U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Period Ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-14392
COLOROCS INFORMATION TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Georgia (State of incorporation)
58-1482573 (I.R.S. Employer Identification Number)
5600 Oakbrook Parkway, Suite 240, Norcross, Georgia 30093-1843
(Address of principal executive offices)
(770) 447-3570 (Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X
No __
Check whether the issuer filed all documents and reports required
to be filed by Section 12,13 or 15(d) of the Securities Exchange
Act of 1934 after the distribution of securities under a plan
confirmed by a court. Yes X No __.
There were 1,967,455 shares of Common Stock outstanding as of May
10, 1996.
Transitional Small Business Disclosure Format. Yes __ No X
<PAGE>
COLOROCS INFORMATION TECHNOLOGIES, INC.
Quarterly Report on Form 10-QSB
For the Three Months Ended March 31, 1996
Table of Contents
Item Number Page
Number
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets - March 31,
1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations
- Three Months Ended March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows
- Three Months Ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements - March 31, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
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PART I - FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
Colorocs Information Technologies, Inc. and Subsidiary
Condensed Consolidated Balance Sheet
As of March 31, 1996 and December 31, 1995
March 31, 1996 December 31,1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 247,793 $1,578,994
Short term investments 4,952,728 1,970,812
Receivables, net of allowance
for doubtful accounts of $10,000 at March 31, 1996 and
December 31, 1995 413,775 2,697,584
Inventories, at cost 386,876 340,092
Prepaid expenses 264,065 186,712
Total current assets 6,265,237 6,774,194
Property and equipment, net of accumulated depreciation of
$20,040 and $18,837 at March 31, 1996 and
December 31, 1995, respectively 94,097 35,882
Long term investment 250,000 250,000
Goodwill, net of accumulated amortization of $7,089 at
March 31, 1996 134,691 141,780
Deposits 24,019 20,967
$6,768,044 $7,222,823
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 226,810 416,279
Deferred income 9,063 12,145
Total current liabilities 235,873 428,424
Deferred licensing income 875,000 875,000
Commitments and contingencies 0 0
Shareholders' equity
Common stock; no par value; 10,000,000 shares authorized;
1,967,455 shares issued and outstanding at March 31, 1996
and December 31, 1995 1,802,738 1,802,738
Additional paid in capital 1,283,000 1,283,000
Retained earnings 2,571,433 2,833,661
Total shareholders' equity 5,657,171 5,919,399
Total liabilities and shareholders' equity $6,768,044 $7,222,823
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets.
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Colorocs Information Technologies, Inc. and Subsidiary
Condensed Consolidated Statement of Operations
Three Months Ended March 31, 1996 and 1995
<TABLE>
1996 1995
<S> <C> <C>
Revenues:
Sales of equipment and supplies, net $ 457,065 $ 426,234
License fees 266,886 0
723,951 426,234
Operating expenses:
Cost of revenue 399,358 267,736
Research and development 47,393 0
Sales and marketing 210,513 64,644
General and administrative 381,944 322,732
Total operating expenses 1,039,208 655,112
Operating loss (315,257) (228,878)
Other income, net 53,029 126,978
Net loss $ (262,228) $ (101,900)
Net income per common and equivalent shares $ (0.13) $ (0.05)
Weighted average shares outstanding 1,967,455 1,948,224
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
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Colorocs Information Technologies, Inc. and Subsidiary
Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 1996 and March 31, 1995
<TABLE>
Three Months Ended
1996 1995
<S> <C> <C>
Operating Activities:
Net loss $ (262,228) $ (101,900)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 10,291 2,615
Changes in assets and liabilities:
Receivables 2,283,809 (321,719)
Inventories (46,784) (177,826)
Prepaid expenses (77,353) (7,528)
Deposits (3,052) 0
Accounts payable, accrued expenses, and deferred
income (192,552) 38,479
Cash provided by (used in) operating activities 1,712,131 (567,879)
Investing Activities:
(Purchase) sale of marketable securities (2,981,916) 985,683
Sale of investment in Savin, net 0 144,000
Purchase of equipment, net (61,416) 0
Payments received on note receivable 0 7,500
Cash (used in) provided by investing activities (3,043,332) 1,137,183
Net (decrease) increase in cash (1,331,201) 569,304
Cash and cash equivalents, beginning of period 1,578,994 231,835
Cash and cash equivalents, end of period $ 247,793 $ 801,139
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
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<PAGE>
COLOROCS INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1. Summary of Significant Accounting Policies
The Company
Colorocs Information Technologies, Inc. (the "Company" ) is
incorporated in the State of Georgia. The Company's principal
operations have shifted from the design, manufacture
and sale of plain paper full color copiers and color printers to
the maintenance and product support of color copiers and
printers previously manufactured and sold by the Company
and to the licensing of the Company's patented color printing and
copier technology. The Company currently generates revenue
from the licensing of its technology, the sale of spare
parts, supplies and other consumables, maintenance of its
installed base of copiers and printers, the sale of the Company's
remaining inventory of color copiers and printers, and the
sale of network printing and file sharing software products.
Effective December 10, 1993, the Company was reorganized and
recapitalized under Chapter 11 of the United States Bankruptcy
Code. New common stock was issued to new investors and to
certain classes of the predecessor Company's creditors as
settlement of their claims pursuant to the Plan of Reorganization
(the "Plan"). Under the Plan, the predecessor Company's former
common stockholders and preferred stockholders also received new
common stock of the reorganized Company.
Financial Statements
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions
to Form 10-QSB and do not include all the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position of the Company
as of March 31, 1996 and the results of its operations and cash
flows for the three months ended March 31, 1996 and 1995 have
been included. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. These
statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995.
Reclassifications
Certain prior period amounts have been reclassified to conform
with the current period presentation.
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2. Acquisition
In December 1995, the Company acquired substantially all of the
assets of CoOperative Printing Solutions, Inc. ("COPS, Inc.")
for $47,872 in cash and 19,231 shares of the Company's Common
Stock. The acquisition has been accounted for using the purchase
method, and accordingly the acquired assets and liabilities were
recorded at their estimated fair value at the date of
acquisition. Allocation of the purchase price of the
acquisition resulted in goodwill of $141,780 which is being
amortized over five years.
3. Long Term Investment
During 1995, the Company purchased 250,000 shares of common stock
(approximately 3%) of ViewCall Europe PLC ("VCE"), a publicly
traded company based in the United Kingdom, for a price of $1.00
per share. VCE develops and markets a low cost television set
top box ("STB") that provides users with direct access to the
Internet through a television and an ordinary telephone line. In
connection with its investment in VCE, the Company obtained a six
month exclusive license, and an option to acquire a permanent
exclusive license, to distribute the STBs in North America. The
Company is currently conducting test market trials of the STBs
in the Atlanta area in order to determine whether to exercise the
option to acquire the permanent exclusive contract. If these
trials are successful (of which there can be no assurance), it is
anticipated that equity securities of the Company and/or a
subsidiary of the Company will be issued as payment for the
permanent exclusive license.
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<PAGE>
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion contains forward looking information
that is subject to a number of uncertainties that could cause
actual results to differ materially from those projected.
Results of Operations
Revenues
Revenues were $723,951 for the three months ended March 31, 1996
and $426,234 for the three months ended March 31, 1995, an
increase of $297,717 or approximately 70%. The increase in
revenues is principally attributable to an increase in software
license fees resulting from the acquisition of COPS, Inc. in
December 1995. Sales generated from equipment and supplies were
$457,065 for the three months ended March 31, 1996 as compared to
$426,234 for the three months ended March 31, 1995, an increase
of $30,831 or approximately 7% which resulted from increased
consumables sales related to the larger installed base of copiers
and printers in the 1996 period.
Cost of Revenue
Cost of revenue was $399,358 or approximately 55% of revenues and
$267,736 or approximately 63% of revenues for the three months
ended March 31, 1996 and 1995, respectively. The increase in the
dollar amount is the result of the increased cost of license fees
from COPS, Inc., partially offset by a decrease in the cost of
maintenance for the Company's installed base of color copiers.
The decrease in cost of revenue as a percentage of revenues is
attributable to the 70% increase in revenues.
Research and Development
Research and development expenses were $47,393 for the three
months ended March 31, 1996. The increase in development
expenses for 1996 is attributable to the addition of software
development personnel in connection with the acquisition of COPS,
Inc., and the addition of research and development personnel for
the STB and the ViewCall America online service.
Sales and Marketing Expenses
Sales and marketing expenses were $210,513 for the three months
ended March 31, 1996 as compared to $64,644 for the three months
ended March 31, 1995, an increase of 226%. Sales and marketing
expenses as a percentage of revenues were 29% for the three
months ended March 31, 1996 and 15% for the three months ended
March 31, 1995. The increase in the dollar amount of sales and
marketing expenses is due principally to the addition of sales
and marketing personnel and increased marketing expenses related
to sales of software products and marketing expenses for the
ViewCall America consumer market trials. The decrease in sales
and marketing expenses as a percentage of revenues is
attributable to the 70% increase in revenues.
8
<PAGE>
General and Administrative Expenses
General and administrative expenses were $381,944 for the three
months ended March 31, 1996 and $322,732 for the three months
ended March 31, 1995, an increase of 18%. General and
administrative expenses were 52% of revenues for the three months
ended March 31, 1996 and 76% of revenues for the three months
ended March 31, 1995. The increase in general and administrative
expenses in the 1996 period is due to the addition of
administrative staff personnel to support the Company's
anticipated growth. The decrease as a percentage of revenue is
due to the 70% increase in revenue in the 1996 period.
Other Income, Net
Other income, net was $53,029 for the three months ended March
31, 1996 as compared to $126,978 for the three months ended March
31, 1995. This decrease is due to a one time investment gain of
approximately $60,000 incurred during the first quarter of 1995.
Liquidity and Capital Resources
The Company's sources of liquidity are current cash balances and
cash equivalents, short term investments, and cash generated from
operations. As of March 31, 1996, the Company had cash and cash
equivalents of $247,793 and short term investments of $4,952,728.
Management believes that these sources of funds, together with
anticipated cash from operations, will be sufficient and that no
lines of credit or debt will be necessary to fund the Company's
color copier and printer and network printing software lines of
business in 1996. However, if the current test market trials of
the STBs are successful and the Company determines to proceed in
manufacturing the STBs and the development of its proprietary
online/Internet access service, additional equity or debt
financing will be required. Although the Company believes
that adequate financing would be available on acceptable terms,
no assurance of such can be given. The inability of the Company
to obtain adequate financing on acceptable terms likely would
prevent the marketing of the STBs and the online/Internet access
service.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None
(b) Reports on Form 8-K. None
The following Current Reports on Form 8-K were filed by the
Company during the quarter ended March 31, 1996:
Financial
Date of Form 8-K Statements
Report Item No. Description Filed
1/12/96 5 Acquisition of CoOperative N/A
Printing Solutions, Inc.
1/12/96 4 Change in Independent N/A
Accountants
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the issuer has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on May
14, 1996.
Colorocs Information Technologies, Inc.
(Issuer)
By: _________________________________
Michael J. Casey
Vice President, Finance and
Administration and Chief Financial
Officer
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