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 September 30, 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 November 1 , 1996.
Class A Common Stock 1,790,516 Shares
Class B Common Stock 2,715,664 Shares
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
FORM 10-QSB
For the Quarter ended September 30, 1996
Part I - Financial Information
Index Page No.
Item 1 Financial Statements
Condensed Consolidated Balance Sheet 3
Condensed Consolidated Income Statement 4
Consolidated Statement of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II - Other Information 10
2
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
September 30 December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $1,505,230 $1,888,574
Accounts receivable net of
allowance for doubtful accounts 2,160,492 1,336,519
Other current assets 79,382 79,184
------------- -------------
Total current assets 3,745,104 3,304,277
Fixed assets less accumulated
depreciation 655,636 798,233
Software development costs net
of accumulated amortization 364,491 468,491
Other assets 43,238 -
------------ ----------
Total assets $4,808,469 $4,571,001
========== ==========
Current Liabilities:
Accounts payable and accrued expenses $ 331,848 $ 290,454
Deferred revenue 59,433 73,622
Other current liabilities - 8,452
---------- -------------
Total current liabilities 391,281 372,528
----------- -------------
Lease obligation 297,153 -
Other non-current liabilities 14,691 15,002
------------ --------------
Total liabilities 703,125 387,530
----------- -------------
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;
1,790,516 shares issued and outstanding 17,905
1,610,000 shares issued and outstanding 16,100
Class B par value $.01; 3,094,721 shares
authorized;
2,715,664 shares issued and outstanding 27,156 28,847
Additional paid-in-capital 5,368,337 6,160,599
Retained (deficit) (1,308,054) (2,022,075)
------------ -----------
Total equity 4,105,344 4,183,471
------------ -------------
$4,808,469 $4,571,001
============ =============
</TABLE>
Attention is directed to the accompanying notes to the condensed financial
statements.
3
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
Condensed Consolidated Income Statement
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Consulting services $3,015,260 $1,405,646 $8,088,577 $5,055,580
Software related revenue 107,468 100,371 341,750 458,833
Other 14,007 81,515 29,232 177,808
------------- ------------- ------------ ------------
3,136,735 1,587,532 8,459,559 5,692,221
Costs and expenses:
Cost of consulting services 1,568,963 1,088,993 4,357,295 3,410,056
Cost of software services 104,125 231,903 292,646 564,932
Sales and marketing 676,462 644,146 2,139,852 1,486,253
Computer software research
and development 157,235 405,636 668,549 708,826
General and administrative 416,300 153,338 1,099,504 605,048
------------- ------- -------------- ----------
Income (loss) before provision for
income taxes 213,650 (936,484) (98,287) (1,082,894)
(Provision) benefit for income taxes
(Note 2) - 357,157 - 411,197
----------- ------- ------------- ---------
Net income (loss) $ 213,650 $ (579,327) $ ( 98,287) $ (671,697)
============= ============ ============= ============
Net income (loss) per share (Note 3) $ .08 $ (.23) $ (.04) $ (.29)
============== ============= ============ ============
</TABLE>
Attention is directed to the accompanying notes to the condensed financial
statements.
4
INTIME SYSTEMS INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 213,650 $ (579,327) $ (98,287) $(671,697)
Adjustments to reconcile net income (loss) to
net cash provided by operating
activities:
Depreciation and amortization 83,312 39,513 252,855 108,139
Increase in provision for doubtful
accounts 94,000 - 94,000 15,600
Changes in assets and liabilities:
Accounts receivable (115,383) (216,807) (917,973) (9,244)
Other assets 15,065 4,194 (43,437) (86,149)
Accounts payable/accrued expenses 46,102 51,718 43,754 (226,635)
Deferred revenue (14,189) 61,541 (14,189) 68,873
Deferred taxes - (359,888) - (414,633)
Other liabilities 3,220 3,233 (2,357) (1,757)
--------- --------- ------ -------
Net cash provided by
(used in) operating activities 325,777 (995,823) (685,634) (1,217,503)
--------- --------- ------ -------
Cash flows from investing activities:
Purchase of property and equipment (15,602) (201,312) (72,938) (330,913)
Capital lease - - 66,679 -
----------- ------------ ----------- -----------
Net cash used in investment activities (15,602) (201,312) (6,259) (330,913)
------------ ------------ ---------- -----------
Cash flows from financing activities:
Prepaid IPO costs - - - 583,020
Lease obligations (38,286) - 297,153 -
Payments on leases (2,683) (2,492) (8,763) (6,637)
Payment on bridge notes - - - (1,500,000)
Issuance of notes payable to stockholders - (50,000) 113 (550,000)
Issuance of common stock - (462 ) 20,046 5,362,291
-------------- ----------- ------------ -----------
Net cash provided by (used in) financing
activities (40,969) (52,954) 308,549 3,888,674
-------------- ---------- ------------- -------------
Increase (decrease) in cash and cash
equivalents 269,206 (1,250,089) (383,344) 2,340,258
Cash and cash equivalents at beginning
of period 1,236,024 4,755,873 1,888,574 1,165,526
------------- ---------- ------------ ------------
Cash and cash equivalents at end
of period $1,505,230 $ 3,505,784 $1,505,230 $3,505,784
========== =========== ========== ==========
</TABLE>
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 - Financial Statements:
The consolidated financial statements herein are unaudited. However, in the
opinion of management, such information reflects all adjustments (consisting
only of normal recurring adjustments) necessary for a fair statement of
financial position and 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. A summary of the
Company's significant accounting policies is set forth in Note Two to the
Consolidated Financial Statements in the Company's Form 10-KSB dated March 29,
1996.
The consolidated results of operations for the nine months ended September 30,
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.
Note 2 - Provision for Income Taxes:
As of September 30, 1996, the Company has a net deferred tax asset consisting
primarily of a net operating loss carryforward in the amount of $2,608,553. 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 September 30, 1996.
Note 3 - Earnings Per Share:
Net income (loss) per share is computed using the weighted average number of
common shares and common share equivalents outstanding. Common share equivalents
consist of the Company's common shares issuable upon the exercise of stock
options using the treasury stock method.
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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues ........................... 100% 100% 100% 100%
Consulting Services Costs .............. 50 68 52 60
Software Services Costs................. 3 15 3 10
Sales/Marketing Expenses ............... 22 41 25 26
Software Development ................... 5 25 8 12
General and Administrative Expenses .... 13 10 13 11
------ ---- ----- -----
Income (Loss) before taxes............. 7% (59%) (1%) (19%)
===== ==== ==== ====
</TABLE>
REVENUES
Consulting services revenue increased by $3,032,997 for the first nine
months of 1996 over the same period in 1995 or 60%. For the third quarter ended
September 30, 1996, consulting services revenue increased by 115% over 1995.
This continues a positive trend in the growth of consulting services revenue
which began in September of 1995. Management anticipates that demand for
consulting services will remain strong throughout the remainder of 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 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
$117,083 for the nine months ended September 30, 1996 or 26% compared to the
same period in 1995. For the three month period then ended, such revenue
decreased by $7,097 or 7% over the same period in 1995. During 1996, the
Company has had additional licenses of its client/server TAMS/O product
for which add-on consulting services will be provided at a later date.
Going forward, management believes the industry move to client/server and
the increasing interest in the Company's TAMS/O product will
positively affect software related revenues.
Since March, 1996 the Company has been working to complete a proposed
agreement with Oracle Corporation ("Oracle") which would make the Company's
relationship with Oracle more formal as it relates to its TAMS/O software
product. Based on various discussions, meetings and written correspondence
between the respective companies, it appears the general structure of the
agreement will include provisions relating to: advanced royalty payments;
separate maintenance fee participation; primary product sales and sales
support responsibility; product maintenance responsibility; and an optional
buyout, which provides for a perpetual "no fee" license to use and sell the
product, in future years. However, there can be no assurances that a
definitive agreement with Oracle will be reached.
7
<PAGE>
Other revenues in 1996 decreased by $148,576 over the comparable nine
month period in 1995 and decreased by $67,508 over the comparable quarter in
1995. The higher cash balance in 1995 was the result of initial IPO funds
available for short term investment. The reduction in excess cash available for
short-term investment is due to the Company's investment in its TAMS/O product
and Oracle relationship.
COST OF CONSULTING SERVICES
Cost of consulting services increased by 44% from 1,088,993 in the
third quarter of 1995 to 1,568,963 in the third quarter of 1996. Cost of
consulting service increased $947,239 or 28% for the nine month period ended
September 30, 1996 as compared to the same period in 1995. The increase is the
direct result of the increased consulting revenues in 1996. As a percentage of
consulting revenue, cost of consulting services decreased to 52% in the third
quarter of 1996 as compared to 77% for the third quarter of 1995. The cost of
consulting services as a percentage of consulting revenue for the nine months
ended September 30, 1996 was 54% as compared to 67% for the same period in 1995.
The improvement in the margins is the result of the following:
1) Over the past twelve months, the mix of the Company's consulting
business has changed significantly from consulting on mainframe
based systems to consulting on client/server based systems. The
investments the Company made in 1995 to strengthen (and grow) its
presence in the client/server area, has positioned the Company to
respond to the changing market.
2) Generally, higher profit margins are attained on client/server
consulting compared to traditional mainframe system consulting.
3) The overall utilization (i.e. billable hours per consultant) has
improved.
As a result, the gross margin for consulting services has improved to
48% and 46% for the three and nine month periods ended September 30, 1996
compared to 23% and 33% for the same periods in 1995.
The gross margin percentages achieved during the first nine months and
the third quarter of 1996 are not necessarily indicative of the gross margins
that will be achievable throughout the remainder of 1996.
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 nine months ended September 30, 1996 such costs were 3% of net
revenues and 86% of software related revenue. For the comparable period in 1995,
such costs represented 10% of net revenues and 123% of software related
revenues. For the three month period ended June 30, 1996 such costs were 3% of
net revenues and 97% of software related revenues. For the same period in 1995
software service costs were 15% of net revenues and 231% of software related
revenues. The reduction in the cost of software services is due to the
completion of the mainframe product implementations.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased for the third quarter by $32,316
or 5% as compared to the same period in 1995. For the nine month period ended
September 30, 1996 sales and marketing expenses increased by $653,599 or 44%
over the same period in 1995.
8
<PAGE>
The increase in sales expenses is a result of the increase in
consulting revenue experienced during the first nine months of 1996 compared to
1995.
SOFTWARE DEVELOPMENT EXPENSES
Software development expense decreased 61% from $405,636 for the third
quarter of 1995 to $157,235 in the third quarter of 1996. For the nine month
period ended September 30, software development costs decreased by $40,277 or 6%
when compared to the same period in 1995.
The reduction for the comparable nine month period is primarily due to
completion of the TAMS/O, Oracle client/server version of TAMS. The bulk of
these investments were made in the last two quarters of 1995 and the first
quarter of 1996.
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 $262,962 or 171% for the
three month period ended September 30, 1996 compared to the same period in 1995.
General and administrative expense increased for the nine month ending September
30, 1996 by $494,456 or 82% over the same period in 1995.
In comparing 1996 to the same period in 1995: employee related costs
(i.e. insurance) have increased due to an increased number of employees;
depreciation has increased due to a significant growth in fixed asset
investments and a first time contribution to the employee 401(k) plan.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996 the Company had cash and cash equivalents of
$1,505,230 and working capital of $3,353,823.
The Company expects that cash flow from operations and existing cash
and cash equivalents will be adequate to meet the Company's cash requirement
during the remainder of 1996 and 1997.
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 industry's move to client/server
and the increasing interest in the Company's TAMS/O product will positively
affect software related revenues; a proposed agreement to make the
Company's relationship with Oracle more formal as it relates to its TAMS/O
software product; ability to grow, strengthen, maintain higher margins
and improved utilization on client/server consulting; and the adequacy of
cash flow are forward-looking statements within the meaning of Section 27A of
the Securities 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 and for other reasons; (4) the continued
ability to sell consulting services and keep new consultants, the Company has
been hiring, fully utilized; (5) failure to reach a contractual agreement with
Oracle at mutually acceptable terms; and (6) Oracle's ability to capture
market share and sell TAMS/O with its system.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- No reports on Form 8-K were filed during the period
- Exhibit 27, Financial Data Schedule
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
November 8, 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/ Michael D. Matte
Michael D. Matte
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 SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,505,230
<SECURITIES> 0
<RECEIVABLES> 2,326,482
<ALLOWANCES> (166,000)
<INVENTORY> 0
<CURRENT-ASSETS> 3,745,104
<PP&E> 912,071
<DEPRECIATION> (256,435)
<TOTAL-ASSETS> 4,808,469
<CURRENT-LIABILITIES> 391,281
<BONDS> 311,844
0
0
<COMMON> 45,061
<OTHER-SE> 4,763,408
<TOTAL-LIABILITY-AND-EQUITY> 4,808,469
<SALES> 0
<TOTAL-REVENUES> 8,459,559
<CGS> 0
<TOTAL-COSTS> 4,555,941
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 94,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (98,287)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,287)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,287)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
