SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: October 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: No. 2-86360
INFORMEDICS, INC.
(Name of small business issuer in its charter)
Oregon 93-0750571
(State of incorporation) (I.R.S. Employer Identification No.)
4000 Kruse Way Place, Bldg 3, Suite 210,
Lake Oswego, OR 97035
(Address of principal executive offices)
Issuer's telephone number: (503) 697-3000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained to
the best of issuer's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [ ]
State the issuer's revenues for its most recent fiscal year: $5,151,547
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of December 29, 1995: $3,520,634, based
on the average bid and asked prices.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,643,622 shares of $0.01 par value
common stock at December 29, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the issuer's Annual Report to Shareholders for the year ended
October 31, 1995 are incorporated by reference into Parts I, II and III of this
Report. Parts of the issuer's definitive Proxy Statement for the 1996 annual
meeting of shareholders to be held on March 15, 1996 are incorporated by
reference into Part III of this Report.
Transitional Small Business Disclosure Format (Check One):
Yes No X
<PAGE>
TABLE OF CONTENTS
Part I
(Portions of Item 1 and Item 2 are incorporated herein by reference from the
Company's 1995 Annual Report to Shareholders)
Item 1 Business ..............................................3
Item 2. Properties ............................................6
Item 3. Legal Proceedings .....................................6
Item 4. Submission of Matters to a Vote of Security Holders ...6
Part II
(Item 5, Item 6 and Item 7 are incorporated herein by reference from
the Company's 1995 Annual Report to Shareholders)
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..................7
Part III
Items 9, 10 and 11 are incorporated herein by reference from the Company's
definitive Proxy Statement for its 1996 annual meeting of shareholders.)
Item 12. Certain Relationships and Related Transactions.......8
Part IV
Item 13. Exhibits and Reports on Form 8-K ....................9
Signatures.......................................................11
Informedics, ClinicManager, LifeLine and StarPath are trademarks of
Informedics, Inc.
<PAGE>
PART I
Parts of Items 1 and 2 are incorporated herein by reference from the Company's
1995 Annual Report to Shareholders, as indicated below. Except for the portions
of the Annual Report to Shareholders that are incorporated into this Form
10-KSB, the Annual Report is not to be deemed filed as part of this Form 10-KSB.
ITEM 1 - BUSINESS
GENERAL
Informedics, Inc., formerly Western Star, Inc. (the "Company"), was organized
under the laws of the State of Oregon on December 21, 1979.
The Company develops and markets a line of computer software applications
designed for use in the health care field. The computer systems typically
consist of computers, peripheral hardware (such as disk drives and printers),
local area network (LAN) hardware and software, and the Company's proprietary
software applications.
From 1986 until 1989, the Company focused all of its development and marketing
efforts on a line of proprietary blood bank data management systems. In
September 1989, the Company purchased a line of pathology data management
systems. The blood bank and pathology data management systems are compatible in
a number of ways. Both systems are marketable through the same distribution
channels to health care providers, both are written in the same computer
programming language, and both operate on the same type of computer systems.
In October 1993, the Company purchased a physician practice management system
and a laboratory test request and reporting system. The physician practice
management system is currently marketed in the Pacific Northwest. The laboratory
test request and reporting system is licensed exclusively to Corning Clinical
Laboratories, Inc., a major independent reference laboratory company.
In the fourth quarter of 1995, the Company completed the development and pilot
phase of the application software for the Oregon Medical Electronic Network
(OMEN) project, which is being offered only by the Oregon Medical Association
(OMA). The OMEN project is being marketed by the OMA for participation by Oregon
physicians, laboratories, pharmacies, insurance carriers and other health care
providers within the State of Oregon.
In addition to the sales of the Company's numerous product lines, the Company
performs ongoing support and maintenance and programming service for its
customers. After the initial installation of a system and related customer
training, the Company provides software support, furnishes customers with
upgrades of software and hardware and maintains hardware for customers who
purchase such services.
The computer hardware marketed by the Company are IBM-compatible micro-computer
products, running on either Windows, MS-DOS or UNIX operating systems. The
Company has been a dealer for numerous hardware manufacturers and presently
focuses its hardware marketing efforts on products manufactured by Compaq,
Novell, Inc., Precision Computer Systems, Inc., Hewlett Packard and Epson
Pacific.
DESCRIPTION OF THE COMPANY'S PRODUCTS
The Company's application software for OMEN is designed to improve the
operational efficiency of physician offices by providing the electronic means to
determine the patient's health plan eligibility and coverage, to seek treatment
authorizations from primary care physicians and health plans and to generate a
referral for services between the primary care and specialist physicians.
The Company's physician practice management system, called ClinicManager, is
designed to support physician office functions, increase staff efficiency and
provide detailed clinical information. ClinicManager can meet the needs of a
wide range of clinics, from a sole practitioner with one office, to a large
multi-specialty clinic with several physician offices. The system provides full
functionality in accounts receivable, billing and insurance processing,
electronic billing, insurance reimbursement and analysis, patient scheduling,
resource management and accounts payable.
The blood bank data management systems, called LifeLine, are modular, yet fully
integrated, software systems which have been designed for the modern blood bank
and hospital transfusion service to monitor donor records, unit inventory, and
patient test and transfusion history. There are three primary applications of
the LifeLine system. The first application supports the needs of the community
blood bank whose activities include drawing and managing blood donors as well as
testing, processing and distributing blood products. The second application
meets the needs of a hospital transfusion service which does not, as a rule,
draw blood from donors. The third application provides the features required by
a hospital which draws blood from donors, manages blood product inventory and
maintains related patient test and transfusion information.
The pathology data management systems, called StarPath, are modular, yet fully
integrated, software systems that are designed to fully automate a pathology
department. Each application allows the pathology group to have direct control
over the content and arrangement of work lists, labels and reports. There are
two primary applications of the StarPath system. The first application automates
the record keeping functions of a pathology department in the areas of surgical
pathology, cytology and autopsies. The second application is similar to the
first application except that it also includes the area of histology.
The laboratory test request and reporting system, developed by the Company for
Corning Clinical Laboratories, Inc., is designed to automate the ordering and
reporting of lab tests from a physician's office or medical clinic to an
independent reference laboratory. The system provides improved accuracy of
patient demographics, insurance information and lab test requests, improved
efficiency and speed in ordering lab tests, and more timely receipt of lab test
results.
DISTRIBUTION OF PRODUCTS
The Company's revenue in fiscal 1995 included sales from all product lines:
OMEN, ClinicManager, LifeLine, StarPath and the Lab Test Request System. Sales
in fiscal 1995 included both direct sales to physician offices, medical clinics,
hospitals, medical laboratories and blood bank donor centers, and sales of
software to companies which agree to act as resellers of the Company's systems.
The Company considers its operations to be in a single industry segment.
In fiscal 1995, the Company recognized revenue from two major customers, HBO
and Company and Corning Clinical Laboratories, Inc. representing 20% and 10% of
the Company's revenue, respectively. While the loss of either of these
customers might initially have a material adverse impact on the Company's
operating results, management believes that the effect of such loss would be
short term, as the Company would concentrate its marketing resources on other
resellers and on direct sales.
COMPETITION
The competition for the ClinicManager system are companies that have similar
software packages that run on mini- and micro-computers. Currently there are
more companies offering products that compete with the ClinicManager product
than with any of the Company's other products.
The competition for LifeLine systems includes companies that market a blood bank
system as part of a complete laboratory information system and companies that
offer a blood bank system as a stand-alone module.
The competition for the StarPath system includes companies that market a
pathology system as part of a complete laboratory information system and
companies that offer pathology as a stand-alone module.
One of the ways the Company has tried to minimize the impact of competing
products in the marketplace is by licensing the Company's software systems to
providers of hospital laboratory information systems to enable them to market
the Company's systems, instead of developing their own blood bank and/or
pathology systems. The Company has agreements with qualified resellers who use
the Company's systems to supplement their existing lines of medical laboratory
software. Total revenue recognized from these agreements was $1,144,131 in 1995
and $1,193,024 in 1994.
The Company believes its products have a competitive edge in the marketplace
based on price, product sophistication, design, flexibility, and reliability. In
addition, with respect to the LifeLine system, the governmental regulation of
blood bank computerized systems places a significant barrier to entry for this
product.
BACKLOG
At October 31, 1995 and 1994, the backlog of system orders was $347,878 and
$283,180, respectively. These amounts represent the unrecognized revenue for
customer work in progress, and undelivered hardware and software as of such
dates.
Unexpired maintenance service contracts at October 31, 1995 and 1994 were
$980,591 and $1,039,325, respectively.
PROTECTION OF PROPRIETARY SOFTWARE
Under existing law, most computer software cannot be patented, and copyright
laws provide only limited protection. To protect its proprietary products, the
Company relies upon copyright and trade secret laws, internal nondisclosure
safeguards, and restrictions on disclosure and transferability incorporated in
its software license agreements. However, as with all software, it is possible
for users and competitors to wrongfully copy the Company's products. The Company
believes that, because of the rapid pace of technological change in the computer
industry, patent, copyright and contractual protection is of less practical
significance than other factors, such as the knowledge and experience of the
Company's management and personnel and their ability to acquire, develop,
enhance and market new products.
REGULATORY COMPLIANCE
In 1994, the Food and Drug Administration ("FDA") notified all developers of
blood bank software that such software is considered to be a medical device. The
FDA required each developer to register as a medical device manufacturer and
submit, by March 31, 1995, a pre-market notification (510K) report for its blood
bank software. The FDA subsequently extended the deadline for filing the
pre-market notification report to March 31, 1996. In fourth quarter 1995, the
Company prepared and filed the required pre-market notification (510K) report
with the FDA. At the time of the 1994 notice, the Company was already registered
as a medical device manufacturer.
In 1995, the FDA notified the Company that prior distributions of certain
LifeLine software updates "meets the formal definition of a recall." The Company
expects to bring closure to the recall in early 1996, as it recently released
LifeLine version 4.2, which addressed all outstanding issues. In 1995, the FDA
conducted a routine inspection of the Company's software development and
distribution processes. The Company has responded to all of the issues
identified in the inspection. The FDA has not yet concluded its review of the
Company's responses. The Company believes that none of the issues raised
concerns health or safety but rather are focused on manufacturing processes and
documentation.
SOFTWARE DEVELOPMENT COSTS
The Company capitalized certain software development costs incurred during
fiscal 1995 and 1994 in accordance with Statement of Financial Accounting
Standards (SFAS) No. 86 "Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed" (see Note 1 to the Company's financial
statements, which are incorporated herein by reference from the Company's 1995
Annual Report, Page 11). The Company is presently enhancing all of its software
product lines and, in accordance with SFAS No. 86, is capitalizing certain costs
associated with new releases. The Company incurred software development costs of
$1,377,906 in 1995 and $701,992 in 1994, of which $365,016 and $306,106 were
capitalized for 1995 and 1994, respectively.
EXPORT SALES
The Company's export sales for fiscal 1995 and 1994 were $93,814 and $216,445,
respectively.
EMPLOYEES
At December 29, 1995, the Company had 67 full-time employees.
ITEM 2 - PROPERTIES
The Company does not own any real property. The Company presently leases office,
production and warehouse space in Lake Oswego, Oregon. For additional
information about the Company's leases, see the 1995 Annual Report, page 12,
"Lease Commitments," which is incorporated herein by reference.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
Except for Item 8, the information required by Part II is incorporated herein by
reference from the Company's 1995 Annual Report to Shareholders, as indicated
below.
ITEM 5 - MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
1995 Annual Report, page 4, "Common Stock and Related Shareholder Information."
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1995 Annual Report, pages 17 and 18, "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
ITEM 7 - FINANCIAL STATEMENTS
Financial Statements
1995 Annual Report, page 5, "Statements of Operations."
1995 Annual Report, pages 6 and 7, "Balance Sheets."
1995 Annual Report, page 8, "Statements of Cash Flows."
1995 Annual Report, page 9, "Statements of Cash Flows -
Supplemental Information."
1995 Annual Report, page 10, "Statements of Stockholders' Equity."
1995 Annual Report, pages 11 through 15, "Notes to Financial Statements."
1995 Annual Report, page 16, "Independent Auditors' Report."
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
Information called for by Items 9, 10 and 11 is incorporated herein by reference
from the indicated sections of the Company's definitive Proxy Statement for its
1996 annual meeting of shareholders.
The Company's
Proxy Statement
(Caption of
Applicable Section)
-------------------
ITEM 9 -DIRECTORS AND EXECUTIVE "Election of Directors";
OFFICERS, PROMOTERS AND CONTROL "Executive Officers" and
PERSONS; COMPLIANCE WITH SECTION "Compliance With Section
16(a) OF THE EXCHANGE ACT 16(a) of the Securities
Exchange Act"
ITEM 10 -EXECUTIVE COMPENSATION "Executive Compensation"
ITEM 11 -SECURITY OWNERSHIP OF CERTAIN "Principal Shareholders"
BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12 -CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
PART IV
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT DESCRIPTION
3(a) Restated Articles of Incorporation, as amended (1)
3(b) Restated Bylaws, as amended (7)
4 Form of Indemnification Agreement--
Directorship and Officership Agreement (2)
10(a)* Restated 1983 Employees' Stock Option Plan (3)
10(b)* Restated 1988 Employees' Stock Option Plan, as amended (4)
10(c) Lease with Beim & James Properties, as amended (5)
10(d)* Incentive Compensation Plan (5)
10(e) Amendments to Lease with Kruse Way Holdings, Inc. (formerly
Beim & James Properties) (8)
11 Computation of Earnings Per Share
13 Portions of 1995 Annual Report to Shareholders, which are
incorporated by reference in this Form 10-KSB
20 Definitive Proxy Statement for 1996 Annual Shareholder
Meeting (6)
23 Independent Auditors' Consent
27 Financial Data Schedule
* Management contract or compensatory plan or arrangement.
(1) Incorporated herein by reference from the Company's annual report on Form
10-K for the year ended October 31, 1993.
(2) Incorporated herein by reference from the Company's definitive proxy
material filed with the Securities and Exchange Commission on April 28,
1988.
(3) Restated 1983 Employees' stock option plan is incorporated herein by
reference from the Company's quarterly report Form 10-Q for the quarter
ended April 30, 1988. Amendment to the Plan is incorporated herein by
reference from the registration statement, Form S-8 (Reg. No. 33-46474)
filed with the Securities and Exchange Commission on March 19, 1992.
(4) Incorporated herein by reference from the Company's definitive proxy
material filed with the Securities and Exchange Commission on February 8,
1992.
(5) Incorporated herein by reference from the Company's annual report on Form
10-K for the year ended October 31, 1990.
(6) To be filed with the Securities and Exchange Commission within 120 days
after the end of the fiscal year covered by this Annual Report.
(7) Incorporated herein by reference from the Company's quarterly report on
Form 10-Q for the quarter ended April 30, 1993.
(8) Incorporated herein by reference from the Company's annual report on Form
10-KSB for the year ended October 31, 1994.
Upon written request to the Chief Financial Officer, Informedics, Inc.,
4000 Kruse Way Place, Bldg 3, Suite 210 Lake Oswego, Oregon 97035, the Company
will furnish shareholders with a copy of any Exhibit upon payment of $.20
per page, which represents the Company's reasonable expenses in furnishing the
Exhibit requested.
(b) Reports on Form 8-K - During the quarter ended October 31, 1995, the
Company filed no reports on Form 8-K.
********************************************
<PAGE>
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.
INFORMEDICS, INC.
Date: January 25, 1996 By: /s/ John Tortorici
--------------------- ----------------------------
John Tortorici, 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 dates indicated.
Date: January 25, 1996 By: /s/ John Tortorici
--------------------- --------------------------
John Tortorici, President,
Principal Executive Officer,
and Director
Date: January 25, 1996 By: /s/ Dale E. Connor
-------------------- --------------------------
Dale E. Conner, Vice President
& Chief Financial Officer
Date: January 26, 1996 By: /s/ Richard D. Glaser
--------------------- ---------------------------
Richard D. Glaser, Ph.D., Director
Date: January 25, 1996 By: /s/ Charles V. Dexter
--------------------- ---------------------------
Charles V. Dexter, Senior Vice
President, & Director
Date: January 26, 1996 By: /s/ Ronald G. Witcosky
-------------------- ---------------------------
Ronald G. Witcosky, Director
<PAGE>
EXHIBIT INDEX
Exhibit Page
3(a) Restated Articles of Incorporation, as amended (1)
3(b) Restated Bylaws, as amended (7)
4 Form of Indemnification Agreement--
Directorship and Officership Agreement (2)
10(a)* Restated 1983 Employees' Stock Option Plan (3)
10(b)* Restated 1988 Employees' Stock Option Plan, as amended (4)
10(c) Lease with Beim & James Properties, as amended (5)
10(d)* Incentive Compensation Plan (5)
10(e) Amendments to Lease with Kruse Way Holdings, Inc. (formerly
Beim & James Properties) (8)
11 Computation of Earnings Per Share
13 Portions of 1995 Annual Report to Shareholders, which are
incorporated by reference in this Form 10-KSB
20 Definitive Proxy Statement for 1996 Annual Shareholder
Meeting (6)
23 Independent Auditors' Consent
27 Financial Data Schedule
* Management contract or compensatory plan or arrangement.
(1) Incorporated herein by reference from the Company's annual report on Form
10-K for the year ended October 31, 1993.
(2) Incorporated herein by reference from the Company's definitive proxy
material filed with the Securities and Exchange Commission on April 28,
1988.
(3) Restated 1983 Employees' stock option plan is incorporated herein by
reference from the Company's quarterly report Form 10-Q for the quarter
ended April 30, 1988. Amendment to the Plan is incorporated herein by
reference from the registration statement, Form S-8 (Reg. No. 33-46474)
filed with the Securities and Exchange Commission on March 19, 1992.
(4) Incorporated herein by reference from the Company's definitive proxy
material filed with the Securities and Exchange Commission on February 8,
1992.
(5) Incorporated herein by reference from the Company's annual report on Form
10-K for the year ended October 31, 1990.
(6) To be filed with the Securities and Exchange Commission within 120 days
after the end of the fiscal year covered by this Annual Report.
(7) Incorporated herein by reference from the Company's quarterly report on
Form 10-Q for the quarter ended April 30, 1993.
(8) Incorporated herein by reference from the Company's annual report on Form
10-KSB for the year ended October 31, 1994.
INFORMEDICS, INC.
EXHIBIT 11
<TABLE>
<CAPTION>
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
1995 1994
PRIMARY
<S> <C> <C>
Net Income (Loss) $(1,177,490) $ 168,429
====================== =====================
Weighted average number of common shares outstanding 2,635,368 2,626,519
Add: Weighted average number of shares of common stock equivalents (1) ---- 64.339
---------------------- ---------------------
Weighted average number of shares used in calculation of primary earnings
per share 2,635,368 2,690,858
====================== =====================
Earnings (Loss) Per Share - Primary $ (0.45) $ 0.06
====================== =====================
FULLY DILUTED
Net Income (Loss) $(1,177,490) $ 168,429
====================== =====================
Weighted average number of common shares
outstanding 2,635,368 2,626,519
Add: Weighted average number of shares of
common stock equivalents (2) ---- 80,620
---------------------- ---------------------
Weighted average number of shares used in
calculation of fully diluted earnings per share 2,635,368 2,707,139
====================== =====================
Earnings (Loss) Per Share - Fully Diluted $ (0.45) $ 0.06
====================== =====================
</TABLE>
(1) Common stock issuable under the 1983 and 1988 employee stock option plans
pursuant to stock options and common stock issuable under stock warrants
outstanding, less the number of shares assumed to be purchased with the proceeds
of the exercises of the stock options and stock warrants using the average
market price of the Company's common stock. Common stock equivalents are
excluded from the calculation of net loss per share for the year ended October
31, 1995, as they are antidilutive.
(2) Common stock issuable under the 1983 and 1988 employee stock option plans
pursuant to stock options and common stock issuable under stock warrants
outstanding, less the number of shares assumed to be purchased with the proceeds
of the exercises of the stock options and stock warrants using the average
market price (or year-end market price if higher than the average market price)
of the Company's common stock. Common stock equivalents are excluded from the
calculation of net loss per share for the year ended October 31, 1995, as they
are antidilutive.
COMMON STOCK AND RELATED SHAREHOLDER INFORMATION
The Company's common stock is traded on Nasdaq under the symbol IMED. The
following table sets forth the high and low prices for the common stock, as
reported on Nasdaq, during the two fiscal years ended October 31, 1995:
<TABLE>
<CAPTION>
1995 Fiscal Year 1994 Fiscal Year
High Low High Low
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
First Quarter $ 2.188 $ 1.438 $ 1.250 $ 0.875
Second Quarter $ 2.188 $ 1.563 $ 1.250 $ 0.625
Third Quarter $ 1.750 $ 1.250 $ 1.063 $ 0.500
Fourth Quarter $ 1.500 $ 1.125 $ 1.563 $ 0.938
</TABLE>
The prices quoted above may reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
At December 29, 1995, there were approximately 1,200 beneficial owners of the
Company's common stock.
The Company has not declared any dividends and has no intention of doing so in
the near future.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31,
----------------------------
1995 1994
-------------- ------------
<S> <C> <C>
REVENUE:
Product Sales .................................. $ 1,908,079 $ 2,573,767
Customer Service and Support .................. 3,243,468 2,969,508
----------- -----------
Total Revenue .................................. 5,151,547 5,543,275
----------- -----------
COSTS AND EXPENSES:
Cost of Products Sold .......................... 734,857 898,588
Cost of Customer Service and Support ........... 2,757,960 1,912,025
Selling and Administrative Expenses ............ 1,999,094 1,817,187
Depreciation and Amortization .................. 1,642,541 646,172
----------- -----------
Total Costs and Expenses ....................... 7,134,452 5,273,972
----------- -----------
Operating Income (Loss) ........................ (1,982,905) 269,303
----------- ------------
OTHER INCOME (EXPENSE):
Interest Expense ............................... (901) --
Interest Income ................................ 53,441 16,531
Other Income (Expense) ......................... (9,411) 10,823
----------- -----------
Total Other Income ............................. 43,129 27,354
----------- -----------
Income (Loss) Before Income Taxes .............. (1,939,776) 296,657
Income Tax Provision (Benefit) (Note 7) ........ (762,286) 128,228
----------- -----------
Net Income (Loss) ............................. $(1,177,490) $ 168,429
=========== ===========
Weighted Average Number of Common Shares and
Common Stock Equivalents Outstanding .......... 2,635,368 2,707,139
=========== ===========
Earnings (Loss) Per Share: .................... $ (0.45) $ 0.06
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS, OCTOBER 31, 1995 AND 1994
ASSETS
- ------
1995 1994
--------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash ............................................... $ 534,260 $1,055,378
Accounts Receivable, less allowance for doubtful
accounts of $64,623 in 1995 and $66,000 in 1994 807,984 1,127,173
Inventories (Note 2) ............................... 74,272 25,707
Prepaid Expenses and Other Current Assets .......... 104,378 96,102
Income Taxes Receivable (Note 7) ................... 86,823 60,577
Deferred Income Taxes (Note 7) ..................... 254,804 303,113
---------- ----------
Total Current Assets ............................... 1,862,521 2,668,050
---------- ----------
FIXED ASSETS:
Furniture and Fixtures ............................. 132,830 103,818
Machinery and Equipment ........................... 597,175 580,807
Automobiles ........................................ 29,138 29,138
Leasehold Improvements ............................. 20,142 32,735
Other Fixed Assets ................................. 118,009 109,538
---------- ----------
897,294 856,036
Less accumulated depreciation and amortization ..... 581,259 565,506
---------- ----------
Total Fixed Assets ................................. 316,035 290,530
---------- ----------
OTHER ASSETS:
Software Development Costs,
less accumulated amortization of
$1,464,073 in 1995 and $2,014,711 in 1994 ...... 576,433 1,386,856
Purchased Software,
less accumulated amortization of $266,084 in
1995 and $320,675 in 1994 ....................... -- 194,020
Covenants Not to Compete,
less accumulated amortization of
$410,249 in 1995 and $333,085 in 1994 ........... 83,796 160,960
Deferred Income Taxes (Note 7) ..................... 253,907 --
Other .............................................. 45,252 53,570
---------- ----------
Total Other Assets ................................. 959,388 1,795,406
========== ==========
TOTAL ASSETS ....................................... $3,137,944 $4,753,986
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- -------------------------------------------------- ------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
Trade Accounts ................................ $ 215,354 $ 169,023
Customer Deposits ............................. 25,923 27,933
Accrued Payroll Taxes and Employee Benefits ... 183,945 141,702
Other Accrued Liabilities ..................... 6,270 8,023
Income Taxes Payable (Note 7) .................... -- 64,693
Deferred Revenue ................................. 1,163,903 1,200,980
Current Portion of Long-Term Obligations ......... 13,033 7,420
----------- -----------
Total Current Liabilities ........................ 1,608,428 1,619,774
LONG-TERM OBLIGATIONS:
Deferred Rent (Note 4) ........................... 43,444 --
Deferred Income Taxes (Note 7) ................... -- 490,166
Commitments and Contingencies .................... -- --
----------- -----------
Total Current Liabilities and Long-Term Obligations 1,651,872 2,109,940
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 per value:
authorized 10,000,000 shares;
shares outstanding: 2,642,207 in 1995 and 2,626,519
in 1994 ....................................... 26,422 26,265
Capital in Excess of Par Value ................... 1,905,476 1,886,117
Note Receivable from Stockholder (Note 3) ........ (22,000)
(22,000)
Retained Earnings (Accumulated Deficit) .......... (423,826) 753,664
----------- -----------
Total Stockholders' Equity ....................... 1,486,072 2,644,046
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY .......................... $ 3,137,944 $ 4,753,986
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEAR ENDED OCTOBER 31,
-----------------------------------
1995 1994
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(1,177,490) $ 168,429
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and Amortization 1,642,541 646,172
Provision for losses on (write-offs of)
accounts receivable (1,377) 40,852
Deferred Income Taxes (695,764) 126,369
Tax benefits from stock options exercised 3,161 ----
Changes in Assets and Liabilities:
Accounts Receivable 320,566 156,866
Income Taxes Receivable (26,246) 64,279
Inventories (48,565) 49,892
Prepaid Expenses and Other Current Assets (8,276) (57,877)
Accounts Payable and Accrued Expenses 84,811 (251,453)
Income Taxes Payable (64,693) 64,693
Deferred Revenue (37,077) 168,784
Deferred Rent 49,057 (33,439)
---------------- ---------------
Net cash provided by operating activities 40,648 1,143,567
---------------- ---------------
INVESTING ACTIVITIES:
Property additions (221,423) (185,144)
Capitalized software development costs (365,016) (306,106)
Other 8,318 (41,542)
---------------- ---------------
Net cash used in investing activities (578,121) (532,792)
---------------- ---------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 16,355 ----
---------------- ---------------
Net cash provided by financing activities 16,355 ----
---------------- ---------------
NET INCREASE (DECREASE) IN CASH (521,118) 610,775
CASH AT BEGINNING OF YEAR 1,055,378 444,603
---------------- ---------------
CASH AT END OF YEAR $ 534,260 $1,055,378
================ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
YEAR ENDED OCTOBER 31,
-----------------------------------------
1995 1994
------------------ -------------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid for:
Interest $ 901 $ ----
Income Taxes Paid (Received) 21,933 (127,113)
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE
YEARS ENDED OCTOBER 31, 1995 AND 1994
CAPITAL
IN NOTE RETAINED
EXCESS OF RECEIVABLE EARNINGS
PAR PAR FROM (ACCUMULATED
SHARES VALUE VALUE STOCKHOLDER DEFICIT) TOTAL
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 1, 1993 2,626,519 $ 26,265 $ 1,886,117 $ (22,000) $ 585,235 $2,475,617
Net Income 168,429 168,429
------------ ---------- ------------- --------------- ------------------ ------------
Balance at October 31, 1994 2,626,519 26,265 1,886,117 (22,000) 753,664 2,644,046
Issuance of Stock 15,688 157 16,198 16,355
Tax benefits from
stock options excerised 3,161 3,161
Net Loss (1,177,490) (1,177,490)
------------ ---------- ------------- -------------- ------------------ ------------
Balance at October 31, 1995 2,642,207 $ 26,422 $ 1,905,476 $ (22,000) $ (423,826) $1,486,072
============ ========== ============= ============== ================== ============
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
INDUSTRY SEGMENT - The Company derives its revenue solely from the sales and
servicing of microcomputer software and related hardware.
INVENTORIES are stated at the lower of cost or market. Specific identification
is used to determine the costs of hardware and software inventory.
FIXED ASSETS are stated at cost, less accumulated depreciation and amortization.
The costs of fixed assets are depreciated over the estimated useful lives (two
to five years) of the assets using the straight-line method. Leasehold
improvements are depreciated over the term of the lease (five years).
CUSTOMER SERVICE AND SUPPORT REVENUE represents revenue earned from hardware and
software maintenance contracts, training, installation of new systems, and
general software support and programming services provided to customers. Under
renewable maintenance contracts, the Company provides, for a term of generally
not more than one year essentially all maintenance and repairs resulting from
the normal and intended use of its products. Deferred revenue on maintenance
contracts is amortized by the straight-line method over the life of the
contracts.
REVENUE RECOGNITION - Revenue from sales of software and hardware is generally
recorded when the product is shipped. Revenue from custom software products,
which are marketed to customers primarily under perpetual license arrangements,
is recorded at the time the product is installed and accepted by the customer.
Revenue from services other than maintenance contracts is recognized as
performed.
EARNINGS (LOSS) PER SHARE - Earnings (Loss) per share are computed on the basis
of the weighted average number of shares outstanding plus common stock
equivalents which would arise from the exercise of stock options and warrants.
Common stock equivalents are excluded from the calculation of net loss per share
for the year ended October 31, 1995, as they are antidilutive.
SOFTWARE DEVELOPMENT COSTS - Certain software development costs are being
capitalized and amortized over the estimated economic life of the software on a
straight-line method, commencing when each product or enhancement is available
for general release. Amortization using the straight-line method was $868,742 in
1995 and $318,465 in 1994.
In 1995, the Company reduced the estimated economic life of certain software
products to coincide with the period remaining before the next anticipated major
release of each software product. This shortening of the estimated economic life
of the software products increased the amortization expense by $417,105 and
reduced net income by $253,183 or $0.09 per share in 1995.
Based upon the Company's sales activity in the first half of 1995, the Company
in 1995 decided to reduce the carrying value of the software development costs
relating to the StarPath and StarQuality products. The effect of this non-cash
write-down was to increase amortization expense by $306,697 and reduce net
income by $185,858 or $0.07 per share in 1995.
In 1995, the Company changed its practice for estimating the economic life of a
software product. For software released for general distribution on or after
February 1, 1995, the estimated economic life of the software is two years or
the period until a new major release of the software is expected to be
distributed, whichever is shorter.
PURCHASED SOFTWARE is stated at cost and is being amortized on the straight-line
method over its estimated useful life. Amortization using the straight-line
method was $194,020 in 1995 and $66,521 in 1994.
In 1995, the Company reduced the estimated economic life of certain purchased
software products to coincide with the period remaining before the next
anticipated major release of each software product. This shortening of the
estimated economic life of the software products increased the amortization
expense by $127,499 and reduced net income by $77,392 or $0.03 per share in
1995.
COVENANTS NOT TO COMPETE are stated at the estimated value of the consideration
given for the covenants (including the present value of any future payments to
be made under each agreement), less accumulated amortization. The costs of the
covenants are being amortized over four or seven years, using the straight-line
method. Amortization was $77,164 in both 1995 and 1994.
INCOME TAXES are accounted for using the methodology established by Statement of
Financial Accounting Standards (SFAS) No. 109, 'Accounting for Income Taxes,'
which requires an asset and a liability approach to financial accounting and
reporting for income taxes (see Note 7). Deferred income tax assets and
liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future. A valuation allowance is established when
necessary to reduce deferred tax assets to amounts expected to be realized based
on enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Income tax expense is the tax payable or
refundable for the period, plus or minus the change during the period in
deferred tax assets and liabilities.
CASH AND CASH EQUIVALENTS - The Company considers cash on hand, deposits in
bank, and highly liquid debt instruments purchased with original maturity dates
of generally three months or less as cash.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the current year presentation. These reclassifications have no effect on net
income.
2. INVENTORIES
Inventories at October 31 consisted of the following:
1995 1994
------------- -------------
Computers $ 37,005 $ 252
Peripheral equipment 29,141 19,125
Parts 690 175
Software 6,077 4,035
Supplies and Forms 1,359 2,120
------------- -------------
Total $74,272 $25,707
============= =============
3. NOTES RECEIVABLE
In September 1993, the Company accepted a $22,000 promissory note from a
director, when he exercised an option to purchase 25,000 shares of common stock.
The promissory note bears an interest rate of seven percent (7%) per year,
payable quarterly. The principal of the promissory note is to be paid in full no
later than September 30, 1996. However, a portion of the principal is to be paid
whenever the director sells any shares of the Company's common stock owned by
him. The shares of common stock issued upon the exercise of the option are held
by the Company as collateral for the promissory note.
4. LEASE COMMITMENTS
In 1994, the Company leased 12,976 square feet of space under a five-year
operating lease which was scheduled to expire in March 1995. In September 1994,
the Company entered into an agreement ("Agreement") to extend the lease of its
current leased space and to lease an additional 3,875 square feet of office
space. The Agreement provided for three months of free rent which is being
amortized over the life of the Agreement. The agreement expires on February 28,
1999. The Company has the option to extend the Agreement for five years. Minimum
lease payments under the Agreement include utilities, insurance,
interior/exterior maintenance and janitorial services, except that the Company,
starting in 1996, is required to pay for its pro-rata share of the increase in
such costs over the base established in calendar year 1995.
Future minimum lease payments under the Agreement are as follows:
1996 $ 278,041
1997 278,041
1998 278,041
1999 278,041
2000 92,681
-----------------
Total $ 1,204,845
=================
Rental expense for all operating leases for the years ended October 31, 1995 and
1994 was $259,956 and $196,237, respectively.
5. CREDIT AGREEMENTS
The Company has a revolving loan agreement with United States National Bank of
Oregon. The loan agreement allows the Company to borrow up to $700,000 and
requires the Company to maintain certain financial ratios. All assets of the
Company are pledged as security for the loan agreement. In 1995, the Company
renewed the agreement under the same terms and conditions. The Company met all
of the required ratios and did not borrow any funds under the loan agreement
during fiscal 1994 and 1995. The agreement expires April 15, 1996.
6. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Savings Plan ("Plan"). All regular full-time employees
(over 21 years old) are eligible to participate in the Plan. The Company's
contribution to the Plan is 50% of the employee' contribution up to a maximum of
2 and 1/2 percent of the employee' wages. During 1995 and 1994, the Company
contributed $39,727 and $24,165, respectively, to the Plan.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The effect of significant
items comprising the Company's net deferred tax asset or liability as of October
31 are as followsgnificant items comprising the Company's net deferred tax asset
or liability as of October 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Deferred Tax Assets:
Accrued Expenses $ 69,277 $ 41,299
Deferred Maintenance Contract 185,527 261,814
Differences Between Book and Tax Basis of
Property and Equipment 149,156 53,589
State Net Operating Loss Carryforward 79,408 16,495
Federal Net Operating Loss Carryforward 246,463
----
Deferred Tax Liabilities:
Capitalized Software Costs (221,120) (560,250)
-------------- --------------
Net Deferred Tax Asset (Liabilities) $508,711 $ (187,053)
============== ==============
</TABLE>
The deferred tax assets and liabilities are included in the following balance
sheet accounts at October 31:
<TABLE>
<CAPTION>
1995 1994
--------------- --------------
<S> <C> <C>
Current Deferred Tax Assets $ 254,804 $ 303,113
Deferred Tax Assets (Liabilities) 253,907 (490,166)
--------------- --------------
Net Deferred Tax Asset (Liability) $ 508,711 $ (187,053)
=============== ==============
</TABLE>
In order for the Company to realize all deferred tax assets recognized under
SFAS No. 109, future taxable income must be at least comparable to the net
income of 1994 and prior years. Although the Company believes such taxable
income levels will be achieved, lower amounts could negatively affect the
provision for income taxes in future years.
There are approximately $720,000 and $1,223,000 of unused net operating loss
carryforwards which, if not used, will expire between 2007 and 2008 for federal
and state tax reporting purposes, respectively.
The Company may realize tax benefits as a result of the exercise of certain
employee stock options. For financial reporting purposes, any reduction of
income tax obligations as a result of these tax benefits is credited to capital
in excess of par value. During 1995, $3,161 was credited to capital in excess of
par value.
A reconciliation between income taxes calculated at the statutory federal tax
rate and the tax provision reflected in the financial statements is as follows:
1995 1994
---------- ---------
Computed income taxes based on statutory
federal income tax rate of 34% ........... $(659,524) $ 100,863
Increase (reduction) in taxes resulting from:
State income tax, net of federal benefit . (94,524) 15,564
Benefit from graduated tax rates ......... -- (1,656)
Adjustment from Change in Tax Method ..... -- 11,238
Other .................................... (8,238) 2,219
--------- ---------
$(762,286) $ 128,228
========= =========
The provision for income taxes, net of operating loss carryforwards, consists of
the following:
1995 1994
---------- ----------
Income taxes currently payable (receivable):
Federal ........................................ $ (66,532) $ 1,849
State .......................................... 10 10
--------- ---------
$ (66,522) 1,859
--------- ---------
Deferred taxes - net:
Federal ........................................ (552,547) 102,777
State .......................................... (143,217) 23,592
--------- ---------
(695,764) 126,369
--------- ---------
$(762,286) $ 128,228
========= =========
8. STOCK OPTION PLANS
The Company has adopted two employee stock option plans that provide for the
issuance of incentive stock options and nonstatutory stock options to employees
and officers and nonstatutory stock options to directors who are not employees.
The stock option plans authorize the issuance of up to 1,250,000 shares of the
Company's common stock. On October 31, 1995, 179,658 shares were available for
future grant.
The plans are administered by the Compensation Committee of the Board of
Directors. The exercise price for the options granted under the option plans is
determined by the Committee and cannot be less than the fair market value of the
common stock as of the date of the grant. The term of each option is determined
by the Committee, but may not be more than ten years. Vesting schedules are
established by the Compensation Committee. All outstanding stock options are
exercisable at a price of not less than the fair market value of the Company's
common stock on the date of the grant. All outstanding options have a term of
five years and vest over a three year period.
One of the stock option plans provides for an automatic grant of nonstatutory
stock options to members of the Compensation Committee. The automatic grant
occurs each year on the date of the annual shareholders' meeting, and the
exercise price of the options issued under the automatic grant is the fair
market value of the common stock on that date. The following table summarizes
the stock option activity under the Company's option plans:
<TABLE>
<CAPTION>
Shares under Option Price
Option Range
------------------ ------------------
<S> <C> <C>
Options Outstanding at October 31, 1993 499,237 $ 0.88 - $4.75
Exercised ---- ----
Canceled or Expired (349,065) $ 0.88 - $3.88
Granted 514,414 $ 0.625 - $1.38
------------------ ------------------
Options Outstanding at October 31, 1994 664,586 $ 0.625- $4.75
Exercised (15,688) $ 0.88 - $1.38
Canceled or Expired (49,754) $ 0.88 - $1.38
Granted 80,000 $ 1.69 - $1.75
------------------ ------------------
Options Outstanding at October 31, 1995 679,144 $ 0.625 - $4.75
================== ==================
Options Excerisable at October 31, 1995 306,267 $ 0.625 - $4.75
================== ==================
</TABLE>
9. COMMON STOCK
During 1991, the Company issued a stock warrant for 70,000 shares of common
stock as part of an agreement for financial consulting, public relations and
investment banking services. Shares are purchasable under the stock warrant as
follows: 15,000 shares at $2.00; 15,000 shares at $2.50; 20,000 shares at $3.00;
and 20,000 shares at $4.00.
The stock warrant term is five years. At October 31, 1995, no shares had been
purchased under the stock warrant.
10. SIGNIFICANT CUSTOMERS During 1995, the Company recorded revenue from two
customers representing 20 percent and 10 percent of total revenue. During 1994,
the Company recorded revenue from two customers representing 30 percent and 11
percent of total revenue.
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
and Stockholders of Informedics, Inc.
Lake Oswego, Oregon
We have audited the accompanying balance sheets of Informedics, Inc. as of
October 31, 1995 and 1994 and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended October 31, 1995. 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, such financial statements present fairly, in all material
respects, the financial position of the Company on October 31, 1995 and 1994 and
the results of its operations and its cash flows for each of the two years in
the period ended October 31, 1995, in conformity with generally accepted
accounting principles.
/S/DELOITTE & TOUCHE LLP
Portland, Oregon
December 15, 1995
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
HIGHLIGHTS
In 1995, the Company reduced the carrying value of certain software products and
shortened the estimated economic life of other software products. The effect of
the write-off and shortening the estimated economic lives was to increase
amortization expense by $851,301 in 1995, as compared to 1994.
During 1995, the Company expanded its activities in the development of new
software and the enhancement and maintenance of existing software. As a result,
the Company incurred software development costs of $1,377,906 in 1995, an
increase of $675,914 over 1994 costs of $701,992. Of the total costs incurred,
the Company capitalized $365,016 in 1995 compared to $306,106 in 1994.
Lower than expected product sales, increased software development costs and
higher amortization expense resulted in a net loss of $1,777,490 or $0.45 per
share for 1995 compared to net income of $168,429 or $0.06 per share for 1994.
RESULTS OF OPERATIONS - MATERIAL CHANGES
The decrease in product sales of $665,688 or 26% for 1995, as compared to 1994,
resulted from a 30% decrease in the number of laboratory and physician office
systems sold. The decrease in the number of laboratory systems sold resulted
primarily from the sale of fewer StarPath systems, as the Company focused its
1995 laboratory products marketing efforts on its LifeLine products. The
decrease in physician office systems sold resulted from a change in the
Company's marketing strategy by concentrating on larger independent physician
associations (IPAs) and physician hospital organizations (PHOs) rather than
individual clinics and physician offices. Management believes that, although the
change negatively impacted 1995 sales, anticipated sales to IPAs and PHOs in
1996 are expected to outpace the 1995 level of sales to individual clinics and
physician offices.
The increase of $273,960 or 9% in customer service and support revenue resulted
from increases in support prices and in the size of the customer base as more
systems were installed in 1995.
A decrease in 1995 hardware sales, primarily relating to physician office
products, resulted in a decrease in the cost of products sold of $163,731. As a
percentage of hardware sales, cost of products sold increased from 83% in 1994
to 90% in 1995. The increase in the 1995 percentage resulted from fewer hardware
sales relating to physician office products, which are typically sold at higher
margins than hardware sales relating to the laboratory products.
The 1995 increase of $845,935 or 44% in the cost of customer service and support
resulted from an increase in the amount of software development costs that were
expensed rather than capitalized and higher labor and related costs for customer
service. As stated earlier, during 1995 the Company expanded its activities in
the development of new software and the enhancement and maintenance of existing
software. In 1995, the Company expensed $1,012,890 of its total software
development costs compared to $395,887 expensed in 1994. The 1995 labor and
related costs for customer service increased by $161,659, when compared to 1994,
as a result of a December 1994 salary increase and the hiring of additional
staff to serve the Company's growing customer base.
Selling and administrative costs for 1995 increased by $181,907 over 1994
amounts due to an increase in labor and related costs, higher rent expense and
an increase in marketing costs for the physician office products. The increase
in labor and related costs resulted from a salary increase implemented in
December 1994 and an increase in the size of the sales and marketing staff. The
higher rent expense resulted from the expansion of office space in November
1994. The increase in marketing costs for physician office products was the
result of increased advertisements in trade publications and the attendance at
more trade shows in 1995 as compared to 1994.
As previously discussed, the Company in 1995 reduced the carrying value of
certain software products and shortened the estimated economic life of other
software products. As a result, depreciation and amortization expense for 1995
was $1,642,541 compared to $646,172 for 1994.
LIQUIDITY - CAPITAL RESOURCES
The Company's financial condition remains strong. The Company's cash position
and working capital on October 31, 1995 were $534,260 and $254,093,
respectively. The Company is virtually debt free. The single largest liability
on October 31, 1995 was the deferred revenue liability of $1,163,903, which is a
liability for future services. The current ratio on October 31, 1995 was 1.2 to
1.0.
Net cash provided by operations during 1995 of $40,648 and the Company's cash
position at October 31,1994 of $1,055,378, were more than sufficient to cover
the net cash used to acquire additional assets and fund the development of the
Company's software in 1995.
Capital expenditures for property additions were $221,423 and $185,144 in 1995
and 1994, respectively. Capitalized software development costs totalled $365,016
and $306,106 in 1995 and 1994, respectively. Management expects that 1996
expenditures for property additions will be somewhat less than those in 1995.
Management anticipates that expenditures for capitalized software development
costs will be comparable to those in 1995. All expenditures are expected to be
funded through cash provided by operations and from the Company's current cash
position.
In 1995, the Company renewed a $700,000 uncommitted revolving line of credit
with US National Bank of Oregon. All of the assets of the Company are pledged as
security for the line of credit. Terms of the revolving line of credit require
the Company to maintain certain financial ratios. As of the date of this Annual
Report, the Company has not borrowed under the line of credit and has maintained
the required ratios. The line of credit expires April 15, 1996.
DELOITTE & TOUCHE LLP
3900 US Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204-3698
INDEPENDENT AUDITORS' CONSENT
Informedics, Inc.:
We consent to the incorporation by reference in Registration Statements Nos.
33-30243, 33-46474, and 33-85132 on Form S-8 of our report dated December 15,
1995 appearing in or incorporated by reference in this Annual Report on Form
10-KSB of Informedics, Inc. for the year ended October 31, 1995.
/s/DELOITTE & TOUCHE LLP
January 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF INFORMEDICS, INC. INCORPORATED
INTO ITS ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
OCTOBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 534,260
<SECURITIES> 0
<RECEIVABLES> 872,607
<ALLOWANCES> 64,623
<INVENTORY> 74,272<F1>
<CURRENT-ASSETS> 1,862,521
<PP&E> 897,294
<DEPRECIATION> 581,259
<TOTAL-ASSETS> 3,137,944
<CURRENT-LIABILITIES> 1,608,428
<BONDS> 0
0
0
<COMMON> 26,422
<OTHER-SE> 1,459,650
<TOTAL-LIABILITY-AND-EQUITY> 3,137,944
<SALES> 1,908,079
<TOTAL-REVENUES> 5,151,547
<CGS> 734,857
<TOTAL-COSTS> 3,492,817
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 901
<INCOME-PRETAX> (1,939,776)
<INCOME-TAX> (762,286)<F2>
<INCOME-CONTINUING> (1,177,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,177,490)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> (0.45)
<FN>
<F1> See Note 2 to Notes to Financial Statements
<F2> See Note 7 to Notes to Financial Statements
</FN>
</TABLE>
