SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended January 31, 1996
--------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934.
For the transition period from to
--------------- -----------------
Commission file number 2-86360
INFORMEDICS, INC.
(Exact name of small business issuer as specified 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
Check whether the issuer (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 issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Number of shares of Informedics, Inc. $.01 par value common stock outstanding as
of March 1, 1996: 2,645,099.
<PAGE>
INFORMEDICS, INC.
Part I - Financial Information
The information included herein is unaudited. However, such
information reflects all adjustments (consisting solely of normal, recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods. The interim
financial information and notes thereto should be read in conjunction with the
Company's latest annual report on Form 10-KSB. The results of operations for
the three months ended January 31, 1996 are not necessarily indicative of
results to be expected for the entire year.
<PAGE>
INFORMEDICS, INC.
- ------------------
STATEMENTS OF OPERATIONS
- ------------------------
<TABLE>
<CAPTION>
Three Months Ended January 31,
------------------------------------------
1996 1995
------------------------------------------
<S> <C> <C>
REVENUE:
Product Sales $ 426,880 $ 618,766
Customer Service and Support 857,301 841,443
------------------- ------------------
Total Revenue 1,284,181 1,460,209
------------------- ------------------
COSTS AND EXPENSES:
Cost of Products Sold 233,825 176,595
Cost of Customer Service and Support 714,205 592,374
Selling & Administrative Expenses 634,646 476,642
Depreciation & Amortization 87,198 188,410
------------------- ------------------
Total Costs and Expenses 1,669,874 1,434,021
------------------- ------------------
Operating Income (Loss) (385,693) 26,188
------------------- ------------------
OTHER INCOME (EXPENSE):
Interest Expense (7) (255)
Interest Income 4,104 12,733
Other Income (Expense) (214) 823
------------------- ------------------
Total Other Income 3,883 13,301
------------------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES (381,810) 39,489
INCOME TAX PROVISION (145,963) 7,883
(BENEFIT)
------------------- ------------------
NET INCOME (LOSS) $ (235,847) $ 31,606
=================== ==================
Weighted Average Number of Common
Shares Outstanding and Common Stock
Equivalents Outstanding 2,643,404 2,836,897
=================== ==================
EARNINGS (LOSS) PER SHARE $ (0.09) $ 0.01
=================== ==================
</TABLE>
See Note to Financial Statements.
<PAGE>
INFORMEDICS, INC.
- -----------------
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
January 31, October 31,
ASSETS 1996 1995
---------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 578,624 $ 534,260
Accounts Receivable, less allowance
for doubtful accounts of $ 92,623 in
1996 and $ 64,623 in 1995 877,241 807,984
Inventories 74,236 74,272
Prepaid Expenses and Other Current Assets 76,946 104,378
Income Taxes Receivable 57,736 86,823
Deferred Income Taxes 248,834 254,804
---------------- ----------------
Total Current Assets 1,913,617 1,862,521
---------------- ----------------
FIXED ASSETS:
Furniture and Fixtures 135,470 132,830
Machinery and Equipment 648,273 597,175
Automobiles 29,138 29,138
Leasehold Improvements 20,142 20,142
Other Fixed Assets 119,880 118,009
---------------- ----------------
952,903 897,294
Less accumulated depreciation and amortization 628,993 581,259
---------------- ----------------
Total Fixed Assets 323,910 316,035
---------------- ----------------
OTHER ASSETS:
Software Development Costs,
less accumulated amortization of $ 458,201 in
1996 and $ 1,464,073 in 1995 666,826 576,433
Purchased Software,
less accumulated amortization of $ 226,804 in 1996
and in 1995 --- ---
Covenants Not to Compete,
less accumulated amortization of $ 429,540 in 1996
and $ 410,249 in 1995 64,505 83,796
Deferred Income Taxes 406,500 253,907
Other 41,816 45,252
---------------- ----------------
Total Other Assets 1,179,647 959,388
---------------- --------------
TOTAL ASSETS $ 3,417,174 $ 3,137,944
================ ================
</TABLE>
See Note to Financial Statements
<PAGE>
INFORMEDICS, INC.
- -----------------
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
January 31, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
--------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
Trade Accounts $ 171,470 $ 215,354
Customer Deposits 77,790 25,923
Accrued Wages, Payroll Taxes and Employee 195,940 183,945
Benefits
Other Accrued Liabilities 17,197 6,270
Deferred Revenue 1,648,138 1,163,903
Current Portion of Long-Term
Obligations 13,033 13,033
--------------- ------------------
Total Current Liabilities 2,123,568 1,608,428
LONG-TERM OBLIGATIONS:
Deferred Rent 40,186 43,444
--------------- ---------------
Total Current Liabilities and
Long-Term Obligations 2,163,754 1,651,872
--------------- ---------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value:
authorized 10,000,000 shares;
shares outstanding: 2,645,099 in 1996 and 2,642,207 26,451 26,422
in 1995
Capital in Excess of Par Value 1,908,642 1,905,476
Note Receivable from Stockholder (22,000) (22,000)
Accumulated Deficit (659,673) (423,826)
--------------- ---------------
Total Stockholders' Equity 1,253,420 1,486,072
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,417,174 $ 3,137,944
=============== ===============
</TABLE>
See Note to Financial Statements.
<PAGE>
INFORMEDICS, INC.
- -----------------
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
Three Months Ended January 31,
-----------------------------------------
1996 1995
----------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (235,847) $ 31,606
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and Amortization 87,198 188,410
Provision for losses on accounts receivable 28,000 5,000
Deferred Income Taxes (146,623) (25,119)
Tax benefits from stock options exercised 650 ---
Changes in Assets and Liabilities:
Accounts Receivable (97,257) (230,201)
Income taxes receivable 29,087 (11,254)
Inventories 36 (38,514)
Prepaid Expenses and Other Current Assets 27,432 (15,323)
Accounts Payable and Accrued Expenses 30,905 65,580
Income Taxes Payable --- (19,744)
Deferred Revenue 484,235 423,384
Deferred Rent (3,258) 58,832
------------------ ------------------
Net cash provided by operating activities 204,558 432,657
------------------ ------------------
INVESTING ACTIVITIES:
Property additions (55,609) (79,487)
Capitalized software development costs (110,566) (88,370)
Other 3,436 33,771
------------------ ------------------
Net cash used for investing activities (162,739) (134,086)
------------------ ------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,545 ---
------------------ ------------------
Net cash provided by financing activities 2,545 ---
------------------ ------------------
NET INCREASE IN CASH 44,364 298,571
CASH AT BEGINNING OF QUARTER 534,260 1,055,378
------------------ ------------------
CASH AT END OF QUARTER $ 578,624 $ 1,353,949
================== ==================
</TABLE>
<PAGE>
INFORMEDICS, INC.
- -----------------
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
Three Months Ended January 31,
--------------------------------------
1996 1995
--------------------------------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid for:
Interest $ 7 $ 255
Income Taxes Paid (Received) (29,077) 64,000
</TABLE>
See Note to Financial Statements.
<PAGE>
INFORMEDICS, INC.
- -----------------
NOTE 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
-----------
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
------------
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 amortized over the
term of the lease (five years).
CUSTOMER SERVICE AND SUPPORT REVENUE
-----------------------------------
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.
INCOME TAXES
------------
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.
Deferred income tax assets and liabilities are computed 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.
<PAGE>
INFORMEDICS, INC.
- -----------------
NOTE TO FINANCIAL STATEMENTS
- ----------------------------
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 for the
three-month periods ended January 31, 1996 and 1995 was $ 20,173 and
$100,639, respectively.
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
------------------
Purchased software is stated at cost and was amortized on the
straight-line method over its estimated useful life. Amortization for
the three-month period ended January 31, 1995 was $ 16,630. Purchased
software was fully amortized at October 31, 1995.
COVENANTS NOT TO COMPETE
------------------------
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 for each
of the three-month periods ended January 31, 1996 and 1995 was $
19,291.
EARNINGS (LOSS) PER SHARE
-------------------------
Earnings (loss) per share are computed on the basis of 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 three months ended January 31, 1996, as they are
antidilutive.
CASH AND CASH EQUIVALENTS
-------------------------
The Company considers cash on hand, deposits in bank and highly liquid
debt instruments purchased with original maturity dates of 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.
<PAGE>
INFORMEDICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
HIGHLIGHTS
During the first quarter of 1996, the Company continued to invest in the
development of its software products. As a result the Company incurred software
development costs of $384,393 for the first quarter of 1996, compared to
$274,115 for the first quarter of 1995. Of the total costs incurred, the Company
capitalized $110,566 for the first quarter of 1996, compared to $88,370 for the
first quarter of 1995. New software products in which the Company invested in
1996 included a Windows version of a managed care system for independent
physician associations and a Windows version of the Company's lab test request
system. During the first quarter of 1996, the Company also invested in the
enhancement of its LifeLine and ClinicManager software products.
A decrease in the number of the Company's laboratory software systems sold
resulted in a decrease of $191,886 or 31% in product sales for the first quarter
of 1996 when compared to the first quarter of 1995. The Company feels that the
number of laboratory systems sold in first quarter 1996 was negatively impacted
by the Food & Drug Administration's (FDA) decision to regulate all blood bank
software developers. Although the Company was one of the first blood bank
software companies to prepare and file a required pre-market notification (510k)
report with the FDA, the Company believes that potential customers are waiting
to see how blood bank software vendors respond to the additional regulations.
The Company feels its prompt filing of the 510k will benefit the Company's sales
in future quarters.
During the first quarter of 1996, the Company also increased its investment in
the sales and marketing of its products by adding sales and marketing staff. The
costs associated with the additional staff contributed to the increase in
selling and administrative costs, from $476,642 for first quarter 1995 to
$634,646 for first quarter 1996.
Lower product sales, and the increased investment in the development of software
and in sales and marketing resulted in a net loss of $235,847 or $0.09 per
share, in the first quarter 1996, compared to net income of $31,606 or $0.01 per
share, in the first quarer 1995.
RESULTS OF OPERATIONS - MATERIAL CHANGES
As stated earlier, the decrease in product sales of $191,886 or 31% in first
quarter 1996, compared to first quarter 1995, resulted from a decrease in the
number of laboratory systems sold. The number of physician office systems sold
was approximately the same in the first quarter of 1996 as in the first quarter
of 1995.
An increase in first quarter 1996 hardware sales, primarily relating to the
physician office products, resulted in an increase in the cost of products sold.
As a percentage of hardware sales, cost of products sold increased from 80% in
first quarter 1995 to 82% in first quarter 1996.
Cost of customer service and support increased by $121,831 or 21% for the first
quarter of 1996 when compared to the first quarter of 1995. The increase
resulted from an increase in the software development costs that were expensed
rather than capitalized and from costs incurred for the first quarter 1996
distribution of an enhanced version of the Company's LifeLine product. The
increase in the amount of software development costs that were expensed
primarily relates to the development of new software products.
The increase in selling and administrative expenses of $158,004 or 33% for first
quarter 1996 primarily resulted from an increase in the sales and marketing
staff, as discussed earlier. Additionally, the Company increased its allowance
for bad debts and wrote-off some pre-paid royalty fees.
INFORMEDICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS-CONTINUED
The decrease in depreciation and amortization expense of $101,212 for first
quarter 1996 when compared to first quarter 1995, resulted from the 1995
write-down and reduction in economic lives of capitalized and purchased
software.
LIQUIDITY - CAPITAL RESOURCES
The Company's financial condition remains strong. The Company's cash position on
January 31, 1996 was $578,624, compared to $534,260 on October 31, 1995. An
increase in the deferred revenue liability on January 31, 1996 when compared to
October 31, 1995, resulted in a negative working capital of $209,951 on January
31, 1996. Excluding the deferred revenue liability, which is a liability for
future services, the Company's working capital on January 31, 1996 was
$1,438,187.
Net cash provided by operations of $204,558 was sufficient to cover the net cash
used to acquire additional assets and fund the development of the Company's
software in the first quarter of 1996.
Capital expenditures for property additions were $55,609 and $79,487 for the
first quarter of 1996 and 1995, respectively. Capitalized software development
costs were $110,566 and $88,370 for the first quarter 1996 and 1995,
respectively. Management expects 1996 expenditures for property additions to be
less than 1995 amounts. Management anticipates that capitalized software
development costs will be somewhat lower for the remainder of 1996 when compared
to 1995. All such expenditures are expected to be funded through cash provided
by operations and from the Company's current cash position.
The Company has a $700,000 uncommitted revolving line of credit with the
Company's bank. 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 Quarterly Report, the
Company has not borrowed under the line of credit and has obtained a waiver of
its noncompliance for one of the specified financial ratios. The line of credit,
which is renewed annually, has been in place since 1992. The line of credit
expires April 15, 1996.
<PAGE>
INFORMEDICS, INC.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4(a) Articles IV, VI and VII of the Restated Articles of
Incorporation, as amended (1)
4(b) Articles 1, 2, 5, 7, 8 and 9 of the Restated Bylaws, as
amended (2)
4(c) Form of Indemnification Agreement--Directorship and
Officership Agreement (3)
27 Financial Data Schedule
(b) Reports on Form 8-K. During the quarter ended January 31,
1996, the Company filed no reports on Form 8-K.
- -------------------------------------------------------
(1) Incorporated by reference to the Company's annual report on
Form 10-K for the year ended October 31, 1993.
(2) Incorporated by reference to the Company's annual report of Form
10-Q for the quarter ended April 30, 1993.
(3) Incorporated by reference to the Company's definitive proxy
material filed with the Securities and Exchange Commission on
April 28, 1988.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFORMEDICS, INC. (Registrant)
Date March 14, 1996 By /s/ John Tortorici
-------------------------- -----------------------------
John Tortorici
Principal Executive Officer
Date March 14, 1996 By /s/ Dale E. Conner
-------------------------- ------------------------------
Dale E. Conner, Vice President
and Chief Financial Officer
<PAGE>
FORM 10-QSB
Exhibit Index
Exhibit
- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INFORMEDICS, INC.'S CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY
REPORT ON FORM 10-QSB FOR THE PERIOD ENDED JANUARY 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1996
<CASH> 578,624
<SECURITIES> 0
<RECEIVABLES> 969,864
<ALLOWANCES> 92,623
<INVENTORY> 74,236
<CURRENT-ASSETS> 1,913,617
<PP&E> 952,903
<DEPRECIATION> 628,993
<TOTAL-ASSETS> 3,417,174
<CURRENT-LIABILITIES> 2,123,568
<BONDS> 0
0
0
<COMMON> 26,451
<OTHER-SE> 1,226,969
<TOTAL-LIABILITY-AND-EQUITY> 3,417,174
<SALES> 426,880
<TOTAL-REVENUES> 1,284,181
<CGS> 233,825
<TOTAL-COSTS> 948,030
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (381,810)
<INCOME-TAX> (145,963)
<INCOME-CONTINUING> (235,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (235,847)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
