNMENT. The rights and obligations of ISI under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of ISI. The rights and obligations of the Employee under its
Agreement shall inure to the benefit of and shall be binding upon the
Employee's heirs, successors, and assigns, except that Employee's
obligation to perform such further services and rights to receive payment
therefore are expressly declared to be non-assignable and non-
transferable.
16. SEVERABILITY. Should any part of this agreement be found by a Court
of competent jurisdiction to be void or against public policy, such part
is to be deleted; but the contract, as so amended, is to remain in full
force and effect.
17. ARBITRATION. If any controversy or claim arising out of this contract
cannot be settled by the parties, the controversy or claim must be
submitted to mediation under the Mediation Rules of the Judicial Arbiter
Group of Denver, Colorado (JAG). Should the mediation not be successful in
resolving the issue, the matter will be submitted to arbitration in
accordance with the rules of the JAG then in effect (as modified herein).
The discovery rules, including sanctions, of the Federal Rules of Civil
Procedure are to be applied in any such arbitration, modified as may be
necessary in the opinion of the arbitrator(s) to give effect to the JAG
rules governing timeliness.
18. ENTIRE AGREEMENT. This instrument contains the entire Agreement of
the parties. It may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this agreement on this 1st
day of October 1999.
EMPLOYEE: 1MAGE SOFTWARE, INC.
/s/David R. DeYoung /s/Mary Anne DeYoung
David R. DeYoung, individually Mary Anne DeYoung, Vice-President
ATTEST:
/s/Robert Wiegand II
Robert Wiegand II, Secretary
RATIFIED BY THE COMPENSATION COMMITTEE:
/s/Robert Wiegand II /s/Richard A. Knapp
Robert Wiegand II Richard A. Knapp
1MAGE SOFTWARE, INC.
MARY ANNE DEYOUNG
EMPLOYMENT AGREEMENT
1 SEPTEMBER 1999
This agreement made as of the 1st day of September 1999, by and between
1MAGE Software, Inc., (ISI), located at 6025 S. Quebec St. Englewood,
Colorado and Mary Anne DeYoung (Employee).
RECITALS
WHEREAS, ISI desires to assure itself of the service of Employee and to
that end desires to enter into a contract of employment with her, upon the
terms and conditions herein set forth and
WHEREAS, Employee is desirous of entering into such a contract of
employment on the terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth, the parties hereto agree as follows:
1. EMPLOYMENT. ISI hereby employs Employee and the Employee hereby
accepts employment upon the terms and conditions hereinafter set forth.
Although ISI may not and does not legally bind itself that Employee shall
have the title of Vice-President, the Board which has authorized this
Agreement has elected her to that office to serve in accordance with the
Company's Bylaws, and it is the present intention of the Board to retain
and continue her in that position.
2. TERM. Subject to the provisions for termination as hereinafter
provided, the term of this Agreement shall begin on the date of this
Agreement and shall terminate on August 31, 2002. This Agreement can
thereafter be modified annually by mutual consent of both parties.
3. COMPENSATION.
a. SALARY. For all services rendered by this Agreement, Company
will pay Employee an annual salary of One Hundred Thousand Dollars
($100,000), such salary to be paid in equal amounts in accordance with
ISI's payroll policy. This salary may be adjusted from time to time by
mutual agreement on the basis of the value of Employee's services to
Company and for unusual absences from duty because of illness, accident,
or time spent in other activities on leaves of absence; and any such
adjustments may increase or decrease said annual salary.
b. BONUS. Employee will be paid a quarterly bonus based on the
financial performance of the Company. This bonus will be paid at the rate
of 4% of the Company's accumulative pre-tax profit. The bonus will be
adjusted for bonus amounts paid in prior quarters of the same fiscal year.
An additional, annual bonus may be paid to the Employee, based on the
performance of the Company and at the discretion of the Board of
Directors.
c. INCENTIVE OPTIONS. Upon the authorization of this agreement, the
Board will grant Employee options to purchase 60,000 shares under the
current equity incentive plan, with the strike price being the FMV of the
stock as of the date of grant. The options are to vest immediately.
4. EXPENSES. ISI shall reimburse Employee for all business expenses
incurred in pursuit of the business of ISI, upon presentation by the
Employee from time to time of an itemized account of such expenditures in
accordance with the standard policies of ISI.
5. VACATION. Employee shall be entitled each year to a vacation of five
weeks, which shall be taken on a pre-scheduled basis.
6. FRINGE BENEFITS. ISI shall pay for the Employee in the regular fringe
benefit plan available to ISI employees, including medical, disability,
and life insurance. Benefits incurred during the previous term of the
previous Employment Agreement will not be reduced by this Agreement.
7. EXTENT OF SERVICES. Employee shall devote her time, attention and
energies to managing ISI and shall not during the term of this Agreement
be engaged in any other business activity whether or not such business
activity is pursued for gain, profit, or other pecuniary advantage; but
this shall not be construed as preventing the Employee from investing her
assets in such form or manner as will not require substantial service on
the part of the Employee in the operation of the affairs of the companies
in which investments are made.
8. DUTY OF LOYALTY. During the term of employment under this Agreement
and thereafter, Employee will neither disclose any confidential
information as to ISI nor at any time remove or retain without Company's
express consent any figures, calculations, letters, papers, or other
confidential information of any type or description. Furthermore, Employee
binds herself to the terms of the ISI standard agreement relating to
protection of trade secrets.
9. DEATH DURING EMPLOYMENT. Should Employee die during the term of her
employment, ISI shall pay to the estate of the Employee the compensation,
which would otherwise be payable to the Employee for six months after the
date on which her death occurs. In addition, all bonuses earned prior to
Employee's date of death shall be paid to Employee's estate.
10. TERMINATION OTHER THAN BY DEATH.
a. Employment under this Agreement will terminate for reasons other
than death of Employee upon the first of the following events to occur:
i. in the absence of any breach, upon not less than sixty (60)
days' written notice by either party to the other party or
ii. upon not less than three (3) days' written notice by the
non-breaching party to the other party upon any breach of any of the
obligations provided herein.
b. For purposes of clause 10.a.ii,
i. breach by Employee will include, but not be limited to:
failure to perform duties or refusal to obey legal direction or
instruction of the Board, substance abuse (including any use of an
illegal substance), dishonesty, acts of moral turpitude, fraud,
defalcation, and illegal acts and
ii. breach by Company will include, but not be limited to:
failure to pay Employee as agreed and knowingly issuing illegal
instructions or directions to Employee.
11. RIGHTS UPON TERMINATION.
a. In the event employment under this Agreement is terminated:
i. by the Company pursuant to the terms of clause 10.a.i, or
by Employee pursuant to clause 10.a.ii, the Company will pay Employee
as liquidated damages the greater of (A) that pro rata portion
remaining under this Agreement based on Employee's annual salary as
set out herein or (B) one year's cash compensation (salary and bonus)
or
ii. by Employee pursuant to the terms of clause 10.a.i, above,
or by the Company pursuant to clause 10.a.ii, above, the Company will
pay Employee that pro rata portion of Employee's annual salary up to
and including the date of termination of employment.
b. For all purposes of this section 11, the term "salary" will
include accrued and un-forfeited but unpaid vacation, but exclude unused
sick leave. In any event, reimbursable expenses will be paid up through
the date of termination in accordance with the provisions of paragraph 4,
above.
c. In the circumstances of clause 11.a.i,
i. all incentive compensation and bonus compensation
established by a written plan is to continue through the full term of
employment under this Agreement and
ii. the Employee shall receive immediate vesting of any and all
outstanding options and warrants, which shall remain exercisable by
Employee for a period of twelve months from the effective date of
termination.
In the circumstances of clause 11.a.ii, all incentive and bonus
compensation is to terminate as of the first day of the month following
the date of termination. d. Notwithstanding the foregoing, should
termination occur within two years of a change in control of ISI, such
termination will be treated as having been by the Company pursuant to the
terms of clause 10.a.i, regardless of the actual circumstances of
termination.
e. Termination pursuant to Section 12 will be treated as having
been by the Employee pursuant to the terms of clause 10.a.i, regardless of
the actual circumstances of termination.
12. DISABILITY. Should Employee become Disabled during the term of
employment, Employee's base salary and other benefits shall continue at
the same rate and in the same manner as on the date of such disability.
Should Employee remain disabled for six consecutive months, the Company,
at its option, may thereafter, upon written notice to Employee or
Employee's personal representative, terminate the employment, subject,
however, to Employee's right to receive disability benefits under the
Company's general employee disability insurance policy and under any
supplemental disability policy provided to Employee. If Employee receives
any disability payments from any insurance policies paid for by the
Company, the annual base salary, the severance amount, and bonuses due to
Employee hereunder shall be reduced by the amount of any payments received
by Employee from such disability insurance policies.
13. NOTICES. Any notice required or permitted to this Agreement must be
in writing and delivered by certified US mail to the parties of this
Agreement.
14. WAIVER OF BREACH. The waiver by ISI of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a
waiver of any subsequent breach by the Employee.
15. ASSIGNMENT. The rights and obligations of ISI under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of ISI. The rights and obligations of the Employee under its
Agreement shall inure to the benefit of and shall be binding upon the
Employee's heirs, successors, and assigns, except that Employee's
obligation to perform such further services and rights to receive payment
therefore are expressly declared to be non-assignable and non-
transferable.
16. SEVERABILITY. Should any part of this agreement be found by a Court
of competent jurisdiction to be void or against public policy, such part
is to be deleted; but the contract, as so amended, is to remain in full
force and effect.
17. ARBITRATION. If any controversy or claim arising out of this contract
cannot be settled by the parties, the controversy or claim must be
submitted to mediation under the Mediation Rules of the Judicial Arbiter
Group of Denver, Colorado (JAG). Should the mediation not be successful in
resolving the issue, the matter will be submitted to arbitration in
accordance with the rules of the JAG then in effect (as modified herein).
The discovery rules, including sanctions, of the Federal Rules of Civil
Procedure are to be applied in any such arbitration, modified as may be
necessary in the opinion of the arbitrator(s) to give effect to the JAG
rules governing timeliness.
18. ENTIRE AGREEMENT. This instrument contains the entire Agreement of
the parties. It may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this agreement on this 1st
day of October 1999.
EMPLOYEE: 1MAGE SOFTWARE, INC.
/s/Mary Anne DeYoung /s/David R. DeYoung
Mary Anne DeYoung, individually David R. DeYoung, President
ATTEST:
/s/Robert Wiegand II
Robert Wiegand II, Secretary
Ratified by the Compensation Committee:
/s/Robert Wiegand II /s/Richard A. Knapp
Robert Wiegand II Richard A. Knapp
