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, 1996
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 300
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: $ 5,155,953
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 31, 1996:
$1,344,642, 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: 2,650,307 shares of $0.01 par value
common stock at December 31, 1996.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the issuer's Annual Report to Shareholders for the year ended October
31, 1996 are incorporated by reference into Parts I, II and III of this Report.
Parts of the issuer's definitive Proxy Statement for the 1997 annual meeting of
shareholders to be held on March 14, 1997 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 1996 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 1996 Annual Report to Shareholders)
Item 5. Market for Common Stock and Related Shareholder Matters 7
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 7. Financial Statements 7
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 1997 annual meeting of shareholders.)
Item 9. Directors and Executive Officers, Promoters and
Control Persons; Compliance with Section 16 (a) of
the Exchange Act 8
Item 10. Executive Compensation 8
Item 11. Security Ownership of Certain Beneficial Owners and
Management 8
Item 12. Certain Relationships and Related Transactions 8
Part IV
- -------
Item 13. Exhibits and Reports on Form 8-K 9
Signatures 11
Informedics, IntraMed.net, LifeLine and StarPath are trademarks of Informedics,
Inc.
<PAGE>
PART I
------
Parts of Item 1 and 2 are incorporated herein by reference from the Company's
1996 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. (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 order entry and results reporting system. The physician
practice management system was sold to Adaptive Health Systems of Washington,
Inc. ("Adaptive") on October 31, 1996. The laboratory order entry and results
reporting system is licensed exclusively to Quest Diagnostics, Inc. (formerly,
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 to Oregon physicians,
laboratories, pharmacies, insurance carriers and other health care providers
within the State of Oregon.
In the fourth quarter of 1996, the Company completed the development of the
initial version of its healthcare information management network software,
designed for Integrated Delivery Systems. The healthcare information management
network software is currently marketed throughout the United States through
salespersons employed by the Company.
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., Hewlett Packard and Epson Pacific.
The Company was organized under the laws of the state of Oregon in 1979.
Description of the Company's Products
- -------------------------------------
The Company's healthcare information management network software, called
IntraMed.net, provides a straightforward, flexible and cost-effective electronic
communication link between organizations and professional caregivers who provide
healthcare services. End users include physicians, insurance carriers,
hospitals, laboratories, pharmacies and ancillary industries. At the touch of a
button, these end users, can obtain patient eligibility, treatment referral,
pre-authorization of procedures, lab results and other pertinent information
needed to succeed in a managed care environment of healthcare delivery services.
<PAGE>
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 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 order entry and results reporting system, developed by the
Company for Quest Diagnostics, 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 1996 included sales from all product lines:
IntraMed.net, OMEN, ClinicManager, LifeLine, StarPath and the Lab Test Request
System. Sales in fiscal 1996 included both direct sales to integrated delivery
systems, 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 1996, the Company recognized revenues from one major customer, HBO and
Company, representing 13% of the Company's revenue. While the loss of this
customer 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 IntraMed.net are companies that have developed similar
healthcare information management network software. While the market and
technology are fairly new, two companies, Integrated Medical Systems, Inc. and
CommuniSys, Inc. have systems similar to IntraMed.net.
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. Currently, the primary
competitor for LifeLine systems is Mediware Information Systems, Inc., which has
a stand-alone system similar to LifeLine.
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 a pathology system as a stand-alone module. Although there
are numerous competing companies, no one company dominates the market.
<PAGE>
One of the ways the Company has tried to minimize the impact of competing
laboratory 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 $660,793
in 1996 and $1,144,131 in 1995.
The Company believes its products have a competitive edge in the marketplace
based product sophistication, design, flexibility, reliability, as well as being
price competitive. In addition, with respect to the LifeLine system, the
governmental regulation of blood bank computerized systems places a significant
barrier to entry for such products.
Backlog
- -------
At October 31, 1996 and 1995, the backlog of system orders was $ 235,740 and
$347,878, 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, 1996 and 1995 were
$1,093,598 and $980,591, 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. The FDA is currently reviewing the Company's pre-market
notification (510K) report. 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
brought closure to the recall in early 1996 when it issued a new release of the
LifeLine product which addresssed all outstanding issues.
The Company has dedicated substantial time and resources to comply with FDA's
new guidelines and regulations and believes that it is in substantial compliance
therewith. The Company, however, cannot predict whether it will be in compliance
with future changes to FDA guidelines, regulations or inspection procedures.
Non-compliance with any such guidelines, regulations or procedures could have a
material adverse effect on vendors of blood bank information systems, including
the Company.
<PAGE>
Software Development Costs
- --------------------------
The Company capitalized certain software development costs incurred during
fiscal 1996 and 1995 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 1996
Annual Report, Page 11). The Company is presently enhancing most 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
$1,510,657 in 1996 and $1,377,906 in 1995, of which $194,365 and $365,016 were
capitalized for 1996 and 1995, respectively.
Export Sales
- ------------
The Company's export sales for fiscal 1996 and 1995 were $9,900 and $93,814,
respectively.
Employees
- ---------
At December 31, 1996, the Company had 51 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 1996 Annual Report, page 13,
"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 1996 Annual Report to Shareholders, as indicated
below.
ITEM 5 - MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
- ----------------------------------------------------------------
1996 Annual Report, page 4, "Common Stock and Related Shareholder Information."
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
1996 Annual Report, pages 17 through 19, "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
ITEM 7 - FINANCIAL STATEMENTS
- -----------------------------
Financial Statements
- --------------------
1996 Annual Report, page 5, "Statements of Operations."
1996 Annual Report, pages 6 and 7, "Balance Sheets."
1996 Annual Report, page 8, "Statements of Cash Flows."
1996 Annual Report, page 9, "Statements of Cash Flows - Supplemental
Information."
1996 Annual Report, page 10, "Statements of Stockholders' Equity."
1996 Annual Report, pages 11 through 16, "Notes to Financial Statements."
1996 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
1997 annual meeting of shareholders.
The Company's
Proxy Statement
(Caption of
Applicable Section)
-------------------
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS, "Election of Directors";
PROMOTERS AND CONTROL PERSONS; COMPLIANCE "Executive Officers" and
WITH SECTION 16(a) OF THE EXCHANGE ACT "Compliance With Section
- --------------------------------------------------- 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(i) Restated Articles of Incorporation, as amended (1)
3(ii) Restated Bylaws, as amended
4 Form of Indemnification Agreement--
Directorship and Officership Agreement (2)
10(i)* Restated 1983 Employees' Stock Option Plan (3)
10(ii)* Restated 1988 Employees' Stock Option Plan, as amended (4)
10(iii) Lease with Beim & James Properties, as amended (5)
10(iv)* Incentive Compensation Plan (5)
10(v) Amendments to Lease with Kruse Way Holdings, Inc. (formerly
Beim & James Properties) (7)
11 Computation of Earnings Per Share
13 Portions of 1996 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 annual report on Form
10-KSB for the year ended October 31, 1994.
<PAGE>
Upon written request to the Chief Financial Officer, Informedics, Inc., 4000
Kruse Way Place, Bldg 3, Suite 300 Lake Oswego 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 - On October 8, 1996, the Company filed
Form 8-K, dated September 30, 1996. In the Form 8-K, the
Company reported that it signed an agreement to sell its
ClinicManager product line.
***************************************************
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
- ------- ----
3(i) Restated Articles of Incorporation, as amended (1)
3(ii) Restated Bylaws, as amended
4 Form of Indemnification Agreement--
Directorship and Officership Agreement (2)
10(i)* Restated 1983 Employees' Stock Option Plan (3)
10(ii)* Restated 1988 Employees' Stock Option Plan, as amended (4)
10(iii) Lease with Beim & James Properties, as amended (5)
10(iv)* Incentive Compensation Plan (5)
10(v) Amendments to Lease with Kruse Way Holdings, Inc.
(formerly Beim & James Properties) (7)
11 Computation of Earnings Per Share
13 Portions of 1996 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 annual report on Form
10-KSB for the year ended October 31, 1994.
<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 24, 1997 By: /s/ John Tortorici
---------------- -------------------------------
John Tortorici, Chairman and
Chief Executive Officer
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 24, 1997 By:/s/ John Tortorici
---------------- -------------------------------
John Tortorici, Chairman and
Chief Executive Officer
Date: January 24, 1997 By:/s/ Dale E. Conner
---------------- -------------------------------
Dale E. Conner, Vice President
and Chief Financial Officer
Date: January 24, 1997 By:/s/ Richard D. Glaser
---------------- -------------------------------
Richard D. Glaser, Ph.D.,
Director
Date: January 24, 1997 By:/s/ Charles V. Dexter
---------------- -------------------------------
Charles V. Dexter, Director
Date: By:
---------------- -------------------------------
Ronald G. Witcosky, Director
Date: January 24, 1997 By:/s/ Gerald P. Kelly
---------------- -------------------------------
Gerald P. Kelly, President,
Chief Operating Officer
and Director
EXHIBIT 3.(ii)
INFORMEDICS, INC.
RESTATED BYLAWS
Amendments Approved by the Board of Directors on
June 14, 1996
Sections 3 and 4 of Article 4 of the Restated Bylaws are replaced with the
following:
Section 3. CHAIRMAN OF THE BOARD
The Chairman of the Board shall be the Chief Executive Officer of the
Corporation, responsible to the Board of Directors for the general supervision
of the property, affairs and business of the Corporation. The Chairman shall be
responsible for developing strategic direction for the Corporation, and shall be
the Corporation's primary spokesperson to the financial community, the
industries in which the Corporation operates and the trade. The Chairman shall
report on the affairs of the Corporation at each meeting of the Board of
Directors, and shall exercise such other powers inherent in the office of chief
executive as the Board of Directors may direct. The Chairman shall also preside
at all meetings of the Board of Directors and at meetings of the shareholders.
At any time that an Executive Committee of the Board of Directors exists, the
Chairman shall be a member of the Executive Committee.
Section 4. PRESIDENT
The President shall be the Chief Operating Officer of the Corporation and
shall, subject to the control of the Board of Directors, have general and active
supervision of the operations of the Corporation. The President shall be
responsible for all day-to-day operations of the Corporation, delegating such
authority as may be determined. All officers of the Corporation at the level of
Vice President shall report to the President. The President shall have the
general powers and duties of management usually vested in the office of
president of a corporation, together with such other powers and duties as may be
prescribed from time to time by the Board of Directors.
Section 3 of Article 3 of the Restated bylaws is replaced with the
following:
Section 3. EXECUTIVE COMMITTEE
Subject to the Oregon Business Corporation Act, the Articles of
Incorporation and contrary provisions as may be contained in the Bylaws as
amended from time to time, the Board of Directors may appoint an Executive
Committee consisting of not less than two nor more than three persons from among
its members. When appointed, the Executive Committee shall have and may exercise
all the authority of the Board of Directors in the management of the
Corporation, subject to the limitations hereinafter set forth. When an Executive
Committee exists, both the Chairman and the President shall report to the
Executive Committee. The Executive Committee shall not have the authority to:
amend the Articles of Incorporation; adopt a plan of merger or consolidation;
recommend to the shareholders the sale, lease, exchange, mortgage, pledge or
other disposition of all or substantially all the property and assets of the
Corporation; recommend to the shareholders a voluntary dissolution of the
Corporation or a revocation thereof; or amend the Bylaws of the Corporation.
Committee members shall be appointed annually and shall hold office at the
pleasure of the Board of Directors. Meetings of the Executive Committee may be
called upon the request of any member thereof upon 24 hours' notice. Notice may
be waived by all members. No action shall be taken by the committee except at a
duly called meeting, and then only upon the unanimous vote of both members when
the Committee consists of two members, and by vote of two out of three members
when the Committee consists of three members.
<PAGE>
INFORMEDICS, INC.
RESTATED BYLAWS
ARTICLE 1
SHAREHOLDERS: MEETINGS AND VOTING
Section 1. PLACE OF MEETINGS
Meetings of the shareholders of Informedics, Inc. (the "Corporation") shall
be held at the principal office of the Corporation, or any other place, either
within or without the state of Oregon, selected by the Board of Directors.
Section 2. ANNUAL MEETINGS
(a) The annual meeting of the shareholders shall be held on the third
Friday in March of each year, if not a legal holiday, and if a legal holiday
then on the next succeeding business day, at such time as may be prescribed by
the Board of Directors and specified in the notice of the meeting. The Board of
Directors shall have the discretion to designate a different annual meeting date
for any year, provided that the date so designated is within 60 days of the date
specified in the preceding sentence. At the annual meeting, the shareholders
shall elect directors of the Corporation, consider reports of the affairs of the
Corporation and transact such other business as may properly be brought before
the meeting.
(b) If the annual meeting is not held within the earlier of six months
after the end of the Corporation's fiscal year or 15 months after its last
annual meeting, the circuit court of the county where the Corporation's
principal office is located, or, if the principal office is not in Oregon, where
the registered office of the Corporation is or was last located, may summarily
order a meeting to be held upon the application of any shareholder of the
Corporation entitled to participate in an annual meeting.
Section 3. SPECIAL MEETINGS
(a) The Corporation shall hold a special meeting of shareholders upon the
call of the President or the Board of Directors, or if the holders of at least
10 percent of all votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date and deliver to the
Secretary of the Corporation one or more written demands for the meeting
describing the purpose or purposes for which it is to be held.
(b) The circuit court of the county where the Corporation's principal
office is located, or, if the principal office is not in Oregon, where the
registered office of the Corporation is or was last located, may summarily order
a special meeting to be held upon the application of a shareholder of the
Corporation who signed a valid demand for a special meeting if notice of the
special meeting was not given within 30 days after the date the demand was
delivered to the Corporation's Secretary or if the special meeting was not held
in accordance with the notice.
<PAGE>
Section 4. NOTICE OF MEETINGS
(a) The Corporation shall notify shareholders in writing of the date, time
and place of each annual and special shareholders meeting not earlier than 60
days nor less than 10 days before the meeting date. Except as otherwise required
by applicable law or by the Corporation's Articles of Incorporation, as amended
(the "Articles of Incorporation"), the Corporation is required to give notice
only to shareholders entitled to vote at the meeting. Such notice is effective
when mailed if it is mailed postage prepaid and is correctly addressed to the
shareholder's address shown in the Corporation's current record of shareholders.
Except as otherwise required by applicable law or by the Articles of
Incorporation, notice of an annual meeting need not include a description of the
purpose or purposes for which the meeting is called. Notice of a special meeting
shall include a description of the purpose or purposes for which the meeting is
called.
(b) If an annual or special shareholders meeting is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment. If a new record date for the adjourned meeting is fixed, or is
required by law to be fixed, notice of the adjourned meeting shall be given to
persons who are shareholders as of the new record date. A determination of
shareholders entitled to notice of or to vote at a shareholders meeting is
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
(c) A shareholder's attendance at a meeting waives objection to: (i) lack
of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.
(d) A shareholder may at any time waive any notice required by law, the
Articles of Incorporation or these Bylaws. Except as otherwise provided in
paragraph (c) of Section 4 of this Article 1, the waiver must be in writing, be
signed by the shareholder entitled to the notice, and be delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
<PAGE>
Section 5. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS
(a) Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to that
matter. Unless otherwise required by law, a majority of the votes entitled to be
cast on the matter by the voting group constitutes a quorum of that voting group
for action on that matter. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.
(b) In the absence of a quorum, a majority of those present in person or
represented by proxy may adjourn the meeting from time to time until a quorum
exists. Any business that might have been transacted at the original meeting may
be transacted at the adjourned meeting if a quorum exists.
Section 6. VOTING RIGHTS
(a) The persons entitled to receive notice of and to vote at any
shareholders meeting shall be determined from the records of the Corporation on
the close of business on the day before the mailing of the notice or on such
other date not more than 70 nor less than 10 days before such meeting as may be
fixed in advance by the Board of Directors.
(b) Except as otherwise provided in the Articles of Incorporation or by
applicable law, each outstanding share, regardless of class, is entitled to one
vote on each matter voted on at a shareholders meeting. Only shares are entitled
to vote.
(c) Except as otherwise provided in the Articles of Incorporation or by
applicable law, if a quorum exists, action on a matter, other than the election
of directors, by a voting group shall be approved if the votes cast within the
voting group favoring the action exceed the votes cast within the voting group
opposing the action.
(d) Except as otherwise provided in the Articles of Incorporation or these
Bylaws, directors shall be elected by a plurality of the votes cast by holders
of the shares entitled to vote in the election at a meeting at which a quorum is
present.
<PAGE>
Section 7. VOTING OF SHARES BY CERTAIN HOLDERS
(a) If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the Corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver or proxy appointment and
give it effect as the act of the shareholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of its
shareholder, the Corporation, if acting in good faith, is nevertheless entitled
to accept the vote, consent, waiver or proxy appointment and give it effect as
the act of the shareholder if:
(i) The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(ii) The name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
Corporation requests, evidence of fiduciary status acceptable to the Corporation
has been presented with respect to the vote, consent, waiver or proxy
appointment;
(iii) The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the Corporation requests, evidence of this
status acceptable to the Corporation has been presented with respect to the
vote, consent, waiver or proxy appointment;
(iv) The name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the Corporation requests,
evidence acceptable to the Corporation of the signatory's authority to sign for
the shareholder has been presented with respect to the vote, consent, waiver or
proxy appointment; or
(v) Two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
(b) Shares of the Corporation are not entitled to be voted if: (i) they are
owned, directly or indirectly, by another domestic or foreign corporation; and
(ii) the Corporation owns, directly or indirectly, a majority of the shares
entitled to be voted for the directors of such other corporation. This paragraph
does not limit the power of a corporation to vote any shares, including its own
shares, held by it in a fiduciary capacity.
(c) Any redeemable shares that the Corporation may issue are not entitled
to be voted after notice of redemption is mailed to the holders and a sum
sufficient to redeem the shares has been deposited with a bank, trust company or
other financial institution under an irrevocable obligation to pay the holders
the redemption price on surrender of the shares.
<PAGE>
Section 8. PROXIES
A shareholder may vote shares either in person or by proxy. A shareholder
may appoint a proxy to vote or otherwise act for the shareholder by signing an
appointment form, either personally or by the shareholder's attorney-in-fact. An
appointment of a proxy is effective when received by the Secretary or other
officer or agent of the Corporation authorized to tabulate votes. An appointment
is valid for 11 months unless a longer period is expressly provided in the
appointment form. An appointment of a proxy is revocable by the shareholder
unless the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
Section 9. SHAREHOLDER LISTS
(a) After fixing a record date for a meeting, the Corporation shall prepare
an alphabetical list of the names of all of its shareholders who are entitled to
notice of the meeting. The list shall be arranged by voting group, and within
each voting group, by class or series of shares and show the address of and the
number of shares held by each shareholder.
(b) The shareholder list shall be available for inspection by any
shareholder, beginning two business days after notice of the meeting for which
the list was prepared is given and continuing through the meeting. Such list
shall be kept on file at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, or the shareholder's agent or attorney, shall be entitled on
written demand to inspect and, subject to the requirements of law, to copy the
list during regular business hours and at the shareholder's expense during the
period it is available for inspection.
(c) The Corporation shall make the shareholder list available at the
meeting, and any shareholder, or the shareholder's agent or attorney, is
entitled to inspect the list at any time during the meeting or any adjournment.
(d) Refusal or failure to prepare or make available the shareholder list
does not affect the validity of action taken at the meeting.
<PAGE>
ARTICLE 2
DIRECTORS
Section 1. POWERS
The Corporation shall have a Board of Directors. All corporate powers shall
be exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, the Board of Directors,
subject to any limitation set forth in the Articles of Incorporation.
Section 2. NUMBER AND QUALIFICATIONS
The Board of Directors shall consist of not less than three nor more than
seven members, the exact number to be determined from time to time by a
resolution of the Board of Directors, subject to any additional requirements
that may be imposed by the Articles of Incorporation. Until increased or
decreased by the Board of Directors, the number of directors shall be four. Any
decrease in the number of directors designated by the Board of Directors shall
not shorten an incumbent director's term. Directors need not be residents of the
state of Oregon or shareholders of the Corporation, unless required by the
Articles of Incorporation.
Section 3. ELECTION AND TENURE OF OFFICE
(a) Directors shall be elected at annual shareholders meetings.
(b) At any time when the Board of Directors shall consist of six or more
members, in lieu of electing the entire number of directors annually, the Board
of Directors of the Corporation shall be divided into three classes. The method
of classification shall be to assign the longest terms to those directors with
the most seniority as directors. In the event there are more directors with
identical seniority than there are class positions to be filled, the initial
designation of classification shall be made by the director then serving as
Chairman of the Board. The classes shall be Class 1, Class 2 and Class 3. The
term of office of directors of Class 1 shall expire at the first annual meeting
of shareholders after their election, that of Class 2 shall expire at the second
annual meeting after their election, and that of Class 3 shall expire at the
third annual meeting after their election. When classification of directors is
in effect, at each annual meeting of shareholders the number of directors equal
to the number of the class whose term expires at the time of such meeting shall
be elected to hold office until the third succeeding annual meeting. No
classification of directors shall be effective in the event the authorized
number of members of the Board is reduced to fewer than six.
<PAGE>
(c) If the Board of Directors is divided into classes and in the event of
any increase or decrease in the authorized number of directors, then (i) each
director then serving as such shall nevertheless continue as a director of the
class of which the director is a member until the expiration of the director's
current term, or upon the director's earlier resignation, removal from office or
death; (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be allocated by the Board of Directors among the
three classes of directors so as to maintain equal classes to the extent
possible; and (iii) in the event such decrease in the authorized number of
directors makes the total number of directors less than six, then the Board of
Directors shall become declassified and the directors remaining in office shall
continue their terms until the next annual meeting of shareholders, at which
time directors shall be elected to serve for one-year terms or until their
successors are duly elected and qualified.
(d) In every case, a director holding office shall continue to hold such
office until the director's successor has been elected and qualified or until
there is a decrease in the number of directors. Subject to paragraph (c) of
Section 4 of Article 2, a director's term of office shall begin immediately
after election.
Section 4. VACANCIES
(a) A vacancy in the Board of Directors shall exist upon the death,
resignation or removal of any director or upon an increase in the number of
directors.
(b) Except as otherwise provided by the Articles of Incorporation, if a
vacancy occurs on the Board of Directors:
(i) The shareholders may fill the vacancy, provided that the Board of
Directors has not already done so; or
(ii) The Board of Directors may fill the vacancy, provided the
shareholders have not already done so. If the directors remaining in office
constitute fewer than a quorum of the Board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office.
(c) A vacancy that will occur at a specific later date, by reason of a
resignation effective at the later date or otherwise, may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
<PAGE>
Section 5. RESIGNATION OF DIRECTORS
A director may resign at any time by delivering written notice to the Board
of Directors, its Chair or the Corporation. Unless the notice specifies a later
effective date, a resignation is effective at the earliest of the following: (a)
when received; (b) five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postage prepaid and correctly addressed; or
(c) on the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested and the receipt is signed by or on behalf of the
addressee. Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board of Directors.
Section 6. REMOVAL OF DIRECTORS
The shareholders may remove one or more directors with or without cause,
unless the Articles of Incorporation provide that the directors may be removed
only for cause. A director may be removed by the shareholders only at a meeting
called for the purpose of removing the director and the meeting notice must
state that the purpose, or one of the purposes, of the meeting is removal of the
director.
Section 7. MEETINGS
(a) The Board of Directors may hold regular or special meetings in or out
of the state of Oregon.
(b) Annual meetings of the Board of Directors shall be held without notice
immediately following the adjournment of the annual meetings of the
shareholders.
(c) Except as otherwise provided by the Articles of Incorporation, regular
meetings of the Board of Directors may be held without notice of the date, time,
place or purpose of the meeting. The Board of Directors may fix, by resolution,
the time and place for the holding of regular meetings.
(d) Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the President or upon the written request of any
two directors. The person or persons who call a special meeting of the Board of
Directors may fix the time and place of the special meeting.
Section 8. NOTICE OF SPECIAL MEETINGS
(a) Unless the Articles of Incorporation provide for a longer or shorter
period, special meetings of the Board of Directors shall be preceded by at least
two days' notice of the date, time and place of the meeting. The notice need not
describe the purpose of the special meeting unless required by the Articles of
Incorporation. The notice shall be given orally, either in person or by
telephone, or shall be delivered in writing, either personally, by mail or by
telegram. If in writing, such notice is effective at the earliest of the
following: (i) when received; (ii) five days after its deposit in the United
States mail, as evidenced by the postmark, if it is mailed postage prepaid and
is correctly addressed to the director's address shown in the Corporation's
records; or (iii) on the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee. If given orally, such notice is effective when
communicated.
<PAGE>
(b) A director's attendance at or participation in a meeting waives any
required notice to the director of the meeting unless the director at the
beginning of the meeting, or promptly upon the director's arrival, objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting.
(c) A director may at any time waive any notice required by law, the
Articles of Incorporation or these Bylaws. Except as otherwise provided in
paragraph (b) of Section 8 of this Article 2, the waiver shall be in writing,
shall be signed by the director entitled to the notice, shall specify the
meeting for which notice is waived and shall be filed with the minutes or
appropriate records.
(d) Notice of the time and place of holding an adjourned meeting need not
be given if such time and place are fixed at the meeting adjourned.
Section 9. QUORUM AND VOTE
(a) Except as otherwise required by the Articles of Incorporation, a
majority of the directors in office shall constitute a quorum for the
transaction of business. A majority of the directors present, in the absence of
a quorum, may adjourn from time to time but may not transact any business.
(b) If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the Board of Directors unless the
Articles of Incorporation require the vote of a greater number of directors.
(c) A director of the Corporation who is present at a meeting of the Board
of Directors, or is present at a meeting of a committee of the Board of
Directors, when corporate action is taken, is deemed to have assented to the
action taken unless: (i) the director objects at the beginning of the meeting,
or promptly upon the director's arrival, to holding the meeting or transacting
business at the meeting; (ii) the director's dissent or abstention from the
action taken is entered in the minutes of the meeting; or (iii) the director
delivers written notice of dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a director who votes in favor of the action taken.
<PAGE>
Section 10. COMPENSATION
The Board of Directors may, by resolution: (i) provide that the directors
be paid their expenses, if any, of attending each meeting of the Board of
Directors or committee of the Board of Directors; (ii) provide that directors be
paid a fixed sum for attending each meeting of the Board of Directors or
committee of the Board of Directors; or (iii) provide for a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation for that service.
ARTICLE 3
COMMITTEES
Section 1. APPOINTMENT
Subject to applicable law, the provisions of the Articles of Incorporation
and these Bylaws, the Board of Directors may appoint such committees as may be
necessary from time to time, consisting of such number of its members and shall
have such powers as the Board may designate. Each such committee shall have two
or more members, who serve at the pleasure of the Board of Directors.
Section 2. ACTIONS OF COMMITTEES; GOVERNING PROCEDURES
All actions of a committee shall be reflected in minutes to be kept of such
meetings and reported to the Board of Directors at the next succeeding meeting
thereof. The provisions of Article 2 of these Bylaws governing meetings, notice
and waiver of notice, and quorum and voting requirements of the Board of
Directors apply to committees and their members as well.
Section 3. EXECUTIVE COMMITTEE
An Executive Committee may be appointed by the Board of Directors pursuant
to the foregoing paragraphs. When appointed, the Executive Committee shall have
the power to exercise all authority of the Board of Directors, except that the
Executive Committee may not:
(i) Authorize distributions, except as may be permitted by subsection
(vii) of this Section 3;
(ii) Approve or propose to shareholders actions that are required by
law to be approved by shareholders;
<PAGE>
(iii) Fill vacancies on the Board of Directors or on any of its
committees;
(iv) Amend the Articles of Incorporation, except as may be permitted
by subsection (viii) of this Section 3;
(v) Adopt, amend or repeal the Bylaws;
(vi) Approve a plan of merger not requiring shareholder approval;
(vii) Authorize or approve reacquisition of the Corporation's shares,
except within limits prescribed by the Board of Directors; or
(viii) Authorize or approve the issuance or sale or contract for sale
of shares of the Corporation, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee or an officer of the Corporation to
do so within limits specifically prescribed by the Board of Directors.
Section 4. AUDIT COMMITTEE
(a) An Audit Committee of the Board of Directors of the Corporation,
composed of at least two members of the Board (at least one of whom shall not be
an officer of the Corporation), shall be appointed at the annual meeting of the
Board of Directors. The President may, and if the President does not the
committee shall, designate one of its members to serve as Chair of the Audit
Committee. Each member of the committee shall serve until the next annual
meeting of the Board of Directors or the due appointment of the member's
successor. Any vacancy in the Audit Committee shall be filled by a majority vote
of the Board of Directors.
(b) The Audit Committee shall have the authority, in its discretion, to:
(i) review and make recommendations to the Board of Directors with
respect to the engagement or discharge of the Corporation's independent auditors
and the terms of the engagement;
(ii) review the independence of the independent auditors;
(iii) review the policies and procedures of the Corporation and
management with respect to maintaining the Corporation's books and records and
furnishing the information necessary to the independent auditors to enable a
timely, full and accurate presentation of the Corporation's financial statements
for the fiscal year;
<PAGE>
(iv) review procedures to encourage access to the committee and
facilitate the timely reporting during the year by the Corporation's independent
auditors to the Audit Committee of their recommendations and advice with respect
to maintenance of the Corporation's books, records and accounts and accounting
procedures and controls;
(v) review the implementation by management of the recommendations
made by the independent auditors in their annual management letter, if any;
(vi) review the adequacy and implementation of the Corporation's
internal auditing, accounting and financial controls and meet with the
Corporation's internal auditor and financial staff to discuss internal
accounting and auditing controls and the implementation of recommendations for
the improvement therefor;
(vii) review with the independent auditors upon completion of their
audit the results of the auditing engagements, their opinion of the
Corporation's financial and accounting personnel, the cooperation received
during the audit, methods to improve the efficiency and quality of the audit,
significant proposed adjustments, any material changes in accounting principles
and practices, and any other recommendations the auditors may have with respect
to the Corporation's financial, accounting or auditing systems; and
(viii) review such other matters relating to the Corporation's
financial affairs and accounts, communications to shareholders and filings with
governmental agencies as the committee may, in its own discretion, deem
desirable.
(c) The Audit Committee is authorized to employ such experts and personnel,
including those who are already employed or engaged by the Corporation, as the
committee may deem to be reasonably necessary to enable it to ably perform its
duties and satisfy its responsibilities.
Section 5. COMPENSATION COMMITTEE
A Compensation Committee of the Board of Directors of the Corporation,
composed of at least two members of the Board of Directors, shall be appointed
at the annual meeting of the Board of Directors. The President may, and if the
President does not the committee shall, designate one of its members to serve as
Chair of the Compensation Committee. Each member of the committee shall serve
until the next annual meeting of the Board of Directors or the due appointment
of the member's successor. Any vacancy in the Compensation Committee shall be
filled by a majority vote of the Board of Directors. A majority of the members
of the Compensation Committee shall constitute a quorum, and a majority of the
quorum shall be required to adopt or approve any matter. The Compensation
Committee shall have the responsibility and power to review and establish the
salaries of the executive officers of the Corporation. In addition, the
committee shall further have the responsibility and power to grant bonuses,
stock options or other forms of incentive compensation to the officers of the
Corporation. The Compensation Committee is authorized to employ such experts and
consultants as the committee may deem to be reasonably necessary to enable it to
perform its duties and satisfy its responsibilities.
<PAGE>
ARTICLE 4
OFFICERS
Section 1. DESIGNATION; ELECTION
(a) The officers of the Corporation shall be a President, a Secretary and
such other officers and assistant officers as the Board of Directors shall from
time to time appoint, none of whom need be members of the Board of Directors.
The officers shall be elected by, and hold office at the pleasure of, the Board
of Directors. A duly appointed officer may appoint one or more officers or
assistant officers if such appointment is authorized by the Board of Directors.
The same individual may simultaneously hold more than one office in the
Corporation.
(b) A vacancy in any office because of death, resignation, removal or any
other cause shall be filled in the manner prescribed in these Bylaws for regular
appointments to such office.
Section 2. COMPENSATION AND TERM OF OFFICE
(a) The term of office of all officers of the Corporation shall be fixed by
the Board of Directors. Compensation of the Corporation's executive officers
shall be set by the Compensation Committee, if any. If the Corporation has no
Compensation Committee, such salaries shall be set by the Board of Directors.
(b) The Board of Directors may remove any officer at any time, either with
or without cause.
(c) Any officer may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the Corporation. Unless
the notice specifies a later effective date, a resignation is effective at the
earliest of the following: (i) when received; (ii) five days after its deposit
in the United States mail, as evidenced by the postmark, if mailed postage
prepaid and correctly addressed; or (iii) on the date shown on the return
receipt, if sent by registered or certified mail, return receipt requested and
the receipt is signed by or on behalf of the addressee. Once delivered, a notice
of resignation is irrevocable unless revocation is permitted by the Board of
Directors. If a resignation is made effective at a later date and the
Corporation accepts the future effective date, the Board of Directors may fill
the pending vacancy before the effective date, if the Board of Directors
provides that the successor shall not take office until the effective date.
<PAGE>
(d) This section shall not affect the rights of the Corporation or any
officer under any express contract of employment.
Section 3. CHAIRMAN OF THE BOARD
The Chairman of the Board, if and when elected, shall preside at all
meetings of the Board of Directors and at meetings of the shareholders and shall
perform such other duties as may be prescribed from time to time by the Board of
Directors.
Section 4. PRESIDENT
The President shall be the chief executive officer of the Corporation and
shall, subject to the control of the Board of Directors, have general
supervision, direction and control of the business and affairs of the
Corporation. In the absence of the Chairman of the Board, the President shall
perform the duties and responsibilities of the Chairman of the Board. The
President shall be an ex officio member of all the standing committees of the
Board of Directors (except the Compensation Committee, if any), shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.
Section 5. VICE PRESIDENTS
The Vice Presidents, if any, shall perform such duties as the Board of
Directors prescribes. In the absence or disability of the President, the
President's duties and powers shall be performed and exercised by a senior Vice
President, as designated by the Board of Directors.
Section 6. SECRETARY
(a) The Secretary shall keep or cause to be kept at the principal office,
or such other place as the Board of Directors may order, a book of minutes of
all meetings of directors and shareholders showing the time and place of the
meeting, whether the meeting was regular or special and, if a special meeting,
how authorized, the notice given, the names of those present at directors
meetings, the number of shares present or represented at shareholders meetings
and the proceedings thereof.
<PAGE>
(b) The Secretary shall keep or cause to be kept, at the principal office
or at the office of the Corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for such shares and the number and date of cancellation of
certificates surrendered for cancellation.
(c) The Secretary shall give or cause to be given such notice of the
meetings of the shareholders and of the Board of Directors as is required by
these Bylaws. If the Corporation elects to have a seal, the Secretary shall keep
the seal and affix it to all documents requiring a seal. The Secretary shall
have such other powers and perform such other duties as may be prescribed by the
Board of Directors or these Bylaws.
Section 7. TREASURER OR CHIEF FINANCIAL OFFICER
The Treasurer or Chief Financial Officer shall have custody of the funds
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors.
The Treasurer or Chief Financial Officer shall disburse the funds of the
Corporation when proper to do so, taking proper vouchers for such disbursements,
and shall render to the President and directors, at the regular meetings of the
Board of Directors, or whenever they may require it, an account of all his or
her transactions as the Treasurer or Chief Financial Officer and of the
financial condition of the Corporation.
If required by the Board of Directors, the Treasurer or Chief Financial
Officer shall give the Corporation a bond in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors, for the faithful
performance of the duties of his or her office and for the restoration to the
Corporation, in case of his or her death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his or her possession or under his or her control belonging to
the Corporation. The necessity for such bond is not anticipated, but the
decision as to whether the bond may at any time in the future be appropriate
shall be in the absolute discretion of the Board of Directors.
<PAGE>
Section 8. ASSISTANTS
The Board of Directors may appoint or authorize the appointment of
assistants to the Secretary or Treasurer, or both. Such assistants may exercise
the powers of the Secretary or Treasurer, as the case may be, and shall perform
such duties as are prescribed by the Board of Directors.
ARTICLE 5
CORPORATE RECORDS AND REPORTS - INSPECTION
Section 1. RECORDS
The Corporation shall maintain all records required by law. All such
records shall be kept at its principal office, registered office or at any other
place designated by the President of the Corporation or as otherwise provided by
applicable law.
Section 2. INSPECTION OF RECORDS
The records of the Corporation shall be open to inspection by the
shareholders or the shareholders' agents or attorneys in the manner and to the
extent required by applicable law.
Section 3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the Corporation,
shall be signed or endorsed by such person or persons and in such manner as may
be determined from time to time by resolution of the Board of Directors.
Section 4. EXECUTION OF DOCUMENTS
The Board of Directors may, except as otherwise provided in these Bylaws,
authorize any officer or agent of the Corporation to enter into any contract or
execute any instrument in the name of and on behalf of the Corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, or unless inherent in the authority vested in the
office under the provisions of these Bylaws, no officer, agent or employee of
the Corporation shall have any power or authority to bind the Corporation by any
contract or engagement, or to pledge its credit, or to render it liable for any
purpose or for any amount.
<PAGE>
ARTICLE 6
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES
(a) Certificates for shares shall be in such form as the Board of Directors
may designate, shall designate the name of the Corporation and the state law
under which the Corporation is organized, shall state the name of the person to
whom the shares represented by the certificate are issued, and shall state the
number and class of shares and the designation of the series, if any, the
certificate represents. If the Corporation is authorized to issue different
classes of shares or different series within a class, the designations, relative
rights, preferences and limitations applicable to each class, the variations in
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine variations for future series shall be
summarized on the front or back of each certificate, or each certificate may
state conspicuously on its front or back that the Corporation shall furnish
shareholders with this information on request in writing and without charge.
(b) Each certificate for shares shall be signed, either manually or in
facsimile, by the Chairman of the Board, the President or a Vice President and
the Secretary or an Assistant Secretary of the Corporation. The certificates may
bear the corporate seal or its facsimile.
(c) If any officer who has signed a share certificate, either manually or
in facsimile, no longer holds office when the certificate is issued, the
certificate shall nevertheless be valid.
(d) The Corporation may in its discretion issue certificates for fractional
shares, but shall not be required to do so.
Section 2. TRANSFER ON THE BOOKS
Upon surrender to the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, and subject to any limitations on transfer appearing on the
certificate or in the Corporation's stock transfer records, the Corporation
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
<PAGE>
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES
In the event a certificate is represented to be lost, stolen or destroyed,
a new certificate shall be issued in place thereof upon such proof of the loss,
theft or destruction and upon the giving of such bond or other indemnity as may
be required by the Board of Directors.
Section 4. TRANSFER AGENTS AND REGISTRARS
The Board of Directors may from time to time appoint one or more transfer
agents and one or more registrars for the shares of the Corporation who will
have such powers and duties as the Board of Directors may specify.
Section 5. CLOSING STOCK TRANSFER BOOKS
The Board of Directors may close the transfer books for a period not
exceeding 70 days preceding any annual or special meeting of the shareholders or
the day appointed for the payment of a dividend.
ARTICLE 7
INDEMNIFICATION
Section 1. DIRECTORS AND OFFICERS
The Corporation shall indemnify to the fullest extent permitted by law, any
person who is made, or threatened to be made, a party to or witness in, or is
otherwise involved in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, investigative, or otherwise
(including any action, suit or proceeding by or in the right of the Corporation)
by reason of the fact that:
(i) the person is or was a director or officer of the Corporation or
any of its subsidiaries;
(ii) the person is or was serving as a fiduciary within the meaning of
the Employee Retirement Income Security Act of 1974 with respect to any employee
benefit plan of the Corporation or any of its subsidiaries; or
(iii) the person is or was serving, at the request of the Corporation
or any of its subsidiaries, as a director or officer, or as a fiduciary of an
employee benefit plan, of another corporation, partnership, joint venture, trust
or other enterprise.
Section 2. EMPLOYEES AND OTHER AGENTS
The Corporation may indemnify its employees and other agents to the fullest
extent permitted by law.
<PAGE>
Section 3. ADVANCES OF EXPENSES
(a) The expenses incurred by a director or officer in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative, or otherwise, which the director or
officer is made or threatened to be made a party to or witness in, or is
otherwise involved in, shall be paid by the Corporation in advance upon written
request of the director or officer, if the director or officer:
(i) furnishes the Corporation a written affirmation of his or her good
faith belief that he or she is entitled to be indemnified by the Corporation;
and
(ii) furnishes the Corporation a written undertaking to repay such
advance to the extent that it is ultimately determined by a court that he or she
is not entitled to be indemnified by the Corporation. Such advances shall be
made without regard to the person's ability to repay such expenses and without
regard to the person's ultimate entitlement to indemnification under this
Article 7 or otherwise.
Section 4. NONEXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Article 7 shall be in addition
to any rights to which a person may otherwise be entitled under any articles of
incorporation, bylaw, agreement, statute, policy of insurance, vote of
shareholders or Board of Directors, or otherwise.
Section 5. SURVIVAL OF RIGHTS
The rights conferred on any person by this Article 7 shall continue as to a
person who has ceased to be a director, officer, employee or agent of the
Corporation, and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 6. AMENDMENTS
Any repeal of this Article 7 shall be prospective only and no repeal or
modification of this Article 7 shall adversely affect any right or protection
that is based upon this Article 7 and pertains to an act or omission that
occurred prior to the time of such repeal or modification.
<PAGE>
ARTICLE 8
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by law, no director of the Corporation
shall be personally liable to the Corporation or its shareholders for monetary
damages for conduct as a director. No amendment or repeal of this Article 8, nor
the adoption of any provision of these Bylaws inconsistent with this Article 8,
shall adversely affect any right or protection of a director based upon this
Article 8 and existing at the time of such amendment or repeal. No change in the
law shall reduce or eliminate the rights and protections set forth in this
Article 8 unless the change in the law specifically requires such reduction or
elimination. If the Oregon Business Corporation Act is amended, after this
Article 8 shall become effective, to authorize corporate action further
eliminating or limiting the personal liability of directors, officers, employees
or agents, then the liability of directors, officers, employees or agents of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Oregon Business Corporation Act, as so amended.
ARTICLE 9
TRANSACTIONS BETWEEN CORPORATION AND
INTERESTED DIRECTORS
Section 1. VALIDITY OF TRANSACTION
(a) No transaction involving the Corporation shall be voidable by the
Corporation solely because of a director's direct or indirect interest in the
transaction if:
(i) The material facts of the transaction and the director's interest
were disclosed or known to the Board of Directors or a committee of the Board of
Directors, and the Board of Directors or committee authorized, approved or
ratified the transaction;
(ii) The material facts of the transaction and the director's interest
were disclosed or known to the shareholders entitled to vote and a majority of
those shareholders authorized, approved or ratified the transaction; or
(iii) The transaction was fair to the Corporation.
(b) This Article 9 shall not invalidate any contract, transaction or
determination that would otherwise be valid under applicable law.
Section 2. INDIRECT INTEREST
Solely for purposes of this Article 9, a director of the Corporation has an
indirect interest in a transaction if:
(a) Another entity in which the director has a material financial interest
or in which the director is a general partner is a party to the transaction; or
<PAGE>
(b) Another entity of which the director is a director, officer or trustee
is a party to the transaction and the transaction is or should be considered by
the Board of Directors.
Section 3. AUTHORIZATION BY BOARD
For purposes of Section 1 of this Article 9, a transaction in which a
director has an interest is authorized, approved or ratified by the Board of
Directors if it receives the affirmative vote of a majority of the directors on
the Board of Directors, or on the committee, who have no direct or indirect
interest in the transaction. A transaction may not be authorized, approved or
ratified under this Article 9 by a single director. If a majority of the
directors who have no direct or indirect interest in the transaction vote to
authorize, approve or ratify the transaction, a quorum shall be present for the
purpose of taking action under this Article 9. The presence of, or a vote cast
by, a director with a direct or indirect interest in the transaction shall not
affect the validity of any action taken under Section 1 of this Article 9 by the
Board of Directors or a committee thereof, if the transaction is otherwise
authorized, approved or ratified as provided in Section 1 of this Article 9.
Section 4. AUTHORIZATION BY SHAREHOLDERS
For purposes of Section 1 of this Article 9, a transaction in which a
director has an interest is authorized, approved or ratified if it receives the
vote of a majority of the shares entitled to be counted under this Article 9,
voting as a single voting group. Shares owned by or voted under the control of a
director who has a direct or indirect interest in the transaction, and shares
owned by or voted under the control of any entity described in paragraph (a) of
Section 2 of this Article 9 may be counted in a vote of shareholders to
determine whether to authorize, approve or ratify a transaction by vote of the
shareholders under Section 1 of this Article 9. A majority of the shares,
whether or not present, that are entitled to be counted in a vote on the
transaction under this Article 9 constitutes a quorum for the purpose of taking
action under this Article 9.
ARTICLE 10
GENERAL PROVISIONS
Section 1. SEAL
If the Corporation elects to have a corporate seal, the seal shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of its incorporation.
<PAGE>
Section 2. AMENDMENT OF BYLAWS
(a) Except as otherwise provided by applicable law or by the Articles of
Incorporation, the Board of Directors may amend or repeal these Bylaws unless:
(i) The Articles of Incorporation or applicable law reserve this power
exclusively to the shareholders in whole or in part; or
(ii) The shareholders in amending or repealing a particular Bylaw
provide expressly that the Board of Directors may not amend or repeal that
Bylaw.
(b) The Corporation's shareholders may amend or repeal these Bylaws even
though these Bylaws may also be amended or repealed by the Board of Directors.
(c) Whenever an amendment or new Bylaw is adopted, it shall be copied in
the minute book with the original Bylaws in the appropriate place. If any Bylaw
is repealed, the fact of repeal and the date on which the repeal occurred shall
be stated in such book and place.
Section 3. ACTION WITHOUT A MEETING
(a) Action required or permitted by law to be taken at a shareholders
meeting may be taken without a meeting if the action is taken by all the
shareholders entitled to vote on the action. The action shall be evidenced by
one or more written consents describing the action taken, signed by all the
shareholders entitled to vote on the action and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. Action taken
under this section is effective when the last shareholder signs the consent,
unless the consent specifies an earlier or later effective date. If not
otherwise determined by law, the record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder
signs the consent. A consent signed under this section has the effect of a
meeting vote and may be described as such in any document.
(b) Except as otherwise provided by the Articles of Incorporation or these
Bylaws, action required or permitted by law to be taken at a meeting of the
Board of Directors, or at a meeting of a committee of the Board of Directors,
may be taken without a meeting if the action is taken by all members of the
Board or committee. The action shall be evidenced by one or more written
consents describing the action taken, signed by each director or each member of
the committee, as the case may be, and included in the minutes or filed with the
corporate records reflecting the action taken. Action taken under this section
is effective when the last director or committee member signs the consent,
unless the consent specifies an earlier or later effective date. A consent
signed under this section has the effect of a meeting vote and may be described
as such in any document.
<PAGE>
Section 4. TELEPHONIC MEETINGS
Except as otherwise provided by the Articles of Incorporation, the Board of
Directors may permit any or all directors to participate in a regular or special
meeting by, or conduct the meeting through, use of any means of communication by
which all directors participating may simultaneously hear each other during the
meeting. A director participating in a meeting by this means shall be deemed to
be present in person at the meeting.
Adopted by Board of Directors: February 14, 1996
INFORMEDICS, INC.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
1996 1995
------------ ------------
PRIMARY AND FULLY DILLUTED
Net Loss $ (472,906) $(1,177,490)
============ ============
Weighted average number of common shares
outstanding 2,646,194 2,635,368
Add: Weighted average number of shares of
common stock equivalents (1) - -
------------ ------------
Weighted average number of shares used in
calculation of earnings per share 2,646,194 2,635,368
============ ============
Loss Per Share $ (0.18) $ (0.45)
============ ============
(1) Common stock equivalents are excluded from the calculation of net loss per
share for the year ended October 31, 1996 and 1995, as they are antidilutive.
COMMON STOCK AND RELATED SHAREHOLDER INFORMATION
- ------------------------------------------------
The Company's common stock is traded on the Nasdaq Small Cap Market under the
symbol IMED. On October 21, 1996, the Nasdaq Stock Market, Inc., notified the
Company that it failed to maintain the minimum requirements for continued
listing on Nasdaq. Nasdaq asked the Company to submit a plan to bring the
Company into compliance. The Company submitted its plan and is working with
Nasdaq to insure continued listing. 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, 1996:
1996 Fiscal Year 1995 Fiscal Year
High Low High Low
------- ------- ------- -------
First Quarter $ 1.688 $ 1.250 $ 2.188 $ 1.438
Second Quarter $ 1.625 $ 1.000 $ 2.188 $ 1.563
Third Quarter $ 2.063 $ 1.000 $ 1.750 $ 1.250
Fourth Quarter $ 1.250 $ 0.750 $ 1.500 $ 1.125
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 31, 1996, there were approximately 1,100 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>
STATEMENTS OF OPERATIONS
- ------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------
1996 1995
------------------- ------------------
REVENUE:
Product Sales $ 1,601,204 $ 1,908,079
Customer Service and Support 3,554,749 3,243,468
----------- -----------
Total Revenue 5,155,953 5,151,547
----------- -----------
COSTS AND EXPENSES:
Cost of Products Sold 623,785 734,857
Cost of Customer Service and Support 2,895,020 2,757,960
Selling and Administrative Expenses 1,964,371 1,999,094
Depreciation and Amortization 457,080 1,642,541
----------- -----------
Total Costs and Expenses 5,940,256 7,134,452
----------- -----------
Operating Loss (784,303) (1,982,905)
----------- -----------
OTHER INCOME (EXPENSE):
Interest Expense (1,523) (901)
Interest Income 15,903 53,441
Other Income (Expense) 11,590 (9,411)
----------- -----------
Total Other Income - Net 25,970 43,129
----------- -----------
Loss Before Income Taxes (758,333) (1,939,776)
Income Tax Benefit (Note 8) (285,427) (762,286)
----------- -----------
Net Loss $ (472,906) $(1,177,490)
=========== ===========
Weighted Average Number of Common
Shares and Common Stock Equivalents
Outstanding 2,646,194 2,635,368
============ ===========
Loss Per Share $ (0.18) $ (0.45)
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BALANCE SHEETS, OCTOBER 31, 1996 AND 1995
- -----------------------------------------
ASSETS 1996 1995
---------------- ---------------
CURRENT ASSETS:
Cash $ 323,217 $ 534,260
Accounts Receivable, less allowance for
doubtful accounts of $28,439 in 1996
and $64,623 in 1995 681,303 807,984
Inventories (Note 2) 23,833 74,272
Prepaid Expenses and Other Current Assets 36,150 104,378
Income Taxes Receivable (Note 8) - 86,823
Deferred Income Taxes (Note 8) 182,483 254,804
Current Portion of Long-Term Receivable 11,928 -
Current Portion of Notes Receivable (Note 3) 54,095 -
---------- ----------
Total Current Assets 1,313,009 1,862,521
---------- ----------
FIXED ASSETS:
Furniture and Fixtures 134,282 132,830
Machinery and Equipment 583,961 597,175
Automobiles 29,138 29,138
Leasehold Improvements 20,442 20,142
Other Fixed Assets 136,805 118,009
---------- ----------
904,628 897,294
Less accumulated depreciation and amortization 672,300 581,259
---------- ----------
Total Fixed Assets ---------- ----------
OTHER ASSETS:
Long-Term Accounts Receivable 42,742 -
Notes Receivable (Note 3) 305,102 -
Software Development Costs,
less accumulated amortization of
$542,884 in 1996 and $1,464,073 in 1995 305,415 576,433
Covenants Not to Compete,
less accumulated amortization of
$479,698 in 1996 and $410,249 in 1995 14,348 83,796
Deferred Income Taxes (Note 8) 613,060 253,907
Other 41,816 45,252
---------- ----------
Total Other Assets 1,322,483 959,388
========== ==========
TOTAL ASSETS $2,867,820 $3,137,944
========== ==========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ------------------------------------ ---------------- ---------------
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
Trade Accounts $ 115,543 $ 215,354
Customer Deposits 4,120 25,923
Accrued Payroll Taxes and Employee Benefits 175,285 183,945
Other Accrued Liabilities 767 6,270
Revolving Line of Credit (Note 6) 125,000 -
Deferred Revenue 1,274,687 1,163,903
Current Portion of Deferred Rent (Note 5) 13,033 13,033
Current Portion of Deferred Gain on Sale
of Assets (Note 3) 19,615 -
---------- ----------
Total Current Liabilities 1,728,050 1,608,428
LONG-TERM OBLIGATIONS:
Deferred Rent (Note 5) 30,411 43,444
Deferred Gain on Sale of Assets (Note 3) 87,375 -
Commitments and Contingencies - -
---------- ----------
Total Current Liabilities and Long-Term
Obligations 1,845,836 1,651,872
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value:
authorized 5,000,000 shares;
no shares outstanding - -
Common Stock, $.01 per value:
authorized 15,000,000 shares;
shares outstanding: 2,650,307 in 1996
and 2,642,207 in 1995 26,503 26,422
Capital in Excess of Par Value 1,914,213 1,905,476
Note Receivable from Stockholder (Note 4) (22,000) (22,000)
Accumulated Deficit (896,732) (423,826)
---------- ----------
Total Stockholders' Equity 1,021,984 1,486,072
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,867,820 $3,137,944
========== ==========
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
STATEMENTS OF CASH FLOWS
- ------------------------
Year Ended October 31,
-----------------------------------
1996 1995
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (472,906) $(1,177,490)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES:
Depreciation and Amortization 457,080 1,642,541
Provision for write-offs of
accounts receivable (36,184) (1,377)
Deferred Income Taxes (286,832) (695,764)
Tax benefits from stock options exercised 1,395 3,161
Gain on sale of assets (Note 3) (11,888) -
Changes in Assets and Liabilities:
Accounts Receivable 108,195 320,566
Income Taxes Receivable 86,823 (26,246)
Inventories 50,439 (48,565)
Prepaid Expenses and Other Current Assets 62,879 (8,276)
Accounts Payable and Accrued Expenses (135,777) 84,811
Income Taxes Payable - (64,693)
Deferred Revenue 92,034 (37,077)
Deferred Rent (13,033) 49,057
------------ ------------
Net cash provided by (used in) operating
activities (97,775) 40,648
------------ ------------
INVESTING ACTIVITIES:
Property additions (104,762) (221,423)
Capitalized software development costs (194,365) (365,016)
Proceeeds from sale of product line
and related assets (Note 3) 50,000 -
Other 3,436 8,318
------------ ------------
Net cash used in investing activities (245,691) (578,121)
------------ ------------
FINANCING ACTIVITIES:
Increase in revolving line of credit 125,000 -
Proceeds from issuance of common stock 7,423 16,355
------------ ------------
Net cash provided by financing activities 132,423 16,355
------------ ------------
NET DECREASE IN CASH (211,043) (521,118)
CASH AT BEGINNING OF YEAR 534,260 1,055,378
------------- ------------
CASH AT END OF YEAR $ 323,217 $ 534,260
============ ============
<PAGE>
STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
- ---------------------------------------------------
Year Ended October 31,
-----------------------------------
1996 1995
---------------- ---------------
Supplemental Disclosures of Cash Flow
Information:
Cash paid for:
Interest $ 1,523 $ 901
Income Taxes Paid (Received) (86,823) 21,933
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Sale of product line and related assets
for note receivable 359,197 -
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE
YEARS ENDED OCTOBER 31, 1996 AND 1995
- ------------------------------------------
<TABLE>
<CAPTION>
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, 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 exercised 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
Issuance of Stock 8,100 81 7,342 7,423
Tax benefits from
stock options exercised 1,395 1,395
Net Loss (472,906) (472,906)
--------- ------- ---------- ---------- ---------- -----------
Balance at October 31, 1996 2,650,307 $26,503 $1,914,213 $ (22,000) $ (896,732) $ 1,021,984
========= ======= ========== ========= ========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<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.
LOSS PER SHARE is computed on the basis of the weighted average number of shares
outstanding. Common stock equivalents are excluded from the calculation of net
loss per share 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 $201,734 in
1996 and $868,742 in 1995.
<PAGE>
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. Purchased software was fully amortized at October
31, 1995. 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.
In October 1996, the Company retired all of its purchased software, which were
among the assets sold to Adaptive Health Systems of Washington, Inc.
("Adaptive") (see Note 3).
<PAGE>
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 $69,448 in 1996 and $77,164 in 1995.
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 9). 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 includes cash on hand, deposits in bank, and highly
liquid debt instruments purchased with original maturity dates of generally
three months or less.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially subject
the Company to concentrations of credit risks consist principally of cash and
trade receivables. The Company places substantially all of its cash in demand
deposit accounts with high credit quality financial institutions. Trade
receivables are with a large number of customers within the industry, dispersed
across a wide geographic base. Management believes that any risk of loss is
significantly reduced by its ongoing credit evaluations of its customers'
financial condition.
FINANCIAL INSTRUMENTS - Statement of Financial Accounting Standards (SFAS) No.
107, 'Disclosures About Fair Value of Financial Instruments', requires
disclosure of the estimated fair value of financial instruments when it is
practicable to estimate that value. The carrying amount of assets and
liabilities as reported on the balance sheet approximates their fair market
values.
<PAGE>
ACCOUNTING CHANGES - In October, 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 123, `Accounting
for Stock-Based Compensation.' This statement establishes an alternative method
of accounting that requires recognizing as expense the fair value of employee
stock options and other stock-based awards at the grant date. SFAS No. 123 also
allows the continuation of the current accounting treatment under which the
Company does not recognize compensation expense for the stock options it awards
to employees. Since the Company is electing to retain its current method, it
will be required to present pro forma disclosures in its 1997 financial
statements as if the fair value based method had been applied.
ESTIMATES - The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that reflect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expense during the
reporting period. Actual results could differ from these estimates.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the current year presentation. These reclassifications had no effect on
previously reported net income.
2. INVENTORIES
Inventories at October 31 consisted of the following:
1996 1995
------------- -------------
Computers $ 4,418 $ 37,005
Peripheral equipment 11,517 29,141
Parts 2,124 690
Software 4,457 6,077
Supplies and Forms 1,317 1,359
------------- -------------
Total $ 23,833 $ 74,272
============= =============
<PAGE>
3. NOTES RECEIVABLE
On October 31, 1996, the Company sold certain assets of its Clinic Manager
product line to Adaptive for $500,000, subject to increase or decrease based on
revenues received by Adaptive from the Company's former customers during the
six-month period after closing. Under the terms of an Asset Purchase Agreement,
Adaptive paid the Company $50,000 on October 31, 1996, and is required to pay
the remaining balance in 60 equal monthly payments of $7,500. However, if
certain events occur in future periods, the payment terms will be accelerated to
require payment of the purchase price as early as October 31, 1997.
The notes receivable balance at October 31, 1996, represents the present value
of the payments due from Adaptive in future periods, assuming a rate of 9.25%
(the borrowing rate of the Company on October 31, 1996).
The Company is using the installment method to recognize the gain on this sale
of assets, as the current financial condition of Adaptive and the extended
payment terms of the sale provided no reasonable basis for estimating the degree
of collectibility. During 1996, the Company recognized a gain of $11,888 from
the sale.
4. NOTE RECEIVABLE FROM STOCKHOLDER
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 was to be paid in full on September 30,
1996. The Company extended the due date of the promissory note to October 31,
1997. The shares of common stock issued upon the exercise of the option are held
by the Company as collateral for the promissory note.
5. LEASE COMMITMENTS
The Company entered into an agreement ("Agreement") to lease 16,851 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, 2000. The Company has the option to extend the Agreement for five
years. Minimum lease payments under the Agreement include interior/exterior
maintenance, utilities, insurance and janitorial services, except that the
Company, starting in 1996, is required to pay its pro-rata share of the increase
in such costs over the base established in calendar year 1995.
<PAGE>
Future minimum lease payments under the Agreement are as follows:
1997 $ 278,041
1998 278,041
1999 278,041
2000 92,681
-----------
TOTAL $ 926,804
===========
On December 19, 1996, the Company entered into a sub-lease agreement with
Southern Pacific Funding, Inc. ("Southern") to sub-lease 5,222 square feet of
the Company's office space to Southern. The term of the sub-lease agreement is
January 15, 1997 to January 14, 1998. Southern may terminate the sub-lease
agreement after six months, without penalty. Future minimum payments to be
received under the sub-lease agreement are $68,210 in 1997 and $17,950 in 1998.
Rental expense for all operating leases for the years ended October 31, 1996 and
1995 was $269,445 and $259,956, respectively.
6. CREDIT AGREEMENTS
The Company has a revolving line of credit agreement with United States National
Bank of Oregon ("USNB"). The line of credit 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. In 1996,
the Company renewed the agreement. The agreement requires the Company to make
monthly interest-only payments on all amounts outstanding under the agreement.
The interest rate under the agreement is 1% above USNB's prime interest rate, or
9.25% at October 31, 1996. The Company's balance on October 31, 1996 was
$125,000. The agreement expires April 15, 1997.
<PAGE>
7. 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's contribution up to a maximum
of 2-1/2 percent of the employee's wages. During 1996 and 1995, the Company
contributed $43,039 and $39,727, respectively, to the Plan.
8. 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 is as follows:
1996 1995
----------- -----------
Deferred Tax Assets:
Accrued Expenses $ 58,799 $ 69,277
Deferred Maintenance Contract 123,684 185,527
Differences Between Book and Tax Basis of
Property and Equipment 66,589 149,156
State Net Operating Loss Carryforward 137,520 79,408
Federal Net Operating Loss Carryforward 526,108 246,463
Deferred Tax Liabilities:
Capitalized Software Costs (117,157) (221,120)
--------- ---------
Net Deferred Tax Asset $ 795,543 $ 508,711
========= =========
The deferred tax assets and liabilities are included in the following balance
sheet accounts at October 31:
1996 1995
----------- -----------
Current Deferred Tax Assets $ 182,483 $ 254,804
Deferred Tax Assets 613,060 253,907
--------- ---------
Net Deferred Tax Asset $ 795,543 $ 508,711
========= =========
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 $1,582,000 and $2,084,000 of unused net operating loss
carryforwards which, if not used, will expire in 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 1996 and 1995, $1,395 and $3,161, respectively,
was credited to capital in excess of par value.
<PAGE>
A reconciliation between income taxes calculated at the statutory federal tax
rate and the tax provision reflected in the financial statements is as follows:
1996 1995
----------- -----------
Computed income taxes based on statutory
federal income tax rate of 34% $(257,833) $(659,524)
Increase (reduction) in taxes resulting from:
State income tax, net of federal benefit (33,033) (94,524)
Other 5,439 (8,238)
--------- ---------
$(285,427) $(762,286)
========= =========
The provision for income taxes, net of operating loss carryforwards, consists of
the following:
1996 1995
----------- -----------
Income taxes currently payable (receivable):
Federal $ 1,395 $ (66,532)
State 10 10
--------- ---------
$ 1,405 $ (66,522)
--------- ---------
Deferred taxes - net:
Federal (237,482) (552,547)
State (49,350) (143,217)
--------- ---------
(286,832) (695,764)
--------- ---------
$(285,427) $(762,286)
========= =========
9. SIGNIFICANT CUSTOMERS
During 1996, the Company recorded revenue from one customer representing 13
percent of total revenue. During 1995, the Company recorded revenue from two
customers representing 20 percent and 10 percent of total revenue.
10. 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, 1996, 239,766 shares were available under
the plans 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 grants
occur each year on the date of the annual shareholder meeting, and the exercise
price of the options issued is the fair market value of the common stock on that
date.
<PAGE>
The following table summarizes the stock option activity under the Company's
option plans:
Shares under Option Price
Option Range
------------ ---------------
Options Outstanding at November 1, 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
Exercised (8,100) $ 0.88 - $1.38
Canceled or Expired (191,858) $ 0.625 - $3.38
Granted 131,750 $ 1.00 - $1.56
------- ---------------
Options Outstanding at October 31, 1996 610,936 $ 0.88 - $4.75
======= ===============
Options Exercisable at October 31, 1996 326,225 $ 0.88 - $4.75
======= ===============
*******
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, 1996 and 1995 and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended October 31, 1996. 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, 1996 and 1995 and
the results of its operations and its cash flows for each of the two years in
the period ended October 31, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
December 20, 1996
<PAGE>
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
On October 31, 1996, the Company sold certain assets of its ClinicManager
product line to Adaptive Health Systems of Washington, Inc. ("Adaptive") for
$500,000. In addition to the cash flow contribution from the payments to be made
by Adaptive over the next five years, the sale is expected to improve the
Company's operating results in future periods. On a pro-forma basis, if the sale
of ClinicManager had taken place at the beginning of fiscal 1996, the Company
estimates it would have incurred a loss of approximately $202,000 or $0.08 per
share for 1996, compared to the actual loss of $472,906 or $0.18 per share.
In 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 resulted in a lower amortization
expense for 1996 when compared to 1995.
During 1996, the Company continued to invest a large portion of its revenue in
the development of its software products. In 1996, the Company spent $1,510,657
or 29% of revenue, for the development of new software, the enhancement and
maintenance of existing software, and the improvement to the Company's software
development processes to comply with new FDA regulations. In 1995, the Company
spent $1,377,906 or 27% of revenue for similar development activities. Of the
total costs incurred, the Company capitalized $194,365 in 1996, compared to
$365,016 in 1995.
Despite a decrease in product sales in 1996, total revenue was slightly higher
in 1996 when compared to 1995, due to an increase in customer service and
support revenue. The Company's operating loss for 1996 was $784,303, compared to
the 1995 operating loss of $1,982,905. The reduction in operating loss for 1996
resulted from lower depreciation and amortization expense in 1996.
Since the third quarter of 1995, the Company has reported six consecutive
quarters of improved operating results. In fact, the Company reported a net
income of $4,941 in the fourth quarter of 1996. The improvement primarily
resulted from a decrease in operating expenses. Even though operating expenses
are expected to be less in 1997 than in 1996, management does not anticipate
that the improved operating results will continue during the first half of 1997,
as the loss of revenue from the ClinicManager product line is not expected to be
replaced by new sales of the Company's IntraMed.net product line until the
second half of 1997.
RESULTS OF OPERATIONS - MATERIAL CHANGES
The decrease in product sales of $306,875 or 16% for 1996, as compared to 1995,
resulted primarily from a decrease in the number of laboratory systems sold,
offset in part by new software license fees from the IntraMed.net product line.
The Company believes that the number of laboratory systems sold in 1996 was
negatively impacted by additional regulations placed on blood bank software
vendors by the Food and Drug Administration. Although product sales will be
affected by the sale of the ClinicManager product line, management believes that
product sales will be greater in 1997 than in 1996 as the Company plans to
expand its sales and marketing efforts for its IntraMed.net and LifeLine
products, resulting in a greater number of systems sold.
<PAGE>
The increase in customer service and support revenue of $311,281 or 10% resulted
from an increase in the size of the customer base and the assessment of a
regulatory fee to certain laboratory systems' customers in 1996. Management
anticipates that customer service and support revenue will be less in 1997, due
to the loss of revenue from the ClinicManager product line. In addition,
management does not expect to charge a regulatory fee to its laboratory systems'
customers in 1997.
The decrease in the cost of products sold of $111,072 or 15% resulted from a
decrease of $67,926 in hardware sales, combined with a decrease in the cost of
the hardware. As a percentage of hardware sales, cost of products sold decreased
from 90% in 1995 to 84% in 1996. Hardware sales and related cost of products
sold are expected to be less in 1997 as a result of the sale of the Clinic
Manager product line.
Cost of customer service and support increased by $137,060 or 5% for 1996 when
compared to 1995. The increase primarily resulted from increases in wages and in
software development costs that were expensed rather than capitalized, offset in
part by a decrease in contract labor expense. The increase in wages resulted
from an increase in the size of the quality assurance staff, combined with
overall increases in salaries and benefit costs in 1996. The increase in the
amount of software development costs that were expensed primarily relates to the
development of new software products. The decrease in contract labor expense
resulted from a reduction in the use of contract programmers, analysts and
customer service specialists during 1996. Management feels that the cost of
customer service and support will be lower in 1997 due to the reduction in staff
as a result of the sale of the ClinicManager product line.
Although selling and administrative expenses were somewhat less in 1996 as
compared to 1995, management anticipates that these expenses will be greater in
1997 as the Company plans to expand its sales and marketing efforts of its
IntraMed.net and LifeLine product lines.
As previously discussed, the Company in 1995 reduced the carrying value of
certain software products and shortened the estimated life of other software
products. As a result, depreciation and amortization expense for 1996 was
$457,080 compared to $1,642,541 for 1995.
The accumulation of the income tax benefits recorded in 1996 has resulted in an
increase in the balance of net deferred tax assets. The balance of the net
deferred tax assets was $795,543 on October 31, 1996, compared to $508,711 on
October 31, 1995. Current accounting standards require that a valuation
allowance be recorded when it is more likely than not that some portion of
deferred tax assets will not be realized. Management believes that all of the
October 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 October 31, 1996 was $323,217 compared to
$534,260 on October 31, 1995. The decrease in the cash position resulted from
net cash used for operating and investing activities, offset in part by
borrowings under the Company's revolving line of credit agreement. Based upon an
anticipation of higher product sales and reduced operating expenses, management
believes that the Company's current cash position and available funds under its
revolving line of credit agreement, will be sufficient to fund its operating and
investment activities in fiscal 1997.
Continuing losses and an increase in the deferred revenue liability on October
31, 1996, when compared to October 31, 1995, resulted in a negative working
capital of $415,041 on October 31, 1996. Excluding the deferred revenue
liability, which is a liability for future services, the Company's working
capital on October 31, 1996 was $859,646.
<PAGE>
Capital expenditures for property additions were $104,762 in 1996 compared to
$221,423 in 1995. The decrease resulted from management's decision to reduce
capital expenditures in 1996, due to the decrease in the Company's cash
position. Management anticipates that capital expenditures for property
additions will continue to decrease, as the Company's cash will be used for
operating activities.
Capitalized software development costs totalled $194,365 and $365,016 in 1996
and 1995, respectively. As discussed previously, the Company actually spent more
resources for the development of its software products in 1996 than in 1995.
However, the Company expensed a higher portion of the costs incurred in 1996, as
a significant amount of resources were spent on new software products.
Management expects that 1997 expenditures for software development in 1997 will
be comparable to those in 1996. However, management believes that a higher
portion of those costs will be capitalized, as expenses incurred for
enhancements to the new software products will qualify for capitalization in
1997.
The Company has a $700,000 uncommitted revolving line of credit with the
Company's bank. At October 31, 1996, the Company's balance under this line of
credit was $125,000. 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 maintained the required ratios. The line of credit
expires April 15, 1997.
ACCOUNTING CHANGES
In October, 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, `Accounting for Stock-Based
Compensation.' The impact in 1997 of the adoption of this pronouncement is
discussed under "Significant Accounting Policies" in the Notes to Consolidated
Financial Statements.
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,
1996 appearing in or incorporated by reference in this Annual Report on Form
10-KSB of Informedics, Inc. for the year ended October 31, 1996.
/s/ Deloitte & Touche LLP
Portland, Oregon
January 27, 1997
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 323,217
<SECURITIES> 0
<RECEIVABLES> 709,742
<ALLOWANCES> 28,439
<INVENTORY> 23,833<F1>
<CURRENT-ASSETS> 1,313,009
<PP&E> 904,628
<DEPRECIATION> 672,300
<TOTAL-ASSETS> 2,867,820
<CURRENT-LIABILITIES> 1,728,050
<BONDS> 0
0
0
<COMMON> 26,503
<OTHER-SE> 995,481
<TOTAL-LIABILITY-AND-EQUITY> 2,867,820
<SALES> 1,601,204
<TOTAL-REVENUES> 5,155,953
<CGS> 623,785
<TOTAL-COSTS> 3,518,805
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,523
<INCOME-PRETAX> (758,333)
<INCOME-TAX> (285,427)<F2>
<INCOME-CONTINUING> (472,906)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (472,906)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
<FN>
<F1> See Note 2 to Notes to Financial Statements
<F2> See Note 8 to Notes to Financial Statements
</FN>
</TABLE>
