FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the quarterly period ended 3/31/2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from ----- to -----
1MAGE SOFTWARE, INC.
(Exact name of Registrant as specific in its charter)
0-12535
(Commission File Number)
Colorado 84-0866294
(State of Incorporation) (IRS Employer Identification Number)
6025 S. Quebec St. Suite 300 Englewood CO 80111 (303) 694-9180
(Address of principal executive offices) (Registrant's telephone
number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports) and, (2) has been
subject to such filing requirements for the past 90 days. Yes X No ---
As of April 20, 2001, there were 3,146,554 shares of the Registrant's
common stock outstanding.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets -March 31, 2001, and December 31, 2000 3
Statements of Income -for three months ended March 31, 2001
and March 31, 2000 4
Statements of Cash Flows -for three months ended
March 31, 2001 and March 31, 2000 5
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................7
PART II. OTHER INFORMATION
Items 1-5 8
Item 6 Exhibits and Reports on Form 8-K5......................8
PART I - FINANCIAL INFORMATION
ITEM . FINANCIAL STATEMENTS
1MAGE SOFTWARE, INC.
BALANCE SHEETS
ASSETS Unaudited December 31,
March 31, 2000 2001
-------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 147,693 $ 150,457
Receivables:
Trade (less allowance: 2001, $10,000;
2000, $10,000 613,639 407,251
Related parties 200 -
Inventory 40,379 38,654
Prepaid expenses and other current assets 18,425 21,233
---------- ----------
Total current assets 820,336 617,595
PROPERTY AND EQUIPMENT, at cost, net 55,075 55,177
OTHER ASSETS:
Software development costs, net 745,841 754,734
Other 100 100
----------- ----------
TOTAL ASSETS $1,621,352 $1,427,606
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 150,000 $ 200,000
Current portion of capital
lease obligations 1,785 1,785
Deferred revenue 204,127 213,494
Accounts payable 173,782 185,468
Accrued liabilities 152,898 109,450
----------- ----------
Total current liabilities 682,592 710,197
LONG-TERM OBLIGATIONS:
Capital lease obligations 2,733 3,224
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.004 par value
- 10,000,000 shares authorized;
shares outstanding: 2001 -
3,146,554; 2000 - 3,146,554 12,586 12,586
Additional paid-in capital 7,238,658 7,238,658
Accumulated deficit (6,315,217) (6,537,059)
----------- ----------
Total shareholders' equity 936,027 714,185
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,621,352 $1,427,606
=========== ==========
See Notes to Condensed Financial Statements
1MAGE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2001 2000
---------- ----------
REVENUE
System sales and software licenses $ 329,209 $ 222,348
Services and annual fees 503,188 401,845
---------- ----------
Total revenue 832,397 624,193
---------- ----------
COST OF REVENUE:
System sales and software licenses 88,453 98,027
Services and annual fees 125,525 79,516
---------- ----------
Total cost of revenue 213,978 177,543
---------- ----------
GROSS PROFIT 618,419 446,650
% of Revenue 74% 72%
OPERATING EXPENSES:
Selling, general & administrative 390,494 282,948
---------- ----------
INCOME FROM OPERATIONS 227,925 163,702
---------- ----------
OTHER INCOME/(EXPENSE):
Interest income 1,755 2,300
Interest expense (7,838) (4,529)
---------- ----------
Total other income(expense) (6,083) (2,229)
---------- ----------
INCOME BEFORE INCOME TAXES 221,842 161,473
PROVISION FOR INCOME TAXES - -
---------- ----------
NET INCOME $ 221,842 $ 161,473
========== ==========
INCOME PER COMMON SHARE:
Basic $ .07 $ .06
========== ==========
Diluted $ .07 $ .05
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 3,146,554 2,787,194
========== ==========
Diluted 3,414,077 3,158,115
========== ==========
See Notes to Condensed Financial Statements
1MAGE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 221,842 $ 161,473
Adjustments to reconcile earnings to
net cash Provided by operating
activities:
Depreciation and amortization 82,269 89,643
Issuance of stock options for services - (18,046)
Changes in assets and liabilities:
Receivables (206,588) (101,730)
Inventory (1,725) 2,681
Prepaid expenses and other assets 2,808 (5,217)
Accounts payable (11,686) (34,960)
Accrued liabilities and
deferred revenue 34,081 (13,339)
---------- ----------
Net cash provided by
operating activities 121,001 80,505
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (6,867) (5,730)
Additions to capitalized software (66,407) (77,950)
---------- ----------
Net cash used for
investing activities (73,274) (83,680)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to line of credit - -
Repayment of line of credit (50,000) -
Proceeds from exercise of Common
Stock options - 66,872
Repayment of long-term obligations (491) (1,293)
---------- ----------
Net cash provided by
(used for) financing activities (50,491) 65,579
---------- ----------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS (2,764) 62,404
CASH AND CASH EQUIVALENTS,
beginning of period 150,457 253,930
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $ 147,693 $ 316,334
========== ==========
See Notes to Condensed Financial Statements
1MAGE SOFTWARE, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
GENERAL:
Management has elected to omit substantially all notes to the
unaudited interim financial statements. Reference should be made to
the Company's annual report on Form 10-K for the year ended December
31, 2000 as this report incorporates the Notes to the Company's year-
end financial statements. The condensed balance sheet of the Company
as of December 31, 2000 has been derived from the audited balance
sheet of the Company as of that date.
UNAUDITED INTERIM INFORMATION:
The unaudited interim financial statements contain all necessary
adjustments (consisting of only normal recurring adjustments) which,
in the opinion of Management, are necessary for a fair statement of
the results for the interim periods presented. The results of
operations for the interim periods presented are not necessarily
indicative of those expected for the year.
REVENUE RECOGNITION - Revenue from the sale of software licenses,
computer equipment, and existing application software packages is
recognized when the software and computer equipment are shipped to
the customer, remaining vendor obligations are insignificant, there
are no significant uncertainties about customer acceptance and
collectibility is probable. Revenue from related services, including
installation and software modifications, is recognized upon
performance of services. Maintenance revenue is recognized ratably
over the maintenance period.
INCOME TAXES - The Company follows the liability method of accounting
for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109. Under this method, deferred income taxes
are recorded based upon differences between the financial reporting
and tax bases of assets and liabilities and are measured using
enacted tax rates and laws that will be in effect when the underlying
assets or liabilities are received or settled.
The Company has recorded a full valuation allowance against all
deferred tax assets due to the uncertainty of ultimate realizability.
INCOME PER SHARE -Income per share is computed by dividing net income
by the weighted average number of common and equivalent shares
outstanding during the period. Outstanding stock options are treated
as common stock equivalents for purposes of computing diluted
earnings per share.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2001 VERSUS
MARCH 31, 2000
1mage Software, Inc. (the "Company") reported revenue of $832,397 for
the first quarter of 2001, an increase of 33% over $624,193 posted
for the same period a year ago. System sales, which are comprised
almost entirely of software licenses, increased $106,861, or 48%, to
$329,209 for the comparable quarters. Services and recurring annual
fees increased $101,343, or 25%, to $503,188 when comparing the first
quarter of 2001 to the same quarter in 2000. Gross profit was 74%
of revenue in 2001, versus 72% in 2000, due to the increases in high-
margin software revenue and recurring fees. Revenue from indirect
channels increased 21% for the comparable periods. SG&A expenses of
$390,094 increased $107,546 over the two comparable periods,
primarily due to sales and marketing costs associated with increased
revenue levels. The Company posted first quarter 2001 net earnings
of $221,842 or $.07 per share, as compared to net earnings of
$161,473, or $.06 per share, for the same quarter last year.
The Company added an international distributor in the U.K. during
first quarter of 2001 in an ongoing effort to expand international
sales and support.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, cash on hand decreased $2,764 from $147,693 at
December 31, 2000, primarily due to timing of collections on accounts
receivable. The Company continues to add new features to its
software product offerings and used cash of $66,407 for additions to
capitalized software.
On February 24, 2001, the Company renewed its $200,000 line of credit
agreement with a bank for another year. There were no borrowings
against the line of credit at April 20, 2001.
The Company's financial resources include cash on hand, revenues from
operations, and management of funds available on its revolving line
of credit. In the Company's judgment, sufficient financial resources
are available to meet current working capital needs. The Company's
line of credit expires February 24, 2002 and bears interest at prime
plus 1.5% and is secured by the Company's accounts and general
intangibles.
FORWARD LOOKING STATEMENTS
Some of the statements made herein are not historical facts and may
be considered "forward looking statements." All forward-looking
statements are, of course, subject to varying levels of uncertainty.
In particular, statements which suggest or predict future events or
state the Company's expectations or assumptions as to future events
may prove to be partially or entirely inaccurate, depending on any of
a variety of factors, such as adverse economic conditions, new
technological developments, competitive developments, competitive
pressures, changes in the management, personnel, financial condition
or business objectives of one or more of the Company's customers,
increased governmental regulation or other actions affecting the
Company or its customers as well as other factors.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings Inapplicable
Item 2. Changes in Securities Inapplicable
Item 3. Defaults Upon Senior Securities Inapplicable
Item 4. Submission of Matters to a Vote
of Security Holders Inapplicable
Item 5. Other Information Inapplicable
Item 6. Exhibits and Reports on Form 10-K
(A) Exhibit Table Inapplicable
(B) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended
March 31, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
1MAGE SOFTWARE, INC.
(Registrant)
Date: 5/3/2001 /s/ Mary Anne DeYoung
Mary Anne DeYoung
Chief Financial Officer