FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED 6/30/2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from ------- to ----
---.
1MAGE SOFTWARE, INC.
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(Exact name of Registrant as specific in its charter)
0-12535
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(Commission File Number)
Colorado 84-0866294
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(State of Incorporation) (IRS Employer
Identification Numbers)
6025 S. Quebec St. Suite 300 Englewood CO 80111 (303) 694-9180
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(Address of principal executive offices) (Registrants
telephone number,
including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE NONE
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(Title of Class) (Name of Exchange)
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock - $.004 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports) and, (2) has been
subject to such filing requirements for the past 90 days. Yes (X) No ( )
As of August 11, 2000, there were 3,146,554 shares of the Registrant's
common stock outstanding.
Exhibit Index begins on Page 10
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets -June 30, 2000, and December 31, 1999 3
Statements of Operations -for three months
ended June 30, 2000 and June 30, 1999 4
Statements of Operations -for six months
ended June 30, 2000 and June 30, 1999 5
Statements of Cash Flows -for six months
ended June 30, 2000 and June 30, 1999 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Items 1-5 10
Item 6 Exhibits and Reports on Form 8-K 10
PART I FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
1MAGE SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31
2000 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 183,596 $ 253,930
Receivables:
Trade (less allowance:
2000, $21,098; 1999, $10,000) 213,325 204,107
Related parties 1,024 1,635
Inventory 46,867 49,207
Prepaid expenses and other current assets 26,180 13,428
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Total current assets 470,992 522,307
PROPERTY AND EQUIPMENT, at cost, net 62,563 69,263
OTHER ASSETS:
Software development costs, net 758,698 771,919
Other 100 100
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TOTAL ASSETS $1,292,353 $1,363,589
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 135,000 $ 168,235
Current portion of capital
lease obligations 3,514 3,857
Accounts payable 132,188 209,882
Deferred revenue 229,494 210,000
Accrued liabilities 80,929 116,647
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Total current liabilities 581,125 708,621
LONG-TERM OBLIGATIONS:
Capital lease obligations 4,131 521
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.004 par value -
10,000,000 shares authorized;
shares outstanding: 2000 -
3,146,554; 1999 - 2,642,493 12,586 10,569
Additional paid-in capital 7,238,658 7,189,091
Accumulated deficit (6,544,147) (6,545,213)
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Total shareholders' equity 707,097 654,447
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,292,353 $1,363,589
========== ==========
</TABLE>
See Notes to Condensed Financial Statements.
1MAGE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
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<S> <C> <C>
REVENUE:
System sales and software licenses $ 150,705 $ 224,440
Services and annual fees 206,218 169,316
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Total revenue 356,923 393,756
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COST OF REVENUE:
System sales and software licenses 123,009 162,614
Services and annual fees 88,588 70,077
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Total cost of revenue 211,597 232,691
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GROSS PROFIT 145,326 161,065
% of Revenue 41% 41%
OPERATING EXPENSES:
Selling, general & administrative 303,903 317,410
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INCOME (LOSS) FROM OPERATIONS (158,577) (156,345)
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OTHER INCOME/(EXPENSE):
Interest income 1,817 2,121
Other 0 2,051
Interest expense (3,545) (10,151)
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Total other income(expense) (1,728) (5,979)
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INCOME (LOSS) BEFORE INCOME TAXES (160,305) (162,324)
PROVISION FOR INCOME TAXES -- --
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NET INCOME (LOSS) $(160,305) $(162,324)
========= =========
INCOME(LOSS) PER COMMON SHARE
Basic and Diluted $ (0.05) $ (0.07)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,965,416 2,347,910
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
1MAGE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
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<S> <C> <C>
REVENUE:
System sales and software licenses $ 373,053 $ 331,119
Services and annual fees 608,063 549,424
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Total revenue 981,116 880,543
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COST OF REVENUE:
System sales and software licenses 221,037 269,399
Services and annual fees 168,103 175,405
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Total cost of revenue 389,140 444,804
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GROSS PROFIT 591,976 435,739
% of Revenue 60% 50%
OPERATING EXPENSES:
Selling, general & administrative 586,851 572,835
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INCOME (LOSS) FROM OPERATIONS 5,125 (137,096)
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OTHER INCOME/(EXPENSE):
Interest income 4,015 5,666
Other -- 2,217
Interest expense (8,074) (19,869)
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Total other income(expense) (4,059) (11,986)
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INCOME (LOSS) BEFORE INCOME TAXES 1,066 (149,082)
PROVISION FOR INCOME TAXES -- --
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NET INCOME (LOSS) $ 1,066 $(149,082)
========= =========
INCOME/(LOSS) PER COMMON SHARE
Basic and Diluted $ 0.00 $ (0.07)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,965,416 2,285,437
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
1MAGE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 1,066 $(149,082)
Adjustments to reconcile income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 179,799 188,982
Changes in assets and liabilities:
Receivables (26,653) 153,742
Inventory 2,340 3,790
Prepaid expenses and other assets (12,752) (18,724)
Accounts payable (77,694) (54,758)
Accrued liabilities (16,224) 11,640
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Net cash provided by operating
activities 49,882 135,590
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (8,202) (20,371)
Additions to capitalized software (145,479) (157,933)
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Net cash used for investing
activities (153,681) (178,304)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to line of credit 135,000 64,616
Repayment of line of credit (168,235) (50,000)
Additions/Repayment of long-term
obligations (2,930) (2,198)
Proceeds from exercise of common stock
options 69,630 26,233
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Net cash provided by financing
activities 33,465 38,651
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DECREASE IN CASH AND CASH EQUIVALENTS (70,334) (4,063)
CASH AND CASH EQUIVALENTS, beginning of
period 253,930 229,671
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CASH AND CASH EQUIVALENTS, end of period $ 183,596 $ 225,608
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
1MAGE SOFTWARE, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
GENERAL:
Management has elected to omit substantially all notes to the unaudited
interim financial statements. Reference should be made to the Company's
annual report on Form 10-K for the year ended December 31, 1999 as this
report incorporates the Notes to the Company's year-end financial
statements. The condensed balance sheet of the Company as of December 31,
1999 has been derived from the audited balance sheet of the Company as of
that date.
UNAUDITED INTERIM INFORMATION:
The unaudited interim financial statements contain all necessary
adjustments (consisting of only normal recurring adjustments) which, in
the opinion of Management, are necessary for a fair statement of the
results for the interim periods presented. The results of operations for
the interim periods presented are not necessarily indicative of those
expected for the year.
REVENUE RECOGNITION - Revenue from the sale of software licenses, computer
equipment, and existing application software packages is recognized when
the software and computer equipment are shipped to the customer, remaining
vendor obligations are insignificant, there are no significant
uncertainties about customer acceptance and collectibility is probable.
Revenue from related services, including installation and software
modifications, is recognized upon performance of services. Maintenance
revenue is recognized ratably over the maintenance period.
INCOME TAXES The Company follows the liability method of accounting for
income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109. Under this method, deferred income taxes are
recorded based upon differences between the financial reporting and tax
bases of assets and liabilities and are measured using enacted tax rates
and laws that will be in effect when the underlying assets or liabilities
are received or settled.
The Company has recorded a full valuation allowance against all deferred
tax assets due to the uncertainty of ultimate realizability.
INCOME/(LOSS) PER SHARE -Income (Loss) per share is computed by dividing
net income (loss) by the weighted average number of common and equivalent
shares outstanding during the period. Fully diluted earnings per share
are either anti-dilutive or not materially different from primary earnings
per share.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JUNE 30, 2000 VERSUS JUNE 30,
1999
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1mage Software, Inc. (the "Company") reported revenue of $356,923 for the
second quarter ended June 30, 2000, a decrease of 9% over $393,756 posted
for the same period a year ago. While management was disappointed with the
revenue level, other components remained generally the same and the net
loss of $160,305 reported for the second quarter this year was $2,019
less than the loss reported for the same period last year. Gross profit
remained at 41% of revenue for both quarters. Overall, there was very
little difference between the comparable quarters. While revenue and cost
of sales for second quarter 2000 were both down 9% over the year earlier,
selling, general and administrative ("SG&A") expenses were also down by
4%. System sales of $150,705 were $73,735 lower quarter over quarter,
while Services and Annual fees were $36,902 higher for the comparable
periods. SG&A expenses for the second quarter of 2000 were $303,903 or 4%
lower than SG&A expenses of $317,410 for second quarter, 1999. The
Company posted a second quarter 2000 net loss of $160,305 or $.05 per
share, as compared to a net loss of $162,324, or $.07 per share, for the
same quarter last year.
RESULTS OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30, 2000 VERSUS JUNE 30,
1999
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1mage Software, Inc. (the "Company") reported half-year revenue of
$981,116 for the period ended June 30, 2000, an increase of 11% over
$880,543 posted for the same period a year ago. This increase of $100,573
was comprised of gains in Software sales and Annual License fees. Hardware
sales continue to decline, as the Company focuses primarily on Software
sales. For the six months ended June 30, 2000, gross profit on revenue
was 60%, as compared to 50% for the year earlier period. SG&A expenses
for the six month period were $586,851, which was $14,016 (2%) higher than
the six months ended June 30, 1999, primarily due to costs associated with
increased sales and marketing efforts. Results of operations were
basically breakeven for the six months, posting a net income of $1,066
($.00 per share) as compared to a net loss of $149,082 or $.07 per share a
year ago.
LIQUIDITY AND CAPITAL RESOURCES
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As of June 30, 2000, cash on hand decreased $70,334 from $253,930 at
December 31, 1999, primarily due to payments on accounts payable, accrued
liabilities, and a $33,235 reduction in the outstanding line of credit.
Proceeds received from the exercise of Common Stock options provided cash
of $69,630. The Company continues to add new features to its software
product offerings and used cash of $145,479 for additions to capitalized
software.
There were borrowings of $135,000 against the line of credit on August 4,
2000.
The Company's financial resources include cash on hand, revenues from
operations, and management of funds available on its revolving line of
credit. In the Company's judgment, sufficient financial resources are
available to meet current working capital needs. The Company's line of
credit expires February 24, 2001 and bears interest at prime plus 1.5% and
is secured by the Company's accounts and general intangibles.
FORWARD LOOKING STATEMENTS
Some of the statements made herein are not historical facts and may be
considered "forward looking statements." All forward-looking statements
are, of course, subject to varying levels of uncertainty. In particular,
statements which suggest or predict future events or state the Company's
expectations or assumptions as to future events may prove to be partially
or entirely inaccurate, depending on any of a variety of factors, such as
adverse economic conditions, new technological developments, competitive
developments, competitive pressures, changes in the management, personnel,
financial condition or business objectives of one or more of the Company's
customers, increased governmental regulation or other actions affecting
the Company or its customers as well as other factors.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings Inapplicable
Item 2. Changes in Securities Inapplicable
Item 3. Defaults Upon Senior Securities Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders Inapplicable
Item 5. Other Information Inapplicable
Item 6. Exhibits and Reports on Form 10-K
(A) Exhibit Table
27. Financial Data Schedule
(B) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended June
30, 2000.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
1MAGE SOFTWARE, INC.
(Registrant)
Date: 8/14/2000 /s/ Mary Anne DeYoung
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Mary Anne DeYoung
Chief Financial Officer
Exhibit Index
Exhibit Method of Filing
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27 Financial Data Schedule Filed electronically herewith
