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 April 30, 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 June 3, 1996: 2,645,613.
<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 six
months ended April 30, 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 Six Months Ended
April 30, April 30,
----------------------------------------- ---------------------------------------
1996 1995 1996 1995
------------------ ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
REVENUE:
Product Sales $ 390,478 $ 578,998 $ 817,358 $ 1,197,764
Customer Service and Support 894,226 774,322 1,751,527 1,615,765
------------------ ------------------- ------------------- -----------------
Total Revenue 1,284,704 1,353,320 2,568,885 2,813,529
------------------ ------------------- ------------------ -----------------
COSTS AND EXPENSES:
Cost of Products Sold 133,416 225,941 367,241 402,536
Cost of Customer Service and Support
765,852 639,318 1,476,711 1,219,876
Selling & Administrative Expenses 510,957 541,333 1,148,949 1,029,791
Depreciation & Amortization 128,159 959,107 215,357 1,147,517
------------------ ------------------- ------------------ -----------------
Total Costs and Expenses 1,538,384 2,365,699 3,208,258 3,799,720
------------------ ------------------- ------------------ -----------------
Operating Loss (253,680) (1,012,379) (639,373) (986,191)
------------------ ------------------- ------------------ -----------------
OTHER INCOME (EXPENSE):
Interest Expense ---- (220) (7) (475)
Interest Income 4,561 12,933 8,665 25,666
Other Income 329 584 115 1,407
------------------ ------------------- ------------------ -----------------
Total Other Income 4,890 13,297 8,773 26,598
------------------ ------------------- ------------------ -----------------
LOSS BEFORE INCOME TAXES (248,790) (999,082) (630,600) (959,593)
INCOME TAX (94,752) (393,927) (240,715) (386,044)
BENEFIT
------------------ ------------------- ------------------ -----------------
NET LOSS $ (154,038) $ (605,155) $ (389,885) $ (573,549)
================== =================== ================== =================
Weighted Average Number of Common
Shares Outstanding and Common Stock
Equivalents Outstanding
2,645,208 2,632,535 2,644,296 2,629,477
================== =================== ================== =================
NET LOSS PER SHARE $ (0.06) $ (0.23) $ (0.15) $ (0.22)
================== =================== ================== =================
</TABLE>
See Note to Financial
Statements.
<PAGE>
INFORMEDICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1996 1995
------------------- -------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 398,876 $ 534,260
Accounts Receivable, less allowance
for doubtful accounts of $ 48,389 in
1996 and $ 64,623 in 1995 698,201 807,984
Inventories 36,179 74,272
Prepaid Expenses and Other Current Assets 52,011 104,378
Income Taxes Receivable 57,736 86,823
Deferred Income Taxes 230,693 254,804
Current Portion of Long-Term Accounts Receivable 11,928 ----
------------------- -------------------
Total Current Assets 1,485,624 1,862,521
------------------- -------------------
FIXED ASSETS:
Furniture and Fixtures 135,470 132,830
Machinery and Equipment 646,095 597,175
Automobiles 29,138 29,138
Leasehold Improvements 20,142 20,142
Other Fixed Assets 123,701 118,009
------------------- -------------------
954,546 897,294
Less accumulated depreciation and amortization 677,340 581,259
-------------------
-------------------
Total Fixed Assets 277,206 316,035
------------------- -------------------
OTHER ASSETS:
Long-Term Accounts Receivable 47,712 ----
Software Development Costs,
less accumulated amortization of $ 518,721 in
1996 and $ 1,464,073 in 1995 631,217 576,433
Purchased Software,
less accumulated amortization of $ 226,804 in 1996
and in 1995 --- ---
Covenants Not to Compete,
less accumulated amortization of $ 448,831 in 1996
and $ 410,249 in 1995 45,214 83,796
Deferred Income Taxes 519,539 253,907
Other 41,965 45,252
------------------- -------------------
Total Other Assets 1,285,647 959,388
------------------- -------------------
TOTAL ASSETS $ 3,048,477 $ 3,137,944
=================== ===================
</TABLE>
See Note to Financial Statements
<PAGE>
INFORMEDICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------------ ------------------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expenses:
Trade Accounts $ 149,983 $ 215,354
Customer Deposits 149,833 25,923
Accrued Wages, Payroll Taxes and Employee 171,029 183,945
Benefits
Other Accrued Liabilities 5,451 6,270
Deferred Revenue 1,422,240 1,163,903
Current Portion of Deferred Rent 10,861 13,033
------------------ ------------------
Total Current Liabilities 1,909,397 1,608,428
Deferred Rent 39,100 43,444
------------------ ------------------
Total Liabilities 1,948,497 1,651,872
------------------ ------------------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value:
authorized 5,000,000 shares, no shares outstanding --- ---
Common Stock, $.01 par value:
authorized 15,000,000 shares;
shares outstanding: 2,645,613 in 1996 and 2,642,207 26,456 26,422
in 1995
Capital in Excess of Par Value 1,909,235 1,905,476
Note Receivable from Stockholder (22,000) (22,000)
Accumulated Deficit (813,711) (423,826)
------------------ ------------------
Total Stockholders' Equity 1,099,980 1,486,072
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,048,477 $ 3,137,944
================== ==================
</TABLE>
See Note to Financial Statements.
<PAGE>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended April 30,
-----------------------------------------
1996 1995
-----------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (389,885) $ (573,549)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and Amortization 215,357 1,147,517
Write off of accounts receivable (16,234) (4,341)
Deferred Income Taxes (241,521) (333,986)
Tax benefits from stock options exercised 796 ---
Changes in Assets and Liabilities:
Accounts Receivable 66,377 (13,468)
Income taxes receivable 29,087 (13,621)
Inventories 38,093 (32,028)
Prepaid Expenses and Other Current Assets 52,367 (16,959)
Accounts Payable and Accrued Expenses 44,804 110,295
Income Taxes Payable --- (64,693)
Deferred Revenue 258,337 71,844
Deferred Rent (6,516) 55,574
------------------ ------------------
Net cash provided by operating activities 51,062 332,585
------------------ ------------------
INVESTING ACTIVITIES:
Property additions (57,253) (125,181)
Capitalized software development costs (135,477) (158,087)
Other 3,287 32,847
------------------ ------------------
Net cash used for investing activities (189,443) (250,421)
------------------ ------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,997 12,382
------------------ ------------------
Net cash provided by financing activities 2,997 12,382
------------------ ------------------
NET INCREASE (DECREASE) IN CASH (135,384) 94,546
CASH AT BEGINNING OF PERIOD 534,260 1,055,378
------------------ ------------------
CASH AT END OF PERIOD $ 398,876 $ 1,149,924
================== ==================
</TABLE>
<PAGE>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
Six Months Ended April 30,
--------------------------------------
1996 1995
--------------------------------------
Supplemental Disclosures of Cash Flow
Information:
Cash paid for:
Interest $ 7 $ 475
Income Taxes Paid (Received) (29,077) 87,500
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 six month
periods ended April 30, 1996 and 1995 was $ 80,693 and $507,977,
respectively.
In the second quarter of 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 the shortening of
the estimated economic lives increased the amortization expense by $599,728
in the second quarter of 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
Purchased software is stated at cost and was amortized on the straight-line
method over its estimated useful life. Amortization for the six month
period ended April 30, 1995 was $194,020. Purchased software was fully
amortized at October 31, 1995.
In the second quarter of 1995, the Company reduced the estimated economic
life of certain software products to coincide with the period remaining
before the next major release of each such software product. This
shortening of the estimated economic life of the software products
increased the amortization expense by $160,759.
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
six month periods ended April 30, 1996 and 1995 was $ 38,582.
NET LOSS PER SHARE
Net 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 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 CONDITION AND RESULTS OF OPERATIONS
HIGHLIGHTS
During the second quarter and the first six months of 1996, the Company
continued its increased investment in the development of its software products,
when compared to 1995. For the second quarter and the first six months of 1996,
the Company incurred software development costs of $360,912 and $740,143,
respectively, compared to $269,882 and $532,231 for the second quarter and first
six months of 1995, respectively. Of the total costs incurred, the Company
capitalized $24,911 and $135,477 for the second quarter and first six months of
1996, respectively, compared to $69,717 and $158,087 for the second quarter and
first six months of 1995, respectively. New software products in which the
Company invested in 1996 included enhanced versions of the Company's products
with particular emphasis on the HealthLink Integrated Delivery Systems network.
A decrease in the number of systems sold of the Company's laboratory software
products resulted in a decrease of $188,520 or 33% and $380,406 or 32% in
product sales for the second quarter and first six months of 1996, respectively,
when compared to the same periods in 1995. The Company feels that the number of
laboratory systems sold in the first six months of 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.
In the second quarter of 1995, the Company reduced the carrying value of certain
software products and shortened the estimated economic life of other software
products. The write-off and shortening of the estimated economic lives increased
amortization expense in the second quarter of 1995 by $760,487, resulting in a
large decrease in depreciation and amortization expense for second quarter and
the first six months of 1996 when compared to the same periods in 1995.
Lower product sales, and the increased investment in the development of software
resulted in a net loss of $154,038 or $0.06 per share and $389,885 or $0.15 per
share for the second quarter and first six months of 1996, respectively. The
second quarter 1995 write-off and shortening of the estimated economic lives,
discussed earlier, resulted in a net loss of $605,155 or $0.23 per share and
$573,549 or $0.22 per share, for the second quarter and first six months of
1995, respectively.
RESULTS OF OPERATIONS - MATERIAL CHANGES
As stated earlier, the decrease in product sales of $188,520 or 33% and $380,406
or 32% for the second quarter and first six months of 1996, respectively, when
compared to the same periods in 1995, resulted from a decrease in the number of
laboratory systems sold. The number of physician office systems sold was higher
in the second quarter and first six months of 1996 when compared to the same
periods in 1995.
A decrease in hardware sales for the second quarter of 1996, primarily relating
to laboratory products, resulted in a decrease in the cost of products sold. As
a percentage of hardware sales, cost of products sold decreased from 92% in
second quarter 1995 to 84% in second quarter 1996.
Cost of customer service and support increased by $126,534 or 20% and $256,835
or 21% for the second quarter and first six months of 1996, respectively, when
compared to the same periods in 1995. The increase resulted from increases in
wages and in software development costs that were expensed rather than
capitalized. The increase in
<PAGE>
INFORMEDICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
wages resulted from an increase in the size of the customer service staff. 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 $119,158 or 12% for the
first six months of 1996, primarily resulted from an increase in the sales and
marketing staff. Additionally, during the first quarter of 1996 the Company
increased its allowance for bad debts, wrote-off some pre-paid royalty fees, and
incurred additional legal fees to make changes to the Company's Bylaws and
Articles of Incorporation that were approved by the Company's shareholders.
The decrease in depreciation and amortization expense of $830,948 and $928,160
for the second quarter and first six months of 1996, when compared to the same
periods in 1995, resulted from the 1995 write-down and reduction in economic
lives of capitalized and purchased software costs.
During the second quarter and first six months of 1996, the Company recorded
income tax benefits of $94,752 and $240,715, respectively, which is $299,175 and
$145,329 less than the amounts recorded in the second quarter and first six
months of 1995, respectively. The decrease resulted from a decrease in the loss
before income taxes.
The accumulation of the income tax benefits recorded since the second quarter of
1995 has resulted in an increase in the balance of the deferred tax assets. The
balance of the deferred tax assets was $750,232 on April 30, 1996, compared to
$273,042 on April 30, 1995. Current accounting standards require that a
valuation allowance be recorded when it is more likely than not that some
portion of the deferred tax assets will not be realized. Management believes
that all of the April 30, 1996 deferred tax assets will be realized in future
periods. However, continued net operating losses could result in the need for a
valuation allowance against deferred tax assets. Results of operations would be
adversely affected if a substantial valuation allowance is deemed to be
necessary in future periods.
LIQUIDITY - CAPITAL RESOURCES
The Company's cash position on April 30, 1996 was $398,876, compared to $534,260
on October 31, 1995. An increase in the deferred revenue liability on April 30,
1996 when compared to October 31, 1995, contributed to the negative working
capital of $423,773 on April 30, 1996. Excluding the deferred revenue liability,
which is a liability for future services, the Company's working capital on April
30, 1996 was $998,467.
Net cash provided by operations of $51,062 and the Company's cash position on
October 31, 1995 was sufficient to cover the net cash used to acquire additional
assets and fund the development of the Company's software in the first six
months of 1996.
Capital expenditures for property additions were $57,253 and $125,181 for the
first six months of 1996 and 1995, respectively. Capitalized software
development costs amounted to $135,477 and $158,087 for the first six months of
1996 and 1995, respectively. Management expects that 1996 expenditures for
property additions will be less than 1995 amounts. Management anticipates that
capitalized software development costs will be somewhat lower for the remainder
of 1996 when compared to the same periods of 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 maintained the
required ratios. The line of credit expires April 15, 1997.
<PAGE>
INFORMEDICS, INC.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1996 Annual Shareholders Meeting was held
on March 15, 1996.
(b) The following directors were re-elected at the
meeting with the following votes:
Votes For Votes Withheld
--------- --------------
John Tortorici 2,418,957 37,909
Charles V. Dexter 2,418,457 37,409
Richard D. Glaser 2,418,957 37,909
Ronald G. Witcosky 2,418,957 37,909
(c) The following other matters were approved at the meeting:
Approval of certain amendments to and the restatement of the
Company's Articles of Incorporation:
(1) approval of provisions setting size of Board of
Directors, classifying the Board of Directors and
permitting directors to be removed only for cause:
For Against Abstain
--- ------- -------
788,367 362,126 5,305
(2) authorization of additional shares of Common Stock:
For Against Abstain
--- ------- -------
2,017,200 371,075 26,517
(3) authorization of class of Preferred Stock:
For Against Abstain
--- ------- -------
716,416 396,545 25,817
(4) approval of a super-majority voting requirement to
approve certain matters:
For Against Abstain
--- ------- -------
714,232 465,062 8,850
(5) approval of super-majority vote for future amendments
to certain provisions in the Restated Articles:
For Against Abstain
--- ------- -------
756,407 413,562 18,175
(6) approval of other changes included in the Restated
Articles:
For Against Abstain
--- ------- -------
2,144,729 229,478 40,585
Ratification of the appointment of Deloitte & Touche LLP as
independent public accountants for fiscal 1996:
For Against Abstain
--- ------- -------
2,443,466 8,500 4,900
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
------------
27 Financial Data Schedule
(b) Reports on Form 8-K. During the quarter ended April 30, 1996, the
Company filed no reports on Form 8-K.
<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 June 13, 1996 By /s/John Tortorici
----------------------- ------------------------------
John Tortorici, President and
Principal Executive Officer
Date June 13, 1996 By /s/Dale E. Conner
----------------------- ------------------------------
Dale E. Conner, Vice President
and Chief Financial Officer
<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 APRIL 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1996
<CASH> 398,876
<SECURITIES> 0
<RECEIVABLES> 758,518
<ALLOWANCES> 48,389
<INVENTORY> 36,179
<CURRENT-ASSETS> 1,485,624
<PP&E> 954,546
<DEPRECIATION> 677,340
<TOTAL-ASSETS> 3,048,477
<CURRENT-LIABILITIES> 1,909,397
<BONDS> 0
0
0
<COMMON> 26,456
<OTHER-SE> 1,073,524
<TOTAL-LIABILITY-AND-EQUITY> 3,048,477
<SALES> 817,358
<TOTAL-REVENUES> 2,568,885
<CGS> 367,241
<TOTAL-COSTS> 1,843,952
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (630,600)
<INCOME-TAX> (240,715)
<INCOME-CONTINUING> (389,885)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (389,885)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
