SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended July 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 No
Number of shares of Informedics, Inc. $.01 par value common stock
outstanding as of September 3, 1996: 2,649,517.
<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 nine
months ended July 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 Nine Months Ended
July 31, July 31,
----------------------------------------- ---------------------------------------
1996 1995 1996 1995
------------------ ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
REVENUE:
Product Sales $ 356,587 $ 385,782 $1,173,945 $ 1,583,547
Customer Service and Support 908,365 837,256 2,659,892 2,453,021
------------------ ------------------- ------------------- -----------------
Total Revenue 1,264,952 1,223,038 3,833,837 4,036,568
------------------ ------------------- ------------------ -----------------
COSTS AND EXPENSES:
Cost of Products Sold 171,323 247,464 538,563 650,000
Cost of Customer Service and Support
696,402 703,656 2,190,275 1,923,532
Selling & Administrative Expenses 416,793 526,840 1,548,580 1,556,631
Depreciation & Amortization 123,375 333,494 338,733 1,481,012
------------------ ------------------- ------------------ -----------------
Total Costs and Expenses 1,407,893 1,811,454 4,616,151 5,611,175
------------------ ------------------- ------------------ -----------------
Operating Loss (142,941) (588,416) (782,314) (1,574,607)
------------------ ------------------- ------------------ -----------------
OTHER INCOME (EXPENSE):
Interest Expense ---- (427) (7) (901)
Interest Income 2,987 13,678 11,652 39,345
Other Expense (186) (10,098) (71) (8,692)
------------------ ------------------- ------------------ -----------------
Total Other Income 2,801 3,153 11,574 29,752
------------------ ------------------- ------------------ -----------------
LOSS BEFORE INCOME TAXES (140,140) (585,263) (770,740) (1,544,855)
INCOME TAX (52,178) (228,186) (292,893) (614,230)
BENEFIT
------------------ ------------------- ------------------ -----------------
NET LOSS $ (87,962) $ (357,077) $ (477,847) $ (930,625)
================== =================== ================== =================
Weighted Average Number of Common
Shares Outstanding and Common Stock
Equivalents Outstanding
2,646,381 2,634,983 2,644,995 2,633,044
================== =================== ================== =================
NET LOSS PER SHARE $ (0.03) $ (0.14) $ (0.18) $ (0.35)
================== =================== ================== =================
</TABLE>
See Note to Financial Statements.
<PAGE>
INFORMEDICS, INC.
- -----------------
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
July 31, October 31,
ASSETS 1996 1995
------------------- -------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 349,369 $ 534,260
Accounts Receivable, less allowance
for doubtful accounts of $ 46,964 in
1996 and $ 64,623 in 1995 666,343 807,984
Inventories 29,310 74,272
Prepaid Expenses and Other Current Assets 48,744 104,378
Income Taxes Receivable 57,746 86,823
Deferred Income Taxes 213,435 254,804
Current Portion of Long-Term Accounts Receivable 11,928 ----
------------------- -------------------
Total Current Assets 1,376,875 1,862,521
------------------- -------------------
FIXED ASSETS:
Furniture and Fixtures 136,556 132,830
Machinery and Equipment 653,352 597,175
Automobiles 29,138 29,138
Leasehold Improvements 20,142 20,142
Other Fixed Assets 128,027 118,009
------------------- -------------------
967,215 897,294
Less accumulated depreciation and amortization 720,905 581,259
------------------- -------------------
Total Fixed Assets 246,310 316,035
------------------- -------------------
OTHER ASSETS:
Long-Term Accounts Receivable 45,724 ----
Software Development Costs,
less accumulated amortization of $ 579,241 in
1996 and $ 1,464,073 in 1995 595,210 576,433
Purchased Software,
less accumulated amortization of $ 226,804 in 1996
and in 1995 --- ---
Covenants Not to Compete,
less accumulated amortization of $ 468,123 in 1996
and $ 410,249 in 1995 25,922 83,796
Deferred Income Taxes 589,495 253,907
Other 41,967 45,252
------------------- -------------------
Total Other Assets 1,298,318 959,388
------------------- -------------------
TOTAL ASSETS $ 2,921,503 $ 3,137,944
=================== ===================
</TABLE>
See Note to Financial Statements
<PAGE>
INFORMEDICS, INC.
- -----------------
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
July 31, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------------ ------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
Trade Accounts $ 123,791 $ 215,354
Customer Deposits 31,171 25,923
Accrued Wages, Payroll Taxes and Employee
Benefits 194,491 183,945
Other Accrued Liabilities 1,996 6,270
Revolving Line of Credit 100,000 ----
Deferred Revenue 1,409,137 1,163,903
Current Portion of Deferred Rent 13,033 13,033
------------------ ------------------
Total Current Liabilities 1,873,619 1,608,428
Deferred Rent 33,669 43,444
------------------ ------------------
Total Liabilities 1,907,288 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: 2,647,183 in 1996 and 2,642,207 26,472 26,422
in 1995
Capital in Excess of Par Value 1,911,416 1,905,476
Note Receivable from Stockholder (22,000) (22,000)
Accumulated Deficit (901,673) (423,826)
------------------ ------------------
Total Stockholders' Equity 1,014,215 1,486,072
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,921,503 $ 3,137,944
================== ==================
</TABLE>
See Note to Financial Statements.
<PAGE>
INFORMEDICS, INC.
- -----------------
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
Nine Months Ended July 31,
-----------------------------------------
1996 1995
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (477,847) $ (930,625)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES:
Depreciation and Amortization 338,733 1,481,012
Provision for losses on (write-offs of) accounts receivable (18,899) 9,221
Deferred Income Taxes (294,219) (544,547)
Tax benefits from stock options exercised 1,316 ---
Changes in Assets and Liabilities:
Accounts Receivable 102,888 266,115
Income taxes receivable 29,077 (26,074)
Inventories 44,962 (14,251)
Prepaid Expenses and Other Current Assets 55,634 (21,585)
Accounts Payable and Accrued Expenses (80,043) 77,024
Income Taxes Payable --- (64,693)
Deferred Revenue 245,234 70,562
Deferred Rent (9,775) 52,315
---------------- --------------------
Net cash provided (used) by operating activities (62,939) 354,474
---------------- --------------------
INVESTING ACTIVITIES:
Property additions (69,921) (186,903)
Capitalized software development costs (159,990) (243,429)
Other 3,285 31,814
--------------- --------------------
Net cash used for investing activities (226,626) (398,518)
--------------- --------------------
FINANCING ACTIVITIES:
Increase in Revolving Line of Credit 100,000 ---
Proceeds from issuance of common stock 4,674 15,778
--------------- --------------------
Net cash provided by financing activities 104,674 15,778
--------------- --------------------
NET DECREASE IN CASH (184,891) (28,266)
CASH AT BEGINNING OF PERIOD 534,260 1,055,378
--------------- --------------------
CASH AT END OF PERIOD $ 349,369 $ 1,027,112
=============== ====================
</TABLE>
<PAGE>
INFORMEDICS, INC.
- -----------------
STATEMENTS OF CASH FLOWS
- ------------------------
Nine Months Ended July 31,
-------------------------------------------
1996 1995
-------------------------------------------
Supplemental Disclosures of
Cash Flow Information:
Cash paid for:
Interest $ 7 $ 901
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 nine-month
periods ended July 31, 1996 and 1995 was $ 141,213 and $776,270,
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 $198,871
in the third 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 nine-month
period ended July 31, 1995 was $194,020. 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
nine-month periods ended July 31, 1996 and 1995 was $ 57,874.
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
- ------------------------------------------------
The following discussion includes certain forward-looking statements. Those
statements involve a number of risks and uncertainties, which could cause actual
results to differ materially from the expectation stated, including the
following: slower than expected sales of Informedics' products, deterioration of
business conditions generally or specifically in the health-care industry,
regulatory changes involving health care, competitive factors, and price
pressures.
HIGHLIGHTS
The Company reduced its operating loss by $445,475 for third quarter 1996 when
compared to third quarter 1995. The improvement resulted from an increase in
revenue of $41,914 or 3% combined with a decrease in total costs and expenses of
$403,561 or 22%. Despite a decrease in revenue of $202,731 for the first nine
months of 1996 compared to the same period in 1995, the Company reduced its
operating loss by $792,293 as total costs and expenses decreased by $995,024.
During the third quarter and the first nine months of 1996, the Company
continued to invest a large portion of its revenue in the development of its
software products. During the third quarter and the first nine months of 1996,
the Company spent $321,843 and $1,079,148, respectively, in software development
costs. This compares to an investment of $333,430 and $865,660 for the third
quarter and the first nine months of 1995, respectively. As a percentage of
revenue, the Company's investment in the development of its software products
was 25% and 28% for the third quarter and the first nine months of 1996,
respectively, compared to 27% and 21% for the third quarter and the first nine
months of 1995, respectively. Of the total costs incurred, the Company
capitalized $24,513 and $159,991 for the third quarter and the first nine months
of 1996, respectively, compared to $85,341 and $243,429 for the third quarter
and the first nine months of 1995, respectively.
Despite an increase in sales of laboratory software systems in third quarter
1996, the Company sold fewer laboratory software systems in the first nine
months of 1996 when compared to the same period in 1995. As a result, product
sales for the first nine months of 1996 was $409,602 or 26% less than product
sales for the first nine months of 1995. The Company feels that the number of
laboratory systems sold in the first six months of 1996 was negatively impacted
by additional regulations placed on blood bank software vendors by the Food and
Drug Administration (FDA).
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. This write-off and shortening of the estimated economic lives resulted
in a higher amortization expense for third quarter and the first nine months of
1995 when compared to the same periods in 1996.
RESULTS OF OPERATIONS - MATERIAL CHANGES
As stated earlier, the decrease in product sales of $409,602 or 26% for the
first nine months of 1996, as compared to the same period in 1995, resulted from
a decrease in the number of laboratory systems sold.
The increase in customer service and support revenue of $206,871 or 8% for the
first nine months of 1996, when compared to the first nine months of 1995,
resulted from an increase in the size of the customer base and the
implementation of regulatory fees to certain laboratory systems' customers.
A decrease in hardware sales for the third quarter and the first nine months of
1996 resulted in a decrease in the cost of products sold. As a percentage of
hardware sales, cost of products sold decreased from 90% in the first nine
months of 1995 to 83% in the first nine months of 1996.
<PAGE>
INFORMEDICS, INC.
- -----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
Cost of customer service and support increased by $266,743 or 14% for the first
nine months of 1996 when compared to the same period in 1995. The increase
primarily resulted from increases in wages and in software development costs
that were expensed rather than capitalized. The increase in 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 decrease in selling and administration expenses of $110,047 for third
quarter 1996 compared to third quarter 1995 primarily resulted from a decrease
in wages caused by turnover in the sales and marketing staff. Management
believes that this decrease will be short term, as the Company plans to replace
the individuals who left the Company.
The decrease in depreciation and amortization expense of $210,119 and $1,142,279
for the third quarter and first nine months of 1996, respectively, 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 third quarter and first nine months of 1996, the Company recorded
income tax benefits of $52,178 and $292,893, respectively, which is $176,008 and
$321,337 less than the amounts recorded in the third quarter and first nine
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 third quarter of
1995 has resulted in an increase in the balance of deferred tax assets. The
balance of the deferred tax assets was $802,930 on July 31, 1996, compared to
$508,711 on July 31, 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
July 31, 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 July 31, 1996 was $349,369 compared to $534,260
on October 31, 1995. Continuing losses and an increase in the deferred revenue
liability on July 31, 1996, when compared to October 31, 1995, resulted in a
negative working capital of $496,744 on July 31, 1996. Excluding the deferred
revenue liability, which is a liability for future services, the Company's
working capital on July 31, 1996 was $912,393.
Capital expenditures for property additions were $69,921 for the first nine
months of 1996 compared to $186,903 for the first nine months of 1995.
Capitalized software development costs amounted to $159,990 and $243,429 for the
first nine months of 1996 and 1995, respectively. Management expects that
expenditures for property additions and capitalized software development costs
for the remainder of 1996 will be less than 1995 expenditures for the same
period. All such expenditures are expected to be funded through cash provided by
operations and from the Company's cash position.
The Company has a $700,000 uncommitted revolving line of credit with the
Company's bank. During the third quarter of 1996 the Company borrowed $100,000
under this line of credit. 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 maintained the required ratios. The line of
credit expires April 15, 1997.
<PAGE>
INFORMEDICS, INC.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K. On June 24, 1996, the Company filed Form 8-K,
dated June 14, 1996. In the Form 8-K, the Company reported the appointment
of certain officers of the Registrant.
<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 September 12, 1996 By /s/ John Tortorici
- ----------------------- -------------------
John Tortorici, Chairman and
Chief Executive Officer
Date September 12, 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 JULY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JUL-31-1996
<CASH> 349,369
<SECURITIES> 0
<RECEIVABLES> 723,995
<ALLOWANCES> 46,964
<INVENTORY> 29,310
<CURRENT-ASSETS> 1,376,875
<PP&E> 967,215
<DEPRECIATION> 720,905
<TOTAL-ASSETS> 2,921,503
<CURRENT-LIABILITIES> 1,873,619
<BONDS> 0
0
0
<COMMON> 26,472
<OTHER-SE> 987,743
<TOTAL-LIABILITY-AND-EQUITY> 2,921,503
<SALES> 1,173,945
<TOTAL-REVENUES> 3,833,837
<CGS> 538,563
<TOTAL-COSTS> 2,728,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (770,740)
<INCOME-TAX> (292,893)
<INCOME-CONTINUING> (477,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (477,847)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
