UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File Number: 33-15370-D
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CUSA Technologies, Inc.
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(Exact name of the small business as specified in charter)
Nevada 87-0439511
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State of Incorporation IRS Identification Number
986 West Atherton Drive, Salt Lake City, Utah 84123
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(Address of principle executive offices)
(801) 263-1840
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(Telephone of issuer including area code)
Check whether the Issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the past
12 months (or for such shorter period that the Issuer was required to
file such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes ___X___ No ________
APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the Issuer filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 20, 1996, the Issuer had 8,876,768 shares of its
common stock, par value $0.001 per share, issued and outstanding.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUSA Technologies, Inc. (the "Company"), has included the
condensed consolidated balance sheets of the Company and its
subsidiaries as of March 31, 1996 (unaudited) and June 30, 1995 (the
end of the Company's most recent fiscal year), unaudited condensed
consolidated statements of earnings for the three months ended March
31, 1995 and 1996 and unaudited condensed consolidated statements
of operation and cash flows for the nine months ended March 31, 1995
and 1996, together with unaudited condensed notes thereto.
In the opinion of management of the Company, the financial
statements reflect all adjustments, all of which are normal recurring
adjustments, necessary to fairly present the financial condition of the
Company for the interim periods presented. The financial statements
included in this report on form 10-QSB should be read in conjunction
with the audited financial statements of the Company and the notes
thereto included in the annual report of the Company on form 10-KSB
for the year ended June 30, 1995.
CUSA TECHNOLOGIES, INC.
Consolidated Balance Sheets
March 31, June 30,
1996 1995
ASSETS (Unaudited)
Current Assets:
Cash $ 130,843 818,883
Trade accounts receivable, net of allowance for
doubtful accounts 7,175,262 5,141,582
Inventories 488,330 1,274,088
Prepaid expenses and other assets 507,475 288,310
Total current assets 8,301,910 7,522,863
Property and equipment
Land 297,688 297,688
Buildings and improvements 2,476,504 2,431,778
Furniture, fixtures and equipment 2,946,289 2,133,952
Other 903,232 230,427
Total property and equipment 6,623,713 5,093,845
Less accumulated depreciation and amortization 1,651,302 988,663
Net property and equipment 4,972,411 4,105,182
Equipment under capital lease obligations, net 290,417 461,834
Receivables from related parties 452,225 330,054
Software development and acquisition costs, net 4,418,464 3,084,047
Excess of purchase price over fair value of net tangible
and identifiable intangible assets acquired, net 14,687,106 13,431,054
Deferred income tax assets 54,282 -
Other assets 288,417 183,842
$ 33,465,232 29,118,876
The accompanying notes are an integral part of these statements.
CUSA TECHNOLOGIES, INC.
Consolidated Balance Sheets
March 31, June 30,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
Current liabilities:
Lines of credit with banks $ 1,342,088 373,247
Current installments of long-term debt 952,482 870,668
Current installments of obligations under capital leases 169,604 170,334
Accounts payable 4,291,430 3,235,658
Accrued liabilities and deposits 3,834,925 2,841,168
Income taxes payable 79,048 50,256
Notes payable to related parties 1,268,390 1,962,155
Deferred revenue 7,378,666 5,515,623
Total current liabilities 19,316,633 15,019,109
Long-term debt with related parties 2,445,000 1,145,000
Long-term debt, excluding current installments 1,921,425 1,852,471
Obligations under capital leases, excluding
current installments 95,317 226,356
Deferred income taxes - 956,266
Total liabilities 23,778,375 19,199,202
Minority interest - (1,323)
Commitments and contingent liabilities - -
Stockholders' equity:
Series A convertible preferred stock, $.001 par value;
authorized 1,500,000 shares; issued 1,000,000 shares 1,000 1,000
Common stock, $.001 par value; authorized 25,000,000 shares;
issued 8,847,053 shares at March 31, 1996 and
8,509,516 shares at June 30, 1995 8,847 8,510
Additional paid-in capital 10,380,378 9,116,807
Retained earnings (accumulated deficit) (703,368) 794,680
Total stockholders' equity 9,686,857 9,920,997
$ 33,465,232 29,118,876
The accompanying notes are an integral part of these statements.
CUSA TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended Nine months ended
March 31, March 31,
1996 1995 1996 1995
Net revenues $11,213,555 9,375,185 35,031,945 22,618,690
Cost of goods sold and other direct costs 6,472,965 4,944,995 18,976,320 11,699,982
Gross profit 4,740,590 4,430,190 16,055,625 10,918,708
Product development costs 634,791 559,293 1,970,843 1,301,746
Selling, general and administrative
expenses 6,053,626 3,082,228 15,320,599 7,771,011
Operating income (loss) (1,947,827) 788,669 (1,235,817) 1,845,951
Other income (expense):
Interest expense (174,600) (95,790) (437,308) (270,856)
Other, net (61,451) 26,484 (37,729) 65,332
Income (loss) before
income taxes (2,183,878) 719,363 (1,710,854) 1,640,427
Income taxes (benefit) (709,182) 274,138 (302,806) 619,642
Net earnings (loss) $(1,474,696) 445,225 (1,408,048) 1,020,785
Earnings (loss) per common and common
equivalent share
Primary $ (0.17) 0.05 (0.17) 0.13
Fully diluted $ (0.17) 0.05 (0.17) 0.12
Weighted average common and common
equivalent shares
Primary 8,775,494 8,440,277 8,653,093 7,383,482
Fully diluted 8,775,494 8,603,638 8,653,093 7,749,171
The accompanying notes are an integral part of these statements.
CUSA TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
Nine months ended March 31,
(Unaudited)
1996 1995
Cash flows from operating activities:
Net earnings (loss) $(1,408,048) 1,020,785
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,410,904 1,260,062
Minority interest in earnings (loss) of subsidiary 1,323 (2,390)
Net change in current assets and liabilities:
Accounts receivable (2,458,956) (2,123,135)
Inventories 792,841 6,158
Prepaid expenses and other assets (216,448) 29,149
Accounts payable 531,314 (916,038)
Accrued liabilities and deposits 619,690 1,103,910
Deferred revenue 1,374,766 791,430
Income taxes payable 28,792 351,717
Deferred income taxes (456,067) 260,149
Net cash provided by operating activities 1,220,111 1,781,797
Cash flows from investing activities:
Purchase of property and equipment (1,260,548) (554,185)
Cash received from (paid for) business acquisitions,
including acquisition costs, less cash acquired (36,019) (268,251)
Software development costs (1,718,736) (570,933)
Increase in other assets (111,671) (65,329)
Net cash used in investing activites (3,126,974) (1,458,698)
Cash flows from financing activities:
Proceeds from debt with related party 1,300,000 995,000
Proceeds from long-term debt 600,000 2,000,000
Repayment of debt with related party - (1,405,000)
Increase (decrease) in lines of credit 968,841 (260,000)
Repayment of obligations under capital leases (144,839) (123,728)
Repayment of long-term debt (449,232) (182,879)
Reduction of payables to related parties (893,265) (436,664)
Sale of common stock and exercise of stock options 2,818 145,526
Preferred stock dividends (90,000) (92,666)
Payments to retire common stock (75,500) -
Net cash provided by financing activities 1,218,823 639,589
Net increase (decrease) in cash and cash equivalents (688,040) 962,688
Cash and cash equivalents at beginning of period 818,883 379,091
Cash and cash equivalents at end of period $ 130,843 1,341,779
The accompanying notes are an integral part of these statements.
CUSA TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements of CUSA Technologies, Inc. (the
Company) have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and
Item 310 of Regulation S-B. Accordingly, these financial
statements do not include all of the information and
footnote disclosures required by generally accepted
accounting principles for complete financial statements.
These financial statements and footnote disclosures should
be read in conjunction with the audited consolidated
financial statements and the notes thereto included in the
Company's latest report on Form 10-KSB for the year
ended June 30, 1995. In the opinion of management, the
accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to fairly present the
Company's consolidated financial position as of March 31,
1996, its consolidated results of operations for the three
months ended March 31, 1996 and 1995, and its
consolidated results of operations and cash flows for the
nine months ended March 31, 1996 and 1995. The results
of operations for the three months and nine months ended
March 31, 1996 may not be indicative of the results that
may be expected for the year ending June 30, 1996.
(2) Restatement
The consolidated statement of operations for the three
months ended March 31, 1995 and the consolidated
statements of operations and cash flows for the nine months
ended March 31, 1995 have been restated to reflect the
acquisition of Medical Computer Management, Inc., which
has been accounted for as a pooling of interests.
(3) Earnings (loss) per Share
Earnings or loss per common and common equivalent share
is computed by dividing net earnings (loss) by the weighted
average common shares outstanding during the period,
including common equivalent shares (if dilutive). Common
equivalent shares include stock options, convertible
preferred stock and convertible debt. Earnings or loss used
in this calculation are reduced by the dividends paid to
preferred stockholders.
(4) Acquisitions
Acquisition of Medfo
Effective January 1, 1996, the Company acquired 100% of
the equity interest in Medfo Systems of America, Inc.
(Medfo). Medfo is a business engaged in the distribution,
and support of software, principally in the healthcare
industry. In connection with the acquisition of Medfo, the
Company issued 40,267 shares of its restricted common
stock and agreed to issue options to the former owner and
the employees of Medfo to acquire 150,000 shares of its
common stock at fair market value. The former owner of
Medfo is also an officer and shareholder of the Company.
Prior to the acquisition, Medfo and the Company jointly
conducted business pursuant to a subcontract and
assignment agreement under which the Company provided
software, hardware and other resources to customers of
Medfo, for which the Company earned revenues. The
Company had also advanced Medfo $425,309 for its
business operations prior to the acquisition.
Acquisition of ASI
Effective February 1, 1996, the Company acquired 100% of
the equity interest in Automated Solutions, Inc. and
Automated Systems of Arizona, Inc., and 40% of the equity
interest in Automated Solutions of California, Inc.
(collectively ASI). ASI is a business engaged in hardware
and software distribution, and related support services,
principally to the healthcare industry. The equity interests
acquired in these three entities were owned virtually entirely
by one individual. In connection with the acquisition of
ASI, the Company issued 50,000 shares of its restricted
common stock to the former owner of ASI and agreed to
settle certain liabilities of ASI in the approximate amount of
$114,000. The Company agreed to issue options to the
former owner and the employees of ASI to acquire 70,000
shares of its common stock at fair market value.
Acquisition of Source
Effective February 1, 1996, the Company acquired 100% of
the equity interest in Source Computing, Inc., Medical
Clearing Corporation, and certain assets of a proprietorship,
all of which were under common ownership (collectively,
Source). Source is a business engaged in the development,
distribution, and support of software, principally in the areas
of practice management and electronic claims processing
for the healthcare industry. In connection with the
acquisition of Source, the Company issued an aggregate of
160,000 shares of its restricted common stock and agreed to
pay an aggregate of $300,000, of which $125,000 was paid
at closing. The Company agreed to issue options to the
former owner and the employees of Source to acquire
25,000 shares of its common stock at fair market value.
The acquisitions of Medfo, ASI, and Source were
accounted for under the purchase method of accounting and
the Company's financial statements include the results of
operations of Medfo, ASI, and Source since the effective
dates of the acquisitions. The following pro forma
information reflects the combined results of operations of
the Company and the various companies acquired since June
1994 as if the acquisitions had occurred at the beginning of
each period presented. In addition to combining the
historical results of operations of the acquired businesses,
the pro forma information includes adjustments for the
estimated effect on historical operations for amortization
and interest related to the acquisitions. This pro forma
information may not be indicative of the results that would
have occurred if the combinations had been in effect on the
dates indicated or the results which may be obtained in the
future. Anticipated efficiencies from the consolidation of
these businesses are not fully determinable and, therefore,
have been excluded from this pro forma information.
Nine months ended March 31,
1996 1995
Net Sales $36,955,646 $33,823,348
Net earnings (loss) (2,137,424) (638,246)
Earnings (loss) per share (0.24) (0.07)
(5) Long-term debt and line of credit
In January 1996, the Company's principal bank renewed the
Company's revolving line of credit through January 15,
1997. In conjunction with the renewal, the bank increased
the maximum amount available to the Company under the
line of credit from $500,000 to $1,500,000 and lowered the
interest rate to prime plus 1.5%. The line of credit
continues to be secured by accounts receivable, inventory,
and a trust deed on real estate, and contains certain
restrictive covenants. The line of credit is guaranteed by the
chief executive officer of the Company. In exchange for his
guarantee, the chief executive officer received an option to
purchase 68,400 shares of the Company's common stock at
the lower of $5.00 per share or the market price on the date
exercised.
In March 1996, the bank also approved a loan in the
aggregate amount of $1,500,000 for the purpose of
financing the purchase of property and equipment. The loan
is payable in monthly installments of approximately
$90,000, bears interest at prime plus 1.5%, and is due
October 1, 1997. The loan is secured by a first lien on all
assets purchased from the proceeds of the loan and cross
secured with the accounts receivable and inventory that
secure the revolving line of credit.
(6) Contingent Liabilities
The Company is involved in certain legal matters in the
ordinary course of business. In the opinion of management
and legal counsel, the ultimate resolution of these matters
will not have a material adverse effect on the financial
position or results of operations of the Company.
(7) Hardware Maintenance
On March 30, 1996, the Company entered into a Computer
Hardware Maintenance Agreement under which a third
party maintenance provider (the Provider) agreed to provide
hardware maintenance to the Company's end users on an
exclusive basis. Furthermore, under this agreement, the
Company sold its spare parts inventory to the Provider for
$500,000 and the Provider agreed to loan the Company
$500,000. The loan proceeds were received in April 1996.
The loan bears interest at 9% and is repayable in quarterly
instsallments on the first day of each calendar quarter. The
first two installments are for interest only and the next
twelve quarterly installments commencing January 1, 1997
are in the amount of $41,667 plus accrued interest. The
loan is secured by the hardware maintenance agreements for
which the Provider is rendering maintenance services.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The Company develops and markets information
systems, including software, hardware, installation,
training, and software and hardware maintenance,
to the financial services industry (primarily credit
unions), the healthcare industry, and various
construction-related commercial businesses. Since
June 30, 1994, the Company has significantly expanded
its customer base and software offerings through the
acquisition of fourteen business entities, eight of
which were distributors of one or more of the
Company's software product offerings. One to
three of these acquisitions were completed each
quarter from June 30, 1994 to March 31, 1996, and,
with the exception of Medical Computer
Management, Inc., all were accounted for
according to the rules of purchase accounting. (For
a discussion of the acquired entities, please refer to
the Company's report on Form 10-KSB dated June
30, 1995 and reports on Form 10-Q dated
September 30, 1995 and December 31, 1995.) The effect
of this acquisition activity should be considered
when comparing the results of operations for the
quarter and nine months ended March 31, 1996 to
the corresponding period for the prior year.
Net revenues
Net revenues primarily consist of new and upgrade
computer system sales (including hardware,
software, installation and training), amounts earned
pursuant to hardware maintenance and software
support agreements, and the sale of related products
such as statement and government form printing.
The Company's revenues increased 20 percent from
$9,375,185 for the quarter ended March 31, 1995
to $11,213,555 for the quarter ended March 31,
1996 and 55 percent from $22,618,690 for the nine
month period ended March 31, 1995 to
$35,031,945 for the nine month period ended
March 31, 1996. These increases are the result of
heightened sales of computer systems, maintenance
and support agreements, and related products and
the inclusion of the revenues for the entities
acquired during the 12 month period ended March
31, 1996 in the results from operations for the
quarter and nine months ended March 31, 1996.
The Company's revenues for the quarter ended
March 31, 1995 and 1996 reflect seasonal trends of
increased sales of new systems in the first and
second fiscal quarters, and increased revenues from
year end statement processing in the third fiscal
quarter.
Cost of goods sold and other direct costs
Cost of goods sold and other direct costs reflect
mainly the cost of hardware and software
purchased for resale, the amortization of capitalized
software development costs, the expense of
supporting and installing hardware and software,
the cost of training customers to use the Company's
software, and the direct labor and materials costs of
the Company's statement processing operations.
Costs of goods sold increased 31 percent from
$4,944,995 for the quarter ended March 31, 1995
to $6,472,965 for the quarter ended March 31,
1996, and 62 percent from $11,699,982 for the nine
months ended March 31, 1995 to $18,976,320 for
the nine months ended March 31, 1996. When
compared with the quarter ended March 31, 1995,
cost of goods sold as a percentage of revenues
increased by 5 percent in the quarter ended March
31, 1996. This increase in cost of goods sold as a
percentage of revenue reflects fixed costs associated
with training and installation personnel coupled with
the lower than expected revenue for the quarter ended
March 31 1996. Management anticipates slightly reduced
cost of goods sold in future periods as a greater
percentage of the Company's hardware is purchased
pursuant newly negotiated discount hardware purchase
agreements and as software royalty payments to an
outside vendor for sales of medical practice
management software are eliminated and replaced
by sales of the Company's own practice management
software.
Product development costs
Product development costs represent the
uncapitalized cost of software development.
Uncapitalized costs include the employee time and
materials required for fixing system operational
errors and maintenance software upgrades. Product
development and maintenance costs increased from
$559,293 to $634,791 for the quarters ended March
31, 1995 and 1996, and from $1,301,746 to
$1,970,843 for the nine months ended March 31,
1995 and 1996, respectively.
Selling, general and administrative expense
Selling, general and administrative expenses
include direct and indirect selling costs, general
corporate overhead, depreciation, and the
amortization of intangible assets. Selling, general
and administrative expenses increased 96 percent
from $3,082,228 for the quarter ended March 31,
1995 to $6,053,626 for the quarter ended March
31, 1996 and 97 percent from $7,771,011
for the nine months ended March 31, 1995 to
$15,320,599 for the nine months ended March 31,
1996. Selling, general and administrative expenses
as a percentage of revenues increased from 33
percent for the quarter ended March 31, 1995 to 54
percent for the quarter ended March 31, 1996.
This percentage increase reflects the administrative
costs associated with the Company's high rate of
acquisition activity, and the decreased revenues for
quarter ended March 31, 1996 when compared to
the previous quarter. The Company expects selling,
general and administrative expense to decline as
acquisition related expenses are reduced and related
synergy is recognized. (See discussion regarding
the restructuring in the section titled "Net Earnings
and Income Taxes").
Amortization of intangible assets
Significant portions of the purchase price of the
acquisitions have been allocated to "Excess of the
purchase price over the fair value of the net tangible
and identifiable intangible assets acquired"
("Acquired Intangibles") and to intangible
software acquisition costs. The Acquired
Intangibles relate primarily to the hardware and
software maintenance contracts, the customer base,
and the workforce of the acquired businesses. The
intangible software acquisition costs are amortized
over the estimated life of the software acquired
(principally three to five years). The portion of the
Acquired Intangibles that is related to the hardware
and software maintenance contracts, the customer base,
and the workforce of the acquired companies is
amortized using the straight line method over an
estimated life of 15 years. During the quarter and
nine months ended March 31, 1995 and 1996, total
amortization of the excess purchase price increased
from $135,373 to $224,346 and $348,538 to $686,226
respectively, and amortization of software development
and acquisition costs increased from $186,560 to $342,394
and $352,122 to $888,079, respectively.
The Company periodically reviews the value
assigned to the separate components that comprise
the total of Acquired Intangibles through
comparison to anticipated, undiscounted future cash
flows. As discussed in the December 31, 1995 form 10-QSB,
outside circumstances which could affect the anticipated future
cash flows from major components of the Company's acquired medical,
commercial and credit union related software and customer bases
has caused significant uncertainty as to the current
valuation of the Company's Acquired Intangibles.
In light of such uncertainty, the Company is
conducting a detailed evaluation of the Acquired
Intangibles in the fourth quarter of 1996. If from
such evaluation, the Company determines that a
portion of the Acquired Intangibles are impaired, an
appropriate write down of the carrying value
may be necessary to adjust the Acquired Intangibles
to correctly reflect the present value of the discounted
anticipated future cash flow from the Acquired Intangibles.
Net Earnings and Income Taxes
Income (loss) before income taxes was
($2,183,878) and ($1,710,854) for the quarter and the
nine months ended March 31, 1996 respectively,
compared to $719,363 and $1,640,427 for the
quarter and nine months ended March 31, 1995.
The loss for the quarter ended March 31, 1996 was
the result of decreased sales of medical practice
management software principally to the market's
reaction to the acquisition, by Phyician Computer
Network, Inc. of the owner of the MENDS practice
management system, which is one of the main revenue
sources for the Company's medical division.
Futhermore, delays in the release the Company's
proprietary practice management software, Pcare,
which was released by the Company in May of
1996 caused sales to decline. It is anticipated
that in future periods sales of Platinum Practice Care,
upgrades and add-on workstation modules to the Company's
MENDS customers, Mcare (software for Managed
Heathcare Organizations) and CAREpoint (software for
electronic patient records) will begin to replace
the lost revenue from decreased MENDS sales. The
loss was also resultant of excess overhead and
administrative costs which carried over from
the acquired entities. In order to reduce the
fixed costs associated with the medical division,
the Company will implement a restructuring plan
in the fourth quarter of 1996 and the first
quarter of 1997. It is anticipated that the Company
will continue to sustain losses in the medical
portion of its business through the last quarter
of fiscal 1996, after which sales of the new
medical products and savings from the restructuring
plan will begin to positively effect future quarters.
Income taxes were $274,138 and $619,642
for the quarter and nine months ended March 31,
1995, the payment of which is substantially all
deferred into future periods because of the
utilization of acquired net operating losses or other
income tax elections that allow for such deferral.
Income tax benefit was $709,182 and $302,806 for the
quarter and nine months ended March 31, 1996, and
represents the future benefit of the net operating
loss generated during these periods. The effective
income tax rates for periods presented differ from
the federal statutory rate of 35 percent principally
due to the nondeductibility of the amortization of
the excess purchase price over the fair value of
assets acquired associated with all of the
acquisitions except the VERSYSS Credit Union
division.
Capital resources and liquidity
At March 31, 1996, the Company had current
assets of $8,301,910 and current liabilities of
$19,316,633. Thus, current liabilities exceeded
current assets by $11,014,723. Current liabilities
include $7,378,666 of deferred revenue which
primarily represents customer prepayment of
hardware and software maintenance services.
The Company has two loans in the original aggregate
amount of $2,000,000 and a line of credit with a
bank. The line of credit, currently $1,500,000,
bears an interest rate of prime plus one and one half
percent and is secured by accounts receivable,
inventory and a trust deed on real estate, and
matures in January of 1997. In addition to the
financing described above, the Company was
advanced $995,000 in December of 1994 from certain
individual investors through a company affiliated
with an officer and director of the Company
pursuant to a subordinated line of credit which is
secured by accounts receivable.
From June 20, 1995 to October 6, 1995, the
Company received $1,450,000 pursuant to the
issuance of debentures to an entity controlled by an
officer and director of the Company. The
debentures, due June 30, 1998, are convertible into
the Company's common stock at any time at the
discretion of the holder at a rate of $3.00 per share
during the first year, $3.50 per share during the
second year, and $4.00 per share during the final
year, and bear an interest rate of 8 percent per
annum, payable quarterly.
In April of 1996, the Company received $500,000
pursuant to the issuance of a promissory note to
DecisionOne, Inc. ("DecisionOne") in connection
with an outsourcing agreement whereby
DecisionOne became the exclusive provider of
hardware maintenance services to the Company's
hardware maintenance customers. The note bears
an interest rate of 9% per annum, with payments of
interest only on July 1 and October 1, 1996 and the
principal and interest payable in twelve quarterly
installments begining January 1, 1997. The note is
secured by the Company's hardware maintenance
agreements.
Also in March of 1996, the Company received approval for
a loan of up to $1,500,000 from the Company's principal
bank to finance the purchase of computer equipment. As
of May 20, 1996, the Company had received $1,201,644
of the loan. The loan, which bears and interest rate
of prime plus is secured by a first lien on all of the
assets purchased using the proceeds of the loan plus
accounts receivable and inventory. The loan is payable
in monthly installments of approximately $90,000.
The Company anticipates that its current financing
sources, together with cash flow from operations,
will be sufficient to meet the cash requirements of
current operations through June of 1996. The Company
will continue to seek ways to increase the cash flow
from operations and to provide necessary cash for the
operation of its business.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in certain legal matters in
the ordinary course of business. In the opinion of
management and in-house legal counsel, the
ultimate resolution of these matters will not have a
material effect on the financial position or results
of operations of the Company.
ITEM 5. OTHER INFORMATION
On March 30, 1996, the Company signed an
agreement with DecisionOne, a supplier of
hardware maintenance, whereby DecisionOne will
become the sole provider of hardware maintenance
to the Company's customers. Under the agreement,
the Company will still sell hardware maintenance
and sign hardware maintenance contracts with the
customers and the Company will maintain a help
desk to answer the "first call" of the customer,
forwarding the call to DecisionOne when
appropriate. This will allow the Company to
maintain its "one number" policy for system
support while increasing its capacity to offer
hardware maintenance services to its customers.
On March 15, 1996, the Company issued 40,267 shares
ofits common stock, and granted options to acquire
150,000 shares of CTI stock for at prices ranging
from $4.50 to $5.00 per share in exchange for all of the
equity interest of Medfo Systems of America, Inc.,
a North Carolina corporation ("Medfo"). Medfo is a
business engaged in the distribution and support of
computer systems and has particular expertise in the
sale of the Companys Carepoint paperless medical
records product. The former owner of Medfo is an officer
and a shareholder of the Company. Prior to the acquisition,
the Company had advanced Medfo $425,309 for its business
operations prior to acquisition.
ITEM 6. EXHIBITS AND REPORTS ON FORM
8-K
(a) Exhibits
The following exhibits are included as part of this
report:
Exhibit SEC Ref
Number Number Title of Document
------- ------- -------------------
27.3 27 Financial Data Schedule
(b) Reports on Form 8K. NONE
SIGNATURES
Pursuant to the requirements of section 13 or 15(d)
of the Securities and Exchange Act of 1934 as
amended, the Company has duly caused this report
to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 20, 1996
CUSA Technologies, Inc.
By /s/ D. Jeff Peck
-----------------------------------
D. Jeff Peck, Chief Financial Officer