<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[MARK ONE]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31,1999
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: 0-24087
ITERATED SYSTEMS, INC.
(Exact name of registrant as specified in Its charter)
GEORGIA 58-1741516
(State or other Jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
3525 PIEDMONT ROAD
SEVEN PIEDMONT CENTER 30305-1530
SUITE 600 (Zip Code)
ATLANTA, GEORGIA
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 264-8000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of shares of the issuer's class of capital stock as of March 31,1999,
the latest practicable date, is as follows: 13,073,025 shares of Common Stock,
$.01 par value.
================================================================================
ITERATED SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31,1999
(unaudited) and December 31, 1998
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1999 and 1998 (unaudited)
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 and 1998 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ITERATED SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
--------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 3,706,070 $267,232
Short-term investments 4,270,444 5,690,574
Accounts receivable 214,088 383,520
Other current assets 212,132 134,723
------------ ------------
Total current assets 8,402,734 6,476,049
Property and equipment 3,397,737 3,425,214
Accumulated depreciation (2,761,119) (2,889,792)
------------ ------------
Net property and equipment 636,618 535,422
Other assets 44,699 43,446
------------ ------------
TOTAL ASSETS $ 9,084,051 $ 7,054,917
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $153,670 $213,181
Accrued liabilities 353,086 388,850
Deferred revenue 5,126 11,488
Current maturities of debt 4,873 3,729
Other current liabilities 34,572 34,572
------------ ------------
Total current liabilities 551,327 651,820
Non-current liabilities 14,405 5,762
Shareholders' equity
Common stock 130,731 130,731
Additional paid-in capital 29,806,036 29,806,036
Retained earnings (21,461,546) (23,635,529)
Currency translation adjustments 43,098 96,097
------------ ------------
Total shareholders' equity 8,518,319 6,397,335
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,084,051 $ 7,054,917
============ ============
</TABLE>
<PAGE>
ITERATED SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1999
----------------- --------------
<S> <C> <C>
REVENUES:
Development fees $ 119,891 $ 272,670
Product license fees 137,702 100,321
Other revenues 23,405 5,808
----------------- --------------
Total revenues 280,998 378,799
OPERATING EXPENSES:
Sales and marketing 1,201,682 901,388
Research, development and engineering 1,553,344 1,282,958
General and administrative 563,233 423,944
----------------- --------------
Total operating expenses 3,318,259 2,608,290
OPERATING LOSS (3,037,261) (2,229,491)
OTHER INCOME/(EXPENSE):
Interest income 236,158 90,845
Interest expense (8,539) (188)
Foreign currency exchange loss (1,227) (35,146)
----------------- --------------
Total other income 226,392 55,511
----------------- --------------
NET LOSS BEFORE INCOME TAXES (2,810,869) (2,173,980)
INCOME TAXES 0 0
----------------- --------------
NET LOSS $ (2,810,869) $ (2,173,980)
================= ==============
Basic and diluted net loss per share of
common stock $ (0.21) $ (0.17)
================= ==============
Weighted average number of shares of
common stock outstanding 13,105,600 13,073,025
================= ==============
</TABLE>
See accompanying notes.
<PAGE>
ITERATED SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
1998 1999
--------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (2,810,869) $ (2,173,980)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 268,045 133,373
Gain on disposal of property and equipment 0 (3,675)
Loss on foreign currency transactions 1,227 35,146
Changes in operating assets and liabilities:
Accounts receivable 287,740 (145,471)
Prepaid expenses and other assets 1,472 78,662
Accounts payable 23,850 59,511
Accrued expenses 201,441 35,764
Deferred revenue 0 6,362
Other liabilities (8,643) (8,643)
--------------- --------------
Net cash used in operating activities (2,035,737) (1,982,951)
INVESTING ACTIVITIES
Purchases of property and equipment (167,041) (34,361)
Proceeds from sale of property and equipment 0 3,675
Purchases of short-term investments (71,239) (1,420,130)
--------------- --------------
Net cash used in investing activities (238,280) (1,450,816)
FINANCING ACTIVITIES
Payments on note payable to bank (34,623) 0
Payments on capital lease obligations (15,410) (1,144)
Issuance of common stock 2,293 0
Repurchase of common stock (83,802) 0
--------------- --------------
Net cash used in financing activities (131,542) (1,144)
Effect of exchange rate fluctuation on cash 229 (3,927)
--------------- --------------
DECREASE IN CASH AND CASH EQUIVALENTS (2,405,330) (3,438,838)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,633,283 3,706,070
=============== ==============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,227,953 $ 267,232
=============== ==============
</TABLE>
See accompanying notes.
<PAGE>
ITERATED SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,1999
(unaudited)
1. PRESENTATION OF INTERIM INFORMATION
The accompanying condensed consolidated financial statements include
all adjustments consisting of normal recurring adjustments that Iterated
Systems, Inc. and its wholly owned subsidiary, Iterated Systems, Limited
(collectively, the "Company") considers necessary for a fair presentation of its
unaudited results of operations for the three months ended March 31, 1998 and
1999. Results for the three months ended March 31, 1999 are not necessarily
indicative of the results for the year.
2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its wholly owned United Kingdom subsidiary, Iterated Systems,
Limited. Significant intercompany accounts and transactions have been eliminated
in consolidation.
3. PURCHASES AND SALES OF COMMON STOCK
During the three months ended March 31, 1998, the Company repurchased
11,100 shares of its common stock on the open market for a cost of approximately
$83,800. The Company also issued 7,200 shares upon the exercise of stock options
by employees for net proceeds of $2,300.
4. SEGMENT INFORMATION
In accordance with the requirements of Financial Accounting Standards
Board (FASB) Statement No. 131, Disclosure About Segments of an Enterprise and
Related Information, the following disclosure represents the information used by
management when evaluating the operating performance of its business units. The
information reviewed by management includes the operating revenue from external
customers, net loss and identifiable assets for the Company's two geographic
areas, the United States and the United Kingdom. Both operating segments are
involved in developing and marketing patented digital image science technology.
The net assets of the foreign operations exclude intercompany accounts payable
to the Company (for which settlement is not planned or anticipated in the
foreseeable future).
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
Operating revenue
United States $ 280,500 $ 373,600
United Kingdom 500 5,200
--------------- --------------
$ 281,000 $ 378,800
--------------- --------------
Net Loss
United States $ (2,691,500) $ (2,029,900)
United Kingdom (119,400) (144,100)
--------------- --------------
$ (2,810,900) $ (2,174,000)
December 31, March 31, 1999
1998
--------------- --------------
Identifiable assets, net
United States $ 15,946,100 $ 6,532,200
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
United Kingdom (118,800) (134,900)
-------------- ------------
$ 15,827,300 $6,397,300
============== ============
</TABLE>
5. COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, Reporting
Comprehensive Income ("Statement 130"), which establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in financial statements. Statement 130 is effective
for fiscal years beginning after December 15, 1997. The Company adopted
Statement 130 in 1998 and has not presented a statement of comprehensive income
because the effect of the components of comprehensive income is not material to
its consolidated financial statements.
<PAGE>
ITEM 2.
ITERATED SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
LIQUIDITY AND FINANCIAL CONDITION
At March 31, 1999, the Company had cash and short-term investments of
$5,958,000 and shareholders' equity in excess of $6,397,000. The Company will
require significant increases in revenue to cover operating costs and achieve a
profitable level of operations and anticipates that it will need to raise
additional capital through debt or equity financing during this year to provide
adequate operating capital. If adequate funds are not available, or are not
available on acceptable terms, our ability to fund our operations, take
advantage of unanticipated opportunities or otherwise respond to competitive
pressure would be significantly limited. There can be no assurance that we will
be able to raise funds on favorable terms.
In the first three months of 1998 and 1999 the Company used cash in
operating activities of $2,036,000 and $1,983,000. This cash was used to fund
the net loss for the respective periods.
In the first three months of 1998 and 1999 the Company used cash in
investing activities of $238,000 and $1,451,000 respectively. The funds were
primarily for purchases of short-term investments and property and equipment.
In the first three months of 1998 and 1999 the Company used cash in
financing activities of $132,000 and $1,000, respectively. During 1998 the
company used funds primarily to make payments on notes payable and capital lease
obligations, and to repurchase Company shares on the Oslo Stock Exchange as
discussed later in Risk Factors.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Revenues
Total revenues increased 35% to $379,000 in the three months ended
March 31, 1999 compared to $281,000 in the same period in 1998. The increase was
primarily due to the increased level of billings on research contracts for the
development of imaging technology.
Sales and Marketing
Sales and marketing expenses decreased 25% to $901,000 in the three
months ended March 31, 1999 from $1,202,000 during the same period in 1998.
During 1997 and 1998, the Company restructured and reduced its workforce to
focus on a more effective implementation of its business plan. This resulted in
decreased personnel and associated expenses in the sales and marketing area
during 1999 compared to the same period in 1998.
Research, Development and Engineering
Research, development and engineering expenses decreased 17% to
$1,283,000 in the three months ended March 31, 1999 from $1,553,000 in the same
period in 1998. The decrease is primarily the result of lower personnel and
related expenses resulting from the Company's personnel reductions during 1998.
<PAGE>
General and Administrative
General and administrative expenses decreased 25% to $424,000 in the
three months ended March 31, 1999, from $563,000 in the same period in 1998.
This decrease is primarily due to the decreased personnel costs associated with
the Company's revised business focus and a reduction in the level of legal and
professional costs that was required for the Company's initial registration on
the Oslo Stock Exchange and as an SEC reporting company in the United States
during 1998.
Interest Income
Interest income decreased 62% to $91,000 in the three months ended
March 31, 1999 from $236,000 in the same period in 1998. In September 1997, the
Company received approximately $18,600,000 in net proceeds from an initial
public offering of common stock on the Oslo Stock Exchange. The decrease in
interest income is due to lower interest earnings on the decreased cash and
short-term investment balances resulting from the use of these proceeds to fund
the Company's operations.
IMPACT OF YEAR 2000
The Company is in the process of evaluating the potential impact of
what is commonly referred to as the year 2000 issue, concerning the inability of
certain computer systems to properly recognize and process dates starting with
the year 2000 and beyond. The Company is taking steps to ensure that its
business systems software and equipment will continue to function properly after
December 31, 1999. In doing so, the Company has established a team, which will
work directly with management to (1) assess and test all internal information
systems and other systems that may be affected by the year 2000 date change; (2)
assess and test its products that may be affected by the year 2000 date change;
(3) communicate with third parties that supply its products to ensure they are
addressing the year 2000 issue; and (4) compose a contingency and disaster
recovery plan to ensure resolution of problems that may arise as a result of the
year 2000 date change. Until this assessment is completed, the Company will not
be able to determine the costs of becoming year 2000 compliant, the risks of
non-compliance, and its ability to conduct its business under a contingency
plan.
The Company's products do not contain any real-time clocks and
therefore the products themselves do not present any year 2000 issues.
With respect to its information technology accounting systems, the
assessment of equipment and software was started in June 1998. The Company will
have completed the upgrade of these systems to versions that are stated to be
2000 compliant by June 30, 1999.
The Company has commenced testing to determine that its internal
systems are year 2000 compliant. The Company expects to complete testing and
establish compliance with respect to all of its systems and products by June 30,
1999, subject to possible equipment upgrades during 1999 and ongoing
communications with third parties. The Company believes that this time frame
will allow internal auditing and testing of its systems, as well as further
remediation, if necessary.
The Company plans to devote the necessary resources to resolve all
significant year 2000 issues in a timely manner. Based upon current estimates,
the Company believes that its direct costs for year 2000 compliance will consist
primarily of costs related to the staff time devoted to year 2000 compliance.
The Company does not expect material capital expenditures will be necessary for
year 2000 related compliance costs and capital expenditures in these areas have
not been material for historical periods.
<PAGE>
Regardless of the year 2000 compliance of its systems and products, the
Company may be adversely affected by disruptions in the operations of the
enterprises with which it interacts. These business enterprises include
suppliers, corporate partners, both domestic and international, government
agencies, and other third parties. The Company cannot reasonably predict the
impact on its operations and financial condition if any such businesses are
adversely affected by the year 2000 issue.
Statements made herein about the implementation of various phases of
the Company's year 2000 program, the costs expected to be associated with that
program, and the results it expects to achieve constitute forward-looking
information. There are many uncertainties involved in the year 2000 issue and
the following important factors, among others, could affect the impact of the
year 2000 issue: (1) the inherent uncertainty of the costs and timing of
achieving compliance on the wide variety of systems used by the Company; (2) the
reliance on the efforts of vendors, customers, government agencies, and other
third parties beyond its control to achieve adequate compliance and avoid
disruption of its business in early 2000; and (3) the uncertainty of the
ultimate costs and consequences of any unanticipated disruption of its business
resulting from the failure of one of its applications or of a third party's
systems.
SOFTWARE REVENUE RECOGNITION
The American Institute of Certified Public Accountants issued Statement
of Position 97-2 ("SOP 97-2"), SOP 98-4, and SOP 98-9, to clarify guidance on
applying generally accepted accounting principles to software transactions and
to provide guidance on when revenue should be recognized and in what amounts for
licensing, selling, leasing, or otherwise marketing computer software. The
adoption of this guidance had no impact on the Company's methods of recognizing
revenue.
INFLATION
The effects of inflation on the Company's operations were not
significant during the periods presented in the consolidated financial
statements, and the effects thereof are not considered to be of significance in
the
<PAGE>
future. Generally, throughout the periods discussed above, the changes in
revenue have resulted primarily from fluctuations in sales levels, rather than
price changes.
MARKET RISK
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of short-term
investments, trade accounts receivable, and accounts payable.
The Company maintains cash and cash equivalents and certain other
financial instruments with various financial institutions. Company policy is
designed to limit exposure at any one institution. Certain investments are in
excess of Federal Deposit Insurance Corporation ("FDIC") guaranteed amounts. The
Company performs periodic evaluations of the relative credit standing of those
financial institutions that are considered in the Company's investment strategy.
The carrying amounts reported in the balance sheet for cash and cash
equivalents, short-term investments, accounts receivable, accounts payable, and
notes payable approximate their estimated fair values.
RISK FACTORS
The following factors may affect the Company's future performance.
We Have a History of Losses. We have incurred net operating losses
since 1991 and as of March 31, 1999, we have had an accumulated deficit of
approximately $23,635,500. We will need significant increases in revenue to meet
our projected development, selling, marketing and other operating costs and to
achieve a profitable level of operations. There can be no assurance, however, as
to when or if such increases in revenues will be achieved.
Our Revenues Have Decreased Following Expiration of the 1994 MCI
Agreement. From September 1994 until September 1997, approximately 84% of our
revenue was derived from MCI under the 1994 MCI Agreement. Due to the expiration
of the 1994 MCI Agreement in September 1997, our revenue has decreased
dramatically. There can be no assurance that we will be successful in replacing
revenues at the same level in the future.
We Have Changed Our Business Focus. We have revised our business plan
to focus on the development and delivery of technology to the digital imaging
market. As a result of this shift in focus and the expiration of our agreement
with MCI, total revenues decreased 92% in the year ended December 31, 1998
compared to 1997. Our future financial performance will depend in large part on
the successful implementation of our new business focus. There can be no
assurance that we will succeed in implementing our business strategy and any
failure to do so may have a material adverse effect on our business, financial
condition and results of operations.
We Depend on Emerging Markets to Utilize our Products. Currently, only
a limited number of applications incorporating our products or technologies are
in commercial production. We have derived substantially all of our product
revenues, to date, from sales of technology for these applications and sales of
products for development, trials and early deployment of applications that are
not yet commercially available or are not yet in volume production. Our ability
to generate significant revenues will be dependent on the development of new
opportunities for digital images in the computer and photography markets and/or
the adoption of our technologies by producers and users of such images. The
potential size of these new market opportunities and the timing of their
development are uncertain.
<PAGE>
Our Results of Operations May Fluctuate. Our quarterly operating
results have in the past and may in the future vary significantly depending on
factors such as:
. revenue from software sales;
. the timing of new product and service announcements;
. market acceptance of new and enhanced versions of our products;
. the size and timing of significant orders;
. changes in operating expenses;
. changes in our strategy; and
. general economic factors.
We have limited or no control over many of these factors. We operate
with virtually no service or software product order backlog because our services
are purchased on demand and our software products typically are shipped shortly
after orders are received. As a result, revenues in any quarter are
substantially dependent on the quantity of purchases of services requested and
product orders received in that quarter. Quarterly revenues also are difficult
to forecast because the market for our products is evolving and our revenues in
any period are significantly affected by the announcements and product offerings
of our competitors as well as alternative technologies. As a result, we believe
that period-to-period comparisons of our results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance.
Our Success Depends Upon the New Products We Develop and Improving our
Technology. Our operating results depend upon our ability to successfully
introduce new products and improve our core technology on a timely basis and/or
reduce costs of existing products. As a result, we believe that continued
significant expenditures for research and development will be required in the
future. There can be no assurance that new products will be successfully
developed or will achieve market acceptance.
Our Markets are Highly Competitive. The development and marketing of
digital image products and technologies is extremely competitive. Many of the
companies developing and marketing competitive technologies have competitive
advantages over us, because they have established positions in the market, brand
name recognition, established ties with OEMs, and the use of industry standards
for digital compression and decompression such as MPEG and JPEG which can be
obtained at little or no cost to the user. Further, there can be no assurance
that our competitors will not succeed in developing products or technologies
that are more effective than those being developed by us or that would render
our products and technologies obsolete. In addition, many of our competitors
have substantially greater financial, technical, marketing and human resources
capabilities than us.
Our Ability to Generate a Sufficient Amount of Capital is Uncertain. We
anticipate that, in order to maintain a competitive position in our market, we
must expend substantial resources to continue research and development relating
to potential applications and new technologies. We must also expand our sales,
marketing and distribution activities. There can be no assurance that we will be
able to generate internally the funds necessary to continue such research and
development efforts or to expand sales and marketing activities, or that
additional funds from outside sources will be available for such purposes.
Our Success Depends Upon Management, Directors and Key Employees. We
are substantially dependent upon the efforts and abilities of our officers,
directors and certain key employees. The loss or unavailability of any of our
executive officers, directors or key employees could have a material adverse
effect on our business. We have employment agreements with certain key
employees. However, we do not maintain key man life insurance policies on any of
our key employees. As a result, our operations could be adversely affected upon
the death of any of our key employees.
<PAGE>
We Must Increase our Revenues From Abroad. We believe that our
continued growth and profitability may require increasing our international
revenues. International operations are subject to inherent risks, including:
. the impact of possible recessionary environments in economies
outside the U.S.;
. changes in legal and regulatory requirements;
. changes in tariffs;
. currency exchange fluctuations;
. reduced protection for intellectual property rights in some
countries;
. potentially adverse tax consequences; and
. political and economic instability.
There can be no assurance that we will be able to sustain or increase
international revenue, or that the factors listed above will not have a material
impact on our international operations. This expansion will require financial
resources and significant management attention.
Our Success Depends on Our Patents and Proprietary Rights. Our ability
to compete effectively will depend in part on our ability to maintain the
proprietary nature of our technology through a combination of copyright, patent
and trade secret protection and contractual provisions and non-disclosure
agreements. Competition in our market is intense and there can be no assurance
that our competitors will not independently develop or obtain patents on
technologies that are substantially equivalent or superior to our technology. We
could incur substantial costs in defending Iterated Systems in patent
infringement lawsuits brought by others and in prosecuting patent infringement
lawsuits against third party infringers. We also rely on trade secrets and
proprietary know-how that we seek to protect, in part, by non-disclosure
agreements with our employees, suppliers, consultants and potential strategic
partners and customers. There can be no assurance that these agreements will not
be breached, that we will have adequate remedies for any such breach or that our
trade secrets and proprietary know-how will not otherwise become known or be
independently developed by competitors.
FORWARD-LOOKING STATEMENTS
The discussions herein contain trend information and other
forward-looking statements that involve a number of risks and uncertainties. The
actual results of the Company could differ materially from its historical
results of operations and those discussed in the forward-looking statements. The
forward-looking statements are based on the beliefs of the Company's management
as well as assumptions made by and information currently available to the
Company's management. When used herein, the words "anticipate," "believe,"
"estimate," "expect" and "intend" and words or phrases of similar import, as
they relate to the Company or the Company's management, are intended to identify
forward-looking statements.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The following exhibits are filed with this Report:
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ITERATED SYSTEMS, INC.
Date: May 7, 1999 /s/ JOHN C. BACON
----------------------- -------------------------------------------
John C. Bacon
President and Chief Executive Officer
(Principal Executive Officer) and Director
Date: May 7, 1999 /s/ HAINES H. HARGRETT
----------------------- -------------------------------------------
Haines H. Hargrett
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 267,232
<SECURITIES> 5,690,574
<RECEIVABLES> 396,361
<ALLOWANCES> 12,841
<INVENTORY> 0
<CURRENT-ASSETS> 6,476,049
<PP&E> 3,425,214
<DEPRECIATION> (2,889,792)
<TOTAL-ASSETS> 7,054,917
<CURRENT-LIABILITIES> 651,820
<BONDS> 0
0
0
<COMMON> 130,731
<OTHER-SE> 6,266,604
<TOTAL-LIABILITY-AND-EQUITY> 7,054,917
<SALES> 0
<TOTAL-REVENUES> 378,799
<CGS> 0
<TOTAL-COSTS> 1,282,958
<OTHER-EXPENSES> 1,325,332
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 188
<INCOME-PRETAX> (2,173,980)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,173,980)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,173,980)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
