U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 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, WEST PALM BEACH, FL 33401
- ------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 478-0022
Securities registered under Section 12(b) of the Exchange Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
None None
Securities registered under Section 12(g) of the Exchange Act:
Units consisting of 1 share of Class A Common Stock and 1 Class A Warrant
Class A Common Stock
Class A Warrants
<PAGE>
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] NO [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Revenues for its most recent fiscal year. $11,736,869.
The aggregate market value of the voting stock held by non-affiliates based on
the closing price quoted by NASDAQ on March 14, 1997: $13,254,654. (Includes the
value of Class A Common Stock and Class B Common Stock not in escrow or held by
insiders. See Item 11).
Number of shares outstanding of each of the issuer's classes of common equity,
as of March 18, 1997:
Class A Common Stock 1,816,591 Shares
Class B Common Stock 2,691,105 Shares
2,360,000 Class A Warrants
Documents incorporated by reference:
LOCATION IN FORM 10-KSB: INCORPORATED DOCUMENT:
Part III-Items 10, 11, & 12 Definitive Proxy Statement in connection
with its annual meeting of stockholders
to be held on May 13, 1997
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
2
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
InTime Systems International, Inc. ("The Company") and its wholly owned
subsidiaries, the Consulting Team ("TEAM") and InTime Systems, Inc., are
primarily engaged in providing system integration services relating to the
selection, implementation and use of human resources, payroll and selected
software systems. The Company was incorporated in Delaware in January 1994 and
acquired all of the common stock of TEAM, a Florida corporation organized in
1985 and InTime Systems, Inc., a Delaware corporation organized in 1993. In
1995, The Company developed a proprietary time and attendance management
software system, (TAMS), which provides management with combined time,
attendance, payroll and human resource information on a real time basis. TAMS
integrates the human resource and payroll systems for producing a paycheck,
allowing employers to efficiently and accurately produce a paycheck and collect
information to better monitor, analyze, and audit human resource costs in their
business. TAMS is designed to be an efficiency enhancing, time and cost savings
tool. The Company markets TAMS to large corporations, government agencies and
not-for-profit organizations. Since 1985, TEAM has been providing consulting
services to employers relating to the selection, implementation and use of human
resource, payroll and selected software systems. It is from this experience that
TAMS was developed incorporating many features that were not available in client
human resource and/or payroll systems.
In January 1997, the Company signed a technology license agreement (the
"Agreement") with ORACLE Corporation ("ORACLE") allowing ORACLE to promote,
market and distribute TAMS/O through its worldwide distribution channels.
PRODUCT AND SERVICE DESCRIPTION
CONSULTING SERVICES
The Company provides consulting services on Human Resource Management Systems
(HRMS) for Fortune 500 companies. The primary focus is directed toward strategic
services consulting and full system implementation projects for major HRMS
applications, such as Oracle, PeopleSoft, and ADP. TEAM's consulting fulfillment
staff is structured around three (3) major consulting areas: Strategic Services,
HRMS implementation, and Financial Consulting. The Strategic Services group
provides consulting services on process reengineering and improvements, HRMS
needs evaluation, vendor selection and negotiations, generalized Human Resource,
Payroll and Benefit Administration and establishing Human Resource Information
Centers. The HRMS implementation group provides consulting services on all
aspects of HRMS implementation projects, including project definition, fit
analysis, data modeling, functional and technical assistance on the
implementation of packaged systems into production environments.
In October 1996, the Company established a financial consulting division to
provide consultation services to Fortune 500 companies. The goal of the
financial consulting division will be to provide consulting services similar to
the HRMS implementation division with the primary focus on the implementation of
financial systems and associated interfaces. This division will initially focus
on present and former clients of the Company. This will allow for leveraging of
the Company's consulting reputation into financial systems consulting
opportunities. To ensure that these services can be delivered to the market, the
Company is evaluating potential strategic alliances in the financial consulting
area. To date this division has generated nominal revenues.
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CONSULTING STAFF
TEAM's HRMS consulting staff consists primarily of senior level consultants who
are experienced with human resource, payroll and benefit administration
practices and recent changes in industry standards, technological advances, and
government compliance regulations. TEAM's staff contains a blend of functional
skills necessary to apply the business needs to the system's technology and
technical skills needed to ensure the systems are designed with enough
flexibility to handle the ever-changing business practices. TEAM recently
established an employee training program to ensure its consultants are
knowledgeable in the latest applications, technology and project management
expertise.
MARKETING CONSULTING SERVICES
The Company's consulting services are marketed by public or association
presentations, speeches and the preparation of relevant professional articles:
by identifying prospective clients through participation in professional
organizations, direct mail advertising in trade journals and publications read
by corporate executives: by developing alliances with major HRMS vendors and
other third party consulting organizations: and through referrals or inquiries
to TEAM by prospects who have heard of TEAM's successful engagements with other
clients. The Company continues to expand all of these traditional lead
development avenues by adding new senior sales personnel, offering customer
incentives, and by marketing TEAM's proprietary methodologies.
COMPETITION
The Company believes that specializing in the implementation of human
resource/payroll/benefit systems is a unique service. By having a specialization
in this area, TEAM will continue to have the ability to compete with large
international consulting firms. Systems integration is a highly competitive
industry, with competitors that include Big 6 accounting firms and various other
consulting companies. During 1996, the Company began positioning itself to make
the move into the global consulting arena with accounts in Latin America and
prospects in the Middle East and Far East. TEAM is one of only a few specialized
firms that provide full-service technical and functional assistance in the human
resource, payroll and benefit systems area.
CONSULTING AGREEMENTS
Consulting services for all of TEAM's projects are documented through a
Professional Services Agreement (PSA) and a Work Authorization Form (WAF). The
PSA is written to cover the basic contractual terms while the WAF contains the
specifics, such as rates and deliverables for each consulting engagement. By
breaking contractual terms from specific terms for individual projects, a
consulting engagement can be expanded to accommodate additional work or rate
increases without having to renegotiate the contract. A typical implementation
consulting contract involves two to four staff members for a period of six
months to one year. Strategic service projects are more focused and average one
to two staff members for a period of one month to six months.
Consultants work with clients on an hourly, daily, weekly or monthly basis.
Generally, TEAM charges its clients for consulting services on an hourly or per
diem rate basis. However, TEAM has recently entered into 'fixed price' and 'not
to exceed bid' contracts. These contracts are only executed when TEAM has
completed a project definition audit to correctly assess the effort and
resources required.
Clients and the Company's staff must sign a confidential disclosure and
non-compete agreement which preclude them from hiring any of the Company's
consultants for a period of six months after the Company's contract with the
client is completed.
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MAJOR CUSTOMERS
During 1996, the following customers comprised 10% or more of the Company's net
revenue:
THE NEW YORK TIMES COMPANY 18.71%
ASPLUNDH TREE SERVICE 12.36%
The Company's major customers vary from year to year. See Item 7 note 8.
SOFTWARE PRODUCTS
InTime Systems International has two versions of TAMS. The first version is the
original TAMS product, which was developed for operation in a mainframe
environment. The second, TAMS/O, was specifically developed to work exclusively
with the Oracle HRMS system.
In 1996, there were no new sales of the mainframe version of TAMS. This was
primarily due to the fact that the HRMS market in general has moved to
client/server technology. This has resulted in minimal expenditures by companies
for mainframe-based products. Because of this market situation, aggressive sales
activity for the mainframe version of TAMS was curtailed during 1996. Due to the
lack of the demand for mainframe-based systems, no sales activity is planned for
the mainframe version during 1997.
TAMS/O was specifically developed to work exclusively within the Oracle human
resource and payroll system. The system was developed pursuant to Oracle
Application Technical Standards, and therefore provides employers with a
seamless interface between the systems.
Operating in an integrated environment eliminates the traditional need for
multiple interfaces and high manual maintenance efforts associated with
stand-alone time and attendance systems.
TAMS/O can provide employers with many efficiency and cost saving benefits,
including:
/bullet/ Elimination of duplicate payments, overpayments and
underpayments;
/bullet/ Eliminating the typical "time-crunch" associated with meeting
payroll deadlines, which often lead to multiple errors;
/bullet/ Eliminating the manual activity involved in consolidating,
calculating, verifying, correcting, balancing and editing time
and attendance system data prior to payroll processing;
/bullet/ Controlling labor costs by providing management immediate
information, such as attendance and work trends in various units
and notice of where time or cost limits have been exceeded;
/bullet/ Tracking accrued vacation and leave time and other employee
entitlements such as family leave to facilitate the audit
process and reduce auditing cost;
/bullet/ Scheduling employees for work on many different shifts and
plans;
/bullet/ Helping management optimize the labor force mix of permanent,
part-time, contract or shared-job employees.
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MARKETING AND SALES STRATEGY
TAMS/O
The potential market for TAMS/O consist of each perspective customer of the
Oracle HRMS systems. During 1996 several major milestones were achieved in
regard to the release and sale of TAMS/O.
/bullet/ In January 1996, the TAMS/O product was formally approved by Oracle's
Cooperative Application Initiative program. Under this program only
third party products that have been designed to meet specific
standards of integration with the Oracle application systems are
approved. At present, there are only three other software products
which have this approval for operation with the Oracle HRMS systems,
and TAMS/O is the only time and attendance management product with
such an approval.
/bullet/ Initial development of the product was completed in early 1996 and was
first made available by general release during April. Definition of
the general release stage included completion of all user, and system
documentation, successful completion of a documented integration test
plan, establishment of a customer support hot line, and establishment
of packaging, distribution and installation procedures for the
product.
/bullet/ Since general release of the product, agreements have been signed and
TAMS/O has been installed in five companies. Although limited in
number, this has been a positive result due to the fact that there was
a limited number of Oracle HRMS customers in place during 1996, and no
live sites as references. In addition to TAMS/O product sales,
additional Oracle HRMS consulting and implementation business has been
obtained by TEAM, which is the direct result of TAMS/O leads. An
additional five companies engaged TEAM for Oracle consulting work
during 1996.
/bullet/ Marketing and sales collateral were completed in 1996 including
demonstration disk and Oracle application user group presentations. In
addition, all marketing material and demonstration overviews were made
available to all Oracle prospects through the Oracle Web site. It is
anticipated that TEAM will, through marketing and sales efforts, have
the opportunity to provide implementation and consulting services to
Oracle prospects for the implementation of TAMS/O; however, no formal
agreement or commitment to this is in place with Oracle.
/bullet/ Presentations and demonstrations were made during 1996 to the Oracle
sales and sales support staff to expand their knowledge of the
product. This has resulted in several joint proposals that are
currently still in active evaluation.
During the first three quarters of 1996, direct TAMS/O sales efforts were
limited due to the delay in the roll-out of the Oracle HRMS systems. Until the
fourth quarter of 1996, Oracle had no live payroll site, which in turn caused a
delay in the selection of the Oracle HRMS systems during 1996. Since TAMS/O can
only be licensed to perspective Oracle HRMS customers, a decision was made by
management to minimize sales expenses until Oracle had established live
reference sites for its product.
The Company and Oracle entered into a Technology License Agreement (the
"Agreement") effective February 19, 1997. Under the terms of the five-year
Agreement, the Company licensed TAMS/O to Oracle on a non-exclusive basis in
exchange for future sublicense fees and a percentage of maintenance fees paid to
Oracle by its TAMS/O customers. The Agreement requires Oracle to pay the Company
$500,000 in prepaid sublicense fees in 1997 but does not require Oracle to
market TAMS/O. The Company is required to provide material technical support
during the term of the Agreement. Commencing on February 20, 1998, Oracle will
have the option to acquire a perpetual royalty-free and non-exclusive license to
TAMS/O subject to continuing to pay three years of sublicense fees to the
Company commencing with the date of exercise. If Oracle exercises the option,
the Company's support responsibilities will cease except for routine telephone
technical support.
LICENSE, MAINTENANCE, AND SERVICE AGREEMENT
During 1996, when the Company made direct sales of its current TAMS products,
the Company provided a warranty of title against major programming defects. The
licensee could elect an annual maintenance plan at a cost
6
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of approximately 15% to 18% of the base license fee. Also during 1996, the
Company signed contracts with one of its customers to directly customize TAMS/O
as part of a separate professional services agreement. The estimated revenue
from implementation and consulting services can be approximately 2 to 3 times
the cost of the license fee.
As a result of the agreement with Oracle, management does not anticipate
extensive direct licensing of the product to prospective customers. Oracle will
be licensing the product directly to its customers under similar terms as for
the licensing of Oracle's own products. The Company will receive a royalty from
each of the licenses Oracle and/or its distributors conclude pursuant to the
conditions of the agreements.
COMPETITION AND TAMS/O
TAMS/O is the only time and attendance system which is fully integrated and
formally approved (through the CAI approval process) with the Oracle HRMS
systems. Although there are many stand-alone and independent management systems
on the market, all require interfaces to be maintained and built, with
duplication of data, additional training, and lower level of integrated
functionality than is offered with TAMS/O.
As a result of the new technology license agreement with Oracle, it is
anticipated that TAMS/O will be the only time and attendance management system
offered directly by Oracle with integration with its payroll system.
The agreement with Oracle is not exclusive; therefore, there can be no assurance
that other companies with financial resources and expertise in this specialized
field do not have or are not currently developing a functionally equivalent
product that will become available to Oracle in the near future. The computer
industry is characterized by rapidly changing technology and is intensely
competitive. The Company's ability to continue to provide Oracle with a
competitive product will depend on Oracle's ability to license TAMS/O, and
provide a continuing revenue stream to the Company to enhance and improve it.
There can be no assurance that the Company will be able to compete successfully
or that competitors will not develop technologies, products, or relationships
which will render TAMS/O obsolete or less marketable or that the company will be
able to successfully enhance TAMS/O on an on-going basis.
RESEARCH AND DEVELOPMENT
The Company is committed to refining TAMS to meet the changing needs of the
market place and assuring continued compatibility of TAMS with the introduction
of any new software. No assurances can be given that the Company will be able to
do so, or if able to do so, that these refinements and upgrades will be
introduced in a timely manner. The Company currently employs 5 development staff
which expect to devote all or a portion of their time to development support in
accordance with the Oracle distribution agreement. The Company's research and
development department will handle all product enhancement activity,
maintenance, and modification of TAMS in connection with the Oracle agreement.
EMPLOYEES
Currently, the Company has 84 full-time and 2 part-time employees, including its
executive officers. The Company is currently using the services of 9 independent
contractors. The Company's staff is divided into 11 employees in administration,
9 in sales and marketing, 5 in product development, 5 in software sales, 3 in
training, 2 in recruiting, 2 in financial consulting, and 49 software
consultants. None of the Company's employees or independent consultants are
covered by a collective bargaining agreement; however, most are engaged by a
standard letter agreement. Each person has signed a non-compete and confidential
disclosure agreement. Management believes that the Company's relationship with
its employees is excellent. The Company believes that the future success of the
Company is dependent to a significant degree on its ability to retain existing
employees and to attract additional skilled personnel, although there is no
assurance that it will be able to do so.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently leases all of its office space. Its headquarters
are in West Palm Beach, Florida, with additional sales and marketing offices in
the Dallas, Texas; San Mateo, California, and Chicago, Illinois. areas.
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The research and development office is in Columbia, South Carolina. Set forth
below is a summary of the offices leased by the Company.
LOCATION SQUARE FEET ANNUAL RENTAL EXPIRATION DATE
- ------------------------ ----------- ------------- ------------------------
West Palm Beach, Florida 10,529 $137,794 Nov. 2001(1)
Columbia, South Carolina 5,400 $60,480 April 1997, July 1998(2)
Dallas, Texas 285 $13,575 Jan. 1998(3)
San Mateo, California 1,115 $18,732 Jan. 1998(3)
1) 10,529 square feet in an office complex in West Palm Beach. The lease
expires October 2001. The rental rates, including CAM, range from $15.00 to
$19.25 per square foot over the life of the lease.
1) 1,800 square feet expires April 1997, 3,600 square feet expires July 1998.
2) Space rented in executive office suites. No long term arrangements have been
entered into. It is anticipated any annual rental entered into will be at
comparable rates.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
8
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICES OF SECURITIES
Effective February 16, 1995 the Company's common stock units; consisting of 1
share of Class A Common Stock and 1 Class A warrant to purchase 1 share of Class
A Common Stock, began trading on the Small Cap Market of the NASDAQ Stock Market
under the symbols: units, TAMSU; Class A Common Stock, TAMSA; and Class A
Warrants, TAMSW.
As of March 14, 1996, the Company believes there were in excess of 300
beneficial owners for the common stock units, Class A Common Stock, and
warrants. The high and low bid prices for the period February 16, 1995 (the
effective date of the Company's initial public offering) through December 31,
1996 as reported by NASDAQ are:
1995 1996
---- ----
UNITS (TAMSU) HIGH LOW HIGH LOW
- ------------- ---- --- ---- ---
Fourth Quarter $ 9.75 $ 8.50 $10.50 $9.00
Third Quarter $10.25 $ 8.50 $ 9.58 $8.50
Second Quarter $ 9.50 $ 6.125 $10.75 $8.38
First Quarter $ 7.00 $ 5.00 $ 9.88 $8.25
CLASS A COMMON STOCK (TAMSA) HIGH LOW HIGH LOW
- ---------------------------- ---- --- ---- ---
Fourth Quarter $ 7.125 $ 6.25 $8.00 $6.89
Third Quarter $ 7.50 $ 5.74 $7.47 $6.50
Second Quarter $ 6.00 $ 4.75 $8.00 $6.25
First Quarter $ 5.00 $ 4.50 $6.89 $6.13
CLASS A WARRANTS (TAMSW) HIGH LOW HIGH LOW
- ------------------------ ---- --- ---- ---
Fourth Quarter $ 2.75 $ 2.25 $2.75 $1.75
Third Quarter $ 3.25 $ 2.125 2.25 1.63
Second Quarter $ 2.00 $ 1.00 2.75 2.00
First Quarter $ 1.25 $ 1.00 3.00 2.00
At March 14, 1997, the closing prices for the Company's common stock units,
Class A Common Stock and warrants as reported by NASDAQ, were $9.75, $7.25 and
$2 respectively. Such prices reflect inter-dealer prices and do not reflect
retail mark-ups, mark-downs, or commissions. Although there are no restrictions
on the Company's ability to pay dividends to date, the Company has not declared
any cash dividends on any class of security nor does it anticipate doing so in
the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the following persons and entities acquired shares
of common stock and other securities from the Company as set forth in the table
below:
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<TABLE>
<CAPTION>
AMOUNT OF
CLASS OF SECURITIES
STOCKHOLDER DATE SECURITIES SOLD CONSIDERATION
- ----------- ---- ---------- ---------- -------------
<S> <C> <C> <C> <C>
William E. Berry 1/04/94 Common Stock 1,500,000 Stock of The
Declaration of Trust U/A Consulting
Team, Inc.
and InTime
Systems, Inc.
John E. and Carol E. Steiner 1/04/94 Common Stock 1,500,000 Stock of The
Consulting
Team, Inc.
and InTime
Systems, Inc.
Aqumulate, Ltd. 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
William H. and Ann V. Baker 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Howard Berg 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Mark Berger 12/08/94 Bridge Note $ 12,500 $ 12,500
Warrants 6,250
George H. Bucci 12/12/94 Bridge Note $ 75,000 $ 75,000
Warrants 37,500
Michael Cantor 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
Ron Cantor and Marc Roberts 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
Chana Sasha Foundation 12/12/94 Bridge Note $100,000 $100,000
Warrants 50,000
CLFS Limited 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Philippe Cochran 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Ike Cohen 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Howard Commander 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
Alan Conners 12/12/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
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Leonard R. Farber 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
Melrene Friedler 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
Goldstein Family 12/08/94 Bridge Note $ 25,000 $ 25,000
Loving Trust Warrants 12,500
Stuart Gruber 12/12/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Stanley D. Hoffman 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Stanley Hoffman, M.D. PSP 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Bruce and Marjorie Kashkin 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Joseph S. Kulpa 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Ernest La Froscia 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Alda Levitt 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
George Lionikis, Sr. 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Victor J. and June Mosele 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Dennis F. Nardoni 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
North Oaks Obstetrics and 12/08/94 Bridge Note $ 25,000 $ 25,000
Gynecology Warrants 12,500
Gary R. and Rebecca Perrine 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
James R. Pinke, M.D. 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
Roger Rankin 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
Norman Ravski 12/08/94 Bridge Note $ 50,000 $ 25,000
Warrants 25,000
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Steven Richman 12/08/94 Bridge Note $ 50,000 $ 50,000
Warrants 25,000
August J. Saccoccio 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Adam J. Shapiro 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Joel Silidker 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Steven Sklow 12/12/94 Bridge Note $ 12,500 $ 12,500
Warrants 6,250
Theodore R. Tetzlaff 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Anthony Tufano 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
Richard D. and Luella a. Tufo, JTWROS Bridge Note $ 50,000 $ 50,000
12/12/94 Warrants 25,000
United Congregation Mesora 12/12/94 Bridge Note $150,000 $150,000
Warrants 75,000
George Wailand 12/08/94 Bridge Note $ 25,000 $ 25,000
Warrants 12,500
</TABLE>
The common stock, bridge notes and Warrants listed above were sold to accredited
investors in reliance upon exemptions from registration pursuant to Section 4(2)
of the Securities Act of 1933 and Rule 506 thereunder.
Each Warrant entitles the registered holder to purchase one share of Class A
Common Stock at an exercise price of $7.00 through the close of business on
February 15, 2000 provided that at such time a current Prospectus relating to
the Company's Class A Common Stock is in effect and the Class A Common Stock is
qualified for sale or exempt from qualification under applicable state
securities laws.
Commencing February 16, 1996, the Warrants became redeemable by the Company on
30 days' prior written notice at a redemption price of $.05 per Warrant,
provided the average closing bid price of the Company's Class A Common Stock in
the over-the-counter market as reported by Nasdaq for any 30 consecutive
business days ending within 15 days of the notice of redemption averages in
excess of $9.80 per share (subject to adjustment in the event of any reverse
stock split or similar events). The notice of redemption shall be sent to the
registered address of the registered holders of the Warrants. All Warrants must
be called for redemption if any are redeemed.
The exercise prices of the Warrants were determined by negotiation between the
Company and the underwriter of its initial public offering and should not be
construed to predict, or to imply that, any price increases will occur in the
Company's securities. The exercise price of the Warrants and the number and kind
of shares of Class A Common Stock or other securities and property to be
obtained upon exercise of the Warrants, are subject to adjustment in certain
circumstances including a stock split, stock dividend, a
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subdivision, combination or recapitalization of the Class A Common Stock or the
issuance of shares of Class A Common Stock at less than the market price of the
Class A Common Stock. Additionally, an adjustment would be made upon the sale of
all or substantially all of the assets of the Company for less than market
value, a merger or other unusual events (other than share issuances pursuant to
employee benefit and stock incentive plans for directors, officers, employees
and consultants of the Company) so as to enable Warrantholders to purchase the
kind and number of shares or other securities or property (including cash)
receivable in such event by a holder of the kind and number of shares of Class A
Common Stock that might otherwise have been purchased upon exercise of such
Warrant. No adjustment for previously paid cash dividends, if any, will be made
upon exercise of the Warrants. The Company is not required to issue fractional
shares of Class A Common Stock, and in lieu thereof will make a cash payment
based upon the current market value of such fractional shares. Shares of Class A
Common Stock issued upon exercise of Warrants for which payment has been
received in accordance with the terms of the Warrants, will be fully paid and
non-assessable.
The Warrants do not confer upon the Warrantholder any voting or other rights of
a stockholder of the Company. Upon notice to the Warrantholders, the Company has
the right to reduce the exercise price or extend the expiration date of the
Warrants. Although this right is intended to benefit Warrantholders, to the
extent the Company exercises this right when the Warrants would otherwise be
exercisable at a price higher than the prevailing market price of the Class A
Common Stock, the likelihood of exercise, and resultant increase in the number
of shares outstanding, may result in making more costly, or impeding, a change
in control in the Company.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The following selected financial data and discussion should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto, and is qualified in its entirety by the foregoing and by other detailed
financial information included elsewhere in this annual report.
SELECTED FINANCIAL DATA
The following tables set forth selected financial and operating data for the
years ended December 31, 1996 and 1995. The information for the years ended
December 31, 1996 and 1995 has been derived from the consolidated financial
statements of the Company, which have been audited by Price Waterhouse, LLP the
Company's independent accountants and appears elsewhere in this annual report.
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
------- -------
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
Revenues:
Consulting Services ......................... $ 6,774 $11,193
Software Related Services(1) ................ 520 479
Other ....................................... 219 65
------- -------
Net Revenues ................................ 7,513 11,737
Cost and Expenses:
Consulting Services ......................... 4,486 6,003
Cost of Software Services(1) ................ 851 353
Sales and Marketing ......................... 2,271 2,864
Software Development ........................ 1,139 810
General and Administrative .................. 1,015 1,648
------- -------
Income (Loss) Before Taxes .................... (2,249) 60
Income Taxes ................................ 415 --
------- -------
Net Income (Loss) ............................. (1,834) 60
======= =======
Net Income (Loss) Per Share ................... (.77) .02
======= =======
1) Software related services revenue is derived from software license fees and
maintenance fees. Software service costs are direct costs associated with
the Company's proprietary software product TAMS including salaries, wages,
travel, and other expenses incurred in earning the software related services
revenues.
14
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth expense items as a percentage of net sales for
the periods indicated:
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996
----- ------
(Dollars In Thousands)
Net Sales.......................................... 100.0% 100.0%
Consulting Service Costs........................... 59.7 51.1
Software Service Costs............................. 11.3 3.0
Sales/Marketing Expenses........................... 30.3 24.4
Software Development............................... 15.2 6.9
General and Administrative Expenses................ 14.2 14.0
------ ------
Income (Loss) from Operations...................... (29.9%) .01%
====== ======
REVENUES
Net revenues for the year ended December 31, 1996 increased by $4,223,827 or 56%
over net revenues for 1995. The increase was due entirely to consulting services
revenue which increased by $4,419,031 or 65%. The increase in 1996 represents
the continued strong demand for systems integration services. The growth of
consulting services for 1996 is due to increases in billing rate and a reduction
of non-billable time. Although the demand for consulting services remains strong
and the outlook is good, it is unlikely that the Company, in the future, can
continue to grow at the current rate solely from rate increases.
Software related revenue decreased by $40,670 from 1995 to 1996 or approximately
8%. During 1996 the Company recognized no new sales from the mainframe version
of the TAMS product. This resulted primarily from the HRMS market moving from a
mainframe platform to client server technology. This perceived market shift has
resulted in minimal expenditures by companies for mainframe products.
During 1995, the Company began to develop the client server based product -
TAMS/O. The client server version of the TAMS product was specifically developed
to work exclusively with the Oracle Corporation HRMS application. In 1996,
direct TAMS/O sales efforts were limited due to the delay in the roll-out of the
Oracle HRMS systems. Since TAMS/O was developed specifically to work with the
Oracle HRMS system, only a small portion of the potential market was available
for sales during 1996. In January of 1997, the Company entered into an agreement
with Oracle Corporation which allows for the world-wide, non-exclusive
distribution of TAMS/O directly by Oracle. Under this agreement, Oracle may
market the product under their own product name. The product will be listed on
the Oracle price list and sold with Oracle HRMS systems. At this time,
management cannot reasonably estimate the impact on software sales of the Oracle
distribution network for TAMS/O.
CONSULTING SERVICE COSTS
For the year ended December 31, 1996, the cost of consulting services increased
by $1,517,215 or 34% and represented 51% of net sales and 54% of consulting
revenues. For the same period in 1995, the cost of consulting services were 53%
and 55% of net sales and consulting revenues respectively. The cost of the
consulting services as a percentage of consulting revenues can be impacted by
several factors. These factors include the cost of individual consultants and
the actual billable time they achieve during the year. As the demand for
consultants and systems integration increases, the Company expects that the cost
for individual consultants will also increase. Management anticipates passing
these costs along to their clients; however, there are no assurances that the
cost increases can be completely passed through or passed through at all.
15
<PAGE>
As a result of the industry demand for systems integration services, the Company
has focused on specific vendor applications and larger implementations. The
Company will be hiring new consultants and training them on applications that
the Company views have the largest growth potential. This will include Oracle,
PeopleSoft, and ADP. The hiring and training period will represent non-billable
time and will have a negative impact on margins between consulting revenues and
the cost of consulting services. Management believes that this will have a short
term impact; however, the long term benefits of having the resources available
to meet demand will outweigh this temporary impact to earnings.
In addition to the items noted above, the Company also uses independent
contractors. Cost for outside contractors can range between 30% to 60% higher
depending on the technical abilities of the contractor. Depending on the mix
between employees of the Company and outside contractors, this could have a
significant impact on the cost of consulting services. The increase cost
associated with the independent contractors generally cannot be passed on to
clients.
SOFTWARE SERVICE COSTS
Software service costs are direct costs primarily associated with the Company's
proprietary TAMS products. These costs include salaries, wages, travel, and
other expenses incurred from sales support efforts.
For the year ended December 31, 1996, software services costs decreased by
$498,405 from the same period in 1995. Costs were 15% of net revenues and 74% of
software related revenues for the year ended December 31, 1996. For the year
ended December 31, 1995, such cost were 11.3% and 165% of net revenue and
software related revenues respectively. The reduction in cost from the prior
year represents staff reductions relating to the TAMS mainframe product and a
reduction in the sales efforts for the TAMS/O product. Additionally, as
previously noted, no significant investment was made for the marketing of the
TAMS/O product given the delays in the general release of the Oracle HRMS
application. With the signing of the Oracle agreement, such a marketing related
cost should be minimal as the primary focus of the marketing and advertising and
sales cost associated with this product will be incurred by Oracle. The Company
will be required to provide sales support in conjunction with this contract.
SALES AND MARKETING EXPENSES
Sales and marketing expense as a percentage of net sales decreased from 30% in
1995 to 24% in 1996. The drop in the percentage of sales and marketing expense
to net revenues can be attributable to capitalizing on initiatives that began in
1995. In addition, a more territorial dispersion of sales staff took place in
1996 which cut down on travel and related cost associated with sales-calls and
related proposals. As previously noted under the Consulting Revenue section, the
Company has turned its focus to three primary HR and payroll systems
applications which should further assist in maintaining sales and
marketing-related expense at its current levels.
SOFTWARE DEVELOPMENT EXPENSES
Software development costs decreased by $329,193 or 28.9% during 1996 as
compared to the same period in 1995. Software development costs consist
primarily of salary and wages of the development staff required to support
existing systems and the Oracle agreement. Any additional future cost will be
based on the support required as a result of product sales.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by $632,257 or 62% from the same
period in 1995. As a percent of net revenues, general and administrative
expenses were 14% for the year ended December 31, 1996 and 1995. During the
fourth quarter of 1996, the Company accrued a non-recurring charge of $50,000
for the relocation of the administrative and financial functions from Columbia,
South Carolina to West Palm Beach, Florida. These costs were primarily
associated with the termination pay for existing staff in Columbia.
16
<PAGE>
RESULTS OF OPERATIONS
For the year ended December 31, 1996, the Company reported net income of $60,335
as compared to a net loss $1,834,053 in 1995. The turn-around from the net loss
to net income during fiscal year 1996 was attributable to several factors:
1. A reduction in the overall cost incurred in the development of software
products.
2. Decreased sales and marketing expenses relating to TAMS.
3. A refocus on the core business of consulting..
During 1996, the Company focused on completing the agreement with Oracle for the
TAMS/O product. Since Oracle was experiencing a delay in the release of the HRMS
Payroll application system, the Company curtailed spending in the sales and
marketing areas, thus reducing expenses associated with the product. The Company
continued to negotiate for the agreement during 1996 recognizing that the Oracle
sales distribution network would be much more effective in reaching the current
Oracle customers as well as future sales prospects. This allowed management to
refocus its attention on the core business of consulting. The Company expects
the industry to continue to grow as projected by industry publications and fully
expects the Company to continue to grow within the industry expectation.
The Company's revenue from software sales during 1997 will be directly dependent
upon Oracle's ability to market and sell its existing HRMS application package
and the TAMS/O productivity software. The Company does not expect to see
significant revenues from the software sales until third quarter 1997. If
material software sales do not begin to occur by the third quarter 1997, the
Company will reduce staff and other expenditures in support of TAMS/O
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital in the amount of
$3,442,071. During 1996, the Company had net cash used in operating activities
of $131,034 as compared to cash used in operating activities of $2,172,133 for
the year ended December 31, 1995. For the year ended December 31, 1996, the
company had a net cash increase of $53,173 compared to $723,048 for the year
ended December 31, 1995. In 1995, the Company received $5,362,296 of proceeds
from an initial public offering.
The Company does not expect to have any significant commitments for capital
expenditures over the next twelve months. Capital expenditures will consist
primarily of computers for new consultants hired during 1997. The Company
expects that all capital expenditures will be financed through existing cash
flow of the Company. The Company has lease obligations outstanding of $327,058.
The Company has no outstanding lines of credit or debt as of December 31, 1996.
Management believes the Company has sufficient working capital to meet the
current cash requirements for the next twelve months.
FORWARD-LOOKING STATEMENTS
The statements made above under "Management Discussion and Analysis and Results
of Operations" relating to the Company's expectations for demand for consulting
services will remain strong throughout 1997, the Company's ability to grow
within industry expectations, and anticipated increases in revenues from the
sale of TAMS/O are forward-looking statements as described in the Private
Securities Litigation Reform Act of 1995. As discussed above, the results
anticipated by any or all of these forward-looking statements may not occur.
Important factors that could cause actual results to differ materially from the
forward-looking statements include the following: (1) general competition for
consulting services, specifically HRMS consulting; (2) the ability to maintain
and attract qualified consultants and sales staff 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
operating and/or economic downturns; (4) the ability to pass on increased
consulting cost; (5) the length of the sales cycle for HR/payroll systems and
TAMS because of their complexity, size and cost; (6) potential future
competition that may develop technology to compete directly with TAMS; (7) the
ability
17
<PAGE>
of Oracle to successfully sell its HRMS payroll system; (8) the absence of
material problems in the operation of Oracles' HRMS payroll system; (9) the
absence of material problems with the operation of TAMS/O; and (10) a reversal
of the general tendency in the marketplace to move to client/server technology.
ITEM 7. FINANCIAL STATEMENTS
See F-1 through F-18 at the end of this annual report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
18
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT.
Incorporated by reference from the Company's Proxy Statement for the annual
meeting of stockholders to be held on May 13, 1997, section entitled "Election
of Directors".
ITEM 10. EXECUTIVE COMPENSATION
Incorporated by reference from the Company's Proxy Statement for the annual
meeting of stockholders to be held on May 13, 1997, section entitled "Executive
Compensation".
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Company's Proxy Statement for the annual
meeting of stockholders to be held on May 13, 1997, sections entitled "Voting
Securities and Principal Holders Thereof".
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Company's Roxy Statement for the annual
meeting of stockholders to be held on May 13, 1997, section entitled "Related
Party Transactions".
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
23.1 - Consent to Independent Accountants
27.1 - Financial Data Schedule
(a) Reports on Form 8-K: No reports on Form 8-K were filed during the
period covered by this report.
19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on the day of April 11, 1997.
InTime Systems International, Inc.
By: /s/ WILLIAM E. BERRY
-------------------------------------
William E. Berry
President, (Chief Executive Officer)
In accordance with the Securities Exchange Act of 1934, this report
has been signed on April 11, 1997 by the following persons in the capacities
indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JOHN E. STEINER Chairman of the Board April 11, 1997
- ---------------------------
John E. Steiner
/s/ WILLIAM E. BERRY Director April 11, 1997
- ---------------------------
William E. Berry
/s/ MICHAEL MATTE Chief Financial Officer April 11, 1997
- ---------------------------
Michael Matte
/s/ RICHARD H. WILLIAMS Director April 11, 1997
- ---------------------------
Richard H. Williams
/s/ SHERMAN A. DRUSIN Director April 11, 1997
- ---------------------------
Sherman A. Drusin
20
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants F-2
Consolidated Balance Sheet as of December 31, 1996 and 1995 F-3
Consolidated Statement of Operations for the years ended
December 31, 1996, 1995 and 1994 F-4
Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
PRICE WATERHOUSE LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of InTime Systems International, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
InTime Systems International, Inc. and its subsidiaries at December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
March 14, 1997
Atlanta, Georgia
F-2
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,941,747 $ 1,888,574
Accounts receivable, net of allowance for doubtful
accounts of $102,654 and $72,000, respectively 2,101,940 1,336,519
Other assets 89,601 79,184
----------- -----------
Total current assets 4,133,288 3,304,277
Property and equipment, net of accumulated
depreciation and amortization (Note 3) 633,558 798,233
Software development costs, net of accumulated
amortization (Note 4) 312,491 468,491
----------- -----------
$ 5,079,337 $ 4,571,001
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 361,888 $ 290,454
Deferred revenue 126,426 73,622
Current obligations under capital leases (Note 6) 202,903 8,452
----------- -----------
Total current liabilities 691,217 372,528
Obligations under capital leases (Note 6) 124,155 15,002
----------- -----------
Total liabilities 815,372 387,530
----------- -----------
Stockholders' equity (Note 9)
Preferred stock:
Par value $1.00 per share; 5,000,000 shares
authorized; no shares issued or outstanding -- --
Common stock:
Class A common stock:
Par value $.01 per share; 16,905,279 shares
authorized; 1,790,516 and 1,610,000 shares issued
and outstanding, respectively 17,905 16,100
Class B common stock:
Par value $.01 per share; 3,094,721 shares
authorized; 2,715,664 and 2,884,721 shares issued
and outstanding, respectively 27,157 28,847
Additional paid-in capital 6,180,643 6,160,599
Retained deficit (1,961,740) (2,022,075)
----------- -----------
Total stockholders' equity 4,263,965 4,183,471
Commitments and contingencies (Note 6) -- --
----------- -----------
$ 5,079,337 $ 4,571,001
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-3
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------
DECEMBER 31,
------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues:
Consulting services $11,193,014 $ 6,773,983 $ 5,589,992
Computer software services 479,019 519,689 192,500
Interest income 41,829 208,451 3,180
Other 23,007 10,919 6,131
----------- ----------- -----------
11,736,869 7,513,042 5,791,803
Costs and expenses:
Cost of consulting services 6,002,642 4,485,427 3,069,395
Cost of software services 352,674 851,079 --
Sales and marketing 2,863,599 2,270,667 1,594,493
Computer software research
and development 810,039 1,139,232 54,500
General and administrative 1,647,580 1,015,323 846,804
----------- ----------- -----------
Income (loss) before
benefit (provision) for income taxes 60,335 (2,248,686) 226,611
Benefit (provision) for income taxes (Note 5) -- 414,633 (414,633)
----------- ----------- -----------
Net income (loss) $ 60,335 $(1,834,053) $ (188,022)
----------- ----------- -----------
Net income (loss) per share $ .02 $ (.77) $ (.16)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-4
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------- ------------------------- ADDITIONAL
NUMBER NUMBER PAID-IN
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 -- $ -- 3,094,721 $ 30,947 $ --
Transfer of accumulated retained earnings
of S Corporations to additional paid-in
capital -- -- -- -- 1,002,893
Distributions to stockholders -- -- -- -- (190,590)
Net loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 -- -- 3,094,721 30,947 812,303
Issuance of 1,400,000 shares of
common stock in connection with
the initial public offering (Note 9) 1,400,000 14,000 -- -- 5,348,296
Conversion of 210,000 Class B
shares to Class A shares as underwriter's
over-allotment option in connection with
the initial public offering (Note 9) 210,000 2,100 (210,000) (2,100) --
Net loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 1,610,000 16,100 2,884,721 28,847 6,160,599
Conversion of 169,057 Class B
shares to Class A shares 169,057 1,690 (169,057) (1,690) --
Exercise of stock options 11,459 115 -- -- 20,044
Net income -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 1,790,516 $ 17,905 2,715,664 $ 27,157 $ 6,180,643
=========== =========== =========== =========== ===========
</TABLE>
TOTAL
RETAINED STOCKHOLDERS'
DEFICIT EQUITY
----------- ------------
Balance at December 31, 1993 $ 1,002,893 $ 1,033,840
Transfer of accumulated retained earnings
of S Corporations to additional paid-in
capital (1,002,893) --
Distributions to stockholders -- (190,590)
Net loss (188,022) (188,022)
----------- -----------
Balance at December 31, 1994 (188,022) 655,228
Issuance of 1,400,000 shares of
common stock in connection with
the initial public offering (Note 9) -- 5,362,296
Conversion of 210,000 Class B
shares to Class A shares as underwriter's
over-allotment option in connection with
the initial public offering (Note 9) -- --
Net loss (1,834,053) (1,834,053)
----------- -----------
Balance at December 31, 1995 (2,022,075) 4,183,471
Conversion of 169,057 Class B
shares to Class A shares -- --
Exercise of stock options -- 20,159
Net income 60,335 60,335
----------- -----------
Balance at December 31, 1996 $(1,961,740) $ 4,263,965
=========== ===========
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------
DECEMBER 31,
------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 60,335 $(1,834,053) $ (188,022)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 393,552 194,989 61,653
Provision for doubtful accounts
receivable 30,654 37,200 27,000
Loss on sale-leaseback transaction 66,679 -- --
Changes in assets and liabilities:
Increase in accounts receivable (796,075) (89,925) (462,014)
Increase in other assets (10,417) (59,725) (19,459)
Increase (decrease) in accounts payable
and accrued expenses 71,434 (79,608) 320,279
Increase (decrease) in deferred revenue 52,804 73,622 (122,500)
(Decrease) increase in deferred income taxes -- (414,633) 414,633
----------- ----------- -----------
Net cash (used in) provided by operating activities (131,034) (2,172,133) 31,570
----------- ----------- -----------
Cash flows used in investing activities:
Software development costs capitalized -- (128,697) (274,905)
Purchases of property and equipment (88,523) (788,010) (61,460)
----------- ----------- -----------
Net cash used in investing activities (88,523) (916,707) (336,365)
----------- ----------- -----------
Cash flows provided by financing activities:
Distributions to stockholders -- -- (190,590)
Decrease (increase) in prepaid IPO costs -- 583,770 (583,770)
(Repayment) issuance of notes payable to stockholders -- (625,000) 625,000
(Repayment) issuance of bridge notes to investors -- (1,500,000) 1,500,000
Proceeds from sale of computer equipment in sale-leaseback
transaction 362,041 -- --
Repayment of capital lease obligations (109,470) (9,178) (23,933)
Proceeds from the issuance of common stock 20,159 5,362,296 --
----------- ----------- -----------
Net cash provided by financing activities 272,730 3,811,888 1,326,707
----------- ----------- -----------
Increase in cash and cash equivalents 53,173 723,048 1,021,912
Cash and cash equivalents, beginning of year 1,888,574 1,165,526 143,614
----------- ----------- -----------
Cash and cash equivalents, end of year $ 1,941,747 $ 1,888,574 $ 1,165,526
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest
under capital lease obligations (Note 6) $ 29,921 $ 1,989 $ 3,620
=========== =========== ===========
Supplemental disclosure of non-cash financing and investing
activities:
Increase in capital lease obligations (Note 6) $ 413,074 $ -- $ 47,778
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-6
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BASIS OF FINANCIAL STATEMENT
PRESENTATION:
InTime Systems International, Inc. (the "Company") was incorporated in the State
OF Delaware on January 3, 1994. Upon formation, the Company acquired all of the
outstanding common stock of The Consulting TEAM, Inc. ("TEAM") AND InTime
Systems, Inc. ("InTime") (collectively, the "Companies"). TEAM and InTime
operated under common control, with common stockholders and management. The
Company, as successor, continued the business activities previously conducted by
TEAM and InTime. TEAM was incorporated in the State of Florida on June 4, 1985.
TEAM provides a wide array of human resource and payroll systems consulting
services to governmental and business entities in the United States. InTime was
incorporated in the State of Delaware on February 2, 1993. InTime designs,
develops, markets and installs computer software to aid governmental and
business entities in their management of human resources.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of the Company include the
operations of TEAM and InTime. All significant transactions and balances between
the Company, TEAM and InTime have been eliminated in consolidation.
REVENUE RECOGNITION
/bullet/ Consulting services - The Company performs consulting services
generally on a time and expense basis. Revenues are recognized as
services are performed. Certain reimbursable expenses incurred in the
performance of consulting services are included in net revenues from
consulting services and costs of consulting services provided in the
Consolidated Statement of Operations.
/bullet/ Computer software services - Revenue from computer software sales is
recognized upon delivery and customer acceptance, which signifies that
the Company has no significant obligations remaining, and collection
of the resulting receivable is probable, in accordance with AICPA
Statement of Position 91-1, "Software Revenue Recognition." If
significant vendor obligations remain, the Company will accrue for the
remaining costs. The Company does not grant returns or refunds after
customer acceptance of the software.
Software sold is covered under warranty during the period a
maintenance plan is in force and in effect. The Company provides a 90
to 180 day free maintenance period as part of its initial license
agreement with a customer. Any estimated costs to provide such
services are accrued upon product shipment. A subsequent maintenance
plan may be purchased by the customer for a fee. Such maintenance fee
revenue is recognized on a pro rata basis over the terms of the
agreements.
F-7
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1995 and 1996, the Company included certain software installation,
customization and other related revenues as computer software services on the
accompanying Consolidated Statement of Operations. The cost of providing these
services is included in costs of software services. No comparable breakout of
these costs was available in 1994.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investment instruments with
an original maturity of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation for financial reporting purposes is recorded using the
straight-line method over estimated useful lives ranging from three to five
years. Expenditures for maintenance and repairs are charged to expense as
incurred. Gains and losses on sales of equipment are reflected in current
operations.
COMPUTER SOFTWARE RESEARCH AND DEVELOPMENT COSTS
All computer software research and development costs are expensed as incurred
prior to the establishment of technological feasibility.
CAPITALIZED COMPUTER SOFTWARE DEVELOPMENT COSTS
Capitalized computer software development costs consist principally of salaries
and certain other expenses directly related to the development and modification
of software products in accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed". Capitalization of such
costs begins upon establishment of technological feasibility as defined in SFAS
No. 86 and is discontinued when the resulting product is available for general
release.
Amortization of capitalized computer software development costs is provided at
the greater of the ratio of current product revenue to the total of current and
anticipated product revenue or on a straight-line basis over the estimated
economic life of the software, which is not more than five years.
INCOME TAXES
The Corporation records taxes under an asset and liability approach recognizing
deferred tax liabilities and assets for the future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities.
EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of common
shares and dilutive common share equivalents using the treasury stock method.
Common share equivalents include common shares issuable upon exercise of stock
options granted (using the treasury stock method) and warrants issued in
connection with the private placement offering and the IPO (see Notes 9 and 10).
Common share equivalents exclude all common shares and common shares issuable
upon exercise of stock options that are being held in escrow.
F-8
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation" which is effective for
transactions entered into in fiscal years beginning after December 15, 1995.
SFAS No. 123 defines a fair value based method of accounting for stock-based
compensation. The Statement allows measurement of compensation cost in
conformity with Accounting Principles Board Opinion No. 25 ("APB No. 25"),
"Accounting for Stock Issued to Employees", provided pro forma disclosure is
made concerning net income as if the fair value approach had been applied. The
Company adopted the disclosure approach permitted by SFAS No. 123 effective
January 1, 1996 and continues to apply the compensatory measurement principles
of APB No. 25.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
DECEMBER 31,
-----------------------
1996 1995
--------- ---------
Furniture and fixtures $ 235,862 $ 238,058
Computer hardware and other equipment 699,104 705,009
Vehicle 47,778 47,778
Leasehold improvements 8,945 8,945
--------- ---------
991,689 999,790
Less - Accumulated depreciation and amortization (358,131) (201,557)
--------- ---------
$ 633,558 $ 798,233
========= =========
Depreciation of property and equipment totaled $237,552, $99,593 and $30,569 for
the years ended December 31, 1996, 1995 and 1994, respectively. The Company has
entered into noncancellable capital leases on the above vehicle and certain
computer equipment. (See Note 6.)
F-9
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - SOFTWARE DEVELOPMENT EXPENDITURES:
Computer software research and development expenditures are summarized as
follows:
YEAR ENDED
DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
Total computer software research
and development expenditures $ 810,039 $1,267,929 $ 329,405
Less - Additions to capitalized
computer software development
costs, before amortization -- 128,697 274,905
---------- ---------- ----------
Computer software research and
development expense $ 810,039 $1,139,232 $ 54,500
========== ========== ==========
In 1996, the costs consisted solely of salary and wages of development staff
required to enhance and maintain the existing systems.
Activity for capitalized software development costs is summarized as follows:
YEAR ENDED
DECEMBER 31,
--------------------------------------
1996 1995 1994
--------- --------- ---------
Balance at beginning of year, net $ 468,491 $ 435,190 $ 191,370
Additions -- 128,697 274,905
Amortization expense (156,000) (95,396) (31,085)
--------- --------- ---------
Balance at end of year, net $ 312,491 $ 468,491 $ 435,190
========= ========= =========
F-10
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - INCOME TAXES:
From inception through December 31, 1993, the Companies elected to be taxed as S
Corporations under the Internal Revenue Code. Accordingly, taxable income or
loss was allocated directly to the stockholders, and the Companies did not
provide for income taxes.
In January 1994, the stockholders of TEAM and InTime terminated the S
Corporation elections of the Companies to be effective January 1, 1994. In
connection with these terminations, the Company recorded deferred taxes of
$325,028, as calculated in accordance with SFAS No. 109, "Accounting for Income
Taxes".
For the years ended December 31, 1996, 1995 and 1994, the (benefit) provision
for income taxes was as follows:
YEAR ENDED
----------
DECEMBER 31,
------------
1996 1995 1994
--------- --------- ---------
Current tax benefit:
Federal $ -- $ -- $ --
State -- -- --
--------- --------- --------
-- -- --
Deferred tax (benefit) provision:
Federal -- (349,165) 349,165
State -- (65,468) 65,468
--------- --------- ---------
$ -- $(414,633) $ 414,633
========= ========= =========
The differences between income taxes at the statutory federal income tax rate of
34% and income taxes shown above are as follows:
YEAR ENDED
----------
DECEMBER 31,
------------
1996 1995 1994
--------- --------- ---------
Tax expense (benefit) at statutory rate $ 20,607 $(764,642) $ 77,048
Increase (decrease) in taxes resulting from:
State income taxes, net of federal
income tax benefit 2,576 (95,580) 9,064
Change in the valuation allowance (8,280) 412,114 --
Realization of deferred tax asset (37,063) -- --
Cumulative effect of change in tax status -- -- 325,028
Other 22,160 33,475 3,493
--------- --------- ---------
$ -- $(414,633) $ 414,633
========= ========= =========
F-11
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Deferred tax (assets) liabilities are composed of the following:
DECEMBER 31,
---------------------------
1996 1995
----------- -----------
Deferred tax assets:
Current deferred tax asset:
Bad debt expense $ (39,266) $ (27,540)
Non-current deferred tax assets:
Net operating loss carry-forwards (707,146) (978,823)
----------- -----------
Total deferred tax assets (746,412) (1,006,363)
----------- -----------
Deferred tax liabilities:
Current deferred tax liability:
Cash to accrual adjustments 176,563 399,499
Non-current deferred tax liability:
Capitalized software development costs 119,529 179,198
Tax depreciation over book 29,926 15,552
----------- -----------
Total deferred tax liabilities 326,018 594,249
----------- -----------
Net deferred tax asset before valuation
allowance (420,394) (412,114)
Deferred tax asset valuation allowance 420,394 412,114
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
DISTRIBUTIONS TO STOCKHOLDERS
In connection with the terminations of the S Corporation elections, the Board of
Directors voted to distribute within one year from December 31, 1993, the
"Accumulated Adjustments Account" which represents the previously taxed and
undistributed earnings of the Companies.
The Companies became fully subject to corporate income taxation on January 1,
1994, but under applicable tax laws, the existing shareholders continue to be
liable for any tax deficiencies attributable to the Companies' operations prior
to such date. Accordingly, prior to consummation of the IPO, the Company and its
present stockholders entered into a Tax Indemnification Agreement that provides
for the existing stockholders to be indemnified by the Company with respect to
federal and state taxes (plus interest and penalties, as well as any costs
incurred in contesting any dispute with the taxing authority) resulting from any
adjustments to S Corporation income for any taxable year that was taxed directly
to the existing stockholders.
The right of indemnification is absolute and is not conditioned upon realization
by the Company of an offsetting adjustment to the Company's tax liability in a
year in which it was not an S Corporation. Any payment made by the Company to
the existing stockholders pursuant to the
F-12
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Tax Indemnification Agreement may be considered by the Internal Revenue Service
or state taxing authorities to be non-deductible by the Company for income tax
purposes. Additionally, if a payment made under this Tax Indemnification
Agreement is determined to be taxable to the existing stockholders, the Company
is further obligated to make additional payments to the existing stockholders in
amounts sufficient to place them in the same after-tax position that they would
have been if the original indemnification payment had not been included in
income.
NOTE 6 - COMMITMENTS:
The Company leases certain office space, equipment and a vehicle under
noncancellable operating lease agreements expiring over the next five years. In
addition, the Company leases a vehicle and certain computer equipment under
capital leases, which will expire over the next three years. The asset balances
are included in property and equipment, net of accumulated depreciation and
amortization, in the consolidated balance sheet. The following is an analysis of
the leased property under capital leases by major classes:
ASSET BALANCES AT
DECEMBER 31,
---------------------------
1996 1995
--------- ---------
Computers and equipment $ 413,074 $ --
Vehicles 47,778 47,778
--------- ---------
460,852 47,778
Less: Accumulated amortization (113,789) (13,367)
--------- ---------
$ 347,063 $ 34,411
--------- ---------
During 1996, the Company entered into a sale-leaseback transaction whereby it
sold computer equipment with a net book value of $428,720 at a loss of $66,679
and recorded a capital lease obligation of $362,041. The asset balance and
accumulated amortization related to this transaction included above at December
31, 1996 is $362,041 and $96,169, respectively.
F-13
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 31, 1996, future minimum rentals for noncancellable leases with
terms in excess of one year were as follows:
MINIMUM ANNUAL RENTALS
YEAR ENDING ------------------------------
DECEMBER 31, OPERATING CAPITAL
------------ ---------- ----------
1997 $ 241,341 $ 235,980
1998 208,049 107,160
1999 191,773 15,201
2000 197,033 --
2001 and thereafter 170,921 --
---------- ----------
$1,009,117 $ 358,341
========== ==========
Total rent expense under these and other agreements was $237,460, $139,642 and
$87,294 for the years ended December 31, 1996, 1995 and 1994, respectively.
Under the capital leases, the Company recorded interest expense of $29,921,
$1,989 and $3,346 for the years ended December 31, 1996, 1995 and 1994,
respectively.
NOTE 7 - SAVINGS PLAN:
The Company has established a defined contribution plan (the "Plan") which
qualifies under Section 401(k) of the Internal Revenue Code for the benefit of
eligible employees and their beneficiaries. Employees may elect to contribute
from 2% to 15% of their annual compensation to the Plan and the Company may make
matching contributions equal to the percentage of the elective contributions
made by the employees. The Company may make an additional discretionary annual
contribution. Employer contributions of $58,427, $0 and $0 were made to the Plan
in the years ended December 31, 1996, 1995 and 1994, respectively.
F-14
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8 - MAJOR CUSTOMERS:
The Company's operations, as briefly described in Note 1, are conducted within
one business segment.
Customers comprising 10% or greater of the Company's net revenues are summarized
as follows:
YEAR ENDED
DECEMBER 31,
-------------------------
1996 1995 1994
---- ---- ----
New York Times 19% -% -%
Asplundh Tree Service 12 - -
Delta Airlines 7 11 16
Maritz, Inc. --- --- 15
General American Life Insurance Company 1 23 20
All others 61 66 49
--- --- ---
100% 100% 100%
=== === ===
NOTE 9 - STOCKHOLDERS' EQUITY:
In January 1994, all of the outstanding shares of common stock of TEAM and
InTime were exchanged for 3,000,000 shares of the Company's $.01 par value
common stock.
Effective September 8, 1994, the Board of Directors of the Company declared a
1.032 to 1 stock split on all common shares authorized. The accompanying
consolidated financial statements have been retroactively restated to reflect
the stock split.
In accordance with the Escrow Agreement dated as of February 16, 1995 (the
"Agreement") certain shares of Class B Common Stock and options to purchase
shares of Class A Common Stock owned by certain officers, directors and
employees of the Company are held in escrow and will not be assignable or
transferrable until such time, if ever, as the escrowed shares are released from
escrow in accordance with the Agreement. Shares will be released from escrow if
certain pre-tax income targets are met or when the fair market value of the
Company's Class A Common Stock reaches certain levels. In the period in which it
is probable that the release requirements will be achieved (the "Measurement
Date"), the Company must record compensation expense equal to the difference
between the market value of the Class A Common Stock on the Measurement Date and
the market value of the shares when placed in escrow.
The Company filed a registration statement with the Securities and Exchange
Commission for an initial public offering of 1,400,000 units, (not including an
underwriter's over-allotment option of 210,000 units) with each unit consisting
of one share of the Company's Class A Common Stock and one redeemable Class A
Warrant which became effective February 16, 1995.
F-15
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
On February 27, 1995 the Company received $4,587,432 in proceeds from the
initial public offering. These proceeds are net of broker commissions and the
repayment of the $1,500,000 private placement notes payable plus accrued
interest.
On December 28, 1995, the Company filed Post Effective Amendment No. 1 to Form
SB-2 with the Securities and Exchange Commission to register 2,360,000 shares of
Class A Common Stock upon the exercise of redeemable Class A Warrants and
605,625 redeemable Class A Warrants.
NOTE 10 - STOCK OPTION PLANS:
On January 10, 1994, the Company established a 1994 Stock Option Plan (the
"Stock Plan") for employees, consultants and directors. The Stock Plan provides
for options to buy 300,000 shares of the Company's common stock. The Stock Plan
is administered by the Board of Directors. The Board of Directors will determine
eligibility to receive options, the exercise price, the number of shares subject
to the options, the vesting schedule and the term of any options granted. On
December 28, 1995, the Company increased the number of shares which can be
issued under the Stock Plan to 400,000 shares of common stock and on January 20,
1997, increased the number to 450,000. The options vest semi-annually over a
three year period each June 30 and December 31, provided that the grantee is
still employed by the Company on each vesting date. The options expire ten years
from their issuance date.
In accordance with SFAS No. 123, the fair value of each option under the Stock
Plan is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions used for grants in 1995
and 1996: divided yield of 0 percent, expected volatility of 65 percent,
risk-free interest rate of 6 percent and expected life of 5 years.
The Company applies APB No. 25 and related Interpretations in accounting for its
Stock Plan. Accordingly, no compensation cost has been recognized for its Stock
Plan. Had compensation cost for the Company's Stock Plan been determined based
on the fair value at the grant dates for awards consistent with the method of
SFAS No. 123, the Company's net loss and loss per share would have been the pro
forma amounts indicated below:
YEAR ENDED
DECEMBER 31,
--------------------------
1996 1995
--------- ------------
Net income (loss) As reported $ 60,335 $(1,834,053)
Pro forma (198,254) (1,936,425)
Earnings (loss) per share As reported .02 (.77)
Pro forma (.08) (.81)
F-16
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A summary of the status of the Company's Stock Plan as of December 31, 1996 and
1995, and changes during these years is presented below:
<TABLE>
<CAPTION>
1996 1995
---------------------------------- -------------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- ---------------- --------- ----------------
OPTIONS
- -------
<S> <C> <C> <C> <C>
Outstanding at the beginning
of the year 222,244 $ 4.61 209,038 $ 2.44
Granted 97,700 7.06 110,850 6.39
Exercised (11,459) 1.76 - -
Forfeited (73,147) 3.75 (97,744) 1.98
------- -------
Outstanding at the end of
the year 235,338 6.89 222,144 4.61
======= =======
Options exercisable
at the end of the year 159,532 3.90 82,008 3.75
======= =======
Weighted average fair
value of options granted
during the year $ 4.15 $ 3.69
</TABLE>
The following table summarizes information about options outstanding at December
31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------- ------------------------------
RANGE OF EXERCISE WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
PRICES NUMBER REMAINING CONTRACTUAL LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
- ----------------- ------- -------------------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$1.76 - $7.50 235,338 9.2 years $6.89 159,532 $3.90
</TABLE>
NOTE 11 - SUBSEQUENT EVENTS:
In January 1997, the Company entered into an agreement with a third party for
the direct distribution of its software product. The Company will provide
certain marketing and technical support to the third party. As software is sold,
the Company will receive a royalty from the third party.
F-17
<PAGE>
INTIME SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12 - QUARTERLY OPERATING RESULTS (UNAUDITED):
The following is a summary of the unaudited condensed consolidated quarterly
operating results of the Company for 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 QUARTER ENDED
--------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 3,277,310 $3,136,735 $2,961,343 $2,361,481
Expenses 3,118,593 2,923,085 2,666,200 2,968,656
Net income (loss) $ 158,717 $ 213,650 $ 295,143 $ (607,175)
Net income (loss) per share .06 .08 .11 (.24)
Weighted average shares
outstanding 2,582,842 2,582,817 2,571,844 2,569,635
</TABLE>
<TABLE>
<CAPTION>
1995 QUARTER ENDED
--------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 1,820,559 $1,587,532 $1,942,595 $2,162,094
Expenses 2,982,915 2,166,859 2,186,888 2,010,171
Net income (loss) $(1,162,356) $ (579,327) $ (244,293) $ 151,923
Net income (loss) per share (.45) (.23) (.10) .08
Weighted average shares
outstanding 2,560,515 2,560,515 2,560,515 1,882,658
</TABLE>
<TABLE>
<CAPTION>
1994 QUARTER ENDED
--------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 1,869,346 $1,509,361 $1,452,999 $ 960,097
Expenses 1,746,005 1,470,599 1,437,266 1,325,955
Net income (loss) $ 123,341 $ 38,762 $ 15,733 $ (365,858)
Net income (loss) per share .04 .01 .01 (.32)
Weighted average shares
outstanding 3,094,721 3,094,721 3,094,721 1,160,515
</TABLE>
F-18
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 14, 1997, which appears on page
F-2 of InTime Systems International, Inc.'s Annual Report on Form 10-KSB for the
year ended December 31, 1996.
/s/ PRICE WATERHOUSE LLP
--------------------
Price Waterhouse LLP
Atlanta, Georgia
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,941,747
<SECURITIES> 0
<RECEIVABLES> 2,204,594
<ALLOWANCES> 102,654
<INVENTORY> 0
<CURRENT-ASSETS> 4,133,288
<PP&E> 991,689
<DEPRECIATION> 358,131
<TOTAL-ASSETS> 5,079,337
<CURRENT-LIABILITIES> 691,217
<BONDS> 0
0
0
<COMMON> 45,062
<OTHER-SE> 4,218,903
<TOTAL-LIABILITY-AND-EQUITY> 5,079,337
<SALES> 11,736,869
<TOTAL-REVENUES> 11,736,869
<CGS> 0
<TOTAL-COSTS> 11,676,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,335
<INCOME-TAX> 0
<INCOME-CONTINUING> 60,335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,335
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
