-----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, WeDzCILt67YU85cky7mzhRE4LfN4wMocBR+LxGJLM7xO0RFkTrPHahVRGvCbRpow hM8ogSV9KBXkCMw+m5jI+w== 0000950144-97-009180.txt : 19970815 0000950144-97-009180.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950144-97-009180 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: A D A M SOFTWARE INC CENTRAL INDEX KEY: 0000863650 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 581878070 STATE OF INCORPORATION: GA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26962 FILM NUMBER: 97661517 BUSINESS ADDRESS: STREET 1: 1600 RIVEREDGE PARKWAY STREET 2: STE 800 CITY: ATLANTA STATE: GA ZIP: 30328 BUSINESS PHONE: 7709800888 MAIL ADDRESS: STREET 1: 1600 RIVEREDGE PKWY STREET 2: STE 800 CITY: ATLANTA STATE: GA ZIP: 30328 10-Q 1 A.D.A.M. SOFTWARE 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from --------------------- Commission file Number: 0-26962 A.D.A.M. Software, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its charter) Georgia 58-1878070 - ------------------------------------- ----------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1600 RiverEdge Parkway, Suite 800 Atlanta, Georgia 30328 ---------------------------------------- (Address of principal executive offices) (Zip Code) 770-980-0888 ---------------------------------------------------- (Registrant's telephone number, including area code) N/A ------------------------------------------------------------- (Former name or former address, if changed since last report) 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 ------- ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of August 12, 1997 there were 4,901,897 shares of the Registrant's Common Stock, par value $.01 per share, outstanding excluding shares held in treasury by the Registrant. 2 A.D.A.M. Software, Inc. Index Part I - Financial Information ITEM 1. Financial Statements Condensed Balance Sheet at June 30, 1997 and March 31, 1997............................... 3 Condensed Statement of Operations for the Three Months Ended June 30, 1997 and 1996......................................... 4 Condensed Statement of Cash Flows for the Three Months Ended June 30, 1997 and 1996................................... 5 Notes to Condensed Financial Statements........................ 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 8 Part II - Other Information ITEM 6. Exhibits and Reports on Form 8-K...............................10
3 Part I:FINANCIAL INFORMATION A.D.A.M. Software, Inc. FINANCIAL STATEMENTS Condensed Balance Sheet
June 30, March 31, 1997 1997 ---- ---- (unaudited) ASSETS (in thousands, except share data) Current assets: Cash and cash equivalents $ 1,353 $ 2,422 Short-term investments 7,964 8,546 Accounts receivable (net of allowances of $356 and $459, respectively) 715 638 Inventories 447 375 Prepaids and other 144 108 ------- ------- Total current assets 10,623 12,089 Property and equipment, net 630 729 Software development costs, net 559 487 Restricted certificate of deposit 357 357 ------- ------- $12,169 $13,662 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 175 $ 434 Deferred revenue 120 -- Other accrued expenses 849 1,673 ------- ------- Total current liabilities 1,144 2,107 Convertible preferred stock, no par value; 10,000,000 shares authorized; 0 Series A shares issued and outstanding -- -- Common Stock, $.01 par value; 20,000,000 authorized; 5,274,647 and 5,274,647 shares issued and outstanding 52 52 Other shareholders' equity 10,973 11,503 ------- ------- $12,169 $13,662 ======= =======
The accompanying notes are an integral part of these financial statements. 3 4 A.D.A.M. Software, Inc. Condensed Statement of Operations (unaudited)
Three Months Ended June 30, -------------------------- 1997 1996 ---- ----- (in thousands, except share data) Net revenues $ 1,737 $ 1,050 ------- ------- Cost and expenses Cost of revenues 243 331 Sales and marketing 766 1,310 Product development 375 878 General and administrative 295 608 ------- ------- 1,679 3,127 ------- ------- Operating income (loss) 58 (2,077) Interest income 143 369 Interest expense (3) (7) ------- ------- Income (loss) before income taxes 198 (1,715) Income taxes -- -- ------- ------- Net income (loss) $ 198 $(1,715) ======= ======= Net income (loss) per common share $ 0.04 $ (0.33) ======= ======= Weighted average number of common shares and common share equivalents outstanding 5,108 5,249 ======= =======
The accompanying notes are an integral part of these financial statements. 4 5 A.D.A.M. Software, Inc. Condensed Statement of Cash Flow (unaudited)
Three Months Ended June 30, --------------------------- 1997 1996 ----- ---- (in thousands) Net cash used in operating activities $ (701) $(1,178) Investing activities Purchases of property and equipment 2 (76) Purchase of short-term investments (7,964) (8,046) Proceeds from sale of short term investments 8,462 7,910 Software development costs (140) (3) ------- ------- Net cash provided (used) in investing activities 360 (215) Financing activities Repayment of debt -- (250) Purchase of treasury shares (729) -- Proceeds from exercise of common stock options -- 60 ------- ------- Net cash used by financing activities (729) (190) Decrease in cash and cash equivalents (1,070) (1,583) Cash and cash equivalents, beginning of period 2,423 5,352 ------- ------- Cash and cash equivalents, end of period $ 1,353 $ 3,769 ======= =======
The accompanying notes are an integral part of these financial statements. 5 6 A.D.A.M. Software, Inc. Notes to the Condensed Financial Statements (Unaudited) June 30, 1997 1. BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the general instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended March 31, 1998. For further information, refer to the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 1997, which include audited financial statements for the year ended March 31, 1997. 2. SHORT-TERM INVESTMENTS At June 30, 1997 the Company held certain short-term investments in marketable debt and equity securities which it classified as held-to-maturity. Held-to-maturity securities represent those securities that the Company has both the positive intent and ability to hold to maturity, and are carried at amortized cost. Securities with a maturity date within one year are classified as short-term investments as a part of Current Assets and are stated at fair value plus accrued interest. Net unrealized losses on held-to-maturity securities have not been recognized in the accompanying financial statements. There were no realized gains or losses for the three month periods ended June 30, 1997 and 1996. 3. INVENTORIES Inventories consist principally of computer software media and related shipping supplies and are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. The components of inventory are summarized as follows (in thousands):
June 30, -------------- 1997 1996 ---- ---- Raw Materials $170 $204 Finished Goods 277 176 ---- ---- $447 $380 ==== ====
4. INCOME (LOSS)LOSS PER COMMON SHARE Net income (loss) per common share is computed by dividing net income (loss) applicable to common stock by the weighted average number of outstanding 6 7 A.D.A.M. Software, Inc. Notes to the Condensed Financial Statements (Unaudited) June 30, 1997 (continued) shares of common stock during the applicable periods. Common stock equivalents consisting of the Company's stock options and warrants are included in the calculation of net income (loss) per common share if their effect is dilutive. 5. LEGAL PROCEEDINGS On April 25, 1996 the Company and certain of its officers and directors were named in a class action lawsuit. The complaint alleges violations of Section 11, 12(2) and 15 of the Securities Act of 1933, violations of the Georgia Securities Act and negligent misrepresentation arising out of alleged disclosure deficiencies in connection with the Company's initial public offering which was completed on November 10, 1995. The complaint seeks compensatory damages and reimbursements for plaintiff's fees and expenses. The Company and its officers and directors have been and intend to continue to defend vigorously against the allegations. The Company cannot estimate the impact of the outcome of the lawsuit on the financial condition or results of operations. 6. SUPPLEMENTAL CASH FLOW INFORMATION Cash and cash equivalents include cash on hand and on deposit and highly liquid investment investments with an original maturity of three months or less. Cash payments for the three months ended June 30, 1997 and 1996 include interest of approximately $3,300 and $4,700, respectively. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following information should be read in conjunction with the financial statements and the notes thereto and in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997. A.D.A.M. Software, Inc. ("A.D.A.M." or the "Company") creates, publishes and markets educational multimedia software products, services, content and Internet-ready applications that provide anatomical, medical, scientific and health-related information for the academic, consumer and healthcare markets. A.D.A.M. products incorporate internally developed, original medical illustrations with text, audio, photography, animation and video in easy-to-use, interactive software applications. RESULTS OF OPERATIONS REVENUES. Total net revenues increased 65% to $1,737,000 for the three months ended June 30, 1997 compared to $1,050,000 for the three months ended June 30, 1996, due to 1996 being adversely affected by consumer product returns and allowances, royalty payments from the sale of consumer product distribution rights in 1997, and the release and related sales of the Company's flagship academic product, ADAM Interactive Anatomy, in the quarter ended June 30, 1997. COST OF REVENUES. Cost of revenues decreased 27% to $243,000 for the three months ended June 30, 1997 from $331,000 for the three months ended June 30, 1996. The decrease is mainly due to the Company's assignment of consumer product distribution rights, resulting in the Company no longer selling significant product directly to the consumer. As a percentage of total net revenues, cost of revenues decreased to 14% for the three months ended June 30, 1997 from 32% for the three months ended June 30, 1996, primarily due to increased sales of the Company's higher priced, newly released flagship academic product, ADAM Interactive Anatomy, during the three months ended June 30, 1997 as compared with lower priced ADAM Comprehensive sales during the period ended June 30, 1996, as well as third party licensing of consumer product distribution previously mentioned. SALES AND MARKETING. Sales and marketing expenses decreased 42% to $766,000 for the three months ended June 30, 1997 compared to $1,310,000 for the three months ended June 30, 1996. Sales and marketing expenses for the three months ended June 30, 1996 included approximately $664,000 in marketing and advertising costs associated with the promotion, distribution, and sale of consumer products, the majority of which have been absorbed in the three months ended June 30, 1997 by the Company's third party consumer product licensee. As a percentage of total net revenues, sales and marketing expenses decreased to 44% for the three months ended June 30, 1997 compared to 125% for the three months ended June 30, 1996. PRODUCT DEVELOPMENT. Product development expenses decreased 57% to $375,000 for the three months ended June 30, 1997 from $878,000 for the three months ended June 30, 1996. The decrease in product development costs primarily resulted from increases, totaling approximately $136,000, in the amount of development costs capitalized during the three months ended June 30, 1997, in addition to decreases of approximately $200,000 in compensation and consulting costs. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (concluded) As a percentage of total net revenues, product development expenses increased to 22% for the three months ended June 30, 1997 compared to 84% for the three months ended June 30, 1996. GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased 51% to $295,000 for the three months ended June 30, 1997 from $608,000 for the three months ended June 30, 1996 primarily due to decreased rent and compensation costs resulting from the Company's restructuring at the end of the second fiscal quarter of 1997, and also decreased professional fees. As a percentage of total net revenues, general and administrative expenses decreased to 17% for the three months ended June 30, 1997 compared to 58% for the three months ended June 30, 1996. As a result of the above factors, operating income (loss) increased $2,135,000 to a profit of $58,000 for the three months ended June 30, 1997 from a loss of $2,077,000 for the three months ended June 30, 1996. The Company had net income of $198,000 or 4 cents per share for the three months ended June 30, 1997, compared with a net loss of $1,715,000 or 33 cents per share for the three months ended June 30, 1996. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1997, the Company had cash and short-term investments of $9,317,000 and working capital of $9,479,000. The Company uses its working capital to finance ongoing operations, fund the development and introduction of new products and acquire capital equipment. The Company expects that cash flows from operations and existing cash and short-term investments will be adequate to meet the Company's cash requirements for the short and long term, i.e. twelve months or less and one to two years, respectively. 9 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27- Financial Data Schedule (for Electronic Filing purposes only) (b) Reports on Form 8-K None 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. A.D.A.M. SOFTWARE, INC. DATE 8/14/97 Robert S. Cramer --------------------- ---------------------------- Robert S. Cramer Chairman and CEO Michael S. Fisher ---------------------------- Michael S. Fisher Secretary and Director of Finance EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ADAM SOFTWARE, INC. FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 1,353 7,964 715 356 447 10,623 630 2,495 12,169 1,144 0 0 0 52 10,973 12,169 1,737 1,737 243 1,679 0 0 3 198 0 198 0 0 0 198 .04 .04
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