<PAGE>
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 quarterly period ended March 31, 1996.
Commission file number: 0-25338
INTIME SYSTEMS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
DELAWARE 65-0480407
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1601 Forum Place, Suite 500, West Palm Beach,FL 33401
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (407) 478-0022
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
Number of shares outstanding of each of the issuer's classes of common equity as
of May 13, 1996.
Class A Common Stock 1,621,317 Shares
Class B Common Stock 2,884,721 Shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
The consolidated financial information herein is unaudited. However, in the
opinion of management, such information reflects all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
results of operations for the periods being reported. Additionally, it should be
noted that the accompanying condensed consolidated financial statements do not
purport to contain complete disclosures in conformity with generally accepted
accounting principles.
The consolidated results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results of operations for the year ending
December 31, 1996.
The consolidated balance sheet at December 31, 1995 was condensed from
the audited consolidated balance sheet appearing in the Company's Form 10-KSB
dated March 29, 1996.
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
Condensed Consolidated Balance Sheet
March 31, December 31,
1996 1995
(Unaudited)
Current Assets:
Cash and cash equivalents $ 812,844 $ 1,888,574
Accounts receivable net of
allowance for doubtful accounts 1,991,476 1,336,519
Other current assets 93,834 79,184
----------- -----------
Total current assets 2,898,154 3,304,277
Fixed assets less accumulated
depreciation 775,288 798,233
Software development costs net
of accumulated amortization 429,491 468,491
Other assets 17,978 0
----------- -----------
$ 4,120,911 $ 4,571,001
=========== ===========
Current Liabilities:
Accounts payable and accrued expenses $ 431,073 $ 290,454
Deferred revenue 73,622 73,622
Other current liabilities -0- 8,452
----------- -----------
Total current liabilities 504,695 372,528
----------- -----------
Other non-current liabilities 20,001 15,002
----------- -----------
Total liabilities 524,696 387,530
----------- -----------
Stockholders' Equity:
Preferred stock: $1 par value; 5,000,000
shares authorized: none issued or outstanding
Common stock:
Class A par value $.01; 16,905,278 shares
authorized;
1,621,317 shares issued and outstanding 16,213
1,610,000 shares issued and outstanding 16,100
Class B par value $.01; 3,094,721 shares
authorized
2,884,721 shares issued and outstanding 28,847 28,847
Additional paid-in-capital 6,180,405 6,160,599
Retained (deficit) (2,629,250) (2,022,075)
Total equity 3,596,215 4,183,471
----------- -----------
$ 4,120,911 $ 4,571,001
=========== ===========
Attention is directed to the accompanying notes to the condensed financial
statements.
3
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
Condensed Consolidated Income Statement
(Unaudited)
Three Months Ended
March 31,
Net revenues: 1996 1995
----------- -----------
Consulting services $ 2,274,643 $ 2,010,735
Software related revenue 86,110 117,751
Other 728 33,608
----------- -----------
2,361,481 2,162,094
Costs and expenses:
Cost of consulting services 1,397,151 1,227,948
Cost of software services 155,953 73,334
Sales and marketing 771,302 406,037
Computer software research
and development 360,080 79,763
General and administrative 284,170 223,089
----------- -----------
Income (loss) before provision for
income taxes (607,175) 151,923
(Provision) benefit for income taxes
(Note 1) -0- -0-
----------- -----------
Net income (loss) $ (607,175) $ 151,923
=========== ===========
Net income (loss) per share (Note 2) $ (.24) $ .08
=========== ===========
Attention is directed to the accompanying notes to the condensed financial
statements.
4
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
1996 1995
----------- -----------
Cash flows from operating activities:
Net income (loss) $ (607,175) $ 151,923
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 81,000 33,313
Increase in provision for doubtful
accounts -0- 15,600
Changes in assets and liabilities:
Accounts receivable (654,957) 67,769
Other assets (32,629) (109,534)
Accounts payable/accrued expenses 140,619 (69,084)
Deferred revenue -0- 10,083
Deferred taxes -0- 7,922
Other liabilities -0- (3,641)
----------- -----------
Net cash provided by
(used in) operating activities (1,073,142) 104,351
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (19,054) (79,529)
Software development costs capitalized -0- -0-
----------- -----------
Net cash used in investment activities (19,054) (79,529)
----------- -----------
Cash flows from financing activities:
Prepaid IPO costs -0- 583,770
Payments on capital leases (3,453) (2,507)
Payment on bridge notes - 0 - (1,500,000)
Issuance of notes payable to stockholders - 0 - (200,000)
Issuance of common stock 19,919 5,428,669
----------- -----------
Net cash provided by
financing activities 16,466 4,309,932
----------- -----------
Increase (decrease) in cash and cash (1,075,730) 4,334,754
equivalents
Cash and cash equivalents at beginning
of period 1,888,574 1,165,526
----------- -----------
Cash and cash equivalents at end
of period $ 812,844 $ 5,500,280
=========== ===========
Attention is directed to the accompanying notes to the condensed financial
statements.
5
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
Note 1 - Provision for Income Taxes:
As of March 31, 1996, the Company has a net deferred tax asset
consisting primarily of a net operating loss carryforward in the amount of
$3,149,812. The Company has provided a valuation allowance against the net
deferred tax asset since utilization of the net operating loss is not
assured in 1996. Therefore, no tax benefit is provided as of March 31, 1996.
Note 2 - Earnings Per Share:
Earnings per share are based on the weighted average number of common
shares and common share equivalents which would arise from the exercise of stock
options using the treasury stock method. Fully diluted per share amounts are not
presented, as the effect is anti-dilutive.
Three Months Ended
March 31,
Weighted Average Shares: 1996 1995
---- ----
Common Stock 2,569,415 1,882,658
========= =========
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth expense items as a percentage of net revenues for
the periods indicated:
Three Months Ended
March 31,
1996 1995
Net Revenues ...................... 100.0% 100.0%
Consulting Services Costs ......... 59.2 56.8
Software Services Costs ........... 6.7 3.4
Sales/Marketing Expenses .......... 32.7 18.8
Software Development .............. 15.2 3.7
General and Administrative Expenses 11.9 10.3
----- -----
Income (Loss) from Operations ..... (25.7%) 7.0%
===== =====
REVENUES
Consulting services revenue increased by $263,908 for the first three
months of 1996 over the same period in 1995 or 13.1%. In addition, consulting
revenues represented a $552,240 or 32% increase over the fourth quarter of 1995
consulting revenues. This continues a positive trend in consulting revenues
which began in September of 1995 and has continued through the first quarter of
1996. Management anticipates that demand for consulting services will remain
strong throughout 1996. However, there can be no assurances that existing
customers will continue to require consulting services or that the demand for
such services will remain strong. Consulting services revenue is generated from
ad hoc consulting on human resource and payroll systems for clients.
Software related revenue includes all revenue related to the Company's
Time and Attendance Management Systems (TAMS) including: license, installation,
customization and maintenance fees. Software related revenues decreased by
$31,641 for the three months ended March 31, 1996 or 26.9% compared to the same
period in 1995. There were no new license agreements signed in the first quarter
of the year. The software related revenue was for customization work on existing
installations.
The initial Oracle version of TAMS, licensed to the Douglas County
School District in the third quarter of 1995, has not yet been installed.
Installation of the system has been delayed several times by the school district
and the Company has not, at this time, been given a revised date for the
installation. None of the $60,000 license fee associated with this contract has
been recognized.
Even though there have been no new license agreements signed in the
first quarter, there appears to be growing interest in the Company's Oracle TAMS
client/server product. Success of this product is reliant upon the success of
Oracle's sales and marketing efforts for its HRMS system. Activity relating to
requests for information, sales support, demonstrations, etc. for the Company's
Oracle TAMS/O product has been strong. However, there can be no assurances that
such activity will result in future license agreements.
Other revenues in 1996 decreased by $32,880 over the comparable three
month period in 1995. This is a result of a reduction in excess cash available
for short-term investment due to the Company's investment in its Oracle
relationship.
7
<PAGE>
COST OF CONSULTING SERVICES
For the three months ended March 31, 1996 consulting expenses were
59.2% of net revenues and 61.4% of consulting services revenue. For the same
three month period in 1995, consulting expenses were 56.8% and 61% of net
revenues and consulting services revenue, respectively.
The cost of consulting services stabilized in the first quarter of
1996. The investments made in 1995 to strengthen the Company's presence in the
client/server consulting practice began to pay off in the first quarter.
Generally higher margins are associated with the Company's client/server
consulting than its traditional main-frame consulting. As a result, higher
contractor and employee costs were offset somewhat by overall higher consulting
margins.
The Company has achieved a good mix of employees with mainframe and
client/server consulting skills. This should provide the Company with the
flexibility to service a broader cross-section of our market.
SOFTWARE SERVICE COSTS
Software service costs are direct costs associated with the Company's
proprietary software product TAMS including; salaries, wages, travel, and other
expenses incurred during installation, customization, training and maintaining
the software.
For the three months ended March 31, 1996 such costs were 6.7% of net
revenues and 181% of software related revenue as a result of there being no
license fees recognized during the period. For the comparable period in
1995, such costs represented 3.4% of net revenues and 62.3% of software related
revenue.
As noted previously, no license fees were recognized in the first
quarter of 1996. Therefore, the revenue and expenses incurred for software
services were for work performed at existing TAMS installations. In the
comparable 1995 period, revenue was predominantly from license fees which
traditionally have less direct costs associated with earning the revenue.
The Company anticipates improvement in the future mix of
software related services between license fees and customization, etc., which
should improve the software service costs, relationship to revenue.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased for the three months ended March
31, 1996 by $365,265 or 90% over the same period in 1995. As a percentage of net
revenues, sales and marketing expenses were 32.7% for the three month period in
1996 compared to 18.8% for the same period in 1995.
In the first quarter of 1995, the Company had not begun to establish
the sales infrastructure to support its TAMS software and client/server
consulting initiatives.
Continued emphasis is being placed on consulting sales to take
advantage of opportunities that exist in client/server consulting. In addition,
sales support has increased to support Oracle in its sales and marketing effort
for its HRMS System.
8
<PAGE>
SOFTWARE DEVELOPMENT EXPENSES
Software development costs, which are currently being expensed, were
$360,080 for the three month period ended March 31, 1996. For the comparable
period in 1995, such costs expensed were $79,763.
The increases between the two periods is a function of the development
of TAMS/O, the Oracle client/server version of TAMS. Development of this system
was not begun in the first quarter of 1995, but rather began subsequent to the
Company's initial public offering which took place in the first quarter of
1995.
The Company's current expenditures for research and development are
primarily focused on TAMS/O enhancements and release upgrades.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by $61,081 or 27.4% for
the three month period ended March 31, 1996 compared to the same period in 1995.
The increase is primarily due to the increased costs associated with being a
public reporting entity.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used) in operating activities was ($1,073,142)
for the three months ended March 31, 1996 and $104,351 for the same period in
1995. Capital expenditures for equipment were $19,054 and $79,529 for the
periods ending March 31, 1996 and 1995 respectively. Cash provided by financing
activities was $16,466 for the first three months of 1996 and $4,309,932 for the
same period in 1995
As of March 31, 1996, the Company had cash and cash equivalents of
$812,844 and working capital of $2,393,459.
The Company's consulting business has been expanding to meet the
anticipated future demand for its services and the Company plans to continue
hiring additional qualified consultants.
Because the Company's consulting business has historically been
profitable, the addition of more consulting resources, over time, should
increase its working capital. In the near term, due to the time delay
between hiring a consultant, assigning them to a project and collecting
the accounts receivable from such project, the Company plans to use its
existing cash reserves to compensate for any resulting cash shortfall.
Because this in turn has an overall effect on the Company's liquidity,
the Company's board of directors has adopted a resolution which would,
without giving effect to the additional consultants being recruited,
reduce the Company's monthly operating expenses.
In addition, the Company is currently working on a sale/leaseback
of its computer equipment which may result in an additional $400,000 -
$500,000 of liquidity.
The Company has no outstanding lines of credit.
FORWARD-LOOKING STATEMENTS
The statements made above under "Results of Operations" relating to a
continuing positive trend in consulting services and anticipated strong demand
for consulting services throughout 1996, the stabilization of consulting costs,
the ability to maintain higher margins on client/server consulting,
growing interest in the Company's Oracle TAMS client/server product, an
improvement in the future sales mix between software license fees and
customization, and closing a sale/leaseback of equipment, are forward-looking
statements within the meaning of Section 27A of the Securities Exchange Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. As discussed
above, the results anticipated by any or all of these forward-looking
statements may not occur. Important factors that may cause actual results
to differ materially from the forward-looking statements include the
following: (1) general competition for consulting services; (2) the
ability to maintain and attract qualified consultants with the skill
sets to meet market demands; (3) the continued availability of systems
and consulting budgets within large corporations which tend to be
susceptible to reduction during economic downturns or other reasons,
(4) the length of the sales cycle for HR/payroll systems and TAMS because of
their complexity, size and cost; (5) Oracle's ability to capture market share
and sell TAMS/O with its systems, (6) the potential future competition
that may develop technology to compete directly with TAMS; and (7) the leasing
company's credit committee approval of the leasing transaction.
9
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K. No reports were filed by Registrant for
the quarter for which this report is filed.
10
<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 on May 20
, 1996 by the following persons, thereunto duly authorized.
InTime Systems International, Inc.
By: /S/ William E. Berry
William E. Berry
President, Chief Executive Officer
By: /S/ Mark Murphy
Mark Murphy
Chief Financial Officer
(Principal Financial and
Accounting Officer)
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 812,844
<SECURITIES> 0
<RECEIVABLES> 2,063,476
<ALLOWANCES> (72,000)
<INVENTORY> 0
<CURRENT-ASSETS> 2,898,154
<PP&E> 1,018,845
<DEPRECIATION> (243,557)
<TOTAL-ASSETS> 4,120,911
<CURRENT-LIABILITIES> 504,695
<BONDS> 20,001
0
0
<COMMON> 45,060
<OTHER-SE> 3,551,155
<TOTAL-LIABILITY-AND-EQUITY> 4,120,911
<SALES> 0
<TOTAL-REVENUES> 2,361,481
<CGS> 0
<TOTAL-COSTS> 2,968,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (607,175)
<INCOME-TAX> 0
<INCOME-CONTINUING> (607,175)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (607,175)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> 0
</TABLE>
