-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H2idE1bh37j8Rsx8TY3T4RvLQzajM6Gfr+Gygl2miJpgxfdwMO1e5ljzcSvulxyw 0bJsE5O9v3ulVAVTF0eYSw== 0000912057-96-020378.txt : 19960917 0000912057-96-020378.hdr.sgml : 19960917 ACCESSION NUMBER: 0000912057-96-020378 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960916 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOSERV TECHNOLOGIES INC CENTRAL INDEX KEY: 0000746072 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS REPAIR SERVICES [7600] IRS NUMBER: 963619990 STATE OF INCORPORATION: CA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13608 FILM NUMBER: 96630501 BUSINESS ADDRESS: STREET 1: 320 WESTWAY STREET 2: STE 520 CITY: ARLINGTON STATE: TX ZIP: 76018 BUSINESS PHONE: 8008485385 MAIL ADDRESS: STREET 1: 320 WESTWAY STREET 2: STE 250 CITY: ARLINGTON STATE: TX ZIP: 76018 FORMER COMPANY: FORMER CONFORMED NAME: MMI MEDICAL INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JULY 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ COMMISSION FILE NUMBER 0-13608 INNOSERV TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) CALIFORNIA 95-3619990 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 320 WESTWAY, SUITE 530, ARLINGTON, TEXAS 76018 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 468-3377 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 twelve 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 ----- ----- At September 13, 1996, the Registrant had outstanding 5,035,833 shares of its common stock, $.01 par value. INNOSERV TECHNOLOGIES, INC. FORM 10-Q JULY 31, 1996 TABLE OF CONTENTS Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of July 31, 1996, and April 30, 1996 3 Consolidated Statements of Operations for the three months ended July 31, 1996 and 1995 4 Consolidated Statements of Cash Flows for the three months ended July 31, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION Item 2. Changes in Securities 12 Item 6. Exhibits and Report on Form 8-K 12 SIGNATURES 13 INDEX TO EXHIBITS 14 2 INNOSERV TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) July 31, 1996 April 30, (Unaudited) 1996 ---------- ---------- ASSETS Current assets Cash and cash equivalents $ 1,042 $ 941 Receivables 5,466 5,238 Inventory: Spare parts and supplies, net 5,453 5,580 Inventory held for sale 1,180 1,878 Prepaid expenses 302 350 ---------- ---------- Total current assets 13,443 13,987 Equipment, net 5,797 6,186 Goodwill, net 3,505 3,544 Other assets 148 123 ---------- ---------- $ 22,893 $ 23,840 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term debt $ 1,591 $ 862 Accounts payable 4,536 4,613 Accrued liabilities 2,761 3,090 Deferred revenues 3,896 4,399 ---------- ---------- Total current liabilities 12,784 12,964 Long-term debt 770 910 Shareholders' equity Preferred stock, $.01 par value: 5,000,000 shares authorized; no shares issued -- -- Common stock, $.01 par value: 10,000,000 shares authorized; 5,035,833 issued 51 51 Paid-in capital 17,303 17,303 Accumulated deficit (8,015) (7,388) ---------- ---------- Total shareholders' equity 9,339 9,966 ---------- ---------- $ 22,893 $ 23,840 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these financial statements. 3 INNOSERV TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended July 31, -------------------------- 1996 1995 ----------- ---------- Revenues $ 11,788 $ 11,968 Costs and expenses: Cost of operations 10,023 9,466 Depreciation and amortization 511 485 Selling and administrative 1,854 2,156 Interest expense, net 27 49 ---------- ---------- Total costs and expenses 12,415 12,156 ---------- ---------- Loss before income taxes (627) (188) Benefit for income taxes -- (75) ---------- ---------- Net loss $ (627) $ (113) ---------- ---------- ---------- ---------- Per share information: Net loss $ (.12) $ (.02) ---------- ---------- ---------- ---------- Weighted average shares outstanding 5,036 5,039 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these financial statements. 4 INNOSERV TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended July 31, ------------------------ 1996 1995 --------- --------- Cash flows from: Operations - Net loss $ (627) $ (113) Adjustments to reconcile net loss to net cash flows from operations: Depreciation and amortization 511 485 Gain on disposal of equipment -- (100) Deferred income taxes -- (19) Changes in assets and liabilities: Receivables (228) 839 Inventory 825 (778) Prepaid expenses 48 (309) Accounts payable (77) 1,102 Accrued liabilities (329) (114) Other assets (25) (177) Deferred revenues (503) 214 --------- --------- Net cash provided by (used for) operations (405) 1,030 Investments and acquisitions - Sale of equipment -- 180 Purchase of equipment (83) (321) --------- --------- Net cash used for investments and acquisitions (83) (141) Financing activities - Borrowings from line of credit 776 -- Principal payments of long-term debt (187) (1,794) --------- --------- Net cash provided by (used for) financing activities 589 (1,794) --------- --------- Net increase (decrease) in cash and cash equivalents 101 (905) Cash and cash equivalents at beginning of period 941 1,827 --------- --------- Cash and cash equivalents at end of period $ 1,042 $ 922 --------- --------- --------- --------- The accompanying notes are an integral part of these financial statements. 5 INNOSERV TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JULY 31, 1996 (UNAUDITED) 1. GENERAL The consolidated financial statements included herein have been prepared by InnoServ Technologies, Inc. ("InnoServ") without audit, include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three months ended July 31, 1996 and 1995, pursuant to the rules and regulations of the Securities and Exchange Commission, and include the accounts of InnoServ and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. Any and all adjustments made are of a normal and recurring nature in accordance with Rule 10-01(b)(8) of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulation, however, InnoServ believes that the disclosures in such financial statements are adequate to make the information presented not misleading. These financial statements should be read in conjunction with InnoServ's annual report on Form 10-K for the fiscal year ended April 30, 1996, filed with the Securities and Exchange Commission. The results of operations for the three months ended July 31, 1996, are not necessarily indicative of the results that may be expected for the year ending April 30, 1997. 2. INTEREST EXPENSE, NET Interest expense is net of interest income of $15,000 for the period ended July 31, 1996. No interest income was recognized for the period ended July 31, 1995. 3. SUPPLEMENTAL CASH FLOW DISCLOSURE Interest and income taxes paid in the three months ended July 31, 1996 and 1995 were as follows: Three Months Ended July 31, ------------------------ 1996 1995 --------- --------- Interest $ 36,000 $ 61,000 Income taxes $ 13,000 $ 8,000 6 INNOSERV TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JULY 31, 1996 (UNAUDITED) 4. LONG-TERM DEBT InnoServ has a loan agreement with a bank to borrow up to $3,000,000. The loan agreement contains a $1,500,000 term loan expiring January 30, 1999, and a $1,500,000 revolving line of credit for working capital, against which InnoServ had outstanding borrowings of $1,250,000 and $1,032,000, respectively, at July 31, 1996. Obligations under the loan agreement are secured by a security interest in InnoServ's accounts receivable, inventory and equipment. Interest is payable quarterly on all obligations under the loan agreement based on varying interest rates above the prime rate and the term loan requires quarterly principal payments of $125,000. The interest rate at July 31, 1996, on the term loan was 9.25 percent and was 8.75 percent on the revolving line of credit. The loan agreement contains financial covenants including maintenance of certain financial ratios, net worth requirements and restrictions on future borrowings and payment of dividends, with which InnoServ was in compliance at July 31, 1996. Subsequent to July 31, 1996, the expiration date of the revolving line of credit was extended from August 12, 1996, to October 12, 1996, and the limit of the line of credit was reduced to $500,000, the amount outstanding at August 12, 1996. InnoServ has completed negotiations with another financial institution as to the terms of secured financing to replace the bank loan agreement and is in the process of preparing the loan documentation. InnoServ believes the new agreement will be completed prior to the October 12, 1996, expiration date of the bank line of credit. 5. RESTRUCTURING In the fourth quarter of fiscal 1996, InnoServ adopted a plan to reorganize its operations in order to strategically focus on its comprehensive asset management services business ("Asset Management"). As a result of this reorganization, InnoServ recorded restructuring charges in the fourth quarter of fiscal 1996 of $154,000 for employee termination benefits for 25 employees. As of July 31, 1996, $56,000 of this amount had been paid to 15 employees. The reorganization is expected to be completed by the end of the third quarter of fiscal 1997. 7 INNOSERV TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JULY 31, 1996 (UNAUDITED) In the third quarter of fiscal 1996, InnoServ relocated its headquarters from Corona, California to Arlington, Texas and recorded restructuring charges of $411,000. The major components of these charges, the amount paid to date, adjustments to the liability and the remaining payments at July 31, 1996 were as follows (in thousands): Amounts Paid as of Adjustments Total July 31, to the Payments Charges 1996 Liability Remaining --------- -------- -------- --------- Employee termination benefits $ 115 $ (115) $ -- $ -- Employee relocation 169 (162) (5) 2 Employee training 67 (67) -- -- Office equipment relocation 30 (30) -- -- Facility closing costs 30 (7) (23) -- ------- ------- ------- ----- $ 411 $ (381) $ (28) $ 2 ------- ------- ------- ----- ------- ------- ------- ----- The termination benefits relate to 12 employees, all of whom were terminated as of July 31, 1996. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FIRST QUARTER FISCAL 1997 COMPARED TO FIRST QUARTER FISCAL 1996 Consolidated revenues for the first quarter of fiscal 1997 were $11,788,000 as compared to $11,968,000 in the same period of fiscal 1997, a decline of $180,000, or 1.5 percent. Revenues from computerized tomography ("CT") maintenance service agreements decreased approximately $1,900,000 primarily as a result of the continued decline in the number and average contract amount of CT maintenance service agreements in effect as older equipment is being upgraded or removed from service by customers and InnoServ's decision to not renew certain CT maintenance agreements in unprofitable locations. Revenues from InnoServ's diagnostic mobile imaging operations were approximately $230,000 lower than the revenues in the same period in fiscal 1996 as InnoServ discontinued its shared services program at the end of the first quarter of fiscal 1996. Offsetting these declines, revenues from Asset Management and multi-vendor services increased approximately $1,800,000 as InnoServ continues to focus on the growing market for these type services and revenues from equipment and part sales increased approximately $250,000. Cost of operations increased $557,000 from the same period in the prior fiscal year. This increase was a result of costs required to provide services for Asset Management agreements, while InnoServ was not able to reduce its costs to service CT maintenance agreements proportionately due to certain fixed support costs and the need to retain field service technicians in certain locations despite a declining revenue base in that location. Selling and administrative expenses decreased $302,000, or 14 percent, from the prior year primarily as a result of savings from the consolidation of InnoServ's administrative functions and lower bad debt and selling expenses. Depreciation and amortization expenses did not change significantly quarter to quarter. The loss before income taxes for the first quarter of fiscal 1997 was $627,000 as compared to a $188,000 loss in the first quarter of fiscal 1996. This additional loss was primarily the result of unfavorable operating margins associated with InnoServ's maintenance business. Because InnoServ employs field service engineers over a wide geographic area, the current level of revenues are not sufficient in certain locations to cover the direct and indirect costs of providing maintenance and repair services. InnoServ is implementing plans to reorganize its service operations to more cost effectively provide the services required by its customers and to discontinue service in selected locations upon the expiration of the existing maintenance agreements in those locations. InnoServ believes these actions, coupled with strategic changes it is making in the operations of the CT and Asset Management business, will improve InnoServ's operations. However, InnoServ may not realize the full financial impact of these actions until the latter part of fiscal 1997. 9 InnoServ did not recognize a tax benefit from the operating loss for the first quarter of fiscal 1997. Under Statement of Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes," net operating losses enter into the calculation of deferred tax assets and liabilities. At July 31, 1996, InnoServ had a net deferred tax asset, primarily as a result of net operating losses. In accordance with SFAS 109, InnoServ recorded a valuation allowance for the full amount of the deferred tax asset. The ultimate realization of the deferred tax asset depends on the ability of InnoServ to generate sufficient taxable income in the future. While InnoServ believes the deferred tax asset will be substantially realized by future operating results, due to the cumulative losses incurred in recent years the deferred tax assets do not currently meet the criteria for recognition under SFAS 109. At July 31, 1995, the effective tax rate was estimated to be 40 percent and a corresponding benefit for taxes was recorded on the operating losses for the three months ended July 31, 1995. LIQUIDITY AND CAPITAL RESOURCES At July 31, 1996, InnoServ had working capital of $659,000, of which $1,042,000 was in cash and cash equivalents. Operations used $405,000 of cash for the three month period ended July 31, 1996, primarily as a result of the operating losses for the period, a reduction in deferred revenues as services were provided in the period for which payment had been received in a prior period, and the payment of annual bonuses and commissions. These uses of cash were offset by a reduction in CT tube inventory as a result of lower requirements for inventory due to the declining number of CT maintenance service agreements in effect and management controls on purchases, and the sale of refurbished CT and magnetic resonance imaging scanners. The funds used for operations were financed by additional borrowings against InnoServ's revolving line of credit. InnoServ's allowance for doubtful accounts at July 31, 1996, was $1,022,000, or 16 percent of gross accounts receivable. InnoServ's customers include hospitals, physician practices, outpatient clinics and entrepreneurial operations. Some of these customers are thinly capitalized, operate on small margins and experience cash flow difficulties due to the lengthy time required to receive reimbursements from Medicare and insurance companies. The changes occurring in the healthcare industry, primarily the move to managed care, has weakened healthcare providers' ability to honor their debts and have forced some of the providers out of business. As a result of these factors, InnoServ has experienced difficulty in collecting on its accounts receivable. InnoServ has a loan agreement with a bank to borrow up to $3,000,000. The loan agreement contains a $1,500,000 term loan expiring January 30, 1999, and a $1,500,000 revolving line of credit for working capital, against which InnoServ had outstanding borrowings of $1,250,000 and $1,032,000, respectively, at July 31, 1996. Obligations under the loan agreement are secured by a security interest in InnoServ's accounts receivable, inventory and equipment. Interest is payable quarterly on all obligations under the loan agreement based on varying interest rates above the prime rate and the term loan requires quarterly principal payments of $125,000. The interest rate at July 31, 1996, on the term loan was 9.25 percent and was 8.75 percent on the revolving line of credit. The loan agreement contains financial covenants including maintenance of certain financial ratios, net worth requirements and restrictions on future borrowings and payment of dividends, with which InnoServ was in compliance at July 31, 1996. 10 Subsequent to July 31, 1996, the expiration date of the revolving line of credit was extended from August 12, 1996, to October 12, 1996, and the limit of the line of credit was reduced to $500,000, the amount outstanding at August 12, 1996. InnoServ has completed negotiations with another financial institution as to the terms of secured financing to replace the bank loan agreement and is in the process of preparing the loan documentation. InnoServ believes the new agreement will be completed prior to the October 12, 1996, expiration date of the bank line of credit. InnoServ does not foresee the need to make any significant capital purchases in the next twelve months and believes sufficient funds will be available from its operations and line of credit to meet its working capital requirements. CAUTIONARY STATEMENT The statements in this Management's Discussion and Analysis and elsewhere in this report that are forward looking are based on current expectations which involve numerous risks and uncertainties. InnoServ's future results of operations and financial condition may differ materially due to many factors including InnoServ's ability to attract and retain Asset Management contracts, InnoServ's ability to implement its operating plan, particularly as it relates to the CT maintenance business, competitive and regulatory conditions in the healthcare industry generally, and other factors, many of which are beyond the control of InnoServ. 11 PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES In December, 1995 InnoServ entered into a $3,000,000 loan agreement. The loan agreement contains financial covenants including the maintenance of certain financial ratios, net worth requirements, and restrictions on future borrowings and payment of dividends. In addition, the obligations under the loan agreement are secured by a security interest in InnoServ's accounts receivable, inventory and equipment. ITEM 6. EXHIBITS AND REPORT ON FORM 8-K. (a) Exhibits: The information required by this portion of Item 6 is set forth in the Index to Exhibits beginning on page 14. (b) Reports on Form 8-K: During the three months ended July 31, 1996, no reports were filed by the Registrant on Form 8-K. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATED: September 13, 1996 INNOSERV TECHNOLOGIES, INC. By: /s/ Thomas Hoefert ------------------------ Thomas Hoefert Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) 13 INDEX TO EXHIBITS Exhibit No. Description of Exhibit --- ---------------------- 10.1 Revolving Credit Agreement dated as of August 12, 1996, in the principal amount of $500,000 payable by the Registrant to Overton Bank & Trust, N.A. 11.1 Computation of Per Share Earnings. 27.1 Financial Data Schedule. 14 EX-10.1 2 EXHIBIT 10.1 Exhibit 10.1 - Revolving Credit Agreement INNOSERV TECHNOLOGIES, OVERTON BANK & TRUST, ACCOUNT #: CFV/JF INC. N.A. Loan Number 78000407 4330 BELTWAY, SUITE SOUTH ARLINGTON Date: August 12, 1996 300 PO BOX 150049 Maturity Date: October ARLINGTON, TX 76018 ARLINGTON, TX 76015 12,1996 LENDER'S NAME AND Loan Amount: $500,000.00 BORROWER'S NAME AND ADDRESS Renewal of ______________ ADDRESS "You" means the "I" includes each lender, its successors borrower above, joint and assigns. and severally. For value received, I promise to pay to you, or your order, at your address listed above the PRINCIPAL sum of FIVE HUNDRED THOUSAND AND NO/100****Dollars $500,000.00 SINGLE ADVANCE: I will receive all of this principal sum on__________. - --- No additional advances are contemplated under this note. XX MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of - -- principal I can borrow under this note. On August 12, 1996 I will receive the amount of $____________ and future principal advances are contemplated. CONDITIONS: The conditions for future advances are___________. XX OPEN END CREDIT: You and I agree that I may borrow up to the maximum -- amount of principal more than one time. This feature is subject to all other conditions and expire on October 12, 1996. CLOSED END CREDIT: You and I agree that I may borrow up to the maximum -- only one time (and subject to all other conditions). INTEREST: I agree to pay interest on the outstanding principal balance from August 12,1996 at the rate of 8.750% per year until FIRST CHANGE DATE. XX VARIABLE RATE: This rate may then change as stated below. - -- X INDEX RATE: The future rate will be .500% Over the following index --- rate: WALL STREET JOURNAL BASE RATE AS ESTABLISHED BY THE MINIMUM PRIME LENDING RATE FOR LARGE U.S. MONEY CENTER COMM. BANKS AS PUBLISHED IN MONEY RATES SEC. OF W.S.J. X CEILING RATE: The interest rate ceiling for this note is the WEEKLY --- ceiling rate announced by the Credit Commissioner from time to time. X FREQUENCY AND TIMING: The rate on this note may change as often as --- DAILY . A change in the interest rate will take effect ON THE SAME DAY LIMITATIONS: During the term of this loan, the applicable annual --- interest rate will not be more than ________________% or less than ___%. EFFECT OF VARIABLE RATE: A change in the interest rate will have the following effect on the payments: XX The amount of each scheduled payment will change. -- XX The amount of the final payment will change. -- ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis. POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note owing after maturity, and until paid in full, as stated below: X on the same fixed or variable rate basis in effect before maturity (as --- indicated above). at a rate equal to__________________________. --- LATE CHARGE: If a payment is made more than _____ days after it is due, I - --- agree to pay a late charge of____________. ADDITIONAL CHARGES: In addition to interest, I agree to pay the following - --- charges which ___ are ___ are not included in the principal amount above:_________________________________ PAYMENTS: I agree to pay this note as follows: XX INTEREST: I agree to pay accrued interest ON THE 12TH DAY OF EACH MONTH - -- BEGINNING SEPTEMBER 12, 1996 XX PRINCIPAL: I agree to pay the principal OCTOBER 12, 1996 - -- INSTALLMENTS: I agree to pay this note in _____ payments. The first payment will be in the amount of $_________ and will be due ___________. A payment of $_______________will be due ____________________ thereafter. The final payment of the entire unpaid balance of principal and interest will be due ___________________. ADDITIONAL TERMS: SEE SEPARATE SECURITY AGREEMENT DATED SAME THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT PURPOSE: The purpose of this loan BETWEEN THE PARTIES AND MAY BUSINESS: PURCHASE EQUIPMENT NOT BE CONTRADICTED BY EVIDENCE ___________________________________ OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. SIGNATURES: I agree to the terms of this note (including those on Page 2). I have Received a copy on today's date. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Signature for Lender INNOSERV TECHNOLOGIES, INC. /s/ CURTIS F. VON DER AHE BY: /s/ MICHAEL G. PULS - ----------------------------- ------------------------------------ CURTIS F. VON DER AHE,PRESIDENT MICHAEL PULS, PRESIDENT APPLICABLE LAW: The law of the state of Texas will govern this note. Any term of this note which is contrary to applicable law will not be effective, unless the law permits you and me to agree to such a variation. If any provision of this agreement cannot be enforced according to its terms, this fact will not affect the enforceability of the remainder of this agreement. No modification of this agreement may be made without your express written consent. Time is of the essence in this agreement. PAYMENTS: Each payment I make on this not will first reduce the amount I owe you for charges which are neither interest nor principal. The remainder of each payment will then reduce accrued unpaid interest, and then unpaid principal. If you and I agree to a different application of payments, we will describe our agreement on this note. I may prepay a part of, or the entire balance of this loan without penalty, unless we specify to the contrary on this note. I may prepay a part of, or the entire balance of the loan without penalty, unless we specify to the contrary on this note. Any partial prepayment will not excuse or reduce any later scheduled payment until this note is paid in full (unless, when I make the prepayment, you and I agree in writing to the contrary) INTEREST: If I receive the principal in more than one advance, each advance will start to earn interest only when I receive the advance. The interest rate in effect on this note at any given time will apply to the entire principal advanced at that time. Notwithstanding anything to the contrary, I do not agree to pay and you do not intend to charge any rate of interest that is higher than the maximum rate of interest you could charge under applicable law for the extension of credit that is agreed to here (either before or after maturity). If any notice of interest accrual is sent and is in error, we mutually agree to correct it, and if you actually collect more interest than allowed by law and this agreement, you agree to refund it to me. INDEX RATE: The index will serve only as a device for setting the rate on this note. You do not guarantee by selecting this index, or the margin, that the rate on this note will be the same rate you charge on any other loans or class of loans to me or other borrowers. ACCRUAL METHOD: The amount of interest that I will pay on this loan will be calculated using the interest rate and accrual method stated on page 1 of this note. For the purpose of interest calculation, the accrual method will determine the number of days in a "year." If no accrual method is stated, then you may use any reasonable accrual method for calculating interest. POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate" (shown on page 1) applies, the term "maturity" means the date of the last scheduled payment indicated on page 1 of this note or the date you accelerate payment on the note, whichever is earlier. SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that you will make only one advance of principal. However, you may add other amounts to the principal if you make any payments described in the "PAYMENTS BY LENDER" paragraph below. MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect that you will make more than one advance of principal. If this is closed and credit, repaying a part of the principal will not entitle me to additional credit. PAYMENT BY LENDER: If you are authorized to pay, on my behalf, charges I am obligated to pay (such as property insurance premiums), then you may treat those payments made by you as advances and add them to the unpaid principal under this note, or you may demand immediate payment of the charges. SET-OFF: I agree that you may set off any amount due and payable under this note against any right I have to receive money from you. "Right to receive money from you" means: (1) any deposit account balance I have with you; (2) any money owed to me on an item presented to you or in your possession for collection or exchange; and (3) any repurchase agreement or other non deposit obligation. "Any amount due and payable under this note" means the total amount of which you are entitled to demand payment under the terms of this note at the time you set off. This total includes any balance the due date for which you properly accelerate under this note. If my right to receive money from you is also owned by someone who has not agreed to pay this note, your right of set-off will apply to my interest in the obligation and to any other amounts I could withdraw on my sole request or endorsement. Your right of set-off does not apply to an account or other obligation where my rights are only as a representative. It also does not apply to any Individual Retirement Account or other tax-deferred retirement account. You will not be liable for the dishonor of any check when the dishonor occurs because you set off this debt against any of my accounts. I agree to hold you harmless from any such claims arising as a result of your exercise of your right of set-off. REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or a residence that is personal property, the existence of a default and your remedies for such a default will be determined by applicable law, by the terms of any separate instrument creating the security interest and, to the extent not prohibited by the law and not contrary to the terms of the separate security instrument, by the "Default" and "Remedies" paragraph herein. DEFAULT: I will be in default on this loan and any agreement securing this loan if any one or more of the following occurs: (1) I fail to perform any obligation which I have undertaken in this note or any agreement securing this note; or **(2) you, in good faith, believe that the prospect of payment or the prospect of my performance of any other of my obligations under this note or any agreement securing this note is implied. If any of us are in default on this note or any security agreement, you may exercise your remedies against any or all of us. REMEDIES: If I am in default on this note you have, but are not limited to the following remedies: (1) You may demand immediate payment of my debt under this note (principal, accrued unpaid interest and other accrued charges). (2) You may set off this debt against any right I have to the payment of money from you, subject to the terms of the "Set-Off" paragraph herein. (3) You may demand security, additional security, or additional parties to be obligated to pay this note as a condition for not using any other remedy. (4) You may refuse to make advances to me or allow purchases on credit by me. (5) You may use any remedy you have under state or federal law. By selecting any one or more of these remedies you do not give up your right to later use any other remedy. By waiving you right to declare an event to be a default, you do not waive your right to later consider the event as a default if it continues or happens again. COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection, replevin or any other similar type of cost if I am in default. In addition, if you hire an attorney to collect this note, I also agree to pay any fee you incur with such attorney plus court costs (except where prohibited by law). To the extent permitted by the United States Bankruptcy Code, I also agree to pay the reasonable attorney's fees and costs you incur to collect this debt as awarded by any court exercising jurisdiction under the Bankruptcy Code. WAIVER: I give up my rights to require you to do certain things. I will not require you to: (1) demand payment of amounts due (presentment); (2) obtain official certification of nonpayment (protest); (3) give notice that amounts due have not been paid (notice of dishonor); (4) give notice of intent to accelerate; or (5) give notice of acceleration. OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone else has also agreed to pay it (by, for example, signing this form or a separate guarantee or endorsement). You may sue me alone, or anyone else who is obligated on this note, or any number of us together, to collect this note. You may without notice release any party to this agreement without releasing any other party. If you give up any of your rights, with or without notice, it will not affect my duty to pay this note. Any extension of new credit to any of us, or renewal of this note by all or less than all of us will not release me from my duty to pay it. (Of course, you are entitled to only one payment in full.) I agree that you may at your option extend this note or the debt represented by this note, or any portion of the note or debt, from time to time without limit or notice and for any term without affecting my liability for payment of the note. I will not assign my obligation under this agreement without your prior written approval. CREDIT INFORMATION: I agree and authorize you to obtain credit information about me from time to time (for example, by requesting a credit report) and to report to others your credit experience with me (such as a credit reporting agency). I agree to provide you, upon request, any financial statement or information you may deem necessary. I warrant that the financial statements and information I provide to you are or will be accurate, correct and complete. NOTICE: Unless otherwise required by law, any notice to me shall be given by delivering it or by mailing it by first class mail addressed to me at my last known address. My current address is on page 1. I agree to inform you in writing of any change in my address. I will give any notice to you by mailing it first class to your address stated on page 1 of this agreement, or to any other address that you have designated. **(2) you, after due inquiry and ten days' opportunity to cure following prior written notice to me by you of the basis of your good faith belief, in good faith, believe that the prospect of payment or the prospect of my performance of any other of my obligations under this note or any agreement securing this note impaired. EX-11.1 3 EXHIBIT 11.1 EXHIBIT 11.1 - COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share amounts) Three Months Ended July 31, ---------------------- 1996 1995 ------- ------- Primary: Earnings: Net loss $ (627) $ (113) Shares: Weighted average shares outstanding 5,036 5,039 Per share amounts: Net loss $ (.12) $ (.02) ------- ------- ------- ------- Fully diluted (A): Earnings: Net loss $ (627) $ (113) Shares: Weighted average shares outstanding 5,036 5,039 Net shares issuable on exercise of certain stock options 108 9 ------- ------- Weighted average shares outstanding, as adjusted 5,144 5,048 Per share amounts: Net loss $ (.12) $ (.02) ------- ------- ------- ------- Note A: This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. EX-27 4 FDS
5 1,000 3-MOS APR-30-1997 MAY-01-1996 JUL-31-1996 1,042 0 5,539 1,022 6,633 13,443 28,173 22,376 22,893 12,784 1,329 51 0 0 9,228 22,893 917 11,788 713 10,023 511 (15) 42 (627) 0 (627) 0 0 0 (627) (.12) (.12)
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