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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, 1999
[] 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.
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(Exact name of small business issuer as specified in its charter)
GEORGIA 58-1482573
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(State of incorporation) (I.R.S Employer Identification Number)
5600 OAKBROOK PARKWAY, SUITE 240, NORCROSS, GEORGIA 30093-1843
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(Address of principal executive offices)
(770) 447-3570
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(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
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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
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There were 2,114,794 shares of Common Stock outstanding as of March 23, 1999.
Transitional Small Business Disclosure Format Yes No X
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COLOROCS INFORMATION TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE THREE MONTHS ENDED MARCH 31, 1999
TABLE OF CONTENTS
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PAGE
ITEM NUMBER NUMBER
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -- March 31, 1999 and
December 31, 1998 ........................................ 3
Condensed Consolidated Statement of Operations -- Three
Months Ended March 31, 1999 and 1998 ..................... 4
Condensed Consolidated Statement of Cash Flows -- Three
Months Ended March 31, 1999 and 1998 ..................... 5
Notes to Condensed Consolidated Financial Statements --
March 31, 1998 ........................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................ 7
PART II OTHER INFORMATION
Item 5. Other Information .......................................... 8
Item 6. Exhibits and Reports on Form 8-K ........................... 8
SIGNATURES ................................................. 8
INDEX OF EXHIBITS .......................................... 9
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Colorocs Information Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of March 30, 1999 and December 31, 1998
(Unaudited)
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<CAPTION>
March 31, December 31,
1999 1998
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 58,729 $ 524,364
Short term investments................................ -0- -0-
Receivables........................................... 30,170 24,210
Inventory............................................. 2,217 1,305
Prepaid expenses...................................... 17,289 12,106
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TOTAL CURRENT ASSETS.................................. 108,405 561,985
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $72,655 and $67,925 at March 31, 1999 and
December 31, 1998, respectively..................... 14,707 19,436
INVESTMENT IN PRIMECOM INTERACTIVE.................... 400,000 -0-
GOODWILL AND INTANGIBLE ASSETS, net................... 60,169 68,765
DEPOSITS ............................................ 450 337
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TOTAL ASSETS.......................................... $ 583,731 $ 650,523
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................... $ 255,717 $ 255,717
Note payable to director/shareholder................ 87,500 50,000
Notes payable....................................... -0- -0-
Accounts payable and accrued liabilities............ 854,339 887,813
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TOTAL CURRENT LIABILITIES............................. 1,197,556 1,193,530
DEFERRED LICENSING INCOME............................. 875,000 875,000
COMMITMENTS AND CONTINGENCIES......................... -0- -0-
STOCKHOLDERS' DEFICIT
Common stock; no par value, 10,000,000 shares
authorized; 2,114,794 shares issued and
outstanding at March 31, 1999 and
December 31, 1998................................. 1,802,738 1,802,738
Warrants.............................................. 100,000 100,000
Additional paid in capital............................ 1,374,039 1,374,039
Retained deficit...................................... (4,765,602) (4,694,784)
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TOTAL STOCKHOLDERS' DEFICIT........................... (1,488,825) (1,418,007)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT........... $ 583,731 $ 650,523
========== ==========
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COLOROCS INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1999 AND 1998
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
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MARCH 31, 1999 MARCH 31, 1998
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Revenues
Software $ 84,437 $ 235,069
Copier and consumables -- --
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Total revenue 84,437 235,069
Operating expenses:
Research and development 16,949 37,896
Selling, general and administrative 180,808 288,504
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Total operating expenses 197,757 326,400
Operating (loss) (113,320) (91,331)
Other income (expense) net 30,003 (19,281)
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Net income (loss) $ (83,317) $ (110,612)
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Net Income (loss) per share
Basic $ (.04) $ (.05)
Fully Diluted $ (.04) $ (.05)
========== ==========
Weighted average shares outstanding
Basic 2,114,794 2,114,794
Fully Diluted 2,114,794 2,114,794
========== ==========
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Colorocs Information Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998
(Unaudited)
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Three Months Ended
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March 31, 1999 March 31, 1998
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Operating Activities:
Net income (Loss) $ (83,317) $ (110,612)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 13,325 11,602
Minority interest -0- -0-
Changes in assets and liabilities:
Receivables, net (6,334) 758,219
Inventories (913) -0-
Prepaid expenses (4,921) 1,804
Deposits -0- 1,950
Accounts payable, accrued expenses, and deferred
income 16,525 (55,325)
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Cash provided by (used in) operating (65,635) 607,638
activities
Investing Activities:
Investment in Primecom Interactive (400,000) -0-
Sale (purchase) of marketable securities -0- (68,125)
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Cash provided by (used in) operating (400,000) (68,125)
activities
Financing Activities:
Repayment of line of credit -0- (500,000)
Repayment of notes payable -0- -0-
Repayment of payable to director/shareholder -0- (37,500)
Proceeds from exercise of stock options -0- -0-
Proceeds from short-term notes -0- -0-
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Cash provided by financing activities -0- (537,500)
Net increase (decrease) in cash and cash equivalents (465,635) 2,013
Cash and cash equivalents, beginning of period 524,364 29,381
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Cash and cash equivalents, end of period $ 58,729 $ 31,394
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COLOROCS INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Colorocs Information Technologies, Inc. (the "Company") is incorporated in the
state of Georgia. On December 13, 1995, the Company's name was change from
Colorocs Corporation to Colorocs Information Technologies, Inc. The Company
operates using the name Colorocs Information Technologies for its technology
licensing business and COPS, Inc. ("COPS") for the sale of its network printing
and file sharing software. It also licenses the name Colorocs for the outside
sales of copying hardware, consumables, and parts.
The Company currently generates revenue from the licensing of its patented
printer and copier technology and the sale of network printing and file sharing
software products.
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, 1999 and
the results of its operations and cash flows for the three months ended March
31, 1999 and 1998 have been included. Operating results for the three months
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. 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, 1998.
2. LICENSING AGREEMENT
The Company has entered into certain licensing agreements to use the Company's
patented double transfer, single pass paper color imaging system. At March 31,
1999 and December 31, 1998, the Company had deferred approximately $875,000 of
income under certain license agreements.
3. LEGAL PROCEEDINGS
There were no pending or potential material lawsuits or claims against the
Company at March 31, 1999.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 $84,437 and $235,069 for the three months ended March 31,
1999 and 1998 respectively, a decrease of $150,632, approximately 64%. The
decrease in revenues is attributable to a decline in revenues from COPS software
sales.
Research and Development
Research and development expenses were $16,949 for the three months
ended March 31, 1999, compared to $37,896 for the three months ended March 31,
1998, a decrease of $20,947 or 55%. This decrease was attributable to the
completion of the product development and release of COPSTalk for Windows NT.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $180,818 for the
three months ended March 31, 1999, compared to $288,504 for the three months
ended March 31, 1998, a decrease of 37%.
Other income
Other income was $30,003 for the three months ended March 31, 1999
compared to other expense of $19,281 for the three months ended March 31, 1998.
The other income of $30,003 is comprised primarily of a gain of
$33,031 representing additional proceeds received in excess of carrying cost
from the acquisition of NetChannel by America-On-Line.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are current cash balances
and cash equivalents and cash generated from operations, supplemented from time
to time by borrowings under the Company's bank line of credit and from direction
of the Company. Cash and such equivalents were $58,729 as of March 31, 1999.
Management believes that these sources of funds, together with anticipated cash
from operations, will be sufficient to fund the Company's network and printing
software business for the remainder of 1999.
The report of the Company's independent auditors on the consolidated
financial statements of the Company as of December 31, 1998 and for the two
years in the period ended December 31, 1998 contains an explanatory paragraph
as to the Company's ability to continue as a going concern. As stated in the
report, the Company has sold the majority of operating assets and suffered
recurring losses from operations and has a net capital deficiency that raises
substantial doubt about the Company's ability to continue as a going concern.
Certain of the Company's assets might be worth substantially less than the
amounts shown on the Company's
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balance sheet if the Company is unable to continue as a going concern and the
financial statements have not been adjusted to reflect the outcome of this
uncertainty. There can be no assurance that future revenues will exceed
operating expenses to enable the Company to continue as a going concern.
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The proxy statement solicited by management of the Company with respect to
the 1999 Annual Meeting of Shareholders will confer discretionary authority to
vote on any proposals of shareholders of the Company intended to be presented
for consideration at such Annual Meeting that are submitted to the Company 45
days prior to the 1998 proxy mailing date.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
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 this 14th day of May, 1999.
Colorocs Information Technologies, Inc.
(Issuer)
By: /s/ Rudolph P. Russo
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Rudolph P. Russo
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Sharon P. Conte
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Sharon P. Conte
Chief Accounting Officer
(Accounting Officer)
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EXHIBIT INDEX
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Exhibit No. Description Page No.
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27 Financial Data Schedule 12
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COLOROCS INFORMATION TECHNOLOGIES, INC. FOR THE THREE
MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 58,729
<SECURITIES> 0
<RECEIVABLES> 30,170
<ALLOWANCES> 0
<INVENTORY> 2,217
<CURRENT-ASSETS> 108,405
<PP&E> 87,362
<DEPRECIATION> 72,655
<TOTAL-ASSETS> 583,731
<CURRENT-LIABILITIES> 1,197,556
<BONDS> 0
0
0
<COMMON> 1,802,738
<OTHER-SE> 1,474,039
<TOTAL-LIABILITY-AND-EQUITY> 583,731
<SALES> 84,437
<TOTAL-REVENUES> 84,437
<CGS> 0
<TOTAL-COSTS> 197,757
<OTHER-EXPENSES> 33,281
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,278
<INCOME-PRETAX> (83,317)
<INCOME-TAX> 0
<INCOME-CONTINUING> (83,317)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,317)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
