SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
Commission File Number: 0-15457
C.I.S. TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 73-1199382
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
6100 South Yale, Suite 1900, Tulsa, Oklahoma 74136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918/496-2451
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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
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The Registrant has one class of common stock, $0.01 par value. The number of
shares of common stock outstanding as of May 1, 1995 was 32,477,888.
C.I.S. TECHNOLOGIES, INC.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1995
(Unaudited) and December 31, 1994 (Unaudited)............... 3
Consolidated Statements of Operations for the three
months ended March 31, 1995 and 1994 (Unaudited)............ 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1994 (Unaudited)............ 5
Notes to the Consolidated Financial Statements (Unaudited).. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 7-9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 10
Signatures............................................................ 11
2
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
1995 1994
(Unaudited) (Unaudited)
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ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 8,942,013 $ 11,416,151
Accounts receivable:
Trade, net of allowance for doubtful accounts 6,702,263 6,837,580
Charge recovery 5,048,557 4,917,913
Related party receivables 229,154 191,335
Tax refund receivable 5,872 -
Prepaid expenses 645,199 385,082
Other current assets 1,192,738 834,569
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Total current assets 22,765,796 24,582,630
NON-CURRENT ASSETS:
Related party receivables 32,061 106,205
Property and equipment, net 10,170,835 9,814,762
Intangible assets, net 13,461,629 13,640,804
Deferred tax asset 900,000 900,000
Other non-current assets 453,419 457,481
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Total non-current assets 25,017,944 24,919,252
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TOTAL ASSETS $ 47,783,740 $ 49,501,882
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,347,242 $ 3,435,862
Borrowings under line of credit - 43,877
Current maturities of long-term debt 1,102,579 980,816
Current portion of capital leases 220,280 180,208
Related party payables - 16,709
Deferred revenue 573,273 898,111
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Total current liabilities 3,243,374 5,555,583
NON-CURRENT LIABILITIES:
Long-term debt 3,195,596 3,518,863
Capital lease obligations 74,375 -
Deferred income taxes 157,963 157,963
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Total non-current liabilities 3,427,934 3,676,826
STOCKHOLDERS' EQUITY:
Preferred stock 23,842 23,842
Common stock 316,065 316,065
Paid in capital in excess of par 52,698,023 52,698,023
Treasury stock (at cost) (1,778,206) (1,768,544)
Accumulated deficit (10,147,292) (10,999,913)
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Total stockholders' equity 41,112,432 40,269,473
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,783,740 $ 49,501,882
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See accompanying notes to consolidated financial statements.
3
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months Three months
ended ended
March 31, March 31,
1995 1994
(Unaudited) (Unaudited)
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REVENUE $ 8,396,113 $ 7,800,995
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EXPENSES:
Technical operations 856,373 788,189
Sales and client service 4,008,260 3,922,427
General and administrative 1,745,689 1,776,841
Depreciation and amortization 897,053 601,064
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Total operating expenses 7,507,375 7,088,521
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OPERATING INCOME 888,738 712,474
OTHER INCOME (EXPENSE) 15,575 (44,821)
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INCOME BEFORE INCOME TAXES 904,313 667,653
Provision for income taxes 51,692 48,914
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NET INCOME $ 852,621 $ 618,739
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WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 32,495,677 26,888,443
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EARNINGS PER COMMON SHARE,
PRIMARY AND FULLY-DILUTED: $.03 $.02
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See accompanying notes to consolidated financial statements.
4
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months Three months
ended ended
March 31, 1995 March 31, 1994
(Unaudited) (Unaudited)
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OPERATING ACTIVITIES:
Net income $ 852,621 $ 618,739
Noncash items:
Depreciation and amortization 897,053 601,064
Provision for (recovery of) doubtful accounts (78,956) (80,255)
Other - (6,017)
Net change in operating assets and liabilities (2,964,394) (283,227)
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Cash provided by (used in) operating activities (1,293,676) 850,304
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INVESTING ACTIVITIES:
Additions to property and equipment (822,169) (1,431,191)
Sales of property and equipment - 1,805
Acquisition of subsidiary (50,667) -
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Cash (used in) investing activities (872,836) (1,429,386)
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FINANCING ACTIVITIES:
Borrowings on line of credit 297,984 7,643,000
Repayment of line of credit (341,861) (7,149,000)
Book overdrafts - 446,581
Repayment of long- term debt (201,504) (11,168)
Payment of capital lease obligations (62,245) (55,987)
Proceeds from exercise of employee stock options - 483
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Cash provided by (used in) financing activities (307,626) 873,909
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Net (decrease) increase in cash and cash
equivalents during the period (2,474,138) 294,827
Cash and cash equivalents at the beginning of
the period 11,416,151 385,313
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Cash and cash equivalents at the
end of the period $ 8,942,013 $ 680,140
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SUPPLEMENTAL DISCLOSURES:
Interest paid $ 50,757 $ 33,631
Income taxes paid $ 67,502 $ 49,614
Capital lease obligation for computer equipment $ 176,692 $ -
See accompanying notes to consolidated financial statements.
5
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of presentation
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, all of which were of a normal recurring
nature, necessary to summarize fairly the Company's financial position and
results of operations. The results of operations for the three months ended
March 31, 1995 may not be indicative of the results that may be expected for the
year ending December 31, 1995. The year end consolidated balance sheet data was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. These statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-K for the year ended December 31, 1994.
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C.I.S. TECHNOLOGIES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Capital Position. At March 31, 1995 working capital was $19.5 million and the
current ratio was 7.0 compared to $19.0 million and 4.4 at December 31, 1994.
The improvement in the current ratio in the first quarter was primarily due to
the reduction in accounts payable and accrued liabilities of $2,089,000 from
December 31, 1994 and the recognition of approximately $325,000 in deferred
revenue for annual license renewal fees.
The Company's total capitalization (long-term obligations plus stockholders'
equity) was $44.5 million at March 31, 1995 compared with $43.9 million at
December 31, 1994. This increase was the result of the first quarter net income
partially offset by the excess of long-term debt repayments over increased
capital lease obligations.
Liquidity. The Company's short-term cash requirements are currently being met
through internally generated funds, borrowings under its revolving line of
credit facility, and cash reserves on hand. The Company's $5.0 million line of
credit facility will expire October 1997. At March 31, 1995 there were no
borrowings under this line of credit facility.
Cash used in operating activities was $1,294,000 for the quarter ended March 31,
1995, compared to cash provided by operations of $850,000 for the same period in
1994. Cash used in operating activities in the 1995 period was the result of
the net change in operating assets and liabilities. This change was due
primarily to the decrease in accounts payable and accrued liabilities, the
result of payments of year end accruals in the first quarter. The Company
reduced these liabilities to $1,347,000 from $3,436,000 at December 31, 1994.
Cash used in investing activities decreased $557,000 from the same period in
1994 primarily due to decreased software development costs. These costs are
capitalized in accordance with Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." The Company's 1995 capital budget anticipates $2.8 million
for continued software development compared to $3.8 million in 1994.
Cash used in financing activities was $308,000 during the first quarter of 1995
compared to cash provided by financing activities of $874,000 for the same
period in 1994. The net change of $1,182,000 is due primarily to the Company's
cash balance reserves from stock issuances in the fourth quarter of 1994 which
enabled borrowings to be decreased. Net borrowings on the Company's line of
credit and book overdrafts were $941,000 during the first quarter of 1994
compared to net repayments of such borrowings of $44,000 in the first quarter of
1995.
7
C.I.S. TECHNOLOGIES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company expects future software development costs and working capital
requirements will be provided by the Company's internally generated cash flow,
cash reserves on hand, or funds available under its revolving line of credit
facility.
RESULTS OF OPERATIONS
Revenues. Revenue for the first quarter 1995 increased $595,000, or 8%, over
the same quarter in 1994. The first quarter of 1995 included approximately $1
million in revenue from the Company's recently acquired subsidiary, AMSC, Inc.
Excluding the revenue from this subsidiary, revenue decreased by $417,000, or
5%, over the quarter ended March 31, 1994. The decrease was due to: (1)
inclusion in the 1994 quarter of $200,000 of non-recurring revenue related to
the transition to the new standard industry form, UB-92, and (2) the December
31, 1994 end of the Healthcare Information Clearinghouse Program in the state of
New York, which necessitated the renegotiation of each contract resulting in
lower fees beginning in 1995.
Operating Expenses. Operating expenses for the first quarter of 1995 increased
$419,000, or 6%, compared with the first quarter of 1994. This increase was the
result of: (1) approximately $1 million in operating expenses related to AMSC
and (2) an increase in software development amortization expense related to
software development costs of $220,000; offset by a decrease of $800,000 in
expenditures related to technical operations, sales and client service, and
general and administrative. These expenses declined as a result of cost
reductions and quality improvements implemented during 1994.
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LOOKING FORWARD
The Company expects to show continued improvement in revenue and earnings during
1995 as it takes advantage of strategic alliances formed in the fourth quarter
of 1994, sells products and services to new and existing clients and seeks
acquisitions that fit with the Company's strategic vision. These actions will
assist the Company in expanding product lines and taking advantage of what the
Company perceives are many opportunities in the healthcare industry. Management
is committed to maximizing shareholder value through continued product
development, strategic alliances, acquisitions and cost reductions.
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OTHER INFORMATION
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
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(11) Statement re: computation of per share earnings.
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C.I.S. TECHNOLOGIES, INC.
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.
C.I.S. Technologies, Inc.
/s/ Rebecca L. Speight
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Rebecca L. Speight
Director, Finance and Accounting
(Principal Accounting Officer)
Date: May 12, 1995
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