FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the fiscal year ended 12/31/2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from
to .
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1MAGE SOFTWARE, INC.
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(Exact name of Registrant as specified in its charter)
0-12535
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(Commission File Number)
COLORADO 84-0866294
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(State of Incorporation) (IRS Employer Identification Number)
6025 S. QUEBEC ST. #300 - ENGLEWOOD CO 80111 (303) 694-9180
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(Address of principal executive offices) (Registrant's telephone
number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE NONE
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(Title of Class) (Name of Exchange)
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK - $.004 PAR VALUE
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(Title of Class)
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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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy statements or any amendment
of this Form 10-K. X
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Aggregates market value of the voting stock held by non-affiliates of the
Registrant as of March 15, 2002: $1,096,950.
As of March 15, 2002, there were 3,146,554 shares of the Registrant's Common
Stock outstanding.
Exhibit Index begins on Page 38
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TABLE OF CONTENTS
PART I
1. Business.................................................................3
2. Properties...............................................................9
3. Legal Proceedings........................................................9
4. Submission of Matters to a Vote of Security Holders .....................9
PART II
5. Market for Registrant's Common Equity and Related Stockholders Matters..10
6. Selected Financial Data.................................................11
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...............................................11
8. Financial Statements and Supplementary Data.............................14
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ..................................................32
PART III
10. Directors and Executive Officers of the Registrant......................33
11. Executive Compensation..................................................34
12. Security Ownership of Certain Beneficial Owners and Management .........37
13. Certain Relationships and Related Transactions..........................38
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........38
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PART I
ITEM 1. BUSINESS
INTRODUCTION
1mage Software, Inc., (the "Company") develops and markets computer-based
document imaging systems that capture, store and display electronic files and
paper documents as graphical images. Document management systems like 1MAGE(R)
(pronounced "one image") offer organizations of every size the ability to
deliver the information embedded in millions of documents to their workers
across their existing computing infrastructure, as well as the tools to
efficiently manage the proliferation of digital documents for eBusiness
deployment. The modular 1MAGE system captures entire documents from a variety of
sources. Memos, letters, source documents, contracts, purchase orders, word
processing files, e-mail, fax, industry and market studies, spreadsheets,
databases, multimedia, maps and regulatory forms are examples of documents that
are automatically converted into secure, permanent digital images that are
indexed for instantaneous retrieval. Using an open, client/server architecture
design, 1MAGE provides a comprehensive solution for scanning, indexing, storing
and retrieving document images so that they may be viewed, printed, faxed,
e-mailed or made available for eBusiness or eCommerce applications. The 1MAGE
system is designed to integrate easily with existing IT infrastructure, using an
extensive library of multi-platform APIs (Application Programming Interfaces),
rather than forcing expensive investments in re-engineered or new computing
hardware and software.
Today's workplace is dramatically changing with the advent of eBusiness,
eCommerce, and affordable electronic document imaging. During 2001, the Company
concentrated its efforts on selling document imaging software to its niche
markets. This market includes users that prefer (1) operating platforms other
than Microsoft Windows, such as RedHat Linux and Unix, or (2) Open Systems
databases such as IBM's and Raining Data's MultiValue databases. The Company
also continued to make progress toward its goal of establishing a broad-based
Value Added Reseller ("VAR") network for its imaging software. In addition to
VARs, the Company seeks to partner with software developers and other
businesses, which provide software to their targeted vertical markets.
IMAGING SOFTWARE MARKET
The Company markets its products through its direct sales force and its
indirect channel partners. The Company targets VARs, systems integrators, and
other companies that market complementary software, services, or other products.
1MAGE software has an established presence in a multitude of industries,
including automotive retail, building materials, construction, distribution,
education, employee benefit plans, government, healthcare, laboratories,
manufacturing, oil and gas, public libraries, public safety, retailing,
transportation and utilities.
The Company offers a comprehensive reseller program, which provides, in
the context of a cooperative marketing effort, a broad range of sales,
marketing, and technical support. The program includes technical training and
assistance, marketing communications, sales training and assistance, excellent
support and training, lead referral services, customized product literature, and
a discounted demonstration/development system.
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PRODUCTS
As noted above, the Company's flagship product is 1MAGE(R), its
proprietary document imaging software package. The Company is continually
enhancing this product in order to improve its performance and expand its
possible uses.
1MAGE(R) DOCUMENT MANAGEMENT - 1MAGE is a powerful electronic image management
system created to operate the same on Linux, Unix, and Windows(TM)-based
computer systems. It provides a comprehensive solution for the scanning,
indexing, storage and retrieval of images and is designed to file, route, track,
archive, and manage an organization's incoming and outgoing documents and
electronic files.
Additional products include the following:
o 1SCAN for scanning and pre-indexing
o 1FAX for inbound and outbound fax and cover sheet management
o 1COLD/ERM for storing computer-generated formatted data on external
mass storage devices
o 1FORM for business form template administration
o 1RENDITION for merging spooled data with images for billing
o 1WORKFLOW for electronically moving a document from one task to another
o 1OCR/OMR for automatic indexing and data capture via optical and mark
character recognition
o 1SUITE for bringing images to Windows-based PC clients
o 1SERVER for accessing documents via the Internet
o 1VIEW for using standard browsers to access images over the Intranet and
Internet
o 1APPROVE for electronically approving invoices and other document related
business functions
o 1ACCESS for bringing images to computers that support JAVA programming
languages
A key element of the Company's product line is its open systems technology,
namely:
o Open Systems compliant with Linux, Unix, and Windows Operating Systems.
Supports file formats in TIFF, JPEG, PCX, PCL, PDF, HTML or HPGL. The
server software (1MAGE) operates on Linux, Unix, and Windows servers.
Supporting clients include Microsoft Windows, X-Windows, ASCII, JAVA and
browser clients
o Device connectivity via Ethernet or token ring networks using TCP/IP
communication protocol or over the Internet
o Compatibility with IBM AIX, HP-UX, Sun Solaris, SCO Unix, Red Hat Linux
and Windows
o Recognition technology and scanning tasks run on Microsoft Windows
o UniVerse and UniData ("U2") Relational Database software from IBM
1MAGE includes several distinguishing features: the ability to use many
different types of workstations, the ability to quickly and easily integrate
with the existing business application software using application programming
interfaces (APIs), and the ability to handle the needs of companies of all sizes
economically. Through the use of the Linux, Unix, and Windows operating systems
and open systems technology, the Company seeks to offer its customers an imaging
solution at a reasonable cost. Because 1MAGE is a server-based product, the
Linux operating system ("O/S") has become very popular with end users of our
software. In 2001, the majority of systems sold through the direct sales force
installed their document imaging systems on servers running the Linux O/S.
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During 2001, sales of 1MAGE software licenses (excluding annual license
fees) accounted for $1.1 million (42% of total revenue); in 2000, revenue from
sales of software licenses accounted for $881,000 (41% of total revenue). 1MAGE
utilizes the Linux, Unix, and Windows operating systems and IBM's U2 database
software. The Company's open systems technology makes its software transportable
to numerous hardware products from varying manufacturers. Because of the number
of hardware manufacturers using the Linux, Unix, and Windows operating systems,
the Company's software customers are rarely restricted in their choice of
hardware manufacturers.
The Company also sells peripheral products, at the customer's request,
such as scanners and jukeboxes, although this aspect of the Company's business
has been de-emphasized in recent years. Because computer hardware and peripheral
products are purchased upon request to fill customer orders, no inventory is
maintained. Hardware is generally shipped directly from the manufacturer to the
customer. In 2001, revenue from hardware sales accounted for $67,000 (2%) of the
Company's total revenue, as compared to $113,000 (5%) of total revenue for 2000.
SERVICES AND ANNUAL FEES
The Company licenses its 1MAGE software to its customers and charges an
annual license fee which must be paid to continue receiving support for the use
of the software. During 2001 and 2000, annual license fees accounted for $1.1
million (or 41%) and $896,000 (or 42%), respectively, of the Company's net
sales. The Company believes recurring annual license fees from new and existing
customers will contribute to the long-term stability of the Company. The Company
also provides professional services to its customers. These services include
preparation of image management plans for customers, installation, training,
image enabling existing software, and consulting services. For the years ended
December 31, 2001 and 2000, the revenues from these services accounted for
$407,000, or 15%, and $272,000, or 13%, of the Company's net sales. The Company
does not provide service for hardware; rather, service for computer hardware
sold by the Company is provided directly by the manufacturer or the
manufacturer's authorized dealer.
MARKETING AND DISTRIBUTION
To date, the Company has signed VAR agreements for 1MAGE with ten
resellers specializing in a variety of industries, including automotive retail,
health care, construction, collection services, public safety, utilities, and
employee benefit services. In addition, the Company licenses its software and
certain other products and services through agreements with two Application
Service Providers (ASPs) in the healthcare industry. The Company provides its
software to independent software integrators (resellers), who in turn market
products, including or featuring 1MAGE, to each of their individual markets. The
Company's overall marketing objective is to support the current business
partners and to continue to enroll new software integrators in the program. The
Company provides training aids, an Internet demonstration site, user instruction
manuals and other documentation, and a newsletter to keep its resellers, as well
as prospective resellers and customers, informed of new product applications and
developments.
The Company also markets 1MAGE through its direct sales force. The general
strategy is to (1) help customers define the goals for their system, (2) provide
the means of achieving those goals through our document management software and
appropriately configured computer systems, and (3) help assure the ongoing
success of this collaborative process by providing continuing support, including
on-site training and educational programs. The Company also markets its products
and services over the Internet.
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CUSTOMERS
The Company sells its 1MAGE software to businesses in a wide variety of
industries and markets, facilitated through the use of VARs and its direct sales
force.
During the years 2001 and 2000, the Company generated 36% and 35%,
respectively, of its revenue from one customer, Reynolds & Reynolds
("Reynolds"). Reynolds is a Fortune 500 company headquartered in Dayton, Ohio.
In May 1994, the Company signed a software license agreement with Reynolds for
the exclusive right to sublicense certain modules of 1MAGE (without payment of
further license fees to the Company) to businesses primarily engaged in retail
sales of new or used automobiles, trucks, or tractors. In 1996, the Company
signed a Subscription and Maintenance agreement with Reynolds. License fees are
paid to the Company for certain products subsequently available in newer
releases of 1MAGE. These features include the Company's client software.
On January 18, 2002, Reynolds notified the Company of its intent to
terminate the 1996 Subscription and Maintenance agreement effective April 22,
2002. As of this date, the Company has not yet determined what new
agreements, if any, it will enter into with Reynolds to govern its future
licensing arrangements. Notwithstanding the termination of the 1996 agreement,
management believes that Reynolds will continue to provide a significant flow of
revenue from existing installations of 1MAGE, but the level of future sales
cannot be predicted. The loss of this customer would have a significantly
adverse impact on the Company. Reynolds has installed the 1MAGE document
management software in approximately 1,000 of its customer sites in the United
States and Canada. The Company currently derives approximately $35,000 per month
in revenues from licensing and other fees from these installations. The Company
cannot predict at this time how much of this revenue will be lost as a result of
the termination of the 1996 contract by Reynolds but it is possible that much,
if not substantially all, of such revenue will be lost.
SOURCES OF SUPPLY
The Company has an OEM Software Agreement with IBM Corp. to sublicense
their Universe and UniData database programs. The agreement authorizes the
Company to include certain IBM programs as part of their imaging solution. This
agreement currently runs until September 28, 2002 and it may be renewed for
additional one (1) year terms. The Company has designed its product such that
third party software can be easily integrated into the core products with
minimal difficulty and effort.
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS
The Company's current focus on offering its proprietary imaging software
to a broader range of customers, through its emerging reseller network and its
direct sales force, is expected to lessen the historical quarterly fluctuations
in the Company's operating results. Nevertheless, large volume sales or groups
of sales of 1MAGE licenses may cause significant variances in quarterly results
that may be difficult to predict.
The Company's sales cycle, which generally commences at the time a
prospective customer issues a request for proposal or otherwise demonstrates a
serious interest in purchasing a system or software license and ends upon
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execution of a sales contract, is lengthy and not predictable with any degree of
certainty. Prior sales and implementation cycles are not necessarily an
indication of future cycles. Operating results could vary from period to period
as a result of the length of the sales cycle, the timing of individual system
sales, resellers' performance and conditions in the target markets and the
economy in general.
TRADE SECRET AND COPYRIGHT LAWS
The Company regards its software as proprietary and relies for protection
upon trade secret and copyright laws and non-disclosure agreements with its
employees as well as restrictions on disclosure and transferability contained in
its software license agreements with its customers. Despite these restrictions,
it may be possible for competitors or customers to copy, or reverse compile,
aspects of the Company's products or obtain information that the Company regards
as proprietary. Furthermore, there can be no assurance that others will not
independently develop software products similar to those developed or planned by
the Company. Although the Company believes its software does not infringe on the
proprietary rights of others and has not received any notice of claimed
infringement, it is possible that portions of the software marketed by the
Company could be claimed to infringe on existing proprietary rights. In the
unlikely event that any such infringements are found to exist, there can be no
assurance that any necessary licenses or rights could be obtained, or could be
obtained on terms satisfactory to the Company. Further, in such event, the
Company could be required to modify the infringing software. There can be no
assurance that the Company would be able to do so in a timely manner, upon
acceptable terms and conditions, or at all; even though the failure to do so
could have a material adverse effect on the Company.
BACKLOG
As a practical matter, the Company's business has evolved to the point
where the Company has minimal backlog at any given point in time. With respect
to software license sales, because there is no time delay between receipt of an
order and delivery of the software, electronically or otherwise, there is
effectively no backlog. For hardware, because of direct delivery of the hardware
by the manufacturer, hardware sales have such short lead times that unfilled
firm orders seldom, if ever, build up to significant levels.
The Company normally receives a deposit of between 25% and 50% of the
hardware and software price when an order is placed. This deposit may or may not
be returned upon cancellation, depending on the circumstances of the
cancellation.
COMPETITION
The Company experiences intense competition in its business from
competitors who target one or more of the same markets or market segments as the
Company. Software and systems that perform many of the same functions as the
Company's systems and software are also available from a number of competitors
of the Company. Some of these competitors are larger and have longer operating
histories, significantly greater financial, technical, marketing and other
resources, significantly greater name recognition and a larger installed base
than we do. As a result, these competitors may be able to respond more quickly
to emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products than
we can.
-7-
The Company believes that usage of the popular Linux and Unix operating
systems and the IBM U2 databases has strengthened the Company's competitive
position by making the Company's software compatible with more types of hardware
and with the IBM U2 application software offered by software developers and
system integrators. The Company further believes that its principal advantage
over its competitors is the Company's utilization of the Linux, Unix, and
Windows-based open systems architecture and the IBM U2 databases that can be
offered at lower prices.
LIMITED MARKETS
The reseller program targets complementary markets and allows the Company
to draw from a variety of industries with respect to its imaging software
products. As noted above, the Company's strategy has been to expand the domestic
and international markets for its imaging software by engaging resellers for
various industries and markets.
The Company's experience has been that economic downturns or increased
competitive pressures in its niche markets sometimes result in reduction or
deferral of capital expenditures by potential customers. Certain adverse
conditions can sometimes lead to opportunities as potential customers downsize
to smaller, more cost-efficient computer systems or replace custom designed
systems that require higher levels of support and maintenance.
PRODUCT DEVELOPMENT
The software and services market in which we compete is characterized by
(1) rapid technological change, (2) frequent introduction of new products and
enhancements, and (3) changing customer needs. Our future success depends on our
ability to support existing products and develop new products. The Company
capitalizes software development costs once technological feasibility is
established. During 2001, the Company developed a new release of 1MAGE which
employs new technologies, including Application Service Provider (ASP)
requirements and three JAVA systems (i.e. 1APPROVE, 1ACCESS and 1ADMIN) which
will operate on any platform that supports JAVA programming language. In
addition, improvements were made to the hardware/software compatibility
offerings available for Linux users. During 2001 and 2000, the Company spent
$271,000 and $291,000, respectively, for computer software development.
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EMPLOYEES
As of March 15, 2002, the Company employed twenty-one persons, twenty of
whom serve on a full-time basis and one on a part-time basis. Responsibilities
are divided as follows: eight persons in sales and marketing, ten in technical
support and programming functions, and three in administrative positions.
Because the competition for skilled employees in the computer industry is
intense, the Company provides incentive compensation packages to many of its
employees, including its executive officers. The Company's chief executive
officer, David R. DeYoung, receives a quarterly bonus equal to 5% of the
Company's pretax profits. (See "Executive Compensation") The Company's chief
financial officer receives a quarterly bonus equal to 4% of the Company's pretax
profits. Sales personnel receive a commission based upon sales. The Company has
a policy of encouraging the effort and loyalty of all of its employees by making
all employees eligible for the grant of stock options under its Equity Incentive
Plan, subject to vesting schedules. The Company believes that these incentive
programs are important in attracting and retaining skilled personnel. The future
success of the Company will depend in large part upon the quality of its
employees and the efforts they expend on behalf of the Company.
None of the Company's employees are represented by a labor union, and the
Company has experienced no work stoppage. The Company believes that its employee
relations are good.
ITEM 2. PROPERTIES
The Company's executive offices consist of approximately 4,181 square feet
at Plaza Quebec, 6025 South Quebec Street, Suite 300, Englewood, Colorado, 80111
and are occupied pursuant to a sublease agreement between the Company and
Communications World International, Inc. with monthly rental payments of $7,442.
The term of the sublease commenced February 1, 1999 and will terminate on July
31, 2003. The landlord is responsible for property taxes, utilities, janitorial
services, repairs, and maintenance. The Company believes that its facilities and
equipment are in good condition and are satisfactory for their present uses.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders
through the solicitation of proxies or otherwise during the fourth quarter of
the Company's calendar year ended December 31, 2001.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is quoted in the OTC Bulletin Board under the
symbol ISOL. The following table sets forth, for the fiscal quarters indicated,
the high and low bid prices per share for the Common Stock as reported on the
OTC Bulletin Board.
2001
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High Low
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First Quarter $ 1.00 $ 0.63
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Second Quarter 0.95 0.63
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Third Quarter 1.00 0.55
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Fourth Quarter 0.75 0.55
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2000
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High Low
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First Quarter $ 4.19 $ 1.19
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Second Quarter 3.00 1.13
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Third Quarter 1.50 .88
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Fourth Quarter 1.06 .63
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These quotations reflect interdealer prices, without retail mark-up, mark
down or commission and may not necessarily represent actual transactions.
On March 15, 2002, the closing bid price per share for the Common Stock
was $.60 as reported on OTC:BB. On that same date, there were approximately
1,038 holders of record of the Common Stock.
DIVIDENDS
The Company has never declared or paid cash dividends on its Common Stock
and has no present intention to do so. For the foreseeable future, any earnings
will be retained to finance the development and expansion of the Company's
business. The declaration and payment of future dividends will be determined by
the Company's Board of Directors in light of conditions then existing, including
the Company's earnings, financial condition and capital requirements.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, for the periods indicated, selected
financial data of the Company. This table should be read in conjunction with the
financial statements and notes included in Item 8 of this Form 10-K and the
section entitled "Management's Discussion and Analysis of Results of Operations
and Financial Condition" following this section.
Statements of Operations Years Ended December 31,
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In thousands, except for per share 2001 2000 1999 1998 1997
data:
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Net Sales $2,776 $2,163 $1,806 $2,151 $1,809
Cost of Sales 1,109 934 987 935 918
Gross Profit 1,667 1,229 819 1,216 891
Gross Profit (as a % of Net Sales) 60% 57% 45% 57% 49%
Selling, General & Administrative 1,500 1,211 1,163 1,097 1,363
expenses
Income(Loss) before Income Taxes 161 11 (365) 5 (479)
Net Income(Loss) 211 8 (367) 2 (484)
Net Income(Loss) Per Share .07 .00 (.16) .00 (0.23)
Weighted Average Number of 3,146 3,056 2,330 2,173 2,146
Outstanding Shares
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Balance Sheets Years Ended December 31,
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In thousands: 2001 2000 1999 1998 1997
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Working Capital/(Deficit) $ 140 $ (93) $(186) $ 196 $ 43
Total Assets 1,496 1,428 1,364 1,710 1,602
Long Term Obligations 1 3 1 154 159
Total Stockholders Equity 925 714 654 922 860
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000.
The Company's total revenue was $2.8 million for the year ended
December31, 2001 compared to $2.2 million for the year ended December 31, 2000,
representing an increase of $613,000 or 28%. The increase in revenue is
primarily due to the combination of a 31% increase, or $276,000, in software
license revenue and a 28% increase, or $248,000, in annual license fees. The
number of systems sold through our direct sales force in 2001 was more than
double the number sold in 2000, as customers seemed to be scrutinizing their
budgets for technology upgrades more closely in light of the global economic
weakness. The increase in annual license fees was due to the growing size of the
Company's installed base of customers. The professional service group increased
service revenue by 50% for the year due to support and technical services
provided to existing customers and expanded pre-installation offerings to new
customers. Hardware sales comprised 2% of the total revenue, as compared to 5% a
year ago. Gross profit on revenue for the year 2001 increased to 60%, as
compared to 57% for 2000, as a result of the increase in software license
revenue. Selling, general and administrative expenses increased 23% or $
284,000, in 2001. This increase was attributed to higher salaries and benefits,
sales commissions, and various marketing expenses. In addition, the Company
wrote off inventory that was deemed to be obsolete. Net income of $211,000 for
2001 reflects a significant gain over the $8,000 net income posted for the
previous year. Earnings per share for the year 2001 were $.07, as compared to
$.00 per share for 2000.
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Sales through reseller channels increased 28%, or $246,000, to $1.1 million from
$923,000 reported for 2000. Revenue from indirect channels for any period is
subject to significant variations. As a result, the Company believes that period
to period comparisons of indirect revenue are not necessarily meaningful and
should not be relied upon as an indication of future performance. See the
discussion of Reynolds & Reynolds below.
The events of September 11th resulted in a number of delays by customers of
potential orders and may continue to adversely affect demand for the Company's
products in certain industries.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999.
The Company's revenue for the year ended December 31, 2000 of $2.2 million
was 20% greater than $1.8 million reported for the year earlier. The increase in
revenue is attributable to the combination of a $243,000 (38%) increase in
software sales and a $145,000 (19%) increase in recurring annual license fees.
Management believes these two components of revenue are crucial for the
long-term success of the Company. Hardware sales comprised just 5% of the total
revenue, as compared to 8% a year ago. The professional service group increased
Service revenue by 2% for the year, posting revenue of $272,000. Sales through
reseller channels increased $220,000, or 33%, from the year earlier. Gross
profit on revenue for the year 2000 increased to 57%, as compared to 45% for
1999, as a direct result of the significant increase in software sales. Selling,
general and administrative expenses increased 4% (or $48,000) for the year over
year periods. Sales and marketing expenses increased $61,000 as the Company made
concerted efforts to expand its presence in targeted markets. Net income of
$8,000 for 2000 reflected a $375,000 gain over the previous year, when the
Company experienced a significant slowdown in sales due to the Y2K situation.
Earnings per share for the year 2000 were $.00, as compared to a loss per share
of ($.16) for 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased approximately $62,000
during the twelve months ended December 31, 2001 as compared to December 31,
2000. In addition, during 2001, the Company used cash of $200,000 to repay the
total outstanding principal amount of its line of credit. The Company had
working capital of approximately $140,000 on December 31, 2001. The Company's
cash flow from operations increased to approximately $565,000 for 2001.
On January 18, 2002, Reynolds and Reynolds gave notice of the termination
of its 1996 Subscription and Maintenance agreement with the Company effective
April 22, 2002. As of this date, it is not possible to predict what impact this
will have on future cash flows. The Company may continue to receive substantial
cash payments under one or more new agreements with Reynolds, but the amount and
the duration of such revenue is uncertain. If the Company is not able to replace
this revenue stream with revenue from new customers or its installed base of
customers, the termination of this agreement would have a significantly adverse
effect on the short-term cash flow of the Company. The Company believes that any
shortfall in near term cash flow can be compensated for by increased borrowings.
The Company's internal sources of liquidity are revenues from operations
and cash on hand. The Company receives most of its revenues for software
licenses and system sales upon installation and does not maintain inventory
balances. The Company believes that its existing cash, cash and the cash flows
generated from operations, will be sufficient to meet its anticipated cash needs
for working capital for at least the next twelve months. The Company has a
$200,000 revolving line of credit. The loan is collateralized by all accounts
receivable and general intangibles of the Company. There were no borrowings
outstanding under the line of credit at March 29, 2002.
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The Company has no material commitments for capital expenditures for 2002.
Management believes that fourth quarter sales were impacted as a result of
the significant global economic slowdown in the technology sector as well as the
events on September 11, 2001. Our customers make a discretionary decision to
implement our products based upon their individual resources and budget
constraints. As a result, the loss or delay of individual orders could have a
significant impact on quarterly operating results and revenue. Due to poor
visibility as a result of the current economic and political environment, we are
not currently able to assess the likely trend of software revenue in future
periods.
RISKS TO FUTURE FINANCIAL PERFORMANCES
VARIABLE OPERATING RESULTS. Our future operating results may vary significantly
and are difficult to predict due to a number of factors, of which many are
beyond our control. These factors include:
o demand for our products;
o the level of product and price competition;
o the length of our sales cycle;
o the size and timing of individual license transactions;
o the delay or deferral of customer implementations;
o our success in expanding our customer support organization, direct sales
force and indirect distribution channels;
o the timing of new product introductions and product enhancements;
o changes in our pricing policy;
o the mix of products and services sold;
o our ability to develop and market new products and control costs;
o current economic and political conditions; and
o our future relationship with Reynolds and Reynolds and other large
customers.
CURRENT ECONOMIC AND POLITICAL CONDITIONS MAY AFFECT RESULTS. During the last
three months of 2001, we experienced a decrease in software revenue. We believe
that this decrease was due to a broader economic slowdown that may or may not
persist for some time. The slowdown has decreased our visibility and increased
the risk to our revenue stream. Additionally, due to the September 11, 2001
terrorist attacks in New York City and Washington, D.C. and related events, the
political landscape has significantly changed and could have a material impact
on results going forward. We believe there has been an industry-wide slowdown in
IT spending. Due to the discretionary nature of our customers' budget and
purchase cycles and the absence of long-term customer purchase commitments, it
is difficult to avoid fluctuations in quarterly operating results.
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.
-13-
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
1MAGE SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT ACCOUNTANTS' REPORT............................................. 15
BALANCE SHEETS - December 31, 2001 and 2000.................................. 16
STATEMENTS OF OPERATIONS - For the Years Ended
December 31, 2001, 2000 and 1999.......................................... 17
STATEMENTS OF SHAREHOLDERS' EQUITY - For the Years Ended
December 31, 2001, 2000 and 1999.......................................... 18
STATEMENTS OF CASH FLOWS - For the Years Ended
December 31, 2001, 2000 and 1999.......................................... 19
NOTES TO FINANCIAL STATEMENTS................................................ 21
INDEPENDENT ACCOUNTANTS' REPORT ON FINANCIAL STATEMENT SCHEDULES............. 31
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS............................ 32
-14-
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
1mage Software, Inc.
Englewood, Colorado
We have audited the accompanying balance sheets of 1mage Software, Inc. as of
December 31, 2001 and 2000, and the related statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2001. 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 in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 1mage Software, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
BKD, LLP
Denver, Colorado
January 18, 2002
-15-
1MAGE SOFTWARE, INC.
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
- -----------------------------------------------------------------------------------
2001 2000
- -----------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 212,421 $ 150,457
Receivables:
Trade (less allowance: 2001, $10,000; 421,977 407,251
2000, $10,000)
Inventory 9,070 38,654
Deferred tax asset 50,000 --
Prepaid expenses and other current assets 15,597 21,233
----------- -----------
Total current assets 709,065 617,595
PROPERTY AND EQUIPMENT, at cost, net 57,878 55,177
OTHER ASSETS:
Software development costs, net 725,606 754,734
Inventory 2,928 --
Other 100 100
----------- -----------
TOTAL ASSETS $ 1,495,607 $ 1,427,606
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ -- $ 200,000
Current portion of capital lease obligations 1,784 1,785
Deferred revenue 233,000 213,494
Accounts payable 187,878 185,468
Accrued liabilities 146,510 109,450
----------- -----------
Total current liabilities 569,172 710,197
LONG-TERM OBLIGATIONS:
Capital lease obligations 1,093 3,224
SHAREHOLDERS' EQUITY:
Common Stock, $.004 par value - 10,000,000
shares authorized;
shares outstanding: 2001 and 2000-3,146,554 12,586 12,586
Additional paid-in capital 7,238,658 7,238,658
Accumulated deficit (6,325,902) (6,537,059)
----------- -----------
Total shareholders' equity 925,342 714,185
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,495,607 $ 1,427,606
=========== ===========
See notes to financial statements.
-16-
1MAGE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
- ------------------------------------------------------------------------------------
2001 2000 1999
- ------------------------------------------------------------------------------------
REVENUE:
System sales and software $ 1,224,057 $ 994,123 $ 787,828
licenses
Services and annual fees 1,551,874 1,168,540 1,018,520
----------- ----------- -----------
Total revenue 2,775,931 2,162,663 1,806,348
----------- ----------- -----------
COST OF REVENUE:
System sales and software 520,299 558,016 596,128
licenses
Services and annual fees 589,122 375,356 391,277
----------- ----------- -----------
Total cost of revenue 1,109,421 933,372 987,405
----------- ----------- -----------
GROSS PROFIT 1,666,510 1,229,291 818,943
OPERATING EXPENSES:
Selling, general & administrative 1,500,038 1,216,288 1,162,921
----------- ----------- -----------
INCOME/(LOSS) FROM OPERATIONS 166,472 13,003 (343,978)
----------- ----------- -----------
OTHER INCOME/(EXPENSE):
Interest income 4,891 8,059 9,665
Interest expense (10,206) (15,408) (32,140)
Other -- -- 1,760
----------- ----------- -----------
Total other income(expense) (5,315) (7,349) (20,715)
----------- ----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES 161,157 10,654 (364,693)
PROVISION/(CREDIT) FOR INCOME TAXES (50,000) 2,500 2,500
----------- ----------- -----------
NET INCOME/(LOSS) $ 211,157 $ 8,154 $ (367,193)
=========== =========== ===========
BASIC AND DILUTED INCOME
(LOSS) PER COMMON SHARE $ .07 $ 0.00 $ (.16)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,146,554 3,055,600 2,329,818
=========== =========== ===========
See notes to financial statements.
-17-
1MAGE SOFTWARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock Additional
------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balances, December 31, 1998 2,203,019 8,811 6,904,247 (6,178,020) 735,038
Conversion of notes payable into Common Stock 326,474 1,306 201,180 -- 202,486
Exercise of incentive stock options 113,000 452 65,618 -- 66,070
Issuance of non-qualified stock options -- -- 18,046 -- 18,046
Net loss (367,193) (367,193)
----------- ----------- ----------- ----------- -----------
Balances, December 31, 1999 2,642,493 10,569 7,189,091 (6,545,213) 654,447
Exercise of incentive stock options 447,375 1,790 196,047 -- 197,837
Surrender shares for exercise of incentive
stock options (32,294) (129) (128,078) -- (128,207)
Exercise of Class A Warrants 100,000 400 43,350 -- 43,750
Surrender shares for exercise of Class A Warrants (11,020) (44) (43,706) -- (43,750)
Cancellation of non-qualified stock options -- -- (18,046) -- (18,046)
Net income -- -- -- 8,154 8,154
----------- ----------- ----------- ----------- -----------
Balances, December 31, 2000 3,146,554 $ 12,586 $ 7,238,658 $(6,537,059) $ 714,185
----------- ----------- ----------- ----------- -----------
Net income -- -- -- 211,157 211,157
----------- ----------- ----------- ----------- -----------
Balances, December 31, 2001 3,146,554 $ 12,586 $ 7,238,658 $(6,325,902) $ 925,342
=========== =========== =========== =========== ===========
See notes to financial statements.
-18-
1MAGE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
- ----------------------------------------------------------------------------------------------------
2001 2000 1999
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings/(loss) $ 211,157 $ 8,154 $(367,193)
Adjustments to reconcile earnings/(loss) to net cash
provided by operating activities:
Depreciation and amortization 327,663 342,338 367,838
Deferred tax asset (50,000) -- --
Deferred revenue 19,506
(Cancellation)/Issuance of stock options for services -- (18,046) 18,046
Changes in assets and liabilities:
Receivables (14,726) (201,509) 328,083
Inventory 26,626 10,553 6,597
Prepaid expenses and other assets 5,636 (7,805) (3,707)
Accounts payable 2,410 (24,414) (83,001)
Accrued liabilities and deferred income 37,060 (3,703) 6,519
--------- --------- ---------
Net cash provided by operating activities 565,332 105,568 273,182
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (30,263) (14,125) (25,870)
Additions to capitalized software (270,973) (290,745) (302,747)
Redemption of certificate of deposit -- -- 25,000
--------- --------- ---------
Net cash used for investing activities (301,236) (304,870) (303,617)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to line of credit 185,000 300,000 68,235
Repayment of line of credit (385,000) (268,235) (50,000)
Repayment of long-term obligations (2,132) (5,566) (4,611)
Proceeds from exercise of Common Stock options -- 69,630 66,070
--------- --------- ---------
Net cash provided by financing activities (202,132) 95,829 79,694
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 61,964 (103,473) 49,259
CASH AND CASH EQUIVALENTS, beginning of year 150,457 253,930 204,671
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 212,421 $ 150,457 $ 253,930
========= ========= =========
See notes to financial statements
-19-
1MAGE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
- --------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 10,206 $15,408 $15,820
========= ======= =======
Income taxes paid $ 2,500 $ 2,500 $ 2,500
========= ======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH
ACTIVITIES:
Acquisition of property and equipment
by assuming capital lease obligations $ -- 6,197 $ --
========= ======= =======
-20-
1MAGE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000, AND 1999
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
ORGANIZATION AND NATURE OF BUSINESS - 1mage Software, Inc. (the "Company")
was incorporated in Colorado in December 1981.
The Company develops and markets a Linux, Unix, and Windows-based
electronic document image management and retrieval system. The Company
earns the majority of its revenues in the United States.
CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to
be cash equivalents.
INVENTORIES consist of finished goods and are stated at the lower of cost
(specific identification method) or market (net realizable value).
PROPERTY AND EQUIPMENT are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful
lives (generally five years) of the assets or the lease term, if shorter.
The Company capitalizes all expenditures for property and equipment in
excess of $500.
ADVERTISING COSTS are expensed as incurred. Advertising expenses totaled
$121,718, $103,621, and $65,348 in 2001, 2000 and 1999, respectively.
SOFTWARE DEVELOPMENT COSTS are capitalized when technological feasibility
is established. Such costs are stated at the lower of unamortized cost or
net realizable value. Amortization is computed using either the
straight-line method based on estimated economic lives of the products
(five years) or the ratio that current product revenues bear to the total
of current and anticipated future product revenues, whichever is greater.
It is reasonably possible that those estimates of anticipated future gross
revenues, the remaining estimated economic life of the products, or both
will be reduced significantly in the near term due to competitive
pressure. As a result, the carrying amount of the capitalized software
costs may be reduced materially in the near term. The amounts capitalized
for the years ended December 31, 2001, 2000, and 1999 were $270,973,
$290,745, and $302,747, respectively. Amortization of these costs totaled
$300,101, $307,930, and $317,400, respectively. The net realizable value
of such capitalized costs is reviewed by management on a periodic basis,
and costs in excess of net realizable value, if any, are charged to
operations.
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.
The Company performs credit evaluations of its customers' financial
condition and generally does not require collateral. The Company retains a
security interest in the equipment and software sold until they are paid
in full. Receivables are generally due within 30 days, with those
customers not meeting those requirements being subject to stricter credit
policies.
-21-
A single customer accounted for 36%, 35% and 28% of revenues in 2001, 2000
and 1999, respectively.
Two different customers accounted for 18% and 10% of accounts receivable
at December 31, 2001.
One customer accounted for 28% of accounts receivable at December 31,
2000. Two different customers accounted for 11% and 10% of accounts
receivable at December 31, 1999.
EARNINGS (LOSS) PER SHARE is computed by dividing net income (loss) by the
weighted average number of common and equivalent shares outstanding during
the year. The potential dilution from Common Stock equivalents is not
material. Fully diluted earnings per share are either anti-dilutive or not
materially different from basic earnings per share.
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 valuation allowance against the deferred tax
assets due to the uncertainty of ultimate realizability.
ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting periods.
Actual results could differ from those estimates.
RECLASSIFICATION - The Company has reclassified certain amounts from prior
years to conform with the current year presentation. These
reclassifications had no effect on net income.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consists of the following:
2001 2000
---- ----
Equipment $ 651,055 $ 626,656
Furniture 49,177 43,313
Leasehold improvements 8,262 8,262
--------- ---------
708,494 678,231
Less: accumulated depreciation (650,616) (623,054)
--------- ---------
$ 57,878 $ 55,177
========= =========
-22-
3. ACCRUED LIABILITIES
Accrued liabilities at December 31 consists of the following:
2001 2000
---- ----
Sales tax payable $ 36,694 $ 22,949
Accounting and audit fees 14,481 15,486
Accrued compensation 39,036 32,124
Other 56,299 38,891
-------- --------
$146,510 $109,450
======== ========
4. LINE OF CREDIT
The Company has a $200,000 annual revolving bank line of credit which is
extended until February 24, 2003 and bears interest at prime plus 1.5%
(total rate of 8.25% at December 31, 2001) and is collateralized by all
accounts receivable and general intangibles of the Company. Total
borrowings outstanding under the line of credit were $0 and $200,000 at
December 31, 2001 and 2000, respectively.
5. SHAREHOLDERS' EQUITY
STOCK COMPENSATION PLANS
At December 31, 2001, the Company has three stock-based compensation
plans, which are described below. The Company applies Accounting
Principles Board (APB) Opinion 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized. Had compensation cost for the Company's three stock-based
compensation plans been determined based on the fair value at the dates of
awards under those plans consistent with the method of FASB Statement 123,
the Company's net income (loss) and earnings (loss) per share would have
been as indicated below:
2001 2000 1999
----------- ----------- ----------
Net income (loss):
As reported $ 211,157 $ 8,154 $ (367,193)
Pro forma $ 112,349 $ (147,361) $ (518,211)
Income/(Loss) per common share:
As reported $ 0.07 $ 0.00 $ (0.16)
Pro forma $ 0.04 $ (0.05) $ (0.22)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants in 2001, 2000, and 1999:
2001 2000 1999
---- ---- ----
Dividend Yield 0% 0% 0%
Expected Volatility 124% 135% 144%
Risk-Free Interest Rate 4.75% 5.0% 6.00%
Expected Lives 8.4years 3.2 years 8.7 years
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and
are freely transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
-23-
1996 EQUITY INCENTIVE PLAN
In September 1996, the Board of Directors authorized 1,000,000 shares of
Common Stock for issuance under its 1996 Equity Incentive Plan ("1996
Plan") as incentive stock options ("ISOs") or non-qualified stock options
("NQSOs"). The Company grants ISOs only to employees. The Company grants
NQSOs and restricted stock to persons who are employees of the Company and
to non-employee directors.
The options are granted to purchase Common Stock at the fair market value
on the grant date or at other prices as determined by the Board of
Directors. The option-vesting period is determined at the time of each
grant, and all options expire two to ten years from the grant date.
A summary of the 1996 Plan stock option activity follows:
-------------------------------------------------------------------------------
Outstanding Exercise Weighted Avg.
Shares Price Exercise Price
-------------------------------------------------------------------------------
Balances, January 1, 1999 453,000 $.43
Granted 375,000 $.33-$1.29 .62
--------------- ---------------
Balances, December 31, 1999 828,000 .52
Granted 192,500 $.63-$1.44 .66
Canceled (189,000) $.33-$.66 (.56)
Exercised (198,000) $.34-$1.47 (.40)
============== ===============
Balances, December 31, 2000 633,500 .59
============== ===============
Granted 145,000 $.56 - $.75 .60
Canceled (8,500) $.63 - $.66 .65
--------------- ---------------
Balances, December 31, 2001 770,000 $.59
============== ===============
The following table summarizes information about stock options under the
plan at December 31, 2001:
Outstanding Exercisable
---------------------------------------- --------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------ ------------ ------------ ----------- ----------- ---------
0.34 to 0.44 235,000 5.5 years 0.44 235,000 0.44
0.56 to 0.84 519,000 7.8 years 0.64 382,934 0.65
1.28 to 2.06 16,000 8.0 years 1.36 16,000 1.36
At December 31, 2001, options for 633,934 shares were exercisable under
the 1996 Plan. There were 32,000 shares available for future grant.
The weighted-average grant-date fair value of options granted during 2001,
2000, and 1999 were $.60, $.52, and $.65, respectively.
-24-
1994 STOCK OPTION AND GRANT PLAN
In April 1994, the Company authorized 700,000 shares of Common Stock for
issuance under its 1994 Stock Option and Grant Plan ("1994 Plan") to
employees and directors.
The options are granted to purchase Common Stock at the fair market value
on the date of grant or at other prices as determined by the Board of
Directors ("the Board"). Options issued under the 1994 Plan become
exercisable in one or more installments during its term and the right to
exercise may be cumulative, as determined by the Board. Options expire as
determined by the Board, but not more than 10 years after the date of
grant.
Details of activity under the 1994 Plan are as follows:
Weighted Average
Stock Options Outstanding Exercise Price Exercise Price
---------------------------- ------------ -------------- ----------------
Balances, January 1, 1999 $.51
Granted 104,000 $.66 .66
Canceled (13,501) $.34 - $1.44 (.59)
Exercised (113,000) $.34 - $.78 (.58)
------------ ----------------
Balances, December 31, 1999 399,000 .53
Granted 9,500 $.63 .63
Canceled (5,250) $.34 - $1.28 (.88)
Exercised (86,000) $.34 - $1.28 (.53)
------------ ----------------
Balances, December 31, 2000 317,250 .52
Granted 4,500 $.56 .56
Canceled (1,000) $.625 (.63)
------------ ----------------
Balances, December 31, 2001 320,750 $.52
=========== ================
-------------------------------------------------------------------------------------
Stock Grants Grant Price Weighted Average
Exercise Price
-------------------------------------------------------------------------------------
Balances, January 1, 1999 83,166 $.84 - $1.13 $1.66
Granted/Canceled -- -- --
------------ ----------------
Balances, December 31, 1999 83,166 1.66
Granted/Canceled -- -- --
------------ ----------------
Balances, December 31, 2000 83,166 1.66
Granted/Canceled -- -- --
------------ ----------------
Balances, December 31, 2001 83,166 $1.66
============ ================
-25-
The following table summarizes information about stock options under the
plan at December 31, 2001:
Outstanding Exercisable
--------------------------------------- ---------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------ ----------- ------------- ---------- ----------- --------
0.34 to 0.44 126,750 3.7 years 0.34 101,125 0.34
0.56 to 0.84 194,000 3.6 years 0.64 151,435 0.64
The weighted-average grant-date fair value of options granted during
2001, 2000, and 1999 were $.56, $.48, and $.64, respectively.
At December 31, 2001, options to purchase 252,560 shares of Common Stock
were exercisable and 99 shares were available for future grant.
1993 STOCK OPTION PLAN
In May 1994, the Company authorized 235,000 shares of Common Stock for
issuance under its 1993 Stock Option Plan ("1993 Plan") as incentive
or non-qualified stock options. The Company grants nonqualified stock
options to officers, directors and employees. Incentive stock options may
be granted to employees.
The options are granted to purchase Common Stock at the fair market
value on the grant date or at other prices as determined by the Board of
Directors. The option-vesting period is determined at the time of each
grant, and all options expire two to ten years from the grant date.
A summary of the 1993 Plan stock option activity follows:
-------------------------------------------------------------------------------------------
Outstanding Weighted Avg.
Shares Exercise Price Exercise Price
-------------------------------------------------------------------------------------------
Balances, January 1, 1999 239,675 $.45
Canceled/Granted -- --
----------------- -----------------
Balances, December 31, 1999 239,675 .45
Granted -- --
Exercised (163,375) $.44 - $.75 (.45)
----------------- -----------------
Balances, December 31, 2000 76,300 .47
Granted 3,500 $.56 .56
----------------- -----------------
Balances, December 31, 2001 79,800 $.47
================= =================
-26-
The following table summarizes information about stock options under
the plan at December 31, 2001.
Outstanding Exercisable
--------------------------------------- ---------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------ ----------- ------------- ---------- ----------- --------
0.34 to 0.44 71,300 4.2 years 0.43 70,425 0.43
0.56 to 0.84 7,500 7.3 years 0.66 7,500 0.66
1.28 to 2.06 1,000 4.0 years 1.72 1,000 1.72
The weighted-average grant-date fair value of options granted during 2001
was $.56.
At December 31, 2001, options for 78,925 shares were exercisable under the
1993 Plan. There were no shares available for future grant.
COMMON STOCK WARRANTS
On January 28, 1994, the Board of Directors granted 100,000 warrants to an
officer to purchase shares of Common Stock at an exercise price of $1.5625
per share, expiring on January 31, 1999. In January 1998, these warrants
were repriced to $.44 per share and the term was extended until
January 28, 2004. In March 2000, the officer exercised these warrants.
There are no common stock warrants outstanding as of December 31, 2001.
COMMON STOCK RESERVED
Common Stock reserved at December 31, 2001 was as follows:
1996 Equity Incentive Plan 802,000
1994 Stock Option and Grant Plan 320,849
1993 Stock Option Plan 79,800
----------
1,202,649
==========
-27-
7. INCOME TAXES
The provisions (credit) for income taxes for the years ended December 31,
consists of:
Current: 2001 2000 1999
---- ---- ----
Federal $ -- $ -- $ --
State -- 2,500 2,500
-------- -------- --------
Total current 2,500 2,500
-------- -------- --------
Deferred:
Federal -- -- --
State -- -- --
Total deferred (50,000) -- --
-------- -------- --------
$(50,000) $ 2,500 $ 2,500
======== ======== ========
The following is a reconciliation of statutory federal income taxes to
the actual provision (credit) for income taxes:
2001 2000 1999
---- ---- ----
Federal income taxes at statutory rate $ 65,000 $ 3,600 $ (124,845)
Increase (decrease) in taxes resulting from state income taxes 6,300 (800) (16,380)
Increase (decrease) in deferred tax asset valuation allowance (141,000) (133,000) 76,000
Expiration of business tax credits 14,000 121,000 61,000
Other, net 5,700 11,700 6,725
----------- ----------- -----------
Provision/(credit) for income taxes $ (50,000) $ 2,500 $ 2,500
=========== ========== ===========
The components of the net deferred tax (liability) asset recognized in
the accompanying balance sheets are as follows:
2001 2000
---- ----
Deferred tax liability $ (2,000) $ (2,000)
Deferred tax asset 2,109,000 2,200,000
Valuation allowance (2,057,000) (2,198,000)
----------------- ----------------
$ 50,000 $ --
================= ================
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax asset and their approximate tax
effects are as follows:
2001 2000
---- ----
Future income (deductions):
Net operating loss $ 2,090,000 $ 2,156,000
Allowance for doubtful accounts 4,000 4,000
General business tax credits -- 14,000
Depreciation 12,000 18,000
Other, net 1,000 6,000
----------------- ----------------
$ 2,107,000 $ 2,198,000
================= ================
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The Company has net operating loss carry forwards for federal income tax
purposes of approximately $5,394,000. These carry forwards expire on
varying dates from 2005 through 2019.
8. EMPLOYEE BENEFIT PLAN
The Company has a Cash or Deferred Profit Sharing Plan ("the 401(k)
Plan"). The 401(k) Plan is designed to qualify under Section 401(k) of the
Internal Revenue Code and allows the Company to make discretionary
contributions as determined by the Company's Board of Directors. For the
years ended December 31, 2001, 2000, and 1999, the Company contributed
$4,650, $3,988, and $2,476 to the 401(k) Plan.
9. COMMITMENTS AND CONTINGENCIES
At December 31, 2001 and 2000, equipment with a net book value of $6,663
and $10,735, net of accumulated amortization of $13,698 and $9,626,
respectively, has been leased under capital leases.
The Company leases its executive offices under a noncancelable operating
lease which expires in July 2003. Future minimum payments for lease
obligations are as follows:
Capital Operating
-------- --------
2002 $ 3,060 $ 89,304
2003 510 52,094
-------- --------
Total minimum lease payments 3,570 $141,398
========
Amount representing interest (693)
--------
Present value of min. lease payments 2,877
Current portion (1,784)
--------
Long-term portion $ 1,093
========
The Company has bonus agreements with two officers that provide for
quarterly bonuses of 5% and 4%, respectively, of the Company's pre-tax
profits. The Company expensed bonuses of $33,352, $15,968, and $1,312
under these agreements for the years ended December 31, 2001, 2000, and
1999, respectively.
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11. FINANCIAL INSTRUMENTS
All financial instruments are held for purposes other than trading. The
following methods and assumptions were used to estimate the fair value of
each financial instrument for which it is practicable to estimate that
value:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value because of the short maturity
of those instruments.
DEBT
The fair value of the Company's debt is estimated based on borrowing rates
currently available to the Company for bank loans with similar terms and
maturities.
The estimated fair values of the Company's financial instruments at
December 31, 2001 are as follows:
Carrying
Amount Fair Value
---------- ----------
Assets:
Cash and cash equivalents $ 212,421 $ 212,421
Receivables $ 421,977 $ 421,977
Liabilities:
Accounts Payable $ 187,878 $ 187,878
Line of Credit $ -- $ --
The estimated fair values of the Company's financial instruments at
December 31, 2000 are as follows:
Carrying
Amount Fair Value
---------- ----------
Assets:
Cash and cash equivalents $ 150,457 $ 150,457
Receivables $ 407,257 $ 407,257
Liabilities:
Accounts Payable $ 185,468 $ 185,468
Line of Credit $ 200,000 $ 200,000
12. SEGMENT INFORMATION
The Company operates in one industry segment consisting of the development
and marketing of electronic document image management and retrieval
systems. The Company's technologies are managed as one segment because it
offers similar products in similar markets and the factors determining
strategic decisions are comparable for all products and markets.
Sales to foreign markets totaled $67,846, $57,911, and $102,831 for the
years ending December 31, 2001, 2000, and 1999, respectively.
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INDEPENDENT ACCOUNTANTS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders of
1mage Software, Inc.
Englewood, Colorado
In connection with our audit of the financial statements of 1mage Software, Inc.
for each of the three years in the period ended December 31, 2001, we have also
audited the following financial statement schedule. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits of the basic financial statements. The schedule is presented for purposes
of complying with the Securities and Exchange Commission's rules and regulations
and is not a required part of the financial statements.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included herein.
BKD, LLP
Denver, Colorado
January 18, 2002
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1MAGE SOFTWARE, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
- -------------------------------------------------------------------------------------------------
Additions
Balance at charged to: Additions Balance at
beginning Costs and charged to: end of
of period expenses Deductions period
----------- ----------- ----------- ----------
For the Year Ended December 31, 2001:
Allowance for Doubtful Accounts $ 10,000 $ 62,888 $ 62,888 $ 10,000
For the Year Ended December 31, 2000:
Allowance for Doubtful Accounts $ 10,000 $ 31,403 $ 31,403 $ 10,000
For the Year Ended December 31, 1999:
Allowance for Doubtful Accounts $ 15,000 $ 39,485 $ 44,485 $ 10,000
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with accountants on accounting and financial
disclosure.
-32-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information concerning the Company's Executive
Officers and Directors:
First Year As
Executive
Officer or Position
Name Age Director With Company
- ---- --- ------------- ------------
David R. DeYoung 57 1981 President, Chief Executive Officer and Director
Mary Anne DeYoung 48 1994 Treasurer, Chief Financial Officer, Asst. Secretary and Director
Robert Wiegand II 55 1992 Secretary and Director
Richard A. Knapp 56 1997 Director
James J. Capeless 62 2000 Director
DAVID R. DEYOUNG - CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Mr. DeYoung has been President, Chief Executive Officer and a Director
of the Company since its formation in 1981. He served in similar capacities
with the Company's predecessor corporation from 1979 to 1981. He holds a
Bachelor of Science Degree in Business Administration and Computer Science
from California State Polytechnic University. Mr. DeYoung is the spouse of
Mary Anne DeYoung.
MARY ANNE DEYOUNG - TREASURER, CHIEF FINANCIAL OFFICER, ASSISTANT SECRETARY
AND DIRECTOR
Ms. DeYoung was elected to the Board of Directors in April 1996.
Ms. DeYoung was appointed Treasurer, Chief Financial Officer and Assistant
Secretary of the Company on December 15, 1994. Ms. DeYoung has served as Vice
President, Finance and Administration since July 1986. Ms. DeYoung joined the
Company as Controller in April 1981. From 1975 to 1981, Ms. DeYoung was a
systems analyst with Arthur Andersen LLP, a financial analyst, and an
independent financial consultant. Ms. DeYoung holds a Bachelor of Science Degree
in Accounting from the University of Santa Clara. Ms. DeYoung is the spouse of
David R. DeYoung.
ROBERT WIEGAND II - SECRETARY AND DIRECTOR
Mr. Wiegand was elected to the Board of Directors in July 1992.
Mr. Wiegand was appointed to the office of Secretary of the Company on March 1,
1994. Mr. Wiegand is presently a lawyer in private practice. From January 15,
1992 to December 26, 1992, he was Vice-President of Administration for Rose
Manufacturing Co., a privately held manufacturer of safety equipment based in
Englewood, Colorado. Mr. Wiegand has practiced law for 23 years, and prior to
joining Rose Manufacturing, was special counsel with Pendleton & Sabian, P.C., a
law firm in Denver. Mr. Wiegand graduated Phi Beta Kappa from the Tulane
University of Louisiana in 1970 and went on to receive a law degree and was
admitted to practice in Louisiana in 1972 and Colorado in 1977. Since 1976,
Mr. Wiegand's practice has been limited to securities offerings, estate
planning, business organizations and tax law. In addition to membership in six
bar Associations, Mr. Wiegand has been admitted to practice before the U.S.
Supreme Court, the U.S. District Court (Colorado and ED-Louisiana) and before
the U.S. Court of Appeals (5th Circuit).
RICHARD A. KNAPP - DIRECTOR
Mr. Knapp was elected to the Board of Directors in May 1997. Mr. Knapp
is currently the President and CEO of Lease Capital Corporation, a leasing
company located in Castle Rock, CO., and has served in that capacity since 1990.
From 1984 until 1990, Mr. Knapp was a regional manager for both Paccom Leasing
Corporation and Security Pacific Business Finance. In total, Mr. Knapp has been
associated with the
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banking/finance industry for nearly thirty years. He holds a Bachelor of Science
degree in Finance from the University of Arizona.
JAMES J. CAPELESS - DIRECTOR
Mr. Capeless was elected to the Board of Directors in May 2000.
Mr. Capeless currently serves as a consultant to small and medium size
businesses in the high technology sector. Mr. Capeless served as CEO of VMARK
Software, Inc. (VMARK) in Westborough, MA from 1988 until 1996. Under his
leadership, VMARK achieved seven-plus years of revenue and profit growth from
business operations, including a string of 25 consecutive quarters. From 1985
until 1988, he served as Vice President, Marketing for VMARK. From 1983 until
1985, Mr. Capeless served as Vice President, Marketing Development for Infinet,
Inc. in Andover, MA. He served as Director of International Marketing for Prime
Computer (Natick, MA) from 1980-1983. Prior to that, Mr. Capeless served in
various capacities at Honeywell Information Systems in Waltham, MA from 1962
until 1980. Mr. Capeless holds both BA and MA degrees from the University of
Massachusetts.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the executive compensation of two of the
Company's Executive Officers for each of the Company's last three fiscal years.
There were no other Executive Officers serving at the end of the last fiscal
year whose compensation was greater than $100,000.
- ------------------------------------------------------------------------------------------------
Long Term All Other
Annual Compensation * Compensation Compensation
- ---------------------- ------ --------- --------- ---------------------- -------------
Salary Bonus Awards **
- ---------------------- ------ --------- --------- ---------------------- -------------
Name and Principal Securities Underlying
- ---------------------- ------ --------- --------- --------------------- -------------
Position Year ($) ($) Options(#) ($)
- ---------------------- ------ --------- --------- --------------------- -------------
David R. DeYoung 2001 145,260 18,529 25,000 3,156
- ---------------------- ------ --------- --------- --------------------- -------------
President, CEO 2000 144,435 8,872 50,000 3,767
- ---------------------- ------ --------- --------- --------------------- -------------
1999 132,053 730 60,000 4,812
- ---------------------- ------ --------- --------- --------------------- -------------
- ---------------------- ------ --------- --------- --------------------- -------------
Mary Anne DeYoung 2001 103,586 14,823 25,000 2,187
- ---------------------- ------ --------- --------- --------------------- -------------
CFO, Treasurer, Asst.
Secretary 2000 102,898 7,096 50,000 2,187
- ---------------------- ------ --------- --------- --------------------- -------------
1999 95,214 582 60,000 2,155
- ------------------------------------------------------------------------------------------------
* Neither Mr. DeYoung nor Ms. DeYoung received additional compensation other than noted above,
the aggregate amount of which was the lesser of either $50,000 or 10% of their annual salary
and bonus.
** Includes insurance premiums paid by the Company for term life and disability insurance, as
well as premiums paid for a key-man life insurance policy which has the death benefit assigned
to the Company and the cash value of the policy intended to accrue for the benefit of
Mr. DeYoung.
- ------------------------------------------------------------------------------------------------
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the information concerning individual
grants of stock options during the last fiscal year to the named Executive
Officers:
- --------------------------------------------------------------------------------------
Individual Grants
- --------------------------------------------------------------------------------------
Name Number of Percent of Total Exercise or Expiration Date
Securities Options Granted to Base
Underlying Employees in Price
Options Fiscal Year ($/Share)
Granted (#)
- --------------------------------------------------------------------------------------
D.R.DeYoung 25,000 21% $.616 12/28/11
- --------------------------------------------------------------------------------------
Mary Anne DeYoung 25,000 21% $.56 12/28/11
- --------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning each exercise of
stock options during the last fiscal year by the named Executive Officers and
the fiscal year-end value of unexercised options:
- ------------------------------------------------------------------------------------------------------------
Shares Number of securities Value of unexercised in-
acquired on Value underlying unexercised the-money options at
Name exercise (#) Realized ($) options at fiscal year-end fiscal year-end ($)*
(#)
- ----------------- ------------ ------------ -------------------------- -------------------------
Exercisable/unexercisable Exercisable/unexercisable
- ----------------- ------------ ------------ -------------------------- -------------------------
D.R. DeYoung 0 $ 0 313,000 / 0 $77,875 / $0
- ----------------- ------------ ------------ -------------------------- -------------------------
Mary Anne DeYoung 0 $ 0 259,800 / 0 $68,600 / $0
- ------------------------------------------------------------------------------------------------------------
*Based upon the fair market value of the Common Stock on December 31, 2001
of $.60, being the closing price as quoted on the OTC: BB.
EMPLOYMENT CONTRACTS
Mr. DeYoung, the Company's President and Chief Executive Officer, is
employed pursuant to a three-year employment contract between the Company and
Mr. DeYoung, which expires on October 31, 2002. Since November 1, 1999, the
compensation of Mr. DeYoung has been established under the terms of this
employment contract. The contract calls for an annual base salary, in an amount
determined annually by the Board of Directors, payable semi-monthly, plus
expenses and normal fringe benefits. Mr. DeYoung earns a bonus of 5% of the
Company's pretax earnings, calculated on a quarterly basis. An annual bonus may
be paid to Mr. DeYoung based on the performance of the Company and at the
discretion of the Board of Directors. Mr. DeYoung's employment contract provides
that should his employment be terminated for any reason other than for cause, he
is entitled to a cash severance package equal to one year's cash compensation.
In addition, Mr. DeYoung is entitled to receive a grant of a sufficient number
of ten-year options as are necessary to permit him to retain the same percentage
of beneficial ownership interest in the Company as he held on December 16, 1996.
These grants would be made from the Company's Equity Incentive Plan at the fair
market value of the Common Stock on the date of grant.
Ms. DeYoung, the Company's Vice President of Finance and Chief Financial
Officer, is employed pursuant to a three-year employment contract between the
Company and Ms. DeYoung which was effective September 1, 1999. Her compensation
is established under the terms of this employment contract. The contract calls
for an annual base salary, expenses, normal fringe benefits, as well as a bonus
equal to 4% of the Company's pretax
-35-
earnings, calculated on a quarterly basis. In addition, Ms. DeYoung's employment
contract provides that should her employment be terminated for any reason other
than for cause, she is entitled to a cash severance package equal to one year's
cash compensation.
COMPENSATION OF DIRECTORS
The Company currently pays non-employee Directors $1,500 per quarter plus
specific hourly fees for special meetings or additional participation. In lieu
of cash compensation for directors' services, on December 31, 2001, Mr. Capeless
was granted a stock option for 10,000 shares of the Company's Common Stock at
$.60, the fair market value of the stock on the date of grant. Pursuant to the
1996 Stock Option Plan (the "1996 Plan"), members of the compensation committee
of the Board of Directors are automatically granted an option on the last
trading day in June to purchase 4,000 shares of Common Stock at 100% of the fair
market value on such date. On June 30, 2000 each member of the compensation
committee received an automatic grant to purchase 4,000 shares of Common Stock
at $.75, the fair market value on that date. In addition to the automatic
grants, the Board of Directors granted each non-employee director 2,000 stock
options to purchase shares of Common Stock at $0.56 per share, the fair market
value on December 28, 2001.
-36-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth the number of shares of Common Stock owned by each
Executive Officer and Director of the Company, by all persons known by the
Company to be the beneficial owner of more than 5% of any class of the Company's
voting securities, and by all Executive Officers and Directors as a group.
Unless otherwise noted, the share ownership specified in the following
table represents both record and beneficial ownership as of March 15, 2002.
- --------------------------------------------------------------------------------
Beneficial Percent
Name and Address of Beneficial Owner Ownership(1) of Class
- ------------------------------------ ------------ --------
David R. DeYoung 798,591 (2),(3) 23.1%
6025 So. Quebec Street #300,
Englewood, Colorado 80111
Mary Anne DeYoung 330,301 (4) 9.7%
6025 So. Quebec Street #300,
Englewood, Colorado 80111
Robert Wiegand II 84,500 (5) 2.6%
5261 So. Quebec Street,
Greenwood Village, Colorado 80111
Richard A. Knapp 20,500 (6) 0.6%
900 W. Castleton Rd, #120,
Castle Rock, Colorado 80104
James J. Capeless 40,000 (7) 1.3%
2 Nadine Road, Acton, MA 01720
Spencer D. Lehman 300,638 9.6%
1250 4th Street,
Santa Monica, California 90401
John G. Mazza 302,937 9.6%
6613 Zumirez Drive,
Malibu, California 90265
All Executive Officers and Directors 1,273,892 (8) 33.1%
as a Group - 5 persons
- --------------------------------------------------------------------------------
(1) Beneficial owners are believed to have sole voting and investment power
with respect to the shares shown unless otherwise indicated.
(2) Includes: 313,000 options to purchase Common Stock. See EXECUTIVE
COMPENSATION - Employment Contract.
(3) Excludes: any shares attributable to Mr. DeYoung's right under his
employment contract to maintain his proportional ownership of the Company
under certain circumstances. See EXECUTIVE COMPENSATION - Employment
Contract.
(4) Includes 259,800 options to purchase Common Stock
(5) Includes 64,500 options to purchase Common Stock
(6) Consists of 20,500 options to purchase Common Stock
(7) Consists of 40,000 options to purchase Common Stock
(8) Includes 697,800 options to purchase Common Stock
-37-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no related transactions for the year ended December 31,
2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
See Financial Statement Index on Page 13
2. Financial Statement Schedules
See Financial Statement Index on Page 13
3. List of Exhibits
Exhibit Number Description and Incorporation by Reference
- -------------- ------------------------------------------
3.1* - Restated Articles of Incorporation of the Company, as amended.
3.2* - Bylaws of the Company, as amended.
3.3* - Articles of Amendment to the Articles of Incorporation of
the Company dated April 18, 1991
3.4** - Articles of Amendment to the Articles of Incorporation dated
May 21, 1993.
3.4** - Articles of Amendment to the Articles of Incorporation dated
June 28, 1994.
10.5* - UniVerse(TM)Distributor Agreement between INFORMIX SOFTWARE,
INC. and the Company dated May 15, 1991
10.14*******- President Employment Agreement between David R. DeYoung and
the Company dated November 1, 1999.
10.15*******- Chief Financial Officer Employment Agreement between Mary
Anne DeYoung and the Company dated September 1, 1999.
10.21**** - Software License Agreement between Reynolds+Reynolds and the
Company. This exhibit is subject to a grant of confidential
treatment filed separately with the Securities and Exchange
Commission.
10.22*** - 1994 Stock Option and Grant Plan.
10.23** - 1993 Stock Option Plan.
10.24 - Equity Incentive Plan
23 - Consent of BKD, LLP
See Index to Financial Statements on Page 13
* Filed as an Exhibit to Form S-1 Registration Statement No. 33-44717,
on December 23, 1991.
** Filed as an Exhibit to Form S-8 Registration Statement No. 33-86760,
on November 29, 1994
*** Filed as an Exhibit to Form S-8 Registration Statement No. 33-78096,
on April 22, 1994.
**** Filed as an Exhibit to Form 10-K for the period ended December 31,
1994.
****** Filed as an Exhibit to Form S-3 Registration Statement No. 333-35265,
on September 10, 1997.
******* Filed as an Exhibit to Form 10-K for the period ended December 31,
1999
There were no reports filed on Form 8-K for the quarter ended December 31, 2001.
-38-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ David R. DeYoung Date: March 29, 2002
-------------------- -----------------
David R. DeYoung
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
By: /s/ David R. DeYoung Date: March 29, 2002
-------------------- ---------------
David R. DeYoung, President
and Principal Chief Executive Officer
By: /s/ Mary Anne Deyoung Date: March 29, 2002
-------------------- --------------
Mary Anne DeYoung
Vice President, Finance
Principal and Accounting Officer
By: /s/ Robert Wiegand, II Date: March 29, 2002
---------------------- ---------------
Robert Wiegand, II
Director and Secretary
By: /s/ Richard A. Knapp Date: March 29, 2002
-------------------- --------------
Richard A. Knapp
Director
By: /s/ James J. Capeless Date: March 29, 2002
--------------------- --------------
James J. Capeless
Director
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